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Operator: Good afternoon, ladies and gentlemen, and welcome to TechTarget, Inc. First Quarter 2026 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. I would now like to turn the conference call over to Charles D. Rennick, General Counsel and Corporate Secretary. Please go ahead. Charles D. Rennick: Thank you, and good afternoon, everyone. The speakers joining us here today are Gary Nugent, our Chief Executive, and Daniel T. Noreck, our Chief Financial Officer. Before turning the call over to Gary, we would like to remind you that in advance of this call, we posted a press release to the Investor Relations section of our website and furnished it on an 8-K. You can also find these materials on the SEC's website at sec.gov. A replay of today’s conference call will be made available on the Investor Relations section of our website. Following the opening remarks from Gary and Dan, they will be available to answer questions. Any statements made today by TechTarget, Inc. that are not historical, including during the Q&A, may be considered forward-looking statements. These forward-looking statements, which are subject to risks and uncertainties, are based on assumptions and are not guarantees of our future performance. Actual results may differ materially from our forecast and from these forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our most recent periodic report filed on Form 10-Q and the forward-looking statement disclaimer in our earnings release filed earlier today. These statements speak only as of the date of this call, and TechTarget, Inc. undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. Finally, we may also refer to certain financial measures not prepared in accordance with GAAP. A reconciliation of certain of these non-GAAP financial measures to the most directly comparable GAAP measures, to the extent available without unreasonable efforts, accompanies our press release. And with that, I will turn the call over to Gary. Gary Nugent: Thank you, Charles, and good afternoon, everyone. As always, we appreciate you taking the time to join us today. I am pleased to share our Q1 2026 results which demonstrate continuing progress with our strategy and our commitment to delivering top- and bottom-line growth on an ongoing sustainable basis. In Q1 2026, we delivered revenues of $106 million, representing a 2% increase year over year, whilst achieving an adjusted EBITDA of $7.4 million, an increase of 27% year on year. These results reflect the durability of our business model, a model that is built upon our proprietary first-party market data and our permissioned member data. They are also the reflections of the early returns of our combination program completed in 2025. For today, we also report the results of our two operating segments, Intelligence and Advisory and Brand to Demand, offering deeper insight into the makeup of the business and the key drivers of growth. I see durability as Q1 results and I suspect the remainder of this year are set against a backdrop of ongoing geopolitical and macroeconomic uncertainty, in addition to the broader digital transformation that is accelerating across B2B markets as AI changes how buyers are informing their buying journey and how sellers are reaching out and trying to stand out to prospects and customers. I spent much of Q1 and April on the road meeting with clients and colleagues. It is always my favorite thing to do. In the main, our clients, who are B2B technology vendors, are in good health. However, they continue to prioritize capital to R&D investment as they seek to stay current with the AI arms race. This is subduing investment elsewhere for now, specifically in go-to-market. However, as future indication, demand for our businesses is incredibly positive. And ultimately, they will need to seek a return on those R&D investments. Our story of the indispensable partner with the breadth and scale to enable our clients and address their ambitious growth objectives resonates loudly. And it is clear that we are only just scratching the surface in terms of how and where we can help them accelerate their growth and in doing so drive our own growth. The trends we are observing and the needs and wants of our clients directly correlate to our strategic focus. First, our clients are themselves experiencing the impact of the shift from a search engine economy to an answer engine economy. And as such, their ability to raise awareness and generate demand by and of themselves is becoming more difficult. And with that reality, they are increasingly recognizing the value of working with a partner that itself has direct reach and relationships and influence with the prospects and customers. Second, there is a growing realization that better marketing outcomes are achieved when the marketing efforts are aligned and integrated across the lifecycle from strategy through to execution, and that the breadth and scale of TechTarget, Inc. makes us one of the few companies that can deliver value across that lifecycle. This is encapsulated in our unified demand playbook that we launched at the beginning of Q1 and which has been very well received in the marketplace. And finally, we are seeing clients prioritize working with partners that can integrate seamlessly with their sales and their martech landscape and join the dots in terms of attribution to demonstrate measurable performance and return on investment from their marketing investments. Again, that is something that we can provide and are getting increasingly good at, further differentiating us from others. In numbers, revenues from our strategic focus on our largest customers, who are the largest players in the industry we serve, were up double digits as a result of this focus and the investments in products, sales, delivery, and customer success in Q1. Daisy Golota, our new CMO, has gotten her feet well and truly under the table, launching our bold and ambitious marketing strategy designed to raise awareness and generate demand in the broader $20 billion addressable market. As a part of this, we recently leveraged the Forrester B2B Summit in Phoenix to showcase how we are leveraging the breadth and scale of TechTarget, Inc. to partner with our clients and transform their go-to-market and deliver tangible results. One example of this was the work that we have been doing with Tanium. Tanium are a cybersecurity company that helps enterprises manage and protect mission-critical networks. Tanium partnered with TechTarget, Inc. to move beyond a fragmented, siloed marketing approach towards a fully integrated, always-on go-to-market model, choosing us not just as a vendor, but as a strategic partner for our unmatched audience access, high-quality intent data, and ability to influence buying groups before their sales teams are engaged. By activating our platform across Portal, BrightTALK, content syndication, and targeted editorial environments, they were able to precisely identify and engage in-market accounts at scale. The results were substantial. Over 5 thousand leads delivered, equating to $1.2 billion of influenced pipeline, and ROI of over 2.8 thousand x. And importantly, this has translated directly into real revenue growth. As a result, they signed a new two-year deal immediately following the program, representing over a 50% increase in their annual investment. On the subject of our membership, our audience members, as buyers increasingly rely on AI-powered research and zero-click search behaviors, we fundamentally adapted our operational approach to meet them where they are. Our content creation and distribution strategy is now prioritizing AI discoverability while maintaining the editorial excellence and thought leadership that our audiences have come to expect. With a focus on quality over quantity, and engagement over acquisition, this dual focus continued to deliver for us in Q1, with our permissioned membership continuing to grow in low single digits, and our active membership in priority personas such as Chief Information Officers and Chief Information Security Officers up high single digits in the quarter, this all being despite ongoing disruption to traffic. In addition, we added four leading UK media-based brands to our portfolio through the period: Accountancy Age, The CFO, Bob’s Guide, and The Global Treasurer. This expands our first-party permissioned members in the financial services and fintech space, and it is in line with our strategy to grow by extending our vertical audiences into new geographical markets. We are already seeing strong engagement from these new community members. And in recognition of the power and the value of our authoritative, trusted, and original content in the age of AI, our editorial teams recently won three coveted awards at the B2B industry’s Oscars, the Neal Awards, and we have also been shortlisted for 15 awards at the forthcoming ASB Nationals. On the product front, investment in the product pipeline continues to bear fruit. By popular demand, we launched the new BrightTALK Nurture demand product, with 12 customers piloting this new offering in Q2. We also announced to the market the commercial partnership and technical integration of our NetLine demand product with the Demandbase ABM platform. In direct response to the shift from a search-based to an answer-based economy, we have leveraged all of our experience as a digital publisher to launch our AI LLM content audit and consulting services, designed to help clients understand how discoverable and citable content is and to work with them on how to improve upon it. And only last week, we launched the Omnia AI Search Assistant, a further example of how we are leveraging AI technology to improve our products, to improve upon how our customers discover and consume our original authoritative content, and extract maximum value from their subscriptions. The Omnia AI Search Assistant enables our clients to submit natural language queries to the Omnia Knowledge Center and receive answers that are an intelligent composite of all Omnia’s data and analysis. They can also return those answers in over 70 languages, increasing the global applicability of our product. This launch builds upon what were already very encouraging KPIs in the Omnia business, with users, user engagement, and the Net Promoter Score all up double digits in the first quarter. And as we move through to the second and the third quarters, you will see more examples of how we are applying AI technology, specifically conversational interfaces, to our data and content that will improve discoverability, ease consumption, and unlock value for our clients and our members. And in June, our AI search for our audience members will undergo a significant upgrade based upon the lessons learned from the pilot of the past six months. Rather than improving the audience experience, we are also leveraging automation and AI technology and tools extensively across the business to improve upon our productivity and quality in marketing and sales and research and editorial and operations, and our experience is that this is a game of continuous improvement, and we are already banking clear benefits. By way of example, in Q1 our time to first lead for our core demand products decreased by 30% year on year, accelerating time to value for our customers and accelerating time to revenue for ourselves. I think Q1 demonstrates delivery to our plan—financially, strategically, and operationally—growing our revenues and adjusted EBITDA, simplifying and focusing the business, embracing and capitalizing upon the opportunities that AI presents. Our priorities for 2026 are clear: deliver value to our customers and growth for our shareholders. This will give us the momentum and put us in a strong position to continue to invest in innovation and build upon our core strengths of trusted expertise, proprietary market permissioned audience data, and a unified portfolio of products with the breadth and scale to deliver for customers across their lifecycle. We are wholly committed to this plan and to growing revenues and adjusted EBITDA in 2026. I look forward to updating you on our continued progress in the quarters ahead, and now I will turn the call over to Dan to discuss our financial results and guidance in a little more detail, and then we will be happy to take your questions. Daniel T. Noreck: Thanks, Gary, and good afternoon, everyone. In Q1 2026, we delivered revenue of $106 million, representing approximately 2% year-over-year growth compared with 2025. While market demand remains subdued and the environment cautious, our results reflect solid execution and early benefits from our sharpened operating focus following the combination and organizational realignment. As Gary mentioned earlier, we are now reporting our results through two operating segments. In Brand to Demand, or the B2D segment, which represented around 70% of total revenues and is where we generate revenues by providing clients with services that help them raise brand awareness, engage with buyers, and target more qualified potential customers, we saw good revenue growth of around 5% year over year, with particular strength in our unified demand offering. In Intelligence and Advisory, or the I&A segment, which represented around 30% of total revenues and is where we generate revenues primarily through subscription services to our intelligence products including first-party data and specialist analyst research content, as well as advisory services that provide clients with strategic support and bespoke solutions, our revenues were around 4% lower year over year, primarily reflecting a decrease in our go-to-market strategic consulting. Both segments improved profitability in terms of segment operating income, which we define as being revenue less allocated direct and indirect costs but prior to unallocated costs such as central functions, facility, and related overhead expenses. Operating margin also improved for both segments. Encouragingly, we delivered company adjusted EBITDA growth of 27% year over year to $7.4 million, an adjusted EBITDA margin of 6.9% compared with 5.6% in the prior year. This improvement reflects continuing cost discipline, the streamlining of operations, and the initial realization of integration efficiency following last year’s combination plan, even as we continue to invest selectively in growth, product innovation, and go-to-market capabilities. On a GAAP basis, our net loss narrowed to $70.8 million. This included $45 million of technical non-cash impairment of goodwill, as well as ongoing acquisition and integration costs and other non-cash charges. Turning to the balance sheet and liquidity, we are in a strong financial position. We ended the quarter with cash and cash equivalents of $47 million and had almost $130 million undrawn on our $250 million revolving credit facility, giving us liquidity of approximately $178 million. Our net debt at March of around $72 million represented around 0.8x adjusted EBITDA for the prior twelve months, similar to the leverage level at 2025 and 2024. Our free cash flow in the quarter reflected the seasonal dynamics of the business as well as the phasing of integration and restructuring activities from 2025. On an adjusted basis, we delivered meaningful cash flow, demonstrating the attractive underlying cash generation characteristics of our business model. Turning to guidance, we are reiterating our commitment to deliver growth in 2026. To this end, we are maintaining our full-year 2026 adjusted EBITDA guidance of $95 million to $100 million. We are pleased with the progress we have made simplifying the business, improving operational efficiencies, and positioning the company for growth. While the macro environment remains uncertain, we continue to see opportunities to expand customer engagement, increase wallet share, and improve margins as the year progresses. In summary, Q1 represented a solid start to 2026 with revenue growth, adjusted EBITDA improvement, and continued progress integrating the business and sharpening our operating focus. We believe we are well positioned to execute through the remainder of the year and deliver on our financial objectives. As a reminder, our financial model is built to scale efficiently. As we return to growth, every additional dollar of revenue delivers substantial incremental margin, giving us the ability to grow profitability and free cash flows significantly over time. And with that, we are now happy to answer your questions. Operator, will you please open up the line for Q&A? Operator: Thank you, ladies and gentlemen. We will now open the call for questions. Once again, that is star one should you wish to ask a question. Your first question is from Bruce Goldfarb from Lake Street Capital. Your line is now open. Bruce Goldfarb: Hi. It is Bruce. Congratulations on the solid quarter, and thanks. So the first is, are there any inflationary pressures in the business that would put your $95 million to $100 million EBITDA guide at risk? Daniel T. Noreck: Bruce, thanks for the question. I do not think we are seeing any out of the ordinary from inflation that would put that at risk right now. We are still very confident, which is why we reiterated the $95 million to $100 million adjusted EBITDA target. Bruce Goldfarb: Great. Thank you. And then how are growing AI search volumes impacting your membership sign-ups and paid subscriptions? Gary Nugent: I will take that one, Bruce. Nice to talk to you. We have certainly seen the shift in traffic and the mix of traffic that we receive as a business as searches become disrupted and answer engines are becoming more prominent. We continue to see that answer engine traffic converts at a much higher rate to membership than search traffic used to. But interestingly, we are also seeing search traffic conversion rates improve as well. I think that is largely as a result of the fact that what we are now getting from search is more qualified. Effectively, what you are beginning to see in an answer engine environment is that it qualifies out people who are not really serious researchers and serious buyers. So whilst traffic may be disrupted and down, because conversion rates are up, we are still seeing solid membership, and therefore our membership is modestly growing. And in particular, the membership and the activity of members who are the key personas is growing quite nicely. Bruce Goldfarb: Thank you. And my next one, how are churn rates trending in the small to medium enterprise market segment? Daniel T. Noreck: Hi, Bruce. So from a churn perspective, we obviously do not show those metrics, but what I would say is that churn is still higher, clearly because our portfolio accounts have grown. So we are seeing a bit more churn at the lower end of the range. But what I would say to that is we are starting to see a stabilization of that, and so it gives us confidence as we look out for the rest of the year as it relates to those particular client segments. Bruce Goldfarb: Great. And my last question, how is business trending internationally in EMEA and APAC? Gary Nugent: I will pick up a little bit of highlights. I spent a couple of weeks on the road; I was actually in APAC traveling through Singapore and then through Shenzhen and Beijing in China before finishing off in Seoul in Korea. I would say that the actual environment was encouragingly optimistic and building. The vast majority of our business in that part of the world is the Intelligence and Advisory business, and there is certainly a huge amount of demand from APAC companies to grow their business internationally and to expand into markets such as the United States and Europe, and that is a great opportunity for us. And similarly, there is still an appetite from big American brands to build their business, particularly in markets like Japan and Korea. So generally speaking, I was actually really encouraged by the demand there, and I would say that the business has been trading in line with the rest of the business in the first quarter, no sort of material in-pattern. The one obvious exception to that is the Middle East and Africa region as a result of the ongoing situation in Iran. There we have definitely seen customers begin to slow down their investments and slow down their decisions. That would make sense. Bruce Goldfarb: Well, thank you. Congrats again on a solid quarter. Thanks for taking my questions. Operator: Thank you. Your next question is from Jason Michael Kreyer from Craig-Hallum. Your line is now open. Analyst: Hey guys, this is Thomas on for Jason. Thanks for taking my questions. I know you touched on it a little bit, but could you give a little more commentary on the environment you are seeing for software sales, particularly like a Priority Engine that has more of a recurring nature to it? Do you feel like tech companies are still sort of hesitant to lock in longer-term deals? Gary Nugent: I might actually pick up on that subject more broadly. I would certainly say that we have definitely seen the multiyear environment is not as strong as it was two years or so ago. That is definitely true. We are seeing customers—and we have said for some time that customers were shortening their contractual commitments—really through 2025, and I do not think that has really picked up in 2026. It is interesting enough in what is potentially an inflationary environment, because usually there is a bit of tension in the marketplace between customers wanting to lock in pricing for multiple years vis-à-vis making those long-term commitments, so it will be interesting to see how that plays out. I think generally in terms of commitments to software in the end of course of the marketplace, I have not really seen a lot of change in the customers’ appetite. But one of the things that we have spoken about is the need for us to actually integrate our data directly into our customers’ platforms, especially in the intent space. As customers’ martech stacks and sales tech stacks have become more mature and more settled, it is absolutely imperative that you are able to play nicely with their environment. So you heard us talk about this a lot when we are talking about the investment in the intent product: a lot of our investments are now on the subject of integration, and integration not just with API but also increasingly with MCPs in the AI world. And that is really where I think the game is being played now and the game will be played in the future in 2027. Analyst: Great. That is helpful. And then maybe just one follow-up. With the moves you made to position NetLine in a more down market, does that carry any incremental churn or volatility? Or do you still have pretty good visibility into NetLine production? Gary Nugent: NetLine continues to perform incredibly well for us. It is a very exciting story within the company, and it is going from strength to strength. As we have said, we have done a very thorough, forensic analysis to see whether it was cannibalizing any of the business elsewhere, and actually that is not the case. These are different customers. They are different personas within our existing customers. They are different budget pools. It forms part of the unified demand portfolio, and in actual fact the unified demand story that we are now telling, where we have I think the broadest portfolio of demand products to meet any demand problem a customer might have, is playing really nicely for us. Analyst: Great. Thank you, guys. Appreciate it. Thank you. Operator: Thank you. There are no further questions at this time. Ladies and gentlemen, the conference has now ended. Operator: Thank you all for joining. Operator: You may now disconnect your lines.
Operator: Thank you for your continued patience. Your meeting will begin shortly. Team will be happy to help you. Welcome to Forward Air Corporation's first quarter 2026 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. Lastly, if you should require operator assistance, please press 0. I would now like to turn the call over to Tony Carreño, Senior Vice President of Treasury and Investor Relations. Thank you, operator. Tony Carreño: Good afternoon, everyone. Welcome to Forward Air Corporation's first quarter earnings conference call. With us this afternoon are Shawn Stewart, President and Chief Executive Officer, and Jamie G. Pierson, Chief Financial Officer. By now, you should have received the press release announcing Forward Air Corporation's first quarter 2026 results, which was also furnished to the SEC on Form 8-K. We have also furnished a slide presentation outlining first quarter 2026 earnings highlights and a business update. The press release and slide presentation for this call are accessible on the Investor Relations section of Forward Air Corporation's website at forwardair.com. Please be aware that certain statements in the company's earnings release announcement and on this conference call may be considered forward-looking statements. This includes statements which are based on expectations, intentions, and projections regarding the company's future performance, anticipated events or trends, and other matters that are not historical facts, including statements regarding our fiscal year 2026. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information concerning these risks and factors, please refer to our filings with the SEC and the press release and slide presentation relating to this earnings call. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this call. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law. During the call, there may also be discussion of metrics that do not conform to U.S. Generally Accepted Accounting Principles, or GAAP. Management uses non-GAAP measures internally to understand, manage, and evaluate our business and make operating decisions. Definitions and reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in today's press release and slide presentation. I will now turn the call over to Shawn. Shawn Stewart: Good afternoon, everyone, and thank you for joining us. I appreciate your interest in Forward Air Corporation. There are three main topics that I would like to cover on today's call. First, I will provide an update on the customer transition and our strategic alternatives review that we announced in our press release. Second, I will share some thoughts on our first quarter results and the logistics market in general. Third, I will comment on recent awards earned by our team before turning the call over to Jamie. Let me start with the customer transition. While no formal notices have been delivered, we are in discussions with one of our largest customers to transition a significant portion of their business to other providers. How much of the business will be transitioned and the timing thereof are still being discussed, but we are currently anticipating that the majority of what will ultimately transition will start in early 2027 and take place throughout the balance of the year. It is important to note that we believe this has little, if anything, to do with the impeccable level of service that we provide them and more about their own internal diversification strategy. We are still in active discussions to retain as much of the business as possible, and we are doing everything we can to minimize the impact to our company. I want to reiterate that we believe the customer's decision is entirely related to their own operation and supplier diversification initiatives and has nothing to do with the exceptional service we have provided them during our long-term partnership. This leads me to an update on our strategic review and the new actions we are now pursuing to enhance value and help offset this potential impact. As you know, in January 2025, the Board initiated a comprehensive review of strategic alternatives to maximize shareholder value. We have had extensive negotiations and discussions with multiple parties. However, due to a variety of factors, including the developments that I just mentioned, no actionable proposals for sale of the company were received. We continue to consider all opportunities to enhance shareholder value, and we are now pivoting our focus to pursue a sale of non-core assets, including our intermodal segment and two of our smaller legacy Omni businesses, which in aggregate represent approximately $394 million of our 2025 revenue. These targeted sales are intended to advance our efforts to delever the balance sheet and further focus our services around the core of what we do every single day, which is providing service-sensitive logistics to our customers around the world in air, ocean, ground, and contract logistics markets. With that, let us turn to the second topic, our quarterly results. In the midst of an incredibly complex integration, a fairly weak industry backdrop, changing tariff regulations, and the disruption in the Middle East, our team continues to make progress executing our transformation plan, overhauling operations, and improving the quality of our earnings results, which is reflected in our results. For the first quarter, we reported operating income of $20 million compared to $5 million last year, and consolidated EBITDA, which is calculated pursuant to our credit agreement, was $70 million compared to $73 million a year ago. Regarding the overall logistics market, domestic transportation supply has continued to tighten, driven in large part by increased regulatory and enforcement actions over the past year. These dynamics have accelerated carrier exits, particularly among smaller operators, while limiting capacity additions. A tightening supply environment is a component in rebalancing the freight market and supporting a return to more favorable market dynamics after years of prolonged freight recession. However, supply is only one side of the equation. Improvement in demand will ultimately determine the pace and sustainability of a recovery. Encouragingly, early indicators suggest that the industrial economy, which has weighed on freight demand, may be approaching an inflection point. Manufacturing PMIs have now remained in expansion territory for four consecutive months. Readings above 50 have historically served as a leading indicator for increased freight volumes, as rising manufacturing activity typically drives higher shipment of raw materials and finished goods. Additionally, the ratio of inventory to sales continues to decline. Outside of the post-COVID destocking, the current levels are at or slightly below the 10-year average, with shippers operating with conservative inventory levels amid ongoing tariff uncertainty and evolving trade policy. Depressed freight demand in the most recent past also creates the potential for a restocking cycle, which could serve as a meaningful tailwind for freight volumes when demand improves. Also, do not lose sight of the recent increase in truckload spot rates and corresponding spike in tender rejection rates. That said, while the VIX may have settled, macroeconomic risks remain. Ongoing geopolitical tensions in the Middle East and the associated rise in fuel prices introduce a key source of uncertainty. Sustained increases in energy costs could pressure manufacturers and consumers, raising input costs, compressing margins, and ultimately dampening demand. Outside of this week's announcement and subsequent sell-off in oil, if elevated fuel prices persist, they could lead to tempered demand, offsetting some of the positive momentum emerging in the industrial economy and delaying a recovery in the freight markets. While we are optimistic about the improving freight dynamics, we remain focused on prioritizing customer service and thoughtful cost management. We have been operating as one company for over two years now, and I am proud of what our team has accomplished and even more excited about our future. Finally, it gives me a great deal of pride for our team of dedicated logistics professionals to be recognized for their hard work, diligence, and commitment to our customers. Forward Air Corporation was recently named the 2026 Surface Carrier of the Year by the Air Forwarders Association, whose members are freight forwarders that rely on our expedited ground network to maintain the integrity of their airfreight schedules. This recognition reflects the strength of our network, our team's performance, and our commitment to delivering exceptional service on a consistent basis. Forward Air Corporation was also recently named to Newsweek's list of the Most Trustworthy Companies in America 2026. The annual ranking recognizes companies across industries that have earned strong trust among customers, employees, and investors. This award follows the company's selection to Newsweek's list of Most Responsible Companies in 2025. This recognition underscores the significant transformation our team has achieved over the past two years in optimizing operations, improving performance, and enhancing customer relationships. Both of these honors are a reminder of the high service standards that we are known for. They reflect the dedication of our people whose efforts continue to drive our reputation for excellence. With that, I will now turn the call over to Jamie to go through the detailed results of the first quarter. Jamie G. Pierson: Thanks, Shawn, and good afternoon, everyone. As you heard from Shawn, we reported consolidated EBITDA of $70 million in the first quarter compared to $73 million in 2025. As a reminder, the comparable results a year ago were favorably impacted by $4 million of annualized cost reduction initiatives that were actioned in 2025. The credit agreement allows for the inclusion of the unrealized and pro forma savings from these actions to be included in our historical consolidated EBITDA and requires that they be spread back in time to the period in which the expense would have occurred. On an LTM basis, consolidated EBITDA was $3[inaudible] million. Like we normally do, we have detailed the information used to reconcile the adjusted and consolidated EBITDA results on Slide 30 of the presentation. On an adjusted EBITDA basis, we reported $70 million in the first quarter compared to $69 million in the first quarter of last year. Turning to the segments. Expedited Freight reported EBITDA improved to $28 million compared to $26 million a year ago, with the exact same margin of 10.4%. The Expedited Freight segment's first quarter results also improved sequentially compared to the $25 million of reported EBITDA and a margin of 10.1% in 2025. At the OmniLogistics segment, reported EBITDA of $25 million in the first quarter of this year was in line with the $26 million we reported a year ago. The margin improved from 7.9% to 8.3% year-over-year, driven by an increase in contract logistics volume with a higher margin compared to a decrease in air and ocean volumes that have lower margin. At the Intermodal segment, we continue to see a challenging market, especially from reduced port activity. International trade-related softness among several core customers contributed to declines in shipments and revenue per shipment compared to a year ago. In the first quarter, the Intermodal segment reported EBITDA and margin were $5 million and 10.1%, respectively, compared to $10 million and 16.4% a year ago. Externally, and going back into the back half of the year, we expect to see capacity tighten as JIT supply chains for our BCO customer base loosen as tariffs stabilize, and as additional capacity exits the market due to financial difficulties and bankruptcies of smaller drayage carriers. Internally, we have a strong pipeline and have recently enacted strategic rate increases to several key accounts. Turning to cash flow and liquidity. Net cash provided by operating activities in the first quarter was $46 million, an improvement of $18 million, or more than 60%, compared to $28 million in the first quarter of last year. As for liquidity, we ended the first quarter with $402 million, which is an increase of $35 million compared to the end of 2025 and about a $10 million increase from last year's comparable $393 million. The $402 million is comprised of $141 million in cash and $261 million in availability under the revolver. And as usual, I would like to leave you with a couple of additional thoughts. The first of which is liquidity and how we manage the business, especially in uncertain times. As you heard earlier, our ending liquidity included $141 million in cash, which is the highest ending cash balance in the past eight quarters. When compared to our publicly traded peers, we are at the upper end of the spectrum when calculating liquidity as a percent of both total assets and LTM revenue. And on Slide 22 of the earnings presentation, you will also see, on a non-GAAP basis, we generated $58 million in operating cash flow in the first quarter, which is approximately $12 million better than last year's comparable result. Secondarily, as you heard from Shawn, we are cautiously optimistic about improvements in freight demand, especially in the most recent past. However, there are numerous crosscurrents, including potential continued improvement in the freight demand counterbalanced by ongoing headwinds from inflation, subject to consumer confidence, and macroeconomic risks. We will need these to play out to see if the improvement in demand is sustainable. Regardless of when we see the market fully turn in a positive direction, we plan to continue focusing on the customer, increasing sales, and tightly managing expenses. I will now turn the call over to the operator to take questions. Operator? Operator: We will now open the call for questions. The floor is now open for questions. To provide optimal sound quality. Thank you. Our first question is coming from J. Bruce Chan with Stifel. Your line is now open. Andrew Cox: Hey, good afternoon, team. This is Andrew Cox on for Bruce. I just wanted to touch on the customer loss or customer transition here. We understand that nothing is set in stone, but we are talking about 10% of total revenue. Would just like to get some more details on what segment it is in and what the margin profile is, and how much fixed or structural costs are associated with this customer, and how fast you expect to be able to flex down either the cost or backfill the revenues? Thank you. Shawn Stewart: Hey, Andrew, thank you for the question. Yes, it is quite diverse and dynamic in terms of the service offerings we provide them. It is mainly in contract logistics and some transportation. So margins are different depending on what segment of that business it sits in. We are still in conversations, so it is very fluid. Obviously, we do not want to be overly transparent today. But we are still in heavy conversations, and it is a very good relationship. So it is not a situation of anything other than what we understand and believe to be diversifying their overall supply chain portfolio between providers. Jamie G. Pierson: Yes, if I can add on there, Andrew. We are positioning ourselves to hold on to as much of this business as possible. Shawn said it perfectly, which is our belief that this is about their growth and their concentration with us. It is a simple diversification play. It is important to note that we do not see any meaningful impacts to the current year, and as you noted, it is ongoing. To date, the conversations have been positive. Stephanie Moore: Hi, good afternoon. I guess maybe going back to the situation with the customer, maybe I will ask this a little more directly than the prior question. I am trying to understand how much leeway or time you saw this coming. Has this been a conversation that has been going on for some time? It is hard to believe for a customer of this size to make these changes quickly. If you could give a little bit of color on what services this customer provides or end market, just to get some color there, maybe a little history on other customer losses. If it is not due to service and it is just diversification, that is obviously having a really large impact this year. If you could touch a little bit more about when this started happening, and then at the same time, what can be done on your end to hopefully try to retain this as much as possible? Jamie G. Pierson: Hey, Stephanie, Jamie here. In terms of the timing, it is still happening. The dialogue to date is active and constructive. We are putting ourselves in the best possible spot to hold on to as much of the business as we can. If it were a service-related issue, I might feel differently, but if we look at our service KPIs with this customer, they are incredible, in my opinion. These are my words, Stephanie, not anybody else’s. We are incredible. So it is more about their concentration with us. They have grown with us. They have been a long-term partner with us. I think it is more about a risk management perspective on their behalf than anything else. In terms of how quickly, it is May. It is going to take some time. The best that we can tell is there is not going to be any impact to 2026. It will not be until early 2027 that we see anything meaningful and material, if at all. We are not throwing in the towel, but we felt that it was the right thing to do to let you know that we are in these discussions as quickly as we possibly could. Stephanie Moore: I worded it today, and then in the release, that part of the strategic alternative review process was impacted by this development with this customer. As we think about this, how much does this weigh on the strategic process? And then once there is some definitive decision—whether it is bad or if this customer does decide to walk away—what does that mean in terms of ongoing strategic processes once this is cleared up? Jamie G. Pierson: I cannot answer that second question about what will happen after it is cleared up. In terms of the impact, anytime you have a large customer concentration like this, it is going to weigh either positively or negatively. In terms of its impact on the strategic alternatives process, the fact that you look at a customer that is approximately $250 million, plus or minus, in revenue is going to have an impact. Stephanie Moore: Absolutely. I guess one last one for me—just on the core business itself, we wanted to get a sense of the ongoing pricing environment. There are certainly some green shoots and some positives in the freight environment. If you could talk a little bit about pricing across your business and your level of comfort given we are seeing what appears to be a bit of an uptick in the underlying freight market? Shawn Stewart: Hi, Stephanie, it is Shawn. We feel really strong about pricing. We had the hiccups in a prior period, and I feel strongly that we are extremely solid in all of our revenue streams, whether it be in the global freight forwarding market, the ground LTL business, or in truckload. I am extremely confident in what we are doing both on a cost management basis and on a revenue generation basis. And as you can see, the consistency in our margins and profitability is proof that we learned a lot and have continued to enhance our sales from there going forward. Jamie G. Pierson: If I can jump in. If you look at the spot rate over the last six months, it is up about 40% since late last year. Tender rejections are up almost 2x, so up 100%. Inventory-to-sales ratios continue to lean out. PMIs have been positive for four months in a row. I think the macro indicators are pointing in our direction. My experience in this space is it generally takes three to six months for it to really take effect, and we are coming into that third to sixth month now. We are not pricing for yield, and we are not pricing for volume. We are pricing for profitability. Scott Group: Hey, thanks. Good afternoon, guys. Just to follow up on the business trends. Tonnage was down about 2% and yields ex-fuel down about 1%. What are you seeing as the quarter progresses so far in Q2? Are things accelerating? I know you said you feel good about price, but yield ex-fuel down a little bit—just a little more color would be great. Thank you. And then, Jamie, I want to clarify that you said the business that you are selling is $390 million of revenue. That is intermodal plus the two smaller Omni businesses, right? What are the two smaller Omni businesses? Any sense of profitability there? And then your intermodal business—are there containers here, or is it all asset-light? What exactly is your intermodal business? I do not think it is like a J.B. Hunt intermodal business, but maybe I am wrong. And do you own trucks, or do you have owner-operators? Lastly, with this customer loss, I know the leverage thresholds as the year plays out start to get a little bit harder. Maybe this customer is more 2027, but any conversations with the lending group at all? How should we be thinking about this? Shawn Stewart: Hey, Scott. I am going to let Jamie go because I know he wants to say he is not going to give you guidance, but great question. Let us see if he is nicer today. Jamie G. Pierson: At the risk of not giving guidance, I would say over the last two weeks of the quarter and going into April, we have seen a fairly strong volume environment from our perspective. I do not want to preordain that the recovery is here. I stick by what I said about the spot, the tender, the inventory-to-sales ratio, and the PMI—there is a lag. But I would say the last couple of weeks of the quarter and going into April, we have seen a fairly strong volume environment. On the asset sales, that is exactly right—about $390 million of revenue across intermodal plus the two smaller legacy Omni businesses. I am not going to disclose which those two are; there is confidentiality with buyers. You can see the $390 million, with roughly $230 million intermodal, so you are talking about approximately $160 million that is remaining for the two Omni businesses; it is not that much. On intermodal, it is mainly port and railhead drayage with what we call C/Y or container yard management—storage of containers on chassis—and mainly port and railhead drayage to final customers. We utilize owner-operators and we have owned and leased chassis. On leverage and the lending group, it is the right question. We ended the quarter with $40 million in cushion. This is a small step down from where we ended the year, but we ended the quarter with the highest cash balance we have had in two years and over $400 million in liquidity. If you look at liquidity as a percent of total assets or liquidity as a percent of LTM total revenue, we are at the upper echelon of that spectrum of our publicly traded peers. So $40 million in cushion is a position I can live in, and $400 million-plus in liquidity is a very good place to be. Harrison Bauer: Hey, thanks for taking my question. One quick follow-up on the Omni businesses that you are selling—about $160 million. Is there any crossover of the potential lost business of the $250 million? And then taking a step back—general competitive dynamics. With the announcement of Amazon Supply Chain Services this week, is there any relation to that and the loss of this business at all? Are there other areas of your business that are potentially exposed to what Amazon is trying to lay out and some aggressive pricing actions they may take? Lastly, in the remaining Omni business and in Expedited LTL, now that you have a handful of capacity that you may need to backfill, how are you thinking about pricing for that going forward—the trade-off of volume and price? Jamie G. Pierson: Not that I can think of, Harrison. If there is any crossover, it is certainly not material. Shawn Stewart: I will take the Amazon question. There is no correlation between Amazon and our customer. The news of Amazon is fairly new, but we know them extremely well over the years. We are not surprised by their announcement, but we also need to let things evolve a bit and see where it goes. Ultimately, we are not particularly susceptible to this announcement by our volumes, etc. We respect what they are doing and respect Amazon a lot. We will keep an eye on it and not be naive, but we are not overly concerned today as we sit here about the impact to us from this announcement. On pricing and backfilling, we are not going to get into any kind of desperate situation. We have a great organization, great solutions, and a fantastic product, and we will continue to price aggressively but with profitability in mind. We will get strategic where it makes sense in a given customer or a given origin-destination pair, but not at the detriment of the company and our overall margin. You have seen us pick up new logos and new business, and we will continue with that mantra. We are not going to overreact—we will stick to what we do well and move forward with replacing any potential loss in different areas as we see fit. Christopher Glen Kuhn: Hey, guys. Good afternoon. Thanks for the question. I just wanted to clarify. So that customer loss is $250 million—that is the total amount of the customer's business with you, and you may or may not lose all of it. You are in negotiations for that right now. Is that the case? And if you do lose some of this, would that change the margin profile—within the Omni business—or is it relatively similar to where your EBITDA margins are? And is the negotiation on price? Because the service seems pretty solid there. What would be the issue aside from just diversification? Lastly, if you lost any of it, is there a way to backfill it with another customer? Is there a plan for that? Shawn Stewart: It is a total 2025 revenue of $250 million. We are giving you a holistic view of what the revenue is. That does not, by any means, state that we are losing $250 million. That was the total spend in 2025. Jamie G. Pierson: It will be less than that. Shawn Stewart: On the nature of the discussion, it is diversification. You have to think about what we do for some of our customers—we handle an incredible amount of their supply chain. It is wise from a risk management perspective for them not to put too much of a percentage in any one particular supplier’s hands. Throughout the years, we have grown with them and provided that level of service. In our opinion, it is simply a diversification play, and that is understandable. Jamie G. Pierson: We do not talk about margins on any one particular customer. We will see how this shakes out here in the near future. The takeaway is threefold. One, the conversations have been both active and constructive. Two, we see no impact occurring in 2026 given the complexity of what we do for our customers. And three, the discussions have been fairly positive to date, and we will continue them. Shawn Stewart: On backfilling, that is the plan every day, whether we are losing customers or seeing down-trading customers. Growth is the number one strategy of our combined organization. It has been a tough market, but at the same time, you have seen us be very sustainable over the last two years. We need this market to turn, but we are not changing anything because of this announcement. We may just run a little faster, with an already sprinting organization. Jamie G. Pierson: The only thing I would add, Chris, is that, as best as I can tell going back and looking at history, we are a fairly high-beta performer. We do better in times of volatility and especially when capacity gets tight. We all do well when capacity gets tight; we seem to do better than our peers when that occurs. That is certainly part of the plan. Christopher Glen Kuhn: You have talked about this in the past, but have you seen any truckload-to-LTL conversions in your business? Shawn Stewart: We have heard “yes” because of rising truckload rates, and I do not want to get too far ahead of ourselves—back to Scott’s question, we are seeing volumes—so it could be, but we do not have enough information to say that definitively. As you have probably been watching in the true domestic intermodal market, you are seeing a lot of diversions from over-the-road onto the domestic intermodal. You are also seeing, slowly, an influx of the ocean containers coming back in. There is going to be a point of inflection where a lot of things are going to shift as the demand comes through. It could be the early stages, but do not quote me on that; we are watching it. We have heard from certain customers that the transition is starting because of the overall price of truckload. Operator: At this time, there are no further questions in queue. Let me turn it over to Mr. Stewart for any final remarks. Shawn Stewart: Thank you so much for your time, attention, and interest in our organization. In closing, in recent quarters, we have navigated a challenging environment with discipline and focus while taking actions to strengthen our company and our overall business. We are extremely confident in the foundation we are building and the steps we are taking to improve our performance. We really appreciate your time today. As usual, if you have any follow-up questions, please reach out to Tony directly. Thank you. Operator: This concludes Forward Air Corporation's first quarter 2026 earnings conference call. Please disconnect your line at this time and have a wonderful evening.
Julia Vater Fernandez: Hello, everyone, and welcome to the Vtex Earnings Conference Call for the quarter ended 03/31/2026. I am Julia Vater Fernandez, VP of Investor Relations for Vtex. Our senior executives presenting today are Geraldo Thomaz Jr., Founder and Co-CEO, and Ricardo Camatta Sodre, Chief Financial Officer. Additionally, Mariano Gomide, Founder and Co-CEO, and Andre Colliolo, Chief Strategy Officer, will be available during today’s Q&A session. I would like to remind you that management may make forward-looking statements related to such matters as continued prospects for the company, industry trends, and product and technology initiatives. These statements are based on currently available information and our current assumptions, expectations, and projections about future events. While we believe that our assumptions, expectations, and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on these forward-looking statements. Certain risks and uncertainties are described in the Risk Factors and Forward-Looking Statements sections of Vtex’s Form 20-F and other Vtex filings with the U.S. Securities and Exchange Commission, which are available on our Investor Relations website. Finally, I would like to remind you that during the course of this conference call, we might discuss some non-GAAP measures. A reconciliation of those measures to the nearest comparable GAAP measures can be found in our first quarter 2026 earnings press release available on our Investor Relations website. With that, Geraldo, the floor is all yours. Thank you. Geraldo Thomaz Jr.: Good afternoon, everyone. Thank you for joining us. Last quarter, we outlined a clear strategic framework centered on four key growth factors: global expansion, B2B, retail media, and AI. In the first quarter, we continued to execute against this strategy. Today, we will update you on several recent product launches that directly reinforce our positioning across these opportunities. From a financial perspective, our top-line results were in line with our guidance, while our profitability and cash generation both doubled year over year and exceeded our guidance. This reinforces the resilience of our model and our disciplined execution in a dynamic macro environment. While we acknowledge that recent growth has been below our long-term ambitions, we remain committed to executing with discipline and driving long-term value creation. Starting with our vision and product launches, we see our industry entering a new phase where artificial intelligence transitions from a conceptual layer into a structural driver of growth, efficiency, and competitive advantage. We see this as an attractive opportunity for Vtex. In the last technological revolution—the cloud—we architected our platform to fully embrace it from inception with a multitenant approach, avoiding the technical debt that constrains many legacy systems. Now a highly scalable foundation positions us to capitalize on the AI technological shift, enabling us to rapidly deploy innovation and operate at scale as we navigate this new era. At the heart of this transformation is our reinvented Vtex Commerce Platform. We are moving beyond the traditional software-as-a-service model to deliver what we believe is the first AI-native commerce suite—one that delivers simplicity, ease of use, and, most importantly, tangible and measurable business outcomes for our customers. This is AI with real impact. The command center for this new paradigm is the Vtex AI Workspace. This is where our agents for catalog, promotions, and search collaborate. They are engineered to do more than just flag problems: they autonomously diagnose root causes, architect strategic action plans, and execute them with minimal human oversight. For example, our catalog agent does not just manage data—it hunts for revenue opportunities. It systematically analyzes an entire product assortment by leveraging real-time shopper navigation data to understand precisely where and how the catalog should change to increase conversion. It sees where customers drop off, what search terms lead to dead ends, and how they interact with product attributes. Armed with these insights, the agent autonomously optimizes the catalog. It goes beyond simple data entry, performing tailored content improvements across millions of SKUs by enriching descriptions, standardizing attributes, and ensuring every item aligns with our brands’ merchandise guidelines. This allows our customers to maintain a high-quality, high-converting catalog at a scale and speed previously unimaginable, turning a traditionally labor-intensive process into a strategic advantage. This is just one of many intelligent experiences that are now possible. By laying this groundwork, we are paving the way not only to expand our own suite of agents, but to eventually enable a marketplace where customers and partners can deploy third-party agents, creating a truly open and extensible conversational ecosystem. And this intelligence extends far beyond the back office; it transforms the entire customer journey. For shoppers, our new storefront with an AI personal shopper combines conversational interactions, semantic search, and hyper-personalization to guide discovery and dramatically increase conversion rates. For our B2B customers, we are streamlining complex sales cycles with B2B commerce and AI order quotes, enabling sales teams to generate complete, accurate quotes instantly from a simple file upload or even a voice command. More broadly, our B2B and global expansion strategy are being significantly enhanced as the inherent complexity of managing multi-country, multi-currency operations is precisely the challenge our AI works is designed to address at scale. To capture demand wherever it emerges, our integrations with Google Universal Commerce protocol enable shoppers to discover products and check out directly within Gemini and Google web AI modes, with a native cart synced back to our platform. And to empower our entire ecosystem, we introduced the Vtex AI Developer Kit, embedding AI assistance directly into developer workflows across tools like Cursor, Copilot, and others, while connecting them to Vtex’s knowledge base to accelerate development and drive innovation. We are delivering a platform where AI enhances operators, drives conversion for shoppers, accelerates sales for B2B teams, and empowers developers to build faster. This is a complete end-to-end vision for AI-native commerce. But today, Vtex is much more than its commerce platform. We have evolved into a multiproduct company. Beyond our core commerce platform, we now offer two additional strategic solutions—our CX platform and our Ads platform—both enhanced with AI, where we have also introduced significant recent advancements. In our CX platform, we go beyond the traditional storefront to capture demand wherever it originates. The Vtex CX platform redefines customer experience through coordinated AI agents that operate seamlessly across the entire journey, making commerce more fluid and conversational. This includes a truly multichannel approach where AI guides discovery and transactions across web, WhatsApp, and other messaging interfaces. We have introduced a fully integrated WhatsApp store, enabling consumers to complete their entire purchase journey without leaving the conversation, as well as voice commerce for real-time interactions. Importantly, this capability extends into the post-purchase phase, where autonomous post-sales agents manage order status, exchanges, and returns with over 91% automation, allowing human teams to focus on more complex, high-value engagements. In our Ads platform, we are significantly enhancing the power of our platform by embedding AI across orchestration and campaign execution. This enables our customers to transform their digital environments into high-margin media assets and unlock new revenue streams. With our AI campaign management capabilities, retailers and their brand partners can move beyond manual workflows—simply defining an objective such as improving return on ad spend—while AI agents autonomously build and optimize multichannel campaigns to deliver results. This is further strengthened by AI-driven insights offering real-time visibility into performance attribution and market share, all within a privacy-first framework supported by a secure data clean room. Ultimately, we are helping customers convert their traffic into a scalable and strategic growth lever. While we have just launched these updates, we are already seeing some early but encouraging results. For instance, Whirlpool has leveraged our AI capabilities to identify underperforming products, diagnose content gaps, and automatically generate optimized assets, compressing what was two days of manual work into minutes while improving conversion. At TheCapsule, our promotions agent enables real-time competitive responses through automated campaign recommendations. Across these use cases, the pattern is clear: AI is poised to redefine how customers drive sales, accelerate execution, and capture new levels of operational efficiency. These outcomes are particularly relevant in the context of enterprise commerce, where operations are complex, mission-critical, and increasingly global. Customers are not simply selecting a software vendor; they are selecting a strategic backbone that can scale, adapt, and evolve with the next generation of commerce. With knowledge that it is early days and our excitement around this innovation is not yet reflected in our current growth rates, to be fully transparent, we are still evaluating the long-term transformational impact of these waves at scale. However, our commitment is to remain data-driven and grounded in reality, and we look forward to updating you on broader adoption in the coming quarters. We have embedded AI at the core of Vtex, transforming the company into what we believe is the first AI-native commerce suite. We believe Vtex is uniquely positioned to serve this role. Our multitenant software-as-a-service architecture, outcome-aligned business model, and deep transactional data foundation allow us to deploy innovation at scale and align directly with our customers’ success. With that, let me welcome some new customers who went live in 2026, including Central Gana in Argentina; Amadin Paraíba and L’unelli in Brazil; VPCL in Canada; HomeSentry in Colombia; and Omicás in Portugal. We also expanded our relationship with existing customers such as Whirlpool, which launched its Compre Geraeta Parceiros in Brazil, its official B2B channel for distributors, resellers, and authorized service centers; and Electrolux, which launched a B2B channel in Chile; Grupo Itchasac, which launched EBC Atacado de Beleza in Brazil, its official B2B channel for beauty professionals and resellers; Much Leiser, which launched the official OPPO store in Brazil, expanding the smartphone brand’s presence in the country; and Dafiti expanded to Chile, adding to its operation in Brazil. Now, before I hand the call over to Ricardo, I would like to express my sincere gratitude to our 1,147 Vtex employees, our customers, partners, and investors for their continued trust and support. Together, we are building the future of commerce. Ricardo, over to you. Ricardo Camatta Sodre: Thank you, Geraldo. Hi, everyone. I am pleased to share with you Vtex’s financial results. In Q1 2026, GMV reached $5.1 billion, up 17% in U.S. dollars and 7% FX-neutral. Subscription revenue was $60 million versus $52.6 million in Q1 2025, an increase of 14% in U.S. dollars and 4% FX-neutral. The moderation in GMV growth relative to last quarter was primarily driven by Brazil, where the high interest rate environment and persistent promotional marketplace behavior continue to pressure consumer demand in proprietary channels. In Q1, our non-GAAP subscription gross margin reached 81.5%, representing an expansion of 240 basis points year over year. This improvement is mainly driven by structural gains in AI-powered automation in customer support and, to a smaller extent, a positive FX tailwind. Our total gross margin, including services, reached 80%, an expansion of 400 basis points year over year. This continued improvement reflects not only steady gains in subscription gross margin, but also our deliberate de-emphasis of services, as our global partner ecosystem increasingly leads complex implementations with reduced reliance on Vtex-led services. Our expense management continues to reflect our alignment with long-term growth priorities. Total non-GAAP operating expenses in the first quarter were $38 million, up 6% year over year. While Sales & Marketing and G&A remained relatively stable, we deliberately increased investment in R&D, focusing on innovation, product development, and AI capabilities that reinforce our competitive positioning. In other words, even as we extend margins, we are simultaneously strengthening the foundation for sustainable, profitable growth. As a result, our non-GAAP income from operations reached $10.6 million, doubling from $5.3 million in Q1 2025. This also represented a non-GAAP operating margin of 17.4%, up 770 basis points year over year. In short, our operational discipline continues to translate into stronger margins and a more profitable growth trajectory while we focus on revenue reacceleration. Non-GAAP net income was $8.1 million in Q1 2026, up 51% year over year. This earnings step-up reflects strong underlying operational performance, driven by operating leverage and efficiency gains, reinforcing the sustainability of our model. This was partially offset by unrealized mark-to-market losses on our U.S. dollar-denominated investment-grade cash position held in Cayman, following a significant repricing of the yield curve toward the end of the quarter, which has already recovered in April. These continued profitability gains are showing up in our cash generation, which remained strong once again this quarter. Free cash flow for the quarter was $13.3 million, doubling year over year and reaching a free cash flow margin of 21.9%. We also maintained a disciplined approach to share repurchases. During the first quarter, under the $50 million 12-month share repurchase program for Class A shares approved in February 2026, we repurchased 2.5 million Class A common shares at an average price of $3.86 per share, for a total cost of $9.7 million. As we look ahead, our focus remains on disciplined execution as we work toward growth reacceleration, focused on our four growth levers: global expansion, B2B, ads, and AI. While macro headwinds persist—particularly in Brazil, where high interest rates and promotional marketplace behavior continue to weigh on GMV growth—we remain encouraged by the quality of new customer additions, our competitive positioning among global enterprise customers, and the compelling market opportunity across our four key long-term growth initiatives. Importantly, while this affects our near-term growth outlook, it does not change our conviction in the structural opportunity across our four growth levers, nor our ability to continue improving profitability. With that, for Q2 2026, we expect subscription revenue to grow at a low- to mid-single-digit percentage rate on an FX-neutral year-over-year basis; gross profit to grow at a mid-single-digit percentage rate on an FX-neutral year-over-year basis; non-GAAP income from operations to be in the high-teens to low-20s percentage margin; and free cash flow to be in the high-teens to low-20s percentage margin. For the full year 2026, we now expect subscription revenue to grow at a mid-single-digit percentage rate on an FX-neutral year-over-year basis and gross profit to grow at a high-single-digit FX-neutral rate, while maintaining our outlook for non-GAAP income from operations in the low-20s percentage margin and free cash flow also in the low-20s percentage margin. Assuming FX rates remain broadly consistent with April’s average rates, the FX-neutral growth guidance outlined above would translate into higher reported U.S. dollar subscription revenue growth, adding approximately 10.3 percentage points in the second quarter and 8.6 percentage points to the full year 2026. We continue executing with discipline, investing behind our four growth levers to drive durable growth and shareholder value, while improving profitability and maintaining a strong balance sheet. We will now open the call for questions. Thank you. Operator: We will now begin the question and answer session. To ask a question, simply press star followed by the number 1 on your telephone keypad. Please pick up your handset and ensure that your phone is not on mute when asking your question. Our first question comes from the line of Lucca Brendim with Bank of America. Please go ahead. Lucca Brendim: Hi, good afternoon. Thank you for taking my question. I have two from my side. First, could you comment on the main drivers for the reduction in the guidance for top-line growth and gross profit growth for the year—was it mainly driven by macro and competition, or was there something else? Also, does this guidance incorporate anything from the new AI products you have been rolling out, or are those still not incorporated into the guidance? Second, could you give us an update on how you are seeing expansion in the United States and Europe, and the clients that were still in the process to go live—if everything is proceeding according to expectations or if there were any changes? Thank you. Ricardo Camatta Sodre: Hi, Lucca. Good afternoon. Let me start with the guidance. For Q2 and for the full year, we are aligning our short-term outlook with what we are seeing in the business today, while remaining confident in the long-term opportunity. For Q2, we are guiding subscription revenue growth in the low- to mid-single-digit range on an FX-neutral basis, essentially reflecting a continuation of recent trends, particularly in Brazil, where macro conditions remain challenging and continued marketplace promotional intensity is temporarily pressuring proprietary channels. For full-year 2026, we now expect mid-single-digit subscription revenue growth on an FX-neutral basis. The vast majority of this guidance adjustment reflects a lower growth outlook for Brazil GMV, as FX-neutral GMV growth in Brazil decelerated from mid-teens in Q4 to the mid-single-digit range in Q1, driven by a meaningful moderation in same-store sales. Looking beyond Q2, growth is expected to come primarily from the ramp-up of customers we signed in 2025, combined with continued execution across our four strategic growth levers—global expansion, B2B, ads, and AI. On the profitability side, we remain confident. We are targeting non-GAAP operating margin and free cash flow margin in the low-20s for the full year, supported by structural efficiency gains across the organization. While current market conditions affect our near-term growth outlook, they do not change our conviction in the structural opportunity across our four growth levers, nor our ability to continue improving profitability. The message here is realism in the near term combined with continued discipline and conviction in the long term. Geraldo Thomaz Jr.: On the AI contribution to revenue, our AI strategy is about transforming how we serve customers and deliver value through the product. The Vtex AI Workspace is the first product we are offering within this strategy. The idea is to rebuild Vtex from the ground up, informed by the AI revolution. We are seeing interest from a small group of early adopters, such as Whirlpool, Mobly, and Casa do Vidro, who are actively using the product. Our focus is deliberate: prove value creation and satisfaction for a small number of early adopters, then expand. There may be opportunities to monetize these products in different ways over time, but our expectation is that the biggest value after this AI-driven transformation will be acceleration of the sales pipeline as customers see a new way of operating commerce with Vtex. Mariano Gomide: Regarding the United States and Europe, we are seeing good momentum. We continue to close relevant enterprise brands, and we are building a strong and healthy pipeline in both regions. The demand environment from a strategic standpoint remains encouraging, although sales cycles are longer than in the past. Demand is solid for an AI-native commerce suite that delivers efficiency. Global markets—which for us are basically the U.S. and Europe—grew in the 20 handle in Q1. Although they represent a smaller portion of our revenue base, our global markets expansion is contributing disproportionately to our overall growth, and we expect that contribution to increase over time as it scales. As always, we will share more details and customer names as they go live. Overall, we are encouraged by what we are seeing. Operator: Our next question comes from the line of Analyst with J.P. Morgan. Please go ahead. Analyst: Hi. I would like to make two questions. Thank you for the opportunity. First, I would like to explore the B2B segment. Could you share more details about how your B2B strategy is advancing? We heard strong feedback from industry players regarding this market during your Vtex Day in Brazil, so it would be interesting to hear how your commercial pipeline is evolving, when we should see traction in revenues coming from this segment, and if the new logos of Whirlpool in Brazil in B2B and Electrolux in Chile should help unlock value in this segment. Thank you. Mariano Gomide: On B2B, we continue to see solid traction, particularly in the U.S. and Europe, where roughly half of our pipeline is already coming from B2B solution opportunities. In Brazil and broader LatAm, as expected, adoption has been slower. A big part of our effort there has been educating the market on the value of digitalizing B2B channels and replacing very old legacy interfaces for B2B. Encouragingly, we are now starting to see increased demand in Brazil and growing interest across the LatAm region. On the product side, we are focused on strengthening our B2B solutions, making them more robust, and supporting multiple B2B sales channels—self-service portals, call centers, sales teams, and automation, among others. Our goal is to be the transactional backbone for our customers across all B2B and B2C channels. As a data point, B2B grew roughly in the 20 handle in Q1. Although it represents a smaller portion of our revenue base, our B2B solution is contributing disproportionately to our overall growth, and we expect that contribution to increase over time as it scales. It is still early, but we are seeing the right signals in terms of both pipeline and market awareness, and we remain very focused and encouraged by the trajectory so far. Analyst: May I make just one follow-up? Another feedback we heard from the industry is that the B2B sales cycle should take longer than B2C. Can you share more details on this front—the differences between the sales cycle and the closing process—and your outlook for when this should appear more prominently in your revenue growth? Mariano Gomide: Overall, the sales cycle has been getting longer in recent years for both enterprise B2B and B2C customers, largely driven by macro conditions and what we describe as an “AI wait-and-see.” When companies make long-term infrastructure decisions, they want clarity on how AI will reshape their stack, so naturally decision-making is taking longer. On the other hand, AI is affecting implementations in a positive way—shortening the process of implementing the software. So while the sales cycle is getting longer—and we do not expect that to change soon while AI remains a major consideration—the implementation dimension is generating good signals for us. Importantly, we are not seeing deterioration in our win rates or churn; those fundamentals remain intact. Operator: Our next question will come from the line of Maria Clara Infantozzi with Itaú. Please go ahead. Maria Clara Infantozzi: Hi, everyone. Thanks for the opportunity. First, could you please explain how you intend to monetize your new AI launches going forward? Does it make sense to think about increasing take rates with AI products gaining penetration? Second, can you please give us an update on how you feel about the competitive environment both in Brazil and in Argentina? Thank you. Geraldo Thomaz Jr.: On AI monetization, it is too early to give very detailed information because there is still a lot of discovery happening in the market. Many say the path is to charge by outcomes, and that aligns with how AI creates value. In our case, we have charged by outcomes since 2012, and our Vtex CX platform also charges per outcome—particularly for services that do not require a human in the loop. We believe that as AI increases the output and results of our software, we will be able to charge more accordingly. Also, as we transform the product into an AI-informed, AI-based software suite, we expect customers to move beyond the wait-and-see and resume modernizing their commerce infrastructure—and we will be there to serve them, with sales normalizing over time. Operator: This is the operator. I apologize, but there will be a slight delay in our call. Please hold, and we will resume momentarily. You may resume the meeting. Ricardo Camatta Sodre: Continuing on the competitive environment, we have not seen a meaningful change in competitive intensity among direct commerce technology providers. We have taken a different approach to AI—rebuilding the platform to be AI-native rather than layering incremental features on top of legacy systems as we see some players doing. That allows us to deliver better usability and, more importantly, real outcomes to our customers. We feel our strategic positioning has strengthened with this approach. We are a geographically agnostic, comprehensive commerce suite with efficiency benefits driven by our engineering scale and a founder-led culture, which together give us the reputation to lead in AI commerce. Mariano Gomide: To complement, we look at competition across two dimensions. First, consumer behavior: traffic is fragmenting beyond traditional channels like Google, Instagram, and marketplaces. Messaging platforms like WhatsApp, LLMs, and emerging AI interfaces are playing a more relevant role. This shift may be slow and then sudden, and those new channels could take a significant portion of traffic. In a tough macro, high-interest-rate environment, brands and retailers are being challenged to find efficiency and be more conservative in growth, not financing consumers as before. Second, on technology providers, as Ricardo said, we do not see a significant change in competitive intensity. Our AI-native approach is the core of our differentiation. Operator: Our next question comes from the line of Analyst with UBS. Please go ahead. Analyst: Hi, everyone. Thanks for taking the question. It is about the roadmap of your AI investments. We have seen some margin expansion and an increase in R&D as a percentage of revenues. R&D is an ongoing investment, but should we expect this increase to be transitory or to persist in the interim? Any detail would be helpful. Thank you. Geraldo Thomaz Jr.: Thank you for the question. We recently introduced our Vtex Vision in 2026, laying out how we are approaching AI and turning it into real, measurable impact. At the core is a unified suite of AI-powered platforms orchestrating key commerce workflows across Commerce, Customer Experience, and Ads. This AI-native commerce suite is now available for selected customers. First, the Vtex Commerce Platform is powered by the AI Workspace—the new back-office front end that is evolving into an AI-native operating system. It allows customers to move from manually executing tasks to orchestrating outcomes with AI agents handling workflows like search optimization, catalog management, pricing, and data insights. Second, the Vtex CX platform extends into the customer journey with agents that drive discovery and improve conversion through conversational commerce while automating post-sales. In some cases, we are already seeing 90–91% automation levels in customer interactions, which translate directly into higher efficiency and better conversion. Third, the Vtex Ads platform brings AI into retail media, enabling retailers to monetize their traffic and giving brands more effective, data-driven campaign execution. From a roadmap perspective, we are expanding this ecosystem with new agents and capabilities across all three platforms—from search and content optimization to B2B assisted sales and advanced campaign management in ads. The key focus right now is twofold: keep innovating at high speed and drive adoption of what we have already launched so it translates into tangible results for customers. Regarding R&D investment levels, despite the significant product transformation underway, you are not seeing a meaningful increase in our R&D expenditures. This is also related to AI adoption by our teams. We are transforming internally to leverage AI to be much more efficient—improving throughput in product development, customer support, and sales. You are already seeing this in how we support our customers. The internal manifestation of this revolution is higher throughput, better bundling of products that deliver higher-level jobs, and converting what was previously a service into software-driven outcomes—for example, retail media campaign creation handled autonomously. There is a lot of work ahead—it is still early days for AI—but we are encouraged by the trajectory. Operator: This concludes our question and answer session. I will now turn the call back over to Geraldo for any closing comments. Geraldo Thomaz Jr.: As we step back, what we are building at Vtex is increasingly clear. We are redefining how commerce operates. The convergence of our cloud-native foundations with AI is enabling us to move from systems that support decisions to systems that execute them. We are still in the early stages of this transformation, but the direction is clear. AI is already delivering measurable impact across our customers—driving higher conversion, faster execution, and greater efficiency—and as adoption expands, we believe this can become a fundamental driver of long-term value creation for both our customers and our shareholders. At the same time, our evolution into a multiproduct platform—Commerce, CX, and Ads—positions us to capture a broader share of the commerce value chain while reinforcing our role as a strategic partner to global enterprise customers. Looking ahead, our priorities remain consistent: disciplined execution, continued innovation, and scaling these capabilities across our base. We are confident in our ability to translate this strategy into sustainable growth, margin expansion, and durable competitive advantage. Thank you all for your time and continued support. You may now disconnect.
