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Operator: Good morning. Welcome to Establishment Labs First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, today's call is being recorded. I will now turn the call over to Malavika William, Global Head of Corporate Communications and Marketing. Please go ahead. Malavika William: Thank you, operator, and thank you, everyone, for joining us. With me today is Peter Caldini, our Chief Executive Officer; and Sandra Harris, our Chief Financial Officer. Following our prepared remarks, we'll take your questions. Before we begin, I would like to remind you that comments made by management during this call will include forward-looking statements within the meaning of federal securities law. These include statements of Establishment Labs' financial outlook and the company's plans and timing for product development and sales. These forward-looking statements are based on management's current expectations and involve risks and uncertainties. For a discussion of the principal risk factors and uncertainties that may affect our performance or cause actual results to differ materially from these statements, I encourage you to review our most recent annual and quarterly reports on Form 10-K and Form 10-Q as well as other SEC filings, which are available on our website at establishmentlabs.com. I'd also like to remind you that our comments may include certain non-GAAP financial measures with respect to our performance, including, but not limited to, sales results, which can be stated on a constant currency basis or EBITDA, which we disclose on an adjusted EBITDA basis. Reconciliations to comparable GAAP financial measures for non-GAAP measures, if available, may be found in today's press release, which is available on our website. The content of this conference call contains time-sensitive information accurate only as of the date of this live broadcast, May 6, 2026. Except as required by law, Establishment Labs undertakes no obligation to revise or otherwise update any statement to reflect events or circumstances after the date of this call. With that, it is my pleasure to turn the call over to Peter. Filippo Caldini: Good morning, and thank you for joining us. Q1 2026 was a strong start to the year with $59.9 million in revenue and adjusted EBITDA of $1.2 million, representing revenue growth of 45% over Q1 2025. The U.S. business continued to outperform with $19.6 million of revenue, a growth of 216% over Q1 2025 and quarter-over-quarter growth of 13.3%. It's worth noting that Q1 is a seasonally light quarter for breast augmentation and reconstruction, so to grow quarter-over-quarter is a testament to the strength and acceleration of our U.S. launch. Outside the U.S., we delivered 15% growth, driven by strong execution on both our direct and distributor markets. Our minimally invasive platform is showing immense promise as well, generating $9.1 million in revenue in Q1. At the same time, we had our third quarter of positive adjusted EBITDA. Our gross margin improved by 350 basis points in Q1 2026 to 70.7%, up from 67.2% in Q1 2025. We refinanced our credit facility and expect to reach cash flow positive in the second half of the year. Our increasing profitability is demonstrating the operational leverage in our business as well as our ability to generate meaningful earnings per share in the coming years. We continue to be conservative as we forecast our business due to the geopolitical landscape as well as our hyper focus on achieving and scaling a cash flowing positive business. As such, we are raising our guidance to $266.5 million to $268.5 million, up from a previous range of $264 million to $266 million. Our confidence comes from the strong start we are having in Q2, we are setting new weekly highs in our U.S. order counts. We expect our growth to continue throughout 2027 as well. As we've mentioned on prior calls, there is a good likelihood we may be included in several indices, beginning with the Russell 2000. As we're seeing increased interest from firms that benchmark to these indices, we thought it would be helpful to provide an overview for those being introduced to our company for the first time. The robust growth we reported this quarter is a reflection of our work since 2011. Establishment Labs is a women's health company focused on transforming breast aesthetics and reconstruction through innovation. Since the moratorium on breast implants in the U.S. was imposed in 1992, this category has seen very little meaningful innovation. And as a result, patient behavior, surgeon adoption and overall market growth has remained relatively static. Establishment Labs was founded on the belief that a deep investment in science could fundamentally improve existing technology and provide better options for women. From the beginning, we reexamined every aspect of the breast implant from surface technology to manufacturing, leveraging advances in material science, biomedical engineering and device design. This work is reflected in a robust intellectual property portfolio with more than 200 patents issued and pending worldwide. In 2015, we brought on Dr. Robert Langer to lead our Scientific Advisory Board. Bob Langer is one of the most accomplished scientists of the 21st century, and his contributions are behind the founding of several prominent companies. His work at MIT continues to impact science at the highest levels. Our partnership resulted in a seminal paper for plastic surgery. Published in Nature Biomedical Engineering in 2021, this paper focused on breast implant surface technologies and highlighted that the 4-micron surface, which was intentionally designed to enhance biocompatibility, consistently demonstrated low inflammation. These results explain how Motiva implants outperformed the category. The U.S. FDA clinical trial matched both our research findings and clinical data from around the world and is quite frankly, game-changing. All these data points show device-related complication rates at new industry lows, including capsular contracture rates of less than 1%. To put this in perspective, the FDA trials for competitive products have device-related complications rates that are upward to 20%. And in some cases, the complication rates far exceed 20%. Perhaps most interesting is our extended global warranty data with over 49,000 warranties sold and only 377 claims submitted, the resulting complication rate is less than 1%. We publish this data annually on our post-market surveillance report and are the only company in the industry that publicly shares this information, which you can find readily available on our company website. Fear of complications are one of the top barriers for patients when considering a breast augmentation. Having a product that has an outstanding safety profile helps to diminish that concern and provides extra peace of mind for both patients and surgeons. Less complications leads to happy patients and more referrals, which is the lifeblood for any plastic surgery practice. The significant technology moat that has been established is enhanced by our R&D pipeline of continuous innovation. Not only do we believe that we can take a substantial majority of breast implant market in time, we also believe we can significantly expand the market from where it is today. That is best evidenced by the launch of our Motiva minimally invasive platform. We have 2 minimally invasive procedures in market right now, Mia and Preserve. A third is currently in development called GEM and is a revolutionary advancement for gluteal augmentation that should offer a safer, more predictable alternative to the Brazilian Butt Lift. Both Mia and Preserve are available outside the United States with a presence in more than 45 markets globally. While Mia is not yet available in the United States, we recently introduced Preserve to the U.S. market. Both are built on tissue-preserving practices, which Establishment Labs has pioneered, and they allow for the use of minimal anesthesia while preserving the patient's native breast tissue, nipple sensation and chest muscles. Mia features the Motiva Ergonomix2 Diamond shaped implant, which has a unique shape that allows for greater projection than a conventional round implant as the shape creates more projection with less volume. It also includes a proprietary shell, which allows insertion through the smallest incision possible within the Motiva portfolio. These characteristics make for a true scarless breast augmentation done by a small incision in the underarm. This procedure is meant for patients looking for a subtle enhancement with 1 to 2 cup size increase. Preserve can feature either the Motiva Ergonomix1 or 2 implants and accommodates both primary breast augmentation and primary breast augmentation mastopexy, offering patients smaller scars tucked under the breast crease and allows for larger sizes to be used. The launch of minimally invasive techniques into any specialty almost always dramatically increases the market. For example, there were approximately 95,000 total knee arthroplasty procedures in 1991. Between 2000 and 2005, minimally invasive knee procedures became the standard. And by 2010, there were approximately 250,000 procedures annually. In 2025 alone, this number rose to approximately 1.3 million, an increase of close to 14x. This kind of growth exists in other major procedure types as well, such as LASIK eye surgery and fat reduction. In the United States, our minimally invasive technologies command a premium over 2x higher than traditional breast augmentation. And if our overseas growth is any indication, we can expect that minimally invasive will create significant market expansion and be a meaningful driver of growth. The value proposition for patients is well defined, smaller scars, minimal anesthesia, preservation of tissue and sensation and a faster recovery, combined with the safety and performance benefits of Motiva. Our initial 3-year study on Mia was published in the Aesthetic Surgery Journal in October 2025 and showed no device-related complications. Like our FDA trial data, this is game-changing. It's clear that this procedure is fundamentally different from what has come before. Many women no longer view this as the traditional breast augmentation they once knew, but rather as a more accessible almost lunchtime procedure where they can return to normal social activities within hours. Women that have never considered breast augmentation before are now getting the procedure, and we are expanding the market. RealSelf, a popular online platform for aesthetic patients, published last week that breast augmentation page views were up 45% from Q4 and that breast implant revision page views were up 89%, indicating that patients' interest in the category is surging. Not only do our patients benefit, our minimal invasive platform also has the potential to increase surgeon productivity, allowing surgeons to run 2 operating rooms, one where the patient is being prepped or the room is being cleaned and the other where the surgeon is operating. We had one plastic surgeon that started surgery at 6:00 a.m. and by 10:30 a.m., he had completed 10 minimal invasive surgeries. Scheduling a minimally invasive procedure day like this can generate more than 2x additional revenue for a practice. The introduction of our minimal invasive platform enhances the Motiva portfolio, creating a clear, good, better, best framework. This allows the plastic surgeon to address a broader range of patient needs across the aesthetics outcomes, lifestyle consideration and price points. This portfolio approach is not just about product breadth, it enables us to expand the category, increase procedure volumes and drive higher value per procedure while giving surgeons the flexibility to tailor their solutions to each patient. Patients are now engaging with surgeons very differently than before. In a category where it was historically very unusual for patients to ask about implant brands, 78% of surgeons now report being asked for a brand by name. And in those cases, 93% of the time, that brand is Motiva. And now just 18 months into our U.S. launch, we are seeing the next step. Patients are not only asking for Motiva, they are actively seeking out surgeons who are trained in minimally invasive procedures. We expect to see a similar dynamic as we enter breast reconstruction in the United States, an opportunity that is equal in size to the breast augmentation market. We submitted Motiva implants to the U.S. FDA for approval in primary and revision breast reconstruction in December 2025 and are currently progressing through the review process. I hope that reintroduction to our business was helpful and that the context explains our success to date. The U.S. remains the most important driver for our growth. Motiva continues to be one of the fastest launches in the history of breast aesthetics, and we continue to expand our footprint, recently surpassing 1,700 accounts. We are seeing increased adoption from higher-volume surgeons who have moved beyond initial evaluation and are now fully committed to Motiva. This is reflected in our order growth, where we have experienced 30% increase in average orders since the end of Q4. We officially launched our minimally invasive platform in the United States in March, and the response has been exceptional. While we initially trained surgeons on Preserve in our campus in Costa Rica, early demand was so strong, we began training in the United States as well. This has allowed us to train surgeons at a much faster rate, and we have now certified more than 260 surgeons in the U.S. For context, our goal was to train 200 surgeons by the end of 2026, and we soared past that number by the end of the first quarter. Those trained have shown a strong intent to purchase, and we have seen relatively quick adoption with the first procedures being performed shortly after training. A surgeon in the Northeast recently shared that he began offering Preserve after being trained and promoted the procedure on social media. He now has 50 Preserve cases scheduled in Q2 at a 30% premium to his traditional breast augmentation price. Another surgeon in Southern California was thrilled that Preserve has completely changed her practice and that she is consistently seeing patients that had previously deferred surgery due to the concerns around anesthesia and recovery. When you remove historic barriers, you bring new patients into the market. A recent Preserve patient who is a Pilates instructor got her procedure done on a Saturday, went to dinner with friends that night and was back teaching Pilates on Monday. This kind of recovery is traditionally unheard of. And for the first time, patients are truly returning to normal activity with a minimal downtime. In a recent survey conducted with 94 Preserve patients, 3 months post-surgery, 98% stated that they experienced minimal disruption to their daily lives with 95% satisfied or extremely satisfied with the results. In addition, 15% of patients said they were new to the category and had not considered breast augmentation until they learned about Preserve. 