加载中...
共找到 16,490 条相关资讯
Operator: Good afternoon, and welcome to the ADMA Biologics First Quarter 2026 Financial Results and Business Update Conference Call on Wednesday, May 6, 2026. [Operator Instructions] There will be a question-and-answer session to follow. Please be advised that this call is being recorded at the company's request and will be available on the company's website approximately 2 hours following the end of the call. At this time, I would like to introduce the company. Please go ahead. Unknown Attendee: Welcome, everyone, and thank you for joining us this afternoon to discuss ADMA Biologics financial results for the first quarter of 2026 and recent corporate updates, I'm joined today by Adam Grossman, our President and Chief Executive Officer; Terry Kohler, Chief Financial Officer and Treasurer. During today's call, Adam will provide some introductory comments and provide an update on corporate progress, and Terry will provide an overview of the company's first quarter 2026 financial results. Finally, Adam will then provide some brief summary remarks before opening the call up for questions. Earlier today, we issued a press release detailing the first quarter 2026 financial results and summarized certain achievements and recent corporate updates. The release is available on our website at www.admabiologics.com. Before we begin our formal comments, I'll remind you that we will be making forward-looking assertions during today's call that represent the company's intentions, expectations or beliefs concerning future events which constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. All forward-looking statements are subject to factors, risks and uncertainties such as those detailed in today's press release announcing this call and in our filings with the SEC, which may cause actual results to differ materially from the results expressed or implied by such statements. In addition, any forward-looking statements represent our views only as of the date of this call and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update such statements, except as required by the federal securities laws. We refer you to the Disclosure Notice section in our earnings release that we issued today and the Risk Factors section in our annual report on Form 10-Q for the quarter ended March 31, 2026 for a discussion of important factors that could cause actual results to differ materially from these forward-looking statements. Please note that the discussion on today's call includes certain non-GAAP financial measures including adjusted EBITDA and adjusted net income. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP metric is available in our earnings release. With that, I would now like to turn the call over to Adam Grossman. Adam? Adam Grossman: Thank you. Good afternoon, everyone. We had a strong start to the year with earnings growth and margin expansion despite total revenue being essentially flat, underscoring the resilience of the business. We grew adjusted net income by 22% year-over-year, expanded corporate gross margins to 71% and generated approximately $58 million of operating cash flow during the quarter. This was in spite of top line pressures primarily impacting BIVIGAM. We believe the first quarter results likely represent the trough revenue baseline from which we would expect to be able to drive growth in the coming quarters. Key drivers of that, in our view, will be enduring ASCENIV demand, expanding margins and continued strong cash generation. ASCENIV end market demand reached record levels in the first quarter with revenue growth of approximately 28% year-over-year. We saw continued strength and record metrics across new patient starts, prescriber adoption, product pull-through and patient adherence. As a reminder, our distributors not only have to maintain safety stock levels to ensure the continuity of patient care, but we understand these specialty distributors also typically keep extra stock available for immediate administration and to guard against any potential supply chain, manufacturing, testing or regulatory disruptions. We see our distributors' inventory and pull-through sales data on a regular basis and believe these levels are consistent with those of our industry peers and are appropriately sized. At the same time ASCENIV demand is growing, competitive dynamics in the first quarter as well as the variability in ordering patterns created a challenging commercial backdrop, in particular for BIVIGAM. I will discuss these competitive dynamics in a moment. Operationally, during the period, we completed the monetization of 3 plasma centers, enhancing liquidity while further diversifying our plasma sourcing by adding a new third-party plasma supplier. We are also actively reducing expenses in a targeted manner to improve profitability without adversely impacting our core operations. Importantly, with a balanced mix of internal and third-party plasma procurement, we believe we have ample supply of high-titer plasma to support both our near and long-term ASCENIV growth objectives. Our balance sheet remains strong with pro forma net leverage below 0.5x, driven by continued cash generation and adjusted EBITDA growth, which should provide us with the flexibility needed to support growth and activate on our capital allocation priorities. Now let me take a step back and explain why we believe we are experiencing an extraordinarily unique moment in our industry. We believe that historically, the plasma fractionation industry has been in a dislocated state where IG utilization demand has outpaced the industry's ability to supply. Over the back half of 2025, in the first quarter of 2026, new IG products have entered the U.S. market. During the first quarter, the industry also saw a surplus of raw material plasma supply, increased PDT and IG finished goods inventory across the distribution network and aggressive pricing tactics, including discounting and rebating from newer entrants. This drove greater-than-expected competitive intensity and distribution recalibration. We believe there was and continues to be a rapid shift in the ordering patterns occurring at the wholesaler and distributor level, which adversely impacted reported first quarter revenue and created additional variability in ordering patterns for ADMA's products within the quarter. We believe these dynamics were timing related and are transitory in nature. And although it's still early, we are observing signs of reversion in the second quarter. We see these as industry-wide dynamics, not only specific to ADMA. And again, we believe they primarily impacted distributor behavior rather than end market demand. While these dynamics impacted near-term ordering patterns, there was no deterioration in underlying demand for ASCENIV, where fundamentals remain strong and continue to improve with record utilization growth throughout the quarter. We are particularly encouraged that the second quarter run rate based on April demand is in line with the level of first quarter direct sales. This reinforces the key point. Record ASCENIV demand and utilization, which is a forward-looking indicator, is robust and growing, despite the broader standard IG and plasma products market competitive pressures. In our view, this is clear evidence that the first quarter variability was driven by distribution and inventory dynamics primarily affecting BIVIGAM, not by any change in demand or forward-looking growth outlook for ASCENIV. We continue to believe ASCENIV remains early in its penetration curve and that we have multiple durable growth drivers. We believe we still benefit from record new patient adds, a growing prescriber base, expanding distribution network, strong payer access and increasing physician confidence driven by ASCENIV's differentiated clinical profile and favorable real-world outcomes. In review of the reported ASP declines from certain competitor IG products, we know that the market is seeing elevated levels of aggressive discounting and rebating across standard IG. We remain disciplined in our pricing strategy and are committed to building a durable and sustainable growth model. These near-term competitive and pricing dynamics do not change our conviction in the forecast of long-term growth and durability of the U.S. IG market or ASCENIV's differentiated position in the later-line setting for refractory immunodeficient patients. Looking ahead, we believe we have several important catalysts, including our recent approval for ASCENIV's pediatric label expansion and the associated commercial opportunity and upcoming preclinical data publication for our lead pipeline program, SG-001, which will be presented at the International Society of Pneumonia and Pneumococcal Diseases Conference. We expect this SG-001 preclinical data presentation, including oral and poster sessions, to further illuminate the product's novel profile and market as we advance our capital-efficient development pathway. ADMA is a unique company in the plasma-derived therapies complex in that we have a specialized, innovative and forward-thinking R&D engine, which translates into growth opportunities and expanded product margins. Our yield enhancement manufacturing process allows us to maximize the high-titer plasma RSV plasma we collect required to meet ASCENIV's increasing demand. Yield improvement was designed to enhance our R&D pipeline programs including SG-001 so that, in the same way, we are able to maximize value on the hyperimmune plasma used to produce SG-001. We have identified a proprietary way of blending the highest-titer plasma containing strep pneumoniae antibodies from donors and will rely on the yield enhancement IG production methods for future clinical trials and potential future commercialization. To design the most effective method for SG-001 production, we have developed and designed proprietary blends of plasma that are already showing strong proof of concept in preclinical studies for two virulent and prevalent serotypes of pneumonia. As data becomes available, we will keep the market apprised of our R&D development. ADMA remains on track to submit its pre-IND package for SG-001 to the FDA later this year, and we believe, if approved. SG-001 represents an approximately $300 million to $500 million in annual market opportunity at peak that can be ramped to a short order, leveraging our existing platform, infrastructure and commercial footprint. All told, our confidence in ASCENIV's growth trajectory and our mission to meet unmet medical needs for immunocompromised patients remains unchanged. ASCENIV demand is strong, fundamentals are intact and the IG markets growth outlook remains robust, and we believe we are well positioned to drive sustained growth, expand margins and increase cash generation moving forward. Before I turn the call over, I want to recognize and thank our entire ADMA team for their continued dedication and execution during what has been a dynamic and evolving market environment. Their focus on patients, operational discipline and commitment to excellence continues to drive our performance and position the company for expected long-term success. We are grateful for your contributions and proud of the progress we are making together. With that, I'll turn the call over to Terry. P. Terence Kohler: I will begin with our first quarter financial performance and then provide an update on our balance sheet, cash generation and the outlook for the remainder of 2026. Total revenue for the first quarter was $114.5 million compared to $114.8 million in the prior year period, representing flat trends year-over-year. ASCENIV revenue was $97.5 million, representing 28% growth year-over-year, while BIVIGAM revenue was $15.4 million, down 54% and disproportionately impacted by the competitive market dynamics discussed. Revenue from the sale of intermediates and other products also declined year-over-year by $3 million. Gross profit for the quarter was $80.8 million, resulting in gross margin of 71% compared to 53% in the prior year period. Adjusted EBITDA was $59.7 million, representing 24% year-over-year growth, and adjusted net income was $40.7 million. GAAP net income for the quarter was $45.3 million. Turning to the balance sheet. We exited the quarter with substantial flexibility. Pro forma net leverage remains below 0.5x, even following the revolving credit facility draw and accelerated stock repurchase deployment, and we retained approximately $100 million of additional borrowing capacity to support future growth initiatives and return capital to stockholders. Additionally, the company has been actively executing share repurchases, which we will continue deploying opportunistically, and through March 31, resulted in ADMA converting approximately 3.6% of the outstanding share count into treasury stock. ADMA generated $58 million in cash from operations during the quarter and received an additional $5 million in proceeds from the sale of 3 plasma centers in the period. The accounts receivable decline during the quarter was driven by the change in revenue quarter-over-quarter. All of our accounts receivable from the year-end 2025 balance sheet have now been collected, and we ended the quarter with $138 million of cash and cash equivalents. As has been the case historically, the quality of our accounts receivable remains strong. DSOs, which represents accounts receivable as of the balance sheet date divided by net sales per day in the quarter, increased in Q1 2026 to approximately 107 days. As we have referenced in the past, working capital remains a focus for the company, and we believe DSOs stabilized during Q1. Going forward, we believe the appropriate level of DSOs for ADMA is between 90 and 105 days, and we will target that range with expected improvement from current levels over the back half of the year as ordering patterns normalize and as the McKesson Specialty distribution agreement continues to ramp up. For full year 2026, we now expect total revenue in the range of $530 million to $560 million. This outlook reflects continued ASCENIV growth, partially offset by the expectation of sustained competitive pressure in the standard IG space over the course of 2026. Full year 2026 expectations for adjusted EBITDA are now $265 million to $300 million, and adjusted net income is expected to be between $170 million and $200 million. These expectations reflect not only the reduced revenue expectations in the year but also an expected step-up in operating expense, primarily driven by R&D spend related to our SG-001 program, but also a step-up in SG&A as we continue to invest in our commercial operations. Given the uncertainty in the competitive landscape which Adam described earlier, we are withdrawing longer-term guidance at this time. To be clear, this updated outlook does not reflect any change in our confidence regarding the underlying demand fundamentals for ASCENIV as a later-line therapy for refractive and complex immunocompromised patients, which remains strong. However, from where we sit today, we simply do not have the longer-term visibility that we have when the IG landscape was less competitive and in a period of undersupply. Overall, we believe ADMA remains exceptionally well positioned. The company has a differentiated growth asset in ASCENIV, a strong balance sheet and a continued commitment to return capital to stockholders, expanding margins, positive free cash flow and multiple levers to drive long-term value creation. With that, I'll turn the call back over to Adam for closing remarks. Adam Grossman: Thank you, Terry. In summary, we believe the most important takeaway from this quarter is that underlying ASCENIV growth trends continue to strengthen even as the distributors of plasma-derived therapies, including standard IG, work through a temporary period of dislocation, reinforcing the durability of ADMA's franchise. We remain focused on what matters, ASCENIV patient outcomes, product pull-through, patient adherence, prescriber expansion and long-term margin expansion and earnings power. Across each of those dimensions, we continue to see encouraging trends even beyond the first quarter. Additionally, we see meaningful long-term opportunity in SG-001 and in the broader platform we have built. We remain focused on disciplined execution and creating long-term stockholder value. Our confidence in SG-001's market potential remains unwavering as we continue to see a potentially rapid path to commercially scaling the SG-001 product to $300 million to $500 million on an annual basis if approved. Despite recent competitive challenges, we believe we are operating from a position of relative strength. Our business is highly differentiated and specialized. Yield-enhanced production remains embedded in our commercial model. Our plasma sourcing strategy has become more capital efficient and more diversified. Our balance sheet remains flexible, and we are generating robust cash while continuing to invest behind the franchise and our capital-efficient pipeline. We believe that combination positions us well to navigate the current and rapidly evolving U.S. immune globulin environment, and we are confident ADMA and ASCENIV will emerge even stronger as market conditions normalize. Thank you for your time today, and thank you for your continued support of ADMA Biologics. With that, operator, please open up the call for questions. Operator: [Operator Instructions] Our first question comes from Anthony Petrone at Mizuho Financial Group. Anthony Petrone: So maybe the standard IG backdrop comments, Adam, different pressure in that segment. Wholesalers and distributors are changing their ordering patterns. We have competitive dynamics. It appears certainly supply has built up in the channel, and then you have price pressure being triggered by some of the competitors out there. So I guess at what point did this really start to build within the channel? When did you sort of see it on the radar screen? And you're sort of referencing the April patterns here somewhat reversing. What really is line of sight as to when some of these pressures sort of dissipate and we get back to sort of a normal underlying landscape in the traditional IG space? And I'll have a couple of follow-ups. Adam Grossman: Sure. Thanks, Anthony. We appreciate the question. So as you know, the new entrants launched in the back half of 2025, but we really started to see the competitive nature of some of the rebating and discounting was really towards the end of February, beginning of March. Distributors were informing us that they were preparing to place orders and then the market just grew into a state of intense dislocation. As we've said, BIVIGAM was the product that was primarily impacted here. I think if folks recall our commercial history, BIVIGAM has now been on the market for 5-plus years. When we launched, it was the most expensive standard IG product, and we were afforded some very good utilization based on the reimbursement dynamics in the ambulatory infusion setting. And I think that we've really done a good job at setting a nice model here. But new entrants have the benefit of setting new prices. They set some high ASPs. We've seen some dramatic ASP erosion as I spoke about in the prepared remarks there. But primarily, it was impacting BIVIGAM. From a utilization standpoint, we did see BIVIGAM take a decent hit in Q1 from a utilization standpoint. We are seeing that utilization revert a little bit towards the back part of March and certainly April. For BIVIGAM, April was the best utilization month of the year so far. But with respect to ASCENIV, ASCENIV has been largely insulated. We saw record utilization in Q1 and April, and we don't typically speak about individual months utilization, but we think this is a pretty unique period here. But we hit record level of end user utilization in the month of April. And what we said during the prepared remarks is that the level of utilization of April is in line with the direct sales that we made in Q1. So this is a recent dislocation with respect to ordering patterns and discounting, but I do think that this could persist for some period of time. We are seeing trends of reversion for BIVIGAM, and again, ASCENIV -- our confidence is unwavering with ASCENIV. We feel that this product is going to continue to grow quarter-over-quarter. So we don't want investors to think that, for any reason, the core driver of value for our business on a go-forward basis is at risk here. As a later-line therapy, ASCENIV is continuing to open up new doors. We're seeing accelerating patient starts. And we're very encouraged by the trends that we're seeing for ASCENIV. Operator: Our next question comes from Gary Nachman of Canaccord Genuity. Gary Nachman: A few questions for me. So what is factored in your revised guidance with respect to both ASCENIV and BIVIGAM for 2026? If you could break that out separately. And then, Adam, maybe just describe a bit more how much pricing pressure are you seeing with BIVIGAM, if you can quantify that? And how are you adjusting your plans for manufacturing of that product versus ASCENIV? And I mean, do you think it pays to still compete in the standard IG space going forward? And then just a bit more on what the demand queue looks like for ASCENIV. So describe the key metrics that you're seeing on that and how soon you think new patients will be coming off that queue and getting treated with ASCENIV, if you're confident that you're going to see this sequential growth going forward for it. Adam Grossman: So thank you, Gary. That's a lot of questions in one. I was taking notes feverishly. So if I don't hit on something, please feel free to ask me again. So with respect to guidance, this updated framework is really based on the recent dislocation and the competitive pressures. So this assumes that there's going to be some sustained pressures in the standard IG space which should persist, really, we're thinking for the remainder of 2026. Again, it could be a little shorter, it could be a little longer. Again, we just don't have the visibility right now. We've certainly taken a conservative approach here. I mean, this is certainly not something that we are happy to do. There was a lot of thought that went into this. And again, we really want to reiterate that we are collecting the raw material plasma from our third-party providers. We are working on producing as much ASCENIV as we possibly can. And we are seeing that pull-through is accelerating month-over-month and that our production is really just starting to be able to meet that pull-through level here. So we are making more batches of ASCENIV in the first part of this year than we ever have in our corporate history at this point in a calendar. So we're very pleased with our third-party positive procurement. We're very pleased with yield enhancement. Again, all the product that we're selling so far this year is yield-enhanced manufactured product. With respect to your questions about BIVIGAM, look, I've always said it, Gary. I never wanted to be in the standard IG business. But when we acquired this manufacturing facility about 9 years ago, we inherited this product. And again, it's a good product. It's a safe product. It's a product that is efficacious and doctors like it. Unfortunately, right now, we're seeing heavy discounting from new entrants. And if you look at the ASP of some of the new products out there, you can see that from their launch to where they are now in the second quarter from ASP reported to CMS level, they've discounted in the order of between 15% to 20% they've eroded from their original pricing. So that's pretty substantial. It's not a game or a tactic that ADMA Biologics has ever chosen to play. We've pretty much been pretty consistent from a pricing standpoint. Our ASP is very predictable. It doesn't move around a lot. And to certain sites of care into certain books of business, that is valuable. So does it pay to compete in this market? I think the best way I could say it to you, Gary, is we're not going to go out and provide high levels of discounting just to make some sales. It doesn't benefit you into the future. As I mentioned, we're already seeing BIVIGAM revert to very, very strong utilization levels here in April. So my guess is that some of these new entrants have some short-dated material. I hear anecdotal reports of that. My guess here is that they're just trying to play a game to dislocate products like ADMA's from utilization to get people familiar with the product. But I don't think it's a strategy that's going to benefit these competitors long-term. I think the strategy that ADMA has taken, and we're playing a long game here, focused on long-term growth and value creation for stockholders and, ultimately, providing good products that help patients. So I do think it pays. We continue to manufacture BIVIGAM. It's a good product. It's a safe product. It's a product that is liked very much by our end-user customers. I think this is a transitory period in nature. And I think that we'll weather this storm and will come out the other side stronger. So I don't know, Terry, if there's anything you want to add regarding guidance or anything like that. But the variability is really just ordering patterns, Gary. ASCENIV demand remains strong. Guidance is conservative, but it really takes into account these competitive pressures. And it doesn't take into consideration any change in our outlook for ASCENIV demand as a later-line therapy in the refractive complex immunodeficient patients. P. Terence Kohler: Yes, Gary, I'll just echo that. I mean, really, the primary assumptions I think you're getting at is that for BIVIGAM we're assuming in this guidance is a sustained level of this increased competition. ASCENIV, we fully believe in that product and its capabilities and it will continue to grow quarter-over-quarter, and that's what's baked into the assumptions. Gary Nachman: Okay. And if I could just follow up with one more. Just, Terry, maybe explain a little bit more since there has been so much focus on the DSO. So just -- you're expecting that to get to a more reasonable level of 90 to 105 days from where it is currently. So just, how you expect to get there and in what time frame and the initiatives you're putting in place with your current customers, how important McKesson is to help you get there as well? And how much that's going to play into the continued increases in cash flow generation that you talked about? P. Terence Kohler: Sure. So as I said, DSOs in the quarter were 107 days. We want to target between 90 and 105 days. We believe that in the back half of this year, we're going to be able to drive improvement in our DSOs. McKesson, as you pointed out, is going to be an important factor in that as that business continues to grow as a percentage of our overall distribution partners, then they are favorable to our overall DSO performance. And we believe that, that will push us down into a range that is within our target. That's a big piece of it. We also believe that -- although we believe that this competition, and it will lead you for the rest of the year, we do believe that ordering patterns will normalize, and so that's baked into that as well. And as you said, some of the concessions that we have provided a normal course to distribution partners over the first part of this year, we're going to look to tailor that back in the back half of this year. So all those things should help us with our DSOs. Adam Grossman: And Gary, if I could just touch on one thing. Something else that we're thinking about here, and as Terry was speaking and I was thinking about McKesson and the opportunity from the new book of business that we're able to target now that we've got that distribution partner in place. Secondary immune deficiency is really the largest driver of growth of IG. And when Terry was speaking, I was thinking about the fact that we're in this period right now where -- my entire adult life, I've been in the IG space. And ADMA Biologics has been a company, call it, 20 years. And for that entire time, you've really seen this dislocation with respect to there's a supply and demand imbalance. There's more demand than the industry was always able to produce. This is the first time -- and I think I said this in the prepared remarks, right, that this is the first time that the market is in a period of, be it consistent supply or maybe a period of oversupply. And for the last decade-plus, IG has been growing at 10% -- low double digits, 10%, 11%, 12%, 13% year-over-year. IG has been growing. And what we see now, and we see some of the industry expert analyst reports that are coming out, they're forecasting low single-digit growth. So you're talking about 2%, 3%, 4% growth year-over-year. And I don't think this is something that our brethren IG companies are out there talking about publicly. But it's also factored into our guidance and why we're targeting the secondary immune deficient population and going after that book of business. So I thought it was something important to say. But IG is still growing. It's still a highly durable business. The use of immune globulin is not going away anytime soon. It's just these periods where we used to see low double-digit growth year-over-year, we're now seeing low single-digit growth. And I think this is transitory, but I think it's something that's important for us to get out there and that investors are aware of. The market is robust. It's still growing. It's just growing a little slower. P. Terence Kohler: And Gary, I think your other part of that question was on cash generation. And so obviously, in the quarter, we generated a substantial amount of cash. Our cash from operations was $58 million, which is greater than all of 2025. We believe that our cash generation is going to continue to be strong over the course of this year. And so we believe that's just going to continue over the course of this year. Gary Nachman: Okay. And actually, that was all helpful. If I could just squeeze in two more quick ones because I know I get these questions. So I just want to make sure that you don't think there's going to be any spillover in terms of discounts and rebates that you're seeing in the standard IG space over to ASCENIV, that it's going to hold up in terms of pricing. And then 001, you highlighted a bunch of times. But just how long you think it would take you to run that in the clinicals if you start it next year and when realistically it could reach the market? Adam Grossman: Thanks, Gary. I'm just making notes so I don't miss a beat here. So look, we take this disciplined pricing approach across all of our products. So as I mentioned, ASCENIV has been largely insulated. We've seen growth from a utilization standpoint. You see that broken out product level revenues, ASCENIV is still a strong, strong product for us, generating substantial margin opportunity for us. And I think that, that really does speak to the durability of the drug, the durability of our business model and our ability to be resilient in times of these competitive pressures. So I don't think you're going to see us discounting heavily any time soon. It's not a practice that we want to engage in. I think the product speaks for itself. I think that the data that we have published, that others have published independently of ADMA, I think that, that really demonstrates and speaks volumes for the utility of this drug in the refractive highly complex immune-deficient patients that is chronically ill and suffers from persistent infections. So it's a differentiated drug. No one has anything like it out there in the market. And again, our government payer, commercial payer split, it's leaning a little bit more towards the commercial payers. We've certainly been contracting over the course of 2025 into 2026 with some of these commercial payers. So we all know how the game works with the commercial payers. There are a couple of points there depending upon how much utilization there is, but we're very proud of the positioning for both our products, ASCENIV and BIVIGAM. We're very proud of the status that we have with the Florida Cancer Group, which works exclusively through McKesson Specialty business. So I don't anticipate there's going to be any substantial discounting for any of our products, including ASCENIV, to answer your question. With respect to SG-001, so we haven't given any timelines yet. But you asked a question that is reminding me of things I used to say many, many years ago when we were running the clinical trial for ASCENIV, which was then known as RI-002. But assuming that all of our animal work, all the preclinical testing that we're doing, all the assay testing, all of the pilot scale lot production that we're doing pans out. When we are ready to start a clinical trial, there are multiple shots on goal with a product like this. Are we going to go for something similar to what we've done with ASCENIV? Are we going to go for something a little sexier with respect to a potential treatment indication for hospitalized patients? There are a number of avenues that we are seeing benefits in preclinical testing that we could go for this product. But hypothetically, if we were going to go for this like we did for ASCENIV's clinical trial, the FDA has published guidance for industry on how to bring in immune globulin to market. Typically, you have to take, I believe, it's about 50 patients that are well controlled patients off of their commercial IG. Then you replace their commercial IG with the investigational product for 12 months. And if the primary endpoint of that study, if there is less than one serious bacterial infection per patient per year, then you will be to have -- deemed to have met the primary endpoint of less than one serious bacterial infection per patient. Pretty much every IG that I am aware of that has run a TID study has met the primary endpoint. So it is a 12-month study. To run a 12-month study, I'm pretty sure I've been quoted in the public setting as saying, doing a 12-month study takes about 18 months to do. But if that is the pathway, that could give you some idea. But we have not yet provided timing on when that trial will start. But we have given guidance that we will plan to meet with FDA this year on a pre-IND meeting so that as we enter 2027, we'll be in a position to provide guidance to The Street on what kind of trial we're going to run, how long it's going to take, what it's going to cost. So stay tuned. But very encouraged by the data. We're going to be at this conference in a couple of weeks. And I encourage investors and others to take a look at our website as it gets updated with respect to that preclinical data. Operator: Our next question comes from Kristen Kluska at Cantor. Kristen Kluska: So when we think about the prior revenue guidance, do you think the underlying assumption was always that a vast majority of it was going to be driven by ASCENIV? And understand a lot of the color you provided to us today on BIVIGAM, which was very helpful. But maybe can you just help us understand, are you looking for any specific dynamics in the market over the next few months that will get you comfortable providing guidance, especially again as it relates to the fact that ASCENIV is going to have a lot more of the revenue share in the future? And then the other question I had was just understanding the real-world benefits. I know CIS is this week. I know there's been some third-party publications out there, and how you plan to maybe utilize these data sets, not just for your physician conversations, but if it could also help with the payer and reimbursement piece as well. Adam Grossman: Thanks for the question, Kristen. So maybe I'll take your second question first. Yes, this data that we have been publishing and that other third parties published on their own has been very helpful in our payer conversations throughout the back half of 2025 and into 2026. So the payers are seeing this real world evidence in their own patient population. They're seeing these patients staying out of the hospital. They're seeing less frequent ER visits and doctors visits, and they're seeing less concomitant medications in the patients that switch from standard IG to a ASCENIV because of their chronic persistent infection. So this real-world data is really adding value for us from a commercial payer perspective, full stop. With respect to, I think, the first part of your question, the real-world data is really helping to convert clinicians that have been on the fence. I know, Kristen, we've spoken about this a lot during our conversations together over the years. There's a large amount of clinicians that are in the buy-and-bill space with respect to UTI, IVIg administration. And what I can tell you, the feedback from my commercial team has been robust and very, very positive with respect to how the clinicians, if you will, I'm using quote marks, that are "on the fence" of do they want to take the risk and buy in all the ASCENIV to give it to a patient because they're afraid they might not get reimbursed. And what I can tell you is that this data has really helped us push a number of clinicians over that line, and they have become converts and they have started patients this year in 2026. As I said in the prepared remarks, we're seeing increasing new prescribers. We're seeing new patient adds all the time. And everything is really coming together. I know it's our fifth plus year of commercial launch here, but we really feel that the opportunity is in front of us, that ASCENIV is really starting to gain traction and momentum in the ambulatory infusion setting. I think that all the reasons that we spoke about the McKesson Specialty agreement and the book of business from a secondary immune deficient population perspective, we think that, that certainly is a great opportunity for the product. And also, we haven't spoken about it much, but with the pediatric indication, we think that this is certainly gaining some very good conversations with pediatric teaching hospitals. We hear some are even discussing putting this on formulary for hospitalized immunocompromised children. So, while we've