Operator: Greetings, and welcome to the Full House Resorts, Inc. First Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Adam Campbell, Corporate Controller. You may begin. Adam Campbell: Thank you, and good afternoon, everyone. Welcome to our first-quarter earnings call. As always, before we begin, we remind you that today's conference call may contain forward-looking statements that we are making under the Safe Harbor provision of federal securities laws. I would also like to remind you that the company's actual results could differ materially from anticipated results in these forward-looking statements. Please see today's press release under the caption “Forward-Looking Statements” for a discussion of risks that may affect our results. Also, we may reference non-GAAP measures such as adjusted EBITDA. For reconciliations of these measures, please see our website as well as various press releases that we issue. Lastly, we are also broadcasting this conference call at fullhouseresorts.com, where you can find today's earnings release as well as all of our SEC filings. With that said, we are ready to go, Lewis. Lewis A. Fanger: Good afternoon, everyone. We will be quick with our prepared remarks today since I know there is another call about to start. We had a solid first quarter. Revenues were $74.4 million in 2026, which compares to $75.1 million in last year's first quarter. Within this, American Place was up about 7%. Also, keep in mind that last year's number included $1.3 million of revenue from Stockman's, which we sold in April 2025. So on an apples-to-apples basis, revenues grew by 0.9% in the first quarter. Adjusted EBITDA in 2026 rose to $13.2 million. That is almost 15% higher than our adjusted EBITDA in last year's first quarter, which was $11.5 million. We had growth at almost all of our properties: American Place, Chamonix and Bronco Billy's, Silver Slipper, and Rising Star all had large percentage increases in EBITDA. At Grand Lodge, which is our smallest property, we continue to be impacted by refurbishment work that, when it is done, should meaningfully upgrade the overall experience. Regarding our sports skins, last year we had an additional active skin. So the decline in 2026 reflects that fact. At American Place, our temporary casino continues to show significant growth. Revenues increased by 7% to $31.8 million in 2026. Adjusted property EBITDA rose 8% to $8.3 million in 2026. Our table games hold was 1.2 percentage points lower than in last year's first quarter. For April 2026, the state's gaming revenues just came out. We had a very good April, which you probably already saw yesterday, with total gaming revenues up almost 6% versus April 2025. Our table hold percentage was off again in April 2026. If we held as expected, our total gaming revenues would have been up almost 16% versus April 2025. Turning to Chamonix and Bronco Billy's, our revenues were down slightly to between $11.3 million and $11.6 million. Revenues were affected by several things. First, the Bronco Billy's casino was pretty torn up in January and February as we replaced carpets and installed new ceilings. The Bronco Billy's side now feels quite complementary to the Chamonix experience. Second, the unseasonably warm weather resulted in less cash business in the quarter. Two of Cripple Creek's biggest events both occur in the winter—Ice Fest and Ice Castles—both great experiences, and each one brings more than 100 thousand people to town. But warm weather hindered those experiences and adversely affected city visitation. Third, we had some unprofitable promotional activity in the prior-year period. We have an entirely new management team that joined us beginning in April, and they are working to make sure that our marketing spend is much more efficient. We had a good quarter in Colorado despite those factors. In last year's first quarter, adjusted property EBITDA was minus $2.3 million. In this year's first quarter, it was minus $1.3 million, an improvement of 42%. It is a seasonal market strongly favoring the upcoming summer months. With the new property team, we have spent a lot of time focusing not just on efficiency and cost, but also on our overall marketing efforts. That analysis continues to show a huge opportunity for us. Awareness and penetration in Colorado Springs remains extremely low. As guests visit us for the first time, they realize that we did not build a commodity product of more slot machines. They realize that we created a very unique experience. We often compare Chamonix to Monarch in Black Hawk, as both have similar levels of quality and are targeting a similar type of guest. The total Black Hawk gaming market, not including the neighboring casino town of Central City, was about $875 million over the last 12 months. Monarch has a third of the hotel product in Black Hawk, so it is reasonable to think that they have at least a third of the gaming revenue. The reality is they could be higher than that given their skew toward a higher-end guest. Using those numbers as a basis, our slot win per day at Chamonix and Bronco Billy's was about one-fourth of Monarch's slot win per day. Our table win per day was about 16% of Monarch's. Therein lies the opportunity. The numbers that Monarch is generating are not unusual when an underserved gaming market is presented with a high-quality destination. If we can improve our win-per-day figures so they are just 45% of Monarch's, then we will have earned a very good return on our investment in Chamonix. Part of that improvement will involve ramping our hotel occupancy from 41% today to the 80%+ that Monarch achieves. And so the marketing team is laser-focused on awareness. There are about 1 million people in the broader Colorado Springs area. There are another 400 thousand people that live in the southern suburbs of Denver. That is about 1.4 million people for our 300 guest rooms and 700 gaming positions. Within that geographic spread, there are several specific ZIP codes that can meaningfully move the needle, and those ZIP codes are receiving a lot of our attention in a new digital campaign that we are rolling out. Preliminarily, April had good numbers with an estimated 9% increase in net slot win and a 20% increase in net table win. On the balance sheet side, we had about $41 million of liquidity at the end of the quarter, including the undrawn portion of our revolver. The summer season tends to be our strong season. That, combined with a lack of any major construction spend right now, should benefit overall cash flow in the near term. We have been very transparent about our efforts to fund the permanent American Place casino as well as refinance our existing debt. If you recall, we mentioned on our last earnings call that we have been working with a funding source that is prepared to fully fund construction of the permanent American Place casino. We have funded the gaming license, land, slot machines, temporary casino, assembly of the workforce, and the mailing list—all at a total investment today of about $170 million. The new financing will provide the approximately $300 million needed to move into the permanent facility. That solution requires a lot of legal paperwork, which the team is diligently making its way through. We continue to feel very good about that solution and look forward to giving you more details once we can, potentially in the next few weeks. We are confident enough on that financing that we expect to commence construction within the next few weeks. The early stages of construction take time but not much capital. By starting now, we hope to open the permanent American Place about two years from now. Our earthmoving drawings were approved a couple of weeks ago by the City of Waukegan, and we are working to obtain the other government approvals needed to begin construction. We have put together a good construction team that is well-versed in building regional as well as destination casinos. They include Power Construction, which is currently building the new Hollywood Casino in Aurora, Illinois—one of the largest builders in the Chicagoland area. We have W.A. Richardson Builders, who will act in an oversight role—one of the largest construction firms here in Las Vegas with great experience developing casinos from their days at Mandalay Resort Group, including the Grand Victoria Casino in Elgin, Illinois. They also recently built the Fontainebleau and Durango resorts here in Las Vegas. And then we have WATG as architects. Their team has a long list of hospitality projects under their belts, including The Venetian in Las Vegas and the Hard Rock in Rockford, Illinois. Lastly, we are concurrently allowed to operate our temporary until August 2027. In conjunction with our anticipated financing, a bill was introduced in the Illinois legislature to extend that date by 18 months. That would ensure a smooth transition from the temporary to the permanent, including continuation of the approximately $30 million per year in gaming and other state taxes that we currently pay. Typically, items like this in the legislature are voted on late in the session, which ends on May 31. That is everything I had, Dan. What did I miss? Daniel R. Lee: I do not think you missed it. Lewis A. Fanger: Let us go to questions. We will now open the call for questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. Our first question comes from the line of Jordan Bender with Citizens Bank. Please proceed with your question. Jordan Bender: Hi, everyone. Good afternoon, and thanks for the question. Maybe not the quarter that you wanted necessarily in Colorado, but on the expense side, that continues to look better. I see my math gets me to expenses down about 10% in the quarter. How much more do you think you have left to take out if we do not get any material revenue uplift from here? Daniel R. Lee: There is a lot of blocking and tackling that has happened, and we will continue to control costs. But there is stuff like we have an outsourced housekeeping service, which only cleans about nine rooms a day, and we end up paying for that. Down at the Silver Slipper, we clean 14 rooms a day. So we are looking to bring that in-house, and we have to hire about 30 housekeepers to do that. Our laundry service—we think we can get more efficient. We hired an AGM in the first quarter who has a background in hospitality and food and beverage, and he was in a similar role at the Ameristar in Council Bluffs, and before that the Ameristar in East Chicago. He is a really good guy, and he is working on that sort of thing. We also hired a finance director in the first quarter. Frankly, we are getting much better reporting out of it, and that is helpful. But to really get to where we want to be, we need to improve the revenues. We have a lot of new marketing people working on that, and it is much more sophisticated than it was a year ago. It is a constant process to try to make the marketing spend more efficient and targeted—like Lewis mentioned, digitally approaching certain ZIP codes. That is a more efficient way to do it. Of the other things we are looking at doing, the business there is very—like most casinos—slanted towards the weekend. You are trying to hire people in a somewhat difficult place to hire them up in the mountains. So we are looking at going out and offering people a $5-an-hour premium if somebody only wants to work on weekends. The backstory on that is if somebody is willing to go on our payroll working only, say, Friday and Saturday, they will not qualify for the health plan because it is less than 32 hours a week. The health plan costs us more than $5 an hour per employee. You might find somebody who is already gainfully employed, or maybe they are retired non-Medicare, but they like the idea of being a barista in our coffee place on Saturday mornings—it gets them out of the house. We would love to have that employee. We are looking at all sorts of ways to be more thoughtful, efficient, and effective. It does not happen overnight, but it is happening. Frankly, the April numbers are pretty encouraging because I feel like we have our footing on the marketing stuff, and we are starting to show really strong numbers. April was a good month. May looks pretty good so far. Hopefully we continue to build on that going into the summer. We are controlling costs, but ultimately it is about growing the revenues. Lewis A. Fanger: And those incremental revenues—you have probably heard me say this before—at this point the cost structure is pretty fully baked, so the flow-through from those incremental revenues should be pretty steep. We did just reopen a Mexican restaurant that had been closed for a while. We revamped it, promoted from within a new food and beverage manager who is a very talented chef, and he did a phenomenal job on new menus and recipes. I would argue we probably have the best Mexican restaurant in Colorado at this point. We renamed it Don Juan's—it is a fun name—and we also tied it into the elevator to get to it. We are going to start offering brunch on Saturdays and Sundays in 980 Prime, which is a wonderful venue for a brunch. We are doing it in ways where we know on Fridays, Saturdays, and Sundays there is demand for that brunch, and we are not doing it every day of the week. Jordan Bender: Great. And on the follow-up, good to hear in Waukegan that is going to get going here in the next couple of weeks. Just curious your view on the casino proposal up in Kenosha and kind of where that stands, and how you underwrite that property in relation to yours. Daniel R. Lee: First off, our customers primarily come from Lake County, and to the extent they come from outside of Lake County, it tilts towards the south. If you drive north from us to Kenosha, there is some farmland out there, so there is kind of a gap. They would have a much bigger impact on the Pottawatomis in downtown Milwaukee than they would on us. That tribe is pretty powerful. Which brings up the second question: do they ever get there? They have been working on this for 20 years. This is not an Indian tribe from Kenosha. This is the Ho-Chunk Nation. They have a small casino a couple hundred miles away in the middle of Wisconsin. They are trying to create a whole new piece of land and reservation trust strictly for commercial purposes to cut into the Pottawatomie business. So it is more of a tribal war than it is an issue for us, and I do not think it would have much impact on us. If they get there, it is going to take them a long time. If everything went smoothly for them, it would be a few years before they got open. Even when they did get open, I do not think it has much impact on us. My first guess is they never get there, because what they are trying to do is not easy. It is one thing if you are a poor Indian tribe trying to get a casino on your reservation—you are somebody that deserves empathy, if you will. This is not a poor Indian tribe trying to get a casino on their reservation. This is reservation shopping and trying to get in a commercially better spot than where their existing casino is. It takes a lot of different regulatory approvals and state approvals, and they are a long way from having it. Lewis A. Fanger: I will tell you that the legal hurdles preventing that are still a very, very long list. Daniel R. Lee: Where this really gets us is there is an analyst out there who is negative on us. He brings this up every time. If he did not have this, he would have something else. I heard yesterday that six months ago he was telling everybody to invest in the Affinity bonds instead of us, and it was with great pleasure to tell you that Affinity is shutting everything down they have in Primm. So he has some mud on his face, and that mud is getting thicker by the day. Jordan Bender: Thanks, everyone. Daniel R. Lee: Thanks. Operator: Thank you. Our next question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Please proceed with your question. Ryan Sigdahl: Hey, guys. Good afternoon. On the financing for American Place, good to hear the progress—should hear something in the next couple weeks—is fantastic. On the last call, Dan referred to it as acceptable terms. Lewis, you referred to it as attractive terms. Curious if you could give an update on how it is trending at the moment. Daniel R. Lee: We are not a AAA credit, and we are not borrowing money at 5%. But it is also not 15%. We think we can get our existing debt refinanced and the incremental money, and all be not a little bit higher than where our debt is today, but not much. Lewis A. Fanger: I do not have anything to add other than what we have said. I do not think you are going to have to wait too much longer. The amount of work that has happened behind the scenes has been extensive, and we continue to push forward and certainly feel better about where we are today than we did at the last earnings call. Daniel R. Lee: It is understandable. The firm on the other side of this does not want us to disclose their name or details until we have the final docs signed. We are working to do that, and that is understandable. I will look on the positive side. The world has been such a mess lately with everything going on in the Middle East, and the high-yield market has hung in there. It has been pretty stable through all this, which is somewhat remarkable and encouraging. Lewis A. Fanger: The high-yield markets have held up. Daniel R. Lee: American Place has continued to display pretty strong numbers. Chamonix is starting to hit its stride. There is a lot of good happening, so all in, I think we are sitting in a good spot. Ryan Sigdahl: Good. Chamonix is a good transition. It is good to see the scrappy nature of spending and cost efficiencies across that entire property. But ultimately, to go from losing a couple million in EBITDA to making a couple million—we want to get to tens of millions—you probably have to really start to ramp the revenue as well. Have you had any renewed thoughts around how to drive that new customer to try the property and really start to build the base of business there on the revenue side? Daniel R. Lee: We are firing on all cylinders here. We now have a four-person sales force, and we are looking for another person, focused on meetings and conventions. They are putting quite a bit on the books, but that stuff is ahead of time, so it really starts to bear fruit in 2027 and 2028. We have a new advertising agency. We have a chief marketing officer here. We have a new director of marketing at the property. We have an advertising person here that we have added. We have subscribed to some third-party research firms who are giving us much more detail on not only who our customers are, but who is out there. We are getting a lot more sophisticated in our targeting. April was the first month where we said, “Okay, this is starting to bear fruit.” Hopefully we will continue to show good results every month going forward. Some months you are going to have off win percentage or something, but I think we have a base to build on. We lost only a little bit of money through the worst part of the year seasonally, so we will end up making money this year—not as much as we would like given our investment—but I think it forms a good base this year and then better results next year. We have also been working with the City of Cripple Creek to get them more focused on how to build it as a destination. If you pull up Telluride, Colorado—believe it or not, its population is not that much more than Cripple Creek. Of course, they have a famous ski area, but they are four-and-a-half hours from any metropolitan area. They have a festival every weekend all year long—everything from a country music festival to a film festival. Our single biggest weekend of the year is Ice Festival, where the city buys blocks of ice, puts them on the street, and people carve them with chainsaws. It sounds kind of hokey, but it gives people the excuse to come up, and our biggest weekend of the year is in the middle of the winter when normally we are summer seasonal. We are now working with the city, which has hired a new director of marketing, to have more of these festivals. We just celebrated Cinco de Mayo. How do we do more of that? The city is starting to get smarter about it. This little town has the potential of being a pretty significant destination for people from Colorado Springs and Denver, but you have to get them up there. Lewis A. Fanger: People do forget sometimes—and not to make myself sound old—but if you go back to when Ameristar took over their property in Black Hawk, they relaunched a rebranded and expanded, much nicer Black Hawk casino in 2006, and opened their hotel tower in 2009. It was a multiyear process—they took over a failed Hyatt casino 100%. If you compare their revenues from 2005 to 2010, the five-year CAGR of gaming revenues was about 24%. That is phenomenal. They were the ones that reinvented that market and said, “Look, there is actually something nice in Colorado to go and gamble at.” What Monarch benefited from was that, 20 years ago, someone changed the mentality in Denver and said, “There is something nice.” When Monarch opened, people were already accustomed to a nicer building in Black Hawk. We did not have that. We are only starting to get that. When we look at penetration—when I say it is massively low, in the ZIP codes I mentioned, we have like 8% penetration. There is no reason why it should be that low. That is exactly why we are focusing the digital efforts. We are not talking about finding hundreds of thousands of new people; we are talking about finding 20,000 new people to bring into the building on a regular basis. That is what moves the needle to a very good investment. We feel very good about where the marketing sits right now. The new ad agency started late in the fourth quarter; it took a few months to get their hands around things, so their true efforts did not really launch until March. We are showing very good signs in April; May is off to a good start. Looking at the penetration stats and the win-per-day stats I mentioned earlier, I think it is harder to think that we cannot achieve those than that we can. Daniel R. Lee: Sometimes we are so used to the numbers. The American Gaming Association has a survey that shows that 30% of American adults visited a casino within the past 12 months. That is the U.S. average. Colorado Springs is less than a third of that. Ryan Sigdahl: Very good. Dan, well done—you never fail to have me learn something new, and “mushroom festival” is one. Well done, and I look forward to a 24% CAGR over the next five years, Lewis. Good luck, guys. Daniel R. Lee: Thank you. Operator: Thank you. Our next question comes from the line of John DeCree with CBRE. Please proceed with your question. Maxwell Marsh: Hey, guys. This is Max Marsh on for John. Still clearly in the early innings of GGR penetration in Colorado, but is there any difference in what you are seeing on the database side? Any insight into the database sign-up trends would be helpful. Thanks. Lewis A. Fanger: The database trends are good. If you look in the month of April as an example, new sign-ups were up 12%, rated visits were up 19%, and win per rated visit was up about 14%. Short answer: the trends are good. We continue to grow the database pretty meaningfully, and we are also bringing in a higher volume of higher-rated guests through the doors. Daniel R. Lee: By the way, I am smiling because he is reading that off a daily operating report. We hired a new finance director from outside of the casino business with a lot of experience in the hotel business, and he has gotten it organized pretty fast. A year ago, we would not have had those numbers by this point in May, and if we had them, they probably were not reliable. Now we are getting them on a daily basis, and they are quite reliable. That is one of the first steps in getting this thing going well. Maxwell Marsh: Great. Thanks for that. And could you give us a little bit more detail about what is driving the growth at Silver Slipper? I know we have a new management team there as well. Is that coming from better OpEx management, or could there be some broader tailwinds there? Lewis A. Fanger: It is a little bit of both. It is probably a little more on the OpEx side versus the revenue side, but it is a little of both. On the OpEx side, we have a new GM there. She is looking at things differently than the prior GM and is finding more efficient ways to do some of what we are doing. A big part has been on the marketing side—being smarter about the marketing dollars that go out the door. As an example, we used to have a weekly seniors day where we would give you a breakfast buffet for $0.99. We found out that a nearby senior center was bringing people in for their weekly nearly free breakfast. When we ran the numbers as to how many of those people were actually in the database and gambling in the casino, the answer was very, very few. It is about taking a fresh look at different marketing ideas and making sure there is a return there. Maxwell Marsh: Gotcha. Thank you, guys. Lewis A. Fanger: Thanks, Max. Operator: Thank you. Our next question comes from the line of Chad Beynon with Macquarie. Please proceed with your question. Sam: Hi. This is Sam on for Chad. Thank you for taking our questions. Switching over to Waukegan, now that you have made more progress toward the permanent construction of that property, any updated thoughts on the earnings power of that property? I know in the past, $90 million of EBITDA was put out there. Any update or color on the timeline to get to that point and what is needed to get to that level? Daniel R. Lee: Even the temporary continues to progress. The run rate today is in the ballpark of $40 million per year of EBITDA. If you start thinking about it, we have indicated it takes about $300 million to build the permanent, and the cost of that money is probably a little higher than our existing bonds—but use 10% for a big round number. Ten percent on $300 million is $30 million a year. The permanent casino is roughly twice the size of the temporary in terms of square footage. It has more restaurants, a much better street appeal, much better decor. In terms of slots and tables, it is not quite double, but it is up significantly. We expect the permanent to do much more business than the temporary. There are a lot of examples, like the Hard Rock in Rockford, which also went from a temporary to a permanent—their revenues doubled. You see it in the Hollywood in Joliet that moved from an old boat to a permanent building. You see it in New Orleans at Treasure Chest, and others, where people went from temporary to permanent, and in every case it has shown a big increase in revenues and profitability. So we do think it gets to $100 million—you said $90 million; I actually think it is $100 million. It does not happen overnight. It might take three years or something. If it takes us two years to build and we open two years from now, then five years from now it is doing $100 million. Lewis A. Fanger: We say it does not happen overnight—although in all the examples we threw out, it did happen overnight—but nonetheless, we assume that it does not and builds over time. Daniel R. Lee: I think even in the temporary, it continues to grow. At some point, you start to max out on weekends—our win per slot machine per day is pretty high in the temporary. We will continue to show growth even before we build the permanent, and then you will have a step to a new plateau in the permanent and then it will grow from there. Sam: Thank you. Appreciate that. And then switching over to your sports skins, wondering on the outlook for those—if you see upside or downside to the current run-rate EBITDA related to those sports contracts over the next few years. Daniel R. Lee: At this point, we only have two. In that industry, we used to have agreements with Wynn and Churchill Downs in markets, but DraftKings and FanDuel—and to a lesser extent, BetMGM—have moved in and dominated the market. A lot of these other guys have pulled away. In Indiana, we have one. They paid us in advance because for a while they had not been paying us, and we said if you want to extend the contract, fine, but you have to pay us in advance. The accountants do not let us book it all at once, but we already have the money. We are going to recognize that income over time. Lewis A. Fanger: It is the initial access fee, recognized over the life of the agreement. Daniel R. Lee: The other one is with Circa, who is a niche player. Their sportsbook here in Las Vegas is probably the biggest single sportsbook in the country, and they have a good forte with that. In Illinois, you only get one license. We had three skins for our license in Indiana, and we also had three skins in Colorado. We only have one in Illinois. The population of Illinois is much bigger, and that is by far the most valuable skin. That is with Circa, and I think they are doing okay. They know that business probably better than anybody, and they are good at it. We will have a beautiful permanent sportsbook in our new facility, which I think they are quite excited for. We continue to look for people who want to get into the sports business, but frankly, at this point there are not a lot of new companies looking to get in—it is so dominated by DraftKings and FanDuel. Lewis A. Fanger: On the flip side—not that I expect this to happen anytime soon—our agreements only include sports betting. They do not include anything for true online casinos. To the extent that were ever to happen, there is the potential for more upside as we would monetize that bit. Daniel R. Lee: I had forgotten—at Tahoe, we had a tiny sportsbook that had been run for a long time by William Hill. A former CEO of William Hill started a new company called Boomers. He came to us and made us an offer, and he is paying us significantly more in rent than we were getting. It is still not a big number, but it is roughly two times what it used to be, and he is promoting it much more than William Hill was. The sports betting companies are also having to deal with competition from prediction markets. They have started branches where they are going into prediction markets under the auspices of being commodities trading firms, offering sports betting in places like Texas and California where it is not been legal, and doing it without paying any state gaming taxes. From DraftKings and FanDuel, that is like, “If they can do it, why cannot we?” Nevada came out and said if you do that, then you cannot operate in Nevada, so they both backed away from operating in Nevada. That opened the opportunity for Boomers, who is not going to try to operate elsewhere. There is a little turmoil there, and we will see where it goes because from the gaming industry's perspective, the idea that somebody can start taking bets on the Super Bowl in Texas without any approval of the Texas legislature—given that the Texas constitution forbids gambling—is problematic. These people are offering Super Bowl bets in places like Texas—unregulated and untaxed—and not surprisingly, they are probably making pretty good money with it. Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to Full House Resorts, Inc. CEO, Daniel R. Lee, for any closing remarks. Daniel R. Lee: We are making good progress, and I think it is going to be an exciting quarter because we are going to get under construction and get this financing done. By the way, we do not take this lightly, but starting construction will cost us a couple million dollars, and you do not normally want to do that unless you are certain you have the money to finish. We are confident enough that this financing is going to come through that we are going to start, because otherwise the opening day keeps sliding. The initial stages of construction are guys driving bulldozers around—it is not a lot of money—so we are going to go ahead and start because we are pretty confident that it is all going to come together here. Lewis A. Fanger: Thank you. Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Hello, and thank you for standing by. I will be your conference operator today. At this time, I would like to welcome everyone to the AerSale 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 withdraw your question, press 1 again. I would like to now turn the call over to Christine Padron, Vice President, Global Trade and Compliance. Christine, please go ahead. Good afternoon. Christine Padron: I would like to welcome everyone to AerSale Corporation’s first quarter 2026 earnings call. Conducting the call today are Nicolas Finazzo, Chief Executive Officer, and Martin Garmendia, Chief Financial Officer. Before we discuss this quarter’s results, we want to remind you that all statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements within the meaning of the federal securities laws, including statements regarding our current expectations for the business and our financial performance. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results. Important factors that could cause actual results to differ materially from forward-looking statements are discussed in the Risk Factors section of the company’s Annual Report on Form 10-K for the year ended 12/31/2025 filed with the Securities and Exchange Commission, SEC, on 03/10/2026, and its other filings with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those indicated by the forward-looking statements on this call. We will also refer to non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of those non-GAAP metrics to the nearest GAAP metric can be found in the earnings presentation material made available on the Investors section of AerSale Corporation’s website at investors.aersale.com. After our prepared remarks, we will open the call for questions. With that, I will turn the call over to Nicolas Finazzo. Nicolas Finazzo: Thank you, Christine, and good afternoon, everyone. Thank you for joining us today. I will begin with an overview of our first quarter performance and key operational developments, and then discuss how we are progressing against our strategic priorities for 2026. I will then turn the call over to Martin to walk through the financials in more detail. This quarter, our team stayed focused on executing our strategy across Asset Management and TechOps: prioritizing (1) disciplined acquisition and monetization of flight equipment and used serviceable material—you will hear me say USM; (2) expanding and optimizing our MRO capabilities; and (3) building a recurring and more predictable revenue base through MRO services and leasing while maintaining our high standards for safety, quality, and on-time performance. First quarter revenue was $70.6 million, an increase of 7.4% from the prior-year period. Adjusted EBITDA also increased by $4.2 million, or 131.9%, to $7.4 million from the prior-year period. Excluding flight equipment sales, which tend to be volatile quarter to quarter, revenue increased 2.2% year-over-year, reflecting growth in leasing and increased demand across our [inaudible] compared to the prior-year period. We placed an additional Boeing 757 freighter aircraft into service, ending the quarter with three aircraft on lease and one additional aircraft under a letter of intent for lease. We continue to engage in discussions with potential customers, as increased demand for cargo continues to make us bullish on deploying the remaining four 757 freighters reconverted in 2026. We also expanded our engine lease portfolio, ending the quarter with 18 engines on lease compared to 16 engines in the prior-year period. Higher average lease rates and improved utilization contributed to stronger asset yields across both aircraft and engines, and reflect our continued progress toward building a larger and more consistent recurring revenue base. Partially offsetting the increased leasing revenue was a decrease in USM sales resulting from the internal consumption of engine material for our own engine builds. At present, we have multiple engines in work where most of the material required has come from our own inventory, and our decision to utilize this USM results from our determination that we will achieve a higher value and total dollar margin consuming this material rather than selling USM piece parts to third parties. Across our TechOps platform, we continue to make progress on several strategic growth initiatives. At our on-airport MRO facility in Millington, Tennessee, we commenced work under a recently awarded long-term, multi-line aircraft maintenance agreement for a fleet of CRJ700 and CRJ900 regional jets. In addition, operations began at our expanded facility located in Hialeah Gardens, Florida. Both initiatives contributed to higher TechOps revenue in the quarter. As expected when ramping up operations at new facilities, we incurred incremental training costs and early-stage operating inefficiencies that created margin pressure during the quarter. We view these impacts as temporary and expect margins and throughput to improve as volumes continue to increase and operations stabilize. TechOps was also impacted by lower MRO parts sales in the quarter. Lastly, our Roswell facility experienced revenue and gross profit declines due to fewer aircraft in storage during the quarter. Related to our Engineered Solutions products, AirSafe continues to remain strong in advance of a Federal Aviation Administration November 2026 compliance deadline for the Fuel Quantity Indication System airworthiness directive related to fuel tank safety systems. We closed the quarter with a backlog of $15.3 million, of which the majority will close in 2026. In addition, we continue to market our revolutionary enhanced flight vision system, AeroWare, to select interested customers. We are also continuing our efforts to educate our U.S. regulators and the agencies responsible for the safety of our air transportation system on how the unique features of AeroWare can improve safety and provide economic efficiency to the industry. During the quarter, we deployed $25.1 million in feedstock acquisitions to support future leasing and monetization opportunities. We remain disciplined in our acquisition approach and continue to focus on assets where we see strong long-term demand and attractive risk-adjusted returns. Our win rate in the quarter was 6.3% compared to 10.4% in 2025, which shows our commitment to discipline on pricing as we continue to evaluate opportunities to redeploy and monetize inventory in ways that improve velocity and cash conversion without compromising value. Looking ahead, our priorities for the remainder of 2026 remain consistent with those we have previously outlined. These include increasing the number of assets deployed in our lease pool, including the placement of the remaining four 757 freighters during this year; continuing to monetize our inventory through USM sales; filling available capacity across our MRO network; and improving overall operational profitability as recent expansion initiatives continue to gain scale. Despite the expected start-up costs incurred in the first quarter, we remain confident in our ability to deliver improved financial performance as we progress throughout the year. With a strong inventory position, an active leasing pipeline, and expanded operational capabilities, we believe AerSale Corporation is well-positioned to deliver more consistent and growing earnings. With that, I will turn the call over to our Chief Financial Officer, Martin Garmendia. Thanks, and good afternoon, everyone. Martin Garmendia: I will walk through additional details on our first quarter financial performance, then touch on cash flow, liquidity, and our outlook for the remainder of 2026. Revenue for the first quarter of 2026 was $70.6 million compared to $65.8 million in the prior-year period. Flight equipment sales totaled $5.2 million and consisted of one engine sale compared to $1.8 million from one engine sold in 2025. Excluding flight equipment sales, revenue increased 2.2% year-over-year, driven by growth in leasing activity, partially offset by lower USM and MRO parts sales. As we note each quarter, flight equipment sales can vary meaningfully from period to period. As a result, we believe performance is best assessed over time with a focus on feedstock acquisition, monetization of those investments, and profitability trends. Adjusted EBITDA for the quarter was $7.4 million, or 10.4% of revenue, compared to $3.2 million, or 4.8% of revenue, in the prior-year period. The EBITDA dollar and margin increase was primarily driven by higher leasing revenue and flight equipment sales during the quarter. Asset Management Solutions revenue increased 10% year-over-year to $43.1 million in the first quarter. Excluding flight equipment sales, revenue grew modestly, supported by an expanded lease pool and favorable engine mix, but partially offset by lower USM volumes. We ended the quarter with 18 engines and three Boeing 757 freighters on lease compared to 16 engines and one freighter on lease in the prior-year period. Technical Operations revenue increased 3.4% year-over-year to $27.5 million, driven primarily by higher on-airport MRO activity. Growth was led by increased activity at our Goodyear and Millington facilities, including the initial ramp-up of CRJ work at Millington. These gains were partially offset by lower MRO parts sales during the quarter. Gross margin for the quarter was 26.7% compared to 27.3% in the same period last year. The modest and temporary decline reflects start-up and training costs related to the CRJ line in Millington and the Aerostructures expansion, as well as higher labor costs at Goodyear as we maintained elevated staffing levels in anticipation of increased demand expected later in the year. We expect these margins to normalize and begin to improve as we increase labor and facility utilization. Selling, general, and administrative expenses were $22.2 million in the first quarter, down from $24.6 million in the prior-year period. The decrease reflects the benefits of our ongoing efficiency initiatives and the absence of one-time severance costs incurred last year. Current-year expenses included $1.8 million of share-based compensation expense compared to $1.2 million in the prior year. Net loss for the first quarter was $3.5 million compared to a net loss of $5.3 million in the prior-year period. Adjusted net income was approximately breakeven compared to an adjusted net loss of $2.7 million last year. Adjusted EBITDA for the quarter was $7.4 million compared to $3.2 million in the prior-year period, benefiting from a higher-margin product mix and lower expenses. Year-to-date cash used in operating activities was $26.7 million, primarily related to feedstock acquisitions of $25.1 million as we continue to make disciplined investments to grow the Asset Management segment. We ended the quarter with inventory of $369.5 million and aircraft and engines held for lease of $121.5 million. Available liquidity at the end of the quarter was $41.8 million, which included $2.1 million in cash and $39.7 million of availability in our $180 million asset-backed revolver, which can be expanded to $200 million. This available liquidity, growing performance, and our strong inventory position provide us with the tools needed to continue to grow our business through the remainder of 2026 and beyond. In conclusion, we remain focused on monetizing the investments that we have made. In a competitive market, we have built a strong inventory position that will allow us to continue to grow our leasing and USM activities. The commencement of a multi-line maintenance program at our Millington facility and new work commencing at our expanded Aerostructure facility put us on a positive trajectory to exceed the incremental $50 million revenue expectations for our expansion initiatives, with the expectation that margins will improve as we increase utilization of our additional capacity and start-up initiatives mature. All of this will allow us to continue to grow both our revenue and profitability in a more predictable and recurring manner quarter over quarter. With that, operator, we are ready to take questions. Operator: We will now open the call for questions. Thank you. At this time, I would like to remind everybody that in order to ask a question, please press star followed by the number 1 on your telephone keypad. Our first question comes from the line of Kevin Liu with RBC Capital Markets. Your line is open. Analyst: Hey, good afternoon, Nicolas and Martin. Thanks for taking the question. Could you talk about what you are hearing from customers in light of the ongoing conflict in the Middle East as it relates to your business, whether that is in USM, spare parts, or lease rates? Nicolas Finazzo: Hi, Kevin. Thanks for the question. We are not really hearing much from our customers at this point, and that is something we ask internally: how is the Middle East situation going to affect us in the short run? We are not seeing it yet. What do we expect? We expect that if this continues for a prolonged period of time and we see airlines park more aircraft, the result will be more aircraft in storage, which would benefit us, and there may eventually be a downturn in the demand for used serviceable material parts. However, as I have said, every quarter this question gets asked: is there enough USM out there to support demand? And the answer is, for the proper amount of USM—I do not mean every part from every engine, but the parts that sell from an airframe or engine—there continues to be more demand than available inventory. Until that eventually equalizes, if a number of airplanes are grounded—certainly during the COVID environment there were enough airplanes on the ground that there was very little requirement for USM because aircraft could be cannibalized for parts, and engines were not going into the shop because engines on wing were being cannibalized to keep other aircraft flying. Over time, if this prolongs, if fuel costs stay high, and that results in a substantial grounding of the fleet, then we expect that will have an impact. But I do not know when that would be. I believe that impact would still be years off unless you had a COVID-type event where a substantial amount of the fleet is grounded. So the short answer is we are not seeing an effect at this point, and based on the type of USM that we sell, we do not expect there to be an effect, certainly not in the short run. Analyst: Okay. Got it. Thank you. That is helpful. And then on a separate note, could you give us an update on your current capacity additions in MRO and talk about the potential impact to revenues in your business, both this year as well as in 2027? Martin Garmendia: Sure. As stated in the prepared remarks, Millington has come online and we have started a CRJ line there. We have gone through some start-up costs and a learning curve, but right now that is potentially going to expand to three aircraft that will be at full capacity at the Millington location, under a very profitable contract with a very good customer to whom we can provide multiple services. At our Goodyear facility, we continue to ramp up work, especially from the lows incurred last year after a long-term contract had finalized, and we continue to be bullish there. We continue to serve multiple operators, including Spirit, and we are seeing a ramp-up of return-to-service work for them with some of those overall aircraft. Based on the recent news, we expect that to accelerate during the remainder of the year. At our Roswell facility, we primarily do storage work. We have seen a decline in aircraft being stored, but if, for some reason, the war in the Middle East continues and there is an overall reduction in aircraft operating, we could potentially see aircraft being returned into that location from a storage perspective. On our component MRO side, our Aerostructures facility came online during the first quarter, and we are ramping up there. That is a 90 thousand-square-foot facility. We have a lot of capacity to fill. We have made a lot of inroads with customers, getting that process finalized, so we expect to quickly start ramping up demand there. Our landing gear shop has also been doing extremely well. We are starting two agreements—one with an OEM and one with an international carrier—that are expected to significantly increase our volume at that facility as we progress through the quarter. And our component shop has also seen increased demand, and we continue to pursue additional initiatives to fill that capacity because we have a good amount of available capacity there. As the market continues and there is overall demand, we are poised to grow and to fulfill some of those leads. Analyst: Got it. And just one last follow-up. As you are selling this capacity today, could you give us more color on what kind of margins you are getting on this new capacity and how we should think about the potential EBITDA contribution? Martin Garmendia: On the on-airport MRO side, there is still a need and a limited supply of available slots, so we have been seeing margin improvement in that area. Overall, as I mentioned, in the quarter margins were temporarily impacted by the Millington start-up, but as Millington comes fully online, we expect gross profit margins to be in excess of 20%. And at our Goodyear facility, as we increase return-to-service work—depending on the type of work—we definitely expect margins to be better than they have been historically. Operator: There are no further questions at this time. I would like to turn the call back over to Nicolas Finazzo, Chief Executive Officer, for closing remarks. Nicolas Finazzo: Thanks. Despite nonrecurring start-up costs from our facilities expansion projects in the first quarter, our operating business has continued to improve. These results validate our unique multidimensional and fully integrated business model, and as these units continue to develop and mature, we will be in an excellent position to achieve substantial growth in the years ahead. I want to thank Kevin for his insightful questions today, which I think provide good insight into our business model and will help our investors better understand how we are performing. To all the rest of you, I very much appreciate your interest in listening to our call today and look forward to bringing you up to date during our next earnings call. I wish you all a good evening, and thank you.
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Jumia's Results Conference Call for the First Quarter of 2026. [Operator Instructions] With us today are Francis Dufay, CEO of Jumia; and Antoine Maillet-Mezeray, Executive Vice President, Finance and Operations. We'll start by covering the safe harbor. We would like to remind you that our discussions today will include forward-looking statements. Actual results may differ materially from those indicated in the forward-looking statements. Moreover, these forward-looking statements may speak only to our expectations as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the risk factors that could cause actual results to differ from the forward-looking statements expressed today, please see the Risk Factors section of our annual report on Form 20-F as published on February 24, 2026, as well as our other submissions with the SEC. In addition, on this call, we will refer to certain financial measures not reported in accordance with IFRS. You can find reconciliations of these non-IFRS financial measures to the corresponding IFRS financial measures in our earnings press release, which is available on our Investor Relations website. With that, I will hand the call over to Francis. Francis Dufay: Good morning, everyone, and thank you for joining Jumia's first quarter 2026 earnings call. 2025 was the year we demonstrated the resilience and scalability of our model and '26 is the year we plan to demonstrate our path to profitability. Q1 '26 showed that our momentum towards profitability is continuing and in several important ways, accelerating. Over the past few years, Jumia has been building an e-commerce model designed specifically for Africa, adapted to the unique structural supply, logistical and consumer realities of our markets. In 2025, we proved that this model delivers scale with improving economics and Q1 '26 confirms that the flywheel is turning. This foundation drove our strong operating momentum in the first quarter. GMV grew 32% year-over-year adjusted for perimeter effects. Growth was broad-based across our core markets, reflecting the continued strengthening of our marketplace fundamentals and efficient execution. Profitability metrics continue to move in the right direction. Adjusted EBITDA loss narrowed to $10.7 million from $15.7 million in Q1 '25. The business absorbed higher volumes with increasing efficiency while maintaining a disciplined approach on costs. Excluding the onetime costs related to our Algeria exit in February '26, adjusted EBITDA loss would have been $9.7 million, reflecting an underlying improvement of 38% year-over-year in our core business. Based on the progress we made in '25 and the momentum continuing into Q1 '26, we remain focused on achieving our target of adjusted EBITDA breakeven and positive cash flow in the fourth quarter of '26 and delivering full year profitability and positive cash flow in '27. I should also note that we are monitoring the broader macro environment, including cost increases in memory chips and the ongoing geopolitical tensions in the Middle East as well as the potential effects on global supply chain, shipping costs and commodity prices. While we have observed limited impact on our business to date, we remain attentive to downstream risks, including potential pressure on smartphone components availability and transport costs. We believe the resilience of our model and the diversity of our supplier base positions us well to navigate this uncertain environment. Notwithstanding these external matters, we reiterate our guidance for 2026. Let me walk you through the key highlights of the quarter. Usage trends remain strong across our platform. Adjusted for perimeter effects, physical goods orders grew 31% year-over-year, driven by expanding in-country geographic coverage, improved assortment and sustained consumer demand. Our focus remains clearly on physical goods, which accounted for nearly all orders and GMV this quarter. Digital transactions through the JumiaPay app now represent a residual share of our orders as we continue to prioritize transactions with stronger economics. Relatedly, TPV and Jumia Payments gateway transactions have become less meaningful as indicators of our operating performance and effective as of the first quarter of '26, we will discontinue the quarterly disclosure of these KPIs. Adjusting for perimeter effects, quarterly active customers increased 25% year-over-year, reflecting continued traction in both acquisition and retention. Repeat behavior continued to improve with 47% of new customers from Q4 '25 making a repeat purchase within 90 days, up from 45% in Q4 '24. Demand was broad-based across electronics, home & living, fashion and beauty and consistent across most countries, reflecting a similar quality of execution and inputs across our markets. Adjusted for perimeter effects, GMV grew 32% year-over-year in reported currency. Average order value for physical goods increased to $36 from $35 in Q1 '25. Revenue totaled $50.6 million, up 39% year-over-year, driven by higher usage and improved monetization. First-party sales represented 46% of total revenue, supported by continued strength from international partnerships, including Starlink in Nigeria and Kenya. Now turning to profitability. The progress made over the past 3 years continues to translate into measurable operating leverage. Cost improvements across general and administrative, technology and fulfillment are structural. In addition, we renegotiated third-party logistics contracts in February and March and implemented increases in commissions and take rates across most countries in mid-January '26. This reflects the scale of our platform and improved service levels delivered to sellers. Importantly, these commission increases had limited impact on growth, validating our strategy of progressive monetization increases on the back of greater volumes and better seller experience. We also drove meaningful growth in higher-margin revenue streams with marketing and advertising revenue up 44% year-over-year and value-added services revenue nearly tripling, which both reflect improved platform monetization. These changes are consistent across markets and reflect stronger marketplace fundamentals. Fulfillment cost per order was $2.06, flat year-over-year on a reported basis or down 10% year-over-year on a constant currency basis. This reflects productivity gains and economies of scale in fulfillment operations, increased call center automation and improved logistics partner rates. Most fulfillment operating expenses are incurred in local markets and denominated in local currencies. Technology and content expenses declined 8% year-over-year, reflecting ongoing headcount optimization, automation, platform simplification and the benefit of renegotiated seller agreements, including cloud infrastructure. As a result, adjusted EBITDA loss narrowed to $10.7 million from $15.7 million in Q1 '25. Loss before income tax was $17.8 million, an 8% increase year-over-year or 21% decline on a constant currency basis, primarily reflecting noncash foreign exchange losses. Quarterly cash burn increased to $15.3 million in Q1 '26 compared to $4.7 million in Q4 '25. The shift from the previous quarter is consistent with typical seasonal dynamics. This compares favorably to the $23.2 million decrease in liquidity in Q1 '25, demonstrating the improvement in our financial trajectory. Now turning to operational highlights and execution at the country level. Q1 '26 demonstrated continued execution strength across our markets. Supply fundamentals remain solid with improvements in both local and international sourcing. Growth was supported by strong performance across multiple categories with fashion and beauty among the top contributors to items sold growth year-over-year and with international items continuing to gain share. Efficient marketing deployment, including CRM, paid online, SEO channels, supported customer acquisition at attractive unit economics. In the first quarter, we sold 4.9 million gross items internationally, up 87% year-over-year adjusted for perimeter effects. This reflects the continued scaling of our Chinese seller base as well as growing volumes from our supply base from affordable fashion in Turkey. Operationally, we continue to extend our reach beyond major urban centers. Orders from upcountry regions accounted for 62% of total volumes, up from 58% in the prior year quarter, both adjusted for perimeter effects. These regions are delivering strong growth while benefiting from a cost structure that scales efficiently with volume. In secondary cities, we are addressing clear customer pain points, including limited product availability and elevated prices from local traders. As a result, our value proposition continues to resonate strongly, driving both adoption and repeat purchase. Now at the country level. Nigeria delivered a strong quarter. Physical goods GMV increased 42% year-over-year. Sustained growth was driven by a broad range of categories with home & living performing particularly strongly alongside continued traction from a country expansion, where a large part of the addressable market remains untapped. We opened over 80 additional pickup stations during the quarter, further extending our delivery network. I should note that Nigeria experienced a significant increase in local fuel prices during March, which created headwinds in our 3PL cost negotiations. However, consumer demand remains sustained and strong. Kenya performed strongly with physical goods GMV up just below 50% year-over-year. Performance was driven by continued strong supply fundamentals and efficient marketing despite similar headwinds to other countries in the phones category. Strong performance in home & living driven by local suppliers and in fashion, driven by international suppliers more than offset the tighter supply in phones. Kenya remains a relatively underpenetrated market for Jumia with vast opportunities up country and we continue to invest in expanding our reach. Ivory Coast growth gradually moderated over the course of the quarter. Physical goods GMV was up 16% year-over-year. Growth was affected by 2 converging headwinds. First, supply disruption in appliances, which is market specific and in smartphones, which is a global dynamic, both felt directly in the market where we have our highest penetration levels. And second, a sharp decline in regulated cocoa farm gate prices down nearly 60% effective in March '26, which reduced the purchasing power of a large share of the upcountry population. Cocoa is the primary export of Ivory Coast and approximately 6 million people depend on it for their livelihoods. This is a meaningful demand side headwind that we expect to persist in the second quarter. However, we remain confident in the fundamentals of our business in Ivory Coast, where we hold a very strong position with a trusted brand and healthy monetization. Egypt's performance this quarter confirmed sustained recovery. Physical goods GMV grew 3% year-over-year, excluding corporate sales, which were still material in Q1 '25, but has since been deprioritized. Physical goods GMV grew 56% year-over-year, confirming genuine market level recovery. Very strong dynamics on the supply side of our marketplace are driving top line acceleration, supported by improved assortment and seller engagement. Our buy now, pay later offering continued to gain traction with strong penetration in high-value categories. Egypt experienced a fuel price increase in March as well, which we are monitoring. However, core marketplace dynamics remain positive. We are also expanding our delivery network through pickup stations in more remote regions, which are poorly served by physical retail. Ghana delivered an exceptional first quarter with physical goods GMV increasing 142%, driven by a country expansion, the scaling of local marketplace and strong supply from international sellers. Ghana was largely unaffected by the disruption in the electronics segment. Our current focus is to continue building logistics capacity to sustain this rapid expansion with stronger customer experience and cost efficiency. Our other markets portfolio also performed well, collectively delivering 10% physical goods GMV growth. Uganda experienced a nearly 1-week internet blackout during the quarter, temporarily impacting volumes, though the market still delivered growth for the period. In February '26, we completed our exit from Algeria, which represented approximately 2% of GMV in '25. The winddown resulted in total onetime exit costs of approximately $1 million, reflecting employee termination benefits and asset impairment, which were all recognized in our Q1 '26 results. Over the medium to long term, this decision simplifies our footprint and improves operational focus, allowing us to allocate resources more efficiently towards markets with stronger growth and profitability profiles. We have not seen significant changes in our competitive environment in Q1 '26. The softening of competitive intensity trends observed in the second half of '25 has continued with competitive intensity remaining subdued across our core markets. The recent disruption of air freight going through the Middle East is expected to create headwinds for non-resident platforms that rely on direct international shipping, contributing to a more level playing field for locally embedded operators like Jumia. Most of our supply comes via sea freight, which was not impacted. We are also seeing increased regulatory scrutiny on cross-border platforms across several of our markets, further reinforcing this dynamic. We are navigating an international environment that is evolving quickly with 2 main developments having the potential to impact our business. First, the memory chips and CPU price increases. We saw a delayed impact on entry-level phone prices and the availability of components for products like smart TVs taking place gradually over Q1. Phone prices increased by approximately 20% between late '25 and early April. We do not see this as a fundamental long-term shift, but it is impacting our business in the near term as supply chains reorganize. Distributors remain temporarily reluctant to release fresh inventory, while prices may increase further and older, cheaper inventory in some markets is still temporarily competing with our more recent supply. We are mitigating this by diversifying our supplier base for smartphones and scaling our marketplace across both local and international sellers. Second, the war in the Middle East. The most immediate impact was the disruption of air freight through the UAE from Asia, which affected some smartphone distributors. Supply routes have since reorganized through other hubs. There are also delayed effects. Disruption to helium supplies creates additional uncertainty for chip production and the majority of our markets have seen fuel prices begin to rise from March, which is expected to weigh on local logistics costs, particularly for middle-mile trucking operations run by our local partners. The impact on our Q1 P&L has been limited with extra costs primarily in Nigeria. If high fuel prices persist, we should expect greater pressure in Q2, potentially partially offsetting the savings from our 3PL rates renegotiations. That said, our strategy of building pickup stations throughout countries is very helpful in this regard as it means that we have already decorrelated a significant share of our delivery costs from fuel prices. In particular, 74% of our ship packages are fulfilled through pickup stations rather than door delivery in Q1 '26, up from 67% in Q1 '25, both adjusted for perimeter effects. We have also taken steps to electrify our last-mile delivery fleet in Uganda and we are looking to replicate this successful pilot in more countries as we continue to reduce our dependence on fuel in logistics operations. '25 was the year when we showed that our business model is on the right track. It delivered growth and improved economics at the same time. '26 is the year when we intend to show that this model will take us to profitability. In this regard, Q1 is a strong data point that is consistent with Q4 '25 trends. We see sustained growth despite an uncertain environment, continued operational leverage and improved unit economics across the whole P&L, resulting in significantly reduced losses. We are committed to delivering trajectory to breakeven by chasing more scale in a disciplined way, improving operational execution and further streamlining our fixed cost base. While we are currently navigating an uncertain international environment, we believe that our business fundamentals, which were rebuilt from '22 to '25, mostly in much tougher times than this are strong. We do expect some temporary disruption, but it does not change our midterm profitability targets or our belief in Jumia's long-term opportunity for growth. With that, I will now turn the call over to Antoine to walk you through the financials in more details. Antoine Maillet-Mezeray: Thank you, Francis, and thank you, everyone, for joining us today. I will now walk you through our financial performance for the first quarter. Starting with revenue. First quarter revenue reached $50.6 million, up 39% year-over-year or up 28% on a constant currency basis. Results reflect sustained customer demand and consistent execution across our platform. Marketplace revenue for the first quarter totaled USD 27 million, up 50% year-over-year and up 35% on a constant currency basis. Third-party sales were USD 23.2 million, up 45% year-over-year or up 31% on a constant currency basis. Growth was driven by solid performance in the marketplace, including healthy usage trends and higher effective take rates. Marketing and advertising revenue was USD 2.2 million, up 44% year-over-year or up 31% on a constant currency basis. The improvement was driven by continued growth in sponsored products, supported by strong tools rolled out in mid-2025 that increased seller adoption, improved return on ad spend and drove greater density and competition on our marketplace. With advertising revenue currently representing roughly 1% of GMV as we are improving this figure, we see meaningful opportunity to scale this profitable source of revenue. Value-added services revenue was USD 1.7 million in the first quarter of 2026, compared to USD 0.6 million in the first quarter of 2025, driven by strong growth in warehousing fees, reflecting higher volumes flowing through our storage infrastructure, largely driven by demand from Chinese sellers and improved monetization of our warehousing services. Revenue from first-party sales was USD 23.1 million, up 30% year-over-year or up 21% year-over-year on a constant currency basis, driven by strong momentum with key international brands. Turning to gross profit. First quarter gross profit was USD 29.4 million, up 48% year-over-year or up 33% year-over-year on a constant currency basis. Gross profit margin as a percentage of GMV increased by 160 bps to 13.9% for the quarter compared to 12.3% in the first quarter of 2025, reflecting continued progress in marketplace monetization. As we enter 2026, we implemented broad-based increases in commissions across most countries, leveraging the scale and improved service levels we have built with sellers. Q1 2026 was already tracking the expected impact with gross profit margin expanding by 160 bps year-over-year, marketing and advertising revenue up 24% and value-added services revenue nearly tripling. We expect these trends to continue supporting gross profit growth going forward. Now moving to expenses. We continue to see the benefits of our cost initiatives in the first quarter with additional improvements expected to materialize over the coming quarters. Fulfillment expense for the first quarter was USD 12.2 million, up 29% year-over-year and up 17% in constant currency, primarily due to higher volumes. Fulfillment expense per order, excluding JumiaPay app orders, was $2.06, flat year-over-year or down 10% year-over-year on a constant currency basis, reflecting productivity gains and economies of scale in fulfillment operations, increased call center automation and improved logistics partner rates. Sales and advertising expense was USD 5.1 million for the first quarter, up 64% year-over-year and up 54% in constant currency. We view this increase positively. We are scaling high ROI marketing investment on the back of stronger product fundamentals, improved quality of service and higher platform reliability, driving not only top line growth, but also better unit economics as higher volumes and improved customer retention contribute directly to operating leverage and margin improvement. Technology and content expense was $8.9 million for the first quarter, representing a decrease of 8% year-over-year or a decrease of 10% on a constant currency basis, driven primarily by continued headcount optimization and ongoing renegotiated seller contracts. First quarter G&A expense, excluding share-based compensation expense, was $16.8 million, up 4% year-over-year and down 3% on a constant currency basis. The year-over-year increase was primarily driven by staff costs with general and administrative expense, excluding share-based compensation expense, which increased by 16% to USD 9.1 million, driven by approximately USD 0.8 million in onetime termination benefits related to our Algeria exit and the appreciation of local currencies against the U.S. dollar compared to the first quarter of 2025. We continue to streamline the organization. The total headcount has declined by 8% since December 31, 2024, with just over 1,980 employees on payroll as of March 31, 2026. At the end of the fourth quarter of 2022, when current leadership was installed, we had 4,318 employees. We are actively working to further reduce headcount, continue process automation and leverage AI tools. We expect to reduce our headcount by at least an additional 200 full-time employees over the next 2 quarters. More broadly, AI and automation are becoming meaningful drivers of efficiency across Jumia. We are deploying AI tools across our operations, finance processes, headcount efficiency programs in our technology organization, encompassing cybersecurity monitoring and software development, which supported the net FTE reduction and drove efficiency gains year-over-year. Importantly, AI is also helping us solve problems on the ground. In logistics, it improves routing and reduces failed deliveries. In customer services, it enables faster resolution with fewer agents and in sellers operation, it streamlines onboarding and compliance monitoring. This is not only reducing cost but also improving the quality of service we deliver to customers and sellers, reflecting our ongoing commitment to structural cost efficiency. Turning to profitability, adjusted EBITDA for the quarter was negative $10.7 million or negative $10.9 million on a constant currency basis. Loss before income tax was $17.8 million, an 8% increase year-over-year or 21% decline on a constant currency basis, primarily reflecting noncash foreign exchange losses. Turning to the balance sheet and cash flow. We ended the first quarter with a liquidity position of $62.6 million, including USD 61.5 million in cash and cash equivalents and $1.1 million in term deposits and other financial assets. Our liquidity position decreased by $15.3 million in Q1 2026 compared to a decrease of $23.2 million in Q1 2025. Net cash flow used in operating activities was $12.5 million in the quarter, including a broadly neutral working capital contribution. The improvement reflects the continued strengthening of our marketplace flywheel driven by higher volumes, improved payment flows and stronger bargaining power with large third-party accounts. In summary, we delivered another quarter of solid execution and strong top line growth while continuing to improve cost efficiency. Progress on structural cost reductions, automation and cash discipline reinforces our confidence in meeting our near-term objectives and moving closer to profitability. Looking ahead, we remain focused on operational discipline, margin expansion and prudent and informed capital allocation, positioning Jumia for sustainable growth and long-term value creation. I now turn the call back over to Francis for a discussion of our updated guidance. Francis Dufay: Thank you, Antoine. Let me now turn to our expectations for 2026. Our focus for '26 remains on accelerating growth, driving further operating efficiency and continuing our progress towards profitability. We are seeing continued strong momentum validated by our Q1 results, which give us confidence in reaffirming our full year '26 outlook. We are navigating an evolving international environment. While we expect some temporary disruption from memory chips and CPU price pressures and the ongoing conflict in the Middle East, our business fundamentals are strong. Our Q1 '26 results demonstrate continued execution and we have not changed our midterm profitability targets or our belief in Jumia's long-term opportunity for growth. For the full year '26, we anticipate GMV to grow between 27% and 32% year-over-year adjusted for perimeter effects. On profitability, we expect adjusted EBITDA to be in the range of negative $25 million to negative $30 million. We confirm our strategic goal to achieve breakeven on an adjusted EBITDA basis and positive cash flow in the fourth quarter of '26 and to deliver full year profitability and positive cash flow in '27. Looking specifically at the second quarter, GMV is projected to grow between 27% and 32% year-over-year adjusted for perimeter effects. Thank you for your attention. We will now be happy to take your questions. Operator: [Operator Instructions] Your first question for today is from Jack Halpert with Cantor Fitzgerald. John Halpert: I just have 2, please. So on the memory chip inflation, are you maybe able to quantify this at all in terms of the impact in the quarter? And maybe how much of this has been resolved already versus expected to continue in 2Q and beyond? And just is it more about consumers like deferring purchases trading down? Or is it more of a supply availability issue? That's the first question. And then the second question, just on the AI efficiency you guys mentioned and I think the planned 200 reduction in headcount. First, just how much of this headcount reduction is tied to the Algeria exit, if at all? And then maybe on the AI side, what are a few examples of areas you're seeing the most efficiency in the business from AI currently? Francis Dufay: Let me take the 2 questions and Antoine will also comment on the AI impact across our business. Starting with memory chips, CPU prices inflation. So to quantify the impact, you can look at our presentation where we show the share of smartphones category in our mix. You'll see that the whole smartphones category, I mean, is directionally roughly 10% of our sales in GMV. This is usually a category with lower unique contribution. It's lower margins than, let's say, fashion, for example. So it definitely has -- I mean, it's not 10% of our gross profit, as you can imagine. It's not the whole category that's in danger. Obviously, it can impact the growth of the category and it has in the first quarter. It's likely to continue in the second quarter. But we're not talking of a major impact over the whole top line of Jumia, okay? It's something that we have to flag because it's global trends and it's relevant for our business, but we're talking impact on a fraction of our total business and it will not wipe out like half of the sales, obviously. It's limited. And most importantly, we see it as temporary. The timing here is that we had delayed impact really. A lot of people asked us questions, sorry, late 2025 and in the first month of '26 and really not much was changing on the market at this time. And then prices -- the price increase of directionally 20% that we've mentioned on entry-level smartphones was mostly felt in the month of March across key countries. So that's directionally what happened. We believe it's a matter of timing. I mean we're used to those kind of supply disruptions and market reorganizations. So it doesn't last forever, but we know that for a couple of months, supply may be disrupted. Some brands may be doing better and some brands may be more disrupted, which we've seen in the market. Some brands will be running out of stocks. Some brands will still be available with sometimes lower price increases. For example, we see that Samsung has had lower price increases because they have much better integration of the whole supply chain. But basically, we see it as temporary disruption as the supply chain reorganizes. And when it comes to consumer impact that you were asking, we see a mix of both, right? We see a mix of, of course, prices increasing, so consumers are trading down. When people are still buying smartphones, that will never change, but they are buying lower specs with the same amount of money in their pocket. And on the other hand, we also see supply -- I mean, pure supply availability issues on very specific brands in very specific markets. So as we mentioned in the -- earlier in the call, we've been more impacted in the Ivory Coast, for example, than in Kenya in terms of pure supply availability. So all of that is having an impact, some level of impact, but we see it as clearly temporary. It's not -- I mean, it's not a long-term challenge. We will keep on selling smartphones and the market will reorganize. And what matters is that we have access to the best supply, the best prices and our distribution is a huge advantage when it comes to selling smartphones across Africa. And then to your second question about headcount, the 200 target is not tied to Algeria. So most of the impact on Algeria is already behind us. So the 200 headcount reduction that we mentioned has nothing to do with the exit from Algeria. Antoine, do you want to comment on the use of AI across our team? Antoine Maillet-Mezeray: Yes, I can take this one. Thank you. Obviously, we're using AI in tech, be it in cybersecurity or coding. We are able to be much, much more productive thanks to the different tools that we are using. We pay a lot of attention to be agnostic in terms of tools so that we don't end up with 1 or 2 suppliers that will change pricing policy overnight. But we are going much further than pure tech. We're using AI in accounting, for instance, to automate bank reconciliations. If you want a very pragmatic example, we're also using AI in HR. Basically, we have a lot of database, which are very structured and ready to be used consumed by AI, allowing us to produce smarter reporting in a much faster way and being able to share the information across our very large footprint, resulting in better efficiency. Operator: Your next question is from Brad Erickson with RBC Capital Markets. Bradley Erickson: Just a couple of follow-ups on that first question. I guess with maintaining the full year guide, it looks like maybe a little bit of deceleration built in there through the year. I guess would you say that outlook kind of reflects this idea that some of these headwinds you're talking about are sort of dynamic and adjusting and reflected in Q2, but then sort of stabilize through the year? Or is there any contemplation in the range that maybe things get worse? Francis Dufay: Well, in the current international environment, if you -- Brad, if you know for sure what's going to happen, please tell me. We could make a lot of money. Well, more seriously, we acknowledged some level of uncertainty in the international environment with very specific aspects that can have a negative impact on our P&L. We mentioned chip prices and fuel prices. We remain confident in the range that we have given as guidance for the full year and for the second quarter. It accounts -- I mean, it covers, it includes some level of uncertainty. But I think it reflects -- I mean, the fact that we stabilized that range reflects our opinion that most of the disruption we're seeing is temporary. So we're seeing real headwinds like the demand side headwinds in the Ivory Coast due to cocoa prices is real and can be felt on the ground. Smartphone price increases and supply disruption is real and can be felt on the markets. But we all see that as quite temporary and really not disrupting the fundamentals of our business, neither the midterm or long-term opportunity. So we -- and we're also seeing continued strength in the trends in several countries, especially Nigeria, which is still growing over 40%; Ghana, which is growing over 100%. So in short, those headwinds and that level of uncertainty is not structurally challenging our business and it's not something we expect for the long run. So this range of 27% to 32% top line growth that we're giving for the second quarter as well is our best assessment in the current environment based on the early results of the quarter that we're already seeing and reflects the level of confidence in our business model. Bradley Erickson: Got it. And then you called out marketing and being a strong point in your prepared remarks. I guess just within your outlook, how much kind of flexibility do you think you have on marketing given some of these other headwinds you're talking about? And I guess how much kind of like offense do you feel like you can play here in 2026 in terms of putting your foot down on marketing? Or is it still fairly measured given how some of the macro factors you're talking about? Just kind of the upside, downside considerations there with marketing spend. Francis Dufay: Yes. I think 3 things on the marketing side. So first of all, I think we remain at spend ratios that are very reasonable for an e-commerce company of our size, right? Our ratio of spend is slightly lower than much, much bigger peers in emerging markets, which shows frugality and efficiency in that field. So we were very -- I mean we're confident in our ability to spend very efficiently our marketing budget and driving strong returns. Second, we still have major improvements coming over the year in terms of efficiency and the better use of our marketing channels, especially online. And third, we are very reactive as well. A large part of those budgets are spent on online channels where it's very easy to pilot on a monthly, weekly, daily basis. So we are able to make decisions if needed, if we see lower traction in a given market. We're very dynamic in reallocating budgets when we need to on a daily or weekly basis. At this stage, we believe we still have -- I mean we do have sufficient traction and that justifies the amount that we're spending. But we are very flexible and we can be extremely reactive if we see different trends. Bradley Erickson: Got it. And then one last one. Just when you think about the journey to cash flow positive in the next year, you talked about the headcount reduction here in the next few quarters. Besides that, just what are kind of some of the major pain points on reaching that goal that you still -- you feel like you still have to get through? Francis Dufay: You mean the goal of cash flow positive? Bradley Erickson: Correct. Francis Dufay: I would not talk about pain points. I mean I'll let Antoine comment as well, but I think the path is pretty clear, right? I mean if you look at our numbers, now it's just -- it's not just us talking. You have very clear verifiable numbers showing that we're able to scale, we're able to improve the unit economics, get operating leverage and further reduce the fixed costs. So that's a very clear trajectory that takes us to breakeven. It's mostly an execution game. It's mostly an execution game. I would not say we have blockers or pain points. We know very much what we're working on. We need to keep on scaling the top line and keep on delivering those improvements in the unit economics and further reducing in absolute terms of fixed costs. I think you can see a clear trajectory in the last 2 quarters. It's extremely consistent. It's all about execution unless there would be a major macro disruption that we're not seeing at this stage, it's really about execution. Operator: Your next question for today is from Ryan Sigdahl with Craig-Hallum. Ryan Sigdahl: Very nice quarter and execution. Laundry list of, let's call them, crosswinds, some headwinds in Q1 into Q2. Outside of those, it feels like the business is actually outperforming because you reiterated the guide, you outperformed in Q1. Q2 guide is in line despite kind of all of those challenges. So I guess trying to take a step back and maybe normalizing for a lot of those outside factors, how you feel about the progress thus far in the year internally? Francis Dufay: Yes. Thanks, Ryan, for putting it this way. I mean we -- Antoine and I are very deeply in the business and we -- it's sometimes good to step back and realize the progress. I mean we have a tendency to look more at the problems than the successes, but it's how we managed to push it forward. But yes, I think there are very clear bright side this quarter. It's very clear and that's what you see in our presentation on the operating leverage. And we see that we, again, this quarter, just like in the fourth quarter of '25, we're able to show significant GMV growth. So the business model is working while clearly improving all the unit economics. So 31% GMV growth that translates into a significant improvement of 64% of all gross profit after fulfillment and marketing costs. So that's real operating leverage and we're able to further reduce our fixed cost, thanks to pretty hard work on tech specifically this quarter, but also a lot happening in G&A that will pay off in the coming quarters. You see the 1/3 32% improvement in adjusted EBITDA. So I think the bright -- I mean, the key message of this quarter is we're able to show very consistent improvement after Q4 with significant growth that's sustained in spite of the environment and continued progress on the unit economics and fixed costs. And we expect that to continue. There's no reason why the trend should change in the coming quarters. Ryan Sigdahl: Very good. We've noticed -- you mentioned Nigeria strength. We've noticed an expanded pickup station footprint there, particularly in secondary cities. Can you talk about Nigeria, but also you mentioned it in Kenya and others, but kind of the upcountry expansion, how you think about that strategy with pickup stations? And then if maybe that strategy has evolved or changed in recent kind of months as you guys have rightsized the cost structure, infrastructure and overall company? Francis Dufay: So I'll talk about Nigeria right afterwards. But overall, across countries, we keep on expanding our reach. So basically opening new pickup stations in new cities that we're not covering or densifying the network in existing bigger cities. This is a very important component of our growth plan because it basically increases the addressable market, right? We are building our distribution network and partnering with local entrepreneurs. And if we don't have -- I mean, if we do not build the distribution network in a given city, it means that city is outside of our addressable market. So by expanding this network of pickup stations, we are increasing our addressable market, which is arguably one of the easiest and cheapest ways to grow our top line. This is happening across all countries, but Nigeria is the most striking example. A few months back, Nigeria, we are still covering about 1/3 of the addressable market of the population. If we look at the cities where we had established distribution, the total population was about 1/3 of total population, which is massive room for improvement. In our more mature markets, we're close to 60% in Ivory Coast, for example. So it gives you an idea of the potential that's still untapped in a country like Nigeria. So we're very -- I mean, we're happy about the growth in Nigeria. We believe we can still get more than that. The growth in Nigeria is largely driven by up country. So distribution expansion, that's a big driver. But we're also seeing very favorable trends across categories and supplies. We mentioned home & living as a strong category this quarter in Nigeria. We're seeing strong engagement on our local marketplace. We're seeing increased supply from international vendors, mostly from China, but also from Turkey in Nigeria. So I think we have lots of tailwinds in Nigeria and the hard work of the past couple of years is really paying off, which is critically important in a market where, first of all, there's so much potential to address. Second, the competitive intensity has reduced around us. And third and quite importantly, it's a market where we have good unit economics after -- especially after the devaluations over the past few years, local unit costs are fairly low and while it's quite profitable to scale in Nigeria to put it this way. Operator: Your next question is from Fawne Jiang with Benchmark Company. Yanfang Jiang: First of all, your international seller growth appeared very strong. Just wonder how should we think about the merchant ramp-up and the typical lead time from onboarding to more meaningful GMV contribution, particularly considering you are opening a new sorting center [indiscernible] and how would that potentially impact your take rate going forward? Francis Dufay: Yes. So that's an important question, guess -- so how can I put it? So the growth we're seeing today in volumes items sold and the whole business from international sellers is actually the result of the last 3 to 4 years of work. Typically, the timelines when a supply -- when a new Chinese vendor is onboarded, we expect meaningful contribution after more than a year, sometimes 2 years or more to deliver volumes and margins. It's because we onboard vendors who don't always -- I mean, don't know very well our markets. They need to test the waters first, they send small supply to the countries. And then gradually, they will scale their inventory in our most important countries. So this process does take time. So they learn the market and they commit more and more working cap and inventory to our countries. And so what you see today is really the result of like 3 to 4 years of real hard work. What we see on the ground in China, I mean, since the whole tariff thing last year, we've seen that strong -- I mean, much stronger enthusiasm and strong engagement with Chinese vendors. We've seen more and more vendors willing to join our platform and sell on Jumia. The trend has been very well maintained over the past quarters and consistent now. And this increased -- this increased volumes of onboarding of vendors is going to reflect over time, but it's not yet fully felt in the numbers. So the good news here is that we really have a pipeline of vendors and the pipeline of supply coming to Africa that will get -- should get stronger over time due to the medium- to long-term structural nature of the work we're doing with our Chinese vendors. And in terms of margins, as we mentioned in the past, the rise of international supply is accretive to our margins. These vendors typically operate in categories that have higher -- sorry, gross profit ratios such as fashion, accessories, home & living and so on. They are also much better contributors to our margins when it comes to purchasing advertising services and using our storage services. So at the end of the day, it enables us to get higher monetization from those sellers and from the local marketplace. Yanfang Jiang: Understood. Another, I guess, topic I want to touch upon is actually your fulfillment leverage. You guys continue to show the leverage there. Just given you are going to very high growth momentum, especially in some of the countries, how sustainable is, I think, the fulfillment leverage? Are any logistic capacity constraints or upcoming investment we should be mindful? Francis Dufay: I'll spend some time on fulfillment. It's an important one because it's our biggest cost bucket. So first of all, I mean, we're still seeing some leverage on costs this quarter with the fulfillment cost per order that's declining 10% in local currency and it's almost all local OpEx. So the local currency view is relevant. But we're not happy with the progress, right? In dollars, we're flat year-over-year at $2.1 per gross order. We want to do better than that. So just to set the stage, we're not happy with the progress here, although there is some leverage that visible in local currency. We believe those cost per order should keep on going down going forward. And scale should play in our favor. There can be very specific temporary cases where like very high volumes lead to some level of inefficiency, but that's really not what should happen across countries and over the long run. So looking specifically at the improvements and the leverage we have on that fulfillment cost per order, we have a lot of work that has -- well, that has been ongoing over the past 2 quarters already. On the fulfillment -- so on fulfillment staff cost, which is about 1/3 of the cost here, we have a big push for higher productivity and more automation. We're rolling out at the moment, for example, new tools at the warehouse to increase productivity and tracking of the workforce. So we believe we have some potential to improve there. And on the transport side, which is around 2/3 of the fulfillment staff cost, about 60%. So on transport, which is basically all the money we're paying to our local logistics partners. We have recently implemented a renegotiation of all the fees, I mean, a reduction of all the fees. Some of that will be partly offset by the fuel price increases, which will lead to surcharges in some countries. But over the long run, as prices will normalize, we expect the surcharges to go away. And we are working to improve also the efficiency of our local partners for logistics, so we can renegotiate their fees. So we're working on new tools to make middle-mile trucking more efficient for our partners so we're able to split the savings with them. And this will be operational later this year. So we still have a lot to do and we still have a lot of efficiencies to capture there. It's a lot of hard work, right? We're using more and more AI to make it more efficient in supply chain as well. Part of it depends on tech progress, which we're seeing on the ground and scale should be a tailwind in this regard. Yes, I hope that answers the question. Yanfang Jiang: Yes, that's very helpful. Lastly, more on housekeeping. Can you provide some color on the FX -- latest FX trends for your key countries? Francis Dufay: Yes, Antoine, do you want to take FX? Antoine Maillet-Mezeray: Yes. So you can see that we've had a disconnect between the progress we made on the adjusted EBITDA basis and the net loss before tax. And this was driven by Forex exchange, which was noncash. If you compare to Q1 '25 last year, we had a net FX gain of USD 2.1 million. And this year, we have recorded a loss of $3.5 million. Again, that swing is not cash-based. There is no cash impact. And this reflects the impact of FX swing on intercompany balances that we have between the total holding and the operations. We are working actively on this one to reduce the impact of the Forex by accelerating repatriating cash and other restructuring operations. This was for the finance and accounting part. On the business side, before Francis comments, if you want, we see some impact, but what is important for us is that the movements are not too violent so that our vendors do not hesitate to import in the countries, which has been the case this year. So so far, we are able to handle properly the FX swing that we are seeing. Francis Dufay: Yes. I'll just add briefly on that. We've seen huge swings in FX over the past 4 years across our key countries like Nigeria and Egypt. There's no such thing happening right now. Local currencies have been behaving much more strongly even over the past few months. And as Antoine mentioned, the most important part here is that it's not impacting suppliers' confidence. It's not impacting customers' purchasing power in any significant way and we're not seeing any disruption in the business because of this. Operator: We have reached the end of the question-and-answer session and conference call. You may disconnect your phone lines at this time. Thank you for your participation.