84% of the Preserve patient survey said they were willing to pay a premium for the benefits of the procedure with 99% saying that they would choose this procedure again. Outside the United States, our business continues to perform well. We delivered approximately 15% growth with strong performance across our direct markets, which continues to be a major focus area for us. Our minimally invasive platform continues to be a key driver for growth globally. It is interesting that surgeons generally view the 2 procedures as complements to each other and all Mia accounts are offering Preserve, showcasing the value of a minimally invasive portfolio approach that provides patients options to meet their aesthetic goals. Preserve continues to attract surgeons to the overall Motiva portfolio. In our OUS markets, we are seeing strong growth across European direct markets, including the U.K., Germany, Nordics and our newly acquired Benelux affiliate. Continued stabilization in Latin America with solid performance in Argentina due to the adoption of the Motiva minimally invasive platform as well as steady demand across all our distributor markets. Our exposure to the Middle East remains less than 5% of total revenue, limiting risk from regional volatility. In our U.S. and OUS markets, we expect growth to continue to accelerate into 2027. We also expect to continue the innovation pipeline by expansion in breast reconstruction in the United States, which effectively doubles our addressable market, gaining CE Mark for Zen temperature, marking our entrance into biosensing capabilities, introducing smaller sizes to our U.S. product matrix and thus expanding our reach within existing accounts, continue to develop our pipeline, including GEM, our glue augmentation solution. We also plan to submit for Health Canada medical device license for expansion in the Canadian market. As part of our overall strategy, we are taking steps to secure our future growth. This includes our signed agreement with Oaktree that refinances our debt and enhances our financial flexibility. And finally, we are in active conversations with NuSil, our silicone supplier as we both look to establish a long-term agreement. We've had strong working relationship with NuSil for the last 15 years, and our ongoing conversations are very focused on what we can accomplish together as partners. I will now turn the call over to Sandra. Cassandra Harris: Thank you, Peter. We delivered an exceptional start to 2026 with nearly 45% revenue growth, gross margin expansion over 70% and our third consecutive quarter of positive adjusted EBITDA, demonstrating the strength, scalability and operating leverage of our business. Total revenue for the first quarter was $59.9 million, an increase of 44.7% from Q1 2025. Starting with our geographic performance. Our business outside the United States remains the largest contributor to revenue and continues to perform well. In the first quarter, OUS revenue grew approximately 15% over Q1 2025, driven by strength across our distributor and direct markets with direct markets delivering double-digit growth. Our exposure to the Middle East remains limited at less than 5% of total annual revenue. In the United States, we see strong momentum early in our expansion. U.S. revenue reached $19.6 million in the quarter and now represents 32.7% of total revenue, up from 26.8% in Q4 2025 and higher than the 15% from Q1 of 2025. This growth reflects both continued adoption of Motiva and the March launch of our minimally invasive platform, which is contributing to higher realized price points. Our gross profit for the first quarter was $42.3 million or 70.7% of revenue, a 350 basis point increase compared to 67.2% of revenue in Q1 of 2025. This expansion was primarily driven by the increasing contribution of our higher-margin U.S. business, along with the growing impact of our minimally invasive platform, which carries higher average selling prices and margins. SG&A expenses increased $3.9 million to $43.6 million compared to $39.7 million in the first quarter of 2025. The increase was primarily driven by variable costs associated with higher sales, including freight as well as the impact of foreign exchange with continued investment in the U.S. business. Excluding a one-time item, adjusted SG&A was $41 million or 68.4% of revenue, representing approximately 50 basis points of leverage versus the prior year as we began to scale the business. R&D expenses for the first quarter were $5.2 million, consistent with prior quarters. Adjusted EBITDA was positive $1.2 million in the first quarter compared to a loss of $12.1 million in the first quarter of last year. This is our third consecutive quarter of positive adjusted EBITDA. During the quarter, cash decreased $7.5 million to $68.1 million from December 31, 2025. The decrease was primarily driven by investments in the U.S. market. We recently completed a refinancing of our debt, which enhances our financial flexibility, improves our liquidity profile and introduces PIK interest that supports our path to cash flow generation. We have enough cash on hand to reach cash flow positive and have no needs or plans to do any type of equity financing. Following our strong performance in the first quarter, we are increasing our full year revenue guidance to $266.5 million to $268.5 million, up from our prior range of $264 million to $266 million. This represents growth of approximately 26% to 27% over 2025. We expect our OUS business to grow in the single digits, while the U.S. is expected to exceed 30% of total revenue for the year, up from approximately 22% last year. At $9.1 million in the quarter, our minimally invasive business is above expectations, and we now expect to exceed $35 million in 2026, up from the $30 million we guided to in February. We expect gross margins in the range of 71.2% to 72.2% for the full year. Operating expenses are expected to remain between $195 million and $200 million, with some variability in quarterly spending based on timing. We also expect to be adjusted EBITDA positive in each quarter of 2026. As it relates to cash flow, we are on track to achieve cash flow positive in the second half of the year, driven by improved profitability and greater working capital efficiency. In the near term, we expect higher cash usage in the second quarter compared to the first quarter, primarily due to the final $4.7 million payment related to the Benelux acquisition, the normal timing of the short-term incentive payouts and continued investment to support the U.S. commercial expansion, partially offset by $6 million of proceeds from our recent debt refinancing. We expect cash performance to improve meaningfully in the third and fourth quarters, supported by increased profitability and the benefit of PIK interest of more than $5 million per quarter. Historically, Q2 and Q4 are the strongest quarters in the industry with Q4 being the largest, while Q3 is typically softer due to summer seasonality. Operating expenses will be elevated in Q2 as we continue to invest in the U.S. business. Despite this, we expect Q2 EBITDA to be approximately double that of Q1, reflecting the underlying operating leverage in the business. With respect to index inclusion, April 30th marked the Russell reconstitution rank date. And based on our current market capitalization, we believe we are well positioned to qualify for inclusion in the Russell indices with final membership to be confirmed in the coming months. With that, I'll turn the call back to Peter. Filippo Caldini: Thank you, Sandra. As you think about our business, we hope we get a chance to interact with you at one of our many events we attend throughout the year. If you're interested in learning more, we selectively invite investors to visit us in Costa Rica at our innovation campus alongside our U.S. plastic surgeon delegations. Investors have found this trip very useful in validating our business and the overall opportunity. We are also hosting a small dinner in Boston around The Aesthetic MEET Plastic Surgery Conference from May 14 to May 17. If you're interested in either of these, please reach out as space is limited. I appreciate you taking the time to listen, and I hope to see you on the next call soon. Operator, we're ready to take questions. Operator: [Operator Instructions] Our first question comes from Anthony Petrone of Mizuho Group. Anthony Petrone: Congratulations, Pete, Sandra and to the team on a strong start to the year here. Maybe the U.S. momentum here, it looks like an inflection and you have really almost 2 simultaneous launches, if you will, ongoing. It's the U.S. Motiva platform in and of itself. There's still a push into new accounts. And then, of course, we have the Preserve launch. So maybe how much was just new accounts bringing in Motiva as a platform versus the Preserve go-live counts? I mean, by our estimate, you're probably approaching somewhere between 75 and 100 go-live Preserve accounts. I'll start there, and I'll have a quick follow-up. Filippo Caldini: Yes. Thanks, Anthony. As you highlighted, I mean, the progress in the U.S. has been tremendous. I mean it's exceeded all our expectations. And you see that with all the different metrics that we look at. I mean we've increased the number of accounts. We continue to grow the base Motiva business. And a lot of that is driven and it shouldn't be a surprise. I mean we've come to the market with what we believe to be the best implants from a performance as well as a safety standpoint, and we couple that with a best-in-class organization. So that's really helping to drive that growth. And a lot of that currently is still based off of expanding the Motiva-based Motiva business and getting into more accounts, but we're also driving utilization in the accounts that we're in. And clearly, Preserve is a significant -- will be a significant driver for us in the future. I mean, it's not a surprise as well. I mean, there's very clear patient benefits with minimal anesthesia, with smaller scars, quicker recovery. And I think it's creating a lot of interest and excitement from a patient as well as a surgeon standpoint. So we're seeing good growth opportunities just on our base as well as on the Preserve launch. Operator: The next question comes from Josh Jennings of TD Cowen. Joshua Jennings: Great to see the strong start to the year. I wanted to ask about the minimally invasive platform, follow-up to Anthony's question and clearly gaining more and more traction. I'd love to just hear you build out more, Peter, on just how Preserve is not cannibalizing the Motiva business or Motiva cases, but it's actually incremental to kind of the traditional augmentation patient. And then maybe do the same for Preserve and Mia, and just help us understand how they may be complementary and how the Preserve launch internationally may be even boosting Mia traction as well. And if you could tie it all into just -- it sounds like you're optimistic that the breast implant market globally, especially in the United States can actually see stronger growth here in the coming quarters, years and then how this all ties in. Sorry for the multilayer question, but I appreciate you taking it. Filippo Caldini: Yes. Thanks, Josh. As you highlighted, the minimally invasive platform, we're seeing a lot of very strong growth. When you look at our OUS markets where we have both Mia and Preserve, what we've seen, and we've been very pleased to see this is they operate very complementary. So in all the accounts that we currently have Mia, which is close to 150 accounts, we have Preserve. There's clear distinction between the 2 where Mia is much more of in the premium segment, smaller scars to no scar, it's under the armpit. But it's somewhat restrictive in terms of the number of -- or the type of patients and the type of surgeons that would use that. While Preserve is much more day-to-day and it's a premium versus our base, but it's less lower priced than Mia. So they work very complementary. What we've been able to see in a lot of markets in OUS is just with the minimally invasive rollout with Preserve as well as Mia. We've been able to expand our account base in a number of markets that's really helped to drive that. And then to answer your last question, and we're seeing this with some of the market research that in the U.S. with Preserve, 15% of women that have used the procedure were not currently considering breast augmentation. So we believe that the minimally invasive, both Mia and Preserve has a real opportunity to drive category growth. And I think there is just increasing a lot more interest in the area of transparency with -- not only with the Preserve and Mia, but as well as just more openness and interest in breast augmentation, and we feel that we're a big part of that. Operator: The next question comes from Sam Eiber of BTIG. Sam Eiber: Maybe I can stay on Preserve for a moment. Peter, would love your thoughts on if you think Preserve can eventually become standard of care over traditional breast augmentation at least here in the U.S. And maybe you can help explain why Preserve is something that beyond the tools is something that can only be done with Motiva, whether it's the implant surface, whether it's the low complication rates. Would love if you can explain that in a little bit more detail. Filippo Caldini: Yes. I mean, I think in terms of the minimally invasive and Preserve, not only in the U.S., but I think globally, it really makes sense. If you look at our different types of procedures, surgical procedures, everything is minimally invasive. And I think bringing that technology and that capability, I think it's -- I think patients, that's what they're looking for. I mean it's very clear what the benefits are for patients, smaller scars, quicker recovery, minimal anesthesia, which is very important for a number of women. So it really has the opportunity to be a significant growth driver, but it's the