always given -- again, because it's weight-based dosing, but I do think that there is a big push right now from a medical education perspective, and doctors are really understanding where the utility is for this product. So the outlook for the drug remains positive. We think the forward-looking opportunity is going to drive this company's growth and profitability. It will help fund all of the capital deployment initiatives that we have with share buybacks. ASCENIV is going to continue to fund our R&D, and it's going to potentially fund any future clinical trials from our very capital-efficient R&D engine. So it's a great drug. The core message of our business and the core message of today is that BIVIGAM got hit, ASCENIV is largely insulated. The growth outlook, we are unwavering in the forward-looking growth opportunity. How fast it's going to grow, that's what we are guiding to right now is there are some challenges in the market. But will the product grow? We believe it will. So thanks for that question. And we really do believe in the outcomes and the clinical benefits that patients experience while on the drug. It's a good product that helps patients that have no alternative, Kristen, and it's going to continue to do so. Operator: Our last question comes from Anthony Petrone at Mizuho Financial Group. Anthony Petrone: Just hopping across some calls here. Adam, you mentioned just excess plasma supply as well that's out there. So it sounds like there's elevated finished IG on the shelf and maybe some elevated plasma. When you just think of that totality, again, you sort of mentioned it's going to take a little bit of time to work itself out. But if you had to estimate it, is that 2 quarters? Could it last a year? Just how long does it take the supply chain to straighten out? And just McKesson quickly there. When you think about new sites of care, like how quickly can the McKesson addition actually result in net new prescribers for ASCENIV? Adam Grossman: Thanks, Anthony. So with respect to IG inventories, I mean, the Plasma Protein Therapeutics Association publishes data on IG sales from reporting manufacturers into the U.S. market. And if you go on their website, you can see the data for the fourth quarter of 2025. That was published, I want to say, at the tail end of March. It really looks to me like there was an enormous amount of push-in from the overall industry. And I want to say in December, I think the trend was roughly about 12 million grams or so of IG being sold by the industry to distributors or direct customers throughout the year on a monthly basis. I want to say in December, there was about 16 million grams or so sold. I don't have that data in front of me. I'm recalling that from memory. But the point being, I don't think utilization grew, call it, 20% between October, November and December. So my crystal ball tells me there's some excess inventory with respect to standard IG from the overall industry in the channel that needs to work its way through. How long that takes, I don't know. IG utilization is robust. What I find encouraging, Anthony, is that BIVIGAM has returned to what I would like to say normal levels in April from a utilization standpoint. It's on the lower bound of what we've seen as normal, but it's back to a place where I'm not pulling the hair out of my head. So I'm feeling better about the market situation. So how long it persists, I don't know. I don't know how much inventory our competitors have. I don't know how much longer they can continue to provide these aggressive discounts and rebates and how much more they want to erode their ASP. With respect to raw material, you asked the question, I mean, that's anyone's guess. I saw an announcement that one of our contracted third-party providers, while it's not going to impact ADMA's ability to collect raw material plasma to make ASCENIV, the high-titer plasma, but Grifols has announced some center closures, and I know some other plasma collection organizations have announced that they're going to be closing some centers. ADMA in the quarter monetized our centers. We signed a new third-party agreement with that collector. But these other larger fractionators are choosing to close them down. I think that there is an oversupply of raw material plasma. I think the spot market has some very attractive and favorable pricing at the lowest levels that I've seen in a while. So I think that, that may persist longer than the IG oversupply situation that's there. But that would be a better question for others than me. We are pretty much self-sufficient from a standard normal sourced plasma perspective. We collect that plasma from our current 7 centers. And again, we're in a pretty good position with respect to the high-titer procurement from our third-party providers and our internal collections. You asked about McKesson and its ability to materialize. We're already seeing increased utilization. April was a good month. This is -- it's in line, I would say, with expectations. But you put a forecast together, and when you hit it, you're happy. So the McKesson book of business is starting. We had a strong April, and we're anticipating that this is going to continue to grow in compound as we progress in the coming period. So hopefully, that answers your questions. Thanks, Anthony. Operator: This concludes the question-and-answer session. I would now like to turn it back to Adam for closing remarks. Adam Grossman: I just want to thank everybody for taking the time today to dial in to today's call. We appreciate your continued support. And again, donate plasma, as I've always said. You can help save many, many lives with just one donation. So thank you again to the ADMA staff and team. Stay healthy, everyone, and have a great evening. 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, and thank you for standing by. Welcome to LegalZoom's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Madeleine Crane, Head of Investor Relations. Please go ahead. Madeleine Crane: Thank you, operator. Welcome to LegalZoom's First Quarter 2026 Earnings Conference Call. Joining me today is Jeff Stibel, our Chairman and Chief Executive Officer; and Noel Watson, our Chief Operating Officer and Chief Financial Officer. As a reminder, we will be making forward-looking statements on this call. These forward-looking statements can be identified by the use of words such as believe, expect, plan, anticipate, will, intend and similar expressions and are not and should not be relied upon as a guarantee of future performance or results. Such forward-looking statements are based on management's assumptions and expectations and information available to us as of today's date. These forward-looking statements are also subject to risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are referred to in the press release we issued today and in the Risk Factors section of our most recent annual report on Form 10-K filed with the Securities and Exchange Commission. Except as required by law, we do not plan to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise. In addition, we will also discuss certain non-GAAP financial measures. We use non-GAAP measures in making decisions regarding our business, and we believe these measures provide helpful information to investors. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are set forth in our investor presentation, which can be found on the Investor Relations section of our website at investors.legalzoom.com. I will now turn the call over to Jeff. Jeffrey Stibel: Thank you, Madeline, and thank you all for joining our call. LegalZoom is a different company than it was 2 years ago, more focused, better positioned and increasingly differentiated. We are building a subscription-led AI-enabled platform that serves small businesses across their entire life cycle. Our results this quarter show that the strategy is working. Total revenue growth of 13% year-over-year and adjusted EBITDA of over $36 million, both exceeded our expectations. In 2026, we are focused on 3 core growth levers: one, driving high-quality subscription growth through premium human-in-the-loop offerings; two, scaling customer acquisition through partnerships and AI channels; and three, leveraging AI to enhance the customer experience and to drive efficiency. We are seeing clear traction across each of these areas. Q1 marked our fourth consecutive quarter of double-digit subscription growth, led by strong momentum in our human-in-the-loop offerings. Through these personalized higher-value services, we are strengthening our customer relationships and increasing lifetime value. This is how we've repositioned LegalZoom for more durable growth in an AI-driven market. AI is reshaping the first mile of the customer journey, expanding access and bringing more customers into the market. But at the last mile, where high-stake decisions are made, expert judgment, execution and accountability still matter. That's where LegalZoom is differentiated. Our human-in-the-loop strategy remains central to how we differentiate and where we see some of our most attractive growth opportunities. At a high level, this includes both our service layer, products like registered agent and virtual mail and our expert layer, which now includes legal plans, IP services and concierge offerings. Together, these solutions address higher-value customer needs through a combination of automation and professional guidance, supporting stronger ARPU and lifetime value. In Q1, revenue across our expert-led offerings grew more than 2x faster than our overall business year-over-year and continues to accelerate. The standout performer is our concierge suite, now at over 3x average ARPU. We are tapping into an underserved market. For example, we estimate that nearly 1/3 of U.S. small businesses are in bad standing or at risk of falling out of compliance each year. LegalZoom is the only provider offering a fully managed do-it-for-me reinstatement and compliance solution, and demand has consistently exceeded our expectations since launch. We are extending this strategy through curated, high-value formation and concierge bundles sold exclusively through our sales team. These packages combine entity formation with ongoing compliance and advisory services, bringing customers directly into higher-value subscription relationships from day 1. We are excited to see the robust rate of adoption with customers increasingly opting for higher tier bundles. These packages support higher ARPU, are driving more durable customer relationships and reinforce the value of expert-led support. As a result, we are using concierge not just as a product, but as a strategic entry point to engage more established small business customers, a key long-term growth opportunity for LegalZoom. Moving to our second growth lever. We are continuing to diversify our go-to-market model to make customer acquisition broader and more efficient over time. We've accelerated both the number of partners and the velocity of growth within this channel. In Q1, our expanded partner portfolio drove order volume from partnerships to 10% of total orders, up from 4% a year ago, reflecting both increased scale and higher intent customers. New partnerships include LinkedIn, Chase and our strategic partnership this year with GoDaddy, where LegalZoom is now the sole legal services provider across their ecosystem. We have a strong pipeline of diversified partnership opportunities and expect these to fuel a greater share of high-value customer acquisition in 2026 as we work to diversify our top of funnel. This quarter, we made a deliberate decision to front-load our marketing investment, aligning spend with peak business formation seasonality. That investment delivered. Unaided brand awareness increased 19% year-over-year. Direct traffic to legalzoom.com grew 13%, and conversion remains strong. These are important signals that our brand investments are driving both awareness and higher-value customer acquisition. Our goal is straightforward: meet customers where they are, bring them into the LegalZoom ecosystem and introduce them to higher-value services over time. Importantly, this approach extends to how we are positioning LegalZoom within AI ecosystems. We've long described LegalZoom as the last mile solution in an AI-driven world. In this quarter, we continue to embed ourselves into the platforms where customers are asking questions and making decisions. That includes the LegalZoom Connector for Quad and the LegalZoom ChatGPT formations app, both launched in Q1. While still early, these integrations are strategically important, allowing us to be present at the moment of intent when a small business owner is ready to act. Over time, we believe this will position LegalZoom to capture more high-intent demand and further strengthen our role as the trusted partner to help customers complete their journey. Finally, we are embedding AI across our workflows and reimagining our organization to increase speed, improve quality and drive efficiency. As Noel will detail, we are already seeing tangible impact. Our AI-powered tools are empowering our experts, improving sales effectiveness, increasing customer satisfaction and allowing us to scale output without proportional increases in headcount. This is translating into real operating leverage and will be an increasingly important driver of our planned margin expansion throughout the year. Stepping back, these initiatives reflect a business that is becoming more durable, more efficient and better positioned for long-term growth. As we move through 2026, we are executing with clarity and building momentum across each of our growth levers. AI is changing how businesses start, but starting is the easy part. Getting to the finish line is what matters, and that's where we win. We combine technology with real human expertise to solve the last mile, deliver outcomes and help our customers move forward with confidence. That combination is difficult to replicate and is what we believe will continue to set LegalZoom apart. Thank you. And I'll now turn it over to Noel. Noel Watson: Thanks, Jeff, and good afternoon, everyone. Let me connect our growth levers to what you're seeing in the numbers. Our results this quarter reflect continued progress in shifting the business toward higher-value subscription-driven revenue. While a portion of our growth benefited from factors I'll discuss shortly, the underlying performance of the business continues to be strong. At the same time, leveraging AI, we are quickly scaling efficiencies across the business and improving execution through our core workflows, which we expect to be an increasing contributor to margin expansion. With that context, I'll turn to our first quarter financial results. Unless otherwise stated, all comparisons will be on a year-over-year basis. Total revenue was $207 million, ahead of our expectations, reflecting growth of 13%. Subscription revenue increased 12% to $130 million, marking our fourth consecutive quarter of double-digit growth. Performance was led by the human-in-the-loop services Jeff highlighted, including strength in registered agent services, benefiting from our pricing initiatives implemented last year, higher revenue from legal advisory subscriptions bundled into certain formation offerings and contributions from Virtual Mail and our concierge suite. We also saw strength in our compliance offering, driven by strong retention from experience improvements rolled out over the past year, including annual report auto file. ARPU increased 4% year-over-year, reflecting our strategy to grow higher-value human-in-the-loop offerings. These services drive ARPU expansion and improve overall revenue quality as we aim to increase customer lifetime value. We expect ARPU to be the primary driver of subscription growth throughout the year. As we execute this strategy, we are seeing a decline in lower-value subscriptions previously bundled within the formation package. As a result, we ended the quarter with approximately 1.92 million subscription units, stable year-over-year, reflecting the continued shift in mix toward higher-value offerings. Turning to transactions. Revenue increased 15% to $77 million. Transaction revenue benefited from the higher-than-expected annual report filing activity within our compliance offering. As a reminder, these filing fees are seasonal in nature with more activity heavily weighted in Q1. Transaction revenue was also driven by strength in trademark and IP offerings as well as a full quarter of contribution from Formation Nation. Growth was partially offset by the expected decline in BOIR revenue. AOV was $205, up 5%, reflecting packaging changes in our formation bundles and the lapping of low-value EOIR transactions in prior year. Transaction units increased 10% to 375,000, reflecting higher annual report volumes as well as growth in business formation volume. We processed 142,000 business formations in the quarter, up 8%, driven by a full quarter contribution from Formation Nation and increased business formation volume from partnerships. Finally, deferred revenue increased $20 million sequentially, reflecting normal seasonality. Turning to profitability, where all metrics are on a non-GAAP basis. Gross margin was 67%, flat year-over-year, driven by more efficient service delivery, offset by higher filing fees. Sales and marketing costs were $72 million or 35% of revenue, up 29%. Customer acquisition marketing increased 25%, reflecting a shift in the timing of investments to align with peak business formation seasonality and diversification of investments in brand and partnerships. Non-CAM sales and marketing expenses increased $5 million or 45%, largely reflecting a full quarter of Formation Nation and targeted investments in our sales team, both of which are directly supporting the higher value revenue growth you're seeing in these results. Technology and development costs were $14 million, down 6%. General and administrative expenses were $15 million, an increase of 2%. Across the organization, we are actively managing cost structure and productivity to ensure investments are aligned with higher value growth. This includes leveraging AI, which is fundamentally changing how we operate the business. We are rapidly transitioning to a fully AI-native organization with tools deployed broadly across the company, backed by ongoing training to drive real workflow transformation. We've launched targeted initiatives to redesign workflows and drive efficiencies through year-end and into 2027. In product and software development, AI is now integrated across the life cycle, improving engineering velocity and enabling increased output without proportional increases in headcount. We are already seeing tangible results. Across our law firm workflows, AI is driving efficiency gains, reducing trademark classification search time by 55%, accelerating patent drafting by 30% and automating key processes, resulting in faster turnaround and more efficient use of attorney capacity. Further, AI-powered coaching has reduced missed sales opportunities by roughly 1/3, enabling our teams to offer more solutions and cross-sell our products. Agentic AI is also handling thousands of customer care chat interactions, fully resolving approximately 40% of inquiries end-to-end. Our operational execution drove adjusted EBITDA of $36 million, representing a margin of 18%. Moving now to our balance sheet and capital allocation. Free cash flow was $41 million, flat year-over-year. We continue to generate strong free cash flow, maintain a debt-free balance sheet and our $100 million revolving credit facility is fully undrawn. We ended the quarter with $183 million in cash and cash equivalents, down $20 million from Q4. The sequential change reflects share repurchases and a $13 million payment of deferred consideration related to the Formation Nation acquisition, partially offset by solid free cash flow generation. During Q1, we repurchased approximately 5.3 million shares of our common stock for $43 million. As of March 31, 2026, we had approximately $126 million remaining under our authorization. We have remained active in the market in Q2, a direct reflection of our confidence in the long-term value of the business relative to current valuation. Now turning to our outlook. For the full year, we are increasing our revenue outlook to a range of $810 million to $830 million, representing approximately 8% year-over-year growth at the midpoint. We continue to expect adjusted EBITDA in the range of $190 million to $200 million or approximately 13% growth at the midpoint. For the second quarter, we expect revenue in the range of $203 million to $207 million, representing approximately 6% growth at the midpoint. Relative to the first quarter, this reflects the full lapping of our Formation Nation acquisition as well as a reduced volume of annual report filings due to seasonality. We expect adjusted EBITDA in the range of $40 million to $42 million. In terms of quarterly cadence, we expect adjusted EBITDA to build throughout the year from improved gross margin, disciplined cost management and AI-driven efficiencies realized in the back half of the year. To wrap up, our first quarter results reflect continued execution against our business strategy, and we look forward to building on our momentum. We have the foundation in place to leverage our differentiated market positioning to drive higher quality revenue growth and margin expansion in 2026 and beyond. With that, we'll open the call for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Ella Smith with JPMorgan. Eleanor Smith: So first, you framed AI as a tailwind and have seen some major partnerships in the past few months. How are you seeing the customer acquisition funnel change? And what kind of conversion are you seeing from that kind of customer? Jeffrey Stibel: Yes. Thanks, Ella. Good to hear from you. Look, we're incredibly excited about what's happening with AI for a couple of reasons. And in effect, we're becoming the execution layer that AI can't replace. We've now launched products into ChatGPT and Cloud, both of those launched in Q1. We've started expanding our partnerships with them and the reach that we're driving to address and attack the additional incremental traffic that's coming from these AI engines. What we're not seeing, I don't think anyone is seeing right now is traffic coming directly in significant volumes. In large part, it's too early, both because they're trying to figure out how that works as are we. So, what we're doing is we're embedding products. We're embedding their AI intelligence into what we're doing. And that's helping to drive the throughput that we're seeing into our business. And the thing that's encouraging for us is what that's allowing us to do is drive incremental formation volume that is coming from higher-value customers and lifting ARPU up. Eleanor Smith: Very clear. And for my follow-up, how do you see ARPU contributing to growth in 2026? You said that it's going to be an important driver. I was curious if you or Noel could walk us through the customer trends and sentiment that you're seeing that give you more confidence to realize ARPU expansion in 2026 and beyond. Jeffrey Stibel: Sure. I mean I can start and then let Noel finish. I mean, if you look, we've had now 2 sequential quarters of ARPU growth, 1% in Q4, accelerating to 4% in this past quarter, and we expect that to continue from a trend perspective. That drives through the entire business. And historically, what we've seen both at LegalZoom and across the ecosystem of SMBs is when you increase value alongside driving higher-priced, better products, you ultimately reduce churn. That's a virtuous cycle for lifetime value. And we've already seen the benefits of that. We've spoken, I think, over the last couple of quarters, in particular, about how our compliance products have seen decreases in churn despite the fact that we're seeing improvement in ARPU. And we're pleased to just start the lapping of concierge right now given that launched about a year ago, and we're pleased with the trends there on retention as well. Noel Watson: Yes. I think you hit the nail on the head. Some of it is driven by some of the pricing initiatives that we took last year and matching kind of price to value. But importantly, we're also seeing a shift in customer mix as we drive more customers towards our higher-value human-in-the-loop offerings like concierge. So, it's the combination of those 2 things that's really driving ARPU, and we see it as a sustainable driver of revenue growth throughout the rest of this year and beyond. Jeffrey Stibel: And then the only thing I'll add is it's what gives us confidence in our raised revenue guide because this is a roll-forward exercise. So, you can see those improvements compounding in the organic business. Operator: Your next question comes from the line of Patrick McIlwee with William Blair. Patrick McIlwee: My first, just following up on Ella's question on the Cloud OpenAI and Perplexity partnerships, it sounded like, Jeff, you said those were not driving a material amount of your traffic at this point. Can you just confirm that, first of all? Because initially, I was curious if those were -- if those represented a material portion of that 10% of volumes you talked about coming through your partnership channels. Jeffrey Stibel: Yes. It's too early for it to be material at this point. This is still test and learn. We are seeing material increase in our partnership channel broadly, and we talked about that in the prepared remarks. That 10% growth is disproportionately coming from the partnerships around GoDaddy, Chase, LinkedIn and others, and we can continue to accelerate that. With these new traffic channels through AI, it really is just too early for it to be a significant driver. Noel Watson: But what's important there is that strategically, we positioned ourselves as the brand and the player that these AI companies are looking to work with when they're looking to work with somebody in the legal services space. So, it's strategically important for us to be there. And obviously, we all expect that this will evolve and become much more significant over time. Jeffrey Stibel: It's probably the most important point. So, I'm glad you brought that up, Noel. I mean we are effectively the de facto choice for legal services across AI. And we're pretty excited about that. And I think it's in part because of our brand, it's in part because of our product and it's in part because of our 25-year history. Patrick McIlwee: Understood. And last quarter, you talked about leaning into the positive formation environment earlier this year with some incremental TAM, and we definitely saw that come through this quarter. Obviously, it seems like that yielded the intended results with the top line performance and also some implied share gains on the formation front. But my question is, can you talk about how you evaluate the ROI on that TAM as we look further into the year, what channels you're leaning into and how your spending plans have evolved, if at all, since last quarter? Noel Watson: Yes. So, we clearly and intentionally spent up into a stronger environment, but also to get our brand messaging across in Q1. We're expecting that to continue, but to a lesser extent. Year-over-year, we expect spend to be up in the -- for the rest of the but to a lesser extent than in Q1. And we measure it in several different ways. We're heavily performance marketing oriented. So, we're measuring ROAs on a daily basis and making tweaks and adjustments to our bidding strategy. But we're also measuring in intangible ways, things like unaided brand awareness, which we mentioned in our prepared remarks where we saw a marked improvement in unaided brand awareness in the quarter as we surveyed it as we know that this will lend itself to supporting our efforts around channel diversification, things like how we show up in AIO and how we do in terms of our partner channel where we're seeing strong momentum. The brand strength really supports all of those initiatives as well. Jeffrey Stibel: And make no mistake, the point we're making, the positioning we're making is we are the choice. There shouldn't be alternatives. And that's one of the reasons why we're pushing towards these exclusive relationships with other small business channels that have great existing and established small businesses. Noel Watson: And I guess one other thing to mention is as we partners, we think that's just a great strategic opportunity for us. It does take some investment upfront to onboard them and start to scale them up. We have clear plans that we engage in to optimize those over time. And it gives us not only the opportunity to drive customer acquisition, that's new formation, but for us to start to roll out initiatives that target established businesses within those partner bases. And there's a lot more flexibility when you're working with a partner on your go-to-market and approaching acquisition as a whole, much more so than we see in traditional search. Operator: Your next question comes from the line of Kishan Patel with Raymond James. Kishan Patel: This is Kishan Patel on for Josh Beck. How are you thinking about utilizing AI internally as a way to grow number of SMBs managed per expert or concierge manager while maintaining your service levels? And what areas of the business are furthest along today? Jeffrey Stibel: Great question. We're not thinking we're doing, and we've seen tremendous progress here. And at the risk of overstating, the answer is all areas from the office of the CEO down to anyone taking out the trash, including me. And the reality is we've seen greater throughput almost across the board. We mentioned a handful of things on the side of customer service. We've talked in the past about what we're able to do with concierge reps. and expanding throughput there. Legal services, we're having a great deal of success with our owned and operated law firm, and we're starting to push that out to our network in terms of understanding there. And just the ability to use AI as a true partner here is probably more valuable within LegalZoom than it is with most customer -- with most companies because our expertise has to be right. There is no sense of good enough. And we hinted at the progress we expect to be making on the margin side in the back half of the year. So much of that is because of our ability to scale our AI investment and push that down throughout the organization and do it effectively and aggressively. And the final point that I'll bring up is this requires an organizational sea shift as well. And we've embraced that pretty deeply. And because of it, we feel pretty excited and downright confident in our ability to execute. Noel Watson: And it's moving real metrics in the business. We -- I'll reiterate maybe a couple of them that we called out in our prepared remarks. So, for example, on our -- on the legal side, in terms of servicing our customers, we saw a 55% reduction in trademark search classification time and a 30% increase in efficiency around drafting patents. On our customer care side, AI is now handling approximately 40% of our chat volume end-to-end and doing it at a TNPS that's on par with our human agents. And then when it does transfer chat, it's increasing the efficiency with the human agents can bring that to closure. On the sales side, we're using it in terms of onboarding sales reps more quickly and providing on-call guidance that's helping identify cross-sell and upsell opportunities. So, as Jeff said, we're really using it cross-functionally and in a way that's directly impacting the customer experience. Operator: Your next question comes from the line of Matt Condon with Citizens Bank. Matthew Condon: My first is just on the concierge suite. Great to see that it's doing very well. Just as you think about 2026 and the product road map, how does that really form where you're going to go next with the products? And what can we see coming down the pike here? And my second question is just on partnerships, getting to that 10% volume. How big can this be over time? And what types of partners are you finding that are working really well? Jeffrey Stibel: Both great questions. I'll take them and Noel feel free to fill in on anything I missed. Concierge has been a great success. Obviously, it's early. It's a recurring revenue product, typically annual. So, we're just getting through the first set of renewal cycles. But the most important thing to understand is it's roughly 3x the ARPU of our average product. So, when you look forward, where we headed to drive ARPU higher and higher so that we have enough margin to add greater and greater value to ultimately reduce churn and extend lifetime value. So, this has been a tremendous success, and we're now leveraging some of that success to go back into our other products like our legal plan products, Business Advisory as an example, and learn from that and integrate some of those learnings. So, our expectation is that is going to grow. We're going to leverage other human-in-the-loop products to push on that motion. And we're going to leverage more and more experts at greater and greater scale as we integrate both human and artificial expertise using AI to give us both a margin boost but also drive ARPU further up the curve while adding value for our customers so that we can keep them longer. It really is a virtuous circle. On switching to the partnership side, the partner channel, I think, is an area of missed opportunity in the past and something we have spent a huge amount of time investing in. And the leaders of that channel, Kathy and Liz have been laser-focused on this for the last 6 to 9 months. You've seen a marked increase in a very short period of time. But mark our words, there's more to come. This is underpenetrated because anyone who has access to, has built relationships with, has a trusted relationship with a small business audience, we should be working with them. And we can help them. We can help them if they haven't formed, form their business. But more importantly, if they have, through concierge products, through legal plans, through compliance offerings. And these are all things that are native to what we do, but that we haven't offered outside of our platform. Even concierge, we're still in that test phase such that we've been selling only to our customers. Opening that up to other partners is a really exciting avenue. So, I think you should expect more to come from us and we want that pressure. Operator: Your last question comes from the line of John Byron with Jefferies. Unknown Analyst: This is John again for Brent Thill at Jefferies. Actually, I had another question regarding concierge suite. I mean I'm looking at your slide deck, it looks like the list prices are between $1,000 and $1,400 compared to ARPUs like the $260. So obviously, it can be a very big contributor. But just wondering if you can kind of size up the percentage contribution maybe either as an overall business or the subscription business? And also wondering where are you getting the lead gen sources? I mean, I guess you just mentioned it's your base itself. And then a follow-up would be in terms of formation nation sales rep productivity, wondering if there's any -- if you can talk about that and whether the number of reps is growing at all. Jeffrey Stibel: Sure. Yes, I'll take the concierge question. It's a continuation. We haven't disclosed the size and scale in part for 2 reasons, both of which we think warrant a bit more time. The first is we are only using leads from our base. And to your specific question, John, that means we're looking at that base of customers. We're checking whether they're in compliance or not in compliance, whether they need to be reinstated and what the direct needs from LegalZoom's perspective are. You can imagine over time, once we perfect this, the ability to go out to partners and direct marketing because we'll be able to help people get banking relationships, get insurance they might not have been able to get otherwise. Get off personal guarantees by helping them become and maintain compliance over the long run with these concierge products. The second is we haven't perfected the product itself yet. We're still looking at pricing. We think that there is huge inelasticity, and we've tested it, but we won't pressure test that until we have the product right. Do we want to include lawyers in that product? Do we want to include accountants in that product? How far up the chain do we want to go? Because we know that the more we can offer a customer, the longer they're going to stay, and they are willing to pay for that value if we're providing a strong service for them. So, we continue to tease apart what the different variables of concierge are currently and should be. And so far, we're incredibly pleased. We're seeing incredible growth from that. And when you look at it, it is the predominant driver of our human-in-the-loop growth here, and we expect it to continue to be. So, we're excited, but we think it's premature to discuss the overall contribution. And Noel, I'll let you take that. Noel Watson: Yes. Just on the sales question. So, for Formation Nation specifically, I think the call out is that this quarter represents a full quarter of Formation Nation sales costs relative to a partial quarter last year because we acquired them partway through the calendar quarter. With that said, we are investing in sales both -- across both of the brands, Formation Nation and LegalZoom, in part to support the growth that we're seeing on concierge on the LegalZoom side. And then on the Formation Nation side as we see greater demand, and we're very much tying any incremental hires on the Formation Nation side to an ROI equation and ensuring that there's enough demand to support the incremental hire. And so that's how we're determining when to add sales reps there. Operator: This does conclude the question-and-answer session. Thank you for your participation in today's conference. This concludes the program, and you may now disconnect.