James Hart: Good day, everyone, and welcome to the Progyny, Inc. earnings conference call. At this time, all participants are placed on a listen-only mode. If you have any questions or comments during the presentation, you may press star 1 on your phone to enter the question queue at any time, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to hand the floor over to your host, James Hart. Thank you, and good afternoon, everyone. Welcome to our quarterly conference call. With me today are Peter Anevski, CEO of Progyny, Inc., and Mark Livingston, CFO. We will begin with some prepared remarks before we open the call for your questions. Before we begin, I would like to remind you that our comments and responses to your questions today reflect management's views as of today only and will include statements related to our financial outlook for both the second quarter and full year 2026, any assumptions and drivers underlying such guidance, the demand for our solutions, our expectations for our selling season for 2027 launches, anticipated employment levels of our clients in the industries that we serve, the timing of client decisions, our expected utilization rates and mix, the potential benefits of our solution, our ability to acquire new clients and retain and upsell existing clients, our market opportunity, and our business strategy, plans, goals, and expectations concerning our market position, future operations, and other financial and operating information, which are forward-looking statements under the federal securities law. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business as well as other important factors. For a discussion of the material risks, uncertainties, assumptions, and other important factors that could impact our actual results, please refer to our SEC filings and today's press release, both of which can be found on our Investor Relations website. Any forward-looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events. During the call, we will also refer to non-GAAP financial measures, such as adjusted EBITDA. More information about these non-GAAP financial measures, including reconciliations with the most comparable GAAP measures, is available in the press release which is available at investors.progyny.com. I will now turn the call over to Peter. Peter Anevski: Thanks, James. Thank you, everyone, for joining us today. We are pleased to report that we have had a good start to the year, with record first-quarter revenue coming in at the higher end of our expectations, and net income, earnings per share, and adjusted EBITDA all above our guidance ranges. These results reflect that we continued to see healthy member engagement during the quarter, with utilization trending to the high end of our historical range, and our continued discipline in managing the business, which yielded strong margins overall as well as healthy cash. In addition, we also made meaningful progress during the quarter in laying the foundation for future growth through our planned investments to expand the capabilities of the platform, enhance our already industry-leading member experience, and extend our position as a solution of choice in women's health and family building. As the second quarter begins, engagement is pacing consistent with the typical seasonal patterns following the start of the year. Mark will take you through the details shortly, but we are pleased to issue ranges for Q2 that reflect sequential increases from Q1 across all the key results. We are also raising our full-year expectations for adjusted EBITDA, net income, and EPS as well. In short, we have begun 2026 on a strong positive note and are excited for the rest of the year ahead. Contributing to our excitement is the level of activity and energy we are seeing in the market. One example is at the recent Business Group on Health Conference, which is one of the most impactful events for the benefits industry. We had the honor of sharing the stage with one of our largest clients. During this joint session, our client discussed the results of a study they commissioned using a third party to analyze their claims data warehouse, which included all claims, not just family building, from Progyny, measuring the impact of our program over an eight-year period versus what they experienced prior to Progyny. The findings reaffirm what we have been reporting to this client regarding outcomes and value that we have been delivering since program inception. They showed that we increased the number of fertility-related pregnancies per year, doubled the pregnancy effectiveness of each treatment, decreased the multiples rate, lowered the miscarriage rate, and more than halved the preterm delivery rate. These results, in turn, lowered the average cost across fertility and related pregnancies, cost per baby, and their NICU costs. The client put it best when they said this is the kind of story they feel needs to be told, as it achieves the trifecta of member experience, improved health outcomes, and cost avoidance, all of which delivers hard ROI. As an aside, this type of analysis has also been performed by a handful of our other jumbo clients, independently analyzing their respective claims data warehouses, and they have all come to similar conclusions. Thought-leadership events like this, where HR leaders and decision-makers come together to share their experiences and help determine their priorities for the year ahead, are just one aspect of our selling season. This activity, amongst others, has the 2026 selling and renewal season off to a good start, with the level of activity and overall engagement we are seeing affirming how family building and women's health solutions remain a priority for every type of employer. Our overall pipeline and the early build of new pipeline are substantially favorable versus a year ago, and early commitments are pacing ahead of this time last year. Additionally, on the renewal side, we have meaningfully de-risked the season by securing early favorable notifications from some of our largest clients whose agreements were up for review this year. Consequently, the remaining renewal exposure, measured in dollars on the book of business yet to be secured, is at its lowest level at this point relative to prior years. Separately, regarding pipeline, we are encouraged by the activity with aggregators and other distribution partners for our Progyny Select offer. While the timing for its incremental contribution to pipeline will be later in the year due to normal buying patterns for these groups, we are pleased with the progress so far relative to our first-year expectations around Select. Taking all of our pipeline activity together, we believe this once again demonstrates not only how important family building and women's health are to employers, but also highlights the market's recognition that our evidence-based solutions drive measurable value to employers through proven cost containment. Let me spend a few minutes walking you through the drivers to pipeline and overall activity. First, we are seeing good traction across our health plan partners overall, and with Cigna in particular. You will recall this is our first full season with Cigna as a partner, and as expected, we are seeing a good inflow of opportunities from that channel. Second, we are seeing a good contribution from our traditional demand generation activities, where our opportunities remain distributed across greenfields and brownfields—companies looking to add the benefit for the first time or considering a switch from their existing provider. Lastly, we are seeing significantly stronger activity from RFPs on business that is currently with stand-alone competitors. In fact, the activity there has thus far already outpaced what we saw across all of last year. Conversely, we are seeing fewer RFPs than we normally expect from our existing client base, and as previously mentioned, two of our largest clients who were up for review this year have already indicated their intention to continue with us. In short, we believe we are well positioned for the season ahead, we are excited about the activity we are seeing, and we look forward to reporting our progress in the coming quarters. We believe one of the reasons for this positive market activity is that employers are increasingly looking for cost-effective solutions that can address the large and growing portion of their workforce being impacted by infertility and who are in need of coverage and support in order to realize their family building and overall health and well-being goals. The CDC recently reported that the number of births in the U.S. and the overall fertility rate have continued to decline, reaching record lows and extending the trends that began nearly two decades ago. Fortunately, if we peel back the layers of this data, we see something more insightful and certainly highly actionable. While the overall birth rate is declining, it is being driven entirely by women aged 29 and younger. On the other hand, birth rates amongst women aged 30 and over have continued to increase, such that women 30 and over now comprise nearly 53% of all births. This is the highest proportion ever for that age group. I will remind you that the population we serve in our family building solution is generally 30 to 42 years old, with the average age of a woman going through IVF at 36. What all this data tells us is that society has increasingly chosen to defer family building to later in life, and while that may be the preferred path to parenthood for the clear majority of people today, there is a biological reality in that conception without the use of assisted reproductive technologies often becomes more difficult as we age, and for many, unaffordable. We believe this is a macro trend that employers simply cannot afford to ignore. This is no less true even given the heightened focus on the state of the labor market, particularly as it relates to the potential for disruption from AI. As just one data point on that topic, the Wall Street Journal recently reported on a survey of 750 CFOs who concluded that the impact of AI is only expected to reduce their companies' headcount by just 0.4% as compared to what it otherwise would have been for 2026, and that impact is largely expected at entry-level roles or clerical and administrative functions where the tasks are more easily automated. This is all the more reason why having family building benefits in a company's overall benefit offering is critical. We recognize that investors are pricing into our valuation the potential for a negative impact on member engagement or on employer demand for our services. To be clear, we are not seeing any signs of either. As we see it, these concerns are more rooted in what we have called headline risk as opposed to accurately reflecting a shift in market dynamics, which we do not believe will adversely impact our business. Before I turn things over to Mark, let me conclude by saying that we believe our results and outlook reflect that we are as well positioned as we have ever been for this opportunity. This is highlighted by five key areas: early sales commitments; our overall pipeline; the progress we are making with our channel partners; our de-risking of the renewal season and the favorable notifications we have already received; and the traction we are seeing with Progyny Select. We view all of this as evidence of the continuing macro tailwinds, and we believe we are in the best position ever to take advantage of those. Although some headwinds always exist, the outsized emphasis of what is seemingly anticipated in our current valuation runs contrary to what we see. We have seen this play out before throughout our history, when in past years there were concerns at varying times regarding high inflation, tariffs, a potential recession, general macro uncertainty, and the loss of our largest client two years ago. Yet we continued to grow through all of the above, and we expect to continue to do so in the future. We recently completed our $200 million share repurchase program, and Mark will take you through those details shortly. Our board is currently evaluating potential options for a new share repurchase program. We anticipate a decision around May, and we expect to make an announcement at that time. Let me now turn the call over to Mark to walk you through the quarter. Mark Livingston: Thank you, Peter, and good afternoon, everyone. Before I begin, I will note that the 8-K we filed a short while ago includes our usual slide presentation, which summarizes both the results in the quarter and highlights some of the longer-term trends that we believe are important in understanding the health and direction of the business. We have also posted that on our website. Rather than repeating what is covered by that material, I will focus on the key themes that impacted both the quarter and how we think about the rest of 2026 and beyond. The first theme is that this quarter's results reflect once again that member engagement has remained healthy and at levels that were consistent with what we were seeing when we issued the guidance in February. The consistency we are seeing in overall engagement continues to demonstrate that members are pursuing the care and services they need in order to achieve their family building and overall well-being goals. As a result, first-quarter revenue came in closer to the high end of our guidance range, reflecting an increase of 1.4% on a reported basis and more than 12% when excluding the contribution from a large former client who was under a transition-of-care agreement in 2025. As a reminder, the transition agreement pertaining to this client ended as of June 30, 2025. Accordingly, the second quarter that is now underway will be the last quarterly period you have to take that into account when looking at our comparative results. The second theme is that we continue to maintain healthy margin performance even as we continue to invest to expand our product platform, enhance features for our members, and lay the foundation for future growth. Gross margin expanded as we continue to realize efficiencies in care management and service delivery, as well as the anticipated reduction in stock compensation expense. And while adjusted EBITDA reflects investments for our longer term, our adjusted EBITDA margin remains healthy even at a higher level of investment. Our first-quarter CapEx was $6.3 million, reflecting a $3.5 million increase over the prior-year period. I will remind you that we were still ramping this investment program over the early part of 2025. Our third theme is the flexibility to both invest in the business while also returning value to our shareholders. We generated approximately $446 million in operating cash flow, yielding over $200 million on a trailing twelve-month basis, a level we have maintained for five consecutive quarters now. Through our ongoing focus on process improvement and revenue-to-cash management, we also continue to drive further improvements in DSO, which was 11 lower than the first quarter a year ago. This improvement occurred even with the customary build in DSO on a sequential basis from Q4 as we work to establish the payment flows with our newest clients who launched on January 1. As of March 31, we had total working capital of $266 million, which includes $225 million in cash, cash equivalents, and marketable securities. There are no borrowings against our $200 million revolving credit facility and no debt of any kind, and we have no planned use for the facility at this time. The fourth and final theme is that during the quarter we repurchased more than 5.5 million shares for approximately $116 million under our most recent share repurchase program, which began in November and provided us with up to $200 million overall. We have now completed that program through the repurchase of approximately 8.8 million shares in aggregate. Turning now to our expectations for the second quarter and the remainder of 2026, as the second quarter begins, member engagement is pacing consistently with the typical seasonal patterns following the start of the year. Although the unexpected variability in engagement that we previously experienced has not recurred since 2024, the assumptions we are making today, particularly at the low end of the ranges, reflect the potential that further variability in activity and treatments could occur. To be clear, this is the same approach we have been following for more than a year when setting our guidance range. The table at the back of today's press release also outlines our assumptions at both ends of the ranges. In terms of utilization, we are maintaining our full-year assumption of 1.04% to 1.05%, which is consistent with our long-term historical ranges. We are also maintaining our assumption for ART cycle consumption per female unique at 0.93 at the low end of the range and 0.95 at the high end. For the second quarter, we are assuming the customary sequential increase reflecting the ramping of member journeys. On the basis of these assumptions, we are projecting revenue between $1.365 billion to $1.405 billion, reflecting growth of between 5.9% to 9%. If we exclude the $48.5 million in revenue from the client who was under a transition-of-care agreement over 2025, our full-year revenue growth is projected to be between 10.1% to 13.3%. At these levels, we expect 2026 to be our eighth straight year of double-digit top-line growth since we became a public company. With respect to profitability, we are increasing our full-year adjusted EBITDA, net income, and EPS expectations. For adjusted EBITDA, we expect a range of $232 million to $244 million, with net income of $103.7 million to $112.3 million. This equates to $1.23 to $1.34 in earnings per diluted share and $1.98 to $2.09 of adjusted EPS on the basis of approximately 84 million fully diluted shares. As it relates to the second quarter, we expect between $342 million to $355 million in revenue, reflecting growth of 2.7% to 6.6%. Again, if we exclude the $17.2 million in revenue from the client under the transition agreement in the year-ago quarter, our second-quarter guidance reflects growth of 8.3% to 12.4%. On profitability, we expect between $58 million to $62 million in adjusted EBITDA in the quarter, along with net income of between $25.8 million to $28.7 million. This equates to $0.31 to $0.35 of earnings per diluted share or $0.50 to $0.53 of adjusted EPS, on the basis of approximately 83 million fully diluted shares. At the midpoints of the ranges for both the quarter and the year, you can see that we are expecting a consistent adjusted EBITDA margin throughout the year, at a level that is also consistent with our full-year result from 2025, even with the investments we are making to grow the business. We will now open the call for questions. Operator, can you please provide the instructions? Operator: Certainly. Everyone at this time will be conducting a question-and-answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you are listening on speakerphone to provide optimum sound quality. And once again, if you have any questions or comments, please press star 1 on your phone. Your first question is coming from Jailendra Singh from Truist Securities. Your line is live. Jailendra Singh: Thank you. Thanks for taking my questions, and congrats on a strong quarter. My first question is on the early sales activity commentary—very encouraging comments there. A few follow-ups. First, how are these early commitments split between not-nows from last year who might have delayed versus employers looking at this benefit for the first time? And then you also called out, Peter, that you are seeing more RFPs from employers who are currently with your competitors. Are there one or two consistent themes that you are hearing from these employers that are driving more pickup in this RFP activity from competitor clients? Peter Anevski: Regarding your first question, as always, early commitments—a higher proportion of them do come from not-nows. But either way, it is positive overall activity and commitments to date versus last year, as we mentioned. As it relates to your second question, nothing really constructive that I could share relative to what we are hearing. Normal general reviews and general comments, but none that are constructive to share here. The bigger, more important data point is the level of activity that we are seeing versus last year and really any other year relative to potential opportunities around solutions that are with current competitors. Jailendra Singh: Okay. And then my quick follow-up. Last quarter, you called out membership changes because of administrative changes. I know the number of eligible lives is a less important metric for you guys to focus on, but given your experience last quarter, have you made any changes in the process over the last two to three months to make sure you get more regular updates from your clients and we do not get any more surprises like what we saw last quarter? Peter Anevski: We are getting regular updates, but what we are also doing is we are in the process of getting full eligibility files as opposed to just updates relative to numeric headcounts from our clients. We have already increased the level of eligibility files that we are getting from our clients since year-end and expect to continue to do so throughout the year, and by year-end, expect to have eligibility files from the significant majority of our clients. Throughout the year, a combination of the periodic updates and having full eligibility files will help mitigate and identify that again. Jailendra Singh: Great. Thanks a lot. Peter Anevski: Thank you. Operator: Your next question is coming from Brian Tanquilut from Jefferies. Your line is live. Analyst: Hi. Congrats on the quarter. This is Cameron on for Brian. I am just wondering if you could give me some more color on the increase you saw in revenue per ART cycle. Can you walk us through the moving pieces of this? Was this ancillary uptake rate? And do you expect this to persist throughout the year? Thank you. Mark Livingston: Sure. In the beginning of the year, you will see a slightly higher rate of overall revenue per ART cycle because you have a higher proportion of clients—particularly for the new ones—that are starting their journey, so they are in the initial consultation phase. There is revenue associated, but not ART cycles. That was a little less evident last year because the revenue that was contributed from the large client that was under the transition-of-care program was more skewed towards ART cycle activity by the definition of how that transition-of-care program worked. What I would say is more instructive is looking back a couple or few years to see how that progresses through the year. Analyst: Thank you. Operator: Thank you. Your next question is coming from Michael Cherny from Leerink. Your line is live. Analyst: Hi. Good evening. This is [inaudible] on for Michael Cherny. Congrats on the great results. As we think about the investments that you are making in future growth, can you give us an update on the pipeline in terms of new products and maybe some timing on that as well? And could you also give some color on what you are seeing and expecting in terms of upsells of new products both this quarter and this year? Thank you very much. Peter Anevski: Regarding your second question, it is a little early to comment on upsells, but simply to say that upsell activity is also positive. Other than that, it is early relative to any more color than that. As it relates to expectations around new products, the investments and capabilities are not necessarily new products, but additional capabilities for the existing products and/or expanded products that address the same areas for our global population. Analyst: Great. And just as a follow-up, what is embedded in the guide in terms of expectations for upselling of new products for the rest of the year? Peter Anevski: The guidance—everything in guidance—is what is already committed. We do not generally put in expectations of any material kind relative to upselling or new activity. The upsell activity impacts materially the following year. Analyst: Got it. Thank you very much. Operator: Thank you. Your next question is coming from Scott Schoenhaus from KeyBanc. Your line is live. Scott Schoenhaus: Congrats on the quarter and the guidance. It seems like you are managing as best as you can the renewal process and seeing a great start to the selling season, so congrats on all. My question is on utilization, and your previous comments when you said this last selling season this year produced higher-utilizing clients. I guess you are still seeing that, but what drove that utilization towards the higher end? Was it this new cohort? How are they progressing? And so far in April and May, your comments were in line with seasonal activity. Is the new cohort seeing elevated utilization through the first month and a half of the quarter? And then I have a follow-up for Mark. Peter Anevski: Thanks for the comment. If you recall, when we talked about it, it is not that the new cohort is having higher-than-normal utilization as a cohort, but it is because the sales in the cohort this year were weighted more towards a higher contribution of certain industries. Overall, it is generally performing as expected. I would not say it is higher or better or anything else like that, but as expected, as we have talked about. Scott Schoenhaus: Okay. Great. And my follow-up for Mark is clearly you beat on the bottom line here despite the investments. Maybe you can walk us through what further investments are needed throughout the rest of the year and where you could potentially see upside to the margin guidance throughout the rest of the year because you did such a solid job in the first quarter? Mark Livingston: I would say that even since February, we have contemplated the investments and phased them throughout the year, so I think they are already well factored in. We had a good quarter, and we have had some puts and takes—nothing that I would call out specifically—but the things that we felt were recurring, we have already now baked into the full-year guide. We brought up the low end of the range a little bit. We kept the high end of the range the same on the top line, but we have increased the adjusted EBITDA, and that is really just reflective of some of the efficiencies that we were able to gain in Q1 that we see recurring through the rest of the year. Scott Schoenhaus: Thanks, guys. Operator: Thank you. Your next question is coming from Sarah James from Cantor Fitzgerald. Your line is live. Sarah James: Thank you. I am wondering if a larger portion of this year's early pipeline sales are coming from clients that were not-nows in past years—so people that you have been talking to for a while—and, if so, why the uptick this year in the decision process to start benefits? Peter Anevski: In general, early commitments—a higher proportion of them—come from not-nows. This is no different. If you recall, some of the things we talked about last year were that the pipeline build was later than normal, and as a result, that could be part of the contribution to early commitments. Either way, the early commitments are just one indication of the selling season. The overall positive activity and all the things I already mentioned that are driving it are, I think, how I look at the overall activity for the selling season, including the early commitments. Sarah James: Got it. And one more just on the general market. How do you see the mix of client demand between case rate versus back-end savings? Is the market trending in one direction, and would you ever consider a product model that has back-end savings? Peter Anevski: You are talking about some sort of value-based care model and risk? We have not needed to do that to win business, and the back-end savings are part of what drives our success in client retention. The current model has served us well, and we are not getting real pushback on it in terms of the current model versus a back-end savings model with risk and upside, etc. So I do not have any plans to modify. Mark Livingston: I would just point out that in Peter's prepared comments, he highlighted the third-party study that was done by one of our largest longstanding clients, and I think the major takeaway is that the savings are demonstrated by our current model. Sarah James: Great. Thank you. Operator: Thank you. Your next question is coming from David Larsen from BTIG. Your line is live. David Larsen: Hi. Congratulations on a good quarter. Can you just remind me what the revenue growth would have been in 1Q, excluding that one major client from the year-ago period, please? Mark Livingston: A bit more than 12%. David Larsen: Okay. And then with regards to growth in your existing clients, it is my sense that the cost of oil affects everything. The stock market broadly speaking had pulled back significantly a couple of months ago, at the end of last year and first quarter. It has now rallied back up. Are you seeing positive signs from your existing client base in terms of adding employees, which would potentially add to your life count in maybe '26 or into '27? Basically, did this Iran war cause the 400,000 lower count at the start of the year? And could it come back up now that things seem to be getting resolved? Mark Livingston: The Iran war, I do not believe, had anything to do with the true-ups we reported before. In general, we are seeing our existing client base, from a lives perspective, stay relatively flat. The good news is, as it relates to everything costing more, as you said, we are not seeing any impact, including what we are seeing so far in Q2. And as we all know, the war has been going on now for a couple months, give or take. We are not seeing any impact on engagement or anything else like that as well. David Larsen: Okay. And then just any comments on Select? What is the market reception to Select? Thanks. Peter Anevski: The market reception is positive. We are signing up aggregators and distributors. Reaction is positive, and we do not expect to see pull-through on that until really the end of the year when small employers normally make their buying decisions and then renewal period is. Nonetheless, so far we are pleased with the activity and the reception. David Larsen: Thanks. Congrats on a good quarter. Peter Anevski: Thank you. Operator: Thank you. Your next question is coming from Alan Lutz from Bank of America. Your line is live. This is Dev on for Alan. Analyst: Pete, I just wanted to touch on the market growth for ART cycles. I think the latest data CDC put out—it was about a 10% CAGR for ART cycles. Progyny, Inc. is now moving closer to that range, but obviously still appears to be taking share. I would love to get your view on what you think the ART cycle growth is for the market and how we should think about that over the medium term? And I have one follow-up. Thanks. Peter Anevski: There is no data I have gotten that suggests the growth rate has changed relative to what we saw over the last ten years based on the most recent data that is available. That is really all I can share. Relative to growth, some of the pharma manufacturers are reporting growth—they are not giving me exact percentages—but they are reporting growth. It continues to grow, but I cannot comment by how much. Analyst: Okay. Great. No problem. And then, sorry to hop on this—true-ups on the administrative side—but just curious what that came in like this quarter. From what I understand, it is a quarterly process. Was that a positive this quarter? Just commentary from what you are hearing from your employer clients around the health of the employees and retention there. Thank you. Mark Livingston: We are basically at the same level as we have seen in most typical quarters. There are some that are up a little, there are some that are down a little—they have largely offset. As Peter highlighted on an earlier question, we are doing a lot of work to gain actual eligibility files on a recurring basis from these clients, which should help us refine and avoid adjustments like that in the future. We already have some coming in, and we expect to have a majority of our clients providing eligibility files on a regular basis by the end of this year. All of that should help. The last thing I would point out is the revenue growth is exactly what we expected. As we tried to highlight on our last call and since, it is really not a driver per se of activity, but an indicator around it, and those adjustments have not seemed to have any effect on our expectations around revenue. Analyst: Great. Thank you. Operator: And our final question comes from Richard Close from Canaccord Genuity. Your line is live. Analyst: Hi. John Penny on for Richard Close. Thanks for the questions, and congrats on the quarter. First, good to hear on the Business Group on Health study. I know it is early in the selling season, but just qualitatively, is there anything about the value proposition of your services that is resonating more this selling season or anything different than past selling seasons that you would comment on? Peter Anevski: I would say no. I spoke more to the demand, even though the pacing of commitments is ahead also. It is more about demand in the pipeline. We are now in the normal process of articulating our capabilities, differentiating ourselves, and articulating the value that we deliver. Nothing substantially different, but just emphasizing, as we always do, that we manage for each individual member on a sponsor's behalf that goes through the program—good outcomes and favorable outcomes—but we also manage overall program cost containment, which is really important for sponsors as they review their alternatives. Analyst: Alright. Just as one follow-up, non-GAAP gross profit or gross profit margin was very strong in the quarter. Anything in particular that is driving that? And is this level sustainable, or is there going to be some coming back here the rest of the year? Mark Livingston: A couple of key things. We have been highlighting that stock compensation expense will be coming down as some of the recognition period for older grants begins to expire. It really started last year in the middle of the fourth quarter, so that is a significant piece of that savings. There is also recurring, regular efficiency that we have been able to gain, which will recur. Both are recurring throughout the balance of the year. It is part of what is contributing to the improvement in adjusted EBITDA that we have now included in the guidance versus what we did a couple months ago. Analyst: Alright. Thanks. Operator: Thank you. That concludes our Q&A session. I will now hand the conference back to James Hart for closing remarks. Please go ahead. James Hart: Thank you, and thank you, everyone, for joining us this afternoon. We know it is a busy day. For those we will not see next week at the conference, please feel free to reach out to me at any time for any follow-ups. Thank you again. Operator: Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Crane NXT Q1 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Matt Roache, Vice President of Investor Relations. Please go ahead. Matt Roache: Thank you, operator, and good morning, everyone. I want to welcome you all to the first quarter 2026 Earnings Call for Crane NXT. Before we begin, let me remind you that the slides we will reference during this presentation can be accessed via the Investor Relations section of our website at cranenxt.com, and a replay of today's call will also be available on our website. Before we discuss our results, I encourage all participants to review the legal notice on Slide 2, which explains the risk of forward-looking statements and the use of non-GAAP financial measures. Additionally, we refer you to the cautionary language at the bottom of our earnings release and in our Form 10-K and subsequent filings pertaining to forward-looking statements. During the call, we will also be using non-GAAP financial measures, which are reconciled to the comparable GAAP measures in the table at the end of our press release and accompanying slide presentation, both of which are available on our website at cranenxt.com in the Investor Relations section. With me today are Aaron Saak, our President and Chief Executive Officer; and Christina Cristiano, our Senior Vice President and Chief Financial Officer. On our call this morning, we'll discuss our first quarter highlights the early completion of the Antares Vision acquisition, our financial and operational performance, and our updated 2026 financial guidance. After our prepared remarks, we'll open the call for questions. With that, I'll turn the call over to Aaron. Aaron Saak: Thank you, Matt, and good morning. I appreciate everyone joining the call today to discuss our first quarter results. I'd like to start by thanking our Crane NXT team members around the world for their strong performance, which helped us begin the year with solid momentum. Starting on Slide 3. In Q1, we delivered on our 3 value creation priorities of accelerating organic growth, building on our leadership positions and driving operational excellence through CBS. In the quarter, we had organic sales growth of approximately 6%, with total sales growth of approximately 17% year-over-year. Also in the first quarter, we further built on our leadership positions, successfully completing the acquisition of Antares Vision ahead of schedule. I would like to extend a special welcome to our new team members from Antares Vision, and we're excited to have you part of the Crane NXT team. Finally, through our focus on continuous improvement, we increased adjusted EBITDA margin by 80 basis points, a 22% improvement over the prior year. In summary, I'm pleased with our start to the year and delivering on our value creation priorities. Moving to Slide 4. I'd like to provide an overview of Antares Vision and why we're so excited by the technology and expanded end markets it brings to the company. At the end of March, we successfully completed all key milestones related to closing the transaction, which was ahead of our original schedule. Now as part of Crane NXT, Antares Vision meaningfully expands our reach into the $3 billion life sciences and food and beverage end markets and further positions Crane NXT as a global leader in authentication and traceability technologies. As shown on this slide, Antares Vision provides advanced detection and inspection equipment, field and remote services and track and trace software that ensures the quality and traceability of products from manufacturing through distribution to consumers. Its core end markets are life sciences and food and beverage with sales primarily coming from the Americas and Western Europe and a growing list of customers in emerging markets. With the transaction now complete, our focus is on executing our integration and synergy plans. Moving to Slide 5. With the addition of Antares Vision, we've successfully built on our core positions and created an integrated and differentiated portfolio, providing customers a full suite of authentication and traceability technologies. These include proprietary security features applied to physical products, the ability to track and trace those products through the supply chain, detection and inspection equipment to authenticate products and ensure their quality, a field service organization for commissioning and maintenance of the equipment and unique capabilities to bring these solutions to governments around the world. These technologies and operational capabilities are a key differentiator, allowing us to truly be a trusted partner to our customers and their consumers. Moving to Slide 6. Antares Vision now sits alongside our CPI business and our newly established Detection and Traceability Technologies segment, or DTT. We see clear and actionable opportunities for operational synergies between Antares Vision and CPI as both businesses are centered on equipment manufacturing, advanced detection system design, and field services. We are confident we can realize these synergies, leveraging our established integration and operational improvement playbook through the Crane Business System. DTT is also highly complementary to our existing Security and Authentication Technologies segment, or SAT. Put simply, DTT focuses on ensuring product quality, authenticity, and traceability across global supply chains. And SAT is focused on helping to prevent the counterfeiting of products and identities through our proprietary security technologies. Together, both segments position Crane NXT as a differentiated global leader across the full authentication and traceability value chain. Now with that, let me hand the call over to Christina to review our first quarter performance in more detail and our updated guidance. Christina Cristiano: Thank you, Aaron, and good morning, everyone. I'd also like to express my appreciation to our associates around the world for their hard work this quarter. Starting on Slide 7. We're off to a good start to the year with sales of $388 million, an increase of approximately 17%. Organic sales increased approximately 6% year-over-year, driven by continued strong performance in SAT partially offset by expected softness in CPI hardware. Adjusted EBITDA margin increased approximately 80 basis points to 19%, driven by the SAT volume flow-through and the realization of operating synergies in authentication. We delivered adjusted EPS of $0.60, an increase of approximately 11%, which is on track with our full year guidance expectations. Finally, free cash flow reflects normal seasonality and timing of payments in the quarter. Based on our strong backlog and delivery schedule, we expect to accelerate free cash flow throughout the year and to achieve a full year conversion ratio between 90% and 110% on track with our guidance. Moving to our segments and starting with Security and Authentication Technologies on Slide 8. In the first quarter, we achieved sales growth of 51% year-over-year, including the contribution from the De La Rue Authentication acquisition that closed in May 2025. Organic sales grew by approximately 22% driven by continued robust demand in international currency and a favorable comparative to 2025 in U.S. currency. This quarter, we were excited to welcome the U.S. Treasurer, Brandon Beach to our currency facilities in Dalton, Massachusetts and Nashua, New Hampshire to learn more about the advanced technology and security measures that go into manufacturing the U.S. currency, and we look forward to the launch of the new $10 banknote, which is expected to be announced this year. We also ended the quarter with 3 new micro-optics wins in our international currency business and are on track to achieve our full year target of 10 to 15 new denominations. I'd like to congratulate our currency team on their continued success, including their work for Curaçao and Sint Maarten Central Bank, which was recently named the 2025 Bank Note of the Year by the International Bank Note Society. These notes, which were released last year are beautifully designed and feature our advanced micro-optics technology on both sides of each banknotes. Adjusted EBITDA margin increased approximately 600 basis points to 20% reflecting the benefit from higher U.S. currency volume and execution of synergies in the authentication business as planned. Looking forward, we expect to see continued margin expansion in SAT and are on track to end the year with an adjusted EBITDA margin of approximately 25%. Finally, SAT backlog continues to be robust and this, along with a healthy funnel of opportunities, gives us high confidence in achieving our full year sales target. Moving to Detection and Traceability Technologies on Slide 9. I'd like to highlight that our first quarter sales and adjusted EBITDA reflects CPI only, as the Antares Vision transaction closed at the end of the quarter. Additionally, as of March 31, we have consolidated Antares's balance sheet into Crane NXT and are now including its backlog in the DTT total as presented on this page. Sales declined approximately 4% year-over-year as mid-single-digit growth in CPI service was more than offset by expected lower hardware sales. Adjusted EBITDA margin decreased approximately 160 basis points year-over-year, reflecting the lower hardware volume and product mix. We expect accelerating sales growth and margin accretion in CPI throughout the year, driven by productivity programs and disciplined cost management. These factors will drive an incremental improvement to CPI's expected full year adjusted EBITDA margin of approximately 20 to 30 basis points. Segment backlog was $221 million, including approximately $100 million of Antares Vision backlog, which we expect to deliver in 2026. CPI backlog of approximately $120 million reflects sequential growth of approximately 8% with a book-to-bill ratio of approximately 1. Turning to our balance sheet on Slide 10. We ended the first quarter with net leverage of approximately 2.9x, including the financing for Antares Vision. Looking ahead, we anticipate deploying free cash flow toward debt reduction and expect to end 2026 with net leverage of approximately 2.3x. This low leverage and our substantial liquidity provide us with ample capacity to deploy capital to M&A in 2027, further building on our leadership position. Moving now to Slide 11. We are updating our 2026 guidance to reflect the inclusion of Antares Vision. For the full year, we now expect total sales growth of 15% to 17%. In SAT, we continue to expect high single-digit sales growth, driven by high single-digit growth in U.S. currency from a favorable mix of banknote demand and low single-digit growth in international currency over a very strong performance in 2025. In Crane Authentication, we expect mid-single-digit organic growth with total growth in the low 20s percent, including a full year contribution from De La Rue Authentication. In DTT, we expect sales growth in the low 20s percent, including Antares Vision. In CPI, we continue to expect sales to be flat year-over-year, reflecting mid-single-digit growth in service, offset by approximately flat to slightly down sales in hardware and vending. Antares Vision will add approximately $200 million to $210 million of revenue for 9 months in 2026, with Q4 being the highest quarter. We now expect our full year adjusted segment EBITDA margin to be approximately 27% including Antares Vision. We are maintaining our full year EPS guidance range of $4.10 to $4.40 as we expect the benefit of productivity initiatives in the core businesses and the EBITDA contribution from Antares to offset the expected incremental interest expense. Looking ahead to the second quarter, we expect mid-teens sales growth in the SAT segment, driven by timing of international currency shipments. In DTT, we expect mid-20s percent sales growth with CPI sales approximately flat to slightly down year-over-year and Antares Vision contributing approximately $60 million to $70 million of sales in the quarter. Now I'll turn it back to Aaron to provide closing remarks. Aaron Saak: Thank you, Christina. To wrap up, we delivered a strong start to the year, delivering on our value creation priorities. First, we're accelerating our organic growth, achieving mid-single digits in Q1. Second, we're building on our leadership positions in authentication and traceability technologies by closing the Antares Vision acquisition ahead of schedule, and it's expanding our TAM into the life science and food and beverage end markets. And third, we drove operational improvements, expanding our adjusted EBITDA margins by 80 basis points. Putting this all together, we continue building momentum as we progress toward our longer-term targets as shown on the next slide. As we outlined at our recent Investor Day, our first priority is focused on accelerating organic growth with the goal of delivering sustainable mid-single-digit growth over the coming years. Second, we plan to continue strengthening our core businesses through targeted organic investments alongside a disciplined approach to M&A, with acquisitions that build on our leadership positions in authentication and traceability technologies. Taken together, these initiatives are expected to grow the company to approximately $2.5 billion in sales in 2028, while maintaining net leverage below 3x. Third, we're committed to driving operational excellence, and we expect to sustain adjusted EBITDA margins in the mid-20% range and to generate approximately 100% free cash flow conversion. We're building a technology-driven leader with durable advantages, strong cash generation and a clear road map for long-term value creation. So thank you again for your time this morning. And I'd also like to again thank our Crane NXT team members around the world for their commitment to our customers, to our communities, and to all of our stakeholders. And with that, operator, we're ready to take our first question. Operator: [Operator Instructions] Our first question comes from the line of Matt Summerville with D.A. Davidson. Matt Summerville: I just want to focus on the international portion of the currency business for a moment. Is there a way for you to either quantify or qualify how the go-forward funnel of opportunity looks in that business today versus maybe a year ago? And we're aware of a significant amount of oncoming redesign activity internationally. I'm wondering if you can sort of pencil out through the end of the decade, whether you envision that peaking or still extending further beyond that? Aaron Saak: Yes. Thanks, Matt. And I appreciate the question. I think, as you know and we've talked about, we're just incredibly confident in the performance of the international currency business. We have a backlog in place that takes us through this year. We're building out for '27 and even some bookings into '28. So very high confidence in how we're performing. I'd go back, Matt, to what we talked about at our Investor Day. We're adding between 10 to 15 new micro-optic wins a year. With that, when you pull that out to 2028, we're going to be approaching 200 denominations under -- or using our micro optics versus just 150 in 2024. So significant increase there. And to your point, we see a number of opportunities. In fact, over 70 denominations that are going to come to being quoted and designed between now and 2030. And that momentum, we do not see abating here over the next coming years. My crystal ball may not be good enough to -- for a decade. But I can tell you for the next 4, 5 years out to 2030, this is a very strong business with a lot of optimism and tailwinds to it. Matt Summerville: In terms of Antares, can you maybe help quantify, obviously, that's going to be dilutive this year. Can you maybe help quantify the magnitude of dilution and maybe if you have an early kind of prognostication on how accretive that deal may be in '27 as you reduce indebtedness and drive efficiencies, et cetera? Aaron Saak: Yes. Thanks, Matt. So exactly as you've indicated here. We do have added interest expense coming in because we've closed the deal and closed it earlier than we originally expected. That's going to be partially offset by the increased profit that Antares Vision brings in 2026. Net-net, we're seeing a few million dollars that are going to be offset though, by increased margins in our core businesses. And as Christina said in our prepared remarks, we're seeing that coming out of CPI with 20 to 30 bps of improvement in margin. So we're able to cover that several million dollars -- a couple of million dollars of net headwind out of that in Antares. In '27, it will be accretive to our EPS and certainly, we'll wait to give updated guidance later in this year, early next in reality on exactly what that means in '27. Exactly as we expected other than we were able to successfully close the deal earlier, Matt. So we feel good about that and the margins that we're seeing in the core are really coming through to hold that EPS range for us. Operator: Our next question comes from the line of Bob Labick with CJS Securities. Bob Labick: Congrats on a good start to the year. Aaron Saak: Thanks, Bob. Good to hear you. Bob Labick: So looking at SAT and kind of digging in a little deeper and maybe we were a little off, but currency sales were much stronger than we expected and authentication were a little bit weaker than expected. Could you talk about the underlying dynamics between the 2? Because you didn't really -- I think you maintained your full year guidance. So maybe timing, it may be something else. But if you could just give us a sense of the strength in currency. And I think it looks like OpSec may have been down year-over-year, but you still have mid-single-digit organic growth as part of your guidance for authentication. Aaron Saak: Yes. Why don't I hand it over to Christina. We can talk about currency, and I'll take authentication. Christina Cristiano: Yes. Sure, that sounds great. Bob, so starting with currency, I just want to start by saying, as Aaron just said, we have very high confidence in our 2026 sales guidance. So we'll expect to see mid-single-digit growth in currency for the full year. That's a high single-digit growth in the U.S. based on favorable mix and a low single-digit growth in international based on a very difficult comp to 2025, as you know, where we had just a blowout year, particularly at the end of the year last year. Now if you step back, that creates a linearity dynamic this year. So the phasing of the sales will not be linear this year in currency, we'll have exceptionally strong performance in the first half driven by U.S. currency and then less strong performance in the second half driven by that difficult comp in international. And so overall, just on currency, as Aaron said, we've got over 90% of our sales in backlog for 2026, and we have high confidence in that sales guidance. Aaron Saak: Yes. And let me pick up on that on the rest of the segment in authentication. Bob really performed as we expected in Q1. We've been going through a lot of CBS and synergy activities. That's on track ahead of schedule from what we originally said a few years ago when we first did OpSec and then last year when we closed De La Rue. And what you're seeing run through is some of the 80/20 work and again, the rationalization of the products. And that's what we expected. So as Christina said in her prepared remarks, we're expecting mid-single-digit growth in authentication this year. And I do want to point out, Bob, and congratulate our authentication team and may be hard to believe, but just this last week, we celebrated the 1-year anniversary of Crane Authentication, where we brought the businesses together. And that's what's really driving a lot of this great 80/20 work in CBS. So congratulations to that team. And I know we're all excited about the next few years ahead. Bob Labick: Super. Okay. And then congrats on closing Antares early. And as it relates to Antares, could you just remind us of some of the growth drivers and let us know, has -- given the European exposure and everything, has it been impacted at all by the war, higher transportation, fuel costs? Any kind of impacts from the macro on Antares? Aaron Saak: Sure. Let me take that last part first, Bob, the simple answer here is, no. Well, we don't really see any significant or material impact to Antares from the war or any of the macro events occurring. What really excites us by it by bringing it into the portfolio is exposure to secular growth in end markets like pharmaceuticals, life sciences and food and beverage that expand our TAM up to now $13 billion and really put us in the position of market-leading authentication and traceability technologies. And we see these as a long-term secular growing markets at mid-single digits. With the leading products in an integrated portfolio. So we're excited to have Antares in the portfolio. And I'd say in the last 30 days since we closed, we've really hit the ground running. Operator: Our next question comes from the line of Ian Zaffino with Oppenheimer. Isaac Sellhausen: This is Isaac Sellhausen on for Ian. Question would be on the DTT side as far as CPI hardware, has anything changed as far as growth expectations across end markets? And maybe when you would expect to see some normalization in vending? And then the second part would just be on the CPI services growth. Maybe what's driving that? Is it mainly more recurring maintenance across some of the installed base? Aaron Saak: Yes. Thanks, Isaac, for that question. Really pleased here with CPI. Performed exactly as expected in Q1. The team did a really good job. And as you know, Isaac, we're focused in that business on driving and maintaining our high margins. We're going to end this year with adjusted EBITDA margins of about 30%. And as Christina said, we're increasing that incrementally by 20 to 30 bps based on productivity programs and cost actions going on inside that business and maintaining approximately 100% free cash flow. So really strong, as expected, consistent performance here from CPI. To your question on the different subcomponents of that business, and we think about that first is services, hardware and vending. Services is growing mid-single digits in the quarter. We expect that for the year, and that's where we're growing last year. And it's where we're targeting investment and the build-out of the capabilities. And it's coming from expanding our service offering, not only inside of our CPI equipment portfolio with a better attach rate but also to third-party equipment. And that's where we see the ARR or recurring revenue growth continuing to occur in that business. And as you know, that's a very resilient, sticky revenue base that we like quite a bit. So good performance there. Hardware and vending largely as expected, we had some seasonality here in the first quarter that we talked about and guided to. That played out as expected, and as Christina mentioned, we expect some recovery there as we go through the year, net-net being about flat for the last part of the year. So hopefully, that helps, Isaac. In summary, really feel good about the performance in Q1 and performing as expected. Isaac Sellhausen: Yes, that's helpful. And then just as a follow-up on U.S. currency, obviously, with the new $10 bill rolling out. Maybe if you could -- I think you walked through a little bit of the growth trajectory in the business earlier, but maybe how you see volumes progressing through the year? And then if we should see a benefit rolling into 2027? Aaron Saak: Yes. Thanks, Isaac. So hey, we're ready to go with the new $10 bill. Our team has done a great job. And our part of that is largely set. What we're really focused on now is with our engineering and designing team is getting ready for the $50. And getting ahead of that so that we're ready to go when the BEP is ready to start their pilot production. So when you look at what's been designed for the $10, which obviously hasn't been announced, with what we're doing on the $50, very confident that the U.S. government is going to include advanced security features, similar, if not better, than what other governments are doing around the world. And we see that playing out in the international currency business. Now in terms of this year, we're benefiting from a nice mix improvement in the U.S. currency, and that's going to read through to high single-digit growth this year. Very confident in that, and we typically follow what the Fed order has projected, and that's what we're seeing. So really, the uplift as we talked about with you and others for the new U.S. currency materially occurs really more in 2027 for us. But feel very confident in the long-term prognosis of this business with what we're seeing. Operator: Our next question comes from the line of Zach Walljasper with UBS. Zachary Walljasper: I guess the first question I had, which is something around the model. Can you just help parse out what's happening below the line? Because it looks like tax was a little high 1Q and then the nonoperating expense is going up relative to the previous guide. And then the other question I had was just around Antares Vision just closed. Anything you guys can share around like the appetite for further M&A and the M&A funnel? Like should we expect more deals within the next year or so? I know it's part of the long-term outcome, but I'm just curious about maybe more near term now that it just closed. Aaron Saak: Yes. Thanks, Zach. So why don't I hand it over to Christina on the modeling question, and then I'll take the M&A part of your question. Christina Cristiano: Yes. And I'll just make a note that there are no changes to our core business guidance. The only changes to the guidance were to include Antares Vision. So just to be clear on that. And the impact of Antares, as you see reading through there's an increase in the sales for DTT. And then an adjustment to margin just for the dilution that Antares brings because it comes into the portfolio at a lower operating margin, but we expect to execute CBS to drive that margin back up to the low 20s percent as we've done with our other acquisitions over the next few years. So feel very confident that we'll get that margin up to the low 20s percent. Then what you're seeing in nonoperating is the addition of interest expense related to the Antares Vision financing. And so that, in total, gets offset with the profitability that Antares brings into the company as well as the productivity that Aaron mentioned in the core business. When you put all that together, we're able to maintain our EPS guidance range of $4.10 to $4.40 and we have high confidence in that guidance range. Aaron Saak: And Zach, let me take the second part there, the question on M&A. Right now, our focus, as you can probably imagine, is on integrating Antares Vision. We're on track and really my compliments to our team and in the Antares Vision team, we've hit the ground running on that here in the month of April. And as it relates to future M&A, I would frame that more as we're really not looking to anything until 2027. And that's also so that we keep our balance sheet well below 3. So as you saw, we're at 2.9, we're going to deploy our cash flow to pay down that debt, get into the low 2s as we go through 2026. And then we'll be ready to go. In 2027, the funnel remains healthy. We're going to continue to use our disciplined framework around markets that are focused on authentication and traceability technologies and feel very good about where we're positioned to potentially do something in 2027. Operator: Our next question comes from the line of Bobby Brooks with Northland Capital Markets. Robert Brooks: I get it's still early days on the ownership of Antares, but I know one of the pieces they brought into the portfolio that's really exciting is the tracking equipment paired with the software. So I was hoping you could discuss what sort of incremental capabilities that brings into your portfolio? Because I think some folks might not appreciate that enough given you already had some hardware and software for tracking and tracing. So curious to hear more there. Aaron Saak: Yes. Thanks, Bobby. I appreciate that question. And it really is a key jewel inside the Antares portfolio. We call that the DIAMIND platform. And you're right. And it's actually part of the integrated portfolio we now have when you link this to some of the capabilities we had in our authentication business, tracking and tracing of products more through the brand and sports leagues and luxury good channels. What Antares brings, it's really a step-up in the capabilities because now we're moving into markets like pharmaceutical and food and beverage that, in some cases, are regulated by the government. And that's a whole step-up in sophistication to track the product from the point of manufacturer, all the way through the consumption of that product by the consumer and every step in between. So I would just say it's a, again, more sophisticated, more detailed type of track and trace software that really brings and elevates our capabilities. And why we're excited by it Bobby, is just, first, the underlying growth in that market that more governments are regulating this for their pharmaceutical products and food and beverage as well as the ability to take the core capabilities of it into other markets. And of course, as you just said, it's very early days for that, but that's strategically where we want to go with the technology. Robert Brooks: Super helpful. Maybe just a follow-up there. Do you think there's -- do you think it's more likely to take that higher -- the higher-end tracking and trace from Antares to some of the markets that you were already in previously in SAT? Or is it maybe more taking some of the SAT products and layering them into the customers that Antares is already serving? Aaron Saak: It could be both. I'll tell you what's our focus right now, and it's a little bit due to it's faster to take the products from Crane Authentication and start to partner those with the Antares sales and products into their channel. And we're already doing that. That's a key part of where we saw commercial synergies. And so that's the early focus area here in 2026. Robert Brooks: That's super helpful. And then just last one for me. You've mentioned, Aaron, I think in the prepared remarks, you targeted growth or targeted organic growth initiatives. And I was just curious if we could hear more about what those look like? Is it similar to the facility expansions in Malta and domestically within SAT, or is it hiring more sales folks to go after those cross-sell opportunities or break it into new markets? Or maybe it's something completely different? Aaron Saak: No. Thanks, Bobby. I appreciate getting a little more precise on that. It really is what you referred to. It's this increase in CapEx and OpEx in our primarily international currency business to take advantage of the just increased win rate we're having and what we see in the coming years. And maybe, Christina, you can talk to some of that in more detail. Christina Cristiano: Yes. We spoke about this last quarter a little bit. So just to reframe, the international currency demand right now is exceeding our expectations. And so we're prioritizing organic growth and investing in that area. And in total, our CapEx will still stay in the same range of about 3% to 5%, but we'll see a greater allocation toward currency and right now, this is focused on building new production lines and outsourcing with partners so that we can just increase our capacity. So as Aaron said, we'll be spending more, you're seeing a little bit of cost coming through in OpEx right now related to freight and supplies and outsourcing, and that will be a few million dollars this year. And then later this year, we'll ramp up more on CapEx which will take 1 to 2 years to build the facility -- the production lines that we're working on. Overall, I think the key point here is we're actively managing our working capital and focusing our CapEx on the areas that will drive organic growth and the highest return. Operator: Our next question comes from the line of Matt Summerville with D.A. Davidson. Matt Summerville: I think it makes a lot of sense to take a minute and just kind of talk through maybe the pluses and minuses that you would want us to be thinking about from a modeling standpoint as we kind of progress through the rest of the year and $0.60 in EPS in Q1, how should we be thinking about kind of the sequential build in earnings through the year to, say, the midpoint of your guidance range? What are the more pronounced things you want us to all be aware of and kind of just a little bit of help with that earnings build? Christina Cristiano: Yes. Maybe I'll start and then Aaron, you can jump in. And again, just confirming that we are maintaining our full year guidance range -- or full year EPS guidance range of $4.10 to $4.40. And so you can expect an acceleration throughout the year. So a linear progression of EPS throughout the year. Antares comes into the portfolio and is a little bit dilutive, as Aaron said, a few million dollars to EPS, but we plan to offset that with productivity in the core. So there's really not a change to the core EPS guidance. Aaron Saak: Yes. I would add, Matt, on the top line, which will definitely flow through, right? In terms of the pluses, you're going to see an acceleration here of CPI exiting Q1, as we've talked about, really unchanged from how we talked about that last quarter. With a little bit of incremental improvement in our margins, as we said in the prepared remarks. For the rest of DTT, which is Antares, the phasing of that, as you think about the year is a little more skewed into the fourth quarter. That's the normal seasonality of their business, where they typically ship large projects, particularly in the pharma space at the end of the calendar year. That's something not new but normal in that business. And with that comes a little bit of an improvement in operating profit or EBITDA margins in the fourth quarter. The one thing I would point out, and we've talked about this, but we will see it as currency inside of the SAT business continues to grow in Q2, we're going to face some tougher comps as we get to the back half of the year. And I really want to point that out, particularly in late through Q3 into Q4, where we just had outstanding performance in Q4 of last year, that's going to tend to become a negative top line growth for us in Q4, but it's just due to the strength that we had in 2025. So, hopefully, that helps, Matt to give you a little bit more color. Matt Summerville: Yes. And then maybe if you can just comment a bit on what kind of magnitude of relative price capture you expect incrementally in '26 across the 2 businesses? Aaron Saak: Yes. Again, I'd like to think about it ex currency, Matt, because of that being a project business and you kind of see it though come through in the margin rates in that business. When you think about CPI, authentication, let's stick to the core there. We're going to see kind of a low mid-single-digit price increase year-over-year. And we're more than offsetting the inflation we're seeing. And that does not include, though, some of the actions we've taken, like many companies right now to offset freight increases that are coming through. The team has done a great job there. We're offsetting those. So kind of core price of, call it, low to mid-single digits across the portfolio. Operator: I'm showing no further questions at this time. I would now like to turn it back to Aaron Saak for closing remarks. Aaron Saak: All right. Well, thank you, operator, and thanks again for all the questions today. So as we conclude our call, I'd like to once again thank our NXT team around the world for their solid start to the year. And I also want to take another moment to welcome our new Antares Vision colleagues to the company. We're excited to have you, and welcome aboard. As I mentioned in my earlier remarks, Q1 was an important proof point on delivering on our value creation priorities. And I look forward to giving you all an update on our progress next quarter. So thank you again for joining today, and I hope you have a wonderful week. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Amylyx Pharmaceuticals First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that this call is being recorded at the company's request. I would now like to turn the call over to Lindsey Allen, Vice President, Investor Relations and Communications. Please proceed. Lindsey Allen: Good morning, and thank you all for joining us today to discuss our first quarter 2026 financial results and business update. With me on the call today are Josh Cohen and Justin Klee, our Co-CEOs; Dr. Camille Bedrosian, our Chief Medical Officer; Jim Frates, our Chief Financial Officer; and Dan Monahan, our Chief Commercial Officer. Before we begin, I would like to remind everyone that any statements we make or information presented on this call that are not historical facts are forward-looking statements that are based on our current beliefs, plans and expectations and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, our expectations with respect to avexitide, AMX0035, AMX0114 and AMX0318, statements regarding regulatory and clinical developments and the impact thereof and the expected timing thereof and statements regarding our cash runway. Actual events and results could differ materially from those expressed or implied by any forward-looking statements. You are cautioned not to place any undue reliance on these forward-looking statements, and Amylyx disclaims any obligation to update such statements unless required by law. Now I will turn the call over to Justin. Justin Klee: Good morning, everyone, and thank you for joining us. The first quarter of 2026 was marked by execution across our pipeline. Most notably, we continue to progress the pivotal Phase III LUCIDITY trial of avexitide, our investigational first-in-class GLP-1 receptor antagonist with FDA breakthrough therapy designation in post-bariatric hypoglycemia or PBH. We are executing on the 3 strategic imperatives for avexitide that we outlined earlier this year. First, we are advancing the pivotal Phase III LUCIDITY trial toward top line data. Randomizing and dosing the last participant in late March was a significant milestone. We have a clear line of sight toward the completion of the 16-week trial, and we remain on track for a top line readout next quarter. Second, we are advancing NDA readiness and regulatory preparations. We are already drafting NDA sections to support a potential submission. And third, we continue to strengthen our launch readiness. We are executing against a comprehensive commercial readiness road map to help ensure we are fully prepared for commercialization of avexitide, if approved, in 2027. In addition to avexitide, we continue to make progress across our broader pipeline. For AMX0318, our long-acting GLP-1 receptor antagonist, IND-enabling studies are underway. We are targeting a 2027 IND filing. For AMX0035 in Wolfram syndrome, we anticipate presenting longer-term week 96 data from the Phase II open-label HELIOS clinical trial at an upcoming scientific meeting. And for AMX0114 in ALS, we fully enrolled Cohort 2 of the Phase I LUMINA trial in March. At the ENCALS Annual Meeting this June, we expect to present early biomarker data from Cohort 1, the first and lowest of 4 doses being evaluated in the trial. We expect these data will provide initial information about the levels of the ALS biomarkers being assessed in the LUMINA trial from the first cohort. As we continue to advance our pipeline, we are simultaneously preparing for the potential commercial launch of avexitide. To discuss our launch readiness efforts, Dan Monahan, our Chief Commercial Officer, is with us on the call today. Dan joined Amylyx in January 2024, bringing more than 2 decades of experience. He was instrumental in the commercialization of Otsuka's Rexulti, Novartis' Cosentyx and Sanofi's Lantus and Actonel, among others. With that, Dan, I'll turn the call over to you. Dan Monahan: Thank you, Justin, and good morning, everyone. I'm pleased to be on the call today to discuss how we have been refining our launch strategies as we prepare for the potential commercialization of avexitide next year. The more we engage with the PBH community, the more we understand the profound unmet need that exists. We are operating with a deep sense of urgency. To date, our commercial efforts have been focused on gaining key insights into the PBH market. This includes gathering direct insights from people living with PBH and the health care professionals who are managing their condition. In addition, we are developing a deep understanding of the patient journey and continuing ongoing claims work to help us determine where patients are being treated. To enable our commercial preparations, we've made key hires across marketing, market access and commercial operations. Ahead of the potential approval and commercial launch of avexitide, our immediate focus is on disease state education. This includes raising stakeholder awareness of PBH with an emphasis on the pathophysiology, the importance of accurate and timely diagnosis and the profound unmet need and burden of the condition. We plan to launch this disease state education campaign this summer. Looking at the market opportunity, our independent claims analysis and ongoing field engagements continue to support our estimate of approximately 160,000 people living with PBH in the U.S. who have undergone the 2 most common types of bariatric surgery: sleeve gastrectomy and Roux-en-Y gastric bypass. Our estimates are firmly rooted in the growing body of prospective and retrospective published literature, including large long-term cohort studies evaluating hypoglycemia in people who have undergone bariatric surgery. Importantly, our ongoing market research indicates that endocrinologists have a high intent to treat PBH if there were to be an approved medicine. To reach appropriate patients, we have initiated our marketplace sizing efforts and continue to identify key centers and endocrinologists that manage this condition. Building up to the potential launch, we will refine these efforts as more insights are generated. Our commercial preparations are advancing in lockstep with our clinical progress, and we look forward to sharing additional details as we move closer to the commercialization of avexitide, if approved. With that, I'll turn the call over to Camille to provide an update on our clinical and medical affairs progress this quarter. Camille Bedrosian: Thank you, Dan. To start, PBH is a chronic metabolic condition driven by an exaggerated GLP-1 response, primarily after food intake, resulting in persistent recurrent and often debilitating hypoglycemia. These events cause an inadequate supply of glucose to the brain known as neuroglycopenia with potential clinical consequences such as cognitive dysfunction, seizures and loss of consciousness. For people living with PBH, this can create a life of perpetual vigilance where a meal with friends or a drive to work carries the risk of debilitating hypoglycemia and its ramification. This fear can disrupt independence and compromise safety, nutrition and overall quality of life. Currently, there are no FDA-approved therapies. Our pivotal Phase III LUCIDITY trial is evaluating avexitide, 90 milligrams once daily, in individuals with PBH following Roux-en-Y gastric bypass surgery using the FDA agreed-upon primary outcome of reduction in the composite of Level 2 and Level 3 hypoglycemic events through week 16. LUCIDITY was designed with the goal of replication. Five prior avexitide trials in PBH, which demonstrated statistically significant results, including reductions in hypoglycemic events directly informed the dose, the primary endpoint, inclusion criteria and surgical subtype for LUCIDITY. Echoing Justin's earlier remarks, our clinical team remains deeply focused on the execution of the LUCIDITY trial, and we continue to work closely with our investigators as we approach our anticipated data readout next quarter. In parallel with our clinical trial execution, we are actively ramping up our field medical affairs team to facilitate on-the-ground engagement with KOLs. I also am pleased to share that we recently launched a U.S. expanded access program to provide avexitide for up to 250 adults with PBH following Roux-en-Y gastric bypass. This program is a direct response to the urgent need we are hearing from individuals who are struggling with the devastating daily realities of PBH and the physicians who treat them. Initial eligible patients include individuals who have either completed LUCIDITY or participated in previous clinical trials of avexitide in PBH. As a reminder, avexitide is an investigational drug and has not been approved by the FDA for any indication. Working directly with the PBH community and seeing the everyday impact of this devastating condition drives our continued commitment to our clinical and medical efforts. And with that, I will now turn over the call to Jim to review our financials. Jim? James Frates: Thanks, Camille. Our financial results for the first quarter were in line with our plans and reflect our focus on the Phase III LUCIDITY trial and targeted investments in advancing our broader pipeline. We ended the fourth quarter with $279.8 million in cash and marketable securities compared to $317 million at the end of the fourth quarter of last year. This capital funds our anticipated cash runway into 2028, including our key expected milestones: the LUCIDITY top line readout expected in Q3 2026, potential FDA approval and potential commercial launch of avexitide in 2027. Turning now to our results for the quarter. Total operating expenses for the quarter were $43.8 million, up 16% from the same period in 2025. Research and development expenses were $27.6 million compared to $22.1 million in Q1 2025. The increase was primarily due to an increase in spending related to the clinical development of avexitide in PBH. This quarter, we also recognized a milestone payment of $4 million to Gubra following the identification of AMX0318 as a development candidate for PBH and other rare diseases. The increase was offset by decreased spending related to the clinical development of AMX0035 for progressive supranuclear palsy. Selling, general and administrative expenses were $16.2 million compared to $15.7 million in Q1 2025. This increase was primarily due to an increase in consulting and professional services as we prepare for the potential commercial launch of avexitide. We recognized $6.1 million of noncash stock-based compensation expense for the quarter compared to $6.8 million of noncash stock-based compensation expense in Q1 2025. Turning to our balance sheet. Our cash usage was slightly higher in Q1 compared to Q4 because of our Gubra milestone payments and the payment of our annual corporate bonus during the quarter. We're in the midst of a pivotal year for Amylyx with the top line data readout for LUCIDITY expected in Q3. The team will continue to focus on scaling our business with discipline, and we're actively laying the groundwork for a potential commercial launch. This focus positions us well, particularly for our work with avexitide. We continue to believe Avexitide has the potential to be a breakthrough treatment for PBH. With that, I'll turn the call over to Josh. Joshua Cohen: Thanks, Jim. To close, we are focused on the execution of the LUCIDITY trial as we track toward our anticipated top line readout next quarter. PBH is a chronic lifelong condition with symptoms that often emerge 1 to 3 years following bariatric surgery. Many people who receive bariatric surgery are in their 40s, suggesting that if they develop PBH, they may have decades of life impacted by this condition. The broader medical community continues to recognize this critical need in PBH. In March, Dr. Colleen Craig and her colleagues at Stanford published the first U.S. prevalence model for PBH in surgery for obesity and related diseases, the official peer-reviewed journal of the ASMBS. And in April, CMS published their annual list of ICD-10 codes to be potentially effective October 1, 2026, which includes an ICD-10 code specific to PBH. The planned adoption of an ICD-10 code shows the growing recognition of this condition by the medical community. We believe that avexitide, if approved, could play a meaningful role in addressing this highly underserved patient population. In parallel with LUCIDITY, we are actively preparing for a regulatory submission following top line results while simultaneously scaling our commercial and medical teams to support a strong commercial launch of avexitide in 2027, if approved. With that, I would like to now open the call up for questions. Operator: [Operator Instructions] Your first question comes from the line of Seamus Fernandez with Guggenheim. Seamus Fernandez: I hope you'll bear 2 for me quickly. The first question is really on the initiation of the EAP. Typically, we see companies sort of waiting for the completion of their Phase III and then the announcement of an EAP in the wake of a positive Phase III. Just wanted to get a better sense of, obviously, how you were able to execute this and get it approved, and then also how you are really responding to the community with the implementation and announcement of the EAP. And then just a quick follow-up question. I wanted to get a sense of just sort of that relative impact that working on the NDA now could actually have from a filing perspective. Typically, when we see biotech companies with positive Phase III data, it will take as much as 6 to 9 months to see that file. So just wanted to get a sense of how working on the NDA now might advance that ahead of those types of time lines. Camille Bedrosian: Thank you very much, Seamus. This is Camille. So for the EAP, indeed, we are responding to the community where there is currently no approved therapies for PBH, and we recognize and have received several requests and demands. Importantly, we're starting the EAP now because we want to be sure there's continuity of treatment for people in the LUCIDITY study who are completing the OLED portion of the LUCIDITY trial. So that drives the timing for the EAP. Now with regard to your question about NDA preparation, Yes, we're sort of not typical for sure. And we are working, as noted, on NDA preparations. And we do hope that, that will allow us to be most efficient as we reach top line data next quarter. And because there is a great sense of urgency, there are no treatments for people with PBH. And if positive, we want to be sure that we're providing the opportunity for access as promptly as possible. Joshua Cohen: Yes. And maybe just -- maybe underscore from Camille as well. I think both of these activities both underscore too, the unmet need in PBH. We know that patients urgently need a new therapy and also our excitement about avexitide. We've had 5 prior trials of avexitide, all which showed very strong results. We have breakthrough therapy from FDA. So we want both to get patients access as quickly as possible, which, of course, is reflected with the EAP, but also, pending positive results, to be able to submit as soon as we possibly can, which is reflected by our ongoing work on the NDA. Justin Klee: And just one more thing to add, thank you, Seamus, is we also have a very experienced team here. Our team has experience with global regulatory approval, certainly a lot of experience with FDA as well. And so that allows us to start working on the NDA documents now. Again, everything is driven by the urgent unmet need for people with PBH, but I think coupled with the strong experience we have here, both for regulatory submissions and process as well as commercialization. Operator: Your next question comes from the line of Joseph Thome with TD Cowen. Unknown Analyst: This is Jacob on for Joe. We were wondering how the baseline for the enrolled Phase III population compare to the patients in the Phase II studies, and then what the expected placebo response in Phase III might be versus what we know about the patients in Phase II and the differences in the run-in periods. Camille Bedrosian: Sure. So the study is ongoing and blinded. And so we will not really comment on the details of this ongoing study. Having said that, we are very much looking forward to top line data next quarter where we'll share the top line data with you and hope you're sharing our excitement as well for this possibility. With regard to the placebo, remind as well, we've had 5 prior highly successful trials. The Phase II trial showed statistical significance and clinically meaningful reductions in the composite as we presented at ENDO. In the PREVENT study, 55% reduction with a highly statistically significant value, and with -- in the Phase IIb with a 90-milligram dose, the dose in LUCIDITY, 64% reduction with a p-value of 0.0031. Those p-values do take into account all aspects of the trial, including the possibility of any placebo effect. We designed LUCIDITY with the goal of replicating these prior successful trials. So -- and we powered -- we're highly powered, 90%, to detect a clinically meaningful reduction in events even under the most conservative circumstances. Operator: Your next question comes from the line of Corinne Johnson with Goldman Sachs. Kevin Strang: This is Kevin on for Corinne. Could you just talk about the steps that you've taken beyond the event rate quota to ensure patient quality in the study for LUCIDITY and then also to ensure, sort of as much as possible, adherence to study protocols for the full 16-week treatment period? Camille Bedrosian: Sure. So we -- again, we're replicating as much as possible the way LUCIDITY is being conducted, mirroring what was done in the successful Phase II and Phase IIb studies. We have training -- extensive training at the clinical sites at the onset of the clinical trial. That training is reinforced throughout the conduct. And we also have materials for the participants to guide them on the study procedures throughout the study as well. And we also do have quality checks on the data overall to be sure that things are moving along well. Joshua Cohen: Yes. And I'd just add too, we have a very experienced team at Amylyx and quality starts from selecting great sites, having strong oversight. And I think throughout the whole course of the study, I've been quite proud of the team's efforts, just kind of continually keeping close and making sure that quality is kind of built in from the start and continues through the whole study. Operator: Your next question comes from the line of Michael DiFiore with Evercore ISI. Michael DiFiore: Congrats on all the continued progress. First one for me is, now that LUCIDITY is fully enrolled, can you help us think through what the top line disclosure will actually look like, what it will contain, beyond whether the primary endpoint is met? What do you think will be the most important aspect of the data for people to understand, again, beyond the primary endpoint in that initial release? And secondly, since you're already preparing for NDA, since the last update, can you share more light on what work remains to be done between top line and potential submission, maybe in terms of QC, any additional studies, et cetera? Justin Klee: Yes. Thank you, Mike. So I think first, in terms of top line disclosure, you know us well. We're a transparent company. So our goal is always to present things as they are. I think what's important in this study is probably 2 things to remind. The first is that the primary outcome, which is Level 2, Level 3 hypoglycemic events, not only is it the primary outcome, it's in FDA guidance, but it's also very well known by endocrinologists and it's inherently clinically meaningful. Level 2 events being less than 54 milligrams per deciliter blood glucose, which is the blood value at which neuroglycopenia occurs. Level 3, of course, means that the clinical manifestations of hypoglycemia have already occurred. So those are inherently clinically meaningful. And then I think a second important point is that there are currently no treatments for PBH. And so what we have heard consistently, not just from people with PBH, but from physicians as well is that any reduction in hypoglycemic events is meaningful. Each one of these events is a medical emergency. And so what we hear from physicians often is that they are worried for their patients, and they have really very few tools to help prevent these medical emergencies. So any reduction in these hypoglycemic events is meaningful. In terms of the NDA, we're working hard on everything we can now. I think the goal would be that the last really substantial piece of work would be everything associated with the Phase III trial. So we're trying to write everything in advance that we can. As I said, we have a very experienced team who's been through many regulatory submissions before. So they're hard at work as we speak. Operator: Your next question comes from the line of Marc Goodman with Leerink Partners. Marc Goodman: This process of adjudicating the claims data, can you give us an example or 2 of just some of these efforts and just so we understand what you have done so far and how confident you are that you're finding these patients in the places that you think they are based on the claims data? And are you only counting, like, the moderate to severe ones, you're not counting the benign ones, right? Dan Monahan: Thanks, Marc. Appreciate the question. Just to talk a little bit about the claims analysis, so within the claims databases, we start with identifying patients that have a presence of bariatric surgery. And then, we look at patients who also have documented hypoglycemia, so nondiabetic hypoglycemia. And then, after that, we'll then apply and we have applied additional signs and symptoms associated with PBH such as fatigue, dizziness, seizures, even blood glucose tests or even ER visits. And then, to add to that, we can look at it from how many of those type of events they've also had within the claims databases. So that's really how we've continued to look at the databases. I'll say we've done it several times. And each time we do it, we are confident in the 160,000 patient population that we've mentioned a few times. Joshua Cohen: Yes. And I might just add, too, some added work the team has done, too, is both speaking to many of the sites and doing kind of market research with many of the sites to validate what we're finding in claims. For example, if the claims are saying a site has 50 patients, actually checking with the site and seeing if they do have 50 patients. And so far, those have been quite confirmatory as well. And I'll also just add from the call today, we also received notification kind of through the CMS manual list that there's likely to be an ICD-10 code for PBH going live in October, which will provide an additional tool kind of to track the claims data as well. Justin Klee: Yes. And directly to your point, too, on excluding benign, based on the coding, both on hypoglycemia, as well as the signs and symptoms, these are people who have severe hypoglycemia. Operator: Your next question comes from the line of Geoff Meacham with Citibank. Geoffrey Meacham: I have 2 quick ones. So ahead of LUCIDITY top line, I know the primary outcome measure is Level 2 or 3 events as a composite. But is there a thought of looking at each one of those separately, in particular, Level 3, just to have a cleaner look at the profile from maybe a more commercial context? And then, the second question. As you guys begin to focus on commercial and further evaluate the PBH prescriber base, how has your thinking evolved in terms of size and scope of sales force and MSL teams? Camille Bedrosian: Geoff, I'll take your first question and then pass to Dan for your second. So, as you say, our primary endpoint, which is FDA agreed upon, we were looking at the reduction in the composite of Level 2 and Level 3 events, and that is well established in the ADA, Diabetes Association, literature and community as well. We do intend as well -- our secondary endpoints are looking separately at Level 2, which is by fingerstick blood glucose level of less than 54 grams per deciliter, and separately Level 3, which is independent of glucose level, signs and symptoms that require individuals to have another individual help or signs and symptoms that would have required someone else to help them if no one else is around. And that is adjudicated by an independent group of experienced endocrinologists who are blinded to the data as well, and they do that adjudication on an ongoing basis. Justin Klee: And I'll just add, too, from the sort of commercial point of view, so you're right, absolutely, Level 3 means the person has had the manifestation of hypoglycemia. And so, of course, that's important. But Level 2 being less than 54 is very well established, too. So I think endocrinologists will be interested in both. And if you think about the outcome, it's really a nice mix. You have a blood value which indicates severe hypoglycemia, so you kind of know what's happening in the body. And then, you have a clinical outcome in Level 3, where you know the person has had the impact of severe hypoglycemia. And then, for your question on prescriber base, I'll turn it to Dan. Dan Monahan: Geoff, thanks for the commercial question. So, on the sales force sizing, we are initiating the go-to-market efforts at this moment. I would say, this is a rare endocrine launch. So from an expectation -- you can expect that the sales force would reflect this particular size of the sales force. I'd also add that on Camille's team and the medical affairs function, we have initiated hiring our regional Scientific Director team, also known as an MSL team, but those hires are in place. Operator: Your next question comes from the line of Rami Katkhuda with LifeSci Capital. Rami Katkhuda: I guess, can you touch on the degree of natural variability there is in Level 2 and Level 3 hypoglycemic events for PBH patients? Do you expect a massive difference from one week to another? And then, secondly, from a commercial perspective, are these PBH patients generally managed at centers of excellence? Or would you need to target endocrinologists more broadly? Joshua Cohen: Sure. Maybe starting with the variability. So all of that's taken into account in our powering analysis, and I think we were quite conservative in our powering, both on the effect size and on the placebo effect, whereas we saw a 50% and 64% effect size at the 60 and 90 mg doses, we powered to a 35% effect, and then, of course, retaining power up to a 50% placebo effect, even though I don't think we expect that in this condition. You can certainly look at the variability kind of from previous studies. But again, that's all kind of accounted for in our powering analysis. And generally, it's a chronic condition. Generally, people are not able to prevent these events from occurring. So often, if people are having events, that will be a continuous thing. They don't kind of come in fits and starts, so to speak, all that often. In terms of the question of how we'll target centers of excellence versus the broader endo community, I'll pass it over to Dan. Dan Monahan: Sure. Thanks, Josh. And I appreciate the question on the potential [indiscernible]. On the -- where the patients are potentially treated, so we have initiated that work, and we are aware, and Josh mentioned this earlier, but there are centers of excellence. There are also key opinion leaders, and that's likely where we'll start from a launch perspective. We know that there's potentially 50 to 60 patients at certain centers, and some centers have even mentioned even more. But we'll start there. We know there's a concentration. And then, as our disease state education efforts take a foothold, we'll expand into the broader endocrinology community. Operator: Your next question comes from the line of James Condulis with Stifel. Unknown Analyst: This is Mark on for James. One for me on Recordati. I believe we should be getting some data this quarter. And just curious your thoughts here as it relates to potential placebo effect and what the implications are for LUCIDITY and whether really this is something that can actually be sort of read through on your trial. Justin Klee: Yes. Thank you, Mark. So I would say, no, I wouldn't think there should be any read-through. They're very different studies. And of course, we're conducting our study and Recordati is conducting their study. As I understand it, I think their study is a Phase II, looking at mixed meal tolerance test. And ours is based on the prior Phase IIs, which is a much more real-world type approach, looking at Level 2, Level 3 hypoglycemic events, which, of course, is within FDA guidance, to support a potential registration. So, no, I don't think there should be any read-through between the studies. Camille Bedrosian: Plus the mechanisms of the drugs are very different as well. Operator: Your next question comes from the line of Graig Suvannavejh with Mizuho. Samuel Lee: This is Sam on for Graig. Maybe switching over to 0114 with the ALS data coming up shortly, can you just remind us of the specific biomarkers potential [indiscernible]? I know there was some prior analysis done by you guys highlighting certain biomarkers. But maybe just a reminder, and then also some of the expectations you guys have or we should be thinking about going ahead into the data. Camille Bedrosian: Sure. Thanks very much. So just to remind, our ALS study with AMX0114, which is an ASO against calpain-2, is ongoing. We announced that we completed enrollment of Cohort 1 in March and that we are recruiting Cohort 2 at the moment. And earlier this year, we reported on the safety data for Cohort 1. And we do anticipate, as you point out, reporting on the biomarker data. Actually, it will be this June at ENCALS in Madrid, Spain. So the biomarkers that we're studying are related to the mechanism of the calpain-2 ASO, blocking this protease, as well as biomarkers that are related also to the ALS disease process. And we look forward very much to sharing those data with you. Joshua Cohen: And just to add as well, as Camille said, the study is proceeding incredibly well. So I think as Camille was mentioning, we've completed enrollment in Cohort 2, and we're now recruiting for Cohort 3 as well. Operator: Your next question comes from the line of Jason Gerberry with Bank of America. Unknown Analyst: This is [indiscernible] on for Jason. Maybe just a couple of commercial questions on avexitide. I think you've mentioned before that the ICD-10 code was not necessary for successful commercialization. But just curious how ultimately having an ICD-10 code kind of alters your confidence in identifying and capturing patients at scale. I know you've outlined the centers you're targeting and what your commercial strategy is, but just curious if it impacts how you're approaching your commercial plan. And then, just a second quick follow-up. I believe you plan to position avexitide as a chronic therapy. I'm just curious what your -- what assumptions you're making around expectations for persistence and adherence in the real world. Dan Monahan: Great. Thanks, [ Tina ]. So, on the ICD-10 question, so in April, CMS, they published a list of ICD-10 codes to be effective October 1. These codes demonstrate a recognition of PBH in the broader medical community. The ICD-10 code, yes, it is helpful for diagnosis and tracking of patients. However, it's not necessarily -- it's not a necessity. ICD-10 codes are often used for epidemiology. So, in implementation of the code, this will enable patients to be tracked across the various electronic medical record systems. It's also important to note that patients, today, they still can be identified via the claims analysis, and that's how we validated the 160,000 patient population. Joshua Cohen: And then, to your other question, too, about kind of chronic therapy and persistence, it's probably early to comment there. We're quite excited about avexitide. And PBH is a chronic condition where the needs do not go away over time. So certainly, we do think that patients will have an ongoing need for therapy. Operator: Your next question comes from the line of Chris Chen with Baird. Christopher Chen: Congrats on the progress. Just a quick one on the OLE. Can you just remind us what the setup is specifically for that? And are you able to kind of share high level how enrollment in that is going? Camille Bedrosian: Sure. So, are you speaking of the OLE or the EAP, just so I'm clear, please? Christopher Chen: The OLE for LUCIDITY, the... Camille Bedrosian: Open-label extension? Christopher Chen: Open-label extension, yes. Camille Bedrosian: Yes. So while I will not comment on details of our ongoing blinded trial, I am pleased to share that LUCIDITY is proceeding well, including participants transitioning from the double-blind period to the OLE portion of the study. We're confident that we're running the right study, and we're very pleased on how the team has been executing on the trial. We have such an experienced team, and they're overseeing the trial with great focus and care. Joshua Cohen: Yes. And you asked the OLE setup. So just to add there as well, so we expect the randomized double-blind study is the study that will -- we expect to use in our NDA to support potential commercialization. The OLE itself, though, also has a Part A and a Part B. During the Part A, we keep the study very similar to how it's conducted during the double blind. That allows to look at kind of data in a similar way to we look at as the double blind. And then later, they enroll in the [ OLE B ] after 8 weeks in the OLE, at which point, it's a little more -- there's less -- it's a less burdensome kind of trial participation at that point. But overall, just to kind of reiterate what Camille said as well, we're very pleased with the conduct of the study. There's a lot of excitement from sites and otherwise as well, and we'll look forward to reporting our data in Q3. Justin Klee: And I think it's obvious, but just to say also, for the open-label extension, I think it's very important when you work in rare debilitating conditions like post-bariatric hypoglycemia that you always try to think about the people we are trying to help. And so, for an open-label extension, if you're on treatment and you believe that you're benefiting in open-label extension, allows you to continue. And if you are randomized to placebo, then allows you to take active medication. So that's something that we always really try to think about in our programs. Operator: Your next question comes from the line of Ananda Ghosh with H.C. Wainwright. Ananda Ghosh: Maybe one question. People have been focusing on U.S. opportunities. So one question would be, have you done work with respect to avexitide on ex-U.S. opportunities? What are you hearing from the KOLs or stakeholders? And then, I have one follow-up question on LUMINA. Justin Klee: Absolutely. Thank you, Ananda. So there's a tremendous unmet need globally for post-bariatric hypoglycemia. Now, our focus is very much on the U.S. right now with 160,000 people in the U.S. with PBH today. That's a substantial unmet need and people to help and address. But our -- first of all, bariatric surgeries occur globally. And also, as we mentioned before, virtually any gastric surgery has the potential to cause the same debilitating hypoglycemia. So, for example, in major Asian countries, gastric cancer rates, esophageal cancer rates are very high. And so, gastrectomy or esophagectomy is often indicated. And so, for people with those surgeries, they also have the potential of developing the same debilitating hypoglycemia, and we have data from the Phase IIb study of avexitide that avexitide may be beneficial for people who had those surgeries leading to this debilitating hypoglycemia as well. The pathophysiology is the same regardless of the surgical intervention. So, our focus is really on the U.S., really on the U.S. population of post-bariatric hypoglycemia. But absolutely, there's a huge unmet need internationally. We get compassionate use requests from people around the world constantly. Ananda Ghosh: Got it. One question on LUMINA. I know there was a question on biomarkers. So given that it's the lowest dose, do we -- are we -- can we expect the preliminary NfL data or target engagement data with respect to calpain-2 levels or other downstream markers like SBDP-145 in the data readout, or that is for later... Joshua Cohen: Yes. I mean, it's hard to know -- sorry to interrupt. It's hard to know until we have the data. I'd say, we do preclinically believe we have a potent ASO. As you look at past ASOs that have been in clinic, usually, they've been studied between the range of generally about 10 mgs to 100 mgs for CSF injection. And we're at the very low end of that range. So we may see signals, but it also may require us to go to a higher dose before we start significantly moving the biomarkers. Justin Klee: But I'll add, too, Ananda, to your point, we really are -- our goal is to have a picture of, first, are we replicating the biology that we saw in the preclinic to the clinic? Are we seeing the implications of calpain-2 knockdown? And then, are we seeing effects on biomarkers that we believe to be prognostic for ALS as well? So that is indeed the goal of the biomarkers in all of these cohorts is to try to get a picture of are we seeing the impacts of calpain-2 and are we seeing potential impacts on ALS as well? Operator: Thank you. There are no further questions at this time. I'll turn the call back to Mr. Klee. Justin Klee: Thank you, operator, and thank you all for your time. If you have any follow-up questions, please reach out to Lindsey. And we hope you have a great rest of your day. Operator: Thank you, everyone.
Operator: Ladies and gentlemen, thank you for standing by. My name is Duncan, and I will be your conference operator for today. I would like to welcome you to Absci Corporation first quarter 2026 business update. All lines have been placed on mute to prevent any background noise, and after the speakers’ remarks, there will be a question and answer session. Now I would like to turn the conference over to Alex Khan. Please go ahead. Thank you. Alex Khan: Absci Corporation released financial and operating results for the quarter ended 03/31/2026. If you have not received this news release, or if you would like to be added to the company’s distribution list, please send an email to investorsasci.com. An archived webcast of this call will be available for replay on Absci Corporation's Investor Relations website at investors.avsci.com for at least 90 days after this call. Joining me today are Sean McClain, Absci Corporation's Founder and CEO; Zach Jonasson, Chief Financial Officer and Chief Business Officer; and Ronti Somerotne, Chief Medical Officer. Before we begin, I would like to remind you that management will make statements during the call that are forward-looking within the meaning of the federal securities laws. These statements involve material risks and uncertainties that could cause results or events to materially differ from those anticipated, and you should not place undue reliance on forward-looking statements. These include statements regarding the development and clinical progress of our pipeline programs, including ABS-201; the design, enrollment, product, and timelines of our ongoing Phase 1/2a headline trial of ABS-201 in androgenic alopecia; anticipated timing of interim proof-of-concept data readout for ABS-201 in 2026; the potential advancement of ABS-201 into Phase 3 development; anticipated initiation of a Phase 2 clinical trial of ABS-201 for endometriosis in 2026, and a potential proof-of-concept readout in 2027; the anticipated characteristics and product profile of ABS-201 as a drug product; our target product profile and its attributes; the potential for an expedited development pathway, including the possibility of advancing directly from Phase 1/2a into Phase 3; our plan to engage with the FDA regarding development strategy; and the potential market opportunity and commercial prospects for ABS-201. Certain statements may also include projections regarding potential market opportunity. These estimates are based on various assumptions, including potential regulatory approval, the final approved label, and the evolving competitive landscape, any of which could cause our actual addressable market to differ materially from these projections. In addition, certain research findings discussed today reflect participant responses to a hypothetical product profile and do not represent clinical results for ABS-201. Additional information regarding the risks and uncertainties that could affect our forward-looking statements is set forth in the press release Absci Corporation issued today, our most recent annual report on Form 10-K, subsequent documents, and reports filed by Absci Corporation from time to time with the SEC. Except as required by law, Absci Corporation disclaims any intent or obligation to update or revise any financial or product pipeline projections or other forward-looking statements because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast on 05/07/2026. With that, I will turn the call over to Sean. Sean McClain: Good afternoon, everyone. Thanks for joining us. Today, I will cover three things: where we are on ABS-201, a new addition to our prolactin pipeline, and the strategy driving both. 2026 is going to be a data-rich year for Absci Corporation with multiple readouts in front of us. Ronti will go through the headline trial and discuss early PK modeling that supports our targeted dosing frequency. At a high level, the Phase 1/2a is on track. We expect to share preliminary safety, tolerability, and PK data next month; interim 13-week hair regrowth data in the second half of this year; and full 26-week proof-of-concept data early next year. ABS-201 is not intended to compete with minoxidil. We are aiming to create a new category of hair regrowth therapy—a targeted biologic against the prolactin receptor that provides durable hair regrowth from a few injections. If successful, ABS-201 could represent the first new mechanism of action in androgenic alopecia in nearly three decades and a fundamentally different treatment paradigm for patients. In parallel, we continue to advance towards initiation of a Phase 2 endometriosis trial in the fourth quarter. We recently launched our endometriosis Clinical Advisory Board with leaders from Yale, UCSF, Duke, and Mayo Clinic. They bring deep expertise across reproductive medicine, fertility, and translational research and will help guide ABS-201’s endometriosis program. Endometriosis has the same kind of opportunity as AGA—large, underserved, and underexplored—and ABS-201 has the potential to open up a new category of therapy there as well. As Zach will discuss, our top strategic priority is using our platform to create novel, differentiated assets. ABS-201 in AGA and endometriosis is the clearest expression of that. We go after hard problems, novel biology, and large patient populations with real unmet need. Our platform is built for this, and our philosophy has always been simple: follow the science, and follow the data. One of the places this has taken us is prolactin biology. Prolactin biology is underexplored, underappreciated, and often misunderstood. Even inside the medical community, the name prolactin can read as narrow, and some still think of it as a lactation hormone. It is much more than that. The more mechanistic insight we have generated on prolactin, the prolactin receptor, and related pathways, the more opportunity we see for this target—well beyond AGA and endometriosis. We have started sharing some of these insights with the medical community as part of a broader education effort. Today, we are announcing another anti–prolactin receptor antibody, ABS-202, for an undisclosed I&I indication. ABS-201 in AGA, ABS-201 in endometriosis, and now ABS-202 in I&I are just the start of our prolactin pipeline. The reason we can do this comes back to our people and our platform, OriginOne. We figured out early that having a good platform is not good enough on its own. We need the people who know how to push it, and in this industry, you also need the assets—novel and differentiated programs that can make a real difference in patients’ lives. The places where unmet need is largest tend to be where biology is most complex and underexplored, and that is exactly where our platform and our people excel. That overlap is also where the potential return on investment is highest, both for patients as well as our shareholders. Our focus remains being an AI-native company dedicated to developing and delivering novel, differentiated therapeutic assets for patients. As we roll out our agentic AI workflows across Absci Corporation, each of our functions is scaling. Across Research, SG&A, and other functions, we are unlocking real efficiencies and new capabilities. That is the focus, and that is what we are committed to delivering. With that, I will turn it over to Ronti, who will walk through the ABS-201 clinical program. Ronti? Ronti Somerotne: Thanks, Sean, and good afternoon, everyone. As Sean mentioned, we are pleased to share that our ongoing Phase 1/2a headline trial for ABS-201 is progressing well and tracking according to plan. As a reminder, this trial is a randomized, double-blind, placebo-controlled study. The primary endpoint is safety and tolerability, while secondary endpoints include PK, PD, immunogenicity, target area hair count, target area hair width, and target area darkening or pigmentation. We will also collect patient-reported outcome data from this study. In the headline trial, we have now finished dosing all four planned healthy volunteer single-ascending-dose cohorts and initiated dosing in the first multiple-ascending-dose cohort. To date, emerging safety and tolerability data remain favorable. Additionally, preliminary PK modeling from this clinical trial supports ABS-201’s targeted dosing interval of two or three injections over a months-long period. Next month, we anticipate sharing blinded preliminary safety, tolerability, and PK data from the SAD cohorts. In that update, we plan to share clinical data that support the safety profile and anticipated ABS-201 dosing interval. In the second half of this year, we plan to disclose interim proof-of-concept data, followed by full proof-of-concept data in early 2027. The 13-week interim is, by design, a directional view. The 26-week time point is the trial’s full POC readout. Given the regenerative nature of the mechanism and our targeted dosing interval, the biology may continue to drive hair growth beyond that point, which is consistent with the long-acting profile we are working towards. Zach will speak to how this positions ABS-201 well for commercial success. We also continue to explore plans to execute our targeted, efficient clinical development strategy, which could enable expedited clinical development with the potential of advancing directly to registrational trials following this Phase 1/2a study. With that, I will pass it over to Zach to discuss our business strategy and to provide an update on our financials. Zach? Zach Jonasson: Thanks, Ronti. We remain focused on creating and developing therapeutic programs that offer the highest potential return on investment. Our strategic priority is the execution of the ABS-201 headline trial, which supports our future registrational study plans for AGA and our Phase 2 clinical trial plan for endometriosis. As Ronti mentioned, we plan to share an interim POC readout, including 13-week hair regrowth data, in the second half of this year. Based on the mechanism and our preclinical data, we anticipate the 13-week interim readout will give a directional view of hair growth, with the 26-week full POC providing the trial’s primary efficacy readout. Given the regenerative nature of the mechanism, we anticipate hair growth to continue beyond the 26-week time point. Conversations with the scientific and medical community, as well as patients, continue to affirm our view of the significant return-on-investment potential for ABS-201 in AGA and endometriosis. We estimate that the capital required to advance ABS-201 through registrational AGA trials will be a fraction of the clinical costs required for other large indications, such as oncology and IBD. Moreover, we expect to be able to leverage the SAD and MAD portions of the current headline trial to support Phase 2 initiation in endometriosis, thereby saving time and cost. Considering the significant potential market opportunities of AGA and endometriosis in conjunction with our efficient development strategy, we believe that ABS-201 offers a unique and compelling ROI. Our market research supports a significant commercial opportunity for ABS-201. In our surveys of AGA consumers and dermatologists, we evaluated a target product profile consisting of 2.5 years of hair growth following three injections of ABS-201, with a hair growth effect of approximately 35 hairs per cm² versus baseline, similar to high-dose oral minoxidil. Results from our market research support a potential total available market exceeding $25 billion annually in the U.S., with meaningful potential upside if hair growth exceeds the survey threshold. ABS-201 has the potential to significantly expand the overall AGA market as a new premium category of durable, regenerative hair growth therapy. Our market research indicates the ABS-201 target product profile would attract not only AGA consumers dissatisfied with current standard of care, but also those who elect to use ABS-201 alongside existing standard of care, such as oral minoxidil or new formulations of oral minoxidil. Similarly, in endometriosis, ABS-201 has the potential to define a new category of therapy that has the potential to address not only pain, but also underlying disease. Endometriosis is prevalent in up to 10% of women worldwide, including an estimated 9 million women in the U.S. We believe ABS-201’s differentiated profile could support potential peak sales in excess of $4 billion. As Sean mentioned earlier, our second priority is building and prioritizing an early pipeline of differentiated programs that offer the highest potential return on investment. Accordingly, today, we are pleased to announce the deepening of our pipeline with the addition of a new anti–prolactin receptor antibody, ABS-202. This program, which leverages our prolactin biology expertise and our AI platform, enables us to expand into new indications where we believe prolactin receptor inhibition will offer a novel and efficacious treatment option. Conversely, we have determined that certain programs no longer fit within our strategic scope, and so we will be deprioritizing development of ABS-301 and ABS-501. We will no longer commit internal capital or resources to further development of these programs. Our capital and resources will be directed toward programs that offer the greatest potential ROI within our strategy. In addition to the two previously discussed strategic priorities, we continue to advance partnering discussions associated with our other internal programs, which are at various stages of preclinical and clinical development. Overall, our strategy remains focused on executing the development of ABS-201 in AGA and in endometriosis, and then further building a pipeline of differentiated programs that provide optionality for internal development or partnering. Turning now to our financials. Revenue in the first quarter was $200 thousand, as we continue to progress our partnered programs. Research and development expenses were $19.3 million for the three months ending 03/31/2026, as compared to $16.4 million for the prior-year period. This increase was primarily driven by advancement of Absci Corporation’s internal programs, including direct costs associated with external preclinical and clinical development of ABS-201. Selling, general, and administrative expenses were $9.1 million for the three months ending 03/31/2026, as compared to $9.5 million for the prior-year period. This decrease was primarily due to a reduction in personnel-related costs. Cash, cash equivalents, and marketable securities as of 03/31/2026 were $125.7 million, as compared to $144.3 million as of 12/31/2025. Based on our current projections, we believe our cash, cash equivalents, and marketable securities will be sufficient to fund our operating plans into 2028. Our current balance sheet supports our execution of key upcoming catalysts, including potential proof-of-concept readouts for both AGA and endometriosis, and continued progress of our early-stage pipeline. We also remain focused on opportunities to generate additional non-dilutive cash inflows that could come from early-stage asset transactions and/or new platform collaborations with large pharma. In particular, we believe our early pipeline programs may offer attractive partnering opportunities. At the same time, we are aggressively implementing agentic AI workflows across our organization, including in business and scientific functions. These implementations are already creating meaningful efficiency gains as well as capability gains. Going forward, we expect to continue to realize cost savings and productivity gains from advancement of our agentic workflows. With that, I will now turn it back to Sean. Sean McClain: Thanks, Zach. Before we open up for questions, I want to thank the team at Absci Corporation for the work they put in each and every day. The catalysts ahead this year are: one, preliminary safety and PK data for ABS-201 next month; two, interim 13-week proof-of-concept hair regrowth data in the second half of this year; three, initiation of a Phase 2 endometriosis trial in Q4, subject to data and regulatory review; and last, continued progress on our early-stage pipeline, including our newest prolactin program, ABS-202. Looking into early 2027, we expect full 26-week proof-of-concept data for ABS-201 in AGA. We will now open the call for questions. Operator: If you would like to ask a question, please press star followed by one. Thank you. Your first question comes from the line of Brendan Smith from TD Cowen. Your line is now open. Please go ahead. Brendan Smith: Hi, guys. Apologies. Can you hear me now? Sean McClain: Yes. Brendan Smith: Thanks for taking the questions, and congrats on everything going on here. I guess maybe just a quick follow-up on the 202 conversation. Can you help us understand a little bit more, even on a mechanistic level, the most important distinctions versus 201 in terms of why it would make sense for some indications versus others, and whether there is a difference to product profile or something about actual mechanism that makes sense for that distinction? Thanks. Sean McClain: Yes, absolutely. With ABS-202, we are creating a differentiated profile, and we also want to position this outside of AGA and endometriosis for other indications where there may be pricing differences. With regard to prolactin biology, we are very interested in how prolactin is driving some autoimmune diseases. It appears to sit on a stress–inflammatory axis and is also driving some interesting B-cell biology. You see prolactin receptor expression throughout the body—bone, immune system, endothelial cells, synovium—so we are continuing to expand the biology there as well as going into other indications with ABS-202, and additionally looking at bispecifics that could be synergistic with this mechanism. Brendan Smith: That is super helpful. And then maybe just quickly on the upcoming MAD efficacy readout with 201. Appreciate the color on how you are thinking about some of this data. Given how the space has evolved in recent months, are you thinking comparable efficacy with clean safety and differentiated dosing is enough to win given how big the market is, or do you think you will need to show superior efficacy? Help us understand those dynamics. Sean McClain: Yes, absolutely. Zach can touch on this more from the consumer quant study we did, but we believe having comparable efficacy to oral minoxidil with infrequent dosing would be a home-run product. That convenience factor with equivalent efficacy is compelling, and any efficacy above that increases the overall TAM of the opportunity. Zach? Zach Jonasson: I would be happy to comment. As you know, we conducted sizable consumer surveys and surveys with dermatologists. The takeaway is that the profile of ABS-201 would establish a brand-new category of therapy based on durability, infrequent dosing, and a truly regenerative mechanism. When we test a profile with efficacy consistent with at least some reports of high-dose oral minoxidil—around 35 hairs per cm² in target area hair count—we see massive potential for adoption, and that is how we get to a potential $25 billion TAM on a TPP that looks like that. We think this product would expand the overall AGA market. Many patients dissatisfied with current standard of care would come to ABS-201, and over a third of males and females we surveyed said they would come first line, even before trying a nutraceutical. We also saw many patients would elect to use both—an oral minoxidil in combination with ABS-201. As a premium, new category of therapy, ABS-201 is very well positioned. Analyst: Good afternoon, and thanks for taking our questions. A little bit of a similar question as it relates to ABS-201 and ABS-202. Are there differences in pharmacokinetics or binding? Is there anything you can tell us about upgrades in ABS-202? And I have a follow-up on the ABS-201 program after this. Thanks. Sean McClain: At this point in time, we are not disclosing the specific profile we are looking to achieve for ABS-202, other than the fact that we are planning to take this into a different indication. Analyst: Fair enough. As it relates to the 13-week readout, another company noted “appreciable improvement” at two months. It is a qualitative measure at an early time point. Is this what we should be expecting at 13 weeks, or should we be expecting something more methodical? Thank you. Sean McClain: The 13 weeks is really a directional readout. We want to see hair growth, and the 26-week is where we expect to see the oral minoxidil hairs-per–cm² effect. That is the final readout. The 13-week is directional, and given differences in hair growth and the mechanism, we want to reserve the 26-week as the final definitive readout. Arseniy Shabashvili: Hi, this is Arseniy on for Vamil. Thanks for taking my questions, and congrats on all the progress. You previously talked about 90% receptor occupancy being necessary to achieve the full therapeutic effect with the prolactin mechanism. Has anything you have seen in the trial so far shifted that perspective in any way, and do you think it is ultimately achievable with the dosing schedule that you need? Sean McClain: So far, what we are seeing supports that as achievable. Ronti? Ronti Somerotne: We are not looking at anything like hair growth in the SAD study, and we designed the dosing paradigm conservatively. In our scaling, we are confident we can hit that 90% receptor occupancy. This is something to look forward to with the MAD data and then the hair growth data. Arseniy Shabashvili: One more follow-up. Do you expect variability in therapeutic response among patients you enrolled—because of biomarker profile, age—or is there something about this mechanism where you think essentially every patient will respond at least to some degree? Ronti Somerotne: At this point, we seem to have a balanced enrollment of the various stages of the Norwood classification. There is nothing from a biomarker perspective that I would expect to predict a variation in response in the AGA population. It is a reasonably sized, randomized study, and in terms of baseline hair characteristics, we are pleased with how patients are distributing amongst the arms. At this point, I am not worried about something else causing inter-subject variability in the mechanism of action itself. Sean McClain: We have not seen any such signals in the in vivo or ex vivo experiments we have run to date either. Analyst: Hi, how is it going? This is Alex on for Kripa. Really exciting time at Absci Corporation. Two questions from us. One, when can we expect to learn more about the mechanism and the properties and indication for ABS-202? And then also, in your consumer survey, did you specifically test for patient preference and desire for combination therapy for ABS-201 and other currently approved products? Thanks. Sean McClain: At the moment, we are not planning on disclosing more than we have on ABS-202’s mechanism of action, though we are very excited about the overall opportunities. As we get closer to the clinic, we will disclose more, but from a competitive standpoint, we are not disclosing at this time. Zach, do you want to take the second question? Zach Jonasson: Yes, absolutely. In the survey itself, we did not specifically segment by combination-therapy questions. What we did see, which was really exciting, is very high intent to seek out the product if available: 87% of men and 69% of women said extremely or very likely. In subgroups already on standard of care, such as oral minoxidil, those numbers went up dramatically—to 92% for men and 89% for women. We clearly see stronger interest among those already using standard of care, supporting the new-category definition where patients will look to ABS-201 either to replace standard care they are dissatisfied with or to use on top of standard care. Debanjana Chatterjee: Hi, thanks for taking my question. I have a question on the endometriosis program. I know pain is a very common endpoint for these trials, but historically the high placebo response has been an issue with pain studies. What structural elements would you implement in this trial to control placebo response? And I have a follow-up. Ronti Somerotne: Thanks for the question. I learned a lot in my time at Vertex overseeing the pain program there. The pain aspect of these studies is ultra important. The crux is how you execute the trial. We will spend a lot of time making sure the sites are carefully chosen, the investigators are carefully chosen, and all partners understand how to mitigate placebo response. Placebo training is really important. We will be surveilling the blinded data for evidence of a placebo response. There is a lot of operational work that is not in the protocol because these are things you have to do in execution. We have also engaged the FDA on how we are approaching mitigation of placebo response. It is really important, heavily operational, and done behind the scenes. Debanjana Chatterjee: That is helpful. For ABS-202, I know for competitive reasons you cannot share many details, but is that something for internal development, or would you partner it given pricing differences for I&I indications? Sean McClain: We are open to both options for ABS-202. The current plan is to pursue it ourselves, but given the opportunity and market size, we are considering both internal development and partnering. Analyst: Hey, guys. Can you hear me? Sean McClain: Yes, we can. Analyst: Thanks for taking my question this afternoon. When you talk about the hair growth benchmark for success, you have guided to that for the AGA MAD portion. Can you clarify whether that benchmark is what you expect at the end of the 26th week? And if it is, can you help us think about what you would expect to see at the 13-week mark based on preclinical work? Sean McClain: Great question. Where we want to be at 26 weeks is definitely where oral minoxidil sits. At 13 weeks, we are not putting an official guide on that; we want to see directional hair growth. Given the biology and the new mechanism, we do not want to set unrealistic expectations. The best lens is the 26-week readout, where we want to be around oral minoxidil with infrequent dosing. Zach Jonasson: To add, our survey shows that if we have a TPP with an effect size similar to high-dose oral minoxidil—think in the 30s—with convenient dosing and durability, that is a home-run, category-defining product. There is still a product with efficacy below that as well, but the research suggests that threshold is fantastic. Analyst: Got it. Maybe going back to the PK data you have seen so far. You said the modeling supports a few-times-a-year dosing regimen. Can you give more color on the key parameters driving that conclusion? Ronti Somerotne: We are assessing PK from all SAD cohorts. We just started dosing the MAD cohorts, so we do not have MAD PK yet, but the SAD cohorts are developing nicely. We feel pretty good about being able to dose at least every eight weeks subcutaneously. We will have more color and a more refined estimation of dosing frequency in a few weeks when we share the data. Sean McClain: From the preliminary half-life and PK, we are feeling very optimistic and look forward to sharing the full data in June. Swayampakula Ramakanth: Thank you. Good afternoon, Sean and Zach. I have a couple of questions. One, you stated that you are deemphasizing oncology products. What are the reasons behind that, and what interest are you seeing from outside for these novel drugs? Sean McClain: From a strategy standpoint, ABS-201 in AGA is a direct-to-consumer type of product, and we want to build out products that support this. I&I makes a lot of sense in that context. Oncology does not support that particular go-to-market strategy we want with AGA. We have deprioritized oncology and will not fund those programs internally, putting focus on assets that support the lead asset, ABS-201, in AGA and endometriosis. Swayampakula Ramakanth: On partnerships, you have been talking about generating partnerships, including with large-cap pharma, but the cadence has been slower than in previous years. Are large-cap companies building their own tools, or are the economics not viable for you? Sean McClain: Our focus is driving the clinical development of ABS-201. We are continuing to look for pharma partnerships around our pipeline, but they have to make sense for us. We are a limited team and want synergy, so we are selective about who we partner with and how they help build the portfolio and support ABS-201’s go-to-market strategy. It is a focus, but it has to be strategically sound. Zach? Zach Jonasson: Internally, we have the capability to generate assets, and we believe we have a leading platform focused on challenging targets, as well as leadership in areas like prolactin biology. Our internal analysis shows we can generate better economic terms on partnerships focused on an asset—even at a preclinical stage—versus tying up resources for target-based platform partnerships. We have a number of assets coming toward DC this year, and several are earmarked for partnering to generate non-dilutive cash flow. The risk-adjusted NPV from creating assets and partnering those is a multiple of what it would be for platform target-based deals on a target- or program-by-program basis. The economics point us in that direction. Analyst: Hey, guys. You mentioned adopting more agentic AI into your business. How is this impacting your drug discovery process and business operations, and any near-term cost savings you can point to? Zach Jonasson: We are aggressively implementing agentic AI workflows throughout Absci Corporation, including in Science and R&D and across SG&A. We are already seeing significant efficiency gains and expect to realize those in cost reduction as well as capability gains on a go-forward basis. Even over the next few months, we should start realizing some of those gains. Arseniy Shabashvili: Hi, it is Arseniy on for Vamil. One more on the hair repigmentation opportunity. You previously talked about it as roughly the same size as the AGA market. What do you expect to see there that would be clinically meaningful? Would you consider pursuing it as a separate indication with additional studies, or as an extra claim in the label in addition to the AGA indication? Sean McClain: We are really excited about the potential for repigmentation. We see it as creating an even bigger market opportunity. Right now, it is an exploratory endpoint, and we will see how the readouts go at 13 and 26 weeks and then determine how to proceed. Ronti Somerotne: The repigmentation data emerging elsewhere are interesting and exciting. Mechanistically, it makes sense as a potential finding. We will see what we can see and plan accordingly. Operator: We have reached the end of the question and answer session. This also concludes our call for today. Thank you, everyone, for attending this call. You may now disconnect. Goodbye.