standard of care, I think, in the industry. And I think in some respects, because of the lack of innovation we've seen in the U.S. prior to our entry, I think a lot of the category is behind. So we do believe that, that's going to be more standardized in the industry. And I think it's really our innovation with the unique implants that we have is very specific and beneficial for this type of procedure. And we'll continue to look at and continue to drive innovation that really shapes the category. And I think this is just the starting point for us. Operator: The next question comes from Mason Carrico of Stephens. Mason Carrico: I assume that most, if not all, Preserve users were already Motiva users. But I was curious to hear if that launch is actually to increased conversation or maybe even conversion of accounts that previously hadn't adopted Motiva. Maybe just a simpler question is, do you think that launch could actually accelerate the onboarding of new accounts moving forward? Filippo Caldini: Yes. So Mason, I mean, we're pretty early in the launch, but what we've seen outside the U.S. is that the minimally invasive, specifically Preserve, has brought in a number of new accounts for us in our direct markets in Western Europe. So it has had that benefit, bringing new technology, bringing a new procedure, I think, has really resulted in our ability to drive account growth in a lot of our Western European markets. In the U.S., I mean, it's still early. I believe you're going to see the same type of trend in the U.S., but we're kind of in month 2 right now, and there's significant demand with the accounts that we do have, and it's very -- we're very focused on getting the training done. But I do believe, to your question, I think it has the potential to drive, certainly account acquisition. Operator: The next question comes from Caitlin Roberts of Canaccord Genuity. Caitlin Cronin: Congrats on the quarter. Just a quick one. Have you added all the reps that you plan to add for Preserve in the U.S.? And just appreciate the guidance on MIS, but could you break out potentially Preserve and Mia? And any updates on the timeline for you guys to bring Ergo2 into the U.S. and eventually Mia? Filippo Caldini: Yes. So thanks, Caitlin. The split between the Preserve and Mia, a bulk of that is really driven by Preserve is the key driver for us. We expect that to be a significant growth driver for us moving forward. And as it relates to Ergo2, I mean, we -- currently, we've had good discussions with the FDA. We're trying to really align on what the appropriate regulatory requirements are for us to get that approved with the FDA. But we don't see that as a significant driver for us until probably around 2028. I mean, we have a lot of growth opportunities as it relates to Preserve currently. As you asked, I mean, we are expanding our sales force. Currently, we're at 50 reps, but we're going to continue to expand that opportunistically when there's a geographical opportunity, but also more importantly, getting the right talent. I think we've been very successful in what I consider to be a best-in-class organization. And in this industry, bringing over high-quality sales reps that have the established relationship, and that makes a big impact, and we've been able to do that. Operator: The next question comes from Joanne Wuensch of Citibank. Joanne Wuensch: I've got a big picture one. What are you seeing in the macroeconomic environment? And specifically, I'm concerned or thoughtful of the consumer and the impacts to the Middle East as it might relate either to sales or resin or oil prices or anything on the bigger landscape would be helpful. Filippo Caldini: Yes. Thanks, Joanne. I think that's a great question. I mean, obviously, that's top of mind for anybody that's running a company. And I think as you look at what's going on in the Middle East, I think, first off, just looking at the Middle East, as we highlighted in the prepared remarks, it represents 5% of our total sales. Not surprising in Q1, we didn't have any orders. But we are -- we do have orders in the system in Q2, and we expect to be shipping to the Middle East this quarter. So there is some demand there. But I think the key question is what you highlighted, what is the potential overall macro impact? And so far, Joanne, we have not seen an impact on the global demand for the number of procedures. And that's something that we're going to continue to closely monitor. As it relates to areas in terms of cost, I think we've seen some -- and I can let Sandra answer this, but we've seen some impact in terms of outward freight. There has not been an impact in terms of our silicone costs because those are locked in for the full year. So I would say, in general, we haven't seen a significant impact, but that's something we're going to monitor very closely. Sandra? Cassandra Harris: Yes. I think Peter hit it. We're seeing some initial surcharges on outbound freight. But at this time, we've been able to navigate through and hold our margin profile. Our silicon provider, we recently have locked in volumes, and we have a contract with them through the end of the year. And we'll monitor the situation and look to protect our margins with any type of price as it progresses. Operator: The next question comes from Allen Gong of JPMorgan. K. Gong: I just had a quick one on the guidance and just the momentum that you're seeing. You talked about how orders are up 30% from 4Q to 1Q. I guess first quick one, is that a U.S. comment? And also, given that kind of momentum, how should we feel about the cadence for the balance of the year, particularly what you're seeing in the second quarter given the reiterated guide or guide just to beat in the first quarter? Filippo Caldini: Yes. Allen, I'll kick it off. But just to clarify that, I mean, when we talk about the orders, that was specific to the U.S. We're -- as we highlighted in the prepared remarks, we're increasing the number of accounts, but also we're increasing the utilization rate as the surgeons work through their schedule. So it's a combination, and it's reflected in the average daily orders. So we see very strong momentum going into Q2 as well. And -- but that's not just in the U.S. I think in overall, globally in a lot of markets, we've -- the demand has been stable. And I think the one outstanding question that we had going into as we're managing the business like a lot of different companies is what's the impact of the Middle East. And as I mentioned before, it is a small part of our business. We do have orders in the system for Q2. So there is demand there. And we have not seen the impact in terms of global demand, but that's something we're going to monitor. So based on that, gave us the comfort to raise the guidance. We had a strong Q1, and then we're off to a good start in Q2. So that gave us the comfort around that. Operator: The next question comes from Matt Taylor of Jefferies. Matthew Taylor: I wanted to follow up on the silicon supply comments. I know that this year, the contract is set in stone. But could you address the potential for cost increases beyond that? Maybe give us an update on how negotiations are going and when we could expect an update? Filippo Caldini: Yes. Thanks, Matt. It's a good question. I mean, we have a very good relationship with NuSil. I mean, it goes back for a number of years. And obviously, as we continue to grow as a company, we become a more valuable customer to NuSil. And we've had very productive conversations with NuSil. I mean, we consider them very good partners. In fact, that we've aligned or we agreed on volume commitments for this year, just about a month ago. So the prices are locked in for this year. We've made that commitment. Obviously, that's an increase in volume versus last year. And we've started conversations around a long-term agreement. And there's interest on the NuSil side to have an agreement as well as for us to have an agreement 5 years or more. And a lot of the conversations are less about pricing. It's much more about co-development work. They're interested in exclusivity with us and looking at the length of the agreement. Generally around the price is more volume driven. But the conversations are very productive. And as I mentioned before, we are -- continue to be a bigger part of their business. And they've been good partners for us in the past, and we expect that to continue moving forward. So we haven't finalized the conversation, the discussions on the agreement, but there's strong intent to have a very -- a long-term agreement for -- with NuSil. Operator: The next question comes from Mike Matson of Needham & Co. Michael Matson: I just wanted to ask one on the refinancing. So by our math, it seems like without the additional $35 million draw, there could be a slight increase in interest expense of maybe like [ $1 million ] a year. Is that right? Cassandra Harris: Yes. Thanks, Mike. So yes, so on the new debt agreement, we've increased it from $225 million. And the current draw is $265 million. There is a lower interest rate at 8.75%. There's ability to PIK, which gives us some near-term cash availability, which we take. So net-net-net, there is neutral to slightly up on the increase in the availability of the funds with the lower interest rate and then the exercise of the PIK. Operator: The next question is a follow-up from Anthony Petrone of Mizuho. Anthony Petrone: One for Sandra, just on gross margin here, guidance 71.2% to 72.2%. How much of that is just kind of a reflection of Preserve at higher prices? And have you baked in an FDA clearance for reconstruction and just what that can bring to the table in terms of gross margin momentum? Cassandra Harris: Yes, Anthony, good question. So our gross margin improvement, and we do expect that it will continue to contribute is the growth of the U.S. With the U.S. business being a direct account, it improves our margin profile, and you're seeing that in our numbers. And then obviously, with OUS being further along in the journey on minimally invasive, its growth in the direct business and then the launch of minimally invasive in the U.S., that also is a big contributor to the margin. So as we look forward, we do expect that we will continue to improve that margin based upon the mix of that business, both U.S. and OUS as well as the minimally invasive. And at this juncture, we do not -- we can't necessarily time the FDA approval. So we've made no assumptions in regard to reconstruction. Operator: Ladies and gentlemen, that is all the time we have for questions today. I will now turn the call back over to Peter Caldini for closing remarks. Filippo Caldini: Thank you, everybody, for joining the call this morning. I appreciate the time and really having everybody get to hear more about the progress we're making with Establishment Labs. As we highlighted or as I highlighted in the commentary, it's a great opportunity. I hope to see at some of the events, but also please take us up on the offer about visiting us in Costa Rica, and you really get an opportunity to really see the uniqueness of this company and the strengths that we have and just to build that partnership. So thanks again, everybody, for joining the call, and look forward to seeing you soon. Thank you. Operator: Thank you, sir. Ladies and gentlemen, that concludes this event. Thank you for attending, and you may now disconnect your lines.
Operator: Thank you for standing by. Welcome to Quanterix Corporation Q1 2026 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Joshua Young. You may begin. Joshua Young: Thank you, Preyila, and good afternoon, everybody. With me on today's call are Everett Cunningham, Quanterix' President and CEO; and Vandana Sriram, Quanterix' Chief Financial Officer. Today's call is being recorded, and a replay of the call will be available on the Investors section of our website. During the course of today's presentation, we will make forward-looking statements covered under the U.S. Private Securities Litigation Reform Act. These forward-looking statements are based on management's beliefs and assumptions as of today, May 6, 2026. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that might cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. To supplement our financial statements presented on a GAAP basis, we have provided certain non-GAAP financial measures. These non-GAAP measures are used to evaluate our operating performance in a manner that allows for meaningful period-to-period comparison and analysis of trends in our business and our competitors. We believe that such measures are important in comparing current results with other period results and assessing our operating performance within our industry. Non-GAAP financial information presented herein should be considered in conjunction with, not as a substitute for the financial information presented in accordance with GAAP. Investors are encouraged to review the reconciliations of these non-GAAP measures to the most directly comparable GAAP financial measures set forth in the presentation posted to our website and in the earnings release issued today. Finally, any percentage changes we discuss will be on a year-over-year basis unless otherwise noted. Now I'd like to turn the call over to Everett Cunningham. Everett? Everett Cunningham: Thanks, Josh. I'm happy to be here with all of you this afternoon. My time at the company has been very exciting and informative, and I'm more confident than ever about the future of Quanterix. Now in that spirit, I'd like to start off by sharing some of my key observations in my first 100 days with the company. First, we have a passionate employee base full of people who want Quanterix to win and be successful for the long term. Now based on our customers' feedback, we remain the market leader in early detection of critical disease biomarkers, and that's a great position to be in, one that we must capitalize on. Next, we have an installed base of over 2,300 instruments across passionate customers who appreciate the value of our products and services. Our market-leading technologies include Simoa, where we are the leaders in ultrasensitive digital immunoassays for protein biomarker quantification and spatial, where we have the highest plex proteomic platform on the market. Now these are both businesses where we can generate strong growth and build solid businesses moving forward. Next, our strong foundation positions us to be a leader in the Alzheimer's diagnostics industry. Now it's early innings, but I believe in our