Operator: Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the DoubleVerify First Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Brinlea Johnson, Investor Relations. Please go ahead. Brinlea Johnson: Good afternoon, and welcome to DoubleVerify's First Quarter 2026 Earnings Conference Call. With us today are Mark Zagorski, CEO; and Nicola Allais, CFO. Today's press release with this call may contain forward-looking statements that are subject to inherent risks, uncertainties and changes and reflect our current expectations and information currently available to us, and our actual results could differ materially. For more information, please refer to the risk factors in our recent SEC filings, including our Form 10-Q and Form 10-K. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures and should be considered in addition to and not as a substitute for our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on our Investor Relations website at ir.doubleverify.com. Also, during the call today, we'll be referring to the slide deck posted on our website. With that, I'll turn it over to Mark. Mark Zagorski: Thanks, Brinlea, and good afternoon, everyone. We delivered strong Q1 results as we continued our solid execution on our product innovation, strategic and financial road maps. In Q1, we achieved 10% year-over-year revenue growth, led by accelerating growth of our social verification and optimization solutions, and we delivered a 31% EBITDA margin, which exceeded expectations, largely due to AI-fueled operational efficiencies. Advertiser growth was positive across all key industry verticals in the quarter as we continue to benefit from our focus on further diversification of customer engagements and ad spend across various client types. We also repurchased $100 million worth of shares year-to-date, reflecting confidence in our business and our commitment to returning capital to shareholders as a core element of our long-term value creation strategy. We expect to deliver a strong 2026 as we successfully execute on our strategic plan to verify the quality, optimize the investment and prove the impact of digital ad impressions across any platform, media or market or advertiser spend. The solid results this quarter were fueled by our core growth catalysts, social activation and measurement products, streaming TV verification and our dynamic suite of solutions that empower advertisers to better navigate the evolving ecosystem of AI advertising platforms and Gen AI content. Across all of these sectors, our incredibly durable value proposition remains tantamount. DV is the independent essential trust layer that marketers rely on to ensure their ad spend is protected from fraud in unsuitable context and most importantly, delivers the highest possible return on investment. And this essential role in the ecosystem continues to expand as new product innovations power our growth flywheel. Let me share a few recent stats that underscore the impact of these investments. Driven by continued success on Meta, social measurement grew 23% year-over-year, a significant acceleration from Q4. Social activation, our fastest-growing solution set, grew 92% year-over-year in Q1, up from 62% in the fourth quarter. Authentic Advantage on YouTube, which combines Scibids AI optimization with prebid filtering and post-bid measurement launched in Q3 last year and is also expanding rapidly. It is now on track to deliver $10 million of expected ACV in 2026. CTV measurement impression volumes also grew, up 28% in the quarter. And our ABS-enabled streaming TV prebid Do-Not-Air List entered general availability in January. With 3 top 15 customers representing hundreds of millions in CTV spend implementing these DV-only streaming TV controls. DV continues to break new ground in the drive towards greater transparency in streaming TV. AI measurement tools like Slop Stopper, which is now available on YouTube and AI agent ID are showing meaningful engagement rates. Our AI Slop Stopper measurement solution for mobile and online video and display is already applied to over 40% of measured impressions, and the prebid tool is being tested by 6 of our largest advertisers. Our midterm goal remains to increase the contribution of social, streaming TV and AI-driven solutions from under 30% of total revenue today to approximately 50%. As we drive this evolution, our mobile and online video and display business remained stable in Q1 with approximately 2/3 of impressions that we engage with delivered on mobile, in-app and mobile web environments. We remain focused on creating a revenue mix that closely aligns with the fastest-growing global digital ad sectors. TV continues to drive new revenue opportunities, distance ourselves from competition and create meaningful margin expansion through AI efficiencies and product innovation. AI solutions, social activation tools and streaming TV quality solutions are positively impacting our customers' ad performance and building a foundation for TAM and market share expansion for DoubleVerify. Shifting focus to the role that AI is playing in the ongoing expansion of our product-led growth cycle, we continue to lean into AI to operate more efficiently, launch products faster and improve margins. And as the emerging AI advertising universe evolves, it is creating new revenue opportunities that expand our TAM as we extend our essential role in this burgeoning environment. Regarding this new environment, we've identified 3 main areas where DV has the largest AI growth opportunities and which we are already seeing traction with customers. First, the Agentic Buying and selling of media, where we are building new products, connecting with and leading the development of the numerous protocols that will help advertisers lean into AI-based buying. Second, we are empowering advertisers to navigate the dynamic AI-impacted advertising landscape as AI cyber fraud and AI content slop becomes prolific. And third, we are digging into the massive potential ad market on LLM chatbots where many of our current advertisers are beginning to deploy their marketing dollars, GIFT had little in the way of transparency and independent measurement. Let me talk briefly about each one of these opportunities. First, we are focused on establishing security and trust in the agentic advertising ecosystem. Trust has always been essential in our industry, and we recently joined the Ad Context Protocol, AdCP, a coalition of ad tech companies established by Agentic Advertising organization to define standards for ad buying and selling by AI agents. According to eMarketer, about 2/3 of ad buyers plan to focus more time on Agentic ad buying this year. While in early days, we are actively engaged to make sure DV is at the forefront of establishing standards that will continue to preserve trust and transparency for its advertisers wherever they choose to deploy their advertising investments. As with all of our engagements, we remain independent and agnostic and the way we operate in the agentic advertising world will be the same with the ability to plug into any agentic protocol from the IAB framework to platform-specific systems that are important to our customers. Second, we are expanding tools to protect ad investments from AI-fueled challenges. We continue to enhance our market-leading suite of AI tools that combat the increasing challenges of navigating AI Slop and avoiding AI cyber fraud. With the launch of DV AI SlopStopper for Social, we've expanded our capability for advertisers to avoid low-quality AI-generated content on YouTube and will broaden our coverage to other walled gardens in the coming quarters. Fueled by malicious AI, cyber fraud continues to become more sophisticated, threatening to challenge the ROI and efficiency gains driven by the positive use of AI. In Q1 2026, DV's fraud web continued to harness AI to fight fraud as AI-powered fraud schemes proliferated at a record pace and became even more sophisticated. AI-powered bot schemes continue to evolve faster than ever with 140% more bot scheme variants emerging in Q1 '26 compared to Q1 '25. In parallel, app-based fraud continues to accelerate dramatically, especially across mobile and CTV, where we have classified over 1,300 apps as fraudulent since the beginning of 2026. Finally, we are focused on capitalizing on the massive potential ad market that AI chatbot marketing will represent. According to eMarketer, ad spend on LLMs is forecasted to grow by over $25 billion by 2029, with ad spend expected to cannibalize over 14% of search spend, a $400 billion market that DV has historically not been able to access. OpenAI recently shared that they expect to generate $100 billion in advertising revenue by 2030, underscoring just how the market may be moving even more rapidly than analysts are predicting. As has been the case for the open web, mobile, streaming and social environments, unbiased independent measurement will play a key role in engendering the advertiser trust needed for this new ecosystem to thrive. While AI platform ad models continue to evolve, advertiser demands remain the same, ensuring ad transactions are trusted and transparent and ads are viewable, brand suitable and delivered to legitimate traffic within authentic content environments. Our enterprise customers and agency platforms have made it clear to us that expanding beyond test budgets in AI environments will require even greater transparency and trust than is present today. We are confident that, as we have shown on social and streaming platforms, our role as an essential trust layer will extend to this new ecosystem, and we are engaged in discussions with several LLMs who are leaning into ad-supported models. As AI drives digital advertising to become more automated, agentic and opaque and as AI Slop becomes the must-avoid content category for advertisers, the need for independent verification, protection and performance measurement has never been greater. Regardless of platform, buying mode or message, DV will be an integral trusted part of the ad equation. Moving to social verification. The social sector remains our fastest-growing business segment and is a core driver of our next phase of growth. No other verification or measurement provider has more innovative solutions for advertisers seeking to protect their spend on social platforms and ensure it performs. Social activation accelerated meaningfully to over 90% year-over-year growth in the first quarter, up from around 60% growth in Q4. This acceleration was driven by continued scaling of our social prebid solutions, elevated by enhanced product capabilities on Meta as well as expanded capabilities across TikTok and YouTube. 87 advertisers have now utilized Meta activation since launch, up from 68 in the fourth quarter with 31 of these customers coming from our top 100 clients. As of the end of the first quarter, our Meta activation product was already at a $12 million annualized run rate. On YouTube, DV Authentic Advantage has seen strong customer adoption. Some of our largest CPG customers have started scaling on the solution, driven by the significant ROI improvements that it delivers. Through the combination of Scibids AI optimization with social prebid filtering and post-bid measurement, DV Authentic Advantage customers have seen their media CPMs decline by as much as 36%, while reach has expanded by 64% and brand suitability integrity remains strong. As with DV's Meta prebid solution, we are just starting to scratch the surface with the impact that Authentic Advantage can have on our customers' business and our growth profile, and we're excited about the significant opportunities ahead for both products. As mentioned previously, our social suite of tools are ramping, and we recently announced the expansion of DV AI verification to include DV's AI Slop Stopper for social. This new industry-leading offering is designed to help advertisers navigate the growing challenges posed by low-quality AI-generated content and safeguard brand reputation across social and video-centric environments, starting with YouTube. DV's AI Slop Stopper for social is another DV tool that empowers advertisers to ensure their brand investment is protected wherever they spend while driving stronger media outcomes. Additionally, in the quarter, we expanded brand suitability coverage across Snapchat's Discover feed format, enabling our advertisers to have complete coverage across Snap Discover Tiles placements. And we recently announced that we achieved Media Rating Council or MRC accreditation for TikTok video viewability, becoming the first measurement vendor to receive the accreditation. As advertising investment continues to grow across video-centric social platforms like TikTok, independent verification plays a critical role in ensuring transparency and accountability. And with accredited measurement informed by tens of trillions of historical ad transactions, advertisers can now evaluate campaign effectiveness with greater confidence and ensure their media investments deliver real value. This milestone underscores our commitment to delivering the highest standards of measurement accuracy and transparency and further demonstrates the company's alignment with the MRC accreditation process as a critical layer of accountability in digital advertising. Turning to streaming TV. We continue to deliver product innovation to address advertiser demand for independent transparency and increasing fraud in streaming environments. Our continued product innovations helped grow CTV measurement volumes by 28% year-over-year this quarter. We've already begun to see solid adoption of ABS Do-Not-Air list from 8 of our largest advertisers as well as strong interest in our authentic streaming TV solution. And in this quarter, we announced that Spectrum Reach became the first partner to join DV's certified transparent streaming program, reinforcing its commitment to secure program level transparency across streaming TV inventory. Spectrum Reach will share key show level data across their programming, including news and live sports, spanning both direct IO and programmatic buying. These insights will be available directly within DV Authentic Streaming TV reporting, giving advertisers verified post-bid visibility into the specific programs their ads ran alongside. By combining real, not implied or aggregated show-level transparency in a privacy-focused way with DV's performance analytics and optimization capabilities, advertisers can now better understand how contextual relevance drives outcomes and make smarter decisions to optimize future streaming investments. This is just the start of our drive to deliver granular unaggregated show-level transparency across all streaming environments, and we are seeing momentum from additional platforms to join our certified transparent streaming program. The results of our innovation leadership are clear. We are growing client engagements and winning deals with new solutions where there aren't any competitors. We work with over 340 advertisers now generating more than $200,000 annually. And our unique solution underscored a 77% greenfield win ratio in Q1, meaning that we're winning deals with solutions in new areas in which there are no competitive incumbents to displace. Investment in innovation continues to be DV's secret sauce to get stickier with our customers, win new deals and gain market share. And AI is enabling us to innovate more efficiently than ever as we continue to expand margins while launching and expanding the tools that cement our role as the essential trust layer for buyers and sellers of digital media. With strong execution in the first quarter, we're leaning hard into AI-powered innovation that will continue to extend our leadership position. Looking ahead to the rest of the year, we remain focused on product development acceleration, partner expansion and market share growth and continued strong margins and cash flow. With that, let me turn the call over to Nicola. Nicola Allais: Thanks, Mark, and good afternoon, everyone. For the first quarter, we achieved 10% year-over-year revenue growth and 31% EBITDA margins. Off the strong start to the year, we are reiterating guidance for the full year. For the first quarter, total revenue was $181 million, representing 10% year-over-year growth. Total advertiser revenue, which includes activation and measurement, represented 90% of total revenue and grew 9% year-over-year, driven by 12% growth in volume or MTM, partially offset by a 4% decline in fees or MTF. Activation revenue grew 6% with ABS representing 53% of activation revenue in the quarter. As of quarter end, over 75% of our top 500 clients were using ABS. Measurement revenue grew 16% year-over-year with social measurement revenue increasing 23% and representing 49% of measurement revenue and international revenue increasing 18% and representing 27% of measurement revenue. Supply side revenue represented 10% of total revenue in the quarter and grew 12% year-over-year. We're driving growth by adding new CTV and digital platform partnerships and by continuing to expand DV solutions on retail media networks. Moving to expenses. In the first quarter, we delivered 82% revenue less cost of sales. Our continued investments and use of AI capabilities are allowing us to scale at a consistently efficient rate even as we measure increasing levels of volume. We delivered $55 million of adjusted EBITDA, representing a 31% margin as compared to 27% margin in Q1 of 2025. Total expenses for product development, sales and marketing and G&A increased 2% as compared to 10% revenue growth. We are showing early signs of the benefit of using AI capabilities to grow through improved productivity across the organization and increased software capitalization related to product development. We are scaling the business more efficiently, which results in increasing EBITDA margins. Stock-based compensation was $24 million in the first quarter, flat to prior year. For the second quarter, we expect stock-based compensation of approximately $25 million to $27 million and weighted average fully diluted shares outstanding of approximately 157 million shares. For the full year, we continue to expect stock-based compensation to range between $102 million to $107 million, a decline year-over-year, reflecting the impact of our updated equity incentive plan that reduced the annual value of equity grants in 2026 by over 40% as compared to 2025. Turning to cash. Year-to-date, we have repurchased 9.8 million shares for $100 million, of which 7.3 million shares were repurchased in the first quarter for approximately $75 million and 2.5 million shares were repurchased in April for approximately $25 million. Year-to-date, the 9.8 million shares we repurchased represent approximately 6% of fiscal year-end 2025 outstanding shares. Net cash from operating activities in the first quarter was $4 million and was impacted by timing of collections and payments at the end of the quarter. For the full year, we expect free cash flow conversion of approximately 60%. We ended the first quarter with approximately $174 million in cash and no long-term debt. Now turning to guidance. For the second quarter of 2026, we expect revenue to range between $199 million and $205 million, representing a year-over-year increase of approximately 7% at the midpoint. As a reminder, we're lapping our 21% growth rate in Q2 of 2025. And we expect adjusted EBITDA to range between $63 million to $67 million, representing a 32% adjusted EBITDA margin at the midpoint. For the full year 2026, we are reiterating our prior guidance. We expect revenue to range between $810 million and $826 million, representing an 8% to 10% year-over-year increase and expect adjusted EBITDA margins of approximately 34%. As discussed on our prior call, incremental growth in 2026 will be driven by 3 product-led growth engines. First, continued adoption of our solutions across social and streaming TV; second, growth from existing enterprise clients scaling our product offering; and third, continued new customer acquisition driven by DV's differentiated products. Our first quarter results demonstrate progress on each growth driver with increasing social activation revenue growth, increased adoption and scaling of new products and a consistently high win rate. Our first quarter results show solid execution. With a clear focus on durable growth and expanding profitability, we're well positioned to continue to deliver long-term shareholder value. And with that, we will open up the line for questions. Operator, please go ahead. Operator: [Operator Instructions] Your first question comes from the line of Matt Swanson with RBC Capital Markets. Matthew Swanson: Congrats on a solid start to the year. I think I'll pick up right where Nicola left off there. So I mean it was a great quarter for social measurement. But I mean, really focusing on that growth opportunity in social activation. Any time you have something with over a 90% growth rate, we should probably start there. Can you just kind of give us an update on how things are trending and kind of how the rollout has been going relative to your expectations with your customers, especially on Meta? Mark Zagorski: Yes. Thanks for the question, Matt. So obviously, we're really pleased with the scale -- scaling and speed of scaling on social activation, which is really being driven by all 3 prongs. The first, as you mentioned, Meta activation and the new Meta prebid tools we have there. The second, growth in YouTube through our Authentic Advantage solution; and third, through TikTok as well, which is -- continues to grow at a really nice pace on the pre-bid side. So our social activation business is really running on all cylinders. And one of the things I think this really underscores is the fact that our solutions are really playing an essential role in the walled gardens. I think there were some questions about whether or not, hey, is DV as powerful or as needed in the walled gardens as it is in the open web. And this -- the growth of this is proving that out. I think it also underscores the power of the prebid and kind of post-bid engine where we can launch prebid solutions where we already have measurement in place, we see a nice catalyst for growth. So it's scaling well. Meta, in particular, now is over 80 clients have engaged with it. Some of our biggest advertisers are now engaged there. We mentioned, I think, in the last call, we wanted to get to a $15 million ARR by the end of '27 -- or '26, I'm sorry, and we're already at $12 million. So like this is growing well. I think it's scaling well. And again, it's definitely being driven by Meta, but it's also that social activation 90% growth number is being supported by our innovations in TikTok and YouTube as well. Matthew Swanson: Great. And then, Nicola, just kind of thinking more on the guidance side. I know over the last couple of years, you've become less exposed to kind of the CPG and retail sectors. But if there's anything from kind of a macro standpoint that you would point out to us? And then just any update on the advertiser who went through the agency change last quarter? Nicola Allais: Yes. So I'll start by saying from a vertical perspective, we spoke a lot about retail and the impact it had on our business for the end of the year. That has normalized as we had expected. We already spoke about it on our last call. And overall, all of our key verticals showed growth in the first quarter of 2026. And we haven't seen material changes across the verticals. If anything, we've been able to diversify further into healthcare and technology, which allows us to not be as reliant on retail and CPG. So it feels more normalized, and it feels that we are continuing to diversify in a way that's going to help to create a more predictable business for us. In terms of macro, if you look at the verticals, I'll address the 2 verticals that I generally mentioned in terms of uncertainty based on what's happening in the macro for us, auto and travel are fairly small verticals. So we're not as exposed to those. And just a general comment on macro. We're obviously not assuming strong tailwinds, but we're assuming an environment that's going to remain fairly stable. Operator: Your next question comes from the line of Brian Pitz with BMO Capital Markets. Brian Pitz: Mark, since I know Slop Stopper is one of your favorite topics, maybe you could give us your latest expectation around penetration rate and maybe thoughts on the future opportunities around this product. And then maybe stepping back more broadly, as AI content continues to proliferate across the Internet, talk about what you're hearing from advertisers in terms of how they're adapting to this changing environment? Are they starting to get more comfortable? Maybe just a little bit more insight. Mark Zagorski: Thanks for the question, Brian. And yes, I love Slop Stopper just because I love saying the name on these calls so much. As we noted in the call, Slop Stopper is now being applied on the measurement side to about 40% of all of our impressions. That's a pretty -- it's probably one of our fastest scaling attach rates for any different category that we've seen. So on the measurement side, it's really being picked up pretty quickly, and that's a great thing. And it also shows to your second part of your question that advertisers are still just trying to figure out how they navigate this world of AI content. And Slop Stopper is built for a specific reason. It's to avoid low-quality, questionable AI content, right? Not all AI content is bad, but there's certainly stuff out there that advertisers want to avoid, and that's what Slop Stopper helps them do. When we think about kind of what's next for that tool, so we launched a prebid Slop Stopper solution on YouTube. We're going to expand that to additional social platforms over the next few quarters. And it's the platforms that -- the social platforms, particularly around video, that are the most kind of challenging for advertisers to try to figure out where they should and shouldn't advertise against. So we see this as, again, another catalyst for higher attach rates for our solution and another catalyst for folks to actually lean into working with DV, maybe even if they're not because it gives them another tool to use to navigate challenging content. And I think the other thing, and as I mentioned in my earlier question, there is -- there's a growing need for our solutions within the walled gardens and not because the content there is particularly better or worse than any other platform, but the content there is becoming really overrun with a good amount of AI content and the advertisers really are looking for tools to help navigate that. So the problems that advertisers saw in the open web are evolving to different types of challenges behind walled gardens. And the great thing is that we've got solutions to address all of them. Operator: Your next question comes from Maria Ripps with Canaccord. Maria Ripps: Mark, you said that you were in discussions with several LLMs regarding sort of verifiying ads on their platforms. Is this the same brand safety stack that you offer today? Or will the agentic ad environment require sort of a fundamentally different product? And how are you thinking about sort of pricing -- sort of structuring pricing models for agentic ads? Mark Zagorski: Thanks for the question, Maria, and it's a really great one. So when we think about what's going on with the ad-supported LLMs, what we've seen so far, even as recently as this week, there's been announcements that OpenAI is embracing third-party ad solutions, right, from demand solutions and creative optimization through companies like Cargo and Pacvue and Smartly. The next step for them, as we've noticed, is really to start looking at measurement and verification. And we're leaning into discussions with lots of different LLMs on that front. And when it comes to kind of what we think about what our solution can do there, it really is to play the same fundamental role that we do in social and in streaming and in display and online video, which is acting as a trust and transparency layer. And that has everything -- has to do with everything from ensuring that ads are viewable and visible by a real human to ensuring that the context where it ends up with is aligned with what that brand and who that brand is and where they want to be. So from a general thesis perspective, the application of our solutions in that environment is pretty much the same. It's building trust between the buyer and the seller. When it comes to the business model around it, we've got lots of different business models when we employ with platforms. But almost all of them are advertiser-paid and they're based on volume of engagement. So as we look at the opportunity within the LLMs, our assumption is that model will extend into there as well, which will be volume-based, advertiser paid based on the scale and level of engagement of that advertiser with the impressions on those platforms. Maria Ripps: Got it. That's very helpful. And then just following up on Slop Stopper. So as we think about the product, do you view it primarily as a retention tool sort of bundled into existing relationships? Or is this a product that can be priced and sold independently? And sort of you just launched it on YouTube, it's coming on other platforms. But sort of what's the realistic time frame for this product to move the needle on revenue either directly or indirectly? Mark Zagorski: Yes. It's another great question. So I think of Slop Stopper really as 2 -- having 2 positive impacts on our business. The first, as you noted, is the retention. It creates greater value in our engagements with our customers by giving them another category of content to have greater transparency on. So for current customers, who already are using our measurement, I think it gives us kind of a stickier, more ingrained relationship. That is always helpful as we go back to renegotiate deals and look at price increases down the road, right? So that's one. The second is it helps with attach rate, right? So it helps advertisers who maybe, for example, aren't using us on Prebid, on YouTube. But now knowing that they can avoid AI slop by using our solution, that drives up attach rates for our solutions there. So I think it has, again, a two-pronged impact the way it currently is structured. A, it helps us retain and grow our relationships with current customers, but it also drives up attach rate. If there's a third aspect as well, it is a differentiator in the market, right? We're -- it is a unique solution for DV that our competitors don't have. It allows us to win deals on a greater scale than we would if we didn't have it. So there's a direct impact to kind of the new customers that we are able to bring on as well. I think we're already seeing -- and so the last part of your question is like when does it create a financial impact in the business. I think we're already starting to see that a little bit. When you see kind of our measurement growing at 16%, which is a great rate for us there. When you see our social activation growing, which -- of which AI Slop Stopper is part of social activation growing at 92%. Those numbers are fueled by features like this, which are unique to DV, which drive attach and create new customer engagements. Operator: Your next question comes from the line of Andrew Marok with Raymond James. Andrew Marok: Maybe just one for me on the chatbot surface again. Obviously, we've seen OpenAI kind of evolve its offering from a CPM to a CPC over time. And of course, nothing is finished yet. But from the architecture of the chatbot ad offering itself, is there anything that they could do that would be more or less advantageous for you to partner with? Are there any kind of structures that you kind of hope that they might lean toward? Mark Zagorski: Thanks for the question, Andrew. You made some great points. The first is that the model is evolving, and it's evolving very quickly, right, as both advertisers experiment and as the LLMs experiment with advertising, right? So they're changing pretty quickly. The current setup of the structures actually lean very well into what we do very well, which is analyzing content and context that's text-based at scale very rapidly. So the way that the engagements are set with consumers, the predominant nature of how consumers engage with those chatbots falls kind of very nicely into what DV has done for the last 15 years, which is analyze advertising in contextual or text environments. So that current structure actually fits well to what we do. Our experience working with walled gardens and getting real-time feeds of content, whether it's from folks like TikTok or others, gives us kind of a really strong legacy to build upon, to be able to analyze the ads in those environments. So I guess that's a long way of saying we're pretty flexible. We've built for many different types of systems from video systems to short-form video systems to text-based open web engagements. So the way that ChatGPT or any of the platforms are set up today are relatively easily engaged with our current system and our current classification system based on what we've done in the past. So we are ready. We've built for very challenging environments before, real-time environments, unique environments based on an individual engagement. And I don't think this is going to be a significant lift for us to move beyond that. Operator: Your next question comes from the line of Matthew Condon with Citizens. Unknown Analyst: This is [ Briana ] on for Matthew Condon. Just a question. You've raised the Authentic Advantage on YouTube ACV to $10 million from $8 million last quarter and then Meta activation, I think it was now $12 million versus $8 million prior. Just can you help us understand the incremental growth you're seeing within these 2 products? How much is it coming from new advertisers? Or is it more so the existing advertisers ramping spend? Mark Zagorski: So it's a combination of both. So it's current DV advertisers that we've upsold to this solution launching and the previous advertisers who we brought on board actually scaling. As we've noted, we went from high 60s number of engagements to 80-plus now. So we've got new customers scaling the solution on Meta Prebid. The same kind of scaling is happening on Authentic Advantage. So it is a combination of both. What we love about it is once advertisers get engaged, they really do stay sticky and scale with us over time. And we've got a handful of our largest advertisers kind of growing at very solid rates across both Meta and Authentic Advantage. I mean when you get a 90% growth rate on something like social activation, it's going to be fueled not just by new customers, but by current customers really starting to scale their business, and that's what we're seeing here. Unknown Analyst: Got it. That's helpful. And then just on the social side, activation grew 92%. Just on activation revenue, it slowed to 6% from the 4Q number. Just can you help unpack what's going on within that line item? Nicola Allais: Yes. So activation for the quarter was up 6%, which equates to the growth that we had in the fourth quarter of last year. Mark spoke of the social activation growth, which is a high percentage on a smaller base. The rest of the business, as we said in our remarks, has remained fairly steady in the first quarter, and the majority of that business would be driven by mobile and online video and display business. Now we are obviously focused on being able to verify and continuing to grow where the advertisers are spending. And so tied to that growth that you see on social activation is the social measurement growth of 23%. Those are the vectors that we're focused on so that we're able to continue to verify wherever the advertiser is spending. Operator: Your next question comes from the line of Mark Murphy with JPMorgan. Mark Murphy: I'll add my congrats. Interested in