Operator: Hello, everyone. Thank you for joining us, and welcome to Blend Labs, Inc.'s first quarter 2026 earnings call. After today's prepared remarks, we will hold a question and answer session. To withdraw your question, press 1 again. I would now like to hand the conference over to management for prepared remarks. Please go ahead. Meg Nunnally: Good afternoon, and welcome to Blend Labs, Inc.'s financial results conference call for 2026 Q1. I am Meg Nunnally, Blend Labs, Inc.'s head of investor relations. Joining me today is Nima Ghamsari, our cofounder and head of Blend Labs, Inc., and Jason Ream, our head of finance and administration. Before we start today's call, I would like to note that we refer to certain non-GAAP measures which are reconciled to GAAP measures in today's earnings release and in the appendix of our supplemental slides. Non-GAAP measures are not intended to be a substitute for GAAP results. Unless otherwise stated, all financial measures we will discuss today, including our profitability, refer to non-GAAP. Also, certain statements made during today's conference call regarding Blend Labs, Inc. and its operations, in particular, our guidance for 2026, other commentary regarding 2026, and our expectations about markets, our strategic investments, product development plans, and operational targets may be considered forward-looking statements under federal securities laws. We caution you that forward-looking statements involve substantial risks and uncertainties, and a number of factors, many of which are beyond the company's control, could cause actual results, events, or circumstances to differ materially from those described in these statements. Please see the risk factors we have identified in our most recent 10-K for fiscal year 2025 and our other SEC filings. We are not undertaking any commitment to update these statements if conditions change except as required by law. The financial information presented on this call is based on continuing operations, and prior periods have been recast to operations that are now discontinued. Lastly, we will be providing a copy of our prepared remarks on our website by the conclusion of today's call, and an audio replay will also be available soon after the call. I will now turn the call over to Nima. Nima Ghamsari: Thanks, Meg, and welcome, everyone. It has been a whirlwind two months since our last call. We reported our Q1 numbers today, which Jason will spend time on, but they came in higher on revenue and non-GAAP operating income than expected. We also signed 15 new deals and expansions in the quarter, including an eClose deal with a top 20 bank along with a new mortgage deal with another top 100 bank. Our pipeline as of March 31, 2026 is up more than 40% year over year, and that does not include Autopilot pipeline, which I will cover in a minute. But the world has shifted underneath us in those two months. Increased global conflict, inflation, and rising mortgage rates, and that leads me to be a little conservative in the short-term numbers. But I am incredibly optimistic about the future. My optimism comes from two things, and they are both tied to artificial intelligence. The first is Autopilot, which is our AI agent and orchestration layer that we put right alongside our customers' work as they work with consumers. The second is the agents we are building inside Blend Labs, Inc., which are starting to do our own work. Together, I believe these two pillars give us a path to see 10% to 15% incremental growth already for us in 2027, on the top line, and more efficiency and speed as a company internally. Let us start with Autopilot. For those new to the story, Autopilot is our flagship AI agent. We unveiled it and rolled it out in beta almost exactly two months ago, telling our customers they could use it for free and try it out for all of Q2 to see it in action and help their business. As of Monday, May 4, 2026, 65 lenders have activated Autopilot, 22 are running it live in production, and over 7 thousand applications have already been touched by Autopilot since we moved it to live production. And we are seeing that early results are improving, both in cycle time and in conversion rate. Two of our largest lenders are actively implementing Autopilot right now with go-lives planned for Q2, and we have three more top 20 logos in our net new pipeline that we expect Autopilot to be a meaningful catalyst for closing. In total, Autopilot is already sitting on $10 million in pipeline because it solves a real problem for our customers and the consumers they serve. But the more important story for me and for our company, for our customers and our shareholders, is how quickly that product is evolving. We have been publishing details on our blog every week, and there are two that I want to call out. The first is Autopilot Chat that was rolled out about a month ago, a conversational interface where the borrower can ask Autopilot questions about their loan in plain language as they are going through the process. What documents are still needed? Why did you ask me for this specific thing? Why does it matter to my situation? What happens next? Instead of a static task list or making a phone call, the borrower can have a real contextual understanding of what is going on to help them through the process. This is the kind of interaction that consumers are starting to expect, and we are right on top of it. The second is something I am even more excited about, which is Autopilot MCP. That opens up the Blend Labs, Inc. platform so that our customers can build their own agents on top of Blend Labs, Inc. or use Blend Labs, Inc. in a headless way in their existing workflows and still get the benefit of all the compliance, all the data model, the workflows, all the native integrations we built, and the intelligence layer of Autopilot. One of our large mortgage company customers has already built a voice agent using it, and I am seeing this as really important and really promising for our customers who want to own more and more things they can do but move really fast. And that pattern, customers innovating with us and around us rather than instead of us, is exactly what we want and exactly what we expect to see more of going forward. What this all adds up to is something I think is really powerful. Our customers can now see a path from initial borrower touch all the way to clear to close without a team member ever having to touch a file. Now they still can work on the file, but they will not have to. That is fundamentally different value than we could ever offer before or the industry could ever offer, and something that I dreamed of being able to offer when I started the company in 2012, and now agentic AI has made that dream possible. And on top of that, eight weeks in, we are shipping at a cadence that Blend Labs, Inc. of years ago and most enterprise software companies would measure in quarters. And every one of those updates is grounded on what our customers need, what they are telling us they want, and how we can help impact and improve their business. With adoption well underway, let me give you an update on how we are going to monetize this. Autopilot has been in preview to date, and our priority has been getting real customers live and proving the value. Starting in June, we are going to move to paid tiers. Now just like any modern software company, there is going to be some base capabilities built into our workflow that are going to provide intelligence, like, did you upload the right document? And that is useful. That is going to lower some friction for consumers to get started and understand AI. But the paid tiers are where the full product lives, what we call underwriting intelligence, where Autopilot is reading the documents, taking real actions on the loan file, running calculations, reconciling against guidelines, and driving the work forward. Over time, our intent is to move the paid tiers of Autopilot to a per funded loan model, just like the rest of our mortgage suite. It is the right long-term structure, and our customers like that because it allows them to see and track the value on a per-loan basis, and we get paid when they make a successful loan. That is a great product for us, it is great alignment with our customers, and it incentivizes us to make sure this is providing real loan-level funded value improvements. When Autopilot helps a lender fund more loans with the same number of people, our revenue scales with their success, not with their headcount. And that is how we have always built Blend Labs, Inc., and that is even more important today in an agent-first world. We are going to continue to provide updates on Autopilot as more customers sign on, but I want investors to understand this is not a small incremental line item for us. Autopilot is a whole new leg of growth for the company on top of the great mortgage and consumer banking suites that are already growing, and we plan to keep growing it. Before we move off Autopilot, I want to spend a minute on something that I think is really important and I keep getting asked about from investors. The billion-dollar question is, where does the durable value in enterprise AI actually accrue? This is an ongoing debate, and it is important to understand where Blend Labs, Inc. fits and how I see this. For the last couple of years, the focus of the industry and the world broadly has been on the foundation models: which model is the fastest, the smartest, the best in benchmarks, the cheapest, and that focus is understandable. But as models converge in capability and keep innovating, the durable value is shifting up the stack to the orchestration layer between the model and the workflow, to the area that people call the harness, and the thing that is driving actual end-business outcomes. The harness, to put it clearly, is a system that channels the engine and all the tools around it into a reliable, controlled outcome, which is so important for an industry like ours, like financial services. And the data and the documents and the specific context of any moment is the fuel that makes any of that work actually useful. And Autopilot is exactly that. It is not a model. In Autopilot, we use the best available models underneath; instead, it is the orchestration layer that decides what to do given that exact moment in a loan. It retrieves the specific guidelines, gets the full context of the loan, runs the right calculations, validates the outputs against investor and regulatory requirements, updates the loan file, and triggers the native Blend Labs, Inc. workflows that move the file forward. That logic is specific to that exact loan, the exact consumer in front of it, and it is the kind of work that generic AI is not built to do. It needs a system around it. And that is where Autopilot fits in. And Autopilot MCP just takes that to the next level. It allows the Blend Labs, Inc. platform users to build their own agents or even work with Blend Labs, Inc. in a completely headless way, which means the harness becomes a platform for them to move really fast because they get all the regulation, the compliance, the integrations, and the Autopilot intelligence out of the box, and they can build their own experiences and their own agents around that. That is a meaningfully different level of importance because now you become more of the engine, the “powered by,” instead of the interface. And that is where agents can be really powerful. And that compounds more as we open up more capabilities for our customers to build faster and on top of us. And that is why I get more confident every quarter about where Blend Labs, Inc. sits in the AI landscape. We are the vertical industry harness for origination. We have the proprietary data to make that harness work. We have the business model already to help capture the benefit of automation and still give most of the benefit to the customer and, hopefully, the consumer. That is the durable place to be. That is why I am excited; that is where Autopilot is. We are bullish on our first pillar, which is agents for our customers. But I am even more bullish on how we are using agents internally. Over the last few months, we have been building something we are boringly calling Blend Labs, Inc. background agents. It is not a new idea, but it is a simple idea. Anytime we get an input from the outside world — it could be a ticket, a customer issue, a feature request — before that reaches a team member, we want an agent to take the first pass of that work and take action on it, and then the team member reviews and approves it. In practice, that could be something like: a ticket comes in outlining a bug in our system. An agent immediately picks it up from our support queue, looks at it, identifies the bug, writes the code to fix the bug, tests the code to make sure the bug is now fixed, and then sends it to a human and says, “I have to change these 10 lines or 50 lines of code. Can you approve this?” That moves our team from manually driving the car and making the turns and figuring out how to get from A to B to playing air traffic control with, hopefully, dozens of cars. To support that, we have given our agents access to our internal tools, our entire code base, the ability to stand up environments, and they will now take a first pass before our engineers or our support team ever see that issue. When I look at the numbers, the new process of how we are adopting AI at Blend Labs, Inc. has already resulted in more than 1.5x productivity in 2026 versus 2025, based on the number of pull requests our engineering team is doing, and we are just getting started. Prospects and customers are already taking notice of how fast we are moving. I get notes from customers all the time. I have been on-site with our biggest customers in the last month, and I can tell you that momentum is palpable. Our customers have noticed a change in our quality and speed. I want to be clear. This is not a one-team experiment. This exact same pattern of agents doing the first pass of work should apply to every role in every company, and specifically in Blend Labs, Inc., it will apply to roles here. That could be something like onboarding a new customer, preparing a cut for a customer business review when we are going on-site with them, or even something as esoteric as getting a manual Excel worksheet that outlines what loans have been funded and doing that work before our accounting team even has to pick it up. I said on the last call that we aim to be in the top 1% of all companies in terms of agentic AI adoption, and I really meant it. We are going to do it. It is something I am very passionate about, and we are going to keep driving for that. When done, I believe this effort, combined with Autopilot, has created the path to 10% to 15% more top-line growth and a lot more efficiency and speed for us. And that speed is probably the most important thing for any business, and especially for a company like Blend Labs, Inc. It means more customer issues fixed, more great features developed, more things like we have done with Autopilot, continuing to grow Autopilot, faster time closing a quarter, better preparedness for customer business reviews; these will be the new Blend Labs, Inc. To wrap up, transforming a company of our size into an agent-first company is definitely more work and more complicated than the world understands. But it is worth it. We have a really important mission. Our customers serve millions of consumers across the country every single year, so this change cannot come fast enough. We are taking it as fast as we can, and we feel like, to be quite candid from my perspective, we are the best-positioned company in the space. It is something that I spend a lot of my time on, and the team is even more passionate about. So, while the war and tariffs and oil and all those things might create some conservatism around short-term mortgage market numbers, because the macro and the rollout time for what we are building also take some time, I have never been more energized about the medium term and, hopefully, even the long term for our customers, our team, and our investors. And with that, I will turn it over to Jason to walk through the financials. Jason Ream: Thanks, Nima, and thank you to everyone else joining us on the call. We delivered a strong start to 2026, with both revenue and non-GAAP operating income above the high end of our guidance ranges. Revenue grew 15% year over year, and our non-GAAP operating margin expanded to 13%, reflecting growth across the business and reflecting the operating leverage we have continued to build into the model. Total revenue in 2026 Q1 was $30.8 million, above the high end of our guidance range, driven by growth in mortgage and consumer banking alike. Mortgage Suite revenue was $17.2 million, up 18% year over year. Funded loans on our platform were approximately 187 thousand in Q1, up 29% year over year and slightly better than we had assumed coming into the quarter. That strong volume growth was partially offset by a lower year-over-year economic value per funded loan, which came in at $84 in Q1, within the $84 to $85 range we discussed on our last call. We were at the lower end of our range primarily because of higher mortgage volumes, which lowers the per-loan economics calculation given some of the fixed-fee arrangements that we have within our customer base. Consumer Banking Suite revenue for the first quarter was $10.8 million, up 12% year over year and consistent with the color we shared on our last call. Professional services revenue for the first quarter was $2.9 million, up sequentially from $2.1 million in Q4. Of the $2.9 million in professional services revenue, approximately $600 thousand related to work completed in prior periods that was recognized this quarter under our revenue recognition policies. We would not expect a similar catch-up amount in future quarters. Turning to profitability. Non-GAAP gross profit was $24.8 million, and our non-GAAP gross margin was 80.3%, up from 72.9% in 2025. I would note that gross profit in the quarter benefited from the PS catch-up that I just mentioned, as well as some one-time cost of revenue benefit that together brought gross margin for the quarter up by about two to three points. Please keep that in mind as you think about modeling gross margin going forward. Non-GAAP operating expenses were $20.7 million in Q1, up 10% year over year. As a reminder, the year-over-year comparison reflects the change in our internally developed software capitalization methodology that we discussed last quarter, where we are capitalizing less of our R&D personnel cost than we did in 2025. This is an accounting treatment change rather than a change in the nature of our R&D investment. As a result, reported R&D looks elevated on a year-over-year basis, an effect that will persist to some extent in 2026 until we lap prior-year periods. Non-GAAP operating income was $4.1 million, above the high end of our $2 million to $3 million guidance range, and representing a non-GAAP operating margin of nearly 13%, an improvement of approximately 10 points compared with 2025. Free cash flow for the quarter was $7 million compared to $15.5 million in the prior year. We are pleased with the strong cash flow generation and want to remind you of our seasonal patterns, where Q1 is typically a strong collections quarter in our business. And our balance sheet remains strong. We ended the quarter with $59 million in cash, cash equivalents, and marketable securities and zero debt. Putting our cash to work, we repurchased 11.2 million shares during the quarter at an average price of $1.66 per share under our share repurchase program, deploying $18.6 million of the $50 million authorization we announced on our last call. As we said last quarter, this program reflects our conviction in the long-term value of the business and our commitment to disciplined capital allocation. With zero debt and a solid liquidity position, we have the balance sheet to invest in both the business and in our shareholders simultaneously. Before I turn to outlook, I want to spend a moment on market share and on the macro environment. On market share, the initial release of 2025 HMDA data in early April showed approximately 4.4 million originations for the year, which puts our 2025 mortgage market share at approximately 17%, squarely in the middle of the 16% to 18% range we guided to back in November. The HMDA data will continue to settle as late filings come in, but we do not expect that figure to move meaningfully. As we look into 2026, we expect a market share headwind of 100 basis points, primarily reflecting the volume roll-off of one large customer that we have discussed previously. At this time, we do not see any other significant headwinds to our market share. On the macro side, the spring housing market started on stronger footing than many had expected, supported by improving affordability and slowly rebuilding inventory. That said, the recent rise in mortgage interest rates adds uncertainty to the outlook. Fannie Mae's most recent forecast calls for total mortgage market growth of approximately 19% year over year in 2026. But Fannie reduced both its second quarter and full-year 2026 outlooks earlier this month as rates have moved higher. Our own 2026 view is anchored to that updated Fannie outlook. We will remain cautious in our outlook until rates come down meaningfully and refi activity picks up. We have the platform and the customer base in place to capture the upside when conditions improve. Now let us turn to guidance. For 2026 Q2, we expect total revenue to be between $32 million and $34 million, representing approximately 1% to 7% year-over-year growth. Underneath those headline numbers, we expect Mortgage Suite revenue to grow 4% to 10% year over year, driven by mortgage market volume growth and partially offset by a year-over-year decline in value per funded loan, which we expect to be in the $79 to $80 range in Q2. The decline in EVPFL from Q1 to Q2 is primarily driven by increased volume, which, as I mentioned earlier, mechanically lowers EVPFL. We expect year-over-year Consumer Banking Suite revenue growth to be between negative 2% to positive 4% in Q2. We expect Q2 non-GAAP operating income to be between $5 million and $6.5 million, implying a non-GAAP operating margin at the midpoint of approximately 18%. A few additional notes on what is embedded in our expectations. Our Mortgage Suite business continues to be subject to macro volume fluctuations, and depending on the trajectory of mortgage rates and the broader housing market from here, Mortgage Suite revenue could moderate or even flatten out in 2026, particularly if refi activity remains soft. On per-loan economics, Q1 is typically the high-water mark due to seasonality, which is why we are guiding to a Q1 to Q2 step down from $84 in Q1 to $79 to $80 in Q2. In the absence of an uplift from Autopilot, which is too early to quantify and is not baked into any of our expectations, we would expect EVPFL in the second half of 2026 to fluctuate with seasonality but still stay below Q1 levels. On consumer banking, growth is moderating based on the headwinds we discussed on our last earnings call. In addition, we have also seen softer macro-driven volumes on home equity as rates have moved higher. Combining these two factors, we expect single-digit year-over-year growth in consumer banking in the back half of 2026, with Q3 growth likely lower than Q4 given the year-over-year compares. And there is macro sensitivity in the home equity portion of our consumer banking business. If rates rise from here, our expectation would be to see additional pressure on those growth rates. Finally, I would like to touch specifically on Autopilot. While we are incredibly excited about the potential for Autopilot to generate revenue upside, we would encourage investors to be cautious about incorporating this into models at this juncture. We hope and plan to provide additional information on potential impact to the outlook as we get past the free trial period and have a little bit more time under our belt. In summary, we feel very good about the shape of the business heading into the rest of 2026. Q1 marked our second consecutive quarter of year-over-year growth in mortgage. With churn now stabilized and the partnership model transition behind us, we expect most of the variability in mortgage revenue from here to be macro driven. Cost discipline remains intact. We expect to continue to drive additional productivity and efficiency over the year as AI-enabled workflows compound across our internal processes, an effort that, as Nima discussed, is now well underway across the company. This is indeed an exciting time for Blend Labs, Inc. We hope that you are excited to be part of it too. And with that, let us open up the call to your questions. Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Ryan Tomasello with KBW. Your line is open. Please go ahead. Ryan Tomasello: Thanks, everyone. Nima, in your prepared remarks, you mentioned that Autopilot and your AI initiatives present a path, I think, to what you said was 10% to 15% more top-line growth. Can you just put a finer point on what you mean by that, and what underpins your confidence in quantifying the benefits at this stage? And then maybe just turning to consumer banking: given the noise in that segment from the large customer churn, can you help us understand where the underlying revenue growth is running in that business for Q1? And then at a higher level, based on the data points you have given previously about, I think, a $2.5 million impact from that large client in consumer banking, it just seems like the growth profile there is coming in a bit weaker than what was initially hoped for. So, Nima, your broader commentary around how you feel about the strength of that business going forward. Thanks. Nima Ghamsari: Yeah, great to hear from you, Ryan. I would start with our current pipeline. Our current Autopilot pipeline is about $10 million. We have only been in the market for just over a month now with pricing, and we have a lot of customers who have turned it on with really positive feedback. I mentioned two very large go-lives with customers. If we can keep up that momentum, think of it as 10% to 15% incremental on top of whatever other growth you may be forecasting, coming from Autopilot, which is what we see a path to right now. We obviously have to keep executing and have a lot of work in front of us, but the product is awesome and our customers love it. On consumer banking, the biggest headwind is from that large customer you called out, and they had a pretty big consumer banking line item. On the positive side, we have some good-sized financial institutions going live with our wall-to-wall suite this year. Those rollouts are in progress, and we are excited about that. Once that hits, I think that will be a positive benefit. We also have great customers rolling out our Rapid home equity product as we speak, which will be another positive catalyst. The home equity market has macro factors as well, but there are enough new things happening on the consumer banking side broadly that make me feel really good about the consumer banking business. Operator: Your next question comes from the line of Dylan Becker with William Blair. Your line is open. Please go ahead. Dylan Becker: Hey, appreciate it. Nima, I appreciate all the color on Autopilot and Autopilot MCP. It sounds like a lot of customers are interested in piloting. I think you called out some of the early proof points around improved cycle times and conversion rates. Could you provide a little bit more color on what that looks like relative to a non-automated process to try to tangibly put some value on what customers are seeing and learning? And then how you are thinking about the deployment or utilization of the first-party agents versus some of the MCP-enabled agents, and maybe the economic variability between those? And then, as a follow-up for Jason, you called out the per-funded-loan dynamics and market share dynamics. It sounds like you are increasing market share with the customers that are coming online or being onboarded, but that is kind of working inversely upfront against per-funded-loan economics. Can you remind us of the mechanics there, as well as when we would expect that to flip so those tailwinds work in tandem — market share growth inflecting alongside per-funded-loan expansion over time? Nima Ghamsari: Yeah. On the impact, there are two anecdotes I will share for two of the customers who have been some of the biggest users. We help them track the cycle time and the conversion. The conversion drivers are less obvious, so I actually talked to one of our customers about this; I will get to that in a second. On cycle time, for one customer, for example, from application complete in Blend Labs, Inc. to closing disclosures being sent to the customer, it went from 29 to 21 days. That is a pretty meaningful improvement. It makes sense because customers have a lot of back and forth with consumers, and what Autopilot does in real time as the consumer is in the flow is find those things that will be the gotchas down the line. It shows the consumer, “We noticed that this account is in the name of a trust. We need to get your trust documentation right now,” versus asking for it a few days later once an underwriter reviews it and sends it to a processor, which sends it back to the loan officer. It short-circuits the process in a positive way. Our hope with Autopilot plus some of the Rapid products — put those two things together, call it Rapid Pilot — is you can get an application started and approved, because Rapid gives you an approval and an offer up front, and then once that customer is ready to go, get them clear to close in a matter of minutes, or conditionally clear to close on an appraisal if one is necessary. Where I have been more surprised is why the conversion is so much better, but it makes sense: when you give people more certainty faster, we are seeing good conversion uplift too. It is early, but that is even more valuable to our customers, because those are consumers who would be walking out the door that they had spent time and money on as a lender — not just credit pulls and other data pulls, but also their teams' time and energy. As we can shorten these cycles and make the process of lending more real time, it fundamentally transforms the industry. On consumer banking, we are building out the integrations to all the consumer banking products for Autopilot. There is opportunity there now. There are fewer manual tasks in consumer banking, but there is a lot more volume of those tasks. While it may not be worth thousands of dollars per loan in consumer banking, the scale matters, and they have very big operations teams managing these processes. Autopilot enables those teams to do a lot more volume. One other thing: rates really drive refi activity. If you are a mortgage servicer with a lot of refi volume, your only way to handle large volumes historically has been to scale up and scale down teams, and you cannot really predict when rates go down. The ability to create elasticity of workforce — with agents that a lender can spin up and spin down alongside their team, with agents taking a first pass — changes the economic profile of servicing and recapture. For our large servicing customers, I think it will change the way they do business because it will allow them to handle market fluctuations even better than on the purchase side. Jason Ream: Yeah, good question, Dylan. We are seeing volume growth. As I mentioned, we had better volume in Q1 than we had expected coming into the quarter. Part of that is our customers doing better; part of that was the market being a little better than we expected in the quarter. Of course, we are always trying to add share and bring new customers onto the platform. As far as per-funded-loan economics — putting aside the seasonal variability that comes from the mechanics I talked about — we are doing a much more concerted effort now to drive growth year over year with existing customers. Things like Autopilot give us better pricing leverage coming into new customer situations. Obviously, Autopilot drives its own revenue stream, but it also gives us leverage in the core platform as well. Rapid remains a driver as well on the refi side in particular. As Nima mentioned, refi is even more sensitive to rates than purchase, and we do not have a Rapid purchase product; we have a Rapid refi product. As rates come down, we should see a benefit in volume and revenue in that sense, but also, as we get more customers up on Rapid refi, we should see a benefit in PFL as well. Operator: Your next question comes from the line of Joseph Vafi with Canaccord Genuity. Your line is open. Please go ahead. Joseph Vafi: Hey, guys. Good afternoon. Thanks for taking my questions. Nima, just the most recent update on the Rapid product uptake — how you are seeing market reaction to them? Obviously, the market backdrop is not as strong as we would like, but any feedback you are getting? Nima Ghamsari: I would reiterate what I said about this Rapid Pilot. Rapid plus Autopilot together is getting momentum and focus from our customers. It is a lot of what I spend my time on. I have had two on-sites with two very large banks and lenders in the last two weeks about this specific thing that they want to get live in Q2. In practice, our customers — especially for refis and home equity — want to be able to make an offer in real time and then fulfill the work they need to get done on that offer in real time. The combination of those two things has been incredibly powerful. On top of that, we have some very, very large customers going live with Rapid home equity — some of the top home equity originators in the country. It is definitely a good time in the industry. If I had one criticism of myself here, it would be: how do I make this so easy to adopt that they flip a switch and turn it on, and now they have Rapid refi enabled in their environment? That is a challenge for us that we are thinking about going into the next couple of months, and we intend to make that happen. As we make that happen, our customers will be able to adopt it much more easily. That is a key learning for us from the Autopilot rollout: we made it truly self-serve for a customer to turn on, and we are seeing the adoption. The numbers we shared in terms of the number of lenders that have turned this on — think about large financial institutions turning on a new AI agent for their organization with the flip of a switch, even without calling us. The most surprising part was we had fairly large banks turning this on in beta and production without us even knowing about it. Then we saw it start to stream through our logs and reached out to them. We are a product-led growth company. We like to talk to our customers to help them get the most out of our product, but making things easy to adopt is going to be very good for Blend Labs, Inc. Everything comes back to speed — speed of adoption, speed of iteration for our team. We showed that with Autopilot, and I am very confident we can take that micro-culture and those concepts to the rest of what we do at Blend Labs, Inc. I will end with one last anecdote. Autopilot MCP has unlocked a lot of doors for us. I was on-site with one fairly large customer last week, and their head of engineering was in the room. The first thing he asked was, “We want to build this into our mobile app.” I said, great — you now have a way to do that. It is called Autopilot MCP. You can get all the capabilities of Blend Labs, Inc., and the intelligence layer of Autopilot, entirely in your own environment. He said, wow, okay. His first question to me after that was compelling: “Can I use this in other parts of my business? We do not use Blend Labs, Inc. for these other kinds of loans,” and he named a couple. I said, yes. Autopilot works. You can put custom guidelines in there yourself; you do not even need to talk to us. His eyes lit up, and he asked for a copy of the Autopilot MCP documentation, which we sent to him. Historically, those stakeholders struggled with how to fit their tech stack into the Blend Labs, Inc. world, and now we have opened that up. We had another really interesting sales call with a fairly large bank. The digital leader came on the call — historically someone who felt a little bit displaced by us sometimes — and his first question was, “Can I use this with my current digital stack?” As soon as the answer was yes, with Autopilot MCP, he went from potentially being a detractor to saying, “Oh, wow. This is actually really interesting. Now I can give new digital capabilities, improve my customer experience, in a powered-by way that would take months, if not years, to do internally,” especially building agents that are this powerful and complex. Operator: A reminder, if you would like to ask a question, please press star 1 now to raise your hand. Your next question comes from the line of Aaron Kimson with Citizens. Your line is open. Please go ahead. Aaron Kimson: Great, thanks for the questions. Nima, in your conversations, how do customers perceive the value that Autopilot is providing today? Do you feel like it is still primarily being thought of as a component of tech budgets, or are financial institutions increasingly open to viewing agentic products like Autopilot as a component of their labor budgets? And then one more: You have been working with financial institutions for a long time now. Can you talk about the appetite for adopting new products faster today than in the past, and how they are thinking about build versus buy — the balance between adopting AI products from AI-native startups versus established software vendors like Blend Labs, Inc. — and then where the frontier labs fit in? I think we are all trying to figure this out for application software in general. Thank you. Nima Ghamsari: It is interesting. Right now, companies are figuring this out as we speak, so they do not know the answer to that exact question yet. That goes to how we price this in the short term — to allow our customers to use it free for a few months, and even after that we will have flat pricing that is good for us economically and good for our customers, to give them time in the short term to make the right changes in their processes and organizations. Long term, they are aligned to the fact that labor does not need to be scaled up and down with volume anymore. I was having a conversation with the CEO of one of our large customers, and the idea of being able to scale their organization without having to add thousands or more heads is so compelling. It naturally ends up being a labor question. But the more important value proposition, as numbers around conversion rates get set in stone and we have a better understanding, will be even more valuable to our customers. There are so many consumers in this country who can benefit from lower interest rates, or equity from their homes, or consolidating debt — things that have been historically hard for our customers to capture, and hard for consumers because they have to go through a lengthy process. If we can make it really transparent with something like Rapid and then really automated with something like Autopilot, it is going to reduce friction, and therefore consumers will do it, and they will do it with our customers. On adoption appetite and build versus buy, we are in an interesting place where a switch flipped sometime in the first quarter of this year — I think February 2026 — where our customers started to realize how important a transformation this is going to be. Maybe it was because of the Anthropic Claude code explosion in the market. They started to realize the magnitude, and they have put budgets behind AI and AI initiatives. It is important for their customers, for their users, and for their long-term economics as a business. It can do really powerful things, and people are starting to believe that. It is no longer something they felt was a 2027 or 2028 thing; it is, “I can do this now.” The sheer number of our large financial institution customers that have turned these capabilities on on their own, and are in active discussions or in process with us of rolling them out broadly, speaks for itself. They do think through how this fits into their stack. Is it a company like Blend Labs, Inc. that is already driving a lot of their work, internally and for their customers? Are they working with Anthropic or OpenAI or some other company in a big project in a consulting-like fashion? Or are they working with a small startup? In the Autopilot versus small startup frame, because we already have so much of the workflow happening in our system — natural entry points to invoke and spin up AI agents, and then spin them back down — we have a good advantage to help move very quickly for our customers. Our job is to make sure Autopilot is the best product on the market for the exact types of work our customers need to do; in this case, underwriting intelligence like I referenced in the prepared remarks. As long as we do those things, I do not think they will go to a small startup. We have to move fast, and we are moving fast; we have to build a great product, and Autopilot is a great product, doing things that a year ago would have seemed like science fiction to our customers. On the labs versus a company like Blend Labs, Inc., some of that remains to be seen. I have heard of really great things the labs are doing with many of our customers. The size of the pie is probably a lot bigger than anybody understands. The labs are not going to go in and try to build into our workflow to drive value for our customers — I do not think they would — but even if they would, we are already there. We already have it. Speed is very important in adoption. If you have to do a nine- or twelve-month project to get something, versus being able to flip a switch, our job is to make that possible. Operator: We have now reached the end of the Q&A session. This concludes today's call. Thank you all for attending. You may now disconnect.
Operator: Welcome to Sensus Healthcare, Inc. First Quarter 2026 Financial Results Conference Call. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Leigh Salvo with New Street Investor Relations. Please go ahead. Leigh Salvo: Good afternoon. And thank you all for joining today's call to discuss Sensus Healthcare, Inc.'s First Quarter 2026 Financial Results. Joining me from Sensus Healthcare, Inc. are Joseph C. Sardano, Chairman and Chief Executive Officer, Michael J. Sardano, President, Chief Commercial Officer and General Counsel, and Javier Rampolla, Chief Financial Officer. As a reminder, some of the matters that will be discussed during today's call contain forward-looking statements within the meaning of federal securities laws. All statements other than historical facts that address activities Sensus Healthcare, Inc. assumes, plans, expects, believes, intends, or anticipates, and other similar expressions such as will, should, or may occur in the future, are forward-looking statements. The forward-looking statements are management's belief based upon current available information as of the date of this conference call, 05/07/2026. Sensus Healthcare, Inc. undertakes no obligation to revise or update any forward-looking statements except as required by law. All forward-looking statements are subject to risks and uncertainties as described in the Company's Forms 10-K, 10-Q and other SEC filings. During today's call, references will be made to certain non-GAAP financial measures. Sensus Healthcare, Inc. believes these measures provide useful information for investors, yet they should not be considered as a substitute for GAAP, nor should they be viewed as a substitute for operating results determined in accordance with GAAP. A reconciliation of non-GAAP to GAAP results is included in today's press release. With that, I would like to turn the call over to Joseph C. Sardano. Joe? Joseph C. Sardano: Thank you, Leigh, and good afternoon, everybody. We appreciate you joining us today. 2026 represents an important transition period for Sensus Healthcare, Inc. With the dedicated CPT codes for superficial radiotherapy now in effect as of January 1, we are operating in a fundamentally different environment than ever before. We are tasked with the responsibility of helping our entire industry pivot to the new reality. For quite some time, two factors weighed heavily on our business: customer concentration and the absence of reimbursement clarity. Today, we believe both of those factors are beginning to shift in a meaningful way. I would like to frame our discussion around five priorities that we believe will define our progress in 2026 and provide a clear framework for tracking our execution over the course of the year. Number one, educate the market on the new reimbursement and train them on how to utilize the codes. Two, drive customer adoption following CPT code implementation. Three, grow our recurring and utilization-based revenue streams. Four, diversify and strengthen the commercial model. And last, number five, deliver sustainable profitability. Our entire first quarter was dedicated to helping existing customers and new prospects better understand the new reimbursement coding. Initial results are excellent. The coding is simple and straightforward, and for those who have billed CMS under the new coding, they are already seeing a smooth transition by the payers as our users receive reimbursements. Both physicians and patients will continue to grow in confidence that SRT is receiving full funding. Which brings us to customer adoption and CPT impact. One of our strategic priorities is converting the new reimbursement environment into broader customer adoption and a more diversified installed base. During the first quarter, we began to see the benefits of the new CPT codes move from concept to commercial reality. With reimbursement now clearly defined and physician economics significantly improved, including approximately a 300% increase in the per-fraction delivery code, we are seeing increased inquiry levels, stronger pipeline development, a growing pipeline of qualified opportunities as of quarter end, and greater engagement from dermatology practices and hospital systems. We shipped 14 SRT systems during the quarter, including 10 direct sales and four placements under the Fair Deal Agreement program as well as rental arrangements. Importantly, these shipments reflect continued progress in broadening our customer base and meaningfully reducing historical customer concentration. We were able to match our sales from Q4, which we believe we will improve upon quarter over quarter for the balance of the year and into 2027. We saw strong momentum coming out of several major dermatology conferences during the quarter where physician interest and engagement levels were among the highest we have experienced. These events continue to be a critical driver of our pipeline growth and customer education as awareness of the new reimbursement environment increases, in addition to the benefit of SRT as a non-invasive alternative to Mohs surgery. Patients are deciding more and more their preference to avoid surgery. Recurring revenue growth and the FDA plus software. Another priority is expanding recurring revenue streams tied to utilization of our installed base and new prospects. There are still groups who prefer a shared service program, as indicated by the four of 14 units shipped in Q1. We are confident this will continue to grow. Our Fair Deal Agreement program continues to be a driver of utilization-based revenue. During the quarter, treatment volumes increased 8% over 2025, and we continue to increase the number of patients. We ended the quarter with 18 active FDA sites and nine pending activations. As we have said previously, FDA placements often serve as a bridge to system ownership, and we continue to see that dynamic play out as customers better understand the economics under the new reimbursement environment. Importantly, we are now taking additional steps to expand recurring revenue through software and services. The introduction of SensusLink represents an important evolution of our model, enabling enhanced workflow, treatment documentation, and operating intelligence across our installed base, while creating a scalable recurring revenue opportunity tied to treatment activity. We view this as an important step in evolving our business model toward a more predictable and recurring revenue profile in the future. Over time, we expect recurring revenue including FDA, service, and software to represent an increasing percentage of total revenue, which historically has been about 10%. Commercial expansion and diversification. Our next priority is broadening commercial reach through access to our technology and reducing volatility by creating more ways for customers to acquire and use Sensus Healthcare, Inc. systems. We are seeing increased interest across a wider range of customers including independent dermatology practices, group networks, hospital systems, and private equity-backed platforms. To support this, we recently launched Sensus Healthcare Financial Services, which provides a streamlined pathway for customers to acquire our systems through flexible financing options. Since launch, we have begun actively engaging with prospective customers to utilize this platform and are seeing improved conversion rates on late-stage opportunities. We are also seeing a shift in customer preference towards purchase compared to prior periods where Fair Deal Agreement program participation was the primary entry point. We now have to ask the question: Why do you want to give up 50% of your revenue when one patient procedure per month represents your breakeven? Profitability. Our priority is translating stronger demand, a growing recurring revenue base, and disciplined expense management into profitability. We are entering this new phase with a strong balance sheet, including $18.3 million in cash and no debt. While our first quarter results continue to reflect transition away from historical customer concentration, we believe the combination of improved reimbursement, a more diversified customer base, expanding recurring revenue streams, and disciplined expense management positions us to deliver improved financial performance over the balance of 2026 with the objective of achieving full-year profitability. With that, I will turn the call over to Michael to provide more detail on our commercial execution and growth initiatives. Michael? Michael J. Sardano: Thanks, Joe. I will focus on how our commercial model is evolving and how we are executing against the priorities Joe just outlined. The most important change we are seeing is that reimbursement clarity has fundamentally reshaped how customers evaluate and adopt SRT. Importantly, this is shifting SRT from a considered option to a financially actionable decision for more and more practices. Customers now have multiple pathways to adoption, including outright purchase, leasing structures, and the Fair Deal Agreement program. In the first quarter, approximately 70% of systems shipped were purchased versus FDA. Average breakeven for customers is now two patients per month, and we are seeing a higher percentage of customers electing ownership earlier in the adoption cycle. From a pipeline perspective, we are seeing increased conversion activity across the board as customers move from evaluation to decision making. A key driver of this momentum has been our participation in several major dermatology conferences during the quarter. These conferences generated new leads, physician engagements and demos, and a meaningful increase in follow-up activity and site evaluations. Importantly, our decision to refine our conference and trade show strategy to prioritize high-yield events where purchasing decisions are actively being evaluated is paying off in our pipeline. Physicians are becoming more aware of the new CPT codes and improved economics of SRT. On the recurring revenue side, our focus is on increasing utilization across the installed base and expanding monetization through additional capabilities. SensusLink is an important part of this strategy, as it enables us to bring advanced functionality to both new and existing systems while also creating a pathway for ongoing service and software revenue tied to treatment workflows. On the installed base, total SRT systems now stand at approximately 965 units globally. We expect the rollout of SensusLink, which provides advanced operating capabilities to our SRT-100 installed base, to begin to take shape and increase interest in SRT significantly this year. Over time, we believe this will support increased utilization, improve customer retention, and create a recurring revenue stream tied directly to system usage. International markets continue to represent an important growth opportunity for Sensus Healthcare, Inc. We are seeing continued demand in key markets such as China and expect additional diversification over time as we expand into new regions. International sales also provide attractive margin characteristics due to lower servicing requirements. Domestically, we are taking a disciplined approach to scaling our sales organization in 2026. Our focus is on expanding selectively, increasing market education, and improving conversion efficiency. Overall, the underlying performance of our business will continue to improve as a combination of reimbursement clarity, expanded adoption pathways, and a more diversified commercial strategy positions us well for sustained growth and profitability. With that, I will turn the call over to Javier for a review of the financials. Javier Rampolla: Thank you, Michael, and good afternoon, everyone. I will briefly review our financial results for 2026, starting with revenue. Revenue for the quarter was $3.4 million compared to $8.3 million in the prior-year period. The year-over-year decrease was primarily driven by the absence of sales to our historically largest customer as well as a lower number of total units shipped. As a reminder, the prior-year period included a significant number of direct sales to that customer. In the current quarter, we had no sales to that customer, which reflects our ongoing transition towards a more diversified customer base. Importantly, excluding sales to that customer in the prior-year period, revenue increased compared to $2.7 million, demonstrating underlying growth driven by a broader mix of customers. In addition, a portion of systems shipped during the quarter were under the Fair Deal Agreement program and rental arrangements, where revenue is recognized over the term of the agreement rather than at the time of shipment. As a result, these placements contribute to revenue over time rather than upfront. Turning to cost of sales. Cost of sales was $2.4 million compared to $4.0 million in the prior-year period. The decrease was primarily driven by lower unit volumes, again reflecting the absence of sales to our historically largest customer, as well as the shift towards FDA and rental placements. Moving to gross profit and margin. Gross profit was $1.0 million compared to $4.4 million in the prior-year period, and gross margin was 29.2% compared to 52.2% in 2025. The decline in gross margin was primarily driven by product mix. This includes a higher proportion of international shipments, which carry lower average selling prices, as well as costs associated with the new system placements under our Fair Deal Agreement program. As utilization increases, these arrangements are expected to contribute more meaningfully to revenue and margin over future periods. Turning to operating expenses. General and administrative expense was $2.0 million compared to $2.2 million in the prior-year period, with the decrease primarily driven by lower professional fees. Selling and marketing expenses were $1.7 million compared to $2.2 million in the prior-year period. The decrease was primarily due to our decision to lower trade show-related spending to focus on events with the highest potential for sales generation. Research and development expense was $1.6 million compared to $2.6 million in the prior-year period. The decrease reflects lower lobbying costs related to reimbursement efforts as well as reductions in headcount and product development spending for next-generation systems. Adjusted EBITDA for 2026 was negative $4.2 million compared with negative $2.5 million for 2025. Adjusted EBITDA, a non-GAAP financial measure, is defined as earnings before interest, taxes, depreciation, amortization, and stock compensation expense. Please see our earnings release issued earlier today for a reconciliation of GAAP and non-GAAP financial measures. Other income was $0.1 million compared to $0.2 million in the prior-year period and relates primarily to interest income. Net loss for the quarter was $2.6 million, or $0.16 per share, consistent with the prior-year period. Finally, we continue to maintain a strong balance sheet, ending the quarter with $18.3 million in cash, no debt, and inventory of $16.5 million, an increase from $14.6 million as of 12/31/2025. This inventory level positions us to continue to meet demand in the coming quarters for both direct and for placements under the Fair Deal Agreement program. Before I turn the call back to Joe, I would like to provide some perspective on how we are thinking about the remainder of the year. We expect second quarter revenue to be higher than first quarter, and we also expect revenue in the second half of the year to be higher than the first half as we continue to build on the momentum we are seeing in our pipeline and customer engagement. From a margin perspective, as discussed earlier, first quarter gross profit and margin reflect the impact of product mix, including a higher proportion of international shipments, as well as costs associated with new system placements under our Fair Deal Agreement program. As utilization under these arrangements increases and revenue is recognized over time, we expect these dynamics to evolve over the course of the year. With that, I will turn the call back to Joe. Joseph C. Sardano: Thank you, Javier and Michael, for those updates. Before we open the call for questions, I want to reiterate that we believe SRT is increasingly being viewed as a compelling noninvasive treatment option that allows practices to expand patient access, improve workflow efficiency, and offer an alternative for treating patients with non-melanoma skin cancer. The new dedicated CPT codes for superficial radiotherapy significantly improve physician reimbursement and support broader adoption of our technology while benefiting patients with certainty of coverage for noninvasive treatment options. As we move through 2026, we remain focused on executing against our five priorities: education and training, accelerating customer adoption, expanding recurring revenue, broadening our commercial reach, and driving Sensus Healthcare, Inc. toward profitability. We believe we are still in the early stages of this transition and look forward to updating you on our progress throughout the year. Thank you for your continued support. Operator: We will now open the call for questions. Your first question today comes from Anthony V. Vendetti with Maxim Group. Anthony V. Vendetti: Joe, how are you doing? Hey, Mike. My first question is a two-part question. Your largest customer, which I think you had 15 units sold to in 2025, so with zero in first quarter 2026, it is not too surprising that revenue is down over 50%. When you said second quarter should be higher than first quarter, should we look at your largest customer, who is not buying any units right now, as upside if they come back? Are you internally assuming they do not come back, and if they do, it is upside? And then I have a follow-up question. Joseph C. Sardano: If they do come back, it is upside. We have not included them in our model for this year, but that does not mean they cannot figure out the new model they have to come up with so that they can remain strong in the market. Anthony V. Vendetti: Okay. So it is still a possibility. Then, with the new CPT codes that took effect January 1 and the approximately 300% increase in the per-fraction delivery code, are you seeing that translate into shorter sales cycles or a bigger pipeline of new business? If there is a pipeline, has it just not yet converted into revenue and you expect it to in time, or is it taking a while for the pipeline to build even though the code has significantly increased? Joseph C. Sardano: I will give you an overview, and then I will let Michael handle it since he was responsible for working directly with CMS to gain those codes. What we are seeing on an overall basis is that interest has increased significantly because of the dedicated and guaranteed coding system for SRT for dermatology. In the past, that did not exist. They were orphan codes that mostly came from ASTRO, and these new codes are specific to dermatology and to SRT. So we are excited for all of that. Regarding the interest from the field, more and more offices are contemplating bringing SRT into their practice because of those codes. Very clear, very obvious. Many are deciding whether they want to go with an FDA, an outright purchase, or a fair market value lease. They are taking it seriously because now all of these sites can consider this a long-term decision for their practice since those codes are in place. Michael? Michael J. Sardano: Sure. Thanks, Anthony. Great question. Joe covered most of it. The thing I will add is that on January 1, 2026, all of the codes took effect, but when it comes to coding and reimbursement, you do not know whether you are going to get paid or how the structure works until after you bill that patient and wait the four to six weeks. So people were not able to see the EOBs of these patients until mid-February to early March when you started treating patients. With those EOBs coming in, now we have actual proof, like Joe said, that we are getting paid. Private insurance, Medicare, Medicaid, CMS, etc., are paying these new codes the way they are supposed to. Now that we have that black-and-white proof, it is in our sales team’s hands, and we are giving it to the market. A big point we did not touch on is that our largest show of the year, AAD, took place March 27 to 31. Those leads could not close in Q1, so they are moving into Q2. I am very confident going into Q2 compared to Q1. As I said on the call, we expect to continue to grow and improve throughout the year, quarter over quarter. As Javier mentioned, we have more recurring revenue shipments than we have ever had before. From an FDA standpoint and also this rental model, as we get 10 rental contracts, then 30, then 40 or 50, we are quickly transitioning to a more recurring revenue base that will require patience. We are transitioning in a way investors have asked for over the last ten years—more recurring revenue, not solely focused on one revenue source—and now we are achieving that. I think we will see improvement on that. Anthony V. Vendetti: That makes sense. As best you can, can you timeline it for us? As you build this pipeline of recurring revenue and the Fair Deal Agreement, do you feel like, whether this quarter, next quarter, or sometime in 2026, you lap that pipeline and then it is easier to see revenues grow? Is there an inflection point you are looking for? Michael J. Sardano: As the education continues to roll out, for instance, we just had two or three more meetings this past April with large roll-up groups in addition to Florida-, Arizona-, and California-based meetings. As that happens, you are going to see education expand. The black-and-white codes greatly help us. This is the first time in our sixteen years that I have been able to go in a room and tell a doctor that these are black-and-white codes with no gray area. As that comes in, you will see a lot of people who were not interested over the last ten years now become interested because their accountants and lawyers can make sense of it. That is about education. The longer you give us, the more we can educate, and more people will adopt SRT. It is here to stay now. CMS has given us exclusive codes for SRT for the first time ever. We do not have to go to Washington as much anymore, which is good for time and money. We are excited. The sales team is fired up. We have already hired three more salespeople into territories—some new and some rehires. We are very excited to keep going. Joseph C. Sardano: Let me add one thing to your question about the recurring revenue piece. One of the codes involves radiation physics and the consults for radiation physics. This code has to be applied to every patient, and our introduction of SensusLink is a main focus for our customer base. They can charge that code once per week. For example, if their protocol uses 20 treatments at two treatments per week over ten weeks, this radiation physics code can be charged at an average of $93.85 per week across the country. That is ten weeks of treatment, or about $930. With our software, we will be sharing that revenue with our customers. The only way that they can access that reimbursement is through SensusLink. That is an important piece of our business that we did not have before. Anthony V. Vendetti: When did SensusLink officially go live? Joseph C. Sardano: It is live now and performing in several accounts already. Anthony V. Vendetti: Great. That was great color. Thanks. I will hop back in the queue. Appreciate it. Michael J. Sardano: Thanks, Anthony. Operator: Seeing no additional questions, this concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Joseph C. Sardano: I think everybody heard where we are headed this year. We believe we are going to have a profitable year, with each and every quarter being better than the previous. We have a very solid start to the year and are looking for increased revenues throughout. With that being said, we look forward to a very successful second quarter and to talking to you again at the next earnings call. Thank you so much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, ladies and gentlemen. Thank you for joining the Swisscom Q1 2026 Results, hosted by Christoph Aeschlimann, Eugen Stermetz and Louis Schmid. Louis, the floor is yours. Louis Schmid: Good morning, ladies and gentlemen, and welcome to Swisscom's Q1 '26 Results Presentation. My name is Louis Schmid, Head of Investor Relations. And with me are our CEO, Christoph Aeschlimann; and Eugen Stermetz, our Chief Financial Officer. Let's now move to Page 2 with the agenda of today. As you can see, our CEO starts presentation with Chapter 1, achievements and a quick overview on the Q1 highlights, operational and financial performances of the first quarter. Then in Chapter 2, Christoph presents the business update for Switzerland and Italy. In the second part of today's results presentation, Eugen runs you through Chapter 3 with our Q1 financials, including the confirmation of our full year guidance. With that, I would like to hand over to Christoph to start his part. Christoph? Christoph Aeschlimann: Thank you, Louis, and welcome also from my side to this Q1 2026 call. I will move directly to Page #4, highlighting our key achievements of this quarter with a consistent delivery, reinforcing our position as the customers' preferred choice. I am pleased to announce that the operational results on the group level are as expected. We have sound financials with operating free cash flow ahead of consensus. However, we would like to highlight that this is mainly due to intra-quarter phasing during 2026, and we expect a result on a full year basis as guided. In Switzerland, I would like to highlight the successful price increase execution, which I will detail a bit more later on, and the improved B2B IT profitability that we have achieved during the first quarter. In Italy, the integration of Vodafone Italia is on track. Synergies are coming in as expected, and we are continuing on our turnaround of the B2C business to move from volume to value. And I will talk a bit about -- in more detail about this later on during the call. You've also seen that we have achieved significant growth in the energy business, and we expect continued growth from that business throughout the full year of 2026. Now moving on to Page #5, you see the overview -- the commercial overview of 2026 Q1. You can see that overall, both on mobile and broadband, Switzerland and Italy, the results have been softer. I will explain those effects in detail later on. There are some overlapping effects in both countries coming from B2C and B2B. So I will mostly explain this in detail when we are in the section of Italy and Switzerland. But on the other side, you can also see that the wholesale business in both countries, both in Switzerland and in Italy, is doing very well. We have continued growth, both on the broadband side and on the mobile side in Italy. Now I will move on to Page #6, which shows you the commercial overview of the Q1. We have a net revenue, which is slightly softer due to a decline in revenues, both in Italy and Switzerland, and some overlapping currency effects, posing CHF 3.6 billion on revenue, in line with guidance. Profitability or EBITDAaL is roughly flat at CHF 1.28 billion. CapEx slightly down, delivering highly increased operating free cash flow of CHF 494 million. You can see that the increase of CHF 96 million is mainly driven by Italy segment where we see the synergy realization kicking in, also a bit softer CapEx, but also Switzerland delivered on the guidance and contributed CHF 34 million adjusted free cash flow on top compared to previous year's results. And I assume Eugen will go into the details of the financial results in his section later on. I will now move on to the business update. I will go directly to Slide #8, which highlights our priority for 2026. So for both countries, we have clear priorities. I will start with Switzerland. Of course, priority #1 in Switzerland is managing the telco service revenue top line, ensuring that our decline is slowing down and ideally coming to a halt. For this year, we expect a CHF 120 million decline on the service revenue side. At the same time, we are continuously working on our cost base, boosting our efficiency. We expect, as guided, CHF 50 million of savings. And at the same time, we want to work on IT profitability and growing the revenue at the same time. We do expect softer growth this year, but increased profitability, as you've seen already in the Q1 results. On the Italian side, our main priority is, of course, working on the integration of Vodafone and Fastweb, driving the synergy realization, which is very well on the way. We are also working on the telco service revenue side, especially on the B2C business, turning around the B2C business moving from volume to value to stabilize and the service revenue and massively reduce the decline on the service revenue side. At the same time, we are also continuously scaling the energy business and the IT business. And overall, this should deliver stable free cash flows from Switzerland and growing free cash flows from Italy so that we have growing free cash flow on the group level and are able to increase the dividend to CHF 27 for the year of 2026. I will now go into the details of Switzerland. I will start on Page 9 with the B2C business in Switzerland. Of course, let's say, the main priority in Q1 and the highlight was the price adjustment that we executed for our own brand offerings in order to sustain the best network quality and service excellence. Basically, the price increase was executed as expected. We had roughly, as expected, the churn in line with our business case. We had some effects also on customers moving or spinning down to the second brand, also roughly in line with expectations. You can see the impact on churn on the right-hand side of the chart. Mobile postpaid churn is roughly stable, slightly increased compared to Q4. But if you compare it to Q1 '25, it's roughly at the same level. Whereas on the broadband side, there was indeed a more churn based on the price increase that we executed in the market. And you can see this on the left or the middle of the chart with the resulting net adds. Whereas on the broadband side, we had net add losses due to the increased churn and slightly lower order volumes due to the price increase. On the mobile side, we still managed to generate a growth on the net debt side, slightly lower than in the previous quarters, but still a positive growth in RGU despite executing the price increase, which is obviously an encouraging result. From a promotional perspective, Q1 was a bit mixed bag or, let's say, the 4 -- the previous 4 months. On the one side, we have a positive movement in the market with both Salt and Sunrise following the price increase. On the other side, we have seen excessive aggressiveness from Sunrise, especially in the previous 3 months. After our price increase, they became really aggressive on the promotional side, even moving to lifetime discounts again on the main brand under the Sunrise umbrella, which is kind of counteracting the price increase. So I would say from a promotional perspective, a bit a mixed situation right now and overall, in line with sort of our expectation and not that much different from before. This is also why we continue to bolster the Wingo positioning on the full service side, so positioning Wingo as an integrated wireline and wireless provider. We are expanding the reach on the shop or the sales side. We opened new shops. We bring Wingo in some of the Swisscom shops to make the brand more visible and sort of be more present in the market with the Wingo brand to make sure that we generate enough sales out of the Wingo side, especially on the broadband business, where we see continued losses on the main brand. Next to -- sort of the main telco service revenue. We are also working on new revenue potential. There are 2 areas where we are investing heavily at the moment. One is the security proposition. So we have launched a new security proposition in Q1 integrated directly into the router, which we believe is very important, and we will continue to drive security service revenue in the future, which will help us to offset some of the ongoing decline on the traditional connectivity side. And we are also continuously investing on the AI side. We see quite a good momentum on the myAI solution, which achieved 78,000 registered users end of Q1. So we will continue to drive user adoption throughout 2026 and looking into how to monetize the AI potential going forward. But if you look at what's going on in the AI world and the general adoption throughout the planet, we do believe that there is potential also for us to generate revenue from this in the consumer space. I'll now move on to Page #10, B2B. So on the B2B side, you see that ARPU-wise, the development is nearly stable. There is a slight decline mainly driven out of the SME space. But overall, I would say, quite a stable ARPU situation. Whereas on the RGU side, you see continued losses. We had, especially on the mobile side, some corporate contracts that ended but also some losses in the SME space on the mobile side, whereas broadband is roughly stable in terms of RGU development. Whats' important for 2026 is that we are on track with the migration from the legacy portfolios to the new modern portfolios, both on wireline with Enterprise Connect and on the wireless with the Protect & Connect product, which integrates the beam security proposition because this is an important element going forward, driving the convergence between connectivity and security, which we believe will make a real difference going forward, both in positioning, but also in generating new revenues. At the same time, we are also working on CVM using better data analytics to drive targeted campaigns, especially in the SME space to stabilize the SME price and RGU development going forward. I'm very happy about the beem evolution. So we managed to secure nearly 60,000 users by end of Q1 over 1,000 locations. So we are very pleased with this development. And we can really see a big demand and a good fit or product market fit with the beem proposition and the requirements of our customers. So both in the SME segment, but also in the corporate segment, we managed to win first corporate customers, which really tells us that the direction is the right one and security will be an important -- or is and will be an important topic going forward. Now on the IT business side, I am very pleased with the development of the profitability. So you can see that we managed to increase profitability from CHF 25 million to CHF 32 million EBITDAaL in Q1. So this is obviously a very pleasing development. On the other side, revenue evolution was flat. Market is not so easy at the moment. Demand is quite soft. So on the revenue growth side, probably there will be only slight growth this year, and we will focus mainly on improving the profitability throughout the year to make sure that the services that we do deliver are also making the required profit -- are at the required profitability level. One positive note going forward, especially also into '27, we have signed a multiyear contract with the Swiss Armed Forces, which should deliver continued growth on sovereign ICT investments going forward. Now on Page 11, some words about network and wholesale. So we continue to invest in network coverage. So both FTTH coverage is up 3% to 56%, going as expected and well. And also on the mobile side, we increased the 5G plus coverage to 89 -- sorry, I mixed up things. So we increased the 5G coverage by 3% to 89%, and we increased the FTTH coverage by 4% to 56%. Sorry for this mix up. And we have also finalized the 5G SA Dual Mode Core. It's fully cloud-native, fully automated, and we will start migrating users now on to the 5G SA Core, which is, I think, quite an important milestone for our mobile tech team and a good achievement that we are proud of, and which will drive user experience and adoption of 5G going forward on the mobile side. On the wholesale side, we are pleased with the results. I've already highlighted before. Access revenues have grown by 8% from CHF 49 million to CHF 53 million. FTTH share is up by 8%. So you can see that this drives our wholesale market share in the market quite nicely, which stands now at 18.6%, and over half of this revenue is already coming from FTTH and continues to grow quite substantially, showing that the FTTH rollout is driving adoption, is driving revenues, especially on the wholesale side. Now moving on or finishing the Swiss side on Page 12 with the cost saving view. So you've seen that Q1 has a quite extraordinary higher cost savings of CHF 25 million. Please do not extrapolate this number on the full year. We continue to expect slightly more than CHF 50 million in savings on a full year basis as we had some cost shifting between Q1 and the other quarters. For example, we had less marketing spend in Q1 than expected and shifted some of the spend into Q2 and Q3. And this explains most of the advance that we have on the cost savings side, and we will catch up or basically spend this money later in the year. So you shouldn't expect much more than the guided CHF 50 million on a full year basis. But what is important, we continue to work, obviously, on the efficiency, both on the sales side, making our shops more efficient, finding new formats. We work on the call center efficiency, heavily investing into AI-driven technologies, both on, let's say, chatbot side but also supporting and helping agents serving our customers better and faster. So this is an ongoing effort from which we continue to expect continued savings this year, but also next year. At the same time, we are also heavily investing internally. We are still working on a phase out of legacy IT systems, but also legacy network systems. And we are also building a new data platform, which will help us move into the agentic world and deliver cost savings going forward when we shut down the old platforms in 2027. So you can see a lot of things going on, both on the commercial front but also on the efficiency front, which is making sure that we can deliver on our targeted and guided revenues and profitability. Now moving to Italy. Page #13 gives you an overview of the integration. So I am happy to announce that the integration activities are all on track. We have One legal entity since January this year. We have also merged the SAP systems into One system. We are now working on harmonizing all the financing activities. We are rolling out one integrated HR system, which allows us to streamline all the HR payrolling processes. So things are going as expected. We've delivered CHF 77 million of synergies. So we are very well on track to deliver the full CHF 300 million that we expect this year. So this is a topic I am very pleased about for Italy this year. And so if things go as expected, we will have reached half of the planned synergies that we expect from this deal on -- by 2029. Also on the cost side, the integration cost side, we are slightly below our planned values. So this is also good news from the integration cost side. Now moving on to Page #14. Looking into the B2C business. So you can see that we are working on all fronts to turn around the business into a more value-oriented approach. So the first and foremost, most important topic is making sure that our existing customers are happy, have high NPS and stay with the company. So you can see the effect of this on the right-hand side. Churn is down quite impressingly from 20% to 17.6% on mobile and from 20.3% to 16% on broadband. And this is despite the fact that we are still have ongoing price increases going on. So as you know, we are executing what we call a back book to front book alignment. So we have increased front book prices past year, and we are now migrating all back book customers, which are below the front book prices onto the new front book prices. So despite these activities going on and of course, generating some incremental churn, the overall resulting net churn is actually going down, demonstrating that all the activities that we are executing in the call center side, servicing side, network side are impacting positively the customer experience and customer happiness and driving down the related churn. Another important aspect that we are working on is driving down or bringing up -- driving down the ARPU that is leaving the company. So making sure that the high-value customers are not churning and staying with the company. And if they are churning that less, ARPU is flowing out. And at the same time, we are working on the inflow ARPU. So we have increased front book pricing. We are also working on the mix of inflows. So historically, we had a very, very high percentage of inflow on the lowest value subscription. We have now managed to shift it. So now over 1/3 of the subscription inflow is on the higher-value subscription. So it lifts our inflow -- average inflow ARPU up. And the resulting effect is that the differential between outflow ARPU and inflow ARPU has substantially decreased. It is nearly half of the mobile side, precisely minus 43%. But of course, it generates on the journey, while we are executing this, it generates some more net add losses as we have softer gross adds. We are focusing on higher value sales. For example, we are less aggressive on tourists or some of the other segments, which generate very low revenue. So this generates lower gross adds and despite lower churn results in a bit softer net adds. We expect this to improve over the year as we are reaching the end also of the back book to front book alignment, and we are more in a stable territory. And going forward, we expect revenue to stabilize throughout the second half of the year. So this is, I would say, all I would like to say on this. On the other side, ARPU, you can see is roughly stable, especially important on the mobile side. It's exactly stable, broadband slightly declining. And on the energy business, we are very pleased. We have now reached over 119,000 customers. So the growth has doubled, as we have sold also into the Vodafone base, and we will continue to focus on the energy business as this revenue growth helps us to compensate still the expected service revenue decline going forward and making sure that the B2C business stabilizes overall throughout 2026. Now on Page #15, looking into B2B. On the telco side, I would say, roughly stable. So you can see the RGU development slightly positive on mobile, slightly negative on broadband. But overall, we could say the telco service revenue on the RGU perspective is slightly -- is roughly stable. From a revenue perspective, it is still slightly declining, but most of the service revenue decline is actually coming out of the B2C business in Italy. And on the B2B side, things are going quite well. The IT trajectory is also confirming the strategic directory. We have been selected as an AWS European sovereign cloud launch partner. We are continuing to push on the AI front and making sure that we can also, again, generate growth out of the IT business in Italy going forward. Now going to Slide 16, Network & Wholesale. So you can see that also in Italy, we are continuously investing in our network. 