capabilities, and I want to invest in them now. So in summary, I believe that we have a clear path towards profitability for our research tools business and a balance sheet to support our growth ambitions for our Alzheimer's disease diagnostics with approximately $100 million in cash and no debt. Now this journey, I'm here to undertake is exciting, and I couldn't be more excited to be here. Now moving from a high-level observation to more of a detailed strategic and tactical consideration. I gathered a lot of feedback in my first 3 months here. The company has many strengths to build upon, but we're not currently fulfilling our potential. So as a result, I'm making some operational as well as strategic changes now and in the future quarters that will help us better capitalize on our compelling opportunities. One overriding philosophical change that we must move the company from a mode of integrating and realizing synergies to a mode of investing and growing our business for long-term growth. We are allocating resources to growth opportunities where we see compelling near-term returns while ensuring that we continue to hit our annual operating targets in 2026 and beyond, just as we delivered our $85 million of cost synergies from the Akoya acquisition. In the first quarter of 2026, we reported $36.4 million of revenue as our end markets remain difficult. While our consumable revenues performed as planned, our revenues from our instrumentation business was slightly softer than expected. Now some of the shortfall is related to timing issues, but there's also some changes that we're going to be implementing to bring more focus to our sales efforts. These changes will bring benefits as the year progresses. Now, in addition to investing in growth opportunities, we are hard at work at creating a culture of operational execution and delivering quarterly expectations as a key tenet of our organization we are building here at Quanterix. We've established good operational rigor, which can be seen in our gross margin performance, our disciplined approach to spending and in our ability to consistently hit our cash usage targets. Now during the last call, I shared details of my 30-year commercial background at companies such as Illumina, Quest Diagnostics and Exact Sciences. I know what best-in-class commercial organizations look like, and I've identified multiple opportunities to take Quanterix to the next level of operational performance. As a result, we're making several investments to improve our commercial effectiveness in 2026 and beyond. Now these investments include: we're going to elevate our pharma partnerships in our accelerator business with an experienced senior leader. This important business has slipped in recent quarters, and we are changing that now. I expect that myself, the new leader and our current professionals in this space will have frequent and candid dialogues with our pharma clients to understand how we can better solve for their needs. Now with our best-in-class technology and solutions, we expect significant improvement this year. Next, we are expanding our team of lead generation representatives to improve our outbound targeting and drive net new business. We're also going to hire new market development leaders that will support the sales team in training, systematic value propositions and competitive positioning. This is intended to refocus our sales force on their customers while clarifying Quanterix' many advantages of our overall value propositions in our key end markets. We will be harder hitting on differentiation. For example, we will highlight our ability to detect proteins more accurately than others while doing it more consistently. Next, we're leveraging Thermo Fisher's distribution capabilities to improve our online presence. Now this will have a dual benefit of helping our customers by easing their barriers to access for our products while reducing the manual work of our commercial team to provide pricing quotes. Everything that we're doing is centered on investments that will yield near-term returns to sharpen our focus, expand our opportunity set and grow our top line performance in 2026 and beyond. Now our customers have told me repeatedly that we are the market leader. Armed with this feedback, we're adjusting our course and importantly, we're moving quickly with a sense of urgency. Now we're also increasing our investment in our Alzheimer's diagnostics business. Health care providers who treat Alzheimer's want a reliable noninvasive test to drive earlier intervention of this terrible disease. We firmly believe and industry leaders concur that we have the best performing and most comprehensive Alzheimer's diagnostics test available today in LucentAD Complete, and we expect to garner meaningful market share as blood-based biomarker testing continues to grow. So we're making the following investments in our diagnostics business. First, we are hiring a new diagnostics leader reporting directly into me to build and invest in our emerging diagnostics business. With this move, we are bringing in strong leadership to expand and strengthen our diagnostics portfolio as part of our commitment to advancing our position in the nascent Alzheimer's testing market. Next, we are upgrading our next-generation Simoa HD-X platform and expect to file for IVD status with the FDA in 2027. Now this will position us not only to serve research customers who increasingly request IVD solutions for their clinical trials, but it will also set us up to support the distributed IVD model for our lab customers. Next, we are investing in lab infrastructure and implementing new targeted sales and marketing tactics to increase mind share for our LucentAD Complete test in anticipation of FDA clearance in the second half of this year. Now these investments will build on the strong momentum that we have in our diagnostics business. As a matter of fact, today, we just announced an important and exciting partnership with Tempus AI. Under this agreement, LucentAD Complete will be integrated into [ EHR ] systems at select Tempus Partner Health System locations as part of the Tempus Next program. Now patients who meet the clinical criteria will be flagged using a proprietary algorithm and testing will be available for order at a clinician's discretion. Now to help fund these investments, we're streamlining our product road map. Now my engagement with customers and collaborators in this sector over the past 3 months has led us to prioritize our Simoa HD-X platform and other investments, both on the research tools and diagnostics sides of the business. Also, we're incorporating learnings and enhancements from our next-generation platform into the HD-X upgrade. And additionally, we are continuing to gather feedback from our early access launch program that we expect to incorporate over time into the next-generation Simoa program. Now on the spatial side of our business, our 2 key priorities for 2026 are to expand our PCS biomarker panels for discovery applications and to release new reagents for the HT platform to better support clinical applications. Now from a financial perspective, we continue to expect to reach cash flow breakeven performance by the fourth quarter this year. The entire company is committed to building a profitable and sustainable research tools business that are leaders in both spatial and ultrasensitive proteomics. Now we expect the investments that I discussed today will help drive commercial effectiveness in the second half of 2026. We are not waiting for better markets. Instead, we're making thoughtful and deliberate decisions to drive Quanterix to where the industry is going. And finally, we are excited about our Diagnostics business as we are delivering on key milestones this year while welcoming in a proven seasoned business leader to accelerate our performance in this space. Now let me turn it over to our Chief Financial Officer, Vandana Sriram. Vandana Sriram: Thank you, Everett, and good afternoon. Total revenue for the first quarter was $36.4 million, an increase of 20% from the previous year. Organic revenue declined by 21%. Revenue from our diagnostics partners was $2.9 million, up meaningfully year-over-year from $1.6 million in the first quarter of 2025. This reflects increasing volume for our single biomarker test from our diagnostics enablement partners. During the quarter, both of our end markets and our consumables revenue were largely in line with our expectations, but we saw slightly weaker-than-expected results in instrumentation with a handful of instrument transactions getting pushed into the second quarter. From a product perspective, Simoa contributed $24 million, a 21% organic revenue decline and spatial reported $12.4 million, down 26% year-over-year. Instruments revenue was $4 million, comprised of $2.3 million from Simoa and $1.7 million from spatial instruments. We placed 16 Simoa and 11 spatial instruments in the quarter. Consumables revenue was $21.4 million. This consisted of $14.5 million in Simoa and $6.9 million in spatial consumables. Accelerator Lab services were $4.3 million, $3.5 million in Simoa and $800,000 in spatial. Our customer mix was meaningfully skewed to academia, which represented approximately 65% of the business in Q1. On a pro forma basis, assuming Quanterix and Akoya were combined for the full year, academic revenue for the first quarter declined approximately 16%. Pharma revenue declined 33% year-over-year, primarily due to fewer large accelerator projects and spatial instruments placed. As Everest already mentioned, we are adding resources and refocusing strategies towards the pharma end market, and we expect to see better results here in the coming quarters. Moving on to the P&L. Gross profit and margin for the first quarter were $15.6 million or 42.7%. Non-GAAP gross profit was $18.5 million and non-GAAP gross margin was 50.9%. The synergies from the Akoya transaction are apparent here. Even with a reduction in pro forma revenue, we are maintaining non-GAAP gross margin over 50%. Operating expenses for the quarter were $56.9 million. Included in operating expenses are approximately $22 million of costs related to acquisition, integration, restructuring and purchase accounting. Notably, this includes a $19 million onetime write-off from an intangible asset related to the termination of an Akoya Diagnostics development agreement. Offsetting this, other income contains $22 million of liabilities written off, resulting in net noncash income of $2.3 million from this termination. Non-GAAP operating expenses were $34.7 million, a decrease of roughly $2.3 million sequentially as a result of the synergies. We are now operating the new Quanterix entity at roughly the same level of operating expenses we had when we were a stand-alone company. As Everett mentioned, as a result of the Akoya integration actions taken to date, at the end of Q1, we have delivered the $85 million of annualized cost synergies that we committed to as part of the acquisition. The combined entity is operating as expected. And while there are a few remaining actions to complete, we will not continue to report these synergies after this quarter. Our adjusted EBITDA was a loss of $9.8 million, a sequential improvement of $1.5 million despite lower revenues versus the prior quarter. We ended the quarter with $102.6 million of cash, cash equivalents, marketable securities and restricted cash. During the quarter, we used $19 million of cash, of which $4.2 million was related to onetime integration and employee-related costs. Adjusted cash usage during the quarter was $14.7 million. The first quarter is our highest quarter of cash usage, similar to many companies due to approximately $11 million of annual payments such as insurance renewals and annual bonuses. As we look ahead, we expect our cash usage to move meaningfully lower as these annual payments are behind us and we make progress towards our cash flow breakeven target. Finally, turning to guidance for 2026. We are maintaining our guidance for the full year 2026, and we continue to expect to report approximately $169 million to $174 million of revenue. We expect GAAP gross margin to be in a range of 41% to 45% and non-GAAP gross margins to be in a range of 49% to 53%. In the first quarter, we changed our accounting policy for classifying shipping and handling costs for product sales to record them within gross margin. Historically, they were recorded in SG&A expenses. We believe this classification is preferable because it better aligns costs with related revenue and is consistent with our peers. We reflected this reclassification in our GAAP margin guidance, but there is no change to the underlying non-GAAP margin expectation. We continue to anticipate achieving cash flow breakeven in the second half of the year and expect to end the year with cash in the range of $100 million with no debt. And finally, in terms of our quarterly cadence, we expect second quarter revenues to be roughly in line to slightly ahead of Q1, and we expect that the commercial initiatives that we're investing in will help to drive increased revenues in the second half of 2026. I will now turn it back over to Everett for closing remarks. Everett Cunningham: Thanks, Vandana. We're moving quickly. We're making decisions that will improve our commercial effectiveness, streamline our product management priorities and also enable Quanterix to capitalize on a compelling opportunity in the Alzheimer's diagnostics market. And we're doing all this while moving Quanterix closer to cash flow breakeven performance. And with that said, I'd like to turn it over back to Josh for questions and answers. Joshua Young: Thank you. Preyila, please assemble the Q&A roster. Operator: And your first question comes from the line of Kyle Mikson with Canaccord. Kyle Mikson: Good to hear all these updates here changes and so forth. I guess, Everett, the one that sticks out to me is the preparation for the IVD submission for HD-X in '27. I guess like the question is kind of like why do you need IVD for that system? You talked about, I think pharma important there as well as a distributed model. But maybe just dive into is that -- is this needed more for Alzheimer's, neurology or oncology? Is that part of the aspiration here? And then maybe like a decentralization strategy internationally. I'm curious if that's in the works as well because when you think about this compared to some other platforms that we know of, it could be interesting to think about long term. Everett