behaviorally, what are you seeing out of the group of 6 or 7 of the large retail and CPG companies that had started to drag on your growth rates. I think that was about 1.5 years ago. And with the understanding, obviously, you would have lapped that slowdown. Is there any signaling from those companies relating to their own internals or how they're coping with commodity prices or consumer spending trends? I'm just wondering if you see any kind of different behavior there? And I have a quick follow-up. Nicola Allais: Mark, we're not seeing any different behavior than the overall vertical, right, for both CPG and retail. And as I said earlier, Retail, in particular, we've sort of seen the spend patterns normalize after the end of last year, which is a positive for us. And then in general, across the verticals, basically all of our key verticals showed growth in the first quarter. So the performance we had was spread. We are diversifying away from CPG and retail because we have large clients that are scaling, especially in healthcare and technology. And so as much as we can diversify as a result of us signing larger brands in different verticals, that obviously helps the business. But to go back to the initial part of your question, what we saw in Q1 is more of a normalized pattern of spend for CPG and retail. Mark Murphy: Okay. That's encouraging. So my other question is coming back to the prospect of working with the LLM providers, whether it's OpenAI or Perplexity or someone else. I'm curious when you think might be the earliest opportunity for some of those ads to maybe run in scale where they could conceivably be measured and verified in a way that would start to contribute noticeably. And then -- and also, is the push to do this coming more from the LLM providers themselves? Or do you think it's coming more from the brand advertisers? Mark Zagorski: Yes. Mark, it's a great question. Things are moving very rapidly on the LLMs with regard to advertising. We've mentioned in the last call and this call that our advertisers are more than excited to test them out, but to scale budgets, and they've been very clear with us and their agent has been clear with us to scale budgets, they've let the platforms know that they're going to need third-party measurement, they're going to need more transparency and more verification. So the drive to kind of integrate into the platforms is really coming from our partners and the brands who want the same level of transparency, the same level of currency-type measurement on the LLMs that they get everywhere else. I mean, on Meta, on YouTube, on TikTok, on the open web, on streaming, they get that kind of agnostic verification and they're demanding it on the LLM. So things are evolving rapidly there. We saw this week that ChatGPT and OpenAI opened their ad platform to numerous third parties to buy -- to allow for buying and creative optimization on those platforms. So it's clear that they're definitely embracing the marketplace. They're embracing third parties to come in and help build that business. And when you throw a number out there like $100 billion by 2030 in ad revenue, they're going to need partners to do that. So we're very positive and bullish on the opportunity. It certainly hasn't materialized yet, and we've been very clear on that, but we do believe that if we can use history as a guide with what's happened with social with us and streaming and mobile, et cetera, that we think this will be a great opportunity for DV down the road. Operator: Your next question comes from the line of Tim Nollen with SSR. Timothy Nollen: Could I switch topics to CTV? Actually, you've had an announcement or 2 during the quarter. And I'm just curious, what are you bringing to TV measurement to CTV that is new and different versus what has existed thus far? And I'm using the term measurement loosely, there's a lot of new ways to measure TV. I'm just curious what is the opportunity for DV in a much more complicated TV market these days than it used to be. And just relatedly, you mentioned MTMs for CTV were up 28%, I think, in the quarter. Could you just put that in a bit of context for us? I assume that's accelerating on the new products and kind of where is that trending for the rest of the year? Mark Zagorski: Yes, Tim, thanks for the question. We've said that of our -- we've got 3 pillars we're focused on for growth: social, AI, which we spend a lot of time on, but streaming is incredibly important to us as well. Impression growth last quarter was up 28%. And it was driven by higher attach rates for some of our new solutions. So the launch of verified streaming TV, which gives advertisers the ability to actually measure and ensure that their ads are being delivered on a high-quality full episode player, not on an outstream or embedded video someplace that it is a truly streaming TV environment. That is gaining traction and driving attach rates up on the post-bid measurement part of our business. We've also seen with our tools like the automated do not air list which allow advertisers to create dynamic exclusion lists of programming that they don't want to be around. Our attach rate has almost tripled for that across our prebid solutions on specific DSPs. So we've seen attach rates grow, which drives prebid. We've seen -- and when prebid attach grows, post-bid attach measurement grows as well. And I think it's because that advertisers have been demanding more transparency on CTV, right? Believe it or not, they probably get less granular verification data on CTV than they get on social or even on like short-form video and YouTube. So I think our solutions are starting to touch a nerve with advertisers. It's driving up attach rates. And it's increasing, obviously, the number of impressions that we're measuring across streaming TV as well. This is all good for us. Attach rates mean more money on how people are using our solutions more. Nicola Allais: Yes. And Tim, on your question for the volume of impressions. So yes, it grew 28% in the first quarter, and we do expect that to continue to outpace the overall revenue growth of the company just because it is the area that is growing. So we do expect that to continue. Timothy Nollen: Okay. And just a quick follow-up. When you're talking about -- I use the term CTV again kind of loosely, but -- and you mentioned streaming, Mark, are you specifying this from video that you've been measuring on -- in other areas like in social? Mark Zagorski: Yes. CTV, we designate as something that actually ends up on a large player in a living room. Streaming TV includes CTV, but includes high-quality branded entertainment that may end up, for example, on a mobile device or a tablet, but it's Hulu. It's not a TikTok video. It's Paramount. It's not a reel. That's different. So streaming TV, think of it includes all high-quality TV. CTV includes stuff that ends up in your living room on a big screen. Operator: Your next question comes from the line of Youssef Squali with Truist. Robert Zeller: This is Rob on for Youssef. On the gross margin expansion due to AI, I'm just curious if we could unpack that. And then is this the new norm for 2026? Or are you still targeting the 80%? And then I'm just curious on the drivers behind the sequential trend in large advertising customers and ARPU for that as well. Nicola Allais: Yes. So on the gross margin, we achieved 82% in the quarter. And the way we're able to do that is that we are using AI tools to essentially allow us to verify and classify content a lot more efficiently. And our expectation is that even though the volume of impressions that we measure will continue to grow, we'll be able to maintain a healthy gross margin. Whether it's 80% or 82%, it's going to depend a little bit on the volume that comes from the new batch of verification that we will have to do, including on the AI platforms. So it's hard to say. But one thing is certain is that we will be able to continue to remain efficient as the volumes grow. And so 80% is a safe benchmark, and it's a very healthy benchmark. And then on the other question, which was trending on large advertisers, what we're seeing -- and we called this out in the last call, which is the average dollars per client for the top 100 is continuing to grow year-over-year. We look at that on an annual basis, but it is certain that our large advertisers are being upsold to the new solutions and are part of the growth rates that we mentioned on social activation. So the ARPU is growing as we're able to offer them new products, especially on social and soon on CTV. Operator: Your final question comes from the line of Justin Patterson with KeyBanc Capital Markets. Jacob Armstrong: This is Jacob on for Justin. I guess kind of hitting on that last point about how you're using AI internally on classification. Can you talk about maybe some of the areas that DoubleVerify is using AI internally in terms of ramping engineer productivity and maybe how you're keeping that -- keeping a scaling token costs in mind while kind of ramping adoption internally these tools? Mark Zagorski: Yes. Thanks for the question, Jacob. We look at obviously, 2 large buckets of how we are leveraging AI. First is in kind of internal execution where we focus on efficiency and effectiveness and better client engagement. And the second major bucket is kind of the AI product development, which we've talked about a lot on this call. When it comes to kind of internal AI execution, we are focused really on agentic development and using agents to create code. So far, we've seen 40% faster software development. We're triaging IT tickets at rates we've never seen before. And it's allowed us to, as we've said before, maintain a headcount that will continue to show efficiencies over the coming year. So, a, just in general, engineering operations, we've been able to balance the cost of tokens with kind of the impact on it. And we look at everything from an ROI perspective when we lean in on using AI. You also mentioned core classification. And we've been using that to help our core systems kind of do what they do much faster. It's increased our productivity by 4x in classification. We're driving labeling, what we do when we label content by about 2,000x faster. And we've been very clear that we've got a decent number of contractors that have been helping us with the labeling and feeding our models. That number of contractors will be reduced by over 100 by the end of the year. So we're seeing efficiencies by using AI and an engineering team across core classification. And eventually, we're going to see this with client interaction as well as we start moving towards more natural language interfaces that enable better client interactions with less client service engagement and overhead. So it's a big impact on our operations. That's why we're seeing not only increasing margins, but faster go-to-market with product and more efficient client engagements. Operator: I will now turn the call back over to management for closing remarks. Mark Zagorski: Thank you all for joining us this evening. As we look ahead, we remain confident in the performance of our business and our priorities are clear: deepen adoption of the core products with core customers, accelerate the growth of our solutions for social, streaming TV and AI and drive industry-leading margins by leveraging the power of AI. We appreciate your continued support and look forward to connecting with many of you at upcoming conferences. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Thank you for standing by, and welcome to Napatech's First Quarter 2026 Interim Management Statement. [Operator Instructions]. And finally, I would like to advise all participants that this call is being recorded. I'd now like to welcome Klaus Skorrup, CFO, to begin the conference. Klaus, over to you. Klaus Skovrup: Good morning. I'm Klaus Skovrup, CFO of Napatech. I am pleased to welcome you all to Napatech's presentation for the first quarter of 2026. Joining me today is our CEO, Kartik Srinivasan. Our first quarter 2026 report was released earlier this morning on the Oslo Stock Exchange and is also available on the Investor Relations section of the Napatech website. For your information, a recording of this webcast will be available later today. There will be a question-and-answer session following the presentation Please note that this presentation contains forward-looking statements that are subject to risks and uncertainties. Our actual results may differ from those discussed in forward-looking statements. For further information on risk factors, please see company announcement and the slides prepared for this presentation. With that, over to you, Kartik. Kartik Srinivasan: Thank you, Klaus, and hello, everyone. Let me start with a brief summary of the quarter. We saw continued strengthening in our financial performance and early signs of demand recovery in the core infrastructure market, supported by disciplined execution across the business. At the same time, we are seeing accelerating momentum in our design win pipeline across both core and AI infrastructures. Importantly, this pipeline is increasingly progressing towards production, which we expect to translate into revenue over time. Finally, our product positioning remains highly differentiated. As AI workloads scale, the network has emerged as a critical bottleneck and our deterministic programmable architecture is well aligned with these evolving requirements. Overall, the quarter reflects improving fundamentals, building momentum and a clear positioning for the next phase of growth. Turning into our financial performance for the quarter. We delivered revenue of $5.7 million, representing 69% year-over-year growth, primarily driven by our improved demand in our core infrastructure business. Gross margins remained strong at 70%, reflecting a favorable product mix and continued discipline in execution. We're also seeing improvement in revenue trends, indicating early signs of recovery in our core infrastructure markets. With all this, while our guidance for 2026 remains unchanged, we continue to focus on consistent execution and converting pipeline into revenue over the course of the year. Turning to business momentum. On the core infrastructure side, we saw solid activity in the quarter with 5 new design wins, continued pipeline expansion across verticals and new customer engagements. We also converted a key design win in the financial infrastructure. This is a production-oriented engagement with a multiyear opportunity. And importantly, we view this as a repeatable use case across similar customers. I will go into a bit more detail on this space in my next slide. On the AI and infrastructure side, we continue to make steady and tangible progress. Our technical deliverables are on track and validation and testing activities are progressing as planned. At the same time, we are seeing continued collaboration as we advance overall solution readiness towards production. In parallel, our engagement with a Tier 1 server OEM continues to progress with use cases defined, product deliverables aligned and commercial discussions underway. Overall, we are seeing strong execution in core infrastructure alongside meaningful progress in AI as both areas contribute meaningfully to our growth trajectory. I'll now take a moment to highlight one of our core infrastructure verticals, financial trading networks. These are mission-critical, latency-sensitive environments where performance is defined not just by speed, but by consistency and determinism. Typical applications in this space include real-time market data capture and normalization, feed handling, trading signal generation and order execution, where even microseconds of variation can impact outcomes. Our customers in this segment include global banks, hedge funds, proprietary trading firms and exchanges, all operating highly performance-sensitive infrastructure. In these environments, the network sits directly in the critical path and increasingly becomes the limiting factor for performance. This is where Napatech's architecture is well aligned, enabling deterministic ultra-low latency processing with high reliability. Importantly, this is a repeatable use case with deployments across leading financial institutions and clear expansion potential over time. Let me now turn to AI infrastructure and how Napatech's role in this space is becoming increasingly critical. As AI workloads scale, performance is increasingly constrained by the network rather than compute. Moving data efficiently between AI compute, memory and storage has become a critical challenge. Importantly, we view this not as a linear or evolutionary shift, but as a more fundamental change in how compute, networking and memory interact, requiring a different architecture to scale efficiently, both from a performance and energy standpoint. Traditional networking introduces variability, congestion and CPU overhead, which limits overall system efficiency and utilization. What we enable is a fundamentally different approach, deterministic programmable networking that sits directly in the data path. This allows for consistent low latency movement, improved utilization of compute resources and more efficient scaling of AI workloads. In practical terms, this applies across applications such as distributed inference pipelines, data preprocessing and storage access used by hyperscalers and enterprise AI deployments. Overall, we see this as a structural shift in the market where networking becomes a key lever for performance and efficiency and where our architecture is well aligned. Before I hand it over, just to summarize, we are seeing strengthening financial performance, solid momentum in our core infrastructure business and continued progress in AI as we position for the next phase of growth. With that, I'll turn it over to Klaus to walk through the financials in more detail and provide an update on our outlook. Klaus Skovrup: Thank you, Kartik. We entered the year with a strong revenue in Q1 of $5.7 million, up 69% compared to Q1 last year. And as Kartik mentioned, the performance reflects continued customer engagement across our core infrastructure segment solutions. Our gross margin in Q1 was 70%, in line with last year. Our staff costs and other external costs in Q1 amounted to DKK 44.5 million, down 9% compared to Q1 2025, mainly due to reduced cost of subcontractors and personnel during 2025 to balance cost to the revenue. In Q1, we capitalized DKK 810,000 compared to DKK 3.1 million in Q1 2025. You can also read that our EBITDA in Q1 2026 amounted to a negative amount of DKK 18 million, which is an improvement of DKK 11 million compared to Q1 last year. Free cash flow in Q1 was negative of DKK 5.8 million following the negative EBITDA, which was partly covered by an improvement in our working capital. We still have more than DKK 120 million in available cash. While we still have focus on reducing inventory, we are increasingly also preordering to make sure we can meet customer demand, especially now where we do see increased lead times for range of components. The positive development in receivables was driven by customers paying their invoices from December 2025 during Q1 '26. Net working capital at the end of Q1 was DKK 73 million, a reduction of DKK 8 million compared to Q4 '25. Net cash flow from financing activities for Q1 was negative DKK 23 million as we did not draw on our credit facilities by the end of Q1. We continue to manage the business with a strong focus on cost discipline and cash preservation. Our guidance for the full year 2026 is unchanged compared to our latest reporting, as Kartik mentioned. So here, we are guiding units to be sold to be expected between 8,700 and 10,700. We expect a revenue between $32 million and $38 million, which corresponds to around DKK 200 million to DKK 240 million, ending in the middle of the range would be equal to a growth of more than 50% compared to 2025. Our gross margin interval is expected to end between 60% and 70%, and we expect staff expenses and other external costs to end in the range of DKK 170 million to DKK 180 million. Staff costs transferred to capitalized development costs are expected to be DKK 5 million to DKK 8 million in 2026. As we wrap up today's presentation, we would like to invite you to visit Napatech at one of these upcoming events. Our full year event plan is shown online at the link provided. And if you happen to be in one of these great cities during the coming period, we would love to meet you in person. With that, we are now ready for the Q&A. Operator, we are now ready to take the first question. Operator: And your first question comes from the line of Christoffer Bjørnsen of DNB Carnegie. Christoffer Bjørnsen: Can you just give some more color on how you are progressing both with the Tier 1 server OEM and with the d-Matrix relationships on the server OEM, perhaps a bit more flavor on where you are in terms of the steps towards commercialization and how you think about timing there? And then in general, both, especially on d-Matrix, whether you feel that the inventory that you added in the quarter is kind of sufficient to prep you for the ramp with d-Matrix or if we should see a proper increase in Q2? Kartik Srinivasan: Thank you, Christoffer for that question. So I'll kind of break this into 2 parts. One is on the AI inference customer. We are progressing from our technical deliverable standpoint as well as commercial deliverable standpoint on track. We remain convinced and excited about that opportunity. And again, the variable here is just the timing of this. To your question about are we changing our supply or planning in terms of how we want to fulfill it. We're sticking to what our guidance is there. We had already factored in orders coming in from them. And so there's no change to that plan as far as that AI infrastructure customer is concerned. And as far as the Tier 1 server OEM, Christoffer, that's progressing well on plan. We have alignment on the statement of work. We have alignment on the features, performance, cost, schedule, et cetera. So things are looking good there. Again, the same kind of response applies. We are delivering to our requirements. When that converts into some sort of meaningful thing remains to be seen. But we have some amount of orders in 2026 baked in from the Tier 1 server OEM as well, which we are not changing right now. Operator: And you have a question from Anders Knudsen private investor. Anders Knudsen: Just on the 5 design wins, could you perhaps give us a bit more flavor on those in terms of potential and also timeline? Are they impacting '26 by any means? And also on the recent design win within the financials, when do you expect to see it convert into the revenue that you have guided for? Is that in Q2 or in Q4? Or when is that going to happen? Kartik Srinivasan: Yes. Thank you for the question. The design win momentum that we speak about, both of those are pertaining to the core infrastructure the 5 new design wins that we had, each of them will track a different kind of path towards production. And some of these may actually impact 2026, but again, no change to our plan there. But these tend to be a bit drawn in how they convert from a design win into full production. It can be anywhere between 6 and 9 months for an existing product, which is why the core infrastructure market is so lucrative for us. We do turnkey solutions in that space to an existing well-known robust customer base. On the other side of the key design win that we announced -- on the financial side, we are expecting the first $1.5 million that we spoke about, that is expected within the next couple of months. So that will definitely hit our 2026 revenue, and that's kind of part of our plan. And the rest of the opportunity will kind of extend into '27 and beyond there. So that's kind of how the timing of the financial institution revenue looks like. Anders Knudsen: What's the financial design win baked into your original guidance? Kartik Srinivasan: Yes. So the way this works is we do have a lot of proof-of-concept designs that we do on an annual basis. And at any given point, each one of these or a few of these can actually convert into a design win like this for us. So we've done data analytics based on how we are engaging with these customers or segments, and we baked that into our assessment for 2026. So this was not something that came as a complete surprise. This is already baked into what we were expecting. Operator: And your next question is from the line of Øystein Lodgaard, of ABG. Øystein Lodgaard: Congrats on the strong growth in Q1. So I guess this kind of reflects the good momentum in your traditional SmartNIC business. Can you say kind of what kind of verticals, what kind of use cases are you seeing strong growth? And how you kind of expect kind of the traditional SmartNIC business to move throughout the year? Should we anticipate kind of normal seasonality from here that it strengthens in the second half? Or is kind of some kind of a large one-off contract or something in Q1, so we shouldn't kind of fully extrapolate that? Kartik Srinivasan: Yes. Fantastic question. Thank you for asking that. So we do -- there is a reason why we kind of placed the definitions of our market segments as core infrastructure and AI infrastructure. Within the core infrastructure, which is where we are seeing early signs of kind of demand recovery, that breaks down for us into at least 4 big verticals that is fintech, telco, cybersecurity and network packet monitoring. Each one of those segments represents individual growth areas for us. Like we announced in the fintech space, we converted a design win into revenue. But we also expect alongside the cybersecurity, packet monitoring and telco businesses are showing signs of early recovery as well. So we're expecting that to play a part in our 2026 performance. Øystein Lodgaard: And can you say something about in terms of new design wins in the AI infrastructure area? Are you working on many leads there? What are you seeing in that area in terms of new potential design wins? Kartik Srinivasan: Yes, there is a lot of engagement there. That is actually the more fascinating place for how fast that space is evolving. One thing I can definitely tell you with a lot of confidence is the AI infrastructure is no longer a compute problem. It is an efficiency problem, which immediately translates to 2 components of the data center that come into question. One is networking and the other is memory. And you will see that, that's why there is a lot of requirements, a lot of specifications, a lot of consortium being formed around what to do in the space of networking. Big hyperscalers are putting out specs, consortiums are putting out specs. And this is an exciting time for a company like Napatech because we are fundamentally based on programmable networking. Our architecture, our products are built to deliver to an evolving paradigm, which is what the AI infrastructure market is going through right now. So I am very confident and excited about this space, and there's a lot of activity that we are currently in, and I'll be the first one to come here and tell you as they convert into some sort of design wins. Operator: And this does conclude our Q&A session via the phone. I would like to hand back to management for any written questions and closing remarks. Klaus Skovrup: Thank you. And we do have some written questions here. I'll just see whether I can group them a little bit. So there's one here from [indiscernible]. A few questions. What is your visibility on H2 AI orders? How will ramp look like? And maybe we'll just start with that and then we'll take the rest of the question. I think you spoke a little bit into it already, Kartik. Kartik Srinivasan: Yes. So the second half of our 2026 is going to be exciting as well because that's when we start seeing some of our AI infrastructure revenue starting to materialize. I think we had mentioned that a good chunk of the 2026 revenue for us will still be based on core infrastructure and the AI infrastructure will probably be about 20%, and that's kind of still the mix that we're expecting for 2026. Klaus Skovrup: And then regarding the Tier 1 OEM, have you lost any opportunities? Kartik Srinivasan: No. Actually, we have not. In fact, we are in a very favorable position within the Tier 1 OEM. I remember using an expression the last time I was here called the hub-and-spoke model, which basically translates to we are very much engaged with the technology team, which is the hub, and then there is a few spokes that lead to the product teams. That model is still strong for us, and we are excited about delivering what we are calling the next-generation data reduction technology, which is extremely important in the AI infrastructure world as you're loading in huge large language models, compression and deduplication becomes a very important aspect of how data gets rolled out. And that's exactly the critical application or use case that we are delivering in this proof of concept. Klaus Skovrup: And then maybe just jumping to [indiscernible], who has a question here. How is the progress in proof of concept with the Tier 1? That's what you just explained. And when can we expect to be part of their sales in their server sales? Kartik Srinivasan: Yes. So the conversion of these designs into revenue and productization, that's kind of the variable in play here. We do have some level of early orders baked into our 2026 revenue like we discussed. But when that converts into material production and revenue, that remains to be seen. Klaus Skovrup: Yes. And then a follow-up question for Lars Knutsen (sic) here. Are there other opportunities arising with other players within AI infrastructure? Kartik Srinivasan: Yes. So that is the engagement or the set of engagements that I've been talking about. We do have to the capability that we have as a company to deliver, we have been selective on how we engage because at the end of the day, we have to prioritize how we deliver and make sure that our deliverable is robust. But yes, there is a set of engagements that we have on the AI infrastructure, which follows our design win pipeline, 4-stage pipeline routine. Klaus Skovrup: Then there's a question here from Ola Millingstad (sic). You're right that first orders from AI infrastructure will come in H2. Could you be specific how many dollars of your '26 guidance of USD 30 million to USD 37 million assume AI infrastructure deliveries? And if H2 AI orders come in as, how does that change the full year picture? Kartik Srinivasan: Yes. So our 2026 revenue profile will still be significantly biased towards the core infrastructure. I think we -- last time we were here, we said about 20% of that is going to be coming in from AI. That's what the numbers look like. And of course, if the AI orders don't materialize, then that's what the impact is going to be. Klaus Skovrup: And let me just see other related to this, I think that is in earlier presentation, this [indiscernible] in earlier presentation, it has been said just 20% of the forecast from d-Matrix is taken into Napa's forecast for '26. Is this still valid? Kartik Srinivasan: Yes. yes. So I think that observation of yours is still what we are tracking for 2026. Klaus Skovrup: I think the point here is that d-Matrix may have a higher forecast and then we have only taken 20% of that in. So I think the point is that currently, our guidance that's based on our expectations of what orders are coming from d-Matrix. Kartik Srinivasan: Right. Right, correct. Klaus Skovrup: Yes. Then there's one here from [indiscernible] again. d-Matrix acquired GigaIO to build a complete rack scale system. How has that changed your role at d-Matrix? Are you still the scale-out NIC in the SquadRack reference architecture? Or is there a risk they switch to a different supplier as they build out their own stack? Kartik Srinivasan: A good question, and I'm sure a lot of people have the same thing, and I'm so a lot, I'm glad that you asked it. Our relationship with them remains as strong as ever. In fact, it's even getting stronger because of the requirements that are unfolding for us as they themselves are evolving in this landscape very rapidly. The requirements are coming in towards production, and we have completed the first stage, and we're already embarking on the next-generation kind of engagement to see what that looks like. The Giga -- and of course, a lot of these questions are for the d-Matrix to answer. But the acquisition that they made of the GigaIO data center assets that definitely enables them to build more of a rack scale architecture of which we are singularly the component delivering scale-out networking. Klaus Skovrup: And then there's a question here from Lisa [indiscernible]. You cite commercial discussions underway on the Tier 1 server OEM design win. Does that mean that proof of concept has been achieved? Where are you currently in the qualification process? Kartik Srinivasan: Right. As part of the design win engagement that we are having with the Tier 1, starting commercial discussions typically indicates that there is activity across the 3 groups that make decisions at these kind of places. So we have alignment with the executives. We have alignment with product management and engineering, and now we are working on alignment with commercial. And once all of those move forward, that converts into product and then converts into revenue. So moving into the commercial stage or activating the commercial stage is a strong indication that things are making good progress towards production. Klaus Skovrup: Yes. And also from Lisa here, can you also give some color on expected revenue ramp-up for the remainder of the year, given that Q1 was seasonally very strong. Kartik Srinivasan: Yes. So there is definitely seasonality that we will still continue tracking towards -- throughout our 2026 revenue. And because our 2026 revenue is still heavily based on core infrastructure, the seasonality will mimic prior year seasonality, not necessarily in the absolute dollars, but at least in direction. So you can expect some of that to be similar in 2026. Klaus Skovrup: Yes. And then a question here from Terry Jensen. Why is revenue for Q1 lower than revenue in Q4? And I think that was what you just explained, Kartik, also that we do see seasonality. And usually, Q1 is our weakest quarter, whereas Q4 is the strongest. And then there's the last question here from [indiscernible]. What's the time line from your order cart from you order carts to have it in stock? Any limitations? Kartik Srinivasan: Yes. So again, very good question across the overall supply chain management and planning there. So our demand planning cycle or at least process is no longer limited by demand. It's actually just what we have to -- how we manage our supply. The lead times across critical components that we put in our adapters and solutions, including the likes of FPGAs and the memory components are seeing longer lead times and, of course, volatility in availability. But the good news is that our engagement with our customers allows us to have a solid level of visibility into how we plan our quarterly delivery. And we have put some mitigation factors in place as well by some level of prepurchasing of these parts, both across FPGAs and memory. So this allows us to deliver our products to plan to the '26 revenue as well as towards what the customer requirements are in the quarterly distribution of our products. Klaus Skovrup: Good. I think that summed up the last question we had in written form as in the Q&A. Good. And I don't think there's more coming in here. Operator, is there more questions on the line? Operator: There are no further questions on the phones. Klaus Skovrup: Thank you. Then I want to thank everyone for listening in. Enjoy the day, everyone. Thank you. Kartik Srinivasan: Thank you. Operator: This concludes today's call. Thank you for joining. You may now disconnect.