5G coverage has reached 89%, up by 4%, and FTTH coverage has reached 58%, up 6%. So this is the first time that Italy has a higher FTTH coverage in Switzerland. And this will remain like this for many years to come as the rollout in Italy is driven by Open Fiber and FiberCop and they are heavily investing in expanding the FTTH coverage in Italy. On the wholesale business, we have seen very pleasing growth, both on mobile and on broadband, so you see plus 108,000 mobile, plus 68,000 on broadband. So really shows that our wholesale strategy is successful and working. We expect continued growth in broadband going forward, whereas on wireline, as you know, PosteMobile is leaving our wholesale business. They are executing or have substantially finished executing the migration in Q2. So at the next quarterly call, you will see a substantial decline on the wireless side from mobile. So we should enjoy this picture of growth in Q1 on both mobile and wireline. And we will, of course, or are already working since many months now on compensating the PosteMobile loss with new customers on the mobile side, so we launched Sky Mobile, but we're also working on new customers on the broadband side, making sure that we can compensate the revenue loss from PosteMobile going forward over the next quarters until we're running into 2027. Now the final slide on Italy, regarding our RAN or mobile infrastructure strategy. So we have taken 3 actions in the Q1 to work on accelerating the rollout, improving coverage and at the same time, decreasing our cost base. So the first one is the RAN sharing that we have announced with TIM that will essentially help us in accelerating rollout and improving coverage. So we expect the final agreement in Q2 2026 to be signed, and then subject to regulatory approval, which will last up to 1 year. So we will see if we can accelerate this a bit, but this will take some time. At the same time, we signed a tower JV with Telecom Italia to deploy up to 6,000 new towers at sustainable market conditions. So this is also in the stage of finding the final agreements and the authority approvals. And then we have terminated the MSA with INWIT, where we believe we have the right to exit by 2028, and this will also help us moving or -- moving away the infrastructure from INWIT onto new infrastructure at sustainable market prices will help us reduce our cost base to effectively compete in this very competitive market in Italy. This was it from my side, and I will now hand over to Eugen for the financial results. Eugen Stermetz: Thank you, Christoph, and good morning, everybody, from my side. All in all, a very solid set of numbers. So I'm happy to walk you through the details. As usual, I'll start with the group perspective on Page 19 with revenue. Revenue is down CHF 153 million. There was CHF 44 million currency. So net of currency revenue is down minus CHF 109 million. Switzerland, minus CHF 25 million, essentially service revenue decline. Italy is down CHF 76 million. That looks like quite a big number. So there is service revenue decline on the one hand, but there is also a sizable decline in hardware revenue with no impact on the margin that is a bit distorting the picture in Q1. There is compensation by growth from the wholesale and from the energy business as well. On the EBITDAaL side. EBITDAaL is slightly up, both on reported numbers and adjusted numbers. Switzerland, almost stable, thanks to higher telco cost savings, a bit of phasing in there, as Christoph already mentioned. And Italy is up CHF 30 million, so the telco service revenue decline could be offset by the realization of synergies and we also have lower costs there in the first quarter compared to prior year. On Page 20, CapEx. CapEx is down CHF 86 million in the group. That's very much driven by phasing effects both in Switzerland and in Italy. Switzerland CapEx is down CHF 40 million. We have lower FTTH construction volumes, which were pretty high in the first quarter 2025. And Italy is around CHF 63 million. It's a combination of somewhat lower CapEx for business as usual as we guided and with a number of phasing effects in Q1. So by implication, the operating free cash flow is up CHF 96 million. So we're clearly on track to deliver stable free cash flows from Switzerland and growing free cash flows from Italy, as guided, given all the phasing effects and OpEx and CapEx, obviously, please don't multiply the year-over-year numbers by 4, but stick to our guidance for the full year, which we're going to confirm in this call. I move on to Page 21. Switzerland. Switzerland revenues, down CHF 25 million. If you look at the individual segments, B2C is down CHF 12 million. So that's telco service revenue decline compensated by a bit of higher hardware revenues. B2B minus CHF 13 million, lower telco service revenue and also slightly lower IT service revenue, as Christoph already pointed out. The wholesale, minus CHF 8 million, is mainly due to roaming. The underlying excess service revenue is actually growing steadily as we communicate on a regular basis. Then on to EBITDAaL. EBITDAaL is almost stable with minus CHF 5 million, also B2C, almost stable. We have the top line decline, which is compensated by telco cost savings. Here, we have, as Christoph already mentioned, some phasing in there, with advertising spend being much higher in the first quarter 2025 due to the introduction of the We are Family! offering back then. Then B2B is down CHF 9 million. The telco decline was partly compensated by the improved profitability from the IT business and wholesale minus CHF 7 million is just the revenue impact of the roaming effect I mentioned. Infrastructure and Support Functions, plus CHF 13 million. So this is the telco cost savings flowing in. Next, Page 22. CapEx is down [ CHF 40 million ]. There is a number of in-year phasing effects across all categories. Obviously, the most important point is wireline access CapEx, which is down CHF 28 million. This is related to the very high FTTH volume in the first quarter in the previous year. And that's a result of stable EBITDAaL and lower CapEx. Obviously, operating free cash flow is up by CHF 34 million. We deep dive into Switzerland on Page 23. Top right, the telco P&L. So telco service revenue came in at minus CHF 34 million. That's pretty much in line with the previous quarters. There is no effect yet from the price increase, which becomes effective in the second quarter. So this is fully in line with our full year guidance of roughly CHF 120 million of service revenue decline. In the P&L, top right, you also see the impact in the indirect costs. So indirect costs, CHF 25 million down, which is obviously quite a bit above the expected quarterly run rate. So we stick to our original guidance of CHF 50 million plus for the full year. Bottom right, the IT P&L, service revenue down minus CHF 5 million. So the market environment is rather challenging, as Christoph already mentioned, we expect only limited growth for the full year. EBITDAaL, however, is up in the first quarter, plus CHF 7 million with improved profitability. So the smaller growth outlook in IT services has neither an impact on our revenue guidance nor obviously on the EBITDAaL guidance for the full year. I move on to -- sorry, I move on to Page 24, Italy. Revenue in Q1 was down CHF 81 million, B2C minus CHF 45 million. So we have a service revenue decline of CHF 35 million and also lower hardware sales. B2B is the biggest chunk here with minus CHF 55 million. Service revenue down CHF 20 million. But as I said, I think there is a significant decline in hardware revenues, which we expect to recover at least partly and has very good margin impact anyway. Wholesale is up due to wireless and wireline business growing. Obviously, the Poste effect will kick in from Q2. So this number will turn negative once we present the second quarter results. EBITDAaL, up CHF 36 million, very nice contribution margin from B2C up CHF 21 million. So you clearly see the significant synergy realization out of MVNO costs in the B2C segment, which overcompensates the telco service revenue decline. B2B contribution margin, down CHF 10 million. So very little influence of the lower revenue line, in particular, the hardware, and there also some compensation out of synergies that we realized on the B2B side, wholesale, up CHF 9 million, in line with revenue. And in indirect costs, we have lower cost of CHF 15 million. It's also driven EBITDAaL by in year phasing. So that number will probably not last, once we go into the subsequent quarters. Page 25. CapEx, down CHF 42 million. Adjusted number is even down, CHF 67 million. Integration costs, obviously up with CHF 29 million year-over-year total adjustments, CHF 25 million of CapEx. As you know, adjusted CapEx is expected lower for the full year despite our guidance by about CHF 100 million, but CHF 60 million CapEx down in just one quarter is obviously driven by some phasing across all categories. And as a result, operating free cash flow is up by CHF 78 million as a result of higher EBITDAaL and lower CapEx. I move on to Page 26. Deep dive into Italy. So you see the service revenue on the left side. Service revenue decline was minus CHF 55 million, is slightly better than in previous quarters. Obviously, still not where we want it to be, and we clearly expect a greater improvement of that number over the coming quarters, in particular in the second half of the year as guided in February. You already see the first time of what is going on in the year-over-year numbers in B2C wireless, where we first started with our back book alignment to front book and the consequent increase in the -- consequent positive effect on to the ARPU. So the service revenue kind of B2C wireless is just minus EUR 13 million, significantly better than in the previous quarters, and this is back book alignment to front book already showing up in the ARPU effect, which is basically down to 0 with just the RGU effect remaining in the service revenue decline. And this is the first sign of what we expect to come overall. Next, Page 27, synergy and integration costs are on track. So synergy realization is running smoothly. We have reached a quarterly run rate of CHF 77 million. This quarterly run rate will not increase dramatically over the course of the year, given that the biggest high -- I mean there is the MVNO synergies, which is now already at full quarterly run rate. And as already mentioned, we expect overall, a yearly run rate increase over the previous years of CHF 200 million up to CHF 300 million, which is already half of order synergies we expected and also integration cost is on track. We expect this to pick up speed over the course of the year. Page 28. Free cash flow. Free cash flow is up CHF 115 million. So I'm backing the group -- sorry, up from Italy back in the group. Free cash flow is up CHF 115 million versus the prior year, fully driven by the increase in operating free cash flow. Not much else to report on this page. I move on to Page 29. Net income. Net income is down minus CHF 35 million. Actually, EBITDAaL, EBITDA and EBITA, all flat. So the only negative impact on net income that is driving the number is a transitory noncash effect in the financial result. Otherwise, net income fully in line with the operating numbers. And then on to Page 30. Last but not least, obviously, given the solid set of Q1 results, we confirm the guidance for the full year. And with that, I hand back to the operator. Operator: [Operator Instructions] So I will now take the first question. Polo Tang: It's Polo Tang from UBS. I have 3 questions. The first question is just on back to Swiss price rises. So you talked about how you're executing according to plan. But should we expect more Swiss subscriber declines in Q2? Also were you surprised by the recent 2% to 3% price increases by both Salt and Sunrise? And did you assume competitor price rises when you set your guidance for 2026? Second question is just about Italian IT service revenues. They saw a decline. So can you maybe elaborate in terms of what's driving this? And how should we think about the outlook for Italian IT service revenues for the rest of the year? And my final question is just on spectrum. What are your expectations for the structure of the Swiss spectrum auction in 2027? And separately, how should we think about the range of outcomes, the allocation of Italian spectrum going forward? So do you think Italian spectrum could be allocated at low cost in return for investment commitments? Christoph Aeschlimann: Thank you, Polo. So I will start with your first question. So in terms of RGU decline, I mean, it will -- we will see now going forward, how promotional aggressiveness develops, and I think this will also impact RGU development. I don't expect the same amount of negativity as we've seen in Q1 because Q1 also had the additional effect of sort of Black Friday cancellations coming in from Q4, which kind of overlapped with the price increase impact. But now during Q2, customers received their first increased invoice this month. So we still need to see a bit how customers react, if -- how churn develops. I think so far, what we've seen post -- or in Q2 is that churn has sort of reverted back to where it used to be. But we still need to, I would say, observe 1 or 2 months more. So -- but overall -- the overall effect, we expect service revenue to come in as guided at roughly minus CHF 120 million overall for B2C and B2B. Eugen Stermetz: And we made no specific assumption with regard to price increases by the competition. The on top churn that we expected out of the price increase happens basically between the announcement of the price increase and the first month that the customers get the higher invoice, which is, in our case, from January to April and May. So there will not be much of an impact of the price increases by the competition on the overall outcome of our price increase. Christoph Aeschlimann: And then in Italy, so I mean you see a bit the same effect in the Italian market as in the Swiss. The Swiss market, the demand is softer, especially on the corporate side. So we are working on sort of reversing the Italian IT revenue back to growth. So we do expect this to improve over time, and we will see how it develops going forward. But overall, I would say we should be able to get at least back to a stable situation and maybe a slight growth. Now on the spectrum question for Switzerland for 2027. So the final -- the consultation on the spectrum auction is ongoing. We expect the final rules to be published after summer. So we can probably talk about this at the Q3 call going forward, knowing exactly how the auction will be structured and when it will happen in 2027. So at the moment, I would say, is roughly in line with expectations, but it's a bit too early to tell as we don't know the final rules yet. The same situation is in Italy. So we expect -- there is also the final consultation going on in network auction 2029 in Italy, and with the final opinion of AGCOM, like the telecom regulator is expected also by summer in Italy, and then we will actually know if there will be a renewal or not, which spectrum will be renewed and at what conditions, which right now is hard to predict. Operator: I will now open the line for the next question. Andrew Lee: It's Andrew Lee from Goldman Sachs here. I had 2 questions. Just one, a follow-up on the Swiss competitive environment. And then just a second question on Italian towers. So just first on the Swiss competitive environment. Am I right in understanding that what you're basically saying is we've had this back book price rise in the first quarter, but that positive is netted off by the negative of more aggressive promotional activity? And so the competitive environment in Switzerland hasn't improved structurally or even on a kind of near-term basis versus where we were, let's say, 6 months ago? Are you seeing any signs of trajectory towards any form of sustainable improvement in the competitive environment, notwithstanding the fact that you're expecting Swiss revenues to improve through the year? And then secondly, just on Italy, just as One independent telco puts it, that looks to be a commercial dispute in terms of what's actually happening on Swiss Towers. Our understanding until at least today is that you haven't come to the table with INWIT to discuss a way of alleviating this problem. And I guess it is a problem for both of you. You're obviously not happy about price, but you also need to invest in your network at some point and this is delaying that. So could you just give us your thoughts in terms of the time line to resolving this issue? Because it's obviously undermining your network quality ambitions in that market. Christoph Aeschlimann: Okay. So regarding your first question, so I think your -- if I understood your summary, I think it's well summarized. So overall, there is some positives regarding different price moves. But of course, they are completely offset, if the promotional aggressiveness in the market continues to be very high. And if other brands move to lifetime promotion on the main brand, basically, there is no more positive effect from the price increase because it's kind of -- what people really look at is what is going on at the promotion side to attract new customers. So in order to structurally improve the competitive environment, it would really need a sustainable change on the promotional approach in the market. On the Italian tower side, so we do expect this issue to take quite some time to be resolved. So I'm not expecting any rapid resolution. I'm not sure, I think you alluded that we haven't come to the table, but actually, we did try to negotiate many times with INWIT, which they refuse to enter into -- entertain a discussion with us, finally forcing us to exiting or providing the notice to the overall MSA contract. We continue to invest into the network. So we are continuously building out new towers and identifying the network. So this dispute doesn't prevent us from continuous investment because, as you say, continuingly -- continuously investing into network quality, coverage and densification is really important, and we continue to do this in Italy. But of course, at the same time, we need to come to a sustainable cost base on the tower side. And this is why we have to take in this action. We are -- this is why we are working on the JV with Telecom Italia. We are in discussion with other tower companies to prepare our migration plan away from INWIT. But of course, if INWIT is open to discuss on moving back to sustainable cost base, we are open to discuss with INWIT, and finding an agreement on the necessary towers that we need to retain post migration. Andrew Lee: That's all very clear. Can I just have one follow-up. Has there been any kind of conversations between you and INWIT post your announcement of the JV and the subsequent advancement of the contract? Christoph Aeschlimann: No, there has been no further... Operator: We'll now take in the next question. Your line is open. Joshua Mills: It's Josh Mills here at BNP Paribas. A couple of questions from my side. I'm going to start with the INWIT question. So you've got a slide in your presentation talking about the options going forward. Telecom Italia put out a bit more detail last night as well. And what they're saying is it would take 10 years to replace the INWIT contract structure. And obviously, they're looking to terminate the contract in 2030 rather than 2028. My question is how practically are you -- if you go down this route, going to replace these towers in such a short time period. I understand this transition agreement, but it's probably not going to last 10 years, it might last for a few years. And on that, have you actually engaged in discussions with other Italian tower companies on transferring anchor tenancies from INWIT to them already? Or is this something that you're just going to talk about doing in the future? Basically I want to understand at what point we'll get a clear guidance on how you go down this route? And then secondly, on the cost savings, clearly came in ahead of expectations this quarter. What gives you the caution to not raise the full year guidance of CHF 50 million now, and which of the areas of cost savings have been overdelivering in Q1 versus what we might have expected? Christoph Aeschlimann: Okay. Thanks, Josh. So I'll take the INWIT question. So the -- so we are working on our migration strategy. And of course, this migration strategy that needs to be discussed together with INWIT. So this activity has not yet started together with INWIT because this is a joint discussion that we need to have with INWIT to make sure that we have a sustainable way of moving towers away. But I would say the overall, looking at what TIM published last evening kind of makes sense. We have the same building blocks. We probably have a similar time line in mind. Also sort of a mix of moving to existing towers, with which we've sort of -- which are provided by many different or multiple different tower companies in Italy. We are in discussion with all of those tower companies already since quite some time to look at what this would mean for them. We're also working out on how to build new towers directly with new tower cos or also with the JV. So I would say overall, it's sort of a similar approach. And of course, the migration period needs to be agreed with INWIT. The contractual provision for this is a negotiation in good faith. It lasts at least 3 years, like from the end of the contract, so giving us already 2 plus 3 years, that means 5 years of migration period. And I also expect, I mean, INWIT has an interest to sustain revenues on their towers. So we do expect that we can accommodate the full year -- the full -- sorry, not the full year, the full duration of the migration with a good faith discussion of migrating those towers in due time one by one. Eugen Stermetz: Okay. Josh, just briefly on the second one. So the target for this year is CHF 50 million cost savings. So if you do a kind of regular quarterly run rate, that would be CHF 12 million, CHF 13 million a quarter. If you look at the cost savings out of our infrastructure and support functions segment, that's CHF 13 million year-over-year. So that's very much in line with what you expect quarterly. But then on top, there are cost savings mostly in the B2C segment. If I remember correctly, it's CHF 11 million out of advertising which comes on top of that normal regular run rate. And this is just in year phasing, as I mentioned, in 2025, we launched the We are Family! offering in the first quarter. So we had higher advertising spend, and that advertising spend is going to be spent over the course of the year. So there is no more magic to our reasoning here. Joshua Mills: Got it. Maybe just to come back on this tower question. Presumably, there is a date by which you will have to communicate to the Board and to shareholders, who will take on some of these anchor tenancies because the third party providers will take a while to ramp up, I think, TI say it will take -- they can enable about 500,000 towers a year through new players. So are you actually already talking about switching the anchor tenancies? Or are the discussions with existing tower cos just about future secondary tenancies, build-to-suits, et cetera? And when will we find out -- at what point do you expect to update the market on the detailed plan for switching away from INWIT? Christoph Aeschlimann: Well, I would say the detailed plan, as said, needs to be discussed with INWIT first. I don't want to communicate things to the market that we didn't discuss with INWIT beforehand. Until now, there is no discussion. I assume INWIT is waiting for the outcome of the legal proceedings that are currently ongoing for the provisionary measures, which we expect to happen over the course of the summer. And then I expect to enter into discussions with INWIT about the migration. And once we have substantially agreed with INWIT how this is going to happen, we will also communicate and update the market. Might be by the end of this year, might also be only next year, but what I can assure you is that we are very seriously and intensively working on this topic to make sure that we have a sustainable way forward for our operations. Operator: So we are now taking the next question. Go ahead, your line open. Robert Grindle: It's Robert Grindle from Deutsche Bank here. Hopefully, it's not going to be an issue much longer, but please remind what's your hedging on energy costs in Switzerland? And is the higher energy cost a boost for your Italy business as customers are looking to change suppliers? And my second question is back to Italy towers. How did the -- no, it's not actually the towers, the relationship with Vodafone, how did the indemnity work in Q1? And what's the full year effect, please? Is it the same benefit for 4 quarters? And at the EBITDAaL level, is it just like the past customers didn't move away this year? Eugen Stermetz: Okay. So first, on the energy cost. So both in Switzerland and in Italy, we have a hedging strategy in place for the energy cost, which protects us from short-term spikes, obviously, there is no projection for long-term increase in energy prices anywhere. But that is in place. So both in Switzerland and in Italy, for 2026, about 90% or so of our energy needs are already purchased and the price is fixed. The methodology with which we do this in Switzerland and Italy differs a bit. So in Switzerland, we have a rolling hedging strategy for the forward years. In Italy, we have the part of the energy need covered by power purchase agreement. So the details differ, but the bottom line is we are protected for -- we are protected for this year. Then on the Vodafone indemnity for the PosteMobile migration, that will most probably be booked during the year in one single quarter. We have not put anything in the first quarter. So the numbers you see for the wholesale segment in Italy in the first quarter are the operational numbers. And PosteMobile is actually still fully in there because they just started their migration after the end of Q1. Operator: We'll now take the next question. Your line is open. Please introduce yourself. Paul Sidney: It's Paul Sidney from Berenberg. Just a couple of questions, please. And the first one, sorry to go back to this, but on the Swiss competition levels, you've been pursuing a value over volume strategy for some time, you're putting prices up modestly. But it just doesn't seem to be working, as I think Andrew said earlier, he summarized it with just being given away in promotions. So I was just wondering, is there anything more Swisscom can do to reduce competitive intensity? Maybe the answer is raising prices more, focusing more on churn reduction? Is there anything else you can do? Or do you just have to accept the rational competition levels that we're currently seeing? And then secondly, on B2C, Swiss B2C, you set out how you would like to monetize additional services by upselling security by AI. I was just wondering, are you currently charging for these services? And if not, what do you think the appetite is for customers to pay for these types of services going forward? And what's your strategy there? Christoph Aeschlimann: Okay. So on the Swiss competition side, I mean, we are -- our overall strategy is to be a price follower in -- like we are not trying to position Swisscom as an aggressive brand. So we are restraining our commercial aggressiveness, really trying to tone down competitiveness in the market. This has always been our strategy, and we continue to work on this. There is not much more, I would say, we can do. I mean, at the end, competition behaves the way they -- or they do what they do. And it's their own decision. I think we have executed the price increase on our second brand. We have executed a price increase on the main brand. Our promotional strategy is around 6 or 12-month promotions. We are not executing lifetime promotions on the main brand, and we will -- I think this is an important way of positioning Swisscom brand as a premium brand and not something that we give away at the low cost. I think what we are -- things we are working on right now, our churn reduction, honestly, is quite hard because the churn levels we have are already quite low. They have now temporarily increased slightly on the broadband side. We will, of course, work again on that side to bring it down even more. But I would say we continue to work on branding, on positioning the brand as a premium brand. We are continuously working on reinforcing Wingo positioning as a converged provider and we are working on increasing our sales footprint to make sure that we are enough visible in the market. But overall, I would say that the strategy will be unchanged going forward. And we will see how the competition evolves over the next quarters. On the additional products, so security, we are already charging for these products. So since many years, we have -- we've always had a security offering that we are kind of amplifying right now and expanding. And we have 300,000 paying customers for security already. So it's quite a nice penetration into the base. We are looking at expanding this penetration, adding new security options so that we can upsell and cross-sell more into the base and really drive revenue generation from this product. So I would say on that side, we are confident that we can monetize security more going forward. The myAI proposition at the moment is a free proposition. So we are mostly looking at driving adoption, making sure that customers know about the product, and we will look into monetizing this next year. But it's still quite hard to tell how many customers are willing to pay for this proposition. And hopefully, of course, we will find many. But I think it also depends a bit on the evolution of what the hyperscalers are doing, what other AI players are doing, what they are charging, et cetera. But we will, of course, look into monetizing the AI proposition also on the consumer front. Operator: So I will now open the line for the last question. This is the last question. Please introduce yourself. Christian Bader: It's Christian Bader from ZKB. And there's a couple of questions regarding Italy. So first of all, telco service revenues declined by CHF 55 million in the first quarter. And you commented that you expect an improvement in the second half, the B2C side, they could be flat. So I was wondering, I mean, would it be possible to get them, let's say, annual number of new expectations for the telco service revenue loss might be in Italy? That's my first question. Eugen Stermetz: Yes, I can take that immediately. So the guidance for the full year for telco service revenue decline in Italy is CHF 150 million, CHF 100 million of which from B2C. Christian Bader: Okay. My next question relates to the wholesale business in Italy. And can you maybe quantify the loss that you do expect from the Poste MVNO contract in terms of user numbers or revenues that we should expect from second quarter onwards? Eugen Stermetz: Yes. So it's a full year effect in 2026 of about CHF 75 million. The migration started after Q1. So you will have a 12-month effect that goes into 2027 of about CHF 100 million. Christian Bader: All right. And also, I believe -- a question related to that, I believe I have read but I can't remember where, that you do get some compensation for this loss. And so therefore, the -- let's say, effect on the results will only be visible in 2027. Am I correct or... Eugen Stermetz: That is correct. There is an indemnification provision with Vodafone, which we also guided for in February, and it will hit the P&L positively by CHF 75 million this year, and we will show it in adjustments and it will be booked in one individual quarter, as I just explained. Louis Schmid: So thank you very much. And with that, I would like to conclude today's conference call. If you have any additional questions, feel free to reach out to the IR team. We look forward to speaking with you and wish you a pleasant day. Operator: Dear participant, the conference call has come to an end. Thank you for your participation. Goodbye.
Operator: Good afternoon, and welcome to Artivion, Inc.'s fourth quarter and year-end 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. I would now like to turn the conference over to your host from the Gilmartin Group. Thank you. You may begin. Unknown Speaker: Thank you. Good afternoon, and thank you for joining the call today. Joining me from Artivion, Inc.'s management team are Pat Mackin, CEO, and Lance Berry, COO and CFO. Before we begin, I would like to make the following statements to comply with the safe harbor requirements of the Private Securities Litigation Reform Act of 1995. Comments made on this call that look forward in time involve risks and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements made as to the company’s or management’s intentions, hopes, beliefs, expectations, or predictions of the future. These forward-looking statements are subject to a number of risks, uncertainties, estimates, and assumptions that may cause results to differ materially from these forward-looking statements. Additional information concerning certain risks and uncertainties that may impact these forward-looking statements is contained from time to time in the company’s SEC filings and in the press release that was issued earlier today. You can also find a brief presentation with details highlighted on today’s call on the Investor Relations section of the Artivion, Inc. website. Lastly, please refer to our release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results. Unless otherwise stated, all comments today will be using our non-GAAP results. Additionally, all percentage changes discussed will be on a year-over-year basis. Revenue growth rates will be at adjusted constant currency rates, and expenses as a percentage of sales will be based on adjusted revenues. With that, I will turn the call over to Pat Mackin. Pat Mackin: Thanks, and good afternoon, everyone. Through 2026, we continued to execute our strategy designed to drive long-term profitable growth through an expanding and clinically differentiated product portfolio. In the quarter, we delivered constant currency revenue growth of 12% and adjusted EBITDA growth of 26% year over year. Revenue growth was driven primarily by On-X and stent grafts, including AMDS. We also benefited from growth within preservation services as tissue processing volumes normalized following the 2024 cybersecurity event. Before expanding further on product line performance, I would like to address today’s exciting news regarding the exercise of our option to acquire Endospan. This follows the PMA approval of its NEXUS aortic arch stent graft system for chronic aortic dissections, which was achieved in early April. NEXUS is a branched endovascular stent graft system purpose-built for minimally invasive treatment of aortic arch disease, where patients often have no choice other than open-heart surgery. The clinical data are compelling. Data from the chronic aortic arch dissection cohort of the TRIUMPH trial demonstrated 93% survival from lesion-related death and 90% freedom from disabling stroke at one year post-treatment. Also, 95% were free from intervention due to endoleaks, excluding type II endoleaks, at one year in this very high-risk population. As a reminder, the total annual U.S. addressable market opportunity associated with both cohorts is estimated to be around $150 million, with dissections representing about $100 million of that. We plan to pursue supplementing the label to include aortic aneurysms through formal regulatory processes expeditiously post acquisition. Importantly, our anticipated acquisition of Endospan and its NEXUS system will complete our market-leading three-pronged aortic arch portfolio. This technology, acquired alongside AMDS and our E-vita OPEN NEO with LSA branch (C-Branch LSA), will position us at the forefront of this segment as the only company globally with a complete portfolio of aortic arch solutions. Importantly, NEXUS is a platform technology, not just a single product. It is supported by three additional PMA programs in development that we expect will further extend and solidify our leadership in the aortic arch market over time. We are pleased to have the financing already in place for this acquisition, and, subject to satisfactory and customary closing conditions, we expect to close in 2026. We expect to be ready for a full U.S. commercial launch of NEXUS in January 2027, following efforts to scale inventory production, complete value analysis committee processes, and augment our U.S. sales team. With that, let me turn back to our Q1 2026 results. From a product category perspective, stent graft revenues grew 10% on a constant currency basis in the first quarter compared to the same period last year. Year-over-year constant currency growth fell below our expectations due to lower than expected AMDS starter set sales in the U.S., as well as softer than expected performance internationally, particularly in the Middle East. Year-over-year growth also reflects a tougher comp in Europe, following a strong Q1 2025 performance as we recovered from the 2024 cybersecurity event. While U.S. AMDS sales associated with initial stocking fell short of our expectations in Q1, we have been very encouraged by implant and reorder patterns within the accounts already using AMDS. We view this as much more critical than the immediate impact of sales from starter sets. Strong reordering patterns reflect positive user experience and ultimately our long-term adoption and growth thesis. Looking ahead, we expect U.S. AMDS starter set sales to accelerate as more accounts get through the VAC process and finalize their procurement, and as we benefit from steps being taken to mitigate the initial upfront $100 thousand cost burden associated with stocking. We also anticipate PMA approval of AMDS in the coming months, which will obviate the need for entirely new accounts to go through the IRB process; some have deferred until PMA approval because of this increasingly imminent date. Ultimately, we see our comprehensive stent graft portfolio as a foundational component of our growth strategy. We are encouraged by our enduring fundamental strength and increasingly strong competitive advantage within the segment. Looking ahead, we intend to replicate our proven strategy by bringing additional stent graft products that are already generating revenue in Europe to the U.S. and Japan, which we believe will unlock further meaningful expansion of our stent graft total addressable market. Meanwhile, our Q1 On-X revenue was up 17% year over year on a constant currency basis. This growth was driven by further global market share gains and continued early traction in our new $100 million U.S. market opportunity unlocked by recently published data demonstrating improved outcomes with mechanical valves versus bioprosthetic valves for younger patients. We maintain our conviction that On-X is the best aortic valve in the market for patients under 65, and we will continue to take market share worldwide in that product line. Tissue processing revenues increased 23% year over year on a constant currency basis in the first quarter, as demand for our products remained strong and tissue volumes normalized year over year following the cybersecurity incident in late 2024. Q1 results were slightly ahead of our expectations of roughly $24 million per quarter for that business. Lastly, BioGlue was relatively flat on a constant currency basis compared to the same period last year. While this performance was slightly lower than our mid-single-digit growth expectation contemplated in our previously communicated full-year revenue guidance, it falls within the range of normal quarter-to-quarter growth variability due to the significant amount of stocking distributor business in that product line. Lastly, on our pipeline, we continue to make great progress on the ARTISON clinical trial for our next-generation frozen elephant trunk. We have 26 patients enrolled in the trial, which is a non-randomized clinical trial consisting of 132 patients in the U.S. and Europe at up to 30 centers for treatment of aortic dissection and aneurysm in the arch. We anticipate completing full enrollment in mid-2027. We are optimistic that the trial will be successful, supported by our clinical results from our current-generation frozen elephant trunk, E-vita OPEN NEO, which is available outside the U.S. Following the one-year follow-up period, assuming the trial meets its endpoints, we anticipate FDA approval for our C-Branch LSA in 2029, unlocking an incremental $80 million annual U.S. market opportunity. In conclusion, while Q1 results fell short of our constant currency expectations and reflected some moving pieces that Lance will walk you through in detail, it was a quarter of meaningful progress against our long-term strategy. The fundamentals that underpin our growth strategy remain intact: a comprehensive, clinically differentiated portfolio, a focused commercial organization, and a pipeline that stands to expand our total addressable market continuously over time. The reordering behavior we are seeing within AMDS accounts reinforces our conviction in the long-term adoption story, and we have a clear line of sight to near-term drivers that will accelerate new account conversion. On-X continues to take share from both mechanical and bioprosthetic valves and is the leading aortic valve on the market for patients under 65. With the addition of NEXUS, we now have what we believe is the most comprehensive aortic arch portfolio in the world, a position we have built deliberately and intend to extend. With that, I will now turn the call over to Lance. Lance Berry: Thanks, Pat, and good afternoon, everyone. Before I begin, please refer to our press release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year-over-year basis, and revenue growth rates will be in constant currency unless otherwise noted. Total revenues were $116.3 million for Q1 2026, up 12% compared to Q1 2025. Adjusted EBITDA increased approximately 26%, from $17.5 million to $22.1 million in Q1 2026. Adjusted EBITDA margin was 19% in Q1 2026, an approximate 130 basis point improvement over the prior year, driven by leverage in SG&A and gross margin improvement. From a product line perspective, stent graft revenues increased 10%, On-X grew 17%, tissue processing revenues grew 23%, and BioGlue revenues were relatively flat in Q1 2026. On a regional basis, revenues in Asia Pacific increased 6%, North America 23%, EMEA increased 5%, and Latin America decreased 23%, all compared to Q1 2025. International growth was below what we typically see from that part of the business. EMEA underperformance was driven by the stent graft-related factors that Pat discussed earlier, while underperformance across APAC and LatAm was driven primarily by quarterly fluctuations in distributor ordering patterns, which we expect to normalize over the course of the year. Q1 gross margins were 64.9%, an increase from 64.2% in Q1 2025, primarily due to favorable product and geographic mix. General, administrative, and marketing expenses in the first quarter were $60.8 million compared to $54.7 million in Q1 2025. Non-GAAP general, administrative, and marketing expenses were $59.3 million, or 51% of sales in the first quarter, compared to $53.0 million, or 53.6% of sales, in Q1 2025, reflecting a 260 basis point improvement. Approximately 170 basis points were driven through leveraging existing infrastructure and annualizing our year-one AMDS launch costs, and approximately 90 basis points were from stock-based compensation. Our as-reported expenses included a gain of approximately $1.5 million in Q1 associated with insurance reimbursement for cybersecurity costs incurred in previous periods, and approximately $1 million of diligence and integration planning costs associated with the planned acquisition of Endospan, both of which are excluded from adjusted EBITDA. R&D expenses for the first quarter were $8.8 million, or 7.6% of sales, compared to $6.7 million, or 6.8% of sales, in Q1 2025. Interest expense, net of interest income, was $5.2 million as compared to $7.5 million in the prior year. Other income and expense this quarter included foreign currency translation losses of approximately $800 thousand. Free cash flow was negative $6.8 million in Q1 2026 as compared to negative $20.6 million in Q1 2025. As a reminder, the first quarter is typically our seasonally lowest free cash flow quarter, and although negative, this quarter’s free cash flow results were slightly better than anticipated. As of 03/31/2026, we had approximately $55.8 million in cash and $215.4 million in debt, net of $4.6 million of unamortized loan origination costs. At the end of the first quarter, our net leverage ratio was 1.8x, down from 4.0x in the prior year. Now for our outlook for 2026. As Pat stated, our Q1 stent graft results did not meet our expectations, due to factors that could continue to impact our revenue in the near term, primarily softness in our international markets, particularly in the Middle East, and timing of AMDS starter set sales in the U.S. It is early in the year, and we are working to mitigate or offset these issues. However, given the uncertainty around the timing and impact of those actions, we believe it is prudent to adjust our guidance. We now expect adjusted constant currency growth between 7% and 11% for full year 2026, representing a reported revenue range of $480 million to $496 million. This guidance contemplates FX to have an approximate one percentage point tailwind on as-reported revenue for the full year. From a product line perspective, the reduction relates primarily to stent grafts due to the factors we have discussed. This guidance assumes inconsequential revenue from U.S. NEXUS sales in 2026 as we seek value analysis committee approvals and build supply for an anticipated 01/01/2027 U.S. launch. As a reminder, growth in Q1 2026 was anticipated to be higher than the remaining quarters, driven by the easier comps for the preservation services business from the prior-year cybersecurity event. These flip to difficult comps for the preservation services business in Q2 and Q3 before normalizing in Q4 2026, followed by a more consistent sequential improvement as our U.S. AMDS and U.S. On-X sales accelerate during the year and we return to normal costs for the preservation services business in Q4. Excluding the impact of the planned Endospan acquisition, we now expect full year 2026 adjusted EBITDA to be in the range of $100 million to $107 million, representing a range of 12% to 20% growth over 2025 and approximately 100 basis points of adjusted EBITDA margin expansion at the midpoint of our ranges. Please note that this full-year adjusted EBITDA guidance excludes potential impact from the anticipated completion of the Endospan acquisition. Assuming the acquisition closes later in the quarter as anticipated, we would expect to incur approximately $8 million of incremental expense through 2026. This would include investments in launch costs and commercial infrastructure while also accounting for the absorption of Endospan operating costs, including ongoing R&D and clinical expenses. Given our expectation for immaterial revenue contribution from U.S. NEXUS sales in 2026, this incremental $8 million would be expected to reduce our full-year 2026 adjusted EBITDA to $92 million to $99 million. Looking forward, we would expect the first meaningful revenue contribution to begin in January 2027, and we anticipate our combined results to be EBITDA neutral for full year 2027 as U.S. NEXUS revenue ramps over the course of the year and as we get combined R&D and clinical spending into our targeted range of 7% to 8% of sales. Relative to the pending acquisition, we also announced today that we drew $150 million under our existing term loan facility. The proceeds will be used to fund the $135 million upfront purchase price for the anticipated Endospan acquisition. Assuming the acquisition closes as anticipated, quarterly interest expense would increase to approximately $8 million starting in Q3 2026, with Q2 2026 interest expense expected to be slightly lower than that. As a reminder, we also continue to anticipate paying a $25 million earnout in 2026 following the anticipated mid-2026 AMDS PMA approval. With that, I will turn the call back to Pat for his closing comments. Pat Mackin: Thanks, Lance. Overall, we have near-term work to do, and we exited Q1 with greater conviction in our foundational growth strategy. We are excited to move forward with our pending acquisition of Endospan, as the NEXUS platform stands to complete our market-leading aortic arch portfolio. We see PMA approval of AMDS on track for midyear. Implant adoption for AMDS continues to build, and our broader market expansion pipeline is accelerating as planned, particularly with ARTISON enrolling as expected. Our long-range growth thesis remains intact. More specifically, we expect future growth to be driven by four key growth drivers: number one, the AMDS PMA; we are commercializing AMDS in the U.S. under HDE, increasing penetration of the annual U.S. market opportunity, with new clinical data, reimbursement dynamics, and PMA approval likely to be further tailwinds. Number two, the On-X heart valve data; we are continuing to educate providers on clinical data showing mortality and reoperation benefits in patients under 65 compared to bioprosthetic valves, which we expect to translate into greater market share globally. Number three, NEXUS; we are moving forward with our strategy to acquire our partner Endospan following the FDA approval of NEXUS. This acquisition, if closed, will provide an additional near-term growth driver, position us at the forefront of this segment, and significantly expand our pipeline with three additional PMA programs in development, extending our runway well beyond the initial approval. Number four, the ARTISON IDE trial; we continue to make progress in our third-generation frozen elephant trunk program, our C-Branch LSA. This clinical trial represents an incremental $80 million U.S. annual opportunity. I want to thank our employees around the globe for their continued dedication to our mission of being a leading partner to surgeons focused on aortic disease. We will now open the call for questions. Operator: At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. One moment, please, while we poll for questions. Our first question comes from Stifel. Your line is now live. Analyst: Hi, Pat and Lance. Thanks for taking the question. I just want to understand better on this guidance reset what is exactly contemplated in it now, because I think there are a few key assumptions, and the key one is exactly when AMDS receives PMA and then more broadly what kind of opportunity the PMA unlocks. Is this truly conservative, adequate, or how would you frame it in terms of expectations for when you get this AMDS approval, and then how should we think about the opportunity that approval unlocks in the context of the revenue ramp throughout the year? Pat Mackin: Thanks. I would say a couple of things. There were two things that did not go as planned in the first quarter. Number one was international stents were off, mostly due to unplanned things: one was the Middle East, and two was some supply chain challenges. Those are temporary, and we are working to fix those. Second, as we pointed out, was the AMDS starter set sales. Those are the starter sets where the hospital has to buy four. We do think that the PMA will help. We have been saying all along that we did not think the PMA was going to make that much of a difference, but the closer we get to PMA approval, there is some bureaucracy and work that hospitals have to do to get IRBs in place, and with the PMA so close, many are just going to wait. So we do think that will be helpful. We are also working to knock down some of the barriers that we are seeing on getting these starter sets. The encouraging thing is that we were ahead of plan on the actual implants. That is what we are working on now—making sure we can get access to these starter sets and working through that process. Lance Berry: We have been saying we expect PMA approval midyear. We still expect that. As far as what the guidance contemplates, it basically contemplates the trends we are seeing right now. We are working to improve those, but that is probably going to take a little bit of time. We think this is prudent guidance given the trends we have right now. Analyst: Got it. That is helpful. And then I also wanted to hit on NEXUS. You talked about working towards closing the acquisition. What are you doing as you work up to 01/01/2027 in terms of building out the commercial infrastructure from here, whether it be hiring or whatever else is required? Key next steps as you build to NEXUS would be great. Pat Mackin: We are very excited about this NEXUS platform. It is the third piece of the puzzle—AMDS, our LSA branch solution, and NEXUS—and that really gives us a comprehensive portfolio for the arch. We will need to do a few things to get ready. Number one, we must go through the value analysis committees. As you have experienced with AMDS, it can take four to six months. We will use that time to do two things: build inventory and hire dedicated clinical specialists. The good news is this is a very different market than AMDS in that there are only about 100 accounts on our initial list. These are very high-end, high-volume accounts. We know who they are, and we can cover that call point with not a lot of reps. We have already started hiring and will continue to add as we go through the value analysis process. Those are the two main focuses once we close this transaction to be ready for a January 1 launch. Analyst: Thanks. That is helpful, and thanks for taking the questions. Pat Mackin: Yep. Operator: Our next question comes from Lake Street Capital. Your line is now live. Frank Takkinen: Great. Thank you for taking the questions. I was hoping to get a little more color on reordering versus a potential plateauing of new accounts. Are new accounts starting to slow down or is the reordering not yet occurring? It feels like we had a steep trajectory with some of the initial ordering patterns, and then we are just waiting for the reordering, or are new orders starting to plateau? Pat Mackin: Let me clarify. We have started using the term “starter sets,” which is basically an account that does not have AMDS. To get AMDS, they need to purchase four devices for $100 thousand. That is not a normal practice for a lot of businesses that will consign units or sell out of trunk stock. We are having hospitals acquire four units. The other piece is the actual implants of the existing accounts. Those went quite well and were ahead of our plan. We are very encouraged and pleased by adoption in the accounts that purchased. What we are working on now is a lot of accounts that have AMDS in the queue, and we are working to get the units on the shelf. Barriers include the IRB or the $100 thousand upfront purchase. We are working on programs to minimize that burden. Lance Berry: In summary, there is the upfront $100 thousand, and every time the device gets used, they need to reorder a device. We call that initial $100 thousand a set sale, and everything after that is implant sales. Implant sales went great. They were ahead of our expectation, and all the feedback we are getting on those is fantastic. We are running into barriers getting the upfront $100 thousand investment approved for a number of different reasons—IRB, financial considerations—so we are putting things in place to help overcome those barriers. We think we will see a reacceleration of starter set sales. Pat Mackin: Because the $100 thousand upfront lands on someone’s desk, it can get stuck there for a while. A key point is DRG 209 for complex arch work—there is very strong reimbursement for AMDS. It takes time for that information to be disseminated to the account, so we are working to ensure they have good visibility to the publicly available information on DRG 209 and what that means to their procedural billing. Frank Takkinen: Got it. Very helpful. Thank you. And then as a second one on NEXUS, how should we think about the growth trajectory? There is potentially more training upfront, but it is very novel, so I would expect a strong growth trajectory coming out of that. And is there a point in time that the $8 million incremental cost is offset by revenue as you think about the ramp? Pat Mackin: Surgeons, particularly vascular surgeons, have a lot of patients who are not being treated right now because there is no option. These are patients too sick for cardiac surgery, and we now have a solution in the arch to treat those patients. They adopt technology rapidly because of the unmet need. The building blocks are: get through value analysis committees, train the surgeons, hire the team, and build inventory. Our goal is to be ready by January 1. We believe this technology has real opportunity to drive growth for the company and help a lot of patients. We will give you more information as we go into 2027. Lance Berry: On the $8 million, it is broken into three pieces. One is initial launch preparation costs that will not carry forward into next year. There are R&D and clinical related expenses that are incremental this year, but as we roll into 2027, we will fit those into our normal 7% to 8% of sales; it is not really incremental from a 2027 standpoint. Then there are run-rate expenses for the sales force and some G&A that will carry forward, and we think those will be covered by actual NEXUS revenue in the U.S. in 2027, making it EBITDA neutral overall. On supply chain and logistics, NEXUS is very different than AMDS. We are not making people buy it upfront. AMDS cases are acute type A emergencies, so you have to have stock on the shelf. Chronic dissections are elective, so we have time beforehand to know exactly what devices are needed, and we will ship them into the cases and get paid at the case. There will be no shelf stocking limiter for NEXUS. Frank Takkinen: Got it. Very helpful. Thank you, guys. Lance Berry: Thanks, Ryan. Operator: Our next question is from Canaccord Genuity. Your line is now live. William Plovanic: Hey, thanks. Good evening. I just wanted to unpack AMDS a little more. One of the challenges brought up multiple times is starter sets. You mentioned strategies to get around this. Are you going to shift the product to consignment, or do you believe the PMA is really going to open that? Is there a backlog? Are we through the early adopter phase and now getting into a broader customer base, implying a slower ramp for new accounts? Lastly, what was the growth of the core stent business if you back out AMDS? Pat Mackin: We have plenty of hospitals. When we set our internal plan and expectations for the year, we had more than enough target accounts to hit the numbers we communicated. We were pleased with implants—ongoing implants were ahead of what we expected. The challenge is getting into hospitals with this upfront $100 thousand purchase. We are not going to consignment. That could always be a last resort, but that is not our strategy. We have programs to address barriers to the $100 thousand upfront. Once PMA is out, there is no longer an IRB, and we think that will be very helpful. Getting accounts through those processes is what we are working on. That timing is harder to control than implant timing. Lance Berry: We do not break out the details on U.S. AMDS revenue compared to international stent grafts. You can tell by geographic growth rates: international growth was much lower than we typically expect this quarter for the reasons discussed. If you normalize North America for easier comps in Q4 and Q1, the North America growth rate is pretty similar in Q4 to Q1, which points to the slowdown being driven significantly by international. But U.S. AMDS starter set sales were below our expectations for the quarter. William Plovanic: When you started out the launch in the first quarter last year, you talked about 140 targeted accounts, with 600 full potential. Can you give any sense of the total targeted number of accounts today and how far you have penetrated? Lance Berry: We have not broken that out. I would say at this point we still have plenty of opportunity to sell starter sets. As we move along, we will consider giving more detail because at some point the starter set is a one-time revenue event, and the implants matter most long term. We will consider providing more information later, but we are not breaking that out at the moment. William Plovanic: On NEXUS, you are pushing to a 2027 launch. Is manufacturing scaled and ready to go? Lance Berry: They are manufacturing today. We have been selling the product in Europe for over five years. We do need to expand and build inventory for the U.S. launch. Endospan had an agreement with us to be acquired upon PMA approval and had no intention of commercializing the U.S. product themselves, so they did not build inventory for a U.S. launch. There is some scale up, but mainly we just need to build product. William Plovanic: Thanks for taking my questions. Pat Mackin: Thanks, Bill. Operator: Our next question is from Oppenheimer. Your line is now live. Analyst: Hi, Pat. Hi, Lance. Thank you for taking our questions. On AMDS, can you quantify how many accounts are deferring AMDS for PMA approval? Is this the first time you are calling it out, or has this been an ongoing trend that is now coming to a head? And with that, should we expect a bolus once you get PMA approval? Pat Mackin: We have been saying for several quarters that we did not really see PMA as a big catalyst. What has happened is practical: for example, we have to go to an IRB at a hospital and the surgeon has to take four hours of training. If PMA is expected in the second quarter, the surgeon may say, “I will just wait. I am not going to do four hours of training for this IRB.” We do have a number of accounts impacted by this. We are not giving specifics on counts. As PMA gets closer, people are less inclined to do the IRB work, and we see PMA as an opportunity. That is contemplated in our guidance. Analyst: On cross-selling with On-X via AMDS, any differences you are seeing in physician utilization? Are they ramping up on a similar curve, or is it more additive but minimal? Pat Mackin: It speaks to our strategy. We are a valve company that treats patients under 65 with the Ross and with On-X, and we are an aortic arch company. Our interactions with top aortic surgeons span our trials—PERSEVERE, ARTISON, TRIUMPH. We are training AMDS centers, and we will have NEXUS trainings that bring heart and vascular surgeons together. We have ARTISON investigator meetings. All of those events help us build relationships with aortic surgeons and deliver our messages across On-X, AMDS, and NEXUS. It is all about the aorta and is highly complementary. We are already seeing cross-selling, and it will get better as we scale trainings. Operator: Our next question comes from Ladenburg Thalmann. Your line is now live. Jeffrey Cohen: Hi, Pat and Lance. Thanks for taking the questions. Two from us. Any updates as far as the commercial organization, both U.S., EU, and perhaps Japan—W-2s and 1099s—for the balance of this year that we should anticipate? Lance Berry: We will have to hire some specialists for NEXUS, but other than that, sales force additions would be fairly limited across the globe and still highly leverageable with our focused sales force. Pat Mackin: On NEXUS, our initial target is about 100 U.S. accounts. We can cover that with a small, dedicated team because these are elective cases. In Japan, we have a relationship with a distributor that has a dedicated team on the ground. We have the commercial infrastructure in Japan; we just need to work through the approval process. Jeffrey Cohen: As a follow-up, can we touch upon the tissue business? It was a strong quarter. Any puts and takes or trends for the balance of the year? Lance Berry: We have told people to think about that as a $24 million per quarter business. We did a little better this quarter, which is great, but that is within normal quarterly fluctuations. If it is a little less in a future quarter, do not read into it. As long as it averages to about $24 million for the year, that is in line with expectations. Jeffrey Cohen: Got it. Thanks for taking the questions. Operator: Our next question comes from Needham & Company. Your line is live. Michael Matson: Thanks for taking my question. Starting with AMDS, I understand the commentary around consignment and the $100 thousand sets, but why not put it on consignment? Is it tying up too much of your capital and inventory on hospital shelves, or is there another reason you are requiring hospitals to have this big expense to get started? Lance Berry: You can always flip to consignment; you can never flip back. It is an emergency case; they need it on the shelf. It is a differentiated product with incredible reimbursement, and we think it is something they should stock. Many accounts have made the purchase. We have hit a point where, further down the list, we are seeing resistance that we had not seen earlier. Our job is to overcome that barrier. We have multiple levers to pull and will come up with solutions as we move along. We are not going to throw in the towel at the first sign of resistance. Pat Mackin: The data are extremely compelling. AMDS can convert malperfusion to non-malperfusion with associated mortality and blood flow restoration benefits. It eliminates the need for vein grafts, with about a 30% difference in reoperation at 10 years and a 20% difference in mortality at five years. It is an emergency, there has not been innovation in 50 years, and it has the best DRG in the market. It should be stocked. Once you start consignment, you typically do not reverse it. Michael Matson: On international stent graft issues, you called out the Middle East and supply chain. Which was bigger? Pat Mackin: About half and half. We have significant business in the Middle East, and we did not contemplate the current situation impacting results, but it did. We also had supply chain items we were not anticipating. Michael Matson: On the revenue guidance of 7% to 11% constant currency, what are your assumptions for AMDS sets and international stent graft sales? Any improvement assumed? Lance Berry: There is definitely some improvement expected for AMDS starter set sales, but at a rate lower than originally anticipated. Roughly half of the guidance reduction is AMDS starter sets and half is international stent grafts. The international stent graft impact is split roughly evenly between the Middle East situation and supply chain issues we are working through. Michael Matson: Got it. Thank you. Operator: Our next question comes from Citizens. Your line is now live. Daniel Walker Stauder: Thanks for taking the questions. First on AMDS reordering behavior, usage was more than you expected. Are multiple surgeons utilizing at some of your larger accounts? Any additional color? Pat Mackin: Typically, a surgeon from an account goes to the training program, returns, and starts implanting, then trains partners or they attend training. In bigger centers, there are often two, three, or four surgeons handling acute type A dissections. We might train one at a hospital, but there are multiple on call. We are training more surgeons per account over time. As usage spreads within accounts, reorders increase. We were pleased that reorders were ahead of expectations. Daniel Walker Stauder: Any different margin contribution from reorders compared to initial orders? Gross margins were strong despite starter set softness. Lance Berry: There is no meaningful difference to gross margin. Both are strong. Daniel Walker Stauder: Thank you. Operator: Our next question comes from Freedom Capital Markets. Your line is now live. Analyst: Thank you. On On-X, can you talk about current usage split between younger and older patients before the new data and where it is today? Pat Mackin: We do not get real-time patient-level age data, but we have historical profiles. Based on recent conferences, there is a lot of discussion about papers showing a mortality benefit for mechanical valves in patients under 60 and about a 20% reoperation benefit at 10 years in mechanical versus tissue valves for patients under 65. We are getting that data out and are growing share in the bioprosthetic space where we previously had not. Much of our growth is from patients aged roughly 50 to 65, which is our focus segment. Analyst: On NEXUS go-forward plans, are there plans to bring Duo and Tre to the U.S., and what regulatory steps are required? Any logistical issues having a custom-made product coming from Israel into the U.S.? Pat Mackin: It is still early; we do not own the company yet, but we have strong collaboration. We are planning to bring Duo and Tre to the U.S. It will require a clinical trial. We will have an off-the-shelf version rather than a custom-made version, which is part of the innovation. We are working on timing and will update our pipeline after closing and integration. On logistics, for U.S. commercialization we will align supply to elective case scheduling, so we do not anticipate custom-made logistical constraints for the U.S. launch plan. Operator: We have an additional question from Canaccord Genuity. Your line is now live. William Plovanic: There has been some discussion on supply chain challenges, and it sounds like that will continue to impact going forward. Can you unpack what it is, the solution, and timing? How much of the portfolio does it impact? Lance Berry: We are not going into a lot of detail, but we have ring-fenced the issue. It relates to our supplier network. We have our arms around it and feel confident about solving it, but it will take a little time. The time to solve it is contemplated in our guidance. It is not broadly across the stent graft portfolio—specific to a small number of products. William Plovanic: Okay. Great. Thanks. Operator: We have reached the end of the question-and-answer session. I would now like to turn the call back over to management for closing comments. Pat Mackin: Thank you for joining the call. We are excited about the Endospan transaction and will be working to close that. This is an exciting day for the company as it is the final piece to the puzzle of our aortic arch solutions. We have AMDS approved under HDE in the U.S. now and are hoping to get PMA midyear. NEXUS just received approval, and you heard our launch plans. ARTISON is enrolling as expected. We have three PMAs in the arch—one approved, one about to be approved, and one on its way. It is very exciting for the company, and we appreciate your support as we continue to build this aortic company. Thank you. Operator: This concludes today’s call. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful evening.