Cunningham: I appreciate the question. And I will just go back to my last 3 months of being out in the market, talking to customers. We're investing in our HD-X platform because it's our workhorse. We have a really good robust installed base. It's our installed base. The timing of it fits nicely to our diagnostics build-out. And also with making the machine more reliable, it's also going to benefit our research customers, too. So when we build the machine, it is for 2 reasons. First of all, it will solidify our research-only business. It will get us ready for diagnostics, and it will give us what I would just say, optionality to have a distributed plan for our lab partners, both domestically and internationally. And that's why we've made the choice of really prioritizing our focus in getting that machine IVD ready in 2027. Kyle Mikson: Yes. Okay. That was great. And then maybe just a follow-up. What's the status of the Simoa 1 platform? And honestly, I think you were talking about like an early access last quarter. And that platform, I believe, was -- had some translational use cases like may be higher plex. And so I feel like given the focus on pharma going forward, it could have actually aligned with that. So could you just give us an update there? Everett Cunningham: Yes, absolutely. And thanks. We're still very focused on being technology leaders in the marketplace. And Simoa ONE is part of our next generation. We are still doing early access with Simoa ONE. We're getting feedback from our customer, and we're looking to take that feedback and actually help us with our HD-X next generation and our HD-X upgrade. So Simoa ONE still is part of our portfolio, and we're getting really good feedback. Kyle Mikson: Awesome. And then finally, on proteomics competition relevant recently, obviously. You guys obviously targeting low plex, a little bit of mid-plex. You got the sensitivity advantage that probably is driving this firm hold on the low-plex market, we would hope. Can you just talk about what you're seeing competitively over the last few months and maybe going forward and just speak to your conviction level that you're going to maintain this share or increase it? Everett Cunningham: Yes. We feel -- and I'll have Vandana help me too. We feel really good about our position in the spatial low plex market. We have 10x the number of low-plex assays available in the marketplace. compared to our competition. Our installed base in this space is larger than our competition. Quanterix focuses on part of the translational research market that includes later-stage clinical trials, of which reproducibility is really, really important. Again, feedback from our customers, we lead in that space. Where I see benefits of our spatial business moving forward, our tools, our technology is market-leading. We're going to improve our reach to our customers. We're putting in more marketing investments. We have amazing exciting launches in the spatial space, and we feel that that's going to give us a boost in the second half. Vandana, I don't know if you want to mention anything else? Vandana Sriram: No, I think that's exactly right. On the Simoa front, while there has been a lot of talk of competition, I think all of the data and all of the research suggests that we have the broadest menu as well as the greatest level of sensitivity as well as lot-to-lot and lab-to-lab reproducibility versus anyone in the market. And then on the spatial side, with a concentration both in the research and in the clinical side, there's a lot of exciting things going on there. As Everett said, we're now going to kind of turbocharge that to make sure we're getting the right share of market that we deserve. Operator: The next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: So I'll ask my questions in one. First, Everett, great to see the actions you're taking on the diagnostics side, bringing in leadership and investing into that business. Just wanted to get a sense of the level of investment that you need there? And how should we expect -- what should we expect for Alzheimer's in the overall guide here? This looks like a second half weighted guide. So I just wanted to get a sense there. And then could you maybe also elaborate as you transition some of the business or the focus from the core tool side to the diagnostics side, is there a chance for any air pocket? Obviously, that's a question that we frequently get from investors. Everett Cunningham: Yes. Maybe I'll start out with just the diagnostics investments, Puneet. Listen, I feel good about bringing in a seasoned leader. I'll give you a little bit of background. I can't name the person specifically yet, but in a couple of weeks, we'll be able to name. This leader has 25-plus years in diagnostics. I've worked with this leader before. Not only the sales side, but they know important customers in this space. They've had really good payer and reimbursement interactions. They know the blood-based biomarker business. And so it's like the perfect fit for Quanterix and where we are now. So that's one. And this person, along with many others here at Quanterix is going to help me build out that end-to-end plan. What we're investing this year, I feel is really appropriate. We're adding right now feet on the street that will help us sell LucentAD Complete and also help with our lab partnership that we have going now. We're investing in clinical utility studies. Those clinical utility studies will read out in the second half. And we're thinking about what is the next phase that we need also to continue to move this forward. And then just to me, I look at this as a surround sound type thing when I think of diagnostics. Our lab infrastructure needs to be ready for order to cash. And so we're investing in our lab infrastructure, too. We will be ready once we get FDA clearance in the second half, we will be ready to what I would say, scale. The last thing I'll mention for a diagnostic standpoint, and I've always thought this way, even back in my Exact Sciences and Quest Diagnostics days, we're not going to do this alone. We're going to have smart, unique partnerships to help us scale this business, and we started now. Our partnership with Tempus AI is a great example of what we're doing and how we're creating scale in the business. We have lifeline screening, again, more scale in helping us get our LucentAD and our LucentAD complete that's out there. We'll do the same once we get FDA clearance of how do we organically build scale, but how do we create really smart partnerships moving forward. Vandana Sriram: Yes. And Puneet, to address your questions on what this means from a financial perspective, we've always had a baseline level of investment in Alzheimer's diagnostics, frankly, for the last 3 or 4 years at this point. What we're doing in this plan right now is being very, very deliberate on where our investments go. We've streamlined projects in other parts of the business where perhaps that payback was not as immediate as these are. And that's what's helping us fund both the commercial acceleration as well as the acceleration in the diagnostics platform. And then from a revenue perspective, as you know, we did almost $10 million of revenue from our partners in 2025. Our expectation is that we have about the same level in 2026. We'll probably have less instrument sales, but an increase in consumable sales as our partners start to do more tests. We're not counting on revenues from direct testing in 2026. We think it will take some time for that to inflect. If that happens sooner, that will be helpful to us, but we're not counting on that picking up very quickly. Everett Cunningham: And Puneet, the last part of your question in terms of how do you balance both. My first 3 months here, I've had a lot of interaction with our commercial colleagues with Ben Meadows, our new Chief Commercial Officer. We have a solid research business, research tools business. The relationship that they have with the customers in the academic space and the research space, it's really, really deep, and we're going to help them get even deeper with the enhancements that I talked about during my remarks. It's an end, and we're going to build up that same expertise on the diagnostics side. Today, we have the appropriate size of our diagnostics business just based on where we are. But the new leader that's coming in will build a plan that will assume, again, FDA clearance. We have a good price crosswalk. We're going to get scalable reimbursement. We will be able to toggle very quickly to build out scale in our diagnostics. We're going to balance on both research, tools and diagnostics. Operator: The next question comes from the line of Dan Brennan with TD Cowen. Daniel Brennan: Maybe first one, just it was already kind of asked in one way in terms of the guide. So if you're kind of flattish in Q2, it implies almost like a 40% back half sequential like second half, first half. So could you just break down a little bit more what would be the drivers of that? Do you want to share any color, maybe instruments, consumables and service, maybe core Quanterix versus spatial? And then I can have a few more questions. Everett Cunningham: Yes, Dan, let me talk about the investments that we're making that these aren't investments that have a year ROI. And I'm just taking this from my past experience of, hey, we need to build out momentum within the next few quarters. These are the investments that we're making. Let me just maybe give a couple of them color to give confidence of our second half ramp. Our lead generation reps are critical to our growth. Our lead generation reps are working with our marketing team and taking our robust leads that we have and making them credible, making phone calls to ensure that when they hand them over to our sales reps, those leads are ready to buy. We've already instituted lead generation reps. And in the first 3 weeks, we're seeing a market difference in terms of net new opportunities. So I look at in the second half, our net new opportunity growth to be absolutely better than it was in Q1. Secondly, our marketing. We have appropriately put investments in marketing on both the Simoa and spatial side of the business to develop more of a multichannel approach. So I always like to say we're selling when people are sleeping. So we feel that that's going to be a major benefit to our business. And then lastly, what I'll add is we are looking strategically at areas to where we could put just more feet on the street on the commercial team today. And like I said, Ben Meadows and the team have done a good job of, again, not overhauling, so we create disruption, but strategically putting more feet on the street so we can get more opportunities in the second half. Vandana Sriram: I think the only thing I'd add there, Dan, is there's also a lot happening on the product side. We recently announced a new molecular barcoding option for customers, which gives our spatial customers a whole new channel for self-serve opportunities on the assays. We also have a handful of assay launches as we generally do that are now coming online and are expected to have more of an impact in the second half of the year. Daniel Brennan: Great. Okay. Are you guys assuming end markets improve as part of the outlook? Obviously, it has been challenging, but we've heard various signs of things getting a little bit better here. Just wondering how you think about that as you contemplate like the improvement in addition to obviously, all the critical company-specific things you're doing? Vandana Sriram: Yes. So on the end markets, on the pharma side, we do think that the end markets are strong. It has really been a little bit of the focus that's been lacking on our side, which we've already started to correct and we're starting to see the results on. The academic side was a little bit slow in the first 3, 4 months of the year. As you know, overall funding slowdown has been a little bit slow. So we're not counting on a big rebound over there, but we do think there might be a small amount of improvement as we get towards the end of the year. But we're not assuming markets change materially. We're really assuming that a lot of the growth is going to happen from our actions, both on the product side as well as on the commercial side. Everett Cunningham: And the only thing I'll add, again, just from an execution standpoint, in the first quarter, start of the second quarter, the communications, the sales calls, the KOL kind of interaction has been very, very solid on our side. We're not waiting for markets to improve. And I think those conversations, that consistent relationship connection that we have with our critical customers, when markets do improve, we will be there to capitalize on that. Daniel Brennan: Great. And then you listed, I think, 4 studies in the press release or maybe in the deck. Are any of those -- I mean, obviously, I'm sure they're all important. Otherwise, you wouldn't have listed them. But any of them stand out more than not in terms of either that will play into FDA play into the label or will they all just be pieces of the puzzle as you build the marketing plan on your diagnostic assay? Everett Cunningham: Yes. Listen, I like the studies that we have. First of all, they're with 3 credible partners, the study dynamics that I've been reviewing on a weekly basis. We're hitting really good enrollment. The settings are mostly in that -- where people are being treated in the specialty care and primary care setting. It demonstrates how LucentAD Complete changes clinical decision-making and patient outcomes. So we're looking at the right things from a clinical utility everyday diagnostic standpoint. I will also add too, I'm excited about the timing. The timing is spot on for us to read out in the second half of 2026, and that will just bolster our meetings with payers to get widespread reimbursement. Daniel Brennan: If I can sneak one final in. Just on the spatial side for Akoya, since you do break it out, like is there an implicit assumption and maybe you've already done this at 4Q when you set the initial guidance, but how are you thinking about kind of the contribution organically for spatial in 2026? Vandana Sriram: Yes. We didn't break out the guide between Simoa and spatial just because they are starting to -- we are starting to kind of report them all together. Our expectation of mix between Simoa and spatial between 2025 and 2026 was relatively consistent though. Operator: Thank you. And there are no further questions