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: 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: 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 the Alpha and Omega Semiconductor Fiscal Q3 2026 Earnings Call.? [Operator Instructions] I will now hand the call over to Steven Pelayo, Investor Relations. Please go ahead. Steven C. Pelayo: Good afternoon, everyone, and welcome to Alpha Omega Semiconductor's conference call to discuss fiscal 2026 third quarter financial results. I'm Steven Pelayo, Investor Relations representative for AOS. With me today are Stephen Chang, our CEO, and Yifan Liang, our CFO.? This call is being recorded and broadcast live over the web. A replay will be available for 7 days following the call via the link in the Investor Relations section of our website. Our call will proceed as follows today. Stephen will begin business updates, including strategic highlights and a detailed segment report. After that, Yifan will review the financial results and provide guidance for the June quarter. Finally, we will have a Q&A session.? The earnings release was distributed over the wire today, May 6, 2026, after the market closed. The release is also posted on the company's website. Our earnings release and this presentation include non-GAAP financial measures. We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with GAAP measures. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release.? We remind you that during this conference call, we will make certain forward-looking statements, including discussions of the business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligations to update the information provided in today's call. Now I'll turn the call over to our CEO, Stephen Chang. Stephen? Stephen Chang: Thank you, Steven. Welcome to Alpha and Omega's fiscal 2026 Q3 Earnings Call. I will begin with a high-level overview of our results and then jump into segment details. We delivered fiscal Q3 revenue results slightly above the midpoint of our guidance, primarily reflecting strength in advanced computing, including AI, servers, and graphics cards, offset by softness in PC markets resulting from seasonality and memory shortage headwinds.? Tablets also showed strong sequential growth. And the Communications segment was also better than expected, driven by year-over-year growth from our Tier 1 U.S. smartphone customers, offset by weaker demand in China.? Overall, total March quarter revenue was $163.8 million, down 0.5% year-over-year and up 0.9% sequentially. Non-GAAP gross margin was 21.7%. Non-GAAP EPS was a loss of $0.28 per share. Our strategy remains consistent, and we are executing well. As we have said, we believe the December and March quarters represent a bottom for both revenue and gross margin, reflecting the impact of near-term market conditions and supporting a more constructive outlook going forward.? March marks the third anniversary of my journey as CEO of AOS.?When I stepped into this role in 2023, my goal was to steer our organization from a component-level supplier towards becoming a provider of application-specific total solutions, a move designed to push us past a $1 billion milestone towards a multibillion-dollar future. At that time, we were just scratching the surface of potential opportunities in front of us. Today, those opportunities have moved to the center of our business.? Over the past 3 years, we have successfully pivoted to higher-performance applications where we can expand BOM content and build durable competitive advantages. This strategy is translating into tangible results, particularly in advanced computing, where demand is broadening across AI data center applications. Specifically, we are gaining traction in high-performance medium-voltage MOSFETs used in hot swap applications and intermediate bus converters with increasing customer engagement and design activity expected to accelerate and contribute more meaningfully as we progress through calendar 2026.? We are actively expanding our medium voltage capacity to support this growth, and our backlog provides us with good visibility. At the same time, we are seeing a broadening of both our solution set and customer base, extending beyond traditional GPU-centric platforms into a wider range of cloud and infrastructure deployments. This reinforces our confidence that advanced computing is becoming a more durable and increasingly important growth driver for the company.? As is broadly reported, memory supply constraints and price pressures represent growing headwinds for the second half of calendar 2026. Against this backdrop, we are using 3 primary levers to protect our growth: steady margin expansion through improved product mix, and further increases in BOM content, where our total solutions approach is enabling us to capture more value as seen in transitions to next-generation PC platforms such as Intel's Panther Lake and higher charging current requirements in smartphones.? Continued disciplined investment to support the opportunities ahead. We have stepped up our targeted R&D investments in areas where we are already seeing success, including power ICs, high-performance MOSFETs for AI and data center applications, and advanced solutions for smartphones. These investments are highly focused and aligned with clear customer road maps and design wins.? While calendar 2026 may reflect some near-term variability, we are confident that the combination of expanding advanced computing opportunities, increased BOM content across key end markets, and our continued execution will position us well for stronger growth as we exit 2026 and accelerate into 2027 and beyond.? With that, let me now cover our segment results and provide some guidance by segment for the next quarter.? Starting with Computing. March quarter revenue was up 2.1% year-over-year and down 0.1% sequentially and represented 49.1% of total revenue. The segment results were slightly better than our original guidance of a low single-digit sequential decline. As I mentioned earlier, seasonal declines in PC markets were likely exacerbated by earlier pull-ins in calendar 2025 and potential demand impacts from rising memory pricing.? Strength in advanced computing, including AI servers and graphics cards, more than offset such decline and combined more than doubled sequentially and increased more than 40% year-over-year. The strong growth resulted in advanced computing representing 25% of the computing segment in the March quarter.? As mentioned before, we are seeing solid demand for our medium-voltage MOSFETs across an expanding list of applications and a customer base that includes power supply providers, module makers, cloud service providers, and major hyperscalers. We are shipping our high-performance MOSFET products into applications, including intermediate bus converters that are now moving into the build phase at some leading ODMs for major hyperscale customers.? Looking ahead to the June quarter, we expect computing segment revenue to increase by low to mid-single digits sequentially, driven by strong AI and server demand in advanced computing. While PC-related revenue is largely stable, tablets declined mostly due to seasonality as well as increased capacity allocation to opportunities in smartphones. We acknowledge that industry forecasts for the PC market continue to be revised lower, and we generally agree with that view, expecting some decline in calendar 2026. That said, we believe our performance should outpace the broader market, supported by continued increases in BOM content driven by our total solution strategy.? Near-term PC demand appears stable for the June quarter, but visibility into the second half of the calendar year remains limited given ongoing macro and component-related uncertainties. In advanced computing, we continue to see strong momentum with demand increasingly centered on our medium voltage solutions supporting server and AI infrastructure.? Importantly, we are seeing a broadening of both our customer base and application footprint with growing engagement across multiple platforms. These solutions are being deployed across both GPU and CPU-based architectures and are benefiting from the ongoing shift towards inference workloads, which are driving higher and more distributed power requirements.? While we continue to view 48-volt to 12-volt intermediate bus architectures as a near-term standard that we are benefiting from today, we see this as a stepping stone towards higher voltage systems, including 800-volt architectures expected to begin emerging around 2027.? In graphics, we expect a more muted environment in calendar 2026, given the current product cycle and allocation priorities, with the next major refresh opportunity tied to future platform transitions. Overall, we expect another quarter of strong sequential growth for advanced computing.? Turning to the Consumer segment. March quarter revenue was down 9.8% year-over-year and up 0.8% sequentially and represented 11.8% of total revenue. The results were below expectations for mid-single-digit sequential growth as recovery in gaming following a sharp inventory correction in the December quarter was offset by softness in home appliances.? On a year-on-year basis, wearables continued to see strong year-on-year growth, driven by market share gains, new customer engagements, rising BOM content, and a broader mix of end applications.? For the June quarter, we expect the Consumer segment revenue to remain relatively flat sequentially. In gaming, demand is tracking in line with our expectations as the current console cycle matures. While near-term production levels reflect seasonality as well, we remain closely engaged with our leading customer on their next-generation platform. We believe our established relationship and strength in high-performance power solutions position us well to participate more meaningfully as that platform ramps, with a greater impact expected beginning in 2028. Home appliance demand remains relatively soft and continues to reflect a cautious consumer demand environment with limited signs of near-term recovery. That said, we continue to see ongoing design activity that supports longer-term opportunities, particularly in emerging markets. Wearables are progressing through their typical seasonal patterns following recent strength, and we continue to benefit from solid customer engagement and a broadening mix of applications. Next, let's discuss the Communications segment. March quarter revenue was up 18.7% year-over-year and up 1.9% sequentially, and represented 20.6% of total revenue. The results were ahead of our expectations for a mid-single-digit decline, driven by strong year-over-year growth from our Tier 1 smartphone customer and BOM content expansion, offset by softness in China due to a weaker market and our prioritization towards premium models in the U.S. Looking ahead to the June quarter, we expect the Communications segment to decline slightly sequentially, but sustain the high year-over-year growth experienced in the March quarter as demand from our Tier 1 U.S. smartphone customers remains robust. As mentioned, we are prioritizing capacity for our Tier 1 U.S. smartphone customers in order to prepare for upcoming product cycles. We continue to benefit from strong positioning in premium models where our differentiated silicon and packaging technologies for battery protection are enabling higher BOM content. In particular, increasing charging currents across new smartphone platforms are driving incremental content opportunities, reinforcing our ability to capture greater value per device. At the same time, we remain mindful that rising memory pricing could impact overall smartphone demand, particularly in more price-sensitive segments and regions. However, we believe premium-tier demand will be more resilient, and our strategic focus on higher-end platforms positions us well to navigate this environment. As a result, we expect continued growth in calendar 2026, driven by both content expansion and continued engagement with leading global smartphone customers. Now let's talk about our last segment, Power Supply and Industrial, which accounted for 17.4% of total revenue and was down 13.1% year-over-year and up 5.3% sequentially. Overall, the results were in line with expectations for mid-single-digit sequential growth as sequential growth in quick chargers and DC fans more than offset continued sluggishness, both sequentially and year-on-year, in solar, power tools, and e-mobility. Looking ahead to the June quarter, we expect Power Supply and Industrial revenue to increase mid-single digits on a sequential basis, primarily driven by momentum in e-mobility, particularly in the Indian market, where we have built a solid backlog heading into the quarter. DC fans also remain an area of strength, benefiting from continued demand tied to data center and AI infrastructure build-outs. Lastly, power tools are also forecast to increase modestly in the June quarter. However, overall tool demand remains subdued. In closing, as we move into the June quarter, we expect a return to sequential growth, along with margin expansion, supported by improving product mix and a greater contribution from higher-value applications, particularly within advanced computing. We are seeing encouraging signs of traction in areas such as AI infrastructure, where demand is broadening across a wider set of applications and customers, and where our solutions are gaining adoption in both GPU and CPU-based platforms. This momentum, combined with increasing BOM content across key end markets, positions us well as we enter the second half of the year, even as overall visibility remains somewhat limited. At the same time, we are executing consistently against the strategy we have outlined. Our focus on becoming a provider of application-specific total solutions is enabling us to expand both our product portfolio and our customer reach. We are seeing tangible progress in advanced computing, where our medium voltage and power IC solutions are addressing a growing range of use cases and where our customer base continues to broaden across hyperscalers, cloud service providers, and platform partners. In parallel, we continue to benefit from structural drivers such as rising power requirements and increasing charging currents, which are driving higher BOM content in both computing and smartphone applications. Looking across calendar 2026, we expect a dynamic environment with some uncertainty in consumer-related demand, particularly given the impact of memory pricing on end markets such as PCs and smartphones. However, we believe these pressures will be partially offset by our increasing exposure to higher performance, less price-sensitive segments, and our ability to capture greater value per system through our total solutions approach. Importantly, we are investing with discipline to support these opportunities with targeted R&D focused on areas where we have clear differentiation, strong customer alignment, and a path to sustainable margin expansion. As we look beyond 2026 and into 2027, we expect the benefits of these investments and design wins to become more pronounced as new programs ramp into production. The combination of expanding participation in advanced computing, increasing BOM content, and a broader and more diversified customer base is expected to drive stronger growth and improved profitability over time. With that, I will now turn the call over to Yifan for a discussion of our fiscal third-quarter financial results and our outlook for the next quarter. Yifan? Yifan Liang: Thank you, Stephen. Good afternoon, everyone, and thank you for joining us. Revenue for the March quarter was $163.8 million, up 0.9% sequentially and down 0.5% year-over-year. In terms of product mix, DMOS revenue was $115.1 million, up 13.9% sequentially and up 7.7% over last year. Power IC revenue was $46.9 million, down 20.3% from the prior quarter and down 14.1% from a year ago. Assembly service and other revenue were $1.8 million as compared to $2.5 million last quarter and $0.4 million for the same quarter last year. Non-GAAP gross margin was 21.7% compared to 22.2% last quarter and 22.5% a year ago. The quarter-over-quarter decrease was mainly impacted by lower utilization and higher operational costs. Non-GAAP operating expenses were $44.3 million compared to $41.3 million for the prior quarter and $39.7 million last year. The quarter-over-quarter increase was mainly due to higher R&D expenses. Non-GAAP quarterly EPS was a loss of $0.28 compared to a loss of $0.16 per share last quarter and a loss of $0.10 per share a year ago. Moving on to cash flow. Operating cash flow was negative $8.3 million compared to negative $8.1 million in the prior quarter and positive $7.4 million last year. In the March quarter, working capital fluctuated by $14 million. EBITDA, excluding equity method investment income and loss, was $5.9 million for the quarter compared to $9.7 million last quarter and $14.7 million for the same quarter a year ago. Now, let me turn to our balance sheet. We completed the March quarter with a cash balance of $190.3 million compared to $196.3 million at the end of last quarter. In the March quarter, we repurchased 214,000 shares for $4.2 million under our share buyback program. We also repurchased 292,000 shares of employee restricted stock units vested during the quarter for $6.2 million. Net trade receivables increased by $9.3 million sequentially. Days' sales outstanding were 20 days for the quarter compared to 25 days for the prior quarter. Net inventory decreased by $1.1 million quarter-over-quarter. Average days in inventory were 139 days for the quarter compared to 140 days for the prior quarter. CapEx for the quarter was $12.1 million compared to $15 million for the prior quarter. We expect CapEx for the June quarter to range from $15 million to $17 million. With that, now I would like to discuss the June quarter guidance. We expect revenue to be approximately $168 million, plus or minus $10 million. GAAP gross margin to be 22.3%, plus or minus 1%. We anticipate non-GAAP gross margin to be 23%, plus or minus 1%. GAAP operating expenses to be $52 million, plus or minus $1 million. Non-GAAP operating expenses are expected to be $45.5 million, plus or minus $1 million. Interest income is expected to be $1 million higher than interest expense, and income tax expense to be in the range of $1 million to $1.2 million. With that, we will now open the call for questions. Operator, please start the Q&A session. Operator: [Operator Instructions] Your first question comes from the line of David Williams with Needham. David Williams: Congrats on the really solid progress there in the advanced computing side. Maybe first, just thinking about the gross margin. We bottomed here in this quarter, it seems like maybe record computing or advanced computing revenue. And my suspicion would be that you would have maybe a little more IC and maybe higher value products going into that segment. So how do you kind of square where the gross margin sits and how we should think about maybe that gross margin in terms of the data center or these AI opportunities for you? Stephen Chang: Thanks, David, for the question. Yes, we are driving margin improvement through our advanced solutions. And those advanced solutions can come in the form of both MOSFETs and ICs. Right now, we are seeing some of our medium-voltage MOSFETs actually gaining traction. And this is going into applications such as hot swap, as well as intermediate bus conversion that go into various data center types and server-type applications. And the margin here actually is quite decent, and many of these medium voltage MOSFETs can actually be higher than some of our power IC products, too. So we are happy to see the contribution of these high-performance MOSFETs contributing as part of the margin improvement. David Williams: And then, as you kind of think about the growth opportunity within that segment specifically, you said it's about 25% of computing revenues today. Where do you think that could grow to? And what would be a good mix that you would be targeting, perhaps, in that segment? And potentially, when could you split that out and call it its own segment? Stephen Chang: Yes, it's a good question. It is becoming a sizable portion of our computing segment. It is something that, when we look at advanced computing, just as a reminder, it includes AI, it includes servers, as well as graphics. The reason we group those together is that the solution set for those ends up being quite similar. There's quite a bit of synergy when it comes to the products and the technology, as well as the end markets and applications that we serve. So yes, we're happy to see it jump to becoming 25% of computing. This was faster than our original expectations for this because, again, of the traction that we're seeing with our medium voltage devices. We do expect that this will continue to grow in the June quarter and in the coming quarters. This is something that we have been investing in as a company. Some of the R&D that we've been investing in, as we talked about in the previous quarter, is going into these markets. So it's for all types of high-performance solutions for AI, including these medium voltage devices. David Williams: And maybe one more, if I may. Just thinking about the capacity, you talked about expanding that for the medium voltage side. Can you talk, maybe about where you're putting that capacity in? Is that in your domestic facility? Or is that in your third party you're building out there on that capacity? Stephen Chang: It's a little bit of both. We do use a mix of both internal and external. So we are investing internally, and for some of the packages that are being done internally, as well as working on expanding on other options for diversifying our supply chain. So it's both. Operator: Your next question comes from the line of Tore Svanberg with Stifel. Tore Svanberg: This is on for Tore Svanberg. So, regarding the memory supply constraint you previously cited, are you seeing Tier 1 customers in PC and smartphone segments trimming a bit of the build forecast for the second half of the year in anticipation of these rising costs? Or is the headwind primarily a risk to end consumer price sensitivity? And just any color on how you see this memory situation play out throughout the year, and any strategies on offsetting the situation would be great. Stephen Chang: Sure. For us, at least, when we say the consumer-facing, we're talking about mainly PCs and smartphones. Those are the biggest impacts for us. And the PC side, yes, over there, they are seeing the impact of memory shortages. And for now, we're seeing some of our customers trying to build out sooner just in order to get products out. But from market reports as well as speaking to our customers, there's a lot of uncertainty about the second half about where the PC forecast will go. So we've also had similar views on this, and that's reflected in our outlook, too. And our story on the PC side is this is something that the industry will have to work to resolve, but our path here is still focused on how to grow share as well as to grow our BOM content in that application. On the smartphone side, our business tends to be more on the premium phone side. And at the end of the spectrum of smartphones, we are anticipating that it will be a little more resilient to memory shortages. We are prioritizing, again, towards the makers of those premium phones. So we actually still expect to grow our business in the smartphone side, mainly because it's not only because of the premium phones, but more specifically because those phone designs are increasing the charging currents. So we are seeing BOM content increasing because we are introducing new products to serve those sockets with higher ASP that can help to make up for any challenges on maybe the lower end of the market for smartphones. Tore Svanberg: As a follow-up, for next quarter, you're guiding a bit of a sequential gross margin recovery in the June quarter. And given that March utilization was a tiny bit of a headwind, how much of this sequential improvement is driven by maybe an uptick in loading versus an improvement in product mix, perhaps from higher performance applications? Stephen Chang: Sure. Yes, we guided the June quarter margin quarter-over-quarter, like a 130 basis point improvement. I would say half of it is anticipated to be utilization improvement, and the other half is from our improved product mix. Operator: [Operator Instructions] Your next question comes from the line of David Williams with Needham. David Williams: Just want to ask, maybe on the pricing side. I know a few of your peers or competitors are certainly pressing pricing, it seems, on the MOSFETs and resetting those prices. Just wondering what you're seeing in the marketplace and what your opportunity set is in order to reprice? And are you getting the benefit of maybe some more positive, favorable tailwinds there? Stephen Chang: Sure. In the March quarter, we saw a slower ASP erosion than in the December quarter. It looks like the pricing environment is improving. So that's definitely a plus. However, we count more on the product mix improvement and also our new product development to capture more high-performance and high-value sockets that Steven just talked about. So that will probably contribute more to our margin improvement. David Williams: And maybe just the last one for me. Stephen, if you think about the progress you've made, you've clearly made a lot of progress in this total solutions approach and even in driving these higher value, higher-margin products. Where do you think you are along that road map? And are you where you thought you would be? Are you maybe better or maybe not as far along? And if we look back in a year from now, how do you think we'll see that success having played out? Stephen Chang: Sure. It can never be fast enough. I'm always anxious to celebrate this. And this is, again, why we are investing to accelerate that. But there is a clear difference in the types of products that we are shipping now compared to a few years ago. And that's also reflected in our customer base, the type of applications that we go after, the Tier 1 customers that we are serving.? The reason why we can build better traction with these customers is because of the higher performance, and that has to come through differentiation. So application-specific is working. We are investing to accelerate that. This is going to be our path, part of our reason for how we get to our $1 billion milestone, and that's definitely worth investing in to see the results. Operator: [Operator Instructions]? Your next question comes from Craig Ellis from B. Riley Securities. Craig Ellis: I did miss the prepared remarks, so excuse me if you covered this, but I wanted to understand some of the strength that you saw in the compute segment. It seemed like there was acceleration in the compute supply chain quarter-to-date, similar to the smartphone supply chain about where we were last year in 1Q and early 2Q. To what extent was that at play in the results? And what do you think it means for the year's linearity, first half versus second half calendar? Stephen Chang: If we're talking about computing, I think we should talk about maybe the subcomponents of that. The PC portion, I think overall, was a little bit of -- we really saw the correction in this quarter from the last quarter, mainly because of memory challenges. But the growth area that we see is particularly in what we call the advanced computing, and that's comprised of AI, server, as well as graphics.? And in particular, we're seeing our solutions, particularly our medium voltage solutions for AI that's going into like hot swap applications, intermediary bus conversion. Those are products that are really starting to take off and have started to ramp in the March quarter. And as we commented in the prepared remarks, the demand for computing represents about 25% of total computing, which is really exciting for us.? We are expecting that this momentum will continue further going into the coming quarters as we continue to ramp our business. We talked a little bit about it. We are also expanding some of our capacity to support this growth as well. Craig Ellis: Congratulations on the mix shift, Stephen, but that also would imply that there must have been a pretty steep falloff in either the traditional compute business or the gaming card business in the quarter if mid-voltage surged. So, can you speak to what happened elsewhere in the segment and how it all netted out, given the significant rise in mid-voltage, hot swap, and other things? Stephen Chang: Sure. As we mentioned, the standard PC industry is undergoing challenges due to memory shortages. And it's also a low season and seasonally regular for the March quarter, but we do just see some correction due to that. And that was already anticipated from the previous quarter. The graphics card has also actually grown a little bit from the last quarter.? But overall, that segment is not as robust as it was maybe a year ago when those graphics cards were first launched. We're expecting that graphics cards are also going to have some challenges in procuring both memory and GPUs that can limit total industry shipments for cards. But overall, our share still remains strong, and it's still a good core part of our business. So this is why we see that and are excited that the advanced computing portion of the business can offset drops and challenges on the PC side, and a little bit of slowdown on the graphics side. Craig Ellis: And just to understand the dynamics in the advanced computing side, can you speak to the OEM diversity that you have within that business? To what extent is it more GPU-related systems, versus maybe x86 systems, that are seeing a resurgence as we see rising agentic workloads? Stephen Chang: Sure. And we're happy that our solutions are going into, as you mentioned, a more diversified customer base. This is going into data center server makers as well as cloud service providers. The solution right now is generally serving the 48-volt to 12-volt conversion. And this architecture is pretty common in many servers, just general server applications. So our solutions there can be generally used in many of those applications. Craig Ellis: So traditional server applications.?Got it. And then just moving on to gross margin dynamics. One of the things we're starting to hear from companies' guys is that rising input costs are putting pressure on packaging and chip costs. As we think through the course of the year, and this is more of a question for you, Yifan, but how do we think about the give and takes between what could be rising chip costs and potentially your ability to either offset those or pass those through, and then the potential for volume to benefit overhead absorption? Yifan Liang: Sure. The March quarter ASP erosion was a little bit better compared to the December quarter. So, since the pricing environment is improving. So we definitely welcome that. So we're monitoring the market and managing our own pricing and product mix. And yes, we count more on those new products and getting into those high-performance, high-value sockets. So we want to grow that part of the business, which can definitely help us to improve gross margin. Craig Ellis: So, Yifan, it's not clear to me if you're seeing rising input costs and to what extent or not? Can you just speak to that point specifically and the degree to which that is something that you're able to mitigate with cost pass-throughs, or if that's something we should be aware of as we think about COGS impacts later this year? Yifan Liang: Yes. We are seeing some increases in input costs. Yes, definitely, I mean, some material costs and then some foundry subcontractors' prices. Yes. So managing the product mix and then digesting some, and then managing our pricing environment. So Yes. Those increases in input costs and the pricing environment are already reflected in our guidance for the June quarter. Operator: There are no further questions at this time. I will now hand the call over to Steven Pelayo for closing remarks. Stephen? Steven C. Pelayo: Thank you. Before we conclude, I'd like to highlight a few upcoming investor events. The management team will be participating in the B. Riley Securities 27th Annual Institutional Investor Conference on May 20 in Marina Del Rey, California; the Stifel 2026 Boston Cross Sector One-on-one Conference on June 3 in Boston, Massachusetts; and the Jefferies Semiconductor IT Hardware and Communications Technology Conference on August 26 in Chicago. If you wish to request a meeting, please contact the institutional sales representative at the sponsoring bank.? With that, this concludes our earnings call today. Thank you for your interest in AOS, and we look forward to speaking with you again next quarter. Operator: This concludes today's call. You may now disconnect.
Operator: 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.