Operator: Welcome to GSI Technology, Inc.’s Fourth Quarter and Fiscal Year 2026 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. At that time, we will provide instructions for those interested in joining the Q&A queue. Before we begin today’s call, the company has requested that I read the following safe harbor statement. The matters discussed in this conference call may include forward-looking statements regarding future events and future performance of GSI Technology, Inc. that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in the company’s Form 10-K filed with the Securities and Exchange Commission. Additionally, I have also been asked to advise you that this conference call is being recorded today, 05/07/2026, at the request of GSI Technology, Inc. Lee-Lean Shu, the company’s chairman, president, and chief executive officer will be hosting the call today. With him are Douglas M. Schirle, chief financial officer, and Didier Lasserre, vice president of sales. I would now like to turn the conference over to Lee-Lean Shu. Please go ahead, sir. Lee-Lean Shu: Good afternoon, and thank you for joining us. To review our fourth quarter and fiscal year 2026 financial results. Fiscal 2026 was a year of meaningful progress for GSI Technology, Inc., marked by strong performance in our SRAM business, continued advancement of Gemini II to commercialization, and the initiation of the PLATO design. While I am pleased with the progress we have made on several fronts, significant work remains. Our team is executing our key milestones and advancing business development for the APU, and I have had several encouraging conversations on numerous fronts in these amounts. We end fiscal 2027 with continuous momentum, promoting the APU and building our customer traction. With that, I will now hand the call over to Didier. Didier Lasserre: Thank you, Didier. Let me start by stepping back and framing where we are today. Because I think the context is important. Our SRAM business performed well in fiscal 2026 and remains the revenue foundation of the company, providing cash for APU development. For the full year, the SRAM business grew 22% year-over-year and gross margins rose to 55% from 49%. The SRAM business has benefited from increased demand from our customers that support high-performance AI chip development and manufacturing. We recently announced that we concluded our strategic review and determined that continuing to execute our standalone strategy is the best path forward for delivering long-term shareholder value. The stronger SRAM business and a strengthened balance sheet, along with non-dilutive R&D funding, are providing the resources to support our go-forward plan. With this financial foundation in place, we are now seeing real progress with Gemini II and PLATO. Over the past several months, we have reached a point where we are seeing both technical validation and early program-level engagement of Gemini II, including the Sentinel drone surveillance POC, the U.S. Army SBIR award, and a new Phase One smart city project I will discuss in a minute. On the technical side, in a bake-off for the Sentinel POC, Gemini II’s performance contributed to winning the contract award by achieving a time to first token of roughly three seconds at 30 watts of system power on Gemma 312B multimodal workloads at the edge. In this use case, time to first token is a critical metric for drone surveillance systems because it reflects how quickly the system can respond in real-world applications where response time directly affects critical decision making. We are working closely with the G2 Tech team on the Sentinel program. We have completed the software deliverables and continue to target a June demonstration of the Gemini II powered drone. This demonstration is planned for the Department of Defense and an international defense agency. In mid-April, we were notified that we had been awarded Phase One of a smart city project. The project leverages our work done for the drone-based surveillance POC and marks an important step forward towards commercial deployment. In this application, Gemini II will process inputs from distributed camera systems to provide near real-time detection of events such as fires and other public safety risks. This project demonstrates how our platform can scale across real-world infrastructure. We expect to share additional details on the smart city program around the time of a planned media event in late May hosted by the municipality. Currently, we are working on several projects in tandem. What matters most for GSI Technology, Inc. at this time is not just the number of early-stage trials and demonstrations we have, but also how these early-stage engagements are helping us identify where our APU architecture provides a clear advantage, particularly in delivering low-latency performance within a constrained power envelope. We are also leveraging our deployment work in two ways. First, we are applying what we have developed for the drone security application to a smart city application. While the end markets are different, the underlying development carries over, giving us a meaningful head start in a new use case rather than starting from scratch. Secondly, as we complete the Sentinel POC and Phase One of the smart city program, we can build on those results to pursue additional opportunities with new customers in those markets. We view this as a repeatable model where each engagement helps accelerate the next. What is exciting for us is that we see the end markets for low-latency, low-power AI at the edge expanding as AI workloads continue to move closer to where the data is generated. These applications favor the APU architecture that can deliver higher compute per watt. Gemini II is ideal for these power- and latency-constrained edge deployments, where real-time response and energy efficiency are critical. Where we are winning is where Gemini II is tested against conventional architectures requiring significantly higher system power for similar or slower responsiveness. We believe Gemini II best addresses this gap and positions us well to win as more AI loads shift towards distributed, power-constrained environments. Consistent with this, we are encouraged by our progress within defense agency programs, as evidenced by our recent U.S. Army SBIR progressing from Phase One into Phase Two. This project is about enabling real-time in-field AI deployment on small, low-power systems typically operating in challenging conditions. As part of this program, we will build and test a ruggedized node containing the Gemini II for real-world mission-critical environments. This SBIR positions us within a broader shift in defense spending, with approximately $13 billion proposed in fiscal 2026 budgeted for AI and autonomous systems, and creates a potential pathway to follow-on programs and future opportunities to supply Gemini II-based systems. So how do we move from where we are today to design wins and ultimately revenue? From a commercial standpoint, we are still in the early stages. Our focus is on advancing our current engagements and working closely with partners to integrate Gemini II into their systems, with the goal of moving into design-level discussions. Given the complexity of these deployments, we are focusing our resources on a small number of high-value opportunities where we believe we have a clear advantage. Although the number of engagements remains limited, we are seeing a meaningful increase in the depth of these engagements and our ability to leverage our prior Gemini II deployment work for new related applications. Looking ahead, our priorities are to advance current POCs and awarded programs and to leverage what we have learned from each of these engagements to drive additional design opportunities. At the edge, performance matters most when it can be delivered within real-world power and latency constraints. That is where we believe Gemini II’s advantage lies. With that, I would like to hand the call over to Doug. Go ahead, Doug. In the earnings release issued today after the close of the market, you will find a detailed summary of our financial results for the fourth quarter and full fiscal year 2026. Douglas M. Schirle: Rather than walking through the numbers again, I will focus my comments on the key drivers behind the results and provide more context and explanation to help you better understand the business. Let me start with the results for fiscal year 2026, ended 03/31/2026. As Didier mentioned, fiscal 2026 revenue increased 22.4% to $25.1 million, reflecting continued strength in our SRAM business, particularly with customers supporting chip design and simulation for AI applications. We experienced solid growth in this customer segment throughout fiscal year 2026. We do see variability in customer orders, and sales can fluctuate from quarter to quarter. However, barring any significant change in underlying AI chip demand that would affect SRAM orders from these customers, we expect this business to remain relatively stable in fiscal year 2027. The higher level of revenue and product mix helped to lift fiscal year 2026 gross margin to 54.5%, a notable gain from the prior year gross margin of 49.4%. Operating expenses in fiscal 2026 rose to $31.2 million compared to $21 million in fiscal 2025. Operating expenses increased year-over-year primarily driven by higher R&D spending on the PLATO chip design. It is also important to note that the prior year included a $5.8 million gain from the sale of assets, which makes year-over-year comparisons appear more pronounced. We also continue to offset a portion of our R&D expenses through non-dilutive funding, SBIR contract funds, and POC-related funding. The majority of our R&D is dedicated to APU. The R&D offset in fiscal 2026 and fiscal 2025 was $1 million and $1.2 million, respectively. Higher operating expenses increased the total operating loss for fiscal 2026 to $17.5 million compared to an operating loss of $10.8 million in the prior year. The fiscal 2026 net loss included interest and other income of $4.1 million, primarily from interest payments on the increased cash balance from the capital raise completed in October 2025, and $3.4 million of other income consisting of a $6.2 million non-cash gain from the change in the fair value of prefunded warrants, partially offset by $2.8 million in issuance costs associated with the registered direct offering in October 2025. Switching now to the fourth quarter. Revenue was $6.3 million with a gross margin of 52.4%. As we have seen in prior periods, quarterly gross margin can fluctuate with the product mix and revenue levels. The fourth quarter gross margin reflects slightly lower semiconductor sales sequentially compared with the prior-year quarter. From a customer perspective, we did see some variability across accounts during the quarter, including lower shipments to certain customers and higher shipments to others. At the same time, defense-related sales increased to approximately 46% of total shipments, reflecting continued demand in that segment. Again, you will find a full breakdown of sales in today’s earnings release. Operating expenses increased from the prior year primarily due to continued investment in our Gemini II and PLATO development programs. These investments align with our strategy to advance our APU roadmap while maintaining discipline in cost management. Last quarter, we expanded quarterly earnings disclosures to help investors better understand the company’s cash consumption and cash generation. This information will complement the condensed consolidated statement of cash flows included in our Forms 10-K and 10-Q. Cash flows for the quarter ended 03/31/2026 were as follows: cash and cash equivalents as of December 31 were $70.7 million; net cash used in operating activities in the quarter was $5.5 million; net cash used in investing activities was approximately $100,000; and net cash provided by financing activities was $2.1 million. Cash and cash equivalents as of 03/31/2026 were $6.2672 billion. From a cash flow standpoint, spending in the quarter continued to reflect our investment in Gemini II and PLATO development. We expect cash usage to remain elevated as we progress through this development phase. As a general reference point, we expect the cash usage to be approximately $4 million per quarter, or about $16 million annually, although this may vary depending on development timing and program activity. We ended the quarter with $67.2 million in cash and no debt. This is a notable improvement from the prior-year cash balance of $13.4 million and is associated with $46.9 million, net of fees, registered direct offering proceeds that closed in October 2025. The absence of debt and the improved cash balance provide us with the flexibility to continue investing in APU while maintaining a disciplined approach to capital allocation. We believe our current cash position provides sufficient runway to support the initial commercialization of Gemini II and the completion of the PLATO tape-out, both expected late fiscal 2027. Before I hand the call over to the operator for Q&A, I would like to provide the first quarter fiscal 2027 outlook. For the upcoming quarter, we expect net revenues in the range of $5.9 million to $6.7 million with gross margin of approximately 54% to 56%. Overall, our strong cash position and continued support from non-dilutive funding give us a runway to advance Gemini II into early commercialization and the PLATO chip design. Operator, at this point, we will open the call for questions. Operator: Thank you. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Once again, it is star 1 to ask a question. The first question is from Tony Brainard, retail investor. Analyst: Hello, gentlemen. How are you? Lee-Lean Shu: Good. Thank you. Analyst: Yes. Can you share some color on the size—like, if you do get the design wins—the size of the market we are looking at? Lee-Lean Shu: On which market? Analyst: On the Gemini II. Didier Lasserre: Okay. That is a pretty broad question. So the markets we are going after initially, you know, some of them are government, military-based, specifically these drone programs. And as we talked about, we are limited in detail now. We will give you more detail on the smart city at the end of May. But both of those markets are multibillion-dollar markets. Lee-Lean Shu: Okay. Analyst: Yep. Analyst: That is fair enough. And that is my only question for today. Thank you very much. Douglas M. Schirle: Alright. Thanks, Tony. Analyst: Thank you. Operator: The next question comes from Robert Christian, Private Investor. Robert Christian: Yes. I would like to know why the PLATO project has moved up from 2027 to late fiscal 2027. Didier Lasserre: Actually, it has not been pushed out. It might have been a mixture of calendars and fiscal quarters. When we had first talked about it, we were targeting the beginning of calendar 2027 to have the part taped out, and we are still on schedule for that. Tape-out means that the design will be done in the first quarter, and that would give us silicon because we have to make the mask sets that are used for the wafer fabs at TSMC. So we will see our first wafers in hand in summertime of calendar 2027, and I believe that has always been our schedule. Lee-Lean Shu: Yeah. I think we mentioned fiscal year 2027. That is the beginning of the 2027 calendar year. Didier Lasserre: That is a good point. So the end of fiscal 2027 is March of calendar 2027. Okay. That would be great. And the second question I have is, Gemini II taped out over two and a half years ago. Is it going to take that long to see expected sales, say, of PLATO? Didier Lasserre: So that is a great question. You have two components to sales. You have the hardware component, which is the chip and any kind of board, and you have the software side. The software side actually lagged the hardware on Gemini II. With PLATO, we are trying to align the two more closely. The good news is some of the software work that is being done for Gemini II can be used for PLATO, while with Gemini I it was a completely new effort. In that respect, we can leverage some of the work from Gemini II for PLATO, and then we are also lining up the resources to be able to bring in the software with PLATO. Robert Christian: Well, the chip is genius, and I wish you guys godspeed. Lee-Lean Shu: Thank you. Didier Lasserre: Thank you. Operator: At this time, we show no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Lee-Lean Shu for closing statements. Lee-Lean Shu: Thank you again for joining today’s call. As a reminder, Didier will be at the LD Micro Conference on May 19. Contact LD Micro if you would like to attend this presentation or take a one-on-one meeting. We are encouraged by the progress we are making with Gemini II, and we remain focused on successfully executing against the opportunities in front of us. We look forward to speaking with you again on our fiscal 2027 first quarter earnings call. Thank you. Operator: This concludes today’s conference. Thank you for attending. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Quantum-Si incorporated First Quarter 2026 Earnings Call and Business Update. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Risa Lindsay. Risa, go ahead. Risa Lindsay: Good afternoon, everyone, and thank you for joining us. Earlier today, Quantum-Si incorporated released financial results for the first quarter ended 03/31/2026. A copy of the press release is available on the company's website. Joining me today are Jeffrey Alan Hawkins, our President and Chief Executive Officer, as well as Jeffry R. Keyes, our Chief Financial Officer. Before we begin, I would like to remind you that management will be making certain forward-looking statements within the meaning of the federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled Forward-Looking Statements of our press release. For a more complete list and description of risk factors, please see the company's filings made with the Securities and Exchange Commission. This conference call contains time-sensitive information that is accurate only as of the live broadcast date today, 05/07/2026. Except as required by law, the company disclaims any intention or obligation to update or revise any forward-looking statements. During this call, we will also be referring to certain financial measures that are not prepared in accordance with U.S. Generally Accepted Accounting Principles, or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is included in the press release filed earlier today. With that, let me turn the call over to Jeffrey Alan Hawkins. Jeffrey Alan Hawkins: Good afternoon, and thank you for joining us. On today's call, we will provide a business update and review our operating results for 2026. After that, we will open the call for questions. As we communicated on our last earnings call, we expect that 2026 will be a transition year with revenue primarily driven by consumable utilization from our installed base, some new placements of Platinum, very modest new capital sales, and a laser focus on Proteus development, preparing the market for a strong commercial launch by 2026. As such, our three corporate priorities for 2026 are as follows: to deliver Proteus with the capabilities customers need, to prepare the market for Proteus launch, and to preserve our financial strength. Our first priority is to deliver Proteus with the capabilities customers need. We made significant progress with the Proteus development program during 2026. The results of this progress were highlighted in our recent announcement regarding the successful completion of sequencing on fully integrated Proteus instruments. The achievement of a milestone of this complexity is a significant de-risking event for any new platform development program. To accomplish this result, we had instruments and software that automatically performed all the steps in the sequencing process from reagent preparation to sample loading through to sequencing and data capture and analysis. We also had developmental sequencing reagents, kinetic arrays, and associated surface chemistry that enabled single molecule loading and sequencing with the detection of 17 amino acids. While there is more work to do to get to the commercial launch, it is clear that the Proteus platform is a fundamentally superior technology compared to Platinum. Beyond automation and throughput, which customers will certainly value, the core technology in Proteus consistently delivers higher proteome coverage. At its core, Proteus has a better signal-to-noise ratio and can reliably detect much shorter pulses of recognizers, which translates into detecting more amino acids per peptide and longer average peptide read lengths. In terms of recognizer development, we recently reported that our internal developmental sequencing kit was able to detect 17 amino acids. Not only have we increased the number of unique amino acids detected from 15 in December 2025 to 17 in just four months, but we have also made improvements that increased detection frequency across all the amino acids we detect. Our recent progress in this area and the pace of improvement we are seeing provide us with high confidence that we are well on our way to delivering Proteus by 2026 with the detection of 18 amino acids, demonstrating detection of all 20 amino acids during 2026, and, in turn, delivering a sequencing kit in 2027 that detects all 20 amino acids. Finally, I want to provide an update on our progress toward enabling post-translational modification capabilities on Proteus. For background, depending on the PTM, customers today have two choices: affinity-based methods, which are limited to a specific site or specific protein of interest, or mass spectrometry, which requires complex sample preparation procedures and access to sophisticated bioinformatics personnel to collect, filter, and analyze the data using a variety of software tools that are required to provide site-resolved profiles. This is true for a well-studied PTM like phosphorylation. When you move into other PTMs like methylation, acetylation, or citrullination, the options are even more limited, with the available analysis tools often being lab-developed versus commercially available. During our November 2025 investor and analyst day, we provided insight into three different ways that our technology can detect PTMs. One of those ways is via kinetic signatures. In short, using the rich set of data that each recognizer generates as the sequencing reaction moves through each amino acid in the peptide, the software can automatically determine if a PTM is present or not, which PTM it is, and at which specific amino acid site. The primary advantage to this method is that the sequencing chemistry is universal, and the PTM detection is accomplished using automated analysis algorithms. This is in stark contrast to affinity-based methods, which require site-specific PTM reagents and, in some cases, those reagents are protein-specific as well. Given the extremely large amount of data we expect to generate in a Proteus sequencing run, and leveraging the power of advanced AI tools, the potential to develop PTM capabilities using kinetic signatures and continuously expand those capabilities over time is immense. This is why we are laser focused on this approach, and I am pleased to report that we are making great progress in this area and expect to have more specific updates to share in the near future. Our second corporate priority is to prepare the market for Proteus launch. In preparation for commercial launch of Proteus, we are focusing our commercial and scientific affairs teams on three main strategic initiatives: demonstrating the value of our single molecule protein sequencing technology, expanding awareness of Proteus across geographies and end market segments, and identifying and developing a funnel of potential Proteus customers to ensure successful commercial adoption upon launch. To demonstrate the value of single molecule protein sequencing, our scientific affairs team has been working with customers using our first-generation Platinum instrument and commercially available kits to generate data and release the results via posters at industry conferences and manuscripts via preprint and peer-reviewed publications. Since the start of 2026, we have had a total of three customer manuscripts released via preprint or peer review, five posters presented at industry conferences, and a customer podium presentation during US HUPO. The data released this year show a wide range of applications, from rapid pathogen and toxin detection to clinical proteomics to detection of post-translational modifications in translational research. Importantly, the data released this year also span multiple end market segments, including academic research, clinical, biopharma, and government. We believe that these sets of customer data and other studies in the pipeline will continue to demonstrate that the potential opportunity for our technology extends well beyond the basic research markets that we operate in today. This is important since customers in biopharma, translational research, and clinical testing typically have higher consumable utilization rates and repeat order patterns compared to basic research customers. Turning now to our work on expanding awareness of Proteus across geographies and end markets: In April, we announced the beginning of the Proteus roadshow series. These events are designed to educate the market on the value of our proprietary single molecule protein sequencing technology and the Proteus instrument and projected capabilities. The individual roadshow events can take the shape of one of two types of formats. First, in institutions where we have an existing customer, we work with them to bring together as many of their colleagues as possible to expand the institutional awareness of our technology. Expanding institutional awareness can benefit our existing user by creating more demand for inclusion of our technology in ongoing research studies, and it also aids us in building a large community of interested users for Proteus, increasing the number of potential avenues to pursue for funding the purchase of the instrument in the future. The second type of event is tailored to locations where we do not have an existing customer. In these locations, we focus on a centrally located venue, and our outreach focuses on engaging potential users from as many unique institutions in the surrounding area as possible. While we have just started the roadshow series, the early data are encouraging. At one recent event, we had 25 people register or attend, but on the day of the event, we had 35 people in attendance. All the attendees were researchers who currently use or want to begin to incorporate proteomic technologies into their research. Importantly, these 35 attendees invested nearly two hours of their time to learn about our technology, the Proteus system, and to discuss potential applications with members of our commercial and scientific affairs team. We expect to continue with roadshows throughout the year, and we will provide more updates on specific cities and associated event metrics as the program progresses. Finally, in addition to supporting our existing Platinum users, our sales team is focused on identifying and developing a funnel of potential Proteus customers to ensure successful commercial adoption upon launch. Our team has been assigned quantitative goals for each quarter, and we are pleased with the current progress we are seeing. As part of this process, we recently announced that we had completed sequencing of our first customer samples on the Proteus prototype. In this first instance, the customer is an existing Platinum user, and they were interested in seeing how much better the data would be with Proteus. While there were many exciting takeaways from the data, two that resonated the strongest with the customer were the increase in the number of amino acids detected and the increase in the average read length on Proteus compared to Platinum. When combined, improvements in these two attributes provide the customer with significantly more sequence-level information about each of their proteins of interest. The positive response from this customer confirms our belief that offering the ability for customers to send in samples for evaluation could be a valuable tool to deepen engagement and advance the customer through the buying process prior to Proteus commercial launch. We are working closely with our manufacturing partners to increase the number of Proteus instruments available within our R&D labs, and once complete, we expect to be able to offer sample evaluations more broadly to prospective customers. Our third priority is to preserve our financial strength. We believe that the data we will generate over the coming months will continue to demonstrate that Proteus is not only a new architecture with greater throughput and automation, but also a significant leap forward in terms of sequencing performance and application breadth. We continue to believe that Proteus will be the long-term driver of commercial adoption, revenue growth, and our path to profitability. We remain committed to continuing to operate with a high level of fiscal discipline while ensuring the core strategic initiatives are appropriately funded to deliver Proteus on time and with the capabilities customers are asking for. I will now turn the call over to Jeffry R. Keyes to review our financial results. Jeffry R. Keyes: Thanks, Jeff. I will now walk through our operating results for 2026. Revenue in 2026 was $258 thousand, consisting of revenue from our Platinum line of instruments, consumable kits, and related services. Gross profit was $74 thousand, resulting in a gross margin of 29%. Gross margin in the quarter was primarily driven by revenue mix with a higher proportion of consumables relative to hardware. As we have discussed and guided for 2026, we expect revenue in the near term to reflect the anticipated launch of Proteus as some customers time purchasing decisions closer to the availability of our new platform. Turning to expenses, GAAP total operating expenses for 2026 were $24.1 million compared to $25.6 million in 2025. Adjusted operating expenses were $21.4 million compared to $22.9 million in the prior-year quarter. Year over year, we funded R&D at a slightly higher level to support Proteus development while maintaining discipline in total overall adjusted operating expenses. Dividend and interest income was $1.9 million in 2026 compared to $2.5 million in the prior-year quarter. The year-over-year decrease reflects lower interest rates and changes in invested balances. As of 03/31/2026, we had $190.4 million in cash, cash equivalents, and investments in marketable securities. As we presented on our last call, our outlook for 2026 includes total revenue of approximately $1 million, adjusted operating expenses of $98 million or less, and total cash usage of $93 million or less. 2026 is a delivery transition year as we prepare the anticipated launch of Proteus, and we are making intentional choices that prioritize long-term platform adoption over near-term revenue maximization. This includes embedding upgrade paths in certain Platinum Pro unit sales in 2026, which has a near-term revenue impact, as well as expected timing shifts as customers plan for Proteus availability. With our development progress, Proteus roadshow events, and continued education of channel partners worldwide, we are seeing strong interest in Proteus, which is influencing customer purchasing timelines. Our operating expense guidance and cash remain on track and reflect the activities required to complete development and support a successful commercial launch of Proteus. Our expected cash usage also includes modest inventory build and commercial readiness efforts ahead of the launch. With over $190 million in cash and investments at March 31, we continue to believe we have cash to support operations into 2028, approximately a year and a half after our estimated Proteus launch date. After the Proteus launch, we expect meaningful operating expense leverage over time as launch-related development spend rolls off. Because we are utilizing key external partners for certain development-related activities, we anticipate the ability to ratchet down R&D spend post-launch. This gives us flexibility to reduce total operating expenses and extend our cash runway while retaining the option to selectively redeploy resources into high-return commercialization initiatives as we scale. Finally, management and the board remain aligned with shareholders. Insider ownership remains meaningful, and recent Form 4 activity by management continues to reflect routine tax-related mechanics associated with equity compensation vesting, with no management team members selling shares outside of plan-mandated sales to cover required tax withholdings. In addition, it is important to note that two of our board members collectively purchased 600 thousand shares during the quarter in the open market. With that, we are happy to take your questions. Operator: We will now open the call for questions. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the roster. Our first question comes from Scott Robert Henry with AGP. Scott, go ahead with your question. Scott Robert Henry: Good afternoon. The first kind of bigger-picture question: as customers are starting to use Proteus and they are seeing more amino acids and longer read length, can you talk a little bit about what that means to the customer experience? I know you mentioned more information, but is it also better information, faster information, new applications? I am just trying to get an idea a little bit more about the customer experience with Proteus versus Platinum. Thanks. Jeffrey Alan Hawkins: Yeah. Thanks, Scott, for that question. So maybe we will break it down into three different application buckets. One bucket could be: I have a sample, and I want to identify the proteins that are present in that sample. Another bucket would be post-translational modifications. And a third sort of application area would be, let us say, variants—an engineering approach where I want to see if there are variants of the target protein I am trying to make. If you think about getting more amino acids and getting longer read lengths—so getting more content per protein—if you are in that protein identification area, it means you are going to be able to deal with a more complex mixture of proteins. You will have more unique content, unique information, with which to determine the variety of proteins that are there. Even more importantly, when you look at post-translational modifications or looking for variants in proteins, that is where more amino acid coverage and longer read lengths give you the ability to detect more of those events. You see those events may be spread out along the length of a peptide; they are not always at the beginning of a peptide. So these things give you a much higher level of fidelity and capability when you start thinking about those applications like post-translational modifications or variants. So that is maybe a way to think about what these fundamental sequencing capabilities mean to a customer in terms of the applications they are doing. Scott Robert Henry: Okay, great. Thank you for that color. And somewhat related—and this relies a little bit on your perception and perhaps some of the earlier customer feedback you have gotten—how could you anticipate customers' volume when one switches from Platinum to Proteus, because you have all these added benefits? Could it double volume? Could it 4x volume? I realize this is a bit of guesswork, but I just want to get your thoughts on that. Jeffrey Alan Hawkins: Yeah, I mean, I think it is the right question, Scott, and I think it is a little hard to predict right now. If we maybe take the question up to the 10,000-foot level, within the Platinum customers, Proteus clearly is going to bring a broader set of applications, which we would expect would open up the utilization of our technology in a lot more research studies. So we would expect within that Platinum base that Proteus should see more volume than Platinum sees. Exactly how much that is—is that a factor of two? Is that a bigger number than that?—I think that is the part that, until we get machines in the field and running, is a little hard to predict. The other aspect is all those labs and customers and some of the market segments that we just have not been able to access with Platinum at all. We think the capabilities, focusing in on post-translational modifications and focusing in on those protein variants, are going to open up a whole bunch of new customers. Today, we do not even have a Platinum in there; we are getting no volume. That will be sort of a new addressable set for us and the ability to go farm that account across a lot of different researchers in one institute and really drive volume into our machine. Scott Robert Henry: Okay, great. Thank you for that feedback. Final question: between now and launch—you have about six months—are there any gating factors technologically, or is it mostly production and building of inventory between now and then? Jeffrey Alan Hawkins: Yeah, Scott, so the way I think about it is you have the invention or the big technological breakthrough phase. That has happened; that is behind us. We have achieved that. We know the technology works. We know we are getting the performance from the fundamental components of our technology, whether that is the consumable, the instrument, or sequencing reagents. So really what we view the next six months as is a mix of the manufacturing transfer and bring-up that you mentioned, but also what I would call very standard hardware or instrument engineering and systems integration—driving up the reliability and the success rates, making sure you really get to the target specifications you want, not just in terms of amino acid coverage but the precision you are getting, the reliability you are getting, the mean time between failures. I would put all of those things into what would classically be considered pretty standard systems engineering or systems integration work. So it is technical in nature, but not something where we would expect the need to have some sort of innovation breakthrough. We think the innovation phase of the program and the invention phase are behind us, and it is really now more an operational and execution-related development effort. Scott Robert Henry: Great. Thank you for taking the questions. Jeffrey Alan Hawkins: Thanks, Scott. Operator: Our next question comes from Michael King with Rodman & Renshaw. Michael, go ahead with your question. Michael King: Hi. Good afternoon, guys. Thanks for taking the question. A couple of quick ones. I am trying to understand how you have lower operating expense in the quarter—$24.1 million versus $25.6 million in the same period last year—but you say you funded research and development at a higher run rate year on year. So how does that math work? Jeffry R. Keyes: Hey, Michael. This is Jeff. From an overall R&D standpoint, it can be a little lumpy from quarter to quarter just as we deploy with third-party partners that help on certain aspects of related activities. So that is why I was saying this year compared to last year, we were spending at a slightly higher level in R&D, but we were spending in SG&A at a slightly lower level based on other activities that we have pulled back and streamlined as part of our overall OpEx optimization to ensure that we have good runway going forward. So R&D can be a little lumpy from quarter to quarter, but overall we expect to spend within those guidelines that I mentioned earlier. Michael King: I see. Okay, thanks for clarifying that. The next question is, are you ramping—I know you use a third-party manufacturer—but are you ramping their production in advance of shipments, or will that not happen until later in the year? Or does that just happen as a function of incoming orders? Maybe you can talk a little bit about that. Jeffrey Alan Hawkins: Yeah, Michael, right now the focus is really ramping the delivery of instruments that we are using for R&D purposes. That is really the main focus today—just building out that base of instruments. That said, some of the build that is happening will ultimately support the early access customers in the summer as we work through the continued development. In terms of building inventory for the launch, that is something we will start to look at as we move through the year and really pace that for what we see as the funnel and any preorders that may come in at the back end of the year. So think right now of more of an internal scale-up to continue to expand the development activities and be able to support those early access sites in the summer. Think of inventory build for sales as being something later in the year. Michael King: Okay, thanks for clarifying that. And then I am curious about the roadshow activity. How many cities, how many sites do you expect to hit? And are you thinking about bringing your existing customers or potential customers into your headquarters to train them up so that once the installation is completed, they can immediately start doing their sequencing at scale instead of having to climb the learning curve? Jeffrey Alan Hawkins: Sure. Let us break the question into two parts. In terms of the roadshows, we put out a press release a couple of weeks ago talking about the first few cities that we were targeting with those events. We are continuing to scale that up. We are committed to continuing to provide a press release around the cities. Right now, we have been most heavily focused in the U.S. market, but we have begun locking in the dates for some of the roadshows and events in Europe. Keep your eyes out for press releases in this area; we will continue to update you on the new cities each quarter as we move through. We are seeing this as a very valuable tool in terms of us reaching people and the amount of time you get. If you are a sales professional trying to educate somebody on a new product or technology and you just go as a sales call, you typically get allotted a fairly short period of time—maybe 30 minutes, a really generous customer maybe an hour—and it could take several sales calls to build the level of information awareness that we get when we do these roadshows, where people come and spend about two hours on average at these events. We like the format, we are liking the engagement, and we are getting positive feedback. To your point on training, the roadshow is more educational; it is not really hands-on with the technology. As we get our internal fleet of instruments up to the number we would like to have, with some additional capacity to apply to customer work, we would look to have customers initially send samples to us so we are generating data. They get that data in their hands and are starting to work through that evaluation process and ultimately the budgeting process. When we get to launch, we will have some number of customers who have already done the prework, and what they will be doing more is working through their budgeting process to get the capital to purchase the machine. Once it is in their lab, we are very comfortable with how to train a customer. We have done it to date on the Platinum instrument, and Proteus, having all of the sequencing components automated, should be easier to train a customer on than it even is today. We are not worried about that back-end training component. We think that sample evaluation access early to get data in their hands is the key thing, and that is the next major milestone we are looking to accomplish over the coming quarter. Michael King: Amazing. And then one final quick question. What does the early access site selection process look like, and how many sites do you expect to have active by the end of the summer? Can you give us a range or point estimate? Jeffrey Alan Hawkins: I would say the process looks like we are going to want to have early access sites that span market segments. Clearly, we are going to want some number of academic institutes because those folks will be the type of customer who not only will do the early access but are also going to publish. That said, we are also evaluating the potential to have one or more of the early access sites be in a commercial environment—whether that be biopharma, antibody production, some area like that—because we really want the data and the experience in that market segment. But we know that when you get into a commercial setting, oftentimes customers are not able to publish. So we are thinking about those factors: demonstrating the capabilities, multiple segments, and also thinking about geographies. We have not set out an exact number. The way we are thinking about it is we are going to want to have a reasonable number of these. Do not think you are going to see us do 10 of them, but at least a handful is probably in the neighborhood of what we would be looking to implement over the course of the summer and even into the fall, again spanning geographies and end markets. Michael King: Super. Thanks so much for taking the questions. Jeffrey Alan Hawkins: Thank you, Michael. Operator: Our next question comes from Charles Wallace with H.C. Wainwright. Charles, go ahead with your question. Charles Wallace: Hi. This is Charles on for RK. Thanks for taking my question. You called out that any Platinum Pro unit sold in 2026 is going to have an embedded credit towards Proteus. Have you sold any Platinum Pro units, and do you have some of these credits stacked up at this point? Jeffrey Alan Hawkins: I will start, and if I do not get everything out, I am sure Jeff will jump in here with anything I miss. Not every Platinum Pro has to have that credit. It is a credit that is available to customers if they want to have that ability. Sometimes when you have a new machine coming, people say, “I want to buy it, but I am not really sure what is going to happen when the new machine comes out—how long will you support it?” Those types of things. So they want to have a credit. It is available to customers if they request it. That said, sometimes the machines you are selling now were ones that were budgeted for many months ago, up to a year ago. Those processes and those quotes would have gone out without this credit. So that might not show up in some of the machines that get sold throughout the year if they were budgeted for in the past. At this point, we are not really breaking out which of the capital sales have had the credit or not. As we go through the year and see other metrics of the funnel building, perhaps we will be in a position to provide a little more color on that, because a credit is really a protection for the customer. They still have the option to buy the Proteus or not. At this point, we are not breaking it out; we do not want to overstate the demand for the future machine just based on whether somebody asked for a credit or not. Charles Wallace: Okay, that makes sense. For the early access program, you mentioned maybe a handful of units, and then you also said you are building a fleet of internal units. How large of an internal fleet are you targeting, and how long does it take typically for an instrument to be built and be fully ready? Jeffrey Alan Hawkins: In terms of the internal fleet, I do not know that we have an exact number that we would give out. You can think about the internal fleet as needing to support our instrument engineering team—people working on instruments, integration, software. We have reagent development—the people putting the sequencing reagents into consumables and getting those optimized and ready to go—so they have to have access to machines. Then, of course, as we are bringing up manufacturing, we have to have some number of machines in our quality control testing environment to develop the QC tests, run the specifications that we will hold ourselves to when we are launching, when we are finalizing a kit, and ultimately deciding what can be shipped to a customer. So we have multiple groups who need access. In general, our strategy is to continue to build those and maximize their utilization. If we see that those are all maxed out, we keep building. We do not ever want to be throttled in terms of our ability to push as much testing volume and development volume through those internal machines. In terms of timelines for build, it would be a little early to put a specific timeline on the lead time to build an instrument. There are a small number—as is the case in most instruments—of long-lead parts. We procure those in advance and hold those parts. The assembly process itself is more about applying the labor and optimizing those processes. We are not having issues with a machine showing up at a Quantum-Si incorporated facility and functioning properly. We are not having those types of challenges that sometimes exist in early hardware development programs. Are we operating the line with perfect efficiency and perfect throughput? It is safe to say we are not yet, but we are very comfortable that we know how to do that, and we can optimize that well in advance of any commercial ramp. Since it is very labor-oriented, we have external partners, and one of the reasons we use those partners for instrument manufacturing is they have the capacity and the people. They can flex that up or down as our forecast requires. As long as we maintain those long-lead parts in inventory, the ability to flex up or down is a pretty efficient thing to do when you have external partners who have that kind of capacity. Charles Wallace: Great. Makes sense, and thank you for all the color. Operator: Our next question comes from Kyle Mikson with Canaccord Genuity. Kyle, go ahead with your question. Charlotte Mauer: Hi. This is Charlotte Mauer on for Kyle. Thank you so much for taking our questions. To start, could you elaborate a little bit more on the recent successful sequencing run on Proteus and how the performance compared to your expectations? What were some of the most notable improvements, and were there any specific challenges that need to be addressed before moving forward? Jeffrey Alan Hawkins: Thanks, Charlotte. I will work on that question backwards to forwards. The last part of your question was whether we experienced any challenges testing those samples, and the answer is no. We were able to run those samples successfully. We ran them both on Platinum and on Proteus so we could get a same-time comparison. In this particular situation, these are a series of proteins that the customer has previously worked with and tested in their own lab using a Platinum instrument. What they were focused on for their application was trying to both identify these proteins, and they are also doing some really novel work around developing tools for essentially de novo detection of amino acids. They are really focused on the coverage and the read length. Getting data from Proteus—one is just the amount of output you get. The number of reads is much, much higher with Proteus simply based on the number of features on that chip compared to Platinum. The coverage—as I mentioned in the prepared remarks—not only are we detecting 17 amino acids now, but our detection frequency of the others is considerably higher. And then, when you think about read length, what the customer saw in these particular samples is that the read length on Proteus was about double—about twice as long as what they are used to seeing on Platinum. If we go back to one of my earlier answers to Scott—why would a customer care about more amino acids being detected or longer read lengths? In this case, they are working on samples where they want to identify these proteins and potentially variants or modifications of them. They are thinking about algorithms they are developing for de novo detection. More content, longer reads, more complete information are going to really help them with their exploratory algorithm work in addition to the basic performance in identifying and subtyping those different proteins. Charlotte Mauer: Thanks for that additional color. I also had some questions about the roadshow. It sounds like there has been some strong early interest, but could you dive a little deeper into any relevant feedback or interest that you have received from customers at this point about Proteus, key highlights or takeaways, and any feedback on pricing? Jeffrey Alan Hawkins: Early interest is largely where we anticipated it: customers are really excited to have the ability to analyze PTMs. It is an area of translational research, basic biology research, and mechanisms of action where—outside of phosphorylation—it is a pretty difficult field to tackle even if you have access to some of the highest-end mass spec machines. So PTMs are a big draw. On the two roadshow formats, in the first format where we go to an institution with an existing Platinum and open up the education, we are seeing not just the core lab but many other researchers—translational and basic biology—who have an interest, a study in mind, a potential way to utilize the technology. That has been a really positive learning for us as we think about driving institutional momentum toward funding: helping the core lab see that their internal customers have a desire to get access to the tech. That type of momentum can be really helpful when working through where the funding proposal sits among all the other capital equipment they are looking at. On pricing, we have announced the price. We have not heard any pushback. I would not expect to at this point for two reasons. First, if you are thinking about PTM applications, those folks are often using very high-end mass spec equipment that can cost upwards of $1 million or more. Us sitting at $425 thousand is really attractively priced compared to what they might be spending on one of the high-end mass spec machines. Second, we have not given people enough information today that someone has to really make the decision on the price. The good news is no one is hearing it and running away, so we are not too high. We will get more nuanced feedback as we continue to put out more data or they are able to start getting sample evaluations in hand. Thus far, no one has been concerned. People have thought it is very reasonable for its capabilities, and we will keep driving home the message around the capabilities at $425 thousand versus having to go all the way up over $1 million for a mass spec that can do the same thing. Charlotte Mauer: Great, thank you. And one last question: looking ahead to expectations for 2027 and some of your capital deployment, you mentioned utilizing key external partners for certain development-related activities. Where in the process do you expect to use these partners the most, and how should we think about this reduction in capital deployment relative to your 2026 levels given a full year of spending on commercialization efforts for Proteus? Jeffrey Alan Hawkins: Let me start, and then I will pass it to Jeff for a little additional color. We are using these partners today across some of our consumable development efforts, our optic system that is inside of Proteus, and instrument development. We have partners who are working with us across those various R&D efforts. Some of those partners will flip into our manufacturing partners next year. They will be with us, but it will be more in terms of building inventory and supporting that. Maybe, Jeff, you can give a little feel for how we think about the burn-down after we launch. Jeffry R. Keyes: Regarding total OpEx as we move forward into 2027, we will need some of these partners to help stabilize the program shortly after launch, which is typical for a new development project. But after that, since we are using a significant amount of partners, we are going to be able to ratchet down that R&D spend specifically. As I noted earlier, we would be able to either bank that savings or redeploy it, but we are going to look for opportunities between R&D and other activities to ratchet down our OpEx, and we will gauge that relative to how Proteus uptake goes in 2027. We will be able to manage it going forward. It is definitely on our radar, and external partner R&D spend is the first obvious step, followed by other items we can look at going forward. Jeffrey Alan Hawkins: And, consistent with what we did this year, as we look at our guidance in 2027, we will be able to be more quantitative when we get there in terms of how we think about our adjusted OpEx or cash use. We will continue to provide that guidance. It is just a little early to be providing it right now, but you can gather from Jeff’s and my feedback how we are thinking about rotating those dollars off in R&D, some deployment perhaps into other initiatives, and banking the majority of that savings. Charlotte Mauer: Awesome. Thank you so much for all the time. Jeffrey Alan Hawkins: Thank you. Operator: This concludes the question and answer session. I would now like to turn it back to Jeffrey Alan Hawkins for closing remarks. Jeffrey Alan Hawkins: Thank you for attending our call today. We look forward to providing additional business updates on our next earnings call. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Welcome to the Q1 2026 ICF International, Inc. earnings conference call. My name is Lauren Cannon, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I will now turn the call over to Lynn Morgen of Advisory Partners. Lynn, you may begin. Lynn Morgen: Thank you, Lauren. Good afternoon, everyone, and thank you for joining us to review ICF International, Inc.'s first quarter 2026 performance. With us today from ICF International, Inc. are John Wasson, Chair and CEO; Anne Cho, President; and Barry M. Broadus, Chief Operating and Financial Officer. During this conference call, we will make forward-looking statements to assist you in understanding ICF International, Inc. management's expectations about our future. These statements are subject to a number of risks that could cause actual events and results to differ materially, and I refer you to our 05/07/2026 press release and our SEC filings for discussions of those risks. In addition, our statements during this call are based on our views as of today. We anticipate that future developments will cause our views to change. Please consider the information presented in that way. We may, at some point, elect to update the forward-looking statements made today but specifically disclaim any obligation to do so. I will now turn the call over to ICF International, Inc. CEO, John Wasson, to discuss first quarter 2026 performance. John? John Wasson: Thank you, Lynn, and thank you all for joining us this afternoon to review our first quarter results and discuss our business outlook. The first quarter represented a solid start to the year. We executed well across our client set, reflecting successful strategic initiatives to diversify our business model and our track record of delivering positive outcomes for our clients. This track record is a function of ICF International, Inc.'s deep domain expertise paired with cross-cutting capabilities in technology, digital transformation, complex program management, and engagement. By going to market with this unique combination of capabilities and experience, we continue to maintain healthy win rates, record industry-leading book-to-bill ratios, and build our business development pipeline — all metrics that underpin ICF International, Inc.'s future growth potential. Key takeaways from 2026 include: First, an 8.6% sequential increase in our revenues from federal government clients, representing a strong indication that this part of the business has stabilized and is on the upswing. As we noted last quarter, we expect to see sequential improvement in our revenues from federal government clients through the third quarter of this year, with year-on-year growth in this client category anticipated for the 2026 fourth quarter. Second, a 17% year-on-year increase in revenues from international government clients, which was a strong showing tied directly to recent contract wins, many of which are single-award contracts. Third, of the total of $12 million in revenues that shifted out of the first quarter through the timing of project work for commercial and international government clients, we expect one-half to be recognized in the second quarter and the remainder to come through the second half. And lastly, we continue to win north of 90% of our recompetes. New business, including modifications, represented 65% of this quarter's awards, a strong indication of how well our qualifications are aligned with client demand. ICF International, Inc. was awarded $450 million in contracts in the first quarter, maintaining our 12-month book-to-bill ratio at a healthy 1.21. After this quarter's awards, our business development pipeline stood at $8.5 billion. Also, we were pleased with our strong margin performance in the first quarter, which we achieved while continuing to invest organically in areas we have identified as drivers of long-term growth for ICF International, Inc., namely commercial energy, disaster recovery, and federal technology modernization. There are several important secular trends supporting our growth expectations for these areas, including rapidly growing demand for electricity in North America highlighting the importance of energy efficiency and grid modernization programs; increased frequency and severity of natural disasters, including hurricanes, wildfires, and other extreme weather events, which often result in major damage to homes, businesses, and critical infrastructure; and the tremendous need for digital and AI-driven technology modernization to improve mission delivery across federal civilian agencies. ICF International, Inc. is well positioned to capture more than our fair share of growth in these markets, which supports our confidence that ICF International, Inc. will return to mid- to high-single-digit organic growth in 2027, and continued growth beyond. When you layer on the potential for accretive acquisitions, you see a clear path to return to double-digit growth. Given our expectations for continued favorable business mix and our ongoing internal efficiencies, many of which are coming from AI and other tools, we expect our earnings growth to continue to outpace revenue growth as we look forward. I know that investors are concerned about the impact of AI tools on the technology modernization work that is being done at federal government agencies. While we understand the concerns, we are doing work in this market every day, and over the last two years we have adjusted our offerings to strengthen our resilience to just that concern. For example, we focus on longer-term demand drivers including AI-augmented application development, foundational modernization, and AI governance and orchestration. Here are several insights that are relevant to ICF International, Inc. First, 80% of our technology modernization work for federal clients is fixed-price or outcome-based, and our civilian agency clients require a lot of support in this area. As AI-augmented methods enable us to complete projects in less time and at a lower cost, we will simply move on to the next project more quickly than in the past. Technology is moving quickly, and there is a substantial backlog of modernization work to be done to address the existing technical debt in the federal civilian arena. Second, as our clients move to advance AI at enterprise scale, we anticipate even greater demand for foundational data, cybersecurity, and cloud services. This is the foundation that determines whether AI deployments produce reliable, secure, and scalable outcomes or fail in production. We are prepared to help our clients continue on their journeys to improve and modernize their data and cloud architectures in order to capitalize on the promise of AI. Third, these AI capabilities also open up a larger technology market. We will see new opportunities for smarter workflow automation as agencies reimagine what is possible. Also, people will address legacy technical debt that was heretofore too expensive to address through traditional modernization. Finally, we will help our clients in addressing new challenges with AI governance, orchestration, and platform optimization that are all emerging as we speak. These areas we talk about require technology and domain expertise combined with human judgment and oversight to get it right. The upside is that the government technology market is expanding in scope, shifting in shape, and asking more of its partners than it did before AI. ICF International, Inc. is positioned to lead and grow through this evolution. Before turning the call over to Anne Cho, our President, who will provide a more detailed business review, I want to comment on M&A. Last year, we were fully concentrated on building our capabilities across our non-federal client base and on tightly managing our federal government business in light of the volatility that we experienced in 2025. This year, we are taking a more aggressive stance with respect to M&A given the substantial opportunities we see in our key growth markets, and in particular, commercial energy. We remain disciplined, but if we find an acquisition that meets our criteria for driving revenue synergies in growth areas and for being accretive soon after completion, we will move forward. Acquisitions have been an important part of ICF International, Inc.'s growth chassis over the last 25 years. We have a great track record of using free cash flow to pay down debt quickly. I will now turn the call over to Anne to discuss first quarter business performance across our client set. Anne? Anne Cho: Good afternoon, everyone. I am pleased to be presenting our business review on my first official call as President of ICF International, Inc. During my 30-year tenure, I have had the opportunity to work in many areas of the company, which makes it very exciting for me to be able to speak to you about the totality of the business. First quarter revenues were led by commercial, state and local, and international government clients, accounting for over 58% of total first quarter revenues, and are on track to exceed 60% of our full-year 2026 revenue. Taking a closer look at our client categories, I will start with commercial energy. There continues to be strong underlying demand for our utility programs, which include energy efficiency, flexible load management, and electrification. These programs represent approximately 80% of the trailing 12-month commercial energy revenue. The addressable market for these services is large, and ICF International, Inc. is a market leader. We continue to gain share, receiving plus-ups on existing contracts reflecting the results we are delivering, introducing new services, and then winning contracts from competitors. Our commercial energy advisory work delivered mid-teens growth in the first quarter. This growth reflected considerable demand for our market assessment and due diligence work, which supports client M&A; the expansion of the grid reliability and protection work; and increasing demand from data center developers. In addition, our engineering support to utilities working to accommodate data center loads continues to accelerate, as those clients expedite the development of new substations. Many of these engagements draw on our proprietary tools like Energy Insights, SightLine DER, and ClimateSite Energy Risk. We pair these model outputs with actionable decision support within the confines of the regulatory and stakeholder environment. From a Q1 perspective, as John noted, there was a timing shift affecting our work on several fixed-price energy efficiency programs that must be completed in 2026. Without this shift to the right, commercial energy revenues would have increased 8.3% in the first quarter instead of the reported 2%. Next, I am going to talk about our state and local portfolio. Q1 state and local government revenues were stable. For the full year, we expect revenues in this client category to increase at a mid-single-digit rate. ICF International, Inc. is a recognized market leader in disaster management and recovery services, which continue to account for about 45% of this client category's revenue. In February, we announced the award of a comprehensive management services contract by the State of Florida, which positions us to compete for a broad portfolio of projects that extend beyond disaster management to include habitat conservation planning and agricultural land conservation. We are also encouraged that, following the confirmation of the new Secretary of the Department of Homeland Security in late March, DHS went on to approve the obligation of $730 million Hazard Mitigation Grant Program funding, signaling the continued intent to fund rebuilding efforts that mitigate future disaster loss. DHS also recently indicated its intent to restart the FEMA Building Resilient Infrastructure and Communities, or BRIC, program that we have historically supported. The combination of these events supports our confidence that disaster management and recovery services will continue to be a driver for ICF International, Inc. over the mid and long term, and will expand our efforts well beyond the current 75 disaster recovery programs in 22 states and territories that we support today. Technology has always played an important role in our work for state and local government clients, and we have expanded our offerings there to include advanced technology solutions and services as well. As we discussed in our last call, our international portfolio is growing nicely. International government revenues increased 17.5% in the first quarter, reflecting the significant contracts that ICF International, Inc. has been awarded over the last 18 months by the European Union and UK clients. The additional $4 million that shifted into the second quarter and second half of this year represented the timing of pass-through revenues that are associated with outreach and marketing events that are under fixed-price contracts requiring the work to be completed in this year. Sales continue to be strong across our international portfolio, winning key recompetes and securing new contracts with international government clients to support growth for the next several years. Finally, I will talk about our work for U.S. federal clients. Our federal business has stabilized, and we continue to expect consecutive revenue growth in Q2 and Q3 and then year-over-year growth in Q4, as we execute on the nearly $1 billion in federal government contracts that we have won over the last 12 months. We are pleased to see procurement activity pick up in the first quarter. Some opportunities that were paused or canceled last year have re-entered the market. We have seen a restart of some of the work we were awarded in the past, such as support of a grant program for the Department of Energy. The procurement environment has changed in the last year, and we have pivoted, focusing more on rapid prototyping and demonstration of capabilities than ever before. Several sweet spots exist at the intersection of the administration's priorities, the agencies' gaps in manpower, and our expertise. These include applying AI and advanced analytics for fraud prevention and supporting child and family services, transportation safety, grid reliability, and technology modernization. A good example of how we combine deep domain expertise and advanced technology with human judgment is our work modernizing the Center for Medicare and Medicaid Quality Improvement and Evaluation System. The program involves the transition of more than 278 million clinical assessments into a national repository, enabling real-time monitoring of care standards across skilled nursing facilities, home health agencies, and hospitals. This work advances the administration's priorities around quality of care, fiscal responsibility, and system resilience. In summary, the trends underlying our business are aligned with our expectations. Our leaders are leaning in across the full portfolio with a winning mindset and eagerness to emerge as a partner of choice as our clients navigate what is a really fast-moving and exciting time. Now I will turn the call over to our Chief Operating Officer and Financial Officer, Barry M. Broadus. Barry M. Broadus: Thank you, Anne. Good afternoon, everyone. I am pleased to provide additional details on our first quarter 2026 financial performance and the factors shaping our results, as well as our outlook for the remainder of the year. At a high level, first quarter results reflect solid execution across our diversified client base. Margins remain strong, contract awards resulted in a book-to-bill above one, we continue to have a healthy pipeline of opportunities which we are pursuing, and, as Anne mentioned, procurement activity in the federal space is showing signs of improvement. In fact, in the federal space, we submitted nearly $400 billion of bids in the first quarter, the majority of which were for new opportunities. While first quarter total revenue came in below our expectation, this was entirely due to timing of certain commercial energy and international government contract work. We fully expect to recover these revenues throughout the balance of the year, with half expected in the second quarter. I would also note that our first quarter tax rate came in above our expectations, which I will address in more detail shortly, but our full-year outlook for a tax rate of 20.5% remains unchanged. Before discussing the first quarter financial metrics, I want to highlight some of the strategies that are supporting margin improvement and helping to drive shareholder value. First, cost optimization has been a key theme as we work to manage our infrastructure costs while funding growth initiatives. We continue to invest in modernizing our ERP systems and our back-office operations while implementing AI tools. These ongoing investments have and will continue to make us more efficient, providing us the ability to scale over time by offering both operational and financial benefits. From a strategic financial standpoint, we continue to focus closely on capital allocation. To that end, organic projects, share repurchases, and acquisitions are top of mind. In the first quarter, we repurchased slightly more than 217,500 shares, and we will continue to opportunistically repurchase additional shares. Further, as outlined by John, we are actively pursuing acquisitions given our strong cash flow and borrowing availability, which was expanded as part of the refinancing we completed last month. In summary, we are executing on our strategic plan and remain on track to return to growth in 2026, and deliver on our full-year top and bottom line guidance. With that context, I will now review our first quarter financial results. Total revenue in the first quarter was $437.5 million, a decline of 10.3% compared to 2025. As we discussed on our fourth quarter call, both first quarter and full-year 2026 revenue comparisons will reflect the impact of federal contract cancellations that occurred between February and May 2025. First quarter revenues were approximately $12 million below our expectations, reflecting a push to the right of roughly $8 million in project work for commercial energy clients on fixed-price contracts and $4 million in international government. The timing of the work simply shifted later in the year. We will recover all of these revenues over the balance of the year, approximately half expected in the second quarter. As a result, we are reiterating our expectation that revenues from commercial, state and local, and international clients will grow at a double-digit rate and represent over 60% of total revenues for the full year, supported by strong underlying demand from utility clients, continued ramp-up of international contract wins, and growing state and local revenues. In our federal government business, we were encouraged to see revenues grow 8.6% sequentially to $182.3 million, which was aligned with our expectations. The sequential improvement was supported by our technology modernization work, which we are well positioned to win and deliver in the current procurement environment. Subcontractor and other direct costs were $102.7 million, representing 23.5% of total revenues, up from 22.7% in the prior-year quarter due to higher pass-throughs on certain non-federal contracts. Despite the year-over-year decline in revenues, gross margin rose 10 basis points to 38.1%, highlighting our favorable business mix and a contract mix that remains largely comprised of fixed-price and time-and-materials contracts. Fixed-price and T&M contracts represented approximately 93% of first quarter revenues, with cost-reimbursable contracts accounting for only 7%. Indirect and selling expenses were $118.8 million, a decline of nearly 10% year over year and representing 27.2% of total revenues. As I mentioned previously, as we optimize our indirect spend, we will continue to invest in high-growth areas, including energy and technology modernization, while preserving our core capabilities in the programmatic side of the federal business, ensuring ICF International, Inc. is well positioned when the market recovers. First quarter EBITDA was $47.3 million compared to $52.1 million last year. Adjusted EBITDA totaled $48.9 million with an adjusted EBITDA margin of 11.2%, stable compared to the 11.3% reported in last year's first quarter, demonstrating the effectiveness of cost management initiatives and the structural improvement in our business mix. We continue to expect adjusted EBITDA margin expansion of 10 to 20 basis points for the full year. Net interest expense in the first quarter was $6.7 million, down 8.5% year over year, reflecting a meaningful reduction in our average debt balance compared to the prior-year period. Our first quarter tax rate was 25.1%, above our expectations due to less-than-expected deductible equity-based compensation expense. This compares to 10.5% in the prior-year quarter, which, as a reminder, included a one-time tax benefit. We continue to expect a full-year tax rate of approximately 20.5%, with each of the next three quarters expected to see a lower tax rate than the first quarter, the largest offsetting benefit expected to be in the third quarter. To close out on taxes, I should note that the higher-than-expected first quarter tax rate had an unfavorable impact of $0.07 on GAAP EPS and $0.09 on non-GAAP EPS in the first quarter. But given that we still expect a full-year tax rate of approximately 20.5%, the Q1 tax rate does not change our outlook as to how taxes will impact our full-year EPS guidance. Net income in the first quarter was $20.5 million, or $1.12 per diluted share, compared to $26.9 million, or $1.44 per diluted share, in the prior-year period. Non-GAAP EPS was $1.50 compared to $1.94 per diluted share in 2025. As noted, both GAAP and non-GAAP EPS for the first quarter of this year reflected the unfavorable tax item that I previously described. We remain confident in our full-year outlook, which calls for 3% revenue growth at the midpoint of our guidance range, supported by recent contract activity and the strength of our backlog and pipeline. Our backlog stood at $3.4 billion at quarter end, approximately 51% of which is funded, and our business development pipeline remains healthy at $8.5 billion. Taken together, these metrics provide good visibility for the year. Now turning to our balance sheet and cash flows. We used $3.1 million in operating cash flow during the first quarter, a meaningful improvement compared to the $33 million used in last year's first quarter, reflecting improved receivables collections and working capital management. Days sales outstanding were 74 compared to 81 days in last year's first quarter. Capital expenditures totaled $2.8 million compared to $3.5 million in the first quarter of last year. We ended the quarter with net debt of $436 million, down considerably from the $499 million at the end of last year's first quarter, and approximately 40% of our current debt is at a fixed rate. Our adjusted leverage ratio was 2.23 turns versus 2.25 turns at the end of last year's first quarter. Subsequent to the end of the first quarter, we refinanced our credit facility and remain well positioned to invest in organic growth, repurchase shares, and pursue strategic acquisitions in our key markets while maintaining our dividend. Today, we announced a quarterly cash dividend of $0.14 per share, payable on 07/10/2026 to shareholders of record as of 06/05/2026. To wrap up, we are pleased to reaffirm our guidance for a return to revenue and EPS growth in 2026, with our revenues expected to range from $1.89 billion to $1.96 billion, representing 3% growth at the midpoint; GAAP EPS from $5.95 to $6.25; and non-GAAP EPS from $6.95 to $7.25, or 5% growth at the midpoint. To further help you with your financial models, please note the following for the full year 2026: both depreciation and amortization, and amortization of intangibles are expected to continue to be $22 million and $24 million, respectively. Likewise, we continue to expect full-year interest expense to be between $27 million and $29 million. As I mentioned earlier, our full-year tax rate expectation remains unchanged at approximately 20.5%. In the second quarter, the rate is estimated to be around 23%, with a significant reduction in the third quarter. We anticipate capital expenditures to total $24 million to $26 million. Given share repurchases in the first quarter, we now expect our year-end fully diluted share count to be 18.3 million shares compared to our prior expectation of 18.5 million shares. And we continue to expect operating cash flow of $135.15 billion for the full year. With that, I will turn the call over to John for his closing remarks. John Wasson: Thank you, Barry. We are pleased that 2026 is shaping up as we expected — to be a year in which ICF International, Inc. returns to growth. In many ways, the trials of 2025 have made us a stronger company. We are more diversified, more efficient, and more agile. As we look to the future, we see a clear path to return to mid- to high-single-digit growth in 2027 and continued growth beyond. The dedication of our professional staff has been critical in helping us navigate dynamic business conditions, pivot to take advantage of new opportunities, and set the stage for ICF International, Inc.'s future growth. We appreciate their support. We will now open the call for questions. Operator: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your questions, please press 11 again. Our first question comes from the line of Jason Tilgin with Canaccord Genuity. Your line is now open. Jason Tilgin: Good afternoon, and thanks for taking my question. I believe in the prepared remarks you talked about the advisory business for commercial energy growing mid-teens year over year in the quarter. I am wondering if you could help give us some additional color on where you are seeing the most activity today as it relates to the data center opportunity, how those conversations are evolving, and what exactly, as it relates to your skills and capabilities, is giving you an edge to continue to win business in that area. Thanks. And then one additional follow-up. High level, in terms of some of the investments that you are making today in the ERP system and other technology, I am wondering if you could help frame how much of those investments today are offsetting some of the benefits from recent cost optimization efforts, and how we should be thinking about the cadence of maybe more substantial gross or operating margin expansion over the coming quarters and years? Thanks. Anne Cho: Sure. When I mentioned the advisory side and that growth, it is important to point out the work we are doing expanding our client portfolio. A couple of years ago, we acquired a firm called CMY, which added engineering capabilities. We have been able to expand our client set in that area, providing those engineering skills to utilities, for instance, that are trying to build out capacity to support data centers in their area. Our power modeling team has been benefiting from a resurgence of work from renewable developers across a suite of technologies — not just wind, but solar, storage, etc. — and then increased demand from data center developers as well. Barry M. Broadus: Yes. This is Barry M. Broadus. From an overall perspective, we have had a program for the last few years where we are modernizing our ERP systems, and that is driving efficiencies. We do this in a balanced way whereby we are receiving benefits — becoming more efficient and able to process and work faster internally. In addition to ERP systems, we are also implementing AI in many of our back-office processes, which is continuing to drive additional efficiencies. We have the ability to deliver more margin, but we are using dollars we save to invest in long-term growth initiatives in the areas that John Wasson and Anne Cho mentioned as part of their opening comments. We do this in a balanced way, and I do not see it detracting from our ability to continue to improve margins as we move forward. Operator: Thank you. Our next question comes from the line of Samuel Kusswurm with William Blair. Your line is now open. Samuel Kusswurm: Hey, everyone. Thanks for taking our questions here. To start on the commercial energy business, it grew 2%, but I think you shared it would have grown 8% if we were to add back the $8 million in project work that got pushed out. At the start of the year, you shared you were expecting at least 10% organic growth for the year in this business. Do you still expect that, and what are you seeing in your backlog that is really supporting it? And then also, can you comment on how the residential and utility energy piece of the business performed versus more of the commercial and industrial energy piece? John Wasson: I will start off. We remain confident in 10% growth for our commercial energy business. We have a strong backlog and a strong pipeline. Those markets are growing high