at this time. Ladies and gentlemen, this now concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Greetings, and welcome to the Freshpet First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Rachel Ulsh, Vice President, Investor Relations and Corporate Communications. Thank you. You may begin. Rachel Perkins-Ulsh: Good morning, and welcome to Freshpet's First Quarter 2026 Earnings Call and Webcast. On today's call are Billy Cyr, Chief Executive Officer; and John O'Connor, Chief Financial Officer. Nicki Baty, Chief Operating Officer, will also be available for Q&A. Before we begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements related to our strategies to reaccelerate growth, progress and opportunities and capital efficiencies, timing and impact of new technology, capital spending, adequacy of capacity, expectations to be free cash flow positive, 2026 guidance and 2027 targets. They involve risks and uncertainties that could cause actual results to differ materially from any forward-looking statements made today, including those associated with these statements and those discussed in our earnings press release and our most recent filings with the SEC, including our 2025 annual report on Form 10-K, which are all available on our website. Please note that on today's call, management will refer to certain non-GAAP financial measures such as EBITDA and adjusted EBITDA, among others. While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for how management defines such non-GAAP measures, why management believes such non-GAAP measures are useful, a reconciliation of the non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP and limitations associated with such non-GAAP measures. Finally, the company has produced a presentation that contains many of the key metrics that will be discussed on this call. That presentation can be found on the company's investor website. Management's commentary will not specifically walk through the presentation on the call, rather, it is a summary of the results and guidance they will discuss today. With that, I'd like to turn the call over to Billy Cyr, Chief Executive Officer. William Cyr: Thank you, Rachel, and good morning, everyone. The message I would like you to take away from today's call is that we are off to a strong start to the year and are well positioned to continue to capture a very large share of the growing market for fresh pet food. This strong start and our success are built on manufacturing scale and expertise that deliver a broad lineup of exceptional products, our extensive fridge network across a wide array of channels that increasingly serves our rapidly growing e-commerce business and our first-mover advantage that has enabled us to build a large and diverse consumer franchise. We've built a business around a wide range of product forms, sizes, prices and channels and with a level of quality that no single competitor can match. It is those strengths that position us to lead the transformation of the pet food category from kibble and can to fresh. Our first quarter net sales growth was ahead of our guidance range for the year, and we believe demonstrates our ability to successfully adapt our growth plans to the dynamic environment in which we are operating. Since last reporting earnings in February, however, the macro environment has been increasingly volatile. So while we are encouraged by the trends we see, we also want to remain prudent. Year-to-date, the consumer's remained remarkably resilient, but we are keeping a watchful eye on potential shifts in consumer buying habits, particularly as it relates to their willingness to trade up and are balancing these risks against the strength we have seen to start the year. As such, we are modestly increasing our sales guidance for 2026. As we look at the business holistically, the fundamentals remain firmly intact. We compete in the large category. We are making consistent share gains and are improving margins and new technologies are increasing our returns on capital. Together, this creates a compelling backdrop and a long runway for value creation. Against that backdrop, there are 3 core reasons we remain confident in our long-term growth opportunity. First, pet food is a very attractive category, with long-term tailwinds like the humanization of pets, treating our pets as valuable family members and younger generations are increasingly interested in feeding high-quality food to every member of their family, including their pets. The phenomenon of feeding your children and pets better food is a generational shift, and that suggests we have a very long runway for growth. As a result, our total addressable market has grown to 36 million households versus the 16.1 million we have today, and we expect both the addressable market and our household penetration to keep growing. Second, consumers are increasingly choosing fresh and frozen over dry and canned food. So we have the winning proposition in a winning category. We've increased our market share to 4.2% in U.S. dog food and treats according to Nielsen omnichannel data and expect to capture a large portion of the future growth of the fresh/frozen category as it continues to become more mainstream. Third, we are focused on improving returns on capital investments as we progress from being a category disruptor to a high-growth, profitable scaled business. Our operational effectiveness programs plus the new technologies we are developing are designed to improve returns. And to continue to drive capital efficiency, we intend to: one, get more out of existing lines, primarily through OEE improvements; two, get more out of existing sites, whether that be finding ways to optimize our network or add more lines to our existing campuses; and three, develop and implement new technologies. We are quite encouraged by the progress we are making on each piece of that plan. We have discussed over the last few quarters how we are shifting our commercial model by changing the media mix and message, making tactical pricing changes and evolving into an omnichannel distribution model. Our goal is to address the needs of a broad consumer base, and we want to give them the Freshpet products they want, how they want them, when they want them and where they want them. We have built significant organization capability to accomplish that. And in conjunction with our network of more than 39,000 fridges that service fulfillment centers, we believe that Freshpet is uniquely positioned to serve the widest range of consumers seeking Freshpet food and the most diverse ways in which they buy. As we make these changes, there will be learnings along the way, but the key will be how we pivot to capture that opportunity. As you know, our marketing model is based on strong advertising driving household growth and more households helps drive further distribution growth. Our recent shift in both our advertising message and our media mix to support our omnichannel business appears to be working, and we are seeing some early signs of increasing media leverage. Our fall campaigns continue to resonate with consumers, and we just launched a new campaign this week called "Kitchen Conversations." Our new tagline of "Better Food for your better half" deepens our connection and relationship with our core audience and our ads showcase the difference that fresh products made. From a household penetration and buy rate standpoint, we continue to see household penetration growth in excess of all other super premium dog food brands, including DTC brands, and MVP growth continues to outpace total households. On a 12-month basis, as of March 29, 2026, household penetration was 16.1 million households, up 8% year-over-year, and total buy rate was approximately $114, up 6% year-over-year. MVPs, our super heavy and ultra heavy users are continuing to grow faster than overall households and now total 2.5 million households, up 13% year-over-year and have an average buy rate of $513. Note that Numerator recently completed its annual panel reset in April. So there have been some revisions to the absolute numbers in the historical data, but the overall trends remain the same. Growth continues to be strongest amongst higher income households and millennials amongst club and online shoppers and amongst our heaviest users, Ultra buyers. We do not see any signs of trade down amongst our users. From a retail standpoint, our objective is to improve accessibility and visibility for the omnichannel consumer. Our products are now in 30,435 stores and 25% of those stores in the U.S. and Canada have multiple fridges. You can see on the updated chart on Slide 13 of our investor presentation that we are adding fridges faster than new stores, and we expect that trend to continue. We will still add new stores such as Tractor Supply's recently announced expansion to up to 700 stores by year-end, but have more opportunity to add more fridges in a variety of formats and configurations in the highest velocity stores we are already in so that we can serve more omnichannel consumers. Our large retail footprint acts as micro fulfillment centers for omnichannel consumers and is a key piece of fulfilling digital orders. In the first quarter, digital orders grew 43% and accounted for 16.1% of our total business, up from 14.6% in the fourth quarter and 81% of those sales volume went through our extensive fridge network. According to Nielsen omnichannel data, Freshpet was the fastest-growing brand over the 13 weeks ending March 28, 2026, demonstrating the power of our marketing model and the broad availability of Freshpet design to meet a wide range of consumers' buying preferences. Our scale advantages extend to our manufacturing as well. Because we own our manufacturing, we have the incentive and the ability to advance the technology for making Freshpet food. We believe our new breakthrough technology enables an even stronger product proposition with both a better consumer experience and better unit economics. As we mentioned last quarter, the first bag line in Bethlehem, utilizing the new technology started up in January. That line continues to perform well, and our first lite version of the technology was successfully installed on another bag line in Bethlehem last month. We are very encouraged by the potential to significantly improve quality, throughput and yield, but we want to run each of these lines for several months before we quantify the magnitude of the benefits. However, the results to date supported our decision to convert a bag line in Ennis to the lite version of the technology as well. That conversion is expected to be completed by late June or early July and will allow us to convert a larger portion of our existing product lineup to the new technology this year. By the end of the year, we expect to have about 35% of our bag capacity using some version of the new technology. The capital for this expansion is modest and does not change our CapEx guidance for the year. In the coming months, we will decide whether to convert an additional bag line, i.e., a third line converted to the lite version of the new technology and also whether we will pull forward the installation of a completely new line using the full version of the technology. That incremental line using the full version of the new technology would add significant capacity to our network sooner than we might need it, and that will factor in our decision-making. If we do move forward with either project, any capital spending for those projects would be above our original $150 million capital budget. We believe the development of this technology demonstrates our technical mastery as a self-manufactured leader in fresh pet food. Maintaining control of our manufacturing also opens up opportunities to further advance the technology. Now I'll provide some highlights from the first quarter. First quarter net sales were $297.6 million, up 13.1% year-over-year, primarily driven by volume. Recall in Q1 of fiscal year '25, we had distributor disruption in the pet specialty channel. Lapping that disruption added 50 to 100 basis points to our growth rate in Q1 of this year. Adjusted gross margin in the first quarter was 46.9% compared to 45.7% in the prior year period. Adjusted EBITDA in the first quarter was $37.9 million, up $2.4 million year-over-year. Now turning to our updated 2026 guidance. We are raising our net sales guidance range from 7% to 10% growth to 8% to 11% growth year-over-year and reiterating our adjusted EBITDA guidance of $205 million to $215 million. We are encouraged by recent sales trends and believe raising net sales guidance is prudent based on year-to-date trends. However, we are balancing the dynamic environment we are operating in. So we are monitoring our costs closely, particularly on logistics, packaging and any additional ripple effects on input costs. We continue to expect capital expenditures to be approximately $150 million this year, absent any incremental investments, and we expect to be free cash flow positive in 2026. John will walk through more details of our 2026 guidance in a few minutes. With that, I'll turn it over to John to walk through more details of our financial results. John O?Connor: Thank you, Billy, and good morning, everyone. The first quarter results demonstrated our ability to deliver category-leading growth despite a challenged consumer environment. Net sales in the quarter were $297.6 million, up 13.1% year-over-year. Volume contributed 14.6% growth, partially offset by unfavorable price/mix of 1.5%, which was primarily driven by gross to net items, which include an unfavorable prior year comp and current year items we do not expect to recur in the rest of the year. We also saw the effect of targeted price reductions, some of which began last year, and we will begin to lap in Q4. We had broad-based consumption growth across channels. For Nielsen-measured dollars, we saw 13.5% growth in total U.S. Pet Retail Plus with Costco. First quarter adjusted gross margin was 46.9% compared to 45.7% in the prior year period. The 120 basis point increase was driven by improved leverage on planned expenses and lower input costs. First quarter adjusted SG&A was 34.2% of net sales compared to 32.2% in the prior year period. This increase was primarily due to higher variable compensation in the quarter, increased media as a percentage of sales due to timing and increases in our logistics costs. Media spending was 15.8% of net sales in the quarter, up from 15.1% in the prior year period, mainly due to a planned