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: Please standby. Your meeting is about to begin. Hello, and welcome, everyone, joining today's Clean Energy Fuels Corp. First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Note this call is being recorded. We are standing by should you need any assistance. It is now my pleasure to turn the meeting over to Tom Driscoll, Vice President, Strategic Development and Sustainability. Please go ahead. Tom Driscoll: Thank you, Dana. Earlier this afternoon, Clean Energy Fuels Corp. released financial results for the first quarter ending 03/31/2026. If you did not receive the release, it is available on the Investor Relations section of the company's website, where the call is also being webcast. There will be a replay available on the website for 30 days. Before we begin, we would like to remind you that some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in the Risk Factors section of Clean Energy Fuels Corp.'s Form 10-Q filed today. These forward-looking statements speak only as of the date of this release. The company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this release. The company's non-GAAP EPS and Adjusted EBITDA will be reviewed on this call and exclude certain expenses that the company's management does not believe are indicative of the company's core business operating results. Non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP and should not be considered as a substitute for or superior to GAAP results. The directly comparable GAAP information, reasons why management uses non-GAAP information, a definition of non-GAAP EPS and Adjusted EBITDA, and a reconciliation between these non-GAAP and GAAP figures is provided in the company's press release, which has been furnished to the SEC on Form 8-K today. With that, I will turn the call over to our President and Chief Executive Officer, Clay Corbus. Clay Corbus: Alright. Thank you, Tom. I want to start by saying that I am honored to be named CEO of Clean Energy Fuels Corp. I have been part of this company for 19 years and have been involved in every major chapter of our evolution, from our days building out the fueling network to our initial investments in RNG in 2008, to the integrated platform we operate today. I have a huge amount of confidence in our team and the foundation we have built, and I am very excited about the opportunity ahead of us. Now as CEO, I plan to focus on growth, strengthen execution and operating discipline, and fully leverage the assets, infrastructure, and people we have in place. We have a strong balance sheet, recurring cash flow, and a very capable team. I also see opportunity to be more technology-forward, using data and software to improve efficiency across operations, corporate functions, RNG, and how we identify new customers and serve existing customers. All of this supports the same objective: deliver value for our customers and stakeholders. At its core, I believe deeply in this business and our product. RNG is domestically produced, lowers fuel costs, reduces greenhouse gas emissions, and uses existing infrastructure. Those fundamentals have always mattered, but they are especially relevant today. Beginning in early March, the conflict with Iran caused a sharp rise in crude oil prices, which quickly flowed through to diesel across the U.S. Diesel prices increased by roughly $1.50 to $2 per gallon or more, a 50% increase almost overnight. Fuel is a meaningful component of cost per mile, and this level of volatility strains fleets, carriers, and shippers, and ultimately leads to higher costs for consumers. This environment reinforces why Clean Energy Fuels Corp. exists. Compared to diesel, natural gas is cheaper, cleaner, domestic, and less exposed to geopolitical events abroad. As you have heard many times before, nearly 100% of the fuel delivered to our stations today is renewable natural gas, which captures all the benefits I just mentioned and helps our customers advance their sustainability goals. Now turning to the quarter, we delivered 67 million gallons of RNG, we generated $16.6 million of Adjusted EBITDA, and we ended the quarter with $126 million of cash on the balance sheet. In our downstream business, performance across core markets remained steady. Our transit and refuse sectors continue to be consistent contributors, supported by long-standing customer relationships and the reliability of RNG. We also see underappreciated growth potential in these segments. Over the past five years, battery-electric and hydrogen solutions have proven costly and challenging to deploy in many locations. As those realities become clearer for transit and refuse fleets, RNG offers a practical, cleaner, and lower-cost alternative to diesel, and many of these fleets already have firsthand experience with RNG. In trucking, the recent diesel price hikes and volatility have brought total cost of ownership back into focus. Heavy-duty trucking remains our largest growth opportunity. Class 8 trucks with the Cummins X15N engine allow fleets to capture RNG's economic and environmental benefits without sacrificing range or performance. The technology works, the infrastructure is in place, the fuel is available today, and it is cheap and less volatile. Quite simply, the case for switching from diesel to RNG has never been stronger. At the same time, adoption of the X15N has been slower than we originally expected. Diesel is the incumbent fuel for the vast majority of fleets. In the last two years, the sector has faced challenging freight fundamentals, federal and state regulatory uncertainty, particularly in California, and frankly, ESG whiplash as companies balance long-term sustainability goals with fluid policies and near-term stakeholder expectations. Even though RNG delivers a lower total cost of ownership, natural gas tractors still carry a higher upfront cost than diesel. In that environment, many fleets have chosen to delay change and stick with the status quo. Our strategy is to be targeted, focusing on applications and fleets where RNG delivers the clearest economic and low-carbon advantages. In our upstream RNG production business, we now have eight projects operating and three under construction. The first quarter reflected continued ramp-up at our South Fork project in Texas and our East Valley project in Ohio. The first quarter also had extreme winter weather, which impacted production, particularly in the Upper Midwest. We were able to get our projects back on track and anticipate production and financial results to improve as the year progresses. I would also like to highlight a positive regulatory milestone. In March, CARB approved the pathway for our Del Rio Dairy project in Texas with a carbon intensity of approximately negative 300. We also continue to await an upgraded GREET model from the Department of Energy for determining 45Z credit values, which is expected to better reflect the negative carbon intensity of dairy RNG. As we scale our RNG production business, projects have taken longer to develop and ramp up than initially expected, and some have faced operational challenges. We have responded by taking a more hands-on approach to operations, strengthening internal oversight, and replacing vendors where performance fell short. These improvements and transitions take time, but we are making progress. We remain focused on improving performance at our operating sites and executing projects under construction. It remains true that Clean Energy Fuels Corp. is an advantaged owner of dairy RNG production. Customer demand for low-CI RNG remains strong, particularly in California, where we have the largest RNG station network. Now, in concluding, I want to take a moment to recognize Andrew J. Littlefair. Andrew J. Littlefair founded this company, led it for three decades, and built Clean Energy Fuels Corp. into the platform that it is today. I have had the privilege of working alongside Andrew J. Littlefair and learning from him. We are fortunate that he remains actively involved by continuing his work on policy matters in Washington and serving on our board. On behalf of the entire company, I want to thank him for his contributions and continued commitment to Clean Energy Fuels Corp. With that, I will hand the call to our CFO, Robert Vreeland, to walk through the financials. Robert Vreeland: Thank you, Clay, and good afternoon to everyone. Overall, our financial performance was in line with our expectations with normal variations within our integrated businesses. For example, while extreme cold weather impacted upstream RNG production, we were able to monetize a larger-than-expected amount of RIN and LCFS credits from our East Valley dairy in Idaho, which was placed into service in March. Increased RNG volumes delivered by our fuel distribution business drove higher RIN revenues, and we were able to optimize our gas costs in this volatile commodities market. To a lesser degree in the quarter, but still ongoing today, we enjoy the dynamics of higher retail fuel prices while our natural gas commodity costs did not increase proportionally at the same level as oil and diesel prices. In fact, despite increases in our natural gas costs and retail prices, we maintained a large discount on our fuel price compared to diesel. Consequently, one of the effects we see of elevated commodity and retail prices is higher revenue. Coupled with higher fuel volumes, which drive both base fuel sales revenue as well as RIN and LCFS revenues, we reported $117.6 million in revenue for 2026 compared to $103.8 million last year. RNG volumes delivered in 2026 were strong. In addition to our normal recurring volumes, we saw higher demand from customers outside our network of stations needing RNG for transportation. We have seen this before, and it is nice to have the supply to accommodate those deliveries. We believe we will come off the first-quarter RNG volumes by a few million gallons or so as we look forward, but remain confident in achieving our annual guidance of delivering 250 million gallons or more given the first quarter of RNG for the year. GAAP net loss was $12 million for 2026. Certainly, there was a return in 2026 to more normal operations versus a year ago in the first quarter, where we reported a GAAP net loss of $135 million, which included a couple of large non-cash charges totaling $115 million. Adjusted EBITDA of $16.6 million in 2026 compares to $17.1 million of Adjusted EBITDA a year ago. In addition to the normal variations I mentioned for 2026, we also saw lower, albeit still very adequate, base fuel margins, which we anticipated in our outlook for 2026. And, as well and also anticipated in our 2026 outlook, we lowered SG&A expenses in 2026. One reporting comment I will make is a change in where the non-cash Amazon warrant charge is recorded in our financial statements. You will notice in 2026, a portion of the warrant charge is included as a charge against our O&M service revenue, whereas previously, 100% of the charge was in our products revenue. There is more detail on the Amazon warrant charge—it is just a different place in the income statement that you are seeing it this year. There is more disclosed in our 10-Q. In addition to the $126 million in cash and investments on our balance sheet, there is another $46 million in cash off balance sheet at our dairy RNG joint ventures. And during the first quarter, we contributed $12 million to our MAS Energy Works JV, with another $12 million that was contributed in April. MAS Energy Works continues to make good progress toward completing the three dairy projects under construction. And with that, operator, please open the call to questions. Operator: Thank you. To leave the queue at any time, press 2. Once again, that is 1 to ask a question, and we will pause for just one moment to allow everyone a chance to join the queue. Our first question comes from Eric Stine with Craig Hallum. Please go ahead. Your line is now open. Eric Stine: Hi, Clay. Hi, Bob. Clay, you touched on it a little bit, just with the X15N. I mean, I know that now there are two OEMs in the market and prior to Freightliner's entry, pricing was an issue, so incremental cost has come down some. And obviously we have all read the glowing feedback of fleets that have been testing this. But the market conditions, as you said, you have a more difficult environment, but obviously it highlights the price benefit. Do you view this as just going to make it more likely that it is going to be the large fleets rather than the small one-off adoption stories? Or how do you view that? I mean, is this the kind of thing that, if it persists, could be what actually jumpstarts this market? Because as you have said, although Cummins' view of it has not changed in terms of the overall opportunity, it is well behind schedule. Clay Corbus: Yeah. Well, Eric, it is what we spend a lot of time thinking about and focused on. I do not think anybody really thinks that diesel is going to stay at these prices forever. But I do think that this run-up in diesel has really heightened the awareness of the volatility. You know, we were at the ACT conference the last few days, and what a lot of people are talking about is, if you just take the last five years and do a regression analysis on what the price of diesel has been, and then you compare that to the price of natural gas, it is just higher overall. And when fleets are trying to plan going forward what their fuel costs are going to be and their total cost of ownership, they are factoring that into those decisions. So it certainly helps us because it helps us with the total cost of ownership and the payback period for that incremental cost. I would also say that I do not know that it changes the types of fleets we are looking at, whether they are large fleets or small fleets. Because even with the large fleets, they are not going to change 2,000 trucks overnight. I think what we are seeing is that—as we heard from some of the fleets—they are going to start out with five trucks, start out with 10 trucks, dip their toe in the water, get their mechanics used to it, get their drivers used to it, get their routes used to it, and then from there, expand it into larger numbers within the fleet. I think that, combined with the advantages that we are seeing now in the total cost of ownership, will result in incremental adoption as we go forward. But it is a long sales cycle. It takes a long time to get trucks ordered, and it takes a long time to get them on the road. So it is not something where people can see high diesel prices and say they are going to order a truck tomorrow. It is a longer decision process than that. But certainly, the fundamentals behind it are reopening a lot of discussions that we are excited to take part in. Eric Stine: Got it. That is very helpful. And then maybe just my second one for Bob. So you mentioned lower base fuel margins and something that was kind of the expectation. Was that commentary for Q1 or early in the year? Because if I think about, especially in trucking, when you have got high diesel prices, you can still offer a pretty healthy discount, and it is a pretty good margin environment for you. So just maybe clarify that statement and how you are thinking about that for the remainder of the year? Robert Vreeland: Yeah, Eric, that comment is looking at the full year. When we gave our guidance back in February, we talked about some of the dynamics that could impact our guidance for 2026, and the possibility of lower margins from a variety of reasons was in the mix, and it is really throughout the year. But I will say, to the point you are making, we have numerous levers. So while the margin gets impacted from one area, the fact that we are enjoying higher prices with our costs remaining pretty stable helps offset some of that. But it is a go-forward look and certainly in our plan. Eric Stine: Okay. Thanks a lot. Clay Corbus: Great. Thanks, Eric. Operator: Thank you. We will now go to Rob Brown with Lake Street Capital Markets. Please go ahead. Your line is open. Rob Brown: Hi, Clay and Bob. Thanks for taking my call. On the RNG volume you talked about in the quarter from kind of third parties, could you just clarify how that works and maybe sort of visibility on that? Clay Corbus: Yeah. You know, it was a strong growth quarter, particularly when you compare it against last year. But I think we want to be careful on that because part of that growth was that the first quarter of last year, we did see our volumes trend down. If you remember, we had the biogas reform that pushed a lot of our volume into 2024, so 2025 was lower. And then, of course, we always have bad weather in the first quarter, but last year it was really spread throughout the country, and so we had less RNG from our third parties, in addition to our own production that was down. So while we are very pleased with the first quarter, a lot of it really was that we were comparing against a very easy comp in 2025. Rob Brown: Okay. Thank you. And just to clarify, given the CARB pathway certification right now, it sounds like that is great. How does that flow through into the ability to get credits? Clay Corbus: Well, it basically almost doubles the number of LCFS credits we can generate. When you are at a negative 150 versus negative 300, you are able to generate more credits off the same fuel that is coming through. Rob Brown: Okay. Thank you. I will turn it over. Clay Corbus: Yeah. Thanks, Rob. Operator: Thank you. We will now go to Matthew Blair with TPH. Please go ahead. Your line is open. Matthew Blair: Thanks, and good afternoon, Clay and Bob. Could you talk a little bit more about the comment where you mentioned higher demand from customers outside of your network? Could you unpack that a little bit? Do you think you were taking share from some of your competitors? Or was it just a situation that these customers were utilizing their existing CNG trucks a little bit more and just needed more fuel given rising diesel prices? And could you also talk about what end markets you saw increased demand from? And then on the fuel distribution guide for 2026—it looks like you did not change it, still 67 to approximately 70 million despite the good result in the first quarter of 19 million. I think you mentioned that you would expect things to roll off a little bit in Q2. Are you already seeing softer conditions so far in the second quarter, or is that just your general expectation? Clay Corbus: Yeah. So, Matthew, there are other folks out there with CNG fueling stations, and there are instances where, based on supply availability and that sort of thing, we will flow our RNG into those stations. It is really a supply-demand dynamic, and I could not necessarily tell you what is going on with their demand, but I know that they need the supply, and we are able to move it. We have done it before. It is not necessarily routine, but that is what that looks like because we have the RNG and we can flow it to other places. It is the beauty of the distribution model. As for the fuel distribution guide, I will not comment on what I am seeing intra-quarter. Second quarter is not really softer or consistent; it is more a comment relative to the volatility and the strength that we saw in the first quarter, and knowing that we may not see that level of strength as we go forward. We had some unique opportunities to sell some RNG to some of our customers that are probably not going to be repeated. So while it was a good result, it was an easy comp against last year, and you should not just multiply it by four for the full year because there were some unique opportunities in Q1 that we took advantage of. Matthew Blair: Sounds good. Thanks for your comments. Clay Corbus: Yeah. Thank you, Matthew. Operator: We will go next to Betty Zhang with Scotiabank. Please go ahead. Betty Zhang: Thank you for taking my questions. I wanted to ask about Amazon and that relationship. Earlier, Amazon announced its logistics services. Do you think there would be an opportunity to leverage that existing relationship and maybe increase some RNG volumes to them? And then for my follow-up, also related to Amazon, on those warrant charges, you mentioned it is now shared between the fuel and services. Is this a change in the contract with Amazon, or how would you describe that change? Thank you. Clay Corbus: Betty, I will take the first comment. We do not comment specifically on Amazon. We want to be very careful—that is not something we can, or will, do. Across our customers, though, every single customer with existing trucks—whether they are 12-liter, 9-liter, wherever they are—we work with all of our customers to try to increase the penetration into their fleet with the X15N. So I am not going to speak specific to Amazon, but it is just good business sense to work with customers that you already have and see if you can continue your growth with them. As far as the Amazon warrant charge, I will let Bob take that one. Robert Vreeland: Yeah. And Betty, I really cannot say that much, but it was not an arbitrary change. Any change like that is typically going to be driven contractually. We are just doing the appropriate accounting based on the contract that we have. Betty Zhang: Thank you. Operator: At this time, there are no further questions in the queue. I will now turn the meeting back over to Clay Corbus. Clay Corbus: Alright, Dana. Thanks very much. And thank everybody else for joining us. We look forward to speaking with you next quarter. Unknown Speaker: Thank you. Operator: This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good day, and thank you for standing by, everyone, and welcome to the Amtech Systems, Inc. fiscal 2026 second quarter earnings conference call. Today, all participants will be in a listen-only mode. Should you need assistance during today's call, please signal for a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. I would now like to turn the conference over to Jordan Darrow of Darrow Associates Investor Relations. Please go ahead. Jordan Darrow: Thank you, and good afternoon, everyone. We appreciate you joining us for the Amtech Systems, Inc. fiscal 2026 second quarter conference call and webcast. With me today on the call are Bob Daigle, Chairman and Chief Executive Officer, and Mark Weaver, Interim Chief Financial Officer. After the close of market today, Amtech Systems, Inc. released its financial results for the fiscal 2026 second quarter. The earnings release is posted on the company's website at amtechsystems.com in the Investors section. To begin, I would like to remind everyone the Safe Harbor disclaimer in our public filings covers this call and the webcast. Some of the comments to be made during today's call will contain forward-looking statements and assumptions that are subject to risks and uncertainties, including but not limited to those contained in our SEC filings, all of which are posted in the Investors section of our corporate website. The company assumes no obligation to update any such forward-looking statements and cautions you not to place undue reliance on forward-looking statements, which speak only as of today. These statements are not a guarantee of future performance, and actual results could differ materially from current expectations. Among the important factors which could cause actual results to differ materially from those in forward-looking statements are changes in technology used by customers and competitors, changes in volatility and the demand for products, the effect of changing worldwide political and economic conditions including trade sanctions, and the effect of overall market conditions, including equity and credit markets and market acceptance risks, ongoing logistics, supply chain and labor matters, and capital allocation plans. Other risk factors are detailed in our SEC filings, including our Form 10-Ks and Form 10-Qs. Additionally, in today's conference call, we will be referencing non-GAAP financial measures as we discuss the financial results for the fiscal second quarter. You will find a reconciliation of those non-GAAP measures to our actual GAAP results included in the press release issued today. I will now turn the call over to Amtech Systems, Inc.'s Chief Executive Officer, Bob Daigle. Bob Daigle: Thank you, Jordan. Revenue for the quarter was $20.5 million, which was up over 30% from the same quarter last year and up 8% sequentially. Our adjusted EBITDA was $2.5 million, or about 12% of sales, an increase of $1.1 million from the prior quarter and $3.9 million from a year ago. While reported revenues were at the high end of our guidance range, our adjusted EBITDA margin was a significant beat, as we had guided to high-single-digit EBITDA margins. Higher gross margins contributed to our improved profitability and cash generation. Gross margin approached 48% in the second quarter, up from 45% in the first quarter. Cash on hand at the end of the quarter was $24.4 million, an increase of $2.3 million from the prior quarter and $11 million from a year ago. AI-related sales accounted for over 30% of our Thermal Processing Solutions segment revenue in the second quarter and bookings were very strong. Momentum for AI-related demand continued to build in the second quarter. Advanced packaging has emerged as a critical bridge between silicon innovation and the escalating demands of artificial intelligence infrastructure. As traditional Moore's law scaling slows, the ability to pack more computing power into a single footprint now relies less on shrinking individual transistors and more on how those chips are interconnected. By enabling high bandwidth memory integration, reducing data latency through 2.5D and 3D stacking, and allowing for massive system-on-package architectures, advanced packaging provides the physical foundation necessary for generative AI and large language models to thrive. In short, packaging is no longer just a protective housing for chips; it is a primary driver of the performance, power efficiency, and scale required to fuel the next generation of AI processors. Capital equipment which can deliver high yields and throughput is vital to support this AI revolution. As broadly reported, semiconductor OEMs and OSATs continue to increase investments to expand capacity to support the massive AI infrastructure buildouts. Demand has been very strong for our advanced packaging equipment and AI server board assembly equipment due to our differentiated capabilities that include TruFlat technology and market-leading temperature uniformity, which enables high yields when producing these very complex and expensive products. Although we have limited visibility due to our short lead times, our channel checks support our belief that demand will remain very strong for the foreseeable future. Based on bookings and quoting activity, we expect the percentage of revenue from AI applications in our Thermal Processing Solutions segment to exceed 40% in the third quarter. We are also seeing increased quoting activity and bookings for panel-level packaging. These more demanding packaging technologies are serving more mainstream semiconductor applications, but their process requirements align very well with our differentiated capabilities. To accelerate growth, we are continuing to invest in next-generation equipment to support higher-density packaging to address emerging customer requirements. We plan to launch the first products for higher-density packaging at the SEMICON trade show in Taiwan in early September. We believe the capabilities provided by our next-generation equipment will significantly increase our addressable market and help drive growth beyond 2026. Growth of our Thermal Processing Solutions parts and service business was also a highlight in the quarter. Customer outreach initiatives have helped drive growth, with revenue up 10% sequentially and 56% year over year. I should note that while we are benefiting from demand for our products to support the AI buildout, we are also beginning to use AI software integrated with our ERP and CRM sales tools to help support customers and streamline our sales process. For our Semiconductor Fabrication Solutions segment, we continue to leverage our foundry service and technical capabilities to pursue applications and customers not well supported in the industry. We have built a strong opportunity pipeline and are expanding efforts to replicate successes and grow sales of legacy products. Overall, our IDI Chemicals business revenue was up 15% year over year. We have also made significant improvements in the service levels we provide and have driven outreach initiatives to grow our parts and services business at Intrepix. Revenue for parts and service at Intrepix was up about 40% year over year. I am very encouraged by the early results from our customer-centric growth initiatives. Unfortunately, much of the success from these initiatives in our Semi Fab Solutions segment has been masked by weak sales of our PR Hoffman products due to weakness in demand from our major silicon carbide customers. As I have stated before, 2026 will be an investment year for our SFS business as we execute on our strategy to over-serve the underserved, but we believe that our customer-centric growth initiatives will deliver recurring revenue streams with meaningful profits beyond 2026. The operating leverage and working capital efficiency across the company resulting from our product line rationalization efforts and a migration to a semi-fabless manufacturing model over the past two years helped deliver improved results for the quarter and should result in continued strong cash flow and further increases in gross margins and EBITDA margins as revenues increase. Our semi-fabless model, which includes the consolidation of our manufacturing footprint from seven facilities to four, should also allow us to significantly increase revenue with minimal capital expenditures. We ended the quarter producing nine reflow systems per week and have the capacity and supply chains to accommodate the growth we expect with little or no CapEx. In summary, growth opportunities driven by AI infrastructure investments and our customer-centric strategy, combined with strong operating leverage that results from our asset-light semi-fabless business model, position us very well to deliver meaningful shareholder value. Before I hand the call over to Mark, I have two organization announcements to share. First, as we announced last week, Tom Sabol has been appointed as CFO and will be joining Amtech Systems, Inc. on May 14. Tom brings more than 20 years of CFO experience across publicly traded and private equity-backed organizations, with deep expertise in developing and leading finance teams, driving financial performance, investor relations, and SEC reporting. His background spans several industries, including financial services, software, and advanced manufacturing. I look forward to working closely with Tom as we continue to drive growth and profitability. I would like to take a moment to recognize and thank Mark Weaver for stepping in as Interim CFO. Mark came out of retirement to help us with this transition, and I greatly appreciate his support and his leadership. I am also pleased to announce that Guy Shechter will be joining Amtech Systems, Inc. on May 19 in a newly created President and Chief Operating Officer role. Guy has held various commercial and general management positions with equipment and advanced packaging equipment companies. The extensive experience, customer relationships, and leadership skills that he brings to Amtech Systems, Inc. will be critical as we expand our portfolio solutions for AI applications to accelerate growth. I am looking forward to having Guy join the Amtech Systems, Inc. team. Now I will turn the call over to Mark for more details concerning our Q2 results. Mark Weaver: Thank you, Bob, once again, and it has been a pleasure working with you and the folks at Amtech Systems, Inc. I have truly enjoyed my time here. Now I will review the financials for the fiscal 2026 second quarter. Following the two-year-plus transformation led by Bob, the company is finally at a place where year-over-year revenue comparisons are meaningful. The one consistent characteristic of our revenue comparisons over the past two years has been the positive impact of AI product demand within the TPS segment. In the 2026 second quarter, AI revenues accounted for more than 30% of TPS segment revenue. Bookings for AI applications remain strong, and we are experiencing both book-and-ship in the same quarter as well as book-now-and-ship-later. This has led to the second consecutive quarter of company-wide bookings exceeding sales for the period. Other areas of TPS and SFS sales are also contributing growth on a consolidated basis, which is being partially offset by weakness in select product lines as Bob discussed in his remarks. Total SFS revenues were $5.7 million in the second quarter, up 15% from approximately $5 million in both the prior sequential quarter and the prior-year quarter. Moving on to gross margins, the company's product line rationalization and our focus on growing higher-margin product lines, including AI advanced packaging solutions as well as our recurring parts and services business, are delivering their intended results, particularly as we are benefiting from greater scale. Gross margin as a percentage of sales increased to 47.7% in the 2026 second quarter, up nearly 300 basis points from 44.8% in the 2026 first quarter. Comparison to the prior-year period is not meaningful since that quarter included a $6 million non-cash inventory write-down as part of our broader turnaround and transition, which took margins into negative territory in the 2025 second quarter. Selling, general and administrative expenses increased $0.3 million sequentially from the prior quarter and were relatively flat as compared to the 2025 second quarter. The increase is primarily due to expanding business activities, tax and IT consulting fees. Research, development, and engineering expenses were relatively flat compared to prior periods. The company continues to invest with a measured yet opportunistic approach to R&D, including next-generation products targeting the AI supply chain and our specialty chemicals business. GAAP net income for the 2026 second quarter was $1.2 million, or $0.08 per share. This compares to GAAP net income of $0.1 million, or $0.01 per share, for the preceding quarter and a GAAP net loss of $31.8 million, or $2.23 per share, for the 2025 second quarter. During the 2025 second quarter, the company recorded significant non-cash inventory write-downs and impairment charges, which make the year-over-year comparisons for profitability not really meaningful. The company's 2026 second quarter GAAP net income includes $0.3 million of foreign currency exchange losses versus $0.2 million in the prior quarter, primarily driven by a weakening United States dollar against the Chinese renminbi. Unrestricted cash and cash equivalents at 03/31/2026 were $24.4 million, compared to $22.1 million at December 31, $17.9 million at September 30, and $13.4 million a year ago. The increased cash balances are due primarily to the company's focus on operational cash generation, working capital optimization, strong accounts receivable collections, and accounts payable management. The increase in cash from the first quarter of this year is even more meaningful since we are carrying an additional $0.9 million in inventory to accommodate higher order flow. The company continues to have no debt. As for the $5 million stock repurchase program, the company did not use any cash for this, as no shares were repurchased since the plan was put in place on December 9. Now turning to our outlook. For the third fiscal quarter ending 06/30/2026, the company expects revenue in the range of $20.5 million to $22.5 million. At the midpoint of this range, our guidance is a meaningful year-over-year and sequential quarter increase. AI-related equipment sales for the Thermal Processing Solutions segment are anticipated to drive the majority of our revenue growth and account for as much as 40% of the segment sales in the 2026 third quarter. With the benefit of continued top-line growth and the sustainable improvements in structural and operational cost reductions, Amtech Systems, Inc. expects to benefit from its operating leverage to deliver adjusted EBITDA margins in the low double-digits range. The outlook provided during our call today and in our earnings press release is based on an assumed exchange rate between the United States dollar and foreign currencies. Changes in the value of foreign currencies in relation to the United States dollar could cause the actual results to differ from expectations. And now I will turn the call over to the operator for questions. Operator: Thank you. We will now begin the question-and-answer session. As a reminder, 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. If at any time your question has been addressed and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble our roster. And today's first question comes from Scott Buck with Titan Partners. Please proceed. Analyst: Hi, good afternoon, guys. Thanks for taking my questions. Bob, I was hoping to get a little more granularity on gross margins in SFS. Looks like it was up about 800 basis points sequentially. So any kind of added color on what is going on there would be great. Bob Daigle: Yes. Again, I think the additional revenue contributed a bit to that, and I think the balance would really be mix-related. There was not anything really structurally different quarter to quarter in that segment. It is more reflective of the mix of products through that business and the incremental revenue. We have a lot of operating leverage, as you might imagine, with the structural changes we have made over the past couple of years. We have positioned ourselves where we do get very solid flow-through of any incremental revenue to our overall results. Analyst: Great. That is very helpful. And then I want to ask about kind of geographic mix and how you are seeing demand trends across regions? Bob Daigle: Yes. So as you might imagine, Asia is really the hotbed for AI infrastructure buildouts. Traditionally in the packaging area, it has been almost exclusively Taiwan, but what we are seeing is a significant buildout of packaging infrastructure in other parts of Southeast Asia—Thailand, Malaysia, Indonesia, India, for example. So we are seeing a broadening of geographic footprint in terms of major investments in the packaging area, almost all driven by AI infrastructure. And I would say more recently, we are seeing quite a bit more activity in North America as well. It was pretty quiet, but we are starting to see some investments being made. I would say more so on the enterprise-level board assembly at this stage than chip packaging, but it is nice to see some increased AI activity in North America as well. Analyst: That is helpful. In terms of Asia, should we be keeping an eye out on any kind of trade policy, tariff, or supply chain dynamics? Bob Daigle: Yes. Specific to the tariffs, we positioned ourselves pretty well there. If you go back a year ago, any equipment coming into the U.S. was basically being manufactured in China, and obviously there were very meaningful tariff impacts as a result of that. But we did establish a partner where we now manufacture equipment for the U.S. in the Singapore/Malaysia area. So we have kind of insulated ourselves quite a bit from the U.S.–China stress levels. And beyond that, there really have not been a lot of cross-Asia issues. Back to your supply chain question, everyone is talking about memory being more expensive and obviously that is the same for us, and we have to adjust our cost and pricing accordingly if memory becomes more expensive. We really have not seen any shortages; I would say it is more that there is a little bit of price pressure that we need to deal with and pass along on the memory side. Analyst: Okay, great. And then last one for me. Cash continues to improve. How should we be thinking about capital allocation? Or I should say, how are you thinking about capital allocation? You have the $5 million repurchase authorization out there. Is that a priority? Or is it more R&D in new products or even potentially M&A? Bob Daigle: Yes. I would say growth is number one, because back to the operating leverage discussion, as we grow with the strong margin leverage we have in our portfolio—and I should mention with all the product lines that we cut from the portfolio rationalization efforts, I would say across the board we have very healthy margins across the entire portfolio right now—so any of the product lines that grow are very meaningful in terms of improving cash generation, gross margins, and EBITDA. From an investment standpoint, we are making those investments. We have been increasing our R&D efforts around next-generation equipment. There could be a little bit of incremental investment needed to drive that home. We are investing in resources to develop the pipeline for SFS in terms of trying to build out our IDI portfolio and the recurring revenue streams. We will continue to incrementally invest in that and do not see that having a meaningful impact on cash needs. And then the other factor I think we want to point out is with our semi-fabless model, we have the ability to scale without meaningful CapEx. As I mentioned in my comments, even looking out a year in terms of high growth and demand for the equipment used for AI packaging, we do not really see the need for deploying meaningful cash for CapEx. The semi-fabless model and our supply chain can handle that growth. So having said all that, long story short is if we find inorganic opportunities, we would deploy cash accordingly. But as I have said to many people, I spent over a decade doing corporate development in a prior life, and I would say we need to be prudent, cautious, and make sure that what we do is generating real meaningful value. So when people ask me, are you going to acquire, I always answer the question with “maybe,” because if we find acquisitions that can create real value, we are going to do those to accelerate growth. But we do have a great pipeline of organic growth that I think can push us forward. And then back to your question about capital allocation, obviously, the priority is growth. If we did not have better uses for that, then of course we would look at providing the cash back to shareholders in some form. Analyst: Perfect. Well, I appreciate all the added color, guys. Thank you very much, and congrats on the strong results. Bob Daigle: All right. Thank you, Scott. Operator: And as a reminder, if you do have a question, please press star then 1 on your touch-tone phone. The next question comes from Craig Irwin with ROTH Capital Partners. Please proceed. Analyst: Good evening. Thanks for taking my questions, Bob. Last quarter, the small delay in one of your AI customers in taking some packaging equipment had a big impact in your stock. Did we maybe see the delivery of that equipment in this current period, or is it expected over the next couple of months? And do you expect the linearity or the overall business to have sort of a smoother trajectory given the size and scale that you are gathering over the next couple of quarters? Bob Daigle: Yes, we did ship that particular equipment during the quarter. And I would say that the visibility—I would not say it is great—but it is getting better because there is a lot more activity in terms of new facilities being put in. And so we are seeing more bookings with deliveries out a quarter, and in a couple of cases, actually a couple of quarters now, which is very unusual for our business because, as I have mentioned before, we have very short lead times, we have a very efficient supply chain, and we turn equipment around very quickly. So we have typically been a book-and-ship, even in this large-scale capital equipment space. But having said that, because people are actually building new facilities now and do not necessarily need all the equipment immediately, we are seeing better visibility, which I think will translate to smoothing things out a bit, frankly, as we get better visibility and bookings that are not just current quarter, but out a ways. Analyst: That definitely makes sense. The next question is one that I get asked fairly often, right? It is more of a big-picture question, Bob. So can you talk a little bit about Amtech Systems, Inc.'s moat in advanced packaging and AI? What has allowed you to dominate this space? There are others that would like to do business in here, but you have maintained a really strong reputation on technology that has allowed you to have those long-term customer relationships and supplier relationships too. What is different about what you are doing that gives you this moat? Bob Daigle: Generally, we win when it is a demanding application, and there are actually three components that usually come into play. In advanced packaging, that TruFlat technology—and unfortunately we do not have graphics in front of you—but these are large conveyorized pieces of equipment, almost half the length of a tractor-trailer bed, that are doing the reflow operations for these packages. You are raising things to very high temperatures; most materials, most substrates, tend to bow and twist and deform as you are heating them up. We have technology which allows us to pull a vacuum and hold the substrates down flat against the belt so things do not basically shift during the assembly process. What does that mean? That means high yield. So in applications where you are trying to process something that is very expensive, you are not going to sacrifice yield; you have to have equipment that is going to be robust. The other thing I would say is temperature uniformity. I think we have a significant advantage in being able to provide uniformity across our reflow—across the belt, within zones. Our latest equipment actually has reconfigurable zones that can be customized by customers. So we have provided capabilities that really are enabling for high-yield, high-throughput processing of these things. And I would say the last thing—which I think I have mentioned before—like our AccuScrub technology, for example, where we can remove the contaminants from the processing fluxes out of the gas stream so that it reduces downtime in the ovens and reduces the risk of contaminating the product. So it is not just one thing; we have a portfolio of capabilities and IP around some of these capabilities that put us in a position where if you are trying to process an AI package, an AI enterprise board, it is expensive. We are worth it, which is why we have captured the strong market position that we enjoy today. Analyst: Definitely makes sense. Well, congratulations on the strong quarter and the strong long-term positioning there. We will hop back in the queue. Bob Daigle: Alright. Thank you, Craig. Operator: And this concludes today's question and answer session. I would now like to turn the conference back over to management for any closing remarks. Bob Daigle: All right. Thank you, operator. In closing, I want to thank you for joining our earnings call today. We look forward to seeing some of you later this month at the B. Riley Annual Investor Conference and then in June at the Planet MicroCap Conference. We hope you can join us at either of these events. Thanks again for your continued support of Amtech Systems, Inc., and have a good evening. Operator: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.