single digits, and we have been benefiting from plus-ups and takeaways that increased our growth rate above the market average. We remain confident that we will continue to do that. In terms of residential versus industrial and commercial, we are the market leader in residential energy efficiency programs. We have about 35% market share and think we can continue to expand that. We are also placing significantly on the commercial building side, where we have about 15% to 20% market share. Anne Cho: I do not have an update beyond what we discussed on the last call in terms of the share of residential versus commercial. One more thing to underline what John Wasson mentioned about the long-term growth trajectory: upstream of these programs we run, we also provide regulatory and consulting support to utilities, which gives us a good sense of the programs coming down the pike. That is another indicator supporting strong sales for both recompetes and wins on the program side. Barry M. Broadus: Historically, in our commercial energy business, we typically recognize roughly 47% of our annual revenues in the first half. The back half is when we typically hit certain milestones with regard to energy incentives, which creates a natural uptick in the back half versus the front half. Samuel Kusswurm: Got it. I appreciate the color. I think I will ask about the federal business next. There was something that caught my ear in the prepared remarks — capturing more of the federal opportunities aligned with the administration's priorities. Could you expand upon that more? From an operating standpoint, what does it mean to pivot in that direction? Are there any recent successes you could point to, or is it still early? Anne Cho: There is definitely a different way of selling in this environment in the federal space — more focus on showing what we can do. We come in with prototypes and good ideas that we can demonstrate, and where we can demonstrate the ability to take a client to a relatively quick win. That is an example of pivoting in capture and business development. In terms of new opportunities, we have been successful winning in new areas and offices at agencies where we have worked before — for instance, the Department of State, Department of Labor, and Department of Defense. We recently won a large BPA with the Defense Counterintelligence and Security Agency, and that is one where we incorporate AI-driven components to modernize very complex operational processes, with human oversight and deep expertise. Those are the kinds of places where our skills resonate. John Wasson: I would also add the administration wants work to be outcome-based or fixed-price, and the vast majority of our work is in that category. We are in the single digits now on cost-plus, and that has been declining. There is a real focus on AI-first. We have our ICF fathom AI platform, which allows us to do rapid prototyping and other work for federal agencies. We also have a real capability around waste, fraud, and abuse at CMS that came to us with the Semantic Bits acquisition. It is a material part of our technology business and our HHS work, and that is an area where there is a lot of focus and we are seeing a lot of opportunity. Operator: Thank you. Our next question comes from the line of Tobey Sommer with Truist. Your line is now open. Tobey Sommer: Thank you. I was hoping you could give us a sketch of what your M&A could look like given the pressures in the federal space. The valuation in your own stock and the group largely has declined. How do you think about multiples and leverage in this context? How engaged and active do you expect to be? Also, from a commercial energy perspective, I understand some work was pushed to the right. What kind of growth cadence do you expect this year, and how quickly will the year-over-year or sequential growth resume? And you talked about a resurgence of renewables — could you give us more context around that in a little more detail? John Wasson: As you know, M&A has been a key part of our strategy over the last 20 years as a public company. There have been three or four times where we have levered up and then, within a year or 18 months, paid down the debt. It has been quite successful for us in terms of both organic and inorganic growth. It remains a priority for us. Generally, we are focused on opportunities in our key growth areas. Right now, energy is first among equals, and the primary focus on the M&A front is on the commercial energy side. We would look for opportunities aligned with our core energy business — bringing us additional geographies, scale, capabilities, and clients. We will also look at adjacencies with more of an engineering focus. Anne Cho mentioned CMY, which brought grid engineering and large-load capabilities; that is an adjacency where there could be real synergies for us. At a high level, we want any acquisition to be accretive in the first year, with strategic and cultural fit, and we would need to see material revenue synergies to achieve those goals. On multiples, the energy arena for our current business retains premium multiples, so we need the right fit with the right synergies to meet our criteria. On leverage, historically when we have levered up, we have gone to about 3.0x to 3.5x — maybe 3.75x at the peak with Semantic Bits and ITG before that. I do not see us going higher than that. We want something we could pay down quickly with our strong cash flow — within a year or 18 months. Barry M. Broadus: On the commercial energy cadence, you could expect mid- to upper-single digits as we move into the next quarter or so, and then it will go beyond that and continue to ramp up as we move throughout the second half. The fourth quarter continues to be the strongest growth period as many energy incentives are realized during that time. Anne Cho: On the resurgence of renewables, there is renewed interest, and “all of the above” is really more of a thing. Hyperscalers have made commitments to provide renewable energy to support their data centers, creating opportunities for us to support the analysis. That can include stakeholder engagement and crisis communication, as well as siting and interconnection analysis. With developers, we are doing siting analysis, expanding renewable facilities, looking at brownfields repurposing with an eye on potential renewables, and gas procurement strategies are still in there. Understanding interconnection applications and speed to power is really important. Battery storage is much more in the forefront now, and that has always been part of our work, but it is now of much greater interest to our clients. Operator: Thank you. Our next question comes from the line of Kevin Steinke with Barrington Research Associates. Your line is now open. Kevin Steinke: Great, thank you. From a housekeeping perspective, can you expand on what resulted in the later timing of some revenue in both the commercial energy and international markets? And in the federal space, you mentioned you submitted $400,000,000 worth of bids in the first quarter. Can you give us more flavor around the type of work you are predominantly bidding on? John Wasson: In terms of the shift of revenue to the right, it was a confluence of events on a handful of projects where we did not ramp up the work quite as quickly as expected, both for ICF International, Inc. and our subcontractors. These are all fixed-price contracts; it is all in backlog, and it all has to be recognized in 2026, but we have to meet certain milestones to book the revenue and that was pushed out a bit. Our fees are performance-related when we meet specific energy production goals, and those were pushed out. It was just a confluence of events that pushed to the right for a handful of projects. There are no underlying challenges or problems with the projects. On federal bids, within HHS, CMS remains an area where we are seeing opportunity, and that was a key part of those figures. We are bidding more opportunities on the technology front at the Department of Defense. We have won several IDIQ contracts in the last year or 18 months, and we are seeing more opportunity for the types of skills we have. The Department of Homeland Security is also an area of opportunity that we are pursuing. We work at FEMA and other DHS agencies. Other civilian clients include NASA and EPA. Barry M. Broadus: On that most recent Department of Defense vehicle John Wasson mentioned, we recently won our first task order on that too, which was good to see. Kevin Steinke: Thanks. One more — you mentioned the target of returning to mid- to high-single-digit revenue growth in 2027. Does that contemplate a return to year-over-year growth in the federal government space? John Wasson: Yes. That would assume a return to growth in the federal space. We have 60% of our business — commercial, state and local, and international — growing 10% or more collectively, and we believe that is a long-term trend. We have indicated that our IT modernization business will return to low-single-digit growth this year. That gets 80% of our business to grow. Our guidance this year for the remaining 20% of our federal business is down mid- to high-teens given difficult comps from last year’s impacts. We think we have bottomed out and are stabilizing there. If that stabilizes and the other 80% is growing, that gets us to mid-single-digit or better organic growth. The upside would be doing better than stabilization in that remainder or higher growth in IT modernization and the other 60%. And, of course, acquisitions could move us to double-digit growth. Operator: As a reminder, to ask a question, press 11 on your telephone and wait for your name to be announced. Our next question comes from the line of Marc Riddick with Sidoti. Your line is now open. Marc Riddick: Hey, good afternoon, everyone. I wanted to touch on what you are seeing on the state and local government activity levels as far as RFPs and demand, as well as the disaster side of things. And could you also touch on what you are seeing internationally as far as the opportunity set? Anne Cho: On the state and local front, beyond disaster, our environmental services to state and local governments have been buoyed by a focus on new broadband fiber installations and opportunities in the mining sector where gold and critical minerals are in high demand. We have won some recent engagements in broadband and see more coming. For state transportation and metropolitan planning organizations, we won a suite of separate but related projects that address the resilience of transportation infrastructure to extreme weather and also focus on safety and mobility. That work is interesting, utilizes proprietary ICF International, Inc. models and deep expertise, and focuses on providing actionable, investable recommendations. We are also seeing opportunities to support states with advanced technology solutions akin to what we do for federal modernization. For a major state client, we are working on a legacy modernization project where we have the opportunity to pilot the use of generative modernization code to speed the process. That pilot is showing promise and is a new place for us to engage on the state side. On disaster, much of the work has shifted to states over the past several years, and we support state and local governments in proactive resilience. Leaning in to increase resilience before a storm is less expensive than responding after a storm. That is a priority of this administration. Programs like BRIC, and others in that proactive resilience front, are important. Internationally, we are very focused on delivery — we have won a lot in Europe and the UK in the last couple of years and are ramping up large contracts. Procurement activity there has been exciting. We continue to see strong recognition of ICF International, Inc.’s brand with UK and EU government clients. With 17.5% growth in the first quarter, there is momentum, and we continue to expect strong growth over the course of the year. John Wasson: Two points to add: our expectation is our state and local business will grow mid-single digits this year, and international will be strong double-digit growth. Marc Riddick: Thank you for the details. One follow-up: on the prioritization of federal areas like fraud prevention, do you anticipate or are you beginning to see any of that type of work at the state and local level as well, or other examples where states are moving in the same direction as federal? Anne Cho: Some states are more focused in areas that are priorities for the federal administration, and others are focused in areas that are not priorities for the administration. In both directions, we have skills that can support state agencies. Some states are trying to fill gaps they see left by the administration shifting away from certain priorities, while other states are aligning directly with administration priorities. We are following those cues accordingly. Operator: I am showing no further questions at this time. I would now like to turn it back to John Wasson for closing remarks. John Wasson: Thank you for participating in today's call. We look forward to seeing you all at upcoming conferences and meetings. Thanks again for attending. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good day, ladies and gentlemen, and welcome to Red Violet's First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your first host for today's conference, Camilo Ramirez, Senior Vice President, Finance and Investor Relations. Please go ahead. Camilo Ramirez: Good afternoon, and welcome. Thank you for joining us today to discuss our first quarter 2026 financial results. With me today is Derek Dubner, our Chairman and Chief Executive Officer; and Dan McLachlan, our Chief Financial Officer. Our call today will begin with comments from Derek and Dan, followed by a question-and-answer session. I would like to remind you that this call is being webcast live and recorded. A replay of the event will be available following the call on our website. To access the webcast, please visit our Investors page on our website, www.redviolet.com. Before we begin, I would like to advise listeners that certain information discussed by management during this conference call are forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. The company undertakes no obligation to update the information provided on this call. For a discussion of the risks and uncertainties associated with Red Violet's business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the most recent annual report on Form 10-K and subsequent 10-Qs. During the call, we may present certain non-GAAP financial information relating to adjusted gross profit, adjusted gross margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and free cash flow. Reconciliations of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measure are provided in the earnings press release issued earlier today. In addition, certain supplemental metrics that are not necessarily derived from any underlying financial statement amounts may be discussed, and these metrics and their definitions can also be found in the earnings press release issued earlier today. With that, I am pleased to introduce Red Violet's Chairman and Chief Executive Officer, Derek Dubner. Derek Dubner: Good afternoon, everyone, and thank you for joining us. Before I walk through the quarter, I want to recognize our team. The results we're reporting today, record revenue, record margins, record EBITDA and one of the strongest quarters for new customer onboarding in our company's history are a direct outcome of disciplined execution. This is a team that consistently delivers and that consistency is what drives the results you're seeing today. Now to the quarter. Revenue for the first quarter was a record $25.8 million, up 17% year-over-year. It's important to note that the prior year period included $1.2 million of one-time transactional revenue. So the underlying growth this quarter is stronger than the headline suggests. Adjusted gross profit increased 20% to $22 million, resulting in a record adjusted gross margin of 85%. Adjusted EBITDA increased 27% to $10.7 million with a record margin of 41%. Adjusted net income was $6.6 million, producing record earnings of $0.46 per diluted share, and operating cash flow increased 32% to $6.6 million. This marked yet another quarter of consistent execution with high-teen growth and continued expansion in margins and cash flow. On the customer front, IDI added 400 new billable customers, one of the highest quarterly additions in our history, bringing total customers to 10,422. FOREWARN grew to more than 417,000 users with over 640 REALTOR associations under contract. These metrics reflect increasing adoption, deeper integration and the growing reliance our customers place on our platform in their daily operations. At the same time, we continue to see a significant and expanding opportunity set in front of us, particularly as AI continues to unlock new capabilities across analytics, data aggregation and customer interaction. Given the strength of our model and the level of cash flow we are generating, we are well positioned to invest proactively into that opportunity. Importantly, our opportunity in AI is not just about access to tools. It is about the foundation that we have built that those tools operate on. Our longitudinal identity graph built and refined over time through real-world usage is what enables us to generate actionable signals, not just data outputs. AI enhances our ability to analyze the foundational graph, identify patterns and surface risk and insight with greater speed and precision. Similarly, our ability to aggregate and fuse new data is directly tied to our ability to resolve that data to unique individuals within our identity graph. Aggregating data is one thing but correctly attributing it to the right individual over time is something entirely different. Whether it is distinguishing between thousands of individuals with the same name, resolving generational differences or identifying underbanked consumers with limited public data, our platform is architected to unify fragmented data into a persistent, accurate identity, a continuously maintained and correctly attributed view of an individual over time, all powered by our proprietary engine. As we bring in additional data inputs, AI further enhances our ability to validate that data against our graph, then link and extract meaningful insight, reinforcing and extending the advantage we have built over the past decade. Across customer workflows, AI is also enhancing how our solutions are experienced, improving responsiveness, deepening integration and increasing the utility of our platform in day-to-day decisioning. Internally, we are seeing accelerating adoption of AI across the organization from engineering and security to operations and customer support, driving significant gains in productivity and development velocity. Within our technology organization, in particular, development velocity has accelerated materially with teams leveraging AI and agentic tools to code, test and deploy at rates we have not previously experienced. What historically required multiple resources can now often be accomplished by a single engineer operating with AI augmentation, significantly increasing our pace of product development and innovation. What we are observing is a compounding effect. As adoption deepens across the organization, the pace of improvement is accelerating, driving efficiency gains internally while simultaneously strengthening the value we deliver to customers. We are just scratching the surface. The net effect is that AI is acting as a force multiplier, increasing the value of our data, accelerating our pace of innovation, strengthening our position within the markets we serve, and further enhancing our AI embedded layered architecture, which is fundamentally differentiated from the legacy technology stacks of our competition. Switching topics for a moment. I also want to revisit something we said several years ago, and Dan will go into it in more detail. At that time, we outlined what this business would look like at a $100 million annual revenue run rate, specifically, adjusted gross margins exceeding 80% and adjusted EBITDA margins in the range of 35% to 40%. We had our skeptics, but that was guided by this team's knowledge and experience building similar businesses over the past three decades. Today, at our current scale, we already are delivering 85% adjusted gross margins and 41% adjusted EBITDA margins. This level of performance reflects the durability of our business and the operating leverage inherent in the model as we grow. We ended the quarter with $43.5 million in cash. We currently have $15.6 million remaining under our stock repurchase program after repurchasing 73,250 shares at an average price of $41.90 per share during the first quarter and through April 30, 2026. We will continue to allocate capital with discipline, balancing share repurchases with continued investment in our platform, data assets and go-to-market capabilities. This was a strong start to 2026 and the continuation of the consistent, disciplined execution that defines who we are. With that, I'll turn it over to Dan. Daniel MacLachlan: Thanks, Derek, and good afternoon, everyone. We are off to an excellent start in 2026, delivering the highest revenue, adjusted gross profit and adjusted EBITDA in our history, results that reflect the strength of our platform, the expanding reach of our solutions and the consistency with which we are executing. I want to take a moment to put these results in context because I think it speaks to something important about this team and this business model. As Derek mentioned, in March of 2022, we laid out a framework on our earnings call of what this business looks like at $100 million in annual revenue. At the time, our run rate was approximately $45 million, our adjusted gross margin was 75%, and our adjusted EBITDA margin was 25%. We told you that at $100 million in annualized revenue, you could expect adjusted gross margin to exceed 80% and adjusted EBITDA margin to be in the range of 35% to 40%. We meant it and we built toward it. This quarter, we crossed that revenue threshold for the first time on $25.8 million in quarterly revenue, a $100 million-plus annual run rate, we delivered adjusted gross margin of 85% and adjusted EBITDA margin of 41%. Disciplined execution against a multiyear road map at the margins we said we would deliver is not something every management team can point to, but we can. And we're just getting started. At maturity, this business model is capable of adjusted gross margins in excess of 90% and adjusted EBITDA margins approaching 65%. The first quarter of 2026 is evidence we are on the right path to get there. But we take a long-term view of this business, and we are not managing to a near-term margin target. We are managing towards the full potential of what we have built. Over the past decade, we have constructed a differentiated data and analytics platform, one that ingests, normalizes and delivers intelligence at scale across a broad and growing set of use cases and end markets. The foundation we have built is what makes our AI opportunity actionable. AI is accelerating how we develop and deploy new capabilities, compressing development cycles and broadening the solutions we can bring to market. It is enhancing our customers interact with our products, improving the speed and precision with which identity intelligence is surfaced and acted upon and it is reshaping how we think about operational efficiency and scale, enabling us to accelerate productivity across the entire business. We are already seeing these benefits, and we expect their impact to compound. As we continue investing in AI, product development and go-to-market capabilities, we expect adjusted EBITDA margins in the near term to trend in the mid- to high 30% range. We view that as a reflection of deliberate investment in the long-term growth of the business. The path to 65% adjusted EBITDA margins runs directly through the investments we are making today. Turning now to our first quarter results. For clarity, all the comparisons I will discuss today will be against the first quarter of 2025, unless noted otherwise. Total revenue was a record $25.8 million, up 17% over the prior year. As Derek noted earlier, Q1 '25 included $1.2 million in one-time transactional revenue from two significant customer wins. Normalizing for that, our underlying growth rate this quarter would have been greater than 20%. We generated $22 million in adjusted gross profit, the highest to date, delivering a record adjusted gross margin of 85%, up 2 percentage points. Adjusted EBITDA came in at a record $10.7 million, up 27% over the prior year. Adjusted EBITDA margin expanded 3 percentage points to 41%, a new high. Adjusted net income increased 29% to $6.6 million, resulting in adjusted earnings of $0.46 per diluted share, both new highs. Turning to the details of our P&L, as mentioned, revenue for the first quarter was $25.8 million with solid performance across the business. Within IDI, we saw broad-based growth across our verticals with particular strength in financial and corporate risk and investigative. We added 400 billable customers sequentially to end the quarter with 10,422 customers. Financial and corporate risk was our fastest-growing vertical, with background screening leading the way with exceptional growth, continuing to benefit from the targeted product development and go-to-market investments we have made over the past year. Financial services delivered strong growth driven by deeper customer integration and volume expansion. In addition, both corporate risk and insurance contributed meaningful growth, rounding out a solid showing across the vertical. Investigative posted robust double-digit gains across every industry, including law enforcement, private investigators, bail bonds, and process servers. Law enforcement, in particular, continues its impressive trajectory, and we remain focused on deepening our penetration of the public sector. This vertical is expanding as a share of our total revenue, and we see significant runway ahead. Collections delivered steady gains this quarter. The recovery dynamic we have discussed in prior quarters remains intact, and we continue to see volume expansion from our existing customer base as the industry works through elevated delinquency levels. The vertical is maintaining its steady recovery, and we view it as a meaningful tailwind to our growth outlook. Emerging markets delivered healthy underlying expansion this quarter. The $1.2 million in one-time transactional revenue in Q1 '25 we noted earlier was concentrated in this vertical, which creates a tough year-over-year comparison. Normalizing for that, the underlying growth rate was robust and in line with the demand momentum we continue to see across these industries. Retail, government, legal, repossession, and marketing all contributed to meaningful growth. We remain encouraged by the breadth of activity throughout emerging markets as a significant long-term growth driver for the business. Lastly, IDI's real estate vertical, which excludes FOREWARN, delivered modest growth year-over-year, but is starting to show signs of stabilization following the prolonged pressure that elevated rates and affordability constraints have placed on housing activity. While the macro environment remains a headwind, we are encouraged by the trajectory and believe we are well-positioned as conditions gradually improve. As to FOREWARN, the platform continued its impressive performance, delivering strong double-digit revenue expansion this quarter. We exited the quarter with over 417,000 users, up from 325,000 users a year ago. FOREWARN continues to gain traction with real estate professionals who rely on it as an essential part of their daily workflow. We now have over 640 REALTOR associations contracted to use FOREWARN. Overall, contractual revenue accounted for 75% of total revenue in the quarter, up 1 percentage point from the prior year. Gross revenue retention remained strong at 95%, down 1 percentage point. Moving back to the P&L, our cost of revenue, exclusive of depreciation and amortization, increased $0.1 million or 4% to $3.8 million. Adjusted gross profit increased 20% to a record $22 million, resulting in a record adjusted gross margin of 85%, up 2 percentage points from the prior year. Our sales and marketing expenses increased $0.5 million or 8% to $5.9 million for the quarter, driven primarily by higher personnel-related expenses. General and administrative expenses increased $1.7 million or 28% to $7.9 million, driven primarily by higher personnel costs and acquisition-related activity. Depreciation and amortization increased $0.2 million or 10% to $2.8 million for the quarter. Net income increased $1 million or 28% to $4.4 million for the quarter. Adjusted net income increased $1.5 million or 29% to $6.6 million, the highest to date, resulting in record adjusted earnings of $0.46 per diluted share. Moving on to the balance sheet. Cash and cash equivalents were $43.5 million at March 31, 2026, compared to $43.6 million at December 31, 2025. Current assets totaled $57.3 million compared to $56.5 million at year-end, while current liabilities were $5.1 million, down from $7.9 million. We generated $6.6 million in cash from operating activities in the first quarter compared to $5 million in the same period last year. Free cash flow for the quarter was $3.1 million, a 24% increase from $2.5 million a year ago. In the first quarter and through April 30, 2026, we purchased 73,250 shares of company stock at an average price of $41.90 per share under our stock repurchase program. As of April 30, 2026, we had $15.6 million remaining under the repurchase program. In closing, crossing the $100 million revenue run rate threshold this quarter is a milestone worth acknowledging, but it is not a finish line. The same discipline and focus that got us here is what will take us to the next level. We have a clear line of sight to continued margin expansion, a platform that is scaling efficiently, and a team that is constantly and consistently delivering on what it said it would do. We are confident in our ability to build on this momentum, and we look forward to updating you on the progress throughout the year. With that, our operator will now open the line for Q&A. Operator: [Operator Instructions] Our first question today is from Eric Martinuzzi with Lake Street Capital Markets. Eric Martinuzzi: Congrats on the $100 million run rate. That's a very significant milestone that I know you guys have been working a long time to achieve. So it's great to see that. I had a question regarding, we're always looking for kind of what's next. And given the achievement of those targets that you laid out back in March of 2022, do we have, you talked a little bit in your prepared remarks, Dan, about the at maturity type model having in excess of 90% gross margins and then approaching the 65% on the adjusted EBITDA. Obviously, that's the goal. Is there a time line you're willing to communicate? Daniel MacLachlan: Thanks, Eric. I appreciate the question. Yes, look, I mean, we're really excited, obviously, about crossing that revenue threshold. And I think that's a milestone that obviously is a good marker for us. But as I said earlier, it's just the beginning. It's not a finish line, so to speak. And so when we talk about some of the timelines to kind of get to that maturity, right, we're not really going to put a timeline on that today because we don't issue formal guidance and, kind of pinning a year of maturity state outlook would be inconsistent with how we manage the business. What it comes down to is kind of the structure of the business model. We operate a data and analytics platform with a largely fixed cost base. Once the platform is built and the data is in place, the marginal cost of an incremental transaction is very small. That means as revenue scales, an outsized share, as you know, of every dollar flows to the bottom line. Our cost structure is built to support a meaningfully larger business than where we are today, and we are continuing to invest in that cost structure to enable future growth. So 65% at maturity isn't a forecast and it isn't a target. It's the model output when you take a high fixed cost, low marginal cost platform and you let it scale to its natural operating leverage. So for timelines, it's really about continuing what we're doing, building a good foundational business and moving quickly as we can towards those underlying metrics. Eric Martinuzzi: Okay. And then the other notable achievement here was the new customer onboarding, as you went through the different verticals you serve, I didn't really pick up on anything that was a substantial change, versus your commentary last quarter, and maybe I'm incorrect there. But what do you attribute the Q1, typically a time when you do onboard a significant number of new customers? Or is there something going on in the macro or with the brand that's allowing you to achieve those numbers? Derek Dubner: Thanks, Eric. It's Derek. Q1 is generally strong. Industries tend to enter the new year with a little bit of wind in their sales. Maybe they're ready to deploy those budgets and get going. But I think what we would say about that is we have produced near record onboarding or at least at the very highs of our average, 12-month average for quite a while now. And we've always said that those are a great leading indicator of the revenue generation and success of the business in the out months. And obviously, that's bearing true, and that's why we use it as exactly that, a leading indicator. It's a confluence of many things that are ongoing within the organization. I think we're doing a very nice job of marketing ourselves, being present at conferences, engaging with our customers and, delivering what they want in products and solutions. We have always said we're very customer-centric, and we will never change. And so when we think about the next series of developments, whether it be functionality, for example, within an application for a certain industry, we're talking to our customers. We're finding out what they want, what they don't see in the competitive environment, and we execute upon that. And so I'm very proud of the organization, and that's why I started out with a thank you to the team. It is really brilliant execution over the last 18 months. And we've got an extraordinarily strong road map. And because of the AI implementations across the organization, we're seeing acceleration there. And so it's got us very enthusiastic that we're very well positioned for the future. Eric Martinuzzi: Got it. Last question for me. You talked about the growth in the quarter was up 17%, but really would have been even stronger when you back out the $1.2 million from the year ago quarter. My math has the kind of apples-to-apples growth at around 24%. I know you're not in the business of giving guidance here, but seasonal trends in the business historically would have Q2 up from Q1. Is there any reason that, that trend would be different this year? Daniel MacLachlan: Thanks, Eric. This is Dan again. Look, I mean, historically and traditionally, first quarter has always been a really strong quarter for us. Obviously, we talked Q1 of '25 had a little additional in there and kind of one-time transactional. But going back historically, we always had a good first quarter out of the gate. We try to replicate and grow that in Q2. Last year, I think if you look, I mean, we were probably down sequentially by about $200,000. But of course, we were going against that kind of transactional comp. So for us, yes, we're not providing any formal guidance. And for us, when we think about the business and going back to 2024, 2025, we talked about early on reaccelerating the growth rate. Obviously, in 2024, 2025, we were able to do that. And so for us, it's one foot in front of the other and continuing to execute. But I think from a sequential basis, we have a great foundation coming out of the gate at $25.8 million. And the expectation is we can leverage that and over the next couple of quarters, obviously grow from there. And first quarter, we talked about April, for the most part, is closed. And what we saw in April was just an extremely strong month. And so we're excited about what's happening in the business and looking forward to continuing to perform for the near, medium and long term. Operator: Our next question comes from Josh Nichols with B. Riley Securities. Josh Nichols: Great to see the company taking back some stock this quarter. I wanted to ask a little bit -- two questions for me. One, about scaling up the go-to-market strategy historically, you've been a little bit more narrowly focused. But when we think about broadening out, inside sales, strategic sales and distribution, what are your plans to grow those channels this year? And how are you investing in that? Daniel MacLachlan: Yes. Thanks, Josh, this is Dan. I'll take that. And look, I mean, if you look historically, especially kind of in that go-to-market line, which we do provide some supplemental metrics around kind of our sales and marketing personnel. And we've invested there. We've invested in the marketing front a number of years ago, bringing in a highly skilled leader to build out that team. And as Derek talked about earlier, we're at the conferences we need to be at. We're at the trade shows we need to be at. We're continuing to engage with the customers. And that starts with a solid marketing foundation and building out from there. When you think about our sales go-to-market type strategy, we've built out an extremely efficient and productive inside sales team. I think of that as kind of the engine of the organization, highly skilled, verticalized subject matter experts across a broad group of industries and verticals. And tactically, over the last several years, we've built out more of our strategic side, right, in a number of areas where we've made investments, and we've built out the strategic team. So for us, when we look at growth, yes, it's not only in some of those pockets where we've been investing in, it's also across the broad and diverse industries and verticals we serve. We kind of call out five main verticals in which we operate and kind of break down revenue. But when you look at the amount of industries that roll up into the verticals, it's around 25, 26 different industries. So, the great thing about the growth that we've seen this quarter and we've seen consistently, it is broad-based. It is in a number of areas, and it's not concentrated in one use case or one customer. And so, that's what obviously gives us a lot of confidence today to talk about how the business has been performing and how we expect it to perform in the future. Derek Dubner: Yes, Josh, it's Derek. I know you're aware, but I'll state it very unequivocally that we are an early-stage company, and we're sitting in front of an enormous market opportunity, and we're very fortunate that we're generating very healthy cash flow. So with that opportunity in front of us, that's really the summary of our call today is that we're going to invest. The opportunity is that large. And our goal isn't to set necessarily a record EBITDA margin tomorrow. For us, you know this, Josh, we're building a very healthy foundational business with a view of 10 years out. And so the answer across the board is we expect to grow our team. You know this team, it's going to be methodical. It's going to be deliberate, and it's going to be directly in line with where the opportunity demands it. And that includes go-to-market, your question, but product, data and definitely on the AI-driven capabilities. And so what that will create over time is an inflection point, right? We will get where the revenue scales meaningfully without a commensurate increase in the headcount because of what we're doing today and tomorrow. And that's the model. We're not one of those companies that has bloated through the pandemic or using AI as an excuse to eliminate personnel or a missed quarter or anything else. Net-net, today, more employees, but a team that's going to operate at fundamentally a much higher level of productivity. And then that will flatten out, and you'll see those margins just drive, drive, drive. Josh Nichols: Thanks, Derek, you touched on it -- always good to hear you talk a little bit about your thoughts on technology and the impact and tailwinds that you think that's going to bring to the business. Clearly, it's a rapidly evolving environment. Agentic capabilities with AI or something, right, that has gotten a lot of focus recently. I'm curious maybe if you want to opine for a minute, just how you're thinking about investing in that, enhancing the company's agentic capabilities and what that could do for the business as it scales up over the next few years? Daniel MacLachlan: Yes. Sure, Josh. Thank you for the question. I appreciate it. We've spent some time on this in the fourth quarter in our earnings and full year and -- but I'm very happy to revisit it. AI, we don't perceive that as a threat to our business. It's a tailwind for us. And I'll restate it again, AI alone cannot replicate our data. We've built this longitudinal identity graph. It's billions of unified records. And it's tested and modeled and refined over years of actual usage. And that's the foundation that AI needs to run on. So for us, -- we've got this healthy foundation built, and we can layer it with AI on top of it and better serve our customers in all different ways in the risk signals we're generating so that through an API connection, our customers see it when they come into the office in the morning versus the competition's solutions. Our competition is working on trying to complete migrations from the cloud -- to the cloud, from other architectures. We are optimized. This is cloud-native, AI embedded from day one. And so for us, we are using AI to, as we said, compress the development cycles, implement more AI across the organization. It's pulsating through the products in what we're doing every day, vibe coding, agentic. And we're very excited because as the customers especially small and medium sized, become more adept at using it, developing it and getting agents, for example, into their workflow. We're completely usage-based. We're volume-based. So that means they will access our products in much faster fashion, less manual activity and more demand for the identities that we can clear every single day. And it's necessary to come back to us, right? We've talked about this. One person's identity on a given day to open a new bank account is only good for that moment in time. The next day, that person's identity and profile has changed. They might have been arrested the night before. They might be now divorced. They might have financial stress that occurred, a bankruptcy filing, a very large judgment. So the next time commercial or public sector see that consumer, they need to then again clear that identity and make a critical decision about that individual. So we've been building for this for the last 11 years. We've built this identity graph to be extraordinarily high confidence. AI can only be directionally correct. We need to be accurate. Law enforcement is making critical decisions every day using our products, financial services, all of our industries. So we're really well positioned. We're very excited about the innovation that's going on and the product road map and very excited about introducing new products and updating you on that. Operator: I'm showing no further questions at this time. So, I would like to turn it back to Derek Dubner for final remarks. Derek Dubner: Thank you. As we close, I want to reiterate that our performance this quarter reflects the strength of our strategy, the resilience of our business model and the continued trust of our clients and partners. We remain focused on disciplined execution, responsible growth and delivering long-term value to our shareholders. While the macro environment continues to evolve, we are confident in our positioning, our technology and our team. We appreciate your continued support, and we look forward to updating you on our progress next quarter. Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.
Operator: Good afternoon, and welcome to Flux Power Holdings, Inc.'s fiscal third quarter 2026 earnings conference call. At this time, participants are in listen-only mode. At the conclusion of today's conference call, instructions will be given for the Q&A session. As a reminder, this conference call is being recorded today, 05/07/2026. If you require operator assistance, please press star then 0. I would now like to turn the call over to Joel Achramowicz of Shelton Group Investor Relations. Joel, please go ahead. Joel Achramowicz: Good afternoon, and welcome to Flux Power Holdings, Inc.'s fiscal third quarter 2026 earnings conference call. I am Joel Achramowicz of Shelton Group, Flux Power Holdings, Inc.'s investor relations firm. Joining me on today's call are Krishna Vanka, Flux Power Holdings, Inc.'s CEO; Kevin Royal, Flux Power Holdings, Inc.'s Chief Financial Officer; and [inaudible], Flux Power Holdings, Inc.'s new Director of OEM Sales. Before I turn the call over to Krishna, I would like to remind our listeners that during the course of this conference call, the company will provide financial guidance, projections, comments, and other forward-looking statements regarding future market developments, the future financial performance of the company, new products, or other matters. These statements are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically our 10-K and our most recent 10-Q, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. Also, the company's press release and management's statements during this conference call will include discussions of certain adjusted or non-GAAP financial measures. These financial measures and related reconciliations are provided in the company's press release and related current report on Form 8-Ks, which can be found in the Investor Relations section of Flux Power Holdings, Inc.'s website at fluxpower.com. For those of you unable to listen to the entire call at this time, a recording will be available via webcast on the company's website. It is now my great pleasure to turn the call over to Flux Power Holdings, Inc.'s CEO, Krishna Vanka. Krishna, please go ahead. Krishna Vanka: Thank you, Joel, and welcome, everyone, to our third quarter conference call. As we anticipated and signaled last quarter, third quarter revenue was impacted by two factors: our largest material handling customer implementing a capital freeze and dynamic ordering patterns across the business. Late in the quarter, rising geopolitical tensions in the Middle East drove fuel prices higher, which further delayed some customer spending. Together, these headwinds pulled consolidated revenue below our expectations entering the quarter. Importantly, however, in both the ground service equipment business and with our material handling customer navigating their capital freeze, customer commitment to Flux Power Holdings, Inc. remains strong. We expect order activity to return to prior levels once these near-term headwinds subside. Given these headwinds, we moved decisively on cost. With our targeted headcount reductions and broader efficiency actions, operating expenses are down 30% versus the prior-year period. We continue to optimize our sales team, launching aggressive new marketing programs and expanding our OEM partner engagements. We have been successful in adding senior industry sales professionals to the team, and we are in the process of replacing our sales leader; we are anxious to have this position filled soon. Further, under new marketing leadership, we launched a comprehensive digital strategy spanning social media, lead generation, and brand awareness initiatives. We also had a strong showing at the MODEX show in Atlanta last month, one of the most important industry events on our calendar. The highlight was winning the Innovation in Sustainability Award. After a rigorous vetting process, including multiple booth visits from an elite panel of industry judges, Flux Power Holdings, Inc. was recognized for delivering an innovative sustainability solution not currently offered by any other company in our space. This award reflects our commitment to cleaner, more efficient, and holistic energy life cycle management from design through deployment to recycling. We believe no one in the lithium-ion battery industry does this better than Flux Power Holdings, Inc. Beyond the award, MODEX delivered on several fronts. Booth traffic was strong, with meaningful engagement from both new prospects and existing customers. We showcased recent advancements to our Sky EMS Fleet Intelligence platform, including mobile dashboards, real-time notifications, expanded data integration and API connectivity, and advanced reporting and analytics. We also featured our newly patented state-of-health technology, which we believe represents a significant advancement in battery life cycle management. I want to highlight another development driving new business activity. You may recall that we announced last quarter that we hired a new director to work with our existing OEM partners and to identify and cultivate new OEM partnerships. He has more than 20 years of experience working for material handling OEMs and their dealer networks. I will now turn the call over to our Director of OEM Sales to provide an overview of these efforts. Unknown Speaker: Thank you, Krishna. I am very happy to be with Flux Power Holdings, Inc. I am thoroughly enjoying working with our existing OEM partners and also working with other OEMs to introduce them to Flux Power Holdings, Inc. and identify how we can work together. I would like to highlight a few data points related to the global forklift market and the status of the electrification of the forklift industry. The global forklift market was approximately $87 billion in calendar year 2025. The electric share of new purchases in North America was 65% for the same period. Lithium-ion penetration stands at 32% at the end of calendar year 2024 and is projected to exceed 70% by 2034, with calendar year 2027 being the year that lithium-ion overtakes lead-acid as the preferred power source for electric forklifts. In addition, the North American forklift market is projected to grow at a compound annual growth rate of 17.2% through calendar 2031. These factors, along with Flux Power Holdings, Inc.'s strong product portfolio, are the primary reasons I am excited to be a part of the team. I have already been in contact with several OEMs. I am pleased with the responses I have received and look forward to securing new OEM partners. I will now turn it back over to Krishna. Krishna Vanka: Thank you. The company has also been working closely with existing OEM partners to optimize our pricing structure for our white-label products. We believe this initiative increases our competitiveness in the market and has resulted in increased volume commitments from our existing OEM partners. As a result of these developments, along with the proactive efforts I have outlined above, we are seeing positive indications of increased order activity going into the fourth quarter and expect sequential revenue growth of approximately 20% in the fourth quarter. Additionally, we are aggressively working to improve margins through near-term supply chain optimization, vendor renegotiations, and product redesign efforts. We believe that these initiatives will have a significant impact on our operating model and will improve our profitability. I look forward to providing additional details of these new efforts and our results on the next earnings call. Let me be clear. While I am excited with our new initiatives and we believe we are positioned positively in the market, I am not satisfied with the results. We are taking every step we believe is necessary to meet and ultimately exceed historic revenue levels, achieve profitability, and build a stable recurring revenue stream business. We have proven our potential to get there based on our Q2 performance. To achieve this profitability goal, the Flux Power Holdings, Inc. team remains intensely focused on the five strategic initiatives that continue to guide us, which include: number one, profitable growth; number two, operational efficiencies; number three, solution selling; number four, building the right products; and number five, integrating value-added software. We continue to make progress on these initiatives each quarter as they remain a top priority for the company. With that, I will now turn the call over to our CFO, Kevin Royal, to discuss our third quarter financial results in more detail. Kevin, please go ahead. Kevin Royal: Good afternoon, everyone. Revenue for the third quarter of 2026 was $6.6 million compared to $16.7 million in the same quarter last year. Gross margin in the third quarter was 27.3% compared to 32% in the prior-year period. The year-over-year decline in gross margin was largely due to changes in product mix and lower volumes resulting in higher unabsorbed labor and overhead. Operating expenses in the third quarter of 2026 were $4.8 million compared to $6.9 million in the third quarter of 2025. The year-over-year decrease in operating expenses primarily reflects cost reduction actions taken to reduce headcount and streamline the operating model. Net loss for the third quarter was $3.2 million, or $0.15 per share, compared to a net loss of $1.9 million, or $0.12 per share, in the third quarter of 2025. Excluding stock-based compensation, third quarter non-GAAP net loss was $2.9 million, or $0.14 per share, compared to a non-GAAP net loss of $1.1 million, or $0.07 per share, in the prior-year period, which also excluded costs associated with the multiyear restatement of previously issued financial statements. Adjusted EBITDA for the third quarter was negative $2.5 million compared to negative $500 thousand in the same quarter a year ago. Turning to the balance sheet, we ended the quarter with cash and cash equivalents of $400 thousand compared to $1.3 million at the end of our 2025 fiscal year. I will now hand the call back to Krishna for closing comments before we open it up to your questions. Krishna Vanka: Thank you, Kevin. In summary, I want to emphasize that the entire Flux Power Holdings, Inc. team remains fully focused on executing our key strategic initiatives as we navigate these short-term challenges. We believe the markets we are targeting in the global lithium-ion industry continue to offer expanding growth opportunities. In addition, our leaner cost structure, margin improvement initiatives, new product development, and enhanced sales and marketing efforts are designed to position us for a return to growth and profitability as revenue recovers. Thank you for your continuing interest and support of Flux Power Holdings, Inc. Operator, you may now open the line for questions. Operator: We will now open the call for questions. To ask a question, please press star then 1. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Mr. Vanka, you have a clarification. Krishna Vanka: Yes. I want to clarify the sequential revenue growth. It will be approximately 20% in the fourth quarter. I want to make sure that came out clearly; there was some double connection on the line. Operator: The first question comes from Sameer Joshi with H.C. Wainwright. Please go ahead. Sameer Joshi: Good afternoon, Krishna and Kevin, and welcome to the team. Thanks for taking my questions. Maybe the first question is for your Director of OEM Sales. You highlighted the market growing at around 17.2% CAGR to 2031. What is the approach you are taking to grow faster than this 17.2% for Flux Power Holdings, Inc.? Krishna Vanka: I will start the answer, and then we will have our Director of OEM Sales follow up. Our approach is to continue working with existing OEMs to further gain share of wallet, as well as work with new OEMs so that we are not only certified, but eventually work more closely with them. Unknown Speaker: Thank you, Krishna. That is a very good question. We are working with OEMs—some under nondisclosure agreements—whose path forward in the market is to transition the majority of their product lines to electrified lift truck models. That aligns with our goals to grow with them and ahead of them, so that we are ready for the market as they continue to phase lead-acid out of their operations. Sameer Joshi: Understood. Krishna, you mentioned 20% sequential growth. Do you have any further visibility beyond that for 2027 in terms of the pipeline you are looking at and maybe orders that are already on the books that will be executed in the fiscal first and second quarters? Krishna Vanka: We are definitely seeing increased activity, and we believe we are coming back up from this quarter—picking up 20% this quarter—and then hopefully continuing that trend forward. The geopolitical situation is not helping, so we hope that will subside soon. We are investing significantly into marketing. We have optimized pricing as we mentioned on the call. We are working closely with our Director of OEM Sales on more OEMs, and we are looking at a new sales leader. All of the above should allow us to continue to grow beyond Q4 and into Q1. Sameer Joshi: Understood. On your comprehensive social media strategy, can you give a bit more insight into what that entails, and does it incrementally add to operating costs going forward? Krishna Vanka: Our digital strategy focuses on generating more qualified leads for our sales team, especially as we target top fleets. This includes collecting information through social media and running significant account-based campaigns. We are seeing good feedback. MODEX proved that we are not only getting good leads, but also quality leads as we follow up. We are doing all of this within the existing budget by focusing the team on what is important. With Michelle, our Director of Marketing who joined about six months ago, we put this program together and started executing in January. We are starting to see the fruits of it, and we are positive it will help build pipeline and backlog. Sameer Joshi: Understood. Thanks for taking my questions. Congratulations on the success at MODEX, and good luck for the rest of the year. Operator: The next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead. Rob Brown: Good afternoon. Thanks for taking my question. Just to clarify the outlook, it is 20% growth off what you reported here in Q3. Is that the baseline? Krishna Vanka: Yes, that is correct—sequential. Rob Brown: And then on visibility for the lifting of the capital freeze, do you see that coming, or is that still to be determined? Krishna Vanka: We do see indications of an eventual lift, but not this calendar year. Rob Brown: Thank you. Operator: Again, if you have a question, please press star then 1. The next question comes from Craig Irwin with ROTH Capital Partners. Please go ahead. Craig Irwin: Good evening, and thanks for taking my questions. Can you compare the relative levels of activity you are seeing in the electric forklift market versus the airport ground equipment market? You have introduced new technology to these customer groups over the last few years with specific product introductions. Can you help us unpack relative activity in these two markets and whether some of these product changes are helping you generate leads that will convert to revenue over the next couple of quarters? Krishna Vanka: Thanks, Craig. Our solutions are being very positively received. We continue to lead the GSE space with respect to lithium-ion solutions through our partner. Any lag we are seeing is due to broader market dynamics, not our product portfolio or GSE in particular. The forklift market has been moving up and down with tariffs and sensitivity to capital spending, and we were particularly affected by one customer's capital freeze, which was beyond our control. Overall, we are seeing increased activity. There was a pickup during the tariff changes, and then the war added some stress again. In both cases, we are looking at growth. In forklift, we are working closely with OEMs and dealerships and pursuing more certifications. In GSE, we remain committed to working with our partner as they bring new airlines into the mix. Craig Irwin: Thank you. Given the sequential progression in revenue, I was pleasantly surprised that margins were as strong as they were. Can you talk about what went right on gross margin and how this should impact progress over the next couple of quarters toward your longer-term targets of 40%? Kevin Royal: We have focused on improving product cost, working with existing vendors in some cases and, in other cases, creating competition by putting certain subassemblies out for bid, thereby lowering cost. That work is ongoing. We have seen a fair amount of progress that has not fully rolled through cost of sales yet because we hold inventory of older, higher-priced components. We also have additional plans for product redesigns, which take longer, so we will not realize those improvements for probably 12 to 15 months. We are happy with the progress thus far from working the supply chain side of the equation. Craig Irwin: Understood. Last question is on the balance sheet. Kevin, inventory management looked good. What stood out was approximately $4.6 million in cash in from receivables. Did you change terms, offer discounts, or were there specific items that allowed you to cut receivables by more than 50% in the quarter? Kevin Royal: We did not change terms. We have been fortunate, even with deteriorating conditions in some cases, to hold the line on payment terms. We had strong collections from last quarter’s shipments, which helped reduce receivables by the March 31 balance sheet date. Operator: Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Krishna Vanka for any closing remarks. Krishna Vanka: Thank you again for joining today's call. We look forward to speaking with you all again on our Q4 call during the September timeframe. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Welcome to Oportun Financial Corporation's first quarter 2026 earnings conference call. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question and answer session. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Dorian Hare, Senior Vice President of Investor Relations. Dorian, you may begin. Dorian Hare: Thanks, and hello, everyone. With me to discuss Oportun Financial Corporation's first quarter 2026 results are Doug Bland, our Chief Executive Officer, and Paul Appleton, our Interim Chief Financial Officer, Treasurer, and Head of Capital Markets. Kate Layton, Oportun Financial Corporation's Chief Legal Officer, and Gaurav Rana, our Senior Vice President and General Manager of Lending, will also join for the question and answer session. I will remind everyone on the call or webcast that some of the remarks made today will include forward-looking statements related to our business, future results of operations, and financial position, including projected adjusted ROE attainment and expected originations growth, planned products and services, business strategy, expense savings measures, and plans and objectives of management for future operations. Actual results may differ materially from those contemplated or implied by these forward-looking statements, and we caution you not to place undue reliance on these forward-looking statements. A more detailed discussion of the risk factors that could cause these results to differ materially is set forth in our earnings press release and in our filings with the Securities and Exchange Commission under the caption Risk Factors, including our upcoming Form 10-Q filing for the quarter ended 03/31/2026. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events other than as required by law. Also on today's call, we will present both GAAP and non-GAAP financial measures, which we believe can be useful measures for period-to-period comparisons of our core business and which will provide useful information to investors regarding our financial condition and results of operations. A full list of definitions can be found in our earnings materials available at the Investor Relations section of our website. Non-GAAP financial measures are presented in addition to, and not as a substitute for, financial measures calculated in accordance with GAAP. A reconciliation of non-GAAP to GAAP financial measures is included in our earnings press release, our first quarter 2026 supplement, and the appendix section of the first quarter 2026 earnings presentation, all of which will be available at the Investor Relations section of our website at oportun.com. In addition, this call is being webcast, and an archived version will be available after the call along with a copy of our prepared remarks. With that, I will now turn the call over to Doug. Doug Bland: Thanks, Dorian, and good afternoon, everyone. Thank you for joining us. I am honored to be speaking with you for the first time as CEO of Oportun Financial Corporation. I was drawn to Oportun Financial Corporation because it stands out: a technology-driven platform with a critical mission and proven ability to responsibly improve the financial lives of people who are too often overlooked by traditional lenders. I also saw a business known for high-quality customer service, uniquely positioned to seamlessly engage with both English- and Spanish-speaking members across its retail, contact center, and mobile app. My initial meetings with team members across the company and with key stakeholders have only reinforced this view. I look forward to working with our team and board to strengthen the business, build deeper relationships with our members, and deliver long-term value for shareholders. I am optimistic about what we can achieve together. I joined Oportun Financial Corporation on April 20, so I have been in the role for less than three weeks. I am not going to use my first earnings call to declare a new strategy before I have completed a deeper review. What I can say from my early assessment is that the team has made real progress strengthening the foundation of the business, particularly profitability, liquidity, and funding costs. While important work remains to improve through-cycle credit performance and rebuild a durable growth engine, the 2026 plan was already in motion before I arrived. Based on my review so far, I support reiterating the full-year guidance. I will now hand it over to Paul for a review of how we are executing against our current strategy and our first quarter financial results. He will also provide our Q2 guidance while updating you on our full-year outlook. Paul Appleton: Thank you, Doug, and good afternoon, everyone. I would like to start by updating you on our strategic priorities, which include improving credit outcomes, strengthening business economics, and identifying high-quality originations. Starting with improving credit outcomes, we have remained in a tight credit posture, maintaining an emphasis on returning members amid an uncertain macroeconomic outlook for low- and moderate-income households. Our annualized net charge-off rate was 12.65% in Q1, at the midpoint of our guidance range. In Q1, the proportion of originations to returning members was 79%, 16 percentage points higher than the 63% recorded in the prior-year quarter. Importantly, our Q1 30+ delinquency rate of 4.5% met the expectations we set on our February earnings call, down 38 basis points sequentially and 18 basis points year over year. We expect the second quarter's 30+ delinquency rate to improve further to a range between 4.1% and 4.2%, which is 22 to 32 basis points lower than Q2 2025 and 30 to 40 basis points lower sequentially than the first quarter. These proof points support our continued confidence that Q1's 12.65% annualized net charge-off rate should be the highest of 2026. As also mentioned on our February earnings call, a key focus this year is continuing to invest in our credit decisioning capabilities to accelerate model training, deployment, and effectiveness. In Q2, we are introducing the latest iteration of our primary underwriting model, B13, which features an enhanced model architecture designed to better capture both long-term and more recent emerging trends. The model also incorporates new alternative data sources to improve predictive power and reduce adverse selection risk. Turning to business economics, we remain committed to improving on full-year 2025 17.5% adjusted ROE and 6.8% GAAP ROE, making progress toward our objective of 20% to 28% GAAP ROEs on an annual basis. A key component of this is continuing our expense discipline. During Q1, total operating expenses declined 1% year over year to $91 million, in line with the substantially flat expectation we set for the full year. Another important part of our efforts to attain our ROE goal is exploring the launch of risk-based pricing. As discussed on our last earnings call, this effort would reintroduce pricing above 36% for shorter-term loans and higher-risk segments, including some customers we are not able to approve today. We have made good progress with this initiative, including signing a letter of intent with a new bank partner. As a result, we continue to expect to roll this initiative out in the second half of the year. Last month, we launched another initiative, a payment protection offering, that we expect will provide more certainty for our members and a positive financial contribution to Oportun Financial Corporation in future years. Payment protection is an opt-in offering that members can elect during the loan application process, which provides protection against unforeseen events like involuntary unemployment, death, or disability by completely or partially paying off the loan. The offering is currently available to loan applicants in several states, and in coordination with our bank partner, we expect to introduce the offering across most of our footprint in the coming months. Due to the phased rollout, we are currently assuming only a modest financial benefit from the payment protection initiative in our 2026 guidance. However, at scale, we see potential for profit enhancement in future years due to lower credit losses on enrolled loans and fees earned. Lastly, regarding identifying high-quality originations, in Q1, originations declined by 11%. This was in line with our expectations, reflecting typical seasonality and the higher mix of returning borrowers I referenced a moment ago. We continue to expect to grow originations in the mid-single-digit percentage range this year. Expanding our secured personal loan portfolio secured by members' autos remains a key pillar of our responsible growth strategy. Partially offsetting the unsecured personal loan originations decline, in Q1 secured personal loan originations grew 12% year over year, and the secured portfolio grew 30% year over year to $233 million. As a result, secured personal loans now represent 9% of our owned portfolio, up from 7% last year. Importantly, average losses on secured personal loans continued to run substantially lower than unsecured personal loans in the first quarter. Turning now to Q1 highlights on Slide 6, we recorded our sixth consecutive quarter of GAAP profitability with net income of $2.3 million and diluted EPS of $0.05 per share. We also generated adjusted net income of $10 million and adjusted EPS of $0.21 per share. Total revenue of $229 million declined by $7.1 million, or 3% year over year, which again was in line with our expectations and driven by the 11% year-over-year decline in originations I mentioned a moment ago. Net decrease in fair value was $86 million this quarter due to $85 million in net charge-offs. The net decrease in fair value was $13 million higher than the prior period, which benefited from a favorable $12 million mark-to-market adjustment on loans. First-quarter interest expense was $48 million, down $9 million year over year. This improvement reflects recent balance sheet optimization initiatives that I will share shortly. Net revenue was $90 million, down $11 million year over year, as the impact of lower total revenue and fair value offset the benefit from lower interest expense. Operating expenses were $91 million, down $1.3 million, or 1% year over year, reflecting continued cost discipline. Adjusted EBITDA, which excludes the impact of fair value mark-to-market adjustments on our loan portfolio and notes, was $29 million in the first quarter. This reflects a year-over-year decrease of $4.2 million as lower total revenue and higher net charge-offs more than offset lower interest expense and adjusted operating expense. Adjusted net income was $10 million, down $8.4 million year over year due to lower net revenue, partially offset by lower adjusted operating expense. Adjusted EPS declined year over year from $0.40 per share to $0.21 per share. Finally, GAAP net income of $2.3 million was similarly down $7.4 million year over year. Turning now to capital and liquidity as shown on Slide 9, we continue to strengthen our debt capital structure through continued balance sheet optimization by further reducing higher-cost corporate debt, lowering our overall cost of capital, and enhancing liquidity. I am pleased with the progress we made deleveraging, ending the quarter with a 6.8x debt-to-equity ratio. That is down from 7.6x a year ago and materially lower than the peak leverage of 8.7x we reported in Q3 2024. The improvements achieved since then and through the end of the first quarter include consistent GAAP profitability, a $69 million, or 21%, increase in shareholders' equity, and a $70 million, or 30%, reduction in our high-cost corporate debt. Q1 interest expense was $48 million, which was $9 million, or 16%, lower than the prior-year quarter, supporting our sustained profitability. This was driven by corporate debt repayments as well as actions taken related to our ABS notes and warehouse facilities. Also supporting our strong liquidity position, our cash flow has enabled us to continue to grow our unrestricted cash balance to $130 million as of the end of Q1 2026, up $25 million from year-end 2025 and up $52 million year over year. With this strong cash position, we paid down another $30 million of high-cost corporate debt following the end of the first quarter, lowering our remaining corporate debt principal balance to $135 million. Corporate debt repayments since the facility's October 2024 inception now total $100 million, reducing outstandings from the initial $235 million balance to $135 million, resulting in $15 million in annual run-rate expense savings. On the capital markets side, we completed a $485 million ABS transaction at a 5.32% yield in February. Over the last 12 months, we have issued $1.9 billion in ABS bonds at sub-6% yields, demonstrating our sustained access to capital on favorable terms. Next, I would like to turn to our updated guidance as shown on Slide 10. While our member base remains resilient, inflation above Federal Reserve targets, uneven job creation, policy uncertainty, and higher gas prices continue to create a cautious environment for low- to moderate-income consumers. We are particularly monitoring the impact of high fuel prices on our members, and while we have not seen any deterioration in our metrics as a result, we understand the pressure this can place on our customers if higher prices persist. Consequently, our outlook prudently assumes we maintain a tight credit posture through the balance of the year. We remain well positioned to adjust quickly as conditions evolve. Our outlook for the second quarter is total revenue of $227 million to $232 million, annualized net charge-off rate of 12.2% plus or minus 15 basis points, and adjusted EBITDA of $34 million to $39 million. At the midpoint, our Q2 revenue guidance implies a modest sequential increase from Q1 and a lesser year-over-year decline driven by higher originations from first-quarter levels. Our Q2 annualized net charge-off rate midpoint guidance of 12.2% implies 45 basis points of sequential improvement from the first quarter, supported by the favorable 30+ delinquency trends I discussed earlier. At the midpoint of $37 million, our Q2 adjusted EBITDA guidance implies strong sequential growth and a return to year-over-year growth of $5 million, or 17%, driven primarily by lower interest expense along with ongoing operating expense discipline. We are fully reiterating our full-year 2026 guidance, including total revenue of $935 million to $955 million, annualized net charge-off rate of 11.9% plus or minus 50 basis points, adjusted EBITDA of $150 million to $165 million, adjusted net income of $74 million to $82 million, and adjusted EPS of $1.50 to $1.65. Our full-year 2026 guidance continues to be underpinned by our expectations for a 1% to 2% decline in average daily principal balance, a reduction in interest expense of at least 10%, and substantially flat operating expenses. Also, our full-year annualized net charge-off rate midpoint guidance of 11.9% continues to indicate slight year-over-year improvement. Midpoint growth of 16% in adjusted EPS and 6% in adjusted EBITDA, even amid macro uncertainty for low- to moderate-income consumers, reflects the resilience of both our members and our business model. Before I turn it back to Doug, let me conclude with a brief summary of our unit economics progress. Although our long-term targets are GAAP targets, I will reference adjusted metrics because they remove non-recurring items and better reflect our future run rate. As shown on Slide 11, we generated 10.5% adjusted ROE during the first quarter. With ramping originations and lower credit losses embedded in our full-year guidance, we expect to improve on our first-quarter adjusted ROE performance in the balance of the year and outpace last year's 17.5% adjusted ROE. I am encouraged by the positive fundamentals we exhibited in Q1, particularly year-over-year improvement in cost of funds and operating expense efficiency. Our balance sheet optimization initiatives drove improvement in our cost of funds from 8.2% to 7%, a level well below our 8% target. And expense discipline enabled improvement in our adjusted OpEx ratio from 13.3% to 12.7%, nearing our 12.5% target. Our North Star remains delivering GAAP ROEs of 20% to 28% annually. We plan to achieve this by driving positive credit outcomes, growing the owned loan portfolio, and effectively managing operating expenses. We also intend to continue to drive our debt-to-equity leverage ratio this year toward our 6x target by reducing our debt outstanding and continuing to grow GAAP profitability. With that, Doug, back over to you. Doug Bland: Thanks, Paul. To close, I would like to emphasize that while Oportun Financial Corporation's foundation is stronger than it was, we need to establish predictable outcomes that result in durable growth. My focus now is on disciplined execution, deeper assessment, and coming back to you on our second quarter earnings call with a clearer view of the path forward. I want to underscore that Oportun Financial Corporation's mission to empower members to build a better future will continue. I see a tremendous opportunity to accelerate this mission. It is my focus to partner with our teams to determine ways to accomplish this. I am energized by what is ahead. With that, we will now open the call for questions. Operator: We will now open the call for questions. You may press 2 if you would like to remove your questions from the queue. It may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question comes from the line of Brendan McCarthy with Sidoti. Please go ahead. Brendan McCarthy: Great, thanks, everybody, for taking my questions, and welcome, Doug. I just wanted to start off on the outlook here. Originations were down 11% year over year. That makes sense considering your tighter underwriting position. How does the new risk-based pricing initiative fit into the 2026 guidance that calls for a mid-single-digit increase for the year? Paul Appleton: Thanks, Brendan. I appreciate the question. When it comes to the risk-based pricing initiative, as I mentioned in my comments, we are making good progress rolling out that program. As you know, for most of Oportun Financial Corporation's history, we did price above 36%. As we reintroduce this pricing regime, we certainly want to be thoughtful about the glide path and what it looks like. For guidance, we have embedded a little bit of benefit in there for 2026, but just a small amount given we want to test into it and the program is not live yet. Brendan McCarthy: Understood. I appreciate the color there. Looking at interest expense, it looked like a pretty steep year-over-year decline, and if you annualize Q1 it looks like you are trending well under that target for a 10% reduction in interest expense for full-year 2026. Do you see room there to boost margins over the course of the year? Paul Appleton: Possibly, yes. I see what you are looking at when you look at the run rate there. We are obviously pleased with the progress in paying down the corporate debt. As I mentioned in my comments, we are down $100 million from the initial balance of the corporate loan, and that is driving a $15 million annualized interest expense run-rate benefit. As I mentioned as well, we paid down another $30 million after the end of the quarter, which is included in that $100 million. So yes, there may be a bit of opportunity there, especially given some of the ABS execution we have had recently. Brendan McCarthy: That makes sense. And as a follow-up on leverage, I think you mentioned you are at about 6.8x leverage at this point. You are trending pretty quickly toward your 6x target. How can we think about your capital allocation once you reach that target? How might capital allocation change going forward? Paul Appleton: Great question, Brendan, thank you. The capital allocation priorities we have right now are continuing to invest in profitable growth and paying down the corporate debt. When we pay that down, that comes with a certain return—we know exactly the expense we are going to save, and the corporate debt has a high price to it. We are at that 6.8x leverage you mentioned. As we said on our last earnings call, we do expect to trend toward that 6x by the end of the year. For now, those are going to remain our two priorities, and then we can look beyond that once we reach the target. Brendan McCarthy: That is great. Thanks, Paul. Thanks, Doug. That is all for me. I will hop back in the queue. Operator: Thank you. Next question comes from the line of Analyst with Jefferies. Please go ahead. Analyst: Good afternoon, and thank you for taking my question. Welcome, Doug. I was just wondering if you have seen any changes to demand trends given the high fuel prices. Has this driven more borrowing given cash constraints? Thank you. Paul Appleton: In the first quarter, we continued to see demand outpace our originations, so there is certainly continued robust demand in the market. Analyst: Great, thank you. And then just a second question—thinking about the current mix of digital versus branch originations. Do you plan to evaluate any changes moving forward, and how should we expect this to trend in the future? Gaurav Rana: Thank you. The trends that we have today you can expect to continue through the course of the year. As Paul alluded to, we are still guiding toward mid-single-digit growth in originations, and we have lined up our marketing spend accordingly to drive that growth. Operator: Thank you. Next question comes from the line of Brendan McCarthy with Dougherty. Please go ahead. Brendan McCarthy: Great, thank you. Just a quick follow-up here. On the net charge-off guidance, I think hitting the 11.9% midpoint for the full year assumes a pretty nice step-down in the net charge-off rate to an average of around 11.6% for the rest of the year. How confident are you that you can really hit the midpoint there? What specific credit indicators are you looking for? Paul Appleton: Thank you for the follow-up question, Brendan. As you know, the 12.65% net charge-off rate we reported in the first quarter was elevated but expected—it was the midpoint of our guidance, and we achieved that. As we mentioned on prior earnings calls, the reason for that spike in net charge-offs was due to the mix shift that we experienced in 2025 when new loan originations accounted for a greater share of the mix than they do now. We have since shifted the mix back to returning borrowers, which is a positive tailwind for credit. Then you look at the guidance we set for the second quarter—we are doing that very informed by what we are seeing in roll rates. Late-stage roll rates that will contribute to second-quarter charge-offs are improving. The third positive trend is 30+ day delinquency that I mentioned in the comments, where those are trending lower than the first quarter. All those signs point to continued improvement. As you no doubt have factored in, when you put in the 12.65%, the 12.2%, and the 11.9% target for the full year, that does imply we are at the 11-handle for the second half of the year, in line with our 9% to 11% target. Operator: Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I would now like to turn the floor over to Doug Bland, Chief Executive Officer, for closing comments. Doug Bland: Thank you, everyone, for joining today's call. Before we close, I want to say a special thanks to the team, in particular Kate, Paul, and Gaurav, for working through the transition. Transition is, even under the best circumstances, never easy, and I think the team has done an excellent job continuing to drive this business focused on discipline, as you heard from the results they achieved during this quarter. I want to thank this team and look forward to working with them as we move forward. We appreciate your continued interest in Oportun Financial Corporation and look forward to speaking with you again soon. Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.