shift in cadence of spend that brought more spending into the first quarter. Logistics costs were 6.3% of net sales in the quarter compared to 5.8% a year ago. The increase was partly due to storm-related costs, including driver shortages as well as recent fuel cost increases, which we began to experience in March. First quarter net income was $48.5 million compared to a net loss of $12.7 million in the prior year period. The increase in net income was primarily due to the sale of our equity investment in Ollie, contributions from higher sales and lower nonrecurring SG&A charges, partially offset by the increase in income tax expense related to the gain on the Ollie sale. First quarter adjusted EBITDA was $37.9 million compared to $35.5 million a year ago, an increase of approximately 7%. This growth was primarily driven by higher sales and gross profit, partially offset by higher adjusted SG&A expenses. Adjusted EBITDA margin was 12.7% in the first quarter compared to 13.5% in the prior year period. This decrease was primarily driven by the higher G&A, cadence of media investments and higher logistics costs in the quarter. Operating cash flow in the quarter was $40.3 million, while capital spending was $27.6 million. We ended the quarter with cash on hand of $381.4 million, including $95.5 million in proceeds from the sale of Ollie and generated free cash flow of $12.7 million. Now turning to guidance for 2026. As Billy mentioned earlier, we now expect net sales growth of 8% to 11% compared to 7% to 10% previously. We are pleased with our results for the quarter and are optimistic about growth opportunities for the year. However, we continue to balance the recent acceleration in our net sales growth against the volatile macro environment and its ability to affect the consumer. Going back to last year, we have taken steps to position ourselves to continue expanding the fresh dog food category amid a slower consumer backdrop with improved entry price point offerings, and we'll continue to make balanced investments in both improved affordability for the consumer and profitability for Freshpet. As a reminder, -- we have easier comps through May and then a tougher comp in Q3 from the significant expansion in a large club customer in the year ago, including pipeline fill. We continue to expect to grow market share as we benefit from a generational shift from dry and wet food to fresh. We continue to expect adjusted EBITDA in the range of $205 million to $215 million, an increase of 5% to 10% year-over-year. Adjusted EBITDA dollars and margin should improve sequentially for the remainder of the year. Media as a percent of sales for the year is still expected to be roughly in line with 2025 at approximately 12.5% of net sales and will be front half weighted in dollars. We now expect elevated logistics costs for the remainder of the year given increased fuel costs. As I said on the last earnings call, 2026 is not necessarily indicative of the underlying operating leverage in our model. We reset variable compensation this year and have made significant investments in omnichannel capabilities. Beyond 2026, we expect adjusted EBITDA growth to exceed net sales growth with an expectation of continued gross margin expansion and a more consistent variable compensation expense. We anticipate adjusted gross margin to improve by approximately 50 to 100 basis points at the midpoint of our net sales range, primarily driven by plant leverage, partially offset by mix. Should our current revenue trends continue, it is possible we will need to add staffing in our manufacturing operations, although this is not currently contemplated in our guidance. Within our guidance range for net sales, we expect to drive OEE improvements to deliver the volume growth embedded in the range. From an inflation standpoint, we are carefully watching for any changes. To address any higher input costs, we are evaluating opportunities to offset through product formulations and targeted pricing actions. Capital expenditures are projected to be approximately $150 million in 2026, excluding any significant incremental investments in fridge islands or expediting the rollout of our new technology. These are 2 distinct investment decisions. Conversations with retailers about fridge island expansion are ongoing, and we expect to make a decision on whether to accelerate the new manufacturing technology in the middle of the year. While it's still early and we need to run the new lines for longer to demonstrate consistent efficiency gains, we are encouraged by the initial results. Regarding our fiscal year 2027 targets, we are confident in our ability to deliver net sales growth well in excess of the U.S. dog food category growth, achieve at least 48% adjusted gross margin and deliver an adjusted EBITDA margin in the range of 20% to 22%. And we believe we have a variety of paths to achieve our 2027 margin targets. Since joining in February, a key focus of mine has been assessing our capital allocation strategy given the strong and evolving nature of our financial position. Freshpet operates in a very attractive and growing category and has built strong competitive advantages that support durable market share gains and revenue growth. With this backdrop, investing internally in the business is far and away our highest priority for capital deployment. These investments include expanding manufacturing capacity in a fast-growing space where we lead, developing novel production methods that enhance product quality, reduce cost to produce and improve returns on capital, new recipes that broaden our offerings and enhance our appeal to pet owners and enhancements to our commercial model to expand distribution, access new channels and reach consumers in a more targeted way. As we pursue these investments, we desire to retain a high degree of financial flexibility to invest in new technologies, capabilities or accelerate our growth. To the extent we are able to cover all of these investment opportunities through internal cash generation, we would then evaluate the opportunity to improve our capital efficiency by returning cash to shareholders in a manner that does not compromise our ability to fund our long-term growth drivers. To summarize, we are pleased with our first quarter results, but remain conscious of developments in the macro environment since we initially set our guidance for 2026. In light of this, we remain cautiously optimistic with our outlook for the remainder of the year. I firmly believe we have a long runway for growth, and we'll continue to build on our competitive advantages as the scaled leader in the fresh/frozen pet food category. That concludes our overview. We will now be glad to answer your questions. As a reminder, we ask that you please focus your questions on the quarter, guidance and the company's operations. Operator? Operator: [Operator Instructions] Our first question comes from the line of Peter Benedict with Baird. Peter Benedict: First, just maybe talk a little bit more about the competitive environment and how your performance is trending in stores where you've seen some new competition enter the market and maybe how that's influencing your plans for innovation or new product rollout? That's my first question. William Cyr: Yes. Yes, so as we look at the competition, obviously, we're seeing a wide range of people trying to compete with us in a variety of different channels. And I'll let others speak for their own performance. But what I can tell you is you should look at us and think about us as having a very broad lineup of products in a wide range of channels at a variety of price points -- and that breadth of our portfolio and the distribution we have has insulated us very, very well from all these new competitive entrants because the vast majority of these folks are competing in a very narrow product lineup and a very limited number of distribution points or different distribution channels. And so as you look at our results, we're able to perform quite well because of the breadth and depth of our portfolio regardless of who these competitors are, what channels they might be in. Peter Benedict: Okay. And then I guess one follow-up. You mentioned in the remarks some signs of media leverage on some of the new programs. Maybe you could expand on that. What exactly are you seeing on that front? William Cyr: I'll let Nicki take that one. Nicola Baty: So as you know, we very much focus on advertising as being a big strategic choice for our investment. We don't discount, so we don't have any investment going through in promotions. We've made some really big shifts with media, especially when you look at the results over the last 13 weeks where we've seen an acceleration versus the last 26. We've changed our messaging. So we put the new creative on air, and we've seen our CAC coming down, which has been great news. We've seen improvements in our ROAS. So return on advertised spend has really gone up across a number of areas. And what we're particularly encouraged about is we're getting higher growth coming through from millennials and also MVPs. So we're seeing some really encouraging signs coming through from media. We elevated media spend in Q1 as we'd always intended to do, and we feel really good about the results that we're seeing as we now go through the year. Operator: Our next question comes from the line of Brian Holland with D.A. Davidson. Brian Holland: So maybe just first on taking the top line guidance of this year. Billy, it sounded like in your prepared remarks that that was informed by the better-than-expected performance in 1Q. So that's backwards-looking, looking forward, do we have any greater visibility on whether that's distribution or competitive dynamics as far as what you're going to see in fridges that you share or other fridge installations outside of your own that leaves you comfortable with the balance of the year relative to when you set your initial guidance? And then maybe within that, do we expect consumption and shipments to largely align over the balance of the year? William Cyr: Yes. Brian, first of all, the decision to raise the guidance and what's embedded in the guidance is obviously informed not by just what we saw, as you indicated, but what we see going forward. As you know, we look at a wide range of factors. We look at everything from the Nielsen measured consumption to what we know our customers' plans are, what our read is on the broader macro environment. And what I can tell you is that so far to date, we feel very good that the brand is performing well. We see that in Nielsen, we see that in the household panel data. To the extent that there are competitors out there, it's obviously not having any significant impact on the numbers that are showing up in Nielsen or showing up in our household panel data because we're still leading growth in the category in both those areas. So our guidance going forward on growth has been informed by that. We are, as you heard in the comments, a little bit cautious about the macro environment. We look at everything from consumer sentiment to housing starts to unemployment to disposal or discretionary income. And as I think you've heard from a lot of other folks, we're all kind of watching and waiting to see where that might go. But so far, everything in our business looks like it's heading in the right direction, and that's what's informed our guidance. Brian Holland: And then maybe on gross margin, as we just think about the year going forward and maybe tied back to the top line here. I believe that initially no plans to add staffing in 2026. What level -- and I think there was some reference to potentially needing to add folks later in the year in the prepared remarks. So maybe just trying to understand at what level of volume growth do you feel like you would then have to bring on more staffing? Just trying to understand the leverage potential there on continued volume strength in excess of what you initially anticipated. William Cyr: Brian, I forgot to answer the second part of your original question, and then I'll hand it to John to answer the margin question. But your question about shipment growth versus consumption growth, the only variable that's going to be different between the 2 is, as we've said before, we will lap a very significant launch into Sam's last year in Q3. And so you would expect that there were more shipments there necessarily than there were consumption in Q3 of last year. So this year, you'd expect to get a little bit of a reversal of that. Outside of that, our business is very predictable and reliable, so consumption growth and the shipment growth should be fairly closely in line with each other. Let me turn it over to John to talk about the margin. John O?Connor: Sure. Thanks, Billy. Yes. So Brian, within the net sales guidance range that we gave, we believe we can deliver that without having to add staff. So what starts driving it higher is if we start meaningfully outperforming our guidance range as we go through the year and getting above the top end of the range, maybe we get a better consumer environment. Those are the levels where we'd start looking at the staff needs to come on at some point in 2026. There is a point as we continue to grow, where we'll need staff for -- to deliver volumes in 2027. But really, the question is if and when in 2026 based on the revenue trends that we're seeing throughout the year, and it would need to be above the net sales guidance range that we gave today. Operator: Our next question comes from the line of Rupesh Parikh with Oppenheimer & Company. Rupesh Parikh: Just going back to the consumption acceleration you saw in Q1. Just curious what you believe are some of the key factors that drove that improvement? And then as you look at the underlying pet category just overall, what you guys are seeing there? William Cyr: I'll take the first part, and Nicki will take the second part. But as you saw in the data that we published, we saw a resumption in household penetration growth and the buy rate growth. Buy rate has been a bigger contributor to our growth of late than it has been historically, and that's in part due to our focus on the MVPs. But it's really -- it's been strong fundamentals, the things that we've been building this business on for a long time, which is great advertising is engaging the right consumers. It's increasing household penetration, and it's increasing household penetration amongst those consumers who are -- have the propensity to buy the highest amount of