Operator: Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Q1 2026 Vanda Pharmaceuticals, Inc. Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Vanda's Chief Financial Officer, Kevin Moran. Kevin Moran: Thank you, Jordan. Good afternoon and thank you for joining us to discuss Vanda Pharmaceuticals First Quarter 2026 performance. Our first quarter 2026 results were released this afternoon and are available on the SEC's EDGAR system and on our website, www.vandapharma.com. In addition, we are providing live and archived versions of this conference call on our website. Joining me on today's call is Dr. Mihael Polymeropoulos, our President, Chief Executive Officer and Chairman of the Board. Following my introductory remarks, Mihael will update you on our ongoing activities. I will then comment on our financial results before we open the lines for your questions. Before we proceed, I would like to remind everyone that various statements that we make on this call will be forward-looking statements within the meaning of federal securities laws. Our forward-looking statements are based upon current expectations and assumptions that involve risks, changes in circumstances and uncertainties. These risks are described in the cautionary note regarding forward-looking statements, risk factors and Management's Discussion and Analysis of Financial Condition and Results of Operations sections of our most recent annual report on Form 10-K as updated by our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and other filings with the SEC, which are available on the SEC's EDGAR system and on our website. We encourage all investors to read these reports and our other filings. The information we provide on this call is provided only as of today, and we undertake no obligation to update or revise publicly any forward-looking statements we may make on this call on account of new information, future events or otherwise, except as required by law. With that said, I would now like to turn the call over to our CEO, Dr. Mihael Polymeropoulos. Mihael Polymeropoulos: Thank you very much, Kevin. Good afternoon, everyone. Thank you for joining us today for Vanda Pharmaceuticals First Quarter 2026 Earnings Conference Call. Vanda delivered strong commercial execution in the first quarter, highlighted by 26% year-over-year growth in Fanapt sales, the groundbreaking U.S. launch of NEREUS with its pioneering direct-to-consumer platform at nereus.us and the FDA approval of BYSANTI. We believe that these achievements, combined with meaningful pipeline progress and our raised 2026 revenue guidance position the company for continued growth and value creation. Financial highlights, the total net product sales reached $51.7 million in the first quarter of 2026, a 3% increase compared to $50 million in Q1 2025. Fanapt net product sales were $29.6 million, up 26% year-over-year. Full year 2026 revenue guidance was raised to $240 million to $290 million, including $10 million to $30 million from newly launched NEREUS. Key commercial highlights. Fanapt saw continued strong momentum with total prescriptions, TRx, up 32% and new-to-brand prescriptions NBRx, up 76% versus the first quarter of 2025. In April 2026, weekly TRx for Fanapt reached an 11-year high of over 2,600 prescriptions for the week ending April 24, 2026. NEREUS is now commercially available nationwide through nereus.us, Vanda's innovative direct-to-consumer platform. This pioneering patient-centric model enables convenient ordering online with rapid direct delivery, eliminating traditional pharmacy barriers and providing a seamless modern access experience. As the first new prescription therapy approved for the prevention of vomiting induced by motion in adults in more than 40 years, NEREUS represents a breakthrough in both science and patient access. Some key regulatory and clinical development highlights. BYSANTI, milsaperidone received FDA approval for the treatment of bipolar I disorder and schizophrenia. BYSANTI is protected by data exclusivity through February 20, 2031, and multiple patents, the latest of which expires on May 31st, 2044. Vanda's ongoing late-stage clinical studies are progressing rapidly and are expected to generate top line results in 2026 or early 2027, including the Phase III study of BYSANTI as a once-daily adjunctive treatment for major depressive disorder with results expected in Q1 2027. The HETLIOZ Phase III study of NEREUS for the prevention of vomiting in patients receiving GLP-1 receptor agonist therapies with results expected in 2026. The Phase III study of VQW-765 in the treatment of adults with social anxiety disorder with results expected by the end of 2026. The FDA accepted the biologic license application for imsidolimab in Generalized Pustular Psoriasis with a Prescription Drug User Fee Act target action date of December 12, 2026. The results of the pivotal clinical study were published in the April 28, 2026, issue of the New England Journal of Medicine Evidence. In summary, 2026 is developing into a transformational year for Vanda with an extensive and diversified portfolio of commercialized products that include Fanapt, HETLIOZ, HETLIOZ LQ, PONVORY, NEREUS, BYSANTI and potentially imsidolimab by year-end. Our recent innovative launch of NEREUS through the nereus.us platform revolutionizes customer experience through a convenient ordering system at a significantly discounted cash pay price. Finally, our late-stage pipeline with several late-stage Phase III studies are poised to further diversify our pipeline and strengthen Vanda's commercial presence for years to come. With that, I'll turn now to Kevin to discuss our financial results. Kevin? Kevin Moran: Thank you, Mihael. I will begin by summarizing our first quarter 2026 financial results. Total revenues for the first quarter of 2026 were $51.7 million, a 3% increase compared to $50 million for the first quarter of 2025 and a 10% decrease compared to $57.2 million for the fourth quarter of 2025. The increase as compared to the first quarter of 2025 was primarily due to growth in Fanapt revenue as a result of the continued commercialization efforts for Fanapt in bipolar disorder, partially offset by decreased HETLIOZ revenue as a result of generic competition. The decrease as compared to the fourth quarter of 2025 was primarily driven by the impact of insurance plan disruptions and deductible resets that are typical in the industry at the beginning of the year. Let me break this down now by product. Fanapt net product sales were $29.6 million for the first quarter of 2026, a 26% increase compared to $23.5 million in the first quarter of 2025 and an 11% decrease as compared to $33.2 million in the fourth quarter of 2025. The increase in net product sales relative to the first quarter of 2025 was attributable to an increase in volume, partially offset by a decrease in price net of deductions. Fanapt total prescriptions or TRx, for the first quarter of 2026 as reported by IQVIA Xponent, increased by 32% compared to the first quarter of 2025. Fanapt new patient starts as reflected by new-to-brand prescriptions, or NBRx, for the first quarter of 2026 as reported by IQVIA Xponent, increased by 76% compared to the first quarter of 2025. The decrease to net product sales relative to the fourth quarter of 2025 was attributable to a decrease in volume and price net of deductions. Fanapt TRx for the first quarter of 2026 decreased by 1% as compared to the fourth quarter of 2025. The decrease in volume was primarily driven by the impact of insurance plan disruptions and deductible resets that are typical in the industry at the beginning of the year and that we have observed with Fanapt and the broader atypical antipsychotic market in prior years. Historically, Fanapt inventory at wholesalers has ranged between three and four weeks on hand as calculated based off trailing demand. As of the end of the first quarter of 2026, Fanapt inventory at wholesalers was slightly above four weeks on hand, which was generally consistent with the level of inventory weeks on hand as of the fourth quarter of 2025, but slightly above the historic range. Turning now to HETLIOZ. HETLIOZ net product sales were $15.9 million for the first quarter of 2026, a 24% decrease compared to $20.9 million in the first quarter of 2025 and a 3% decrease compared to $16.4 million in the fourth quarter of 2025. The decrease in net product sales relative to the first quarter of 2025 and the fourth quarter of 2025 was attributable to a decrease in volume as a result of continued generic competition in the U.S., which has contributed to declines in dispenses for both comparative periods. Of note, for the first quarter of 2026, HETLIOZ continued to be the leading product from a market share perspective despite generic competition now for over three years. HETLIOZ net product sales continue to be impacted by changes in inventory stocking at specialty pharmacy customers from period to period. HETLIOZ net product sales have fluctuated and may continue to fluctuate from quarter-to-quarter depending on when specialty pharmacy customers need to purchase again. HETLIOZ net product sales may decline in future periods, potentially significantly, related to continued generic competition in the U.S. And finally, turning to PONVORY. PONVORY net product sales were $6.2 million for the first quarter of 2026, a 10% increase compared to $5.6 million for the first quarter of 2025 and an 18% decrease compared to $7.6 million in the fourth quarter of 2025. The increase in net product sales relative to the first quarter of 2025 was attributable to an increase in volume and price net of deductions. The decrease in net product sales relative to the fourth quarter of 2025 was primarily attributable to a decrease in price net of deductions, partially offset by an increase in volume. The specialty distributor and specialty pharmacy inventory on hand levels during these periods were in line with normal ranges. Of note, underlying patient demand was essentially flat between the fourth quarter of 2025 and the first quarter of 2026, even in light of the negative impact of insurance plan disruptions and deductible resets at the beginning of the year. Additionally, as we have previously discussed, an amount of variable consideration related to PONVORY net product sales is subject to dispute, of which approximately $3 million was recognized for the three months ended December 31, 2024. For the first quarter of 2026, Vanda recorded a net loss of $48.6 million compared to a net loss of $29.5 million for the first quarter of 2025. The net loss for the first quarter of 2026 included income tax expense of $0.1 million as compared to an income tax benefit of $7.9 million for the first quarter of 2025. As a reminder, the company recorded a onetime tax charge in the fourth quarter of 2025 to establish a valuation allowance against all of Vanda's deferred tax assets. Tax expense is expected to be nominal going forward until such time that a valuation allowance is no longer required. Operating expenses for the first quarter of 2026 were $101.9 million compared to $91.1 million for the first quarter of 2025. The $10.8 million increase was primarily driven by higher SG&A expenses related to spending on Vanda's commercial products as a result of the continued commercialization efforts for Fanapt in bipolar disorder and PONVORY multiple sclerosis, expenses associated with the preparation for NEREUS and BYSANTI commercial launches and higher legal expenses. These increases were partially offset by lower R&D expenses on our imsidolimab program, partially offset by an increase in expenses for our BYSANTI major depressive disorder program, VQW-765 social anxiety disorder program and other development programs. The first quarter of 2025 included an upfront payment to Anaptys for the exclusive global license agreement for the development and commercialization of imsidolimab. On the commercial side, during 2024 and 2025, we conducted a host of activities as a result of the commercial launches of Fanapt in bipolar disorder and PONVORY in multiple sclerosis, including an expansion of our sales force and the development of prescriber awareness and comprehensive marketing programs. Additionally, in the first quarter of 2025, we launched our direct-to-consumer campaign, which has driven meaningful gains in brand awareness for the company and our products, Fanapt and PONVORY. Throughout 2025 and the first quarter of 2026, we maintained strategic investments in our commercial infrastructure, including increased brand visibility through targeted sponsorships with the goal of supporting long-term market leadership and future commercial launches. Vanda's cash, cash equivalents and marketable securities referred to as cash as of March 31, 2026, was $202.3 million, representing a decrease of $61.5 million compared to December 31, 2025. The decrease to cash was driven by the net loss in the first quarter of 2026 as well as a onetime milestone payment of $10 million made to Eli Lilly in the first quarter of 2026 for the approval of NEREUS in the U.S. Seasonal compensation and benefit payments, which generally hit during the first quarter of the year of approximately $7 million and payments to third parties for manufacturing of commercial and clinical product of approximately $11 million, which is significantly higher than recent quarters. As a reminder, payments made in advance of production are capitalized as a prepaid expense. Commercial products are capitalized as inventory on our balance sheet after production, while pre-commercial products are generally expensed as research and development costs as incurred. The timing of manufacturing of pre-commercial products may result in future variability of our R&D expense depending upon the timing of production. When adjusting the decrease in cash for these items, the change in the first quarter of 2026 would have been closer to $40 million. With regard to the launches of Fanapt in bipolar disorder and PONVORY multiple sclerosis, as I mentioned, the launches were initiated in 2024, and we continue to enhance our commercial efforts through the first quarter of 2026 with the impact of these commercial efforts contributing to revenue growth in 2025 and expected to continue to contribute to our revenue growth in 2026 and beyond. We have already seen significant growth in our commercial activities. Several lead indicators suggest a strong market response to our commercial activities related to Fanapt for bipolar disorder, including total prescriptions or TRx increased by approximately 32% in the first quarter of 2026 as compared to the first quarter of 2025. In April of 2026, weekly TRx for Fanapt reached an 11-year high of over 2,600 prescriptions for the week ending April 24, 2026. New patient starts as reflected by NBRx increased by 76% in the first quarter of 2026 as compared to the first quarter of 2025. Of particular note, Fanapt was one of the fastest-growing atypical antipsychotics in the market throughout 2025 and in the first quarter of 2026 based on several prescription metrics. Our Fanapt sales force continues to expand. Our Fanapt sales force number approximately 160 representatives at the end of 2024 and increased to approximately 300 representatives at the end of 2025. These expansions have allowed us to significantly increase our reach and frequency with prescribers. To that end, the number of face-to-face calls in the first quarter of 2026 was more than 80% higher than the number of face-to-face calls in the first quarter of 2025. In addition to our Fanapt sales force, we have established a specialty sales force to market PONVORY to neurology prescribers around the country. We have grown this sales force to approximately 50 representatives. Fanapt performance remains the focus of Vanda's commercial initiatives and encourages us to continue to invest in this differentiated medicine and the franchise extending launch of BYSANTI. Before turning to our financial guidance, I would like to remind folks that with Fanapt, HETLIOZ, PONVORY and now NEREUS already commercially available and with BYSANTI recently approved for bipolar disorder and schizophrenia and a biologics license application for imsidolimab now under review by the FDA, Vanda has five products currently commercially approved and could have six products commercially approved by the end of 2026. Turning now to our financial guidance. Vanda is raising its full year 2026 total revenue guidance to reflect the potential contribution of newly launched NEREUS while maintaining prior ranges for Fanapt and other products. Vanda expects to achieve the following financial objectives in 2026. Total revenues from Fanapt, HETLIOZ, PONVORY and NEREUS of between $240 million and $290 million. The midpoint of this revenue range of $265 million would imply revenue growth in 2026 of approximately 23% as compared to full year 2025 revenue. This compares to the previous guidance of total revenues from Fanapt, HETLIOZ and PONVORY of between $230 million and $260 million. Fanapt net product sales of between $150 million and $170 million. The midpoint of this revenue range would imply Fanapt revenue growth in 2026 of approximately 36% as compared to full year 2025 Fanapt revenue. This guidance is consistent with the previously communicated revenue guidance. Assuming consistent gross to net dynamics between 2025 and 2026, the bottom end of the range assumes high single-digit to low double-digit sequential quarterly TRx growth for Fanapt in the remainder of 2026. The top end of the range assumes mid-teens to high-teens sequential quarterly TRx growth for Fanapt in the remainder of 2026. Other net product sales of between $80 million and $90 million. This range assumes a further decline of the HETLIOZ business due to generic competition and modest growth of the PONVORY business, where we are seeking to significantly improve market access to the product. Depending on our success in these efforts, we could see meaningful improvements in patients on therapy, prescriptions filled, and prescriptions written by prescribers. This guidance is also consistent with the previously communicated revenue guidance. Finally, NEREUS net product sales of between $10 million and $30 million. This guidance was not previously provided and is being introduced as part of the Q1 earnings update. Vanda is currently making conditional investments to facilitate future revenue growth, both in the form of R&D investments, commercial manufacturing, and potentially outsized commercial investments, which could vary moving forward depending on the success of these commercial strategies. As previously communicated, Vanda is not providing 2026 cash guidance at this time. However, it is likely that Vanda's 2026 cash burn will be greater than the cash burn in 2025. With that, I'll now turn the call back to Mihael. Mihael Polymeropoulos: Thank you very much, Kevin. At this point, we'll be happy to answer your questions. Operator: [Operator Instructions] Your first question comes from the line of Olivia Brayer from Cantor Fitzerald. Olivia Brayer: Can you run through what the pushes and pulls are that you're using for that $10 million to $30 million guidance range for NEREUS? It seems like somewhat of a big range, just given that it's so early in the launch. So, I'm curious what the higher end of the range assumes versus the lower end. And then on BYSANTI's launch, what's the progress on getting that to patients at this point? And should we assume that any contribution from BYSANTI this year is essentially embedded in your Fanapt guidance? Or is it just too early to start attributing revenues there? Mihael Polymeropoulos: Maybe, Olivia, I will start off by saying it is very early on the NEREUS launch. And you have seen that we're approaching it as a broadly available commercial product with a direct-to-consumer platform, which is in the early days. And of course, we're working through all the dynamics and logistics of that. We'll have a better idea on progress by our next call. And in terms of the $10 million to $30 million, we're excited about the opportunity. We know we are tapping a market of potentially 70 million people with motion sickness and a good percentage of them suffering from severe motion sickness that is not properly treated today. The $10 million to $30 million is a relatively wide range, but it is not informed by experience. It is more modeling from the total market opportunity and other treatments for motion sickness. But I'll turn it to Kevin. Kevin Moran: Yes. And that's right, Olivia. That's what's driving the range there. It's obviously not informed by actual data at this point. It's informed by modeling and what we've seen in some of our qualitative and quantitative research. And so, as we gather more information there, obviously, we'll be able to provide additional context as the year progresses. Maybe on the BYSANTI side, what we previously communicated there is that we were looking to have the product available in the back half of the year, and that's still on track. So, we're working to bring that product to market. And then as far as the revenue contribution goes, obviously, still pre-launch, so a little bit early on this. But I wouldn't necessarily think about it being as embedded in the Fanapt revenue item because we expect that we'll see demand for BYSANTI independent of Fanapt. And for any demand that we see for BYSANTI that replaces Fanapt demand, we're expecting to see meaningful net price favorability, which obviously would lead to a larger revenue contribution from a BYSANTI unit versus a Fanapt unit. Olivia Brayer: Okay. Got it. So, for BYSANTI specifically, is it just a matter of waiting until it's officially commercially available before providing any sort of revenue numbers around that? Or is 2026 maybe just a little bit too early to start modeling BYSANTI? Kevin Moran: I think it's going to be -- obviously, we haven't -- we're not committing to providing revenue guidance on BYSANTI at any point in time. But obviously, the launch is, I think, going to be critical to us having better visibility into providing revenue guidance. And then we'll be looking to provide additional updates on it. But I don't think it's necessarily too early depending on the timing at which we launch the product. Operator: Your next question comes from the line of Ram Selvaraju from H.C. Wainwright & Co. Raghuram Selvaraju: Firstly, I was wondering if you could provide us with some additional color regarding the timeline to reporting of top-line data for the tradipitant study assessing its ability to attenuate nausea and vomiting and other GI side effects associated with GLP-1 drugs. Kevin Moran: Yes. Thanks, Ram. So, what we've communicated there is that in the press release today, we said results by the end of 2026. And our timing obviously is consistent with that, and that's consistent with what we communicated in our most recent and our initial launch of the program. And obviously, we're actively enrolling patients at this point. So that's informed by actual activity. Raghuram Selvaraju: And can you talk a little bit about what your expectations are for that data set? What you would consider to be a clinically meaningful result? And if you are also going to have additional information regarding the impact of tradipitant use on adherence and efficacy outcomes on the GLP-1s for patients enrolled in the study? Mihael Polymeropoulos: Thank you, Ram. This is Mihael. First of all, the Phase III study is of a very similar design like the Phase II study for which we reported positive results in November. And that is a week of pre-treatment with tradipitant or placebo and then a single injection of Wegovy at 1 milligram and follow-on for another week. So, what we aim to do with this study is confirm the previous finding of the significant reduction in vomiting episodes that we saw. And certainly, that was highly clinically meaningful. On your question whether this will improve adherence, of course, with this short study, we will not have this information. But it is widely known that this GI decreased tolerability, especially around dose escalation to higher doses, is a significant contributor to decreased adherence. Raghuram Selvaraju: And just two other things on that front. Can you comment on the possibility or likelihood of any off-label use of tradipitant given the fact that it is now an approved drug for motion sickness among those folks taking GLP-1 drugs who may potentially have obtained them via some consumer health initiative, potentially to assist them in achieving long-term adherence? Mihael Polymeropoulos: So first of all, the key word here is off label. Of course, we don't have any approved use for that indication. We cannot promote off label, especially in the midst of clinical studies and certainly not before approval in that indication. So, we cannot have any insights for that. We certainly hope that upon approval there will be a significant interest in the use of the drug. Raghuram Selvaraju: And then last question for me is with respect to the long-acting injectable formulation of iloperidone. Can you provide us with an update on that? And how rapidly you expect to be able to advance the product candidate in this context at this juncture? Mihael Polymeropoulos: Yes. Thank you. For context, this is a long-acting injectable iloperidone being used in the study to measure relapse prevention in schizophrenia. The study is ongoing in the U.S. However, it is going slowly and slowly recruiting. We think that is a phenomenon of the field of these studies and the required design of a placebo controlled. And I know you're quite familiar with this type of designs, but we're highly concerned that this exact model that has worked extremely well for Fanapt oral and other antipsychotics is becoming less and less amenable to study new drugs. And what we are thinking and potentially discussing with the FDA soon is that not only recruitment has become slower in the U.S. for this type of placebo-controlled schizophrenia relapse prevention study, but the rate of relapse has historically been significantly reduced. We observed a significant rate of relapse on placebo in the study that was completed in 2015. We've seen since with other drugs that follow this design, a significant reduction on placebo. It is too early for us to say what the exact placebo rate will be in this study. But certainly, we already believe will be much lower rate of relapse than the oral REPRIEVE study of iloperidone. All these go together to say that we are concerned about the timing of -- and the progress of the study. But we do have several ideas. We plan to engage the FDA in a constructive discussion and perhaps even modify the development plan. Operator: Your next question comes from the line of Madison El-Saadi from B. Riley. Madison Wynne El-Saadi: Maybe I'll ask about the recent New England Journal publication on imsidolimab in GPP. So, we're looking at a potential Christmas time approval again. Are you taking steps now to kind of lay the groundwork for a potential year-end commercial launch? Will this likely be something where there's like a one quarter cushion before the launch? And then is the expectation that you would receive approval in both the acute and the maintenance settings out of the gate? Mihael Polymeropoulos: Yes. Thank you very much, Madison. And you're correct. We're very excited with the publication in such a high-caliber journal, the New England Journal of Medicine evidence on this result, a testament of peer reviewed scrutiny around this very impressive data. I will answer the question on indication first. We believe that the data that we've seen from the GEMINI-I, GEMINI-II studies do support both immediate treatment of acute flares with a single injection and maintenance of that relapse in responders with the once every four-week injections. So that is our proposed indication with the FDA. And we're also making progress with -- towards regulatory filings in Japan and in Europe, but they are much earlier than the FDA submission. In terms of launch timing, this is, of course, a complex project to manufacture being a monoclonal antibody. We do not expect that we will be commercially launching right after the PDUFA date. There would be some lag time. But hopefully, we can do that within the first half of 2027. Madison Wynne El-Saadi: Understood. And then if I may ask, so on the Fanapt prescription data, this kind of reacceleration in April, BYSANTI was approved late February. Just wondering if there was maybe some type of a halo effect that could have fed into that or if that was purely kind of the sales force that you described earlier? Kevin Moran: Yes, Madison, thanks for the question on that. So, the reminder there is that historically, including this year, we've seen the first quarter be -- have seasonality with both Fanapt and the broader atypical class. And this first quarter was no exception. And in line with our expectations, we saw a flattish first quarter on prescription demand, which is, again, consistent with what we saw last year and in years prior to that. What we saw last year was after the first quarter, we saw an acceleration and sequential quarterly growth in the double-digit range in the second, third and fourth quarter of last year. And that's our expectation of what we'll see this year, and that's supported by what we see on the April data, which includes our highest TRx prescription number in over 11 years, right, which was over 2,600. So, the pattern that we've seen in prior years and expected to see this year is what we've seen play out to date as the year has gotten started here. Mihael Polymeropoulos: Yes. I agree with all that. But also, I want to emphasize that the commercial infrastructure is mature. We have approximately 300 representative sales force, which is now well trained, mature, developing their relationships in the field and supported by both a significant awareness speakers' program, but also our brand awareness direct-to-consumer marketing. Operator: Your next question comes from Leszek Sulewski from Truist. Leszek Sulewski: So first on Fanapt, do you have a sense of what portion of the TRxs and NBRxs are coming from bipolar versus schizophrenia? And with inventory running above normal, should we expect any wholesaler destocking in 2Q? And then on BYSANTI, can you rank the launch priorities, new patient starts versus switches from Fanapt and targeting the Medicaid heavy patients? And then third, I see the MDD readout was moved to the first quarter of '27 from year-end '26. What drove the timing shift? And I have a follow-up. Kevin Moran: Thanks, Les. Maybe I'll start with the first two, and then Mihael can take the one on the MDD. So first on the split. So, while we don't analyze the data at an indication level, our expectation on the Fanapt growth is that the primary driver is going to be the bipolar label expansion that we got in 2024. And that's what we seen, and that's what's informed our targeting strategy and call points and call guidance. So, the expectation would be that the growth that we're seeing in the Fanapt business is driven by increased demand from the bipolar patient population. As far as the stocking question goes, so just to point you to what I said in my prepared remarks there, historically, we've seen the Fanapt inventory levels at three to four weeks. What we've seen in the -- at the end of the first quarter of 2026, fourth quarter of 2025 and as far back as the fourth quarter of 2024 is that the inventory levels were at or slightly above four weeks on hand. So actually, the inventory at the end of the first quarter is largely consistent with what we've seen over the recent period. And what we would expect to see for a product that's growing, right? Because as you're measuring this, it's based off a trailing demand figure. But if the demand is growing, then it's actually on a lag. So, I wouldn't expect that. I'd expect the inventory levels to maintain at this as long as Fanapt continues to grow. The second question you had there was around the prioritization of new patients versus switches from Fanapt to BYSANTI. And what I would tell you there is that we're going to be prioritizing both. And that's because with BYSANTI being launched as a newly approved atypical antipsychotic, we're certainly going to be detailing it in that light. And as part of that, we'll be deploying commercial strategies to have prescriptions moved from Fanapt to BYSANTI as appropriate. And the last kind of point I would make on that is that with the nearest -- or sorry, with the BYSANTI launch in the back half of this year and the Fanapt potential loss of exclusivity at the end of next year, we've got five quarters or so where both products will be in the market, and we can execute on a switch strategy while executing a launch strategy as well. With that, Mihael, I think, can address the question on the MDD timing. Mihael Polymeropoulos: Yes. Les, you're correct. we moved the timing of end of study and results for the MDD in the first quarter of 2027 from end of '26. We're still working hard to get the results as soon as possible and could be by year-end, but we have better data now on recruitment speed and especially bringing on new sites and those in Europe as well. So, it is a reflection of projections from the actual recruitment data. Leszek Sulewski: That is helpful. And then on your commercialization and motion sickness, can you provide some color around the patient access to the drug and how that pricing looks like outside of the website via the retail pharmacy channel? And then lastly, maybe just kind of curious on your pricing strategy given the competing NK-1s out there and how this would translate to the GLP-1 adjunct opportunity. Kevin Moran: Yes. Thanks, Les. So, as we look at the insurance reimbursement landscape, obviously, with the product relatively recently approved, that will be a process that plays out over coming quarters and years as the payers conduct their clinical assessments and then their periodic reviews. So, I expect to have more information to share on NEREUS access and progress on that front as we move further into the launch, but it's certainly something that would like to secure as well in addition to the cash pay model. But the cash pay model is our immediate focus for the actual NEREUS launch with the innovative platform that we've deployed. And I'm sorry, Les, what was the second question after that? Leszek Sulewski: The pricing strategy around and read-through for the GLP-1 opportunity. Kevin Moran: Yes. Sorry. Thanks, Les. Yes. So, as we kind of evaluate the space and we look at the competitive class for the NK-1s, they range anywhere per dose from the 200 range up to about the 600 range. So, with our pricing strategy there, we're kind of deployed in the middle on the lower end. And we think with an eye towards gastroparesis potentially, if we're able to be successful on the regulatory front there and with the GLP-1 that pricing would put that at a competitive market price to service those patients as well. So certainly, the considerations for us as we launched the pricing were having the appropriate price for the motion sickness market but having an eye towards the potential for a gastroparesis market and a GLP-1 market, hopefully, in the near future. Mihael Polymeropoulos: And what I would add is a couple of things. We chose this commercial model because we believe motion sickness is a prototypical consumer product. And as you can see on our website, we provide the product in increments of two capsules, which may be enough to supply somebody for their business or personal travel, where they may experience motion. So that's important to us, and we're receiving good comments on being very patient-centric. And while in recent, I would say, years or a year, we've seen a model of cash pay at discounted prices, coming on, especially for drugs like the GLP-1 analogues. This is the first instance we know that you can directly coordinate with manufacturer. And this is an innovative system that we have built at Vanda and works in conjunction with a mail order pharmacy that can get expeditiously the product to patients. We also are working to continue to add value-added measures, including a telemedicine platform so that patients can conveniently obtain the prescriptions. So, it's all focused on the customer experience, and we want this to be really an example for others to follow. You mentioned, I think, briefly other NK-1 antagonist. And yes, there are other approved drugs in the class. None of them have ever been studied or approved in motion sickness or as an adjunct to GLP-1. The lead product there has been precedent by Merck in chemotherapy-induced nausea and vomiting and postoperative nausea and vomiting. And there are some key things and key differences on the label that can make potentially NEREUS more attractive for our consumer base. And what I'm alluding to is the absence of interaction in the study imsidolimab study, which actually differentiates NEREUS from event on Emend contraindication or warning around contraceptive use. So that and other items on the prescribing information, we believe can make the product attractive, especially for this approved indication. Leszek Sulewski: That's very helpful. Just to clarify one thing, does it seem that you would weigh out the option of a dual model approach for GLP-1 adjunct opportunity, meaning you could roll it out with a DTC plan and also a traditional insurance channel as well? Mihael Polymeropoulos: Yes. First of all, our premise here is broad access. So, any way people want to acquire the product, we want to make it available for them. At the same time, we recognize the difficulties people are going through with all the, let's call it, middleman, the pharmacy benefits organizations, their own plans. Pharmacies and all the markups of prices that go along. And we know there's a national discussion around that. As Kevin said, the WACC price, the list price of $255 a capsule is within the range of other NK-1 antagonist. However, on the cash pay, we are offering it at about a more than 65% discount from $255 to $85 a capsule, making it affordable for folks who travel for business or pleasure engage in these motion sickness activities. At the same time, we are making the drug available to pharmacies, and we ensure that wholesalers would either stock the drug or will make it available upon demand. So, the premise here is access, but access is not just insurance negotiations is appreciating independence and convenience by individual patients in accessing this drug. And we think this dual model can achieve that. Operator: Your final question comes from the line of Andrew Tsai from Jefferies. Unknown Analyst: This is Faye on for Andrew. So, we have two questions. Number one is about milsaperidone. We want to gauge your views on its likelihood of success in the Phase III MDD trial. We know that not all antipsychotics work in MDD. So, do you want to talk about your confidence why milsaperidone should succeed? And is there any existing data to support any of its benefits as antidepressant? Mihael Polymeropoulos: Yes. We think actually we're quite confident. That's why we're running this study, and we're running it with the once-a-day BYSANTI. We think the study is properly powered to detect a clinical meaningful improvement in symptoms of depression. And generally, atypical antipsychotics are effective as an adjunctive treatment in major depression. Now there are individual receptor binding properties of BYSANTI that differentiated and may increase the ability of effectiveness. And that is not only the dual dopamine and serotonin receptor antagonism, but also the strong and unique in the class alpha-1 receptor antagonism. And whether this will be necessary to achieve the effects or not in major depression will remain to be seen. But we remain very confident on the ability of BYSANTI to achieve the effect. Unknown Analyst: Okay. And the second question we have is for NEREUS. So, it launched earlier this month, and you briefly touched on the pricing strategy, but can you talk about the sales cadence for this drug later this year moving into 2027? Kevin Moran: Yes. So obviously, with us launching mid-second quarter, we would expect the revenue to grow as the year progresses. And that's both with the passage of time, but also with the increase of our promotional activities associated with the product launch. So, one of the key elements to the commercial strategy here is a direct-to-consumer campaign, which we have worked on implementing over recent quarters, but will be continue to investing in as the year goes on. So certainly, we're optimistic about the prospects for NEREUS, and we expect the revenue cadence to increase and accelerate as the year goes on. Operator: There are no further questions. I'd now like to turn it over to Vanna Pharmaceutical management for closing remarks. Mihael Polymeropoulos: Thank you very much all for joining this call and for your questions. We look forward to talking to you soon. Operator: That concludes today's meeting. 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: Hello, and welcome to the Aemetis, Inc. First Quarter 2026 Earnings Conference Call. Joining us today are Eric McAfee, Chairman and Chief Executive Officer; Todd Waltz, Chief Financial Officer; and Andy Foster, President of Aemetis Advanced Fuels. I will now turn the call over to Todd Waltz. Todd Waltz: Thank you, and welcome, everyone. Before we begin, I would like to remind you that during the call, we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve risk and uncertainty that could cause actual results to differ materially from those expressed or implied. Please refer to our earnings release and SEC filings for a discussion of these risks. For 2026, revenue grew 27% to $54.6 million compared with $42.9 million in 2025, with growth across each of the three reportable operating segments. Gross profit was $2.8 million in the quarter, a year-over-year improvement of nearly $8 million from the gross loss of $5.1 million in 2025. Operating loss improved approximately 60% to $6.3 million compared with $15.6 million in the prior period. Net loss improved to $21.7 million compared to $24.5 million in 2025. Production tax credits under 45C contributed $4 million of operating income during the quarter, $1.4 million in dairy RNG and $2.6 million in California ethanol, representing our first quarter of ongoing credit generation tied to quarterly production since 45z eligibility was established in 2025. Adjusted EBITDA for the quarter was negative $1.3 million, reflecting typical winter seasonality with stronger revenue and margin performance later in the quarter. Adjusted EBITDA and a reconciliation of EBITDA to net loss are described in our earnings release issued earlier today. Cash and cash equivalents at the end of the quarter were $4.8 million, comparable to year-end 2025. Capital investments in carbon intensity reduction and dairy digester construction totaled $6.5 million during the quarter. With that overview, I will turn the call over to Eric. Eric McAfee: Thank you, Todd. I want to highlight three key takeaways from 2026. First, Q1 was a financial inflection point. We grew consolidated revenue 27% year-over-year, posted positive gross profit, and improved operating loss by more than $9 million. All three of our reportable operating segments contributed to this result. Second, we benefited from the California Air Resources Board approval of seven new Low Carbon Fuel Standard pathways for our renewable natural gas business at an average carbon intensity score of negative 380 compared with a negative 150 default, which has been providing additional revenue at the higher LCFS value each quarter since Q3 2025. Six additional biogas digester pathways are nearing approval. These LCFS pathway approvals substantially expand the LCFS credit generation per MMBtu of RNG produced and will continue to drive meaningful revenue increases as we scale production. Third, our capital projects are advancing. We received the initial deliveries of dairy biogas pretreatment skids in April under our $27 million fabrication contract. Major equipment for the $40 million mechanical vapor compression project at our Keyes, California ethanol plant has arrived on-site and construction has begun. In dairy RNG, we sold 110 thousand MMBtus in Q1, a 55% increase over the same quarter last year. With H2S cleanup and biogas compression equipment contracted for 15 additional digesters, and four of the equipment units already delivered by the vendor, we are on track to double our operating dairy network with construction into 2027. At our ethanol plant, the MBR project is on track for completion later this year. The system will use on-site solar and grid electricity to displace approximately 80% of the fossil natural gas consumption at the plant. We expect MBR commissioning later this year to add approximately $32 million in annual cash flow from operations, including additional 45z and LCFS uplift from the expected reduction in the carbon intensity of the ethanol produced by the plant and cost savings on natural gas. In India, biodiesel revenue rebounded to $10.5 million in Q1 with the resumption of Oil Marketing Company shipments under new contracts. This revenue growth supports our planned initial public offering of the India subsidiary, Universal Biofuels Private Limited, for which we have retained legal, accounting, and IPO advisers. Looking ahead, our focus for 2026 is scaling production, monetizing the stacked credit value of our renewable fuels platform, completing the India IPO, and the refinancing of existing debt into long-term financing. The principal catalysts we are tracking through the year include the publication of the updated 45z GREET model by the Department of Energy to significantly increase revenues and margins, commissioning the MVR at the Keyes Ethanol Plant, rising LCFS credit prices caused by continued quarterly credit deficits, and progress on the India IPO. Thank you to our shareholders, analysts, and partners for your continued support. Operator, let us take some questions. Operator: We will now open the call for questions. Certainly. The floor is now open for questions. If you have any questions or comments, please press 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if you are listening on a speakerphone to provide optimum sound quality. Please hold for just a few moments while we poll for any questions. Your first question is coming from Matthew Blair with TPH. Please pose your question. Your line is live. Matthew Blair: Thanks, and good morning, Eric. Certainly a lot of things going on at your company, but I was hoping you could talk about the possibility of the RD and SAF plant that has been on the table for a few years now, just in light of the very robust 2026 and 2027 RVO that materially increased the biomass-based diesel requirements. How are you thinking about that RD and SAF project? And maybe you could refresh us on how much it would cost and what kind of capacity it would provide. Thank you. Eric McAfee: Thank you, Matt. The capacity is 80 million gallons a year of SAF, or if we run it only in renewable diesel mode, it is 90 million gallons. And as you know from previous reports, we have 10 different airlines we signed definitive agreements with, etc. We got full permitting approval for construction to begin in 2024. However, market conditions in renewable diesel and SAF were hampered by a new president being hired that, of course, happened in late 2024. That caused the financing markets to take a delay in looking at SAF and RD. You have done a very good job covering margins at renewable diesel producers. Just yesterday in California, Phillips 66 announced they are running above their nameplate capacity on their renewable diesel plant. And certainly, the events since March 1 have driven the price of the molecule up substantially. LA quotes SAF in neat form at $9.80 a gallon as of yesterday. So the market conditions have moved in our favor significantly compared to where we were in late 2024 with a new president being hired who certainly had a policy position that needs some clarification. We are definitely in a position right now in which there is frankly a lot of interest in new SAF production. I would say that the uncertainty in the last few months has given a new certainty to the need for domestic production of renewable fuel and a clarity that airplanes are not going to fly on hydrogen, batteries, nuclear power, or any other sort of energy source other than liquid fuels for the foreseeable number of decades. So we positioned this project specifically for the conditions we are in right now: high price of crude oil alternatives and, frankly, coalescing enthusiasm for the renewable version, which is sustainable aviation fuel. So we are definitely making progress on the financing; that is actually the only remaining part of this. We have the authority to construct permit in place for the facility, and market conditions continue to be in favor of that. That 80 million gallons, of course, if we are selling at $9.80 a gallon, is almost $800 million additional revenue. And I think the industry today is reporting roughly $1.60 a gallon of operating margin. So, obviously, a very positive improvement in our company’s overall revenue and EBITDA growth. But I am going to wrap this up by saying that there are actually four different sources of revenue for that plant, and 45z, the clean fuels provision, is still an unknown. We do not have the updated 45z. It is absolutely expected anytime soon, certainly before June, that the Republicans need to post it. And since there are four revenue streams—you sell the molecule, you sell the California credits, the federal credits, and then receive the 45z production tax credit—that is having an impact on the timing of our financing. Most lenders especially are interested in knowing what the 45z revenue is for this project. Federal law is passed. Treasury adopted their guidance in February 2026 for 45z, but the actual calculator on the Department of Energy website is going to be—that spreadsheet needs to be posted with the updated rules in the spreadsheet in order to finalize that fourth leg of the stool. I want to put that note on the table that that is having an impact. Of course, right now, the business works great without 45z, but people are curious to know what your total revenue is if we are doing a project of that size. Matthew Blair: Sounds good. And then the India biodiesel operations—nice to see them restarted in the first quarter. It looks like profitability is essentially breakeven, maybe a little bit below. Could you talk about your expectations for the second quarter? Do you think volumes will be in a similar range as the first quarter? And I think we typically see some margin improvement in the second quarter as you are able to shift different feedstocks. Do you think that will happen in the second quarter this time around? Thank you. Eric McAfee: Thanks, Matt. Let us talk about the overall trend in India, because it is very important for investors to understand that India is a socialist country, and they have elections that occurred in May. In order to support the existing government, a decision was taken by the government to set the price of diesel at the same price in March and in April as it was in January and February. There is no change in the price of diesel. I think most people on this call would understand that the price of diesel and crude oil dramatically increased in both March and April, but in India, it did not. So as of today, when you go to the pump in India, you do not know that the Iranian war happened from the price of the diesel at the pump. That means that the government is running a very large negative from their expected tax collections from diesel, and the Oil Marketing Companies are losing a very large amount of money every single day on selling diesel because they are buying crude oil at high prices and then selling it at prices below cost in India. That is about to change, and it should happen in the next few days that the price of diesel in India dramatically increases. The Oil Marketing Companies and the Ministry of Petroleum have known about this for two months and have been proactively meeting with the biodiesel and renewable diesel and sustainable aviation fuel producers—or to-be producers—in the country in order to come up with a much more solid program for us to be able to utilize all of our production capacity. We have an 80 million gallon plant that has been operating recently at 10% capacity. There has been a renewed focus on domestic renewable fuels in India. With the policies already in place, the National Biofuels Policy is 5% blended biodiesel in a 25 billion gallon market. That is about 1.25 billion gallons. Unfortunately, they are not at 5%; they are at a 0.5% blend right now, and that is rapidly changing. So you asked about second quarter. I would put it in the context of the trend of this year. We are seeing dramatic increases and, frankly, signing larger contracts and going back to the cost-plus contract model, which is what is in process right now in India. During the course of the next few months, I think you will see that kind of certainty come into play. Our IPO is really being built around us working on that reality that those policies need to be known and need to be adopted. We are setting up our IPO to be directly correlated with when those policies are adopted. I think it will have a very positive impact on not only the valuation of our business but how much money we raise. We are seeking for the IPO in India to be truly a breakout opportunity. We are looking to build the first global diversified renewable fuels business ever to go public in India and certainly anticipate that that will be the positioning we have and that the events of the last two months are having a very significant impact on India and focusing them on redirecting themselves to these policies that they have already got in the books but they have not been fully enforcing. Matthew Blair: Sounds good. Thanks for your comments. Eric McAfee: Sure. Thank you. Operator: Your next question is coming from Nate Pendleton with Texas Capital. Please pose your question. Your line is live. Nate Pendleton: Morning. Do you provide more color around the financing commentary from the release? Just looking to better understand some of the options that are available to you on addressing the debt broadly. And then more specifically, what are you looking at with regard to Keyes and then the status of the refunding for the dairy RNG projects? Eric McAfee: The improved margins and, frankly, now recovery of confidence in the need for domestic renewable fuels is directly expanding our refinancing opportunities. We have been funded and supported for the last 18 years by roughly a $3 billion fund out of Toronto that holds our senior debt, except for the $50 million of U.S. debt that we have, and our expectation is that we will continue to have very positive trends toward having municipal bond financings available to us. Municipal bonds have been used by the renewable fuels industry for a variety of basically greenfield projects. We, of course, are not greenfield; we are expansion. We are actively in the market right now working on a municipal bond type refinancing of our existing bridge financing we got from Third Eye Capital. The Renewable Energy for America Program at USDA is active, but they have slowed down their expansion in renewable fuels in a portfolio review process. The timing of that seems to be changing on a regular basis. As they make a review of their portfolio goals, they will be expanding or not expanding—it is really quite uncertain, to be frank with you. The rapid expansion of interest in the municipal bond and even commercial credit markets, certainly private credit markets, all of which we have had active discussions with, I think are going to overshadow our Renewable Energy for America Program funding. I think we will be seeing much larger financings and moving much quicker than what the USDA program currently looks like for our company. Nate Pendleton: Understood. Thanks, Eric. And then I just wanted to get your perspective on LCFS prices for a moment. While the market has flipped to deficit generation recently, prices have broadly remained quite muted. Can you talk about your expectations for that market going forward? Eric McAfee: I think we are going to see a rapid price increase during the summer and early fall. What muted the deficit—that is, we had our second quarterly deficit on April 30, and that was for the fourth quarter of last year. So there is a trailing deficit announcement. It is literally four months after the end of the physical quarter when the announcement happens. But the price being muted was an expectation by traders that people would not drive as much with high gasoline prices. Interestingly enough, on a formulaic basis, gasoline currently represents roughly 2% of the income of the average American, and I think traders over-traded on this one. They were not anticipating that the Iranian war would actually not be as big of an impact on driving as what it has—or they thought it would have a bigger impact than what it really did. It did not have as big an impact, especially in California. LCFS credit deficits, however, are not driven just by consumption of gasoline. It is also driven by how many credits come from renewable diesel. Renewable diesel is the reason we got such a large 40 million credit bank, and renewable diesel has underperformed in Q4 last year and the first part of this year. I expect it to underperform in credit generation. So if you have fewer credits being generated, quite frankly, it was a lot more of a deficit than what was expected because there were fewer renewable diesel credits generated. We think the LCFS price trend is absolutely upwards. The question of pace has been impacted by the Iranian war. That play did not quite work out, and so we do expect increases to continue. There are plenty of credits in the market; it is not that issue. The issue is: do you want to pay $200 for it 18 months from now when there are very few in the credit bank? So it is a question of major oil company traders over the next 18 months at some point in time reaching a tipping point at which they decide they do not want to have to be buying $200 credits. They might as well get out there and buy whatever they can on the market. When that happens, you will see a very rapid price rise. I would not be surprised at all to see $150 in 2027 as traders see the cap as $268, and they want to get their book filled up as soon as possible. Nate Pendleton: Got it. Thanks for the color, Eric. Eric McAfee: Sure. Thank you. Operator: Your next question is coming from Sameer Joshi at H.C. Wainwright. Please pose your question. Your line is live. Sameer Joshi: Hey, good morning, good afternoon, Eric. Thanks for taking my questions. On the MBR, I understand it is going to be deployed before the end of the year. Are there any additional certifications or verifications needed to be done before you can start generating that $32 million annualized return from it? I know some of it will be immediate because of lower natural gas consumption, but for the other incentive-based cash flows, do you need to do anything? Andy Foster: Thank you for your question. No, there are no additional certifications necessary. We received an authority to construct from the air district, which is really the big number that we have to get crossed off before we can proceed with the project, and that was received last year. We have some local permits that are sort of ongoing as you do construction, but we do not have any requirements for additional permitting or authorization in order to proceed. Construction has begun. We have begun demolition on existing concrete structures. As Eric mentioned in his comments, we have received most of the major equipment stateside now. We received the turbofans from Germany last week. The main evaporator was received from PRASH in India about a week ago. It is currently in transit to the Keyes plant. All of the big-ticket items that take a long time to fabricate are either on-site or will be on-site within the next week or so. Sameer Joshi: Got it. Thanks for that, Andy. Moving to the India OMC activity there—thanks for the color that you provided, Eric, to the previous question. But in terms of pricing that will be available for you, do you expect it to be premium pricing relative to what you got in the last year, for example, or are getting currently? Eric McAfee: Yes, there is definitely premium pricing, actually. The next contract is already being discussed. The structure of a cost-plus contract—which we did $112 million of revenue and about $14 million of positive cash flow last time we had a cost-plus contract—is being strongly considered as a replacement for what they have done in the last couple of years, which was this uncertain sort of pick-a-number-and-see-what-happens kind of structure. We covered this a couple of years ago with investors, but just a reminder: the cost-plus structure was after many years of working with the government to come up with something that was going to expand capacity utilization in India. It worked very well. Then the India government passed a 20% tariff on the feedstock that was being used by the industry, and therefore the price of the formula went up 20% after they had issued us a contract. The Oil Marketing Companies did not want to take a loss, so they just did not take delivery. That created confusion in the market. That confusion has now gotten more clarified because of the very high-cost diesel and the need for them to start getting utilization in the biodiesel industry, and that is the resolution that is being worked out right now. We do expect to return to better conditions for full capacity utilization. India imports over 90% of its crude oil and really needs to expand its domestic production of renewable fuels. Sameer Joshi: Understood. Thanks for that. And then just one last one. You did mention you got seven LCFS pathways approved for the negative 380. Six are being worked on. Should we expect those to occur in the first half, or is it a second-half event? Eric McAfee: There is a strange delay in the process. We expect the approvals to occur, but then they are a look-back a couple of quarters. If we get an approval, for example, at the end of the fourth quarter, it is a look-back to the beginning of the third quarter. So an approval by December is actually effective July 1. Strange situation, but the reality is, yes, we do expect by the end of the year to see appropriate progress here with a look-back that looks like a six-month look-back because they do it the quarter after the closing of the quarter. We will keep the market apprised of progress here, and of course, we are focusing on moving it through the process as quickly as possible. Sameer Joshi: Understood. So that would potentially be a lump sum that you get if it is approved in the fourth quarter for the previous quarter? Eric McAfee: Yes, there might be a one-quarter catch-up, but in essence, it is just the delayed approval for the previous quarter—the way the government looks at it. Sameer Joshi: Thanks a lot. Thanks for taking my questions. Eric McAfee: Thank you, Sameer. Operator: Your next question is from Dave Storms with Stonegate. Please pose your question. Your line is live. David Joseph Storms: Good morning, and thank you for taking my questions. I wanted to stick with the dairy digesters. I believe you mentioned on the call you are expecting another 15—doubling your digesters by 2027. Can you just remind us when you actually get the investment tax credits related to those investments, and maybe just your thoughts around the monetization of those net credits? Eric McAfee: Good question. We get the tax credits upon the completion—the what they call in-service date—for each single digester. So we do not have to build all 15 of them and then add six months to that or anything. As we build each digester and it goes in service, we generate the section 48 investment tax credits. We have sold about $95 million of these tax credits. We tend to sell them in $5 million or higher increments, though that is not absolutely required, and we do expect to have a single party this year acquire each one of the investment tax credit projects that we generate. We will be seeking to do at least once a quarter. There is a potential to do it more than once a quarter depending on how many new units are completed. We expect this to be probably a third-quarter contribution but could be quicker than that. The market is moving quickly, and we have some refinancing activities going on that certainly are very positive for the business. We have already fully financed the construction of $27 million of H2S and compression skids. The process is going on; we have received four of them already and have more coming. We are rapidly executing on portions of this project right now. The investment tax credit delay is a month or so after the in-service date if we were doing it in the ordinary flow of business, so not a whole lot of delay between when the project is completed and when we get the cash. David Joseph Storms: Understood. That is very helpful. And then just sticking with those potential new digesters, do those come online at the negative 380 qualification status? Or how does that process look? If they do not come on at the negative 380, what do you think the current timeline is from the negative 150 to the negative 380? Andy Foster: Are you speaking about the new digesters that are not built? Correct. Given the temporary pathway score of negative 150, then once we go through the process with CARB—which hopefully now that they have moved to a Tier 1 approval process will be significantly shorter than what we have experienced in the last few years, which is this kind of 24- to 36-month approval process—it should be more like nine months. Then we would get the benefit of that higher—or lower, however you want to look at it—CI score. So initially it is a negative 150, and as you work your way through the approval process, then you go to the blended rate of the negative 380. David Joseph Storms: That is perfect. Thank you for taking my questions. Eric McAfee: Thank you, David. Operator: Your next question is coming from Ed Woo with Incendiant Capital. Please pose your question. Your line is live. Edward Moon Woo: Yeah. Congratulations on all the progress, guys. My question is, as we are getting closer to the India IPO, what are your priorities, or what have you allocated in terms of what you are going to do with the capital raised? Eric McAfee: The India IPO is primarily designed to support the expansion of the existing projects in India and in California. Our existing projects in California, specifically focused on dairy RNG, would be a use of some of the proceeds of our India business. That is one of the reasons why it will be the first global diversified—not just biodiesel, but multiple different fuels—company to go public in India that offers the India investor access to a very well-established incentive environment here in California called the Low Carbon Fuel Standard. The federal government support of the Low Carbon Fuel Standard in California is matched by the Renewable Fuel Standard at the federal level and the 45z production tax credit and the value of the molecule. So the Indian investor has access to arguably one of the best markets in the world for renewable fuels, and that is a diversification of the growth in the India business. Another point we have made publicly is that as the largest biodiesel producer in India, we happen to be very well-positioned to build the conversion of a biodiesel facility into sustainable aviation fuel. So our India IPO not only is biodiesel and dairy renewable natural gas, but also a conversion into a SAF producer in India in addition to expanding biodiesel. It is a diversified business. The India market is very deep and wide and right now is about to have the shock of its diesel life with an incredible percentage increase in diesel costs as a result of what has been going on in the world. It is a perfect storm in favor of us as a producer in India who has been there for 18 years to open our opportunity to the public markets. We are making excellent progress, and certainly market conditions will determine the actual timing of what we do, but market conditions are trending in our direction. Edward Moon Woo: Great. Well, thanks for answering my questions, and I wish you guys good luck. Eric McAfee: Thank you, Ed. Operator: There are no further questions in queue at this time. I would now like to turn the floor back over to Eric McAfee for closing remarks. Eric McAfee: Thank you to Aemetis, Inc. stockholders, analysts, and others for joining us today. We look forward to talking with you about participating in the growth opportunities at Aemetis, Inc. Todd Waltz: Thank you for attending today’s Aemetis, Inc. earnings conference call. A written and audio version of this earnings review will be posted to the Investors section of the Aemetis, Inc. website. Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
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.
While Wall Street fixates on the “Magnificent Seven,” South Korea's KOSPI has quietly delivered a staggering 75% gain since January.
Bill Campbell, Doubleline Global, Sovereign and Emerging Markets Head, talks about how the war with Iran is impacting markets, a lasting inflation shock and making sure markets don't lose confidence in the Federal Reserve. He speaks on a special "Bloomberg The Close" from Los Angeles.
The board of governors voted 3-2 to reduce the overnight interest-rate target by a quarter of a percentage point to 6.5%, a four-year low.