product. And so that's driving the buy rate. So we feel very good that it's really fundamentally driven. It's not any unique demographic or customer or channel. It's broad-based across the board. So I'll turn to Nicki to talk about the category. Nicola Baty: Great. Thanks, Billy. So I think the category is still a little bit pressured, especially when we look at dog food. It's broadly flat in terms of household penetration. At the moment, we're not really seeing a significant turn either way. We are seeing more going through online than in-store. So that's still really a faster-growing part of the category. And there's definitely a trend for more going through to what I call affordable retailers. So whether that's club or also the likes of some of the mass grocers are doing particularly well in that area. Now generationally, we are seeing boomers coming out of the category. We're seeing the fastest-growing part being millennials and Gen Z. And then within income groups, we are seeing sort of lower income, particularly pressurized as well. As Billy said, I think why we're feeling pretty good about where our results are coming in at is our growth has been very broad-based. We're growing in every income group, and we're growing with every demographic. But we're particularly winning, especially with millennials and Gen Z, and we're growing at a fast rate with both middle income and higher income as well. Operator: Our next question comes from the line of Robert Moskow with TD Cowen. Robert Moskow: A couple of questions. John, I think you said that you still see a path to the 20% to 22% EBITDA margin target for 2027. But you've also talked about these extra staffing costs that you'll have to take on to handle extra volume and I guess, also cost for the new tech. So I just want to make sure that, that's still the case that you can take on those extra costs and still get to the 20% kind of the low end of that range because it does require a lot of leverage in '27. John O?Connor: Yes. Thanks, Rob. So yes, I think one of the points to also make, right, is that in the past, when we've made some staffing increases, we were a much smaller company, right? And we're much larger today. So each incremental line staffing that we bring in is much less consequential to our overall gross margin, right? And so we do believe, right, that we can bring on additional staffing, deliver volume growth in 2027 and get leverage on that staffing. In terms of the new technology, the costs that it would take to bring on would be capital costs. And those would be depreciated, which for the margin targets that we're talking about is adjusted gross margin, which excludes depreciation, right? So there would be overall cash costs and depreciation that would come with that, but the 20% to 22% is excluding the depreciation. We would, of course, have to staff those lines. But again, we'd only be doing that if we saw the need to deliver more volume into a strong demand backdrop. So it's a good question, Rob, but we do believe that we can get the leverage on the additional expenses or costs required to deliver additional volume in 2027. Robert Moskow: Okay. Can I ask a follow-up? First quarter, you have a big club customer that expanded the size of their fridges. And I think you got the full benefit of that expansion. But I believe in second quarter, they'll introduce a private label version into those fridges. Is any of the beat in first quarter from that dynamic? And would you expect still growth with that customer, but some deceleration in 2Q? William Cyr: Nicki will take that one. Nicola Baty: Thanks, Rob. So look, our club business is performing well, and it's more than one customer, as you can see. We obviously made a big expansion last year into a second club customer, too. The one thing I'd say with our club business is we have more than one item with our club retailers. We have a handful of items that appeal to -- with different formats that appeal to different consumers that are sitting in there. With one particular club customer, we did actually expand our portfolio. We brought in an additional item, which you may have seen, which was our beef roll. And that's delivered a lot of incremental sales that we really saw coming through in Q1, and we anticipate as that distribution has continued to expand, we will continue through the rest of the year. And also another club customer, we've clearly seen the expansion of a much larger fridge network. That's definitely raised the opportunity for more items to have more holding capacity in that club retailer. Clearly, we've seen the benefit being the largest player within that. But we haven't seen any meaningful impact really coming through as yet or significant impact coming through from any competition that's listed. We believe that's due to the increased visibility and the holding capacity that we can continue to bring through. So for us, we're very focused on making sure that we have a breadth of portfolio at the right price points and that we are accessing across all club channels where the shopper is looking to go. And we believe that, that will support sustainable growth for the future. Operator: Our next question comes from the line of Tom Palmer with JPMorgan. Thomas Palmer: In the prepared remarks, you noted the possibility of expediting the rollout of the new manufacturing technology and had kind of a comment that it could result in capacity outpacing sales. Could you maybe discuss the decision-making process here? Are the potential margin benefits, for instance, so significant that it might justify kind of having this excess capacity or maybe there's something else? William Cyr: Yes, Tom. It's -- there's a variety of factors that are going to be involved in that decision. In part, as you indicated, is if you bring on extra capacity, you will have, in essence, incremental costs. But I'd also make sure you think about the technology development and the validation process here. The longer we run the technology, the more we learn, the more certain we can be that the next line that we put in is going to be the best possible line, and it's going to have all the right unit operations in it. So to your question of what are the factors that we're looking at, it's obviously going to start with, is it delivering on the yield throughput and quality advantages that we think it will. And so far, we're very encouraged by what we see. The next question will be, are those gains big enough to justify pulling forward capacity just on that basis alone because we do believe there's also another level of benefit, which will come from higher return on invested capital where these new lines, if they have higher throughput, will put us in a position where the cost to add incremental capacity is lower than what it has been historically. And so we'll put that into the equation as well. But I would also say that one of the big factors is going to be how confident are we that we know exactly what this line needs to look like because every single line we've installed, we have found that there's something we can improve on the next line. And the longer we run it, the more we'll learn about what that will be so we get it right. So I would just put it under the heading of there's a variety of factors that we're going to consider, but all of them seem to be very positive. It's just when do you want to make that choice. Thomas Palmer: Understood. I also wanted to maybe ask on the cost environment and how you kind of see that evolving as this year plays out. For the first quarter, there was the call out for logistics. I think it was both weather challenges and then later in the quarter, higher fuel. As we think about the remainder of the year, should we look at the level of kind of logistics margin as indicative of what the rest of the year will look like because you had that weather piece? And then are there other inflationary call-outs we should be thinking about that might either flow through kind of that SG&A side or COGS? William Cyr: Let me take a shot at that, and I'll ask Nicki or John if they have anything to add to it. But you properly characterized the first quarter. There were 2 things that impacted logistics. One of them was the weather events that occurred in January and early February. And the second was the fuel cost that happened in basically beginning in March. The fuel cost, at least at this point, looks like it's going to continue on, and it will have an impact, and that's going to be embedded in our financials. I don't expect to see another one of the weather events, although the weather event created a driver shortage event. And so obviously, you're vulnerable to driver shortages. But the fuel cost is embedded and it's embedded in our thought process for the guidance we've given going forward. If there's a material change in the cost of fuel, that obviously will have an impact, whether it's positive or negative on how we think about the balance of the year. On the bulk of our cost structure, we are not completely locked, but we're largely locked on the bulk of our cost structure for the year. And so if there is going to be an impact from sort of the trickle effect of higher energy costs on our ingredient suppliers or the inbound transportation and whatnot, that will flow through, but it could flow through later in the year. It may not be as significant. We just have to see where that's going to flow. I don't know, Nicki or John have any thoughts to add on that, John? John O?Connor: Yes. Tom, I think you appropriately characterized it, right? When you look at the total logistics cost as a percent of sales in the first quarter, that's about the level we're expecting it to continue at for the rest of the year, but based on fuel costs, right, for the remainder of the year, as Billy said. Operator: Our next question comes from the line of Steve Powers with Deutsche Bank. Stephen Robert Powers: I actually wanted to ask around the economics of the omnichannel strategy and maybe focus in on e-commerce, just given the strength of the digital orders that you've been seeing and the growing percentage of sales that it represents. Is there a way to help us understand the unit economics in that area and whether the mix shift impacts the margin mix at all materially for the better or for the worse, either on the gross margin line or as it relates to SG&A? Just help us a little bit understand the puts and takes of that growing digital channel and if it has an impact on the P&L. William Cyr: Yes, we'll let Nicki take that one. Nicola Baty: Thanks, Steve. So omnichannel, we're doing a lot of work at the moment. We've built out our capabilities. I think that's the first thing I would say in omnichannel. It does require a little bit of different capabilities for us to build out in the G&A line overall. Our omnichannel is very focused on super serving our MVPs, and our MVPs are much more valuable to us. So the first thing I'd say is as we grow our business and grow our business in MVPs, this is a more long-term profitable way for us to be growing. So the MVP buy rate is obviously much higher. And we do believe we're going to get better returns from a CAC standpoint with each MVP that we bring in from a lifetime value perspective. Now in the short term, we will see a little bit of channel shift coming through. So the first thing I'd say with omnichannel is we've been underpenetrated a little bit in club. So you will see a slight dilutionary impact coming through in that part of the business. But regarding your specific question on e-commerce, I think the great thing about our omnichannel strategy is it's really based on a local fulfillment model, which is to be serving the business through the 39,000 fridge networks that we currently have. So that fridge network and the way that we serve our omnichannel customer, 82% of our online sales are going through that fridge network. Now that's already installed capacity. So we actually anticipate the ROIC from our fridges is going to be improving over time as we continue to drive omnichannel sales. And in terms of the economic profile, given it's in our current retail structure, we don't anticipate a significant shift coming through in that area. We may have a slight change in the economics of D2C coming through, but we still anticipate that will be a relatively small part of our business. John O?Connor: Yes. And if I could add to that, right? So Nicki mentioned the margin in club as we see that shift, right? We had strong growth in club in Q1, but we had also strong delivery of gross margin improvement as well. So as we grow the volume, we are seeing our ability to drive greater and greater efficiency in our cost structure and manufacturing. Stephen Robert Powers: Got it. Okay. Appreciate it. And the second question is a little bit more tactical. Billy, you called out the distribution wins, both in terms of more stores and more fridges per store. Can you guys just update us on sort of your distribution gain outlook for the year today versus where the year started? And just maybe remind us on what was originally embedded in guidance and if there's anything that's been achieved so far that would be incremental to that original outlook? William Cyr: Yes, I'll have Nicki handle that. Nicola Baty: Okay, Steve. So I think the main piece of news on distribution was what was announced on someone else's earnings call last week. So the retail lifestyle distribution, we will have coming through the back end of the year. We're still working through phasing of the incremental stores. In that retail lifestyle, we have 250 stores distributed by the end of the first half. And then we anticipate that by the end of the year, we will have around 700, but that will have to be carefully phased as we go through the year. So that's the main distribution gain in terms of retail. As we also look at, we anticipate that our online growth will continue as we go through the year. And we're nicely on track based on our budgeted goals for the number of multiple fridges that we will be securing. So that's really embedded through in guidance. Billy, is there anything else you'd like to add to that? Stephen Robert Powers: No, I think that's good. Operator: Our next question comes from the line of Michael Lavery with Piper Sandler. Michael Lavery: Just want to start on -- maybe just making sure I've got all the moving parts on pricing. I realize the macro environment is pretty dynamic, but you've made some tactical pricing changes. We see that flow through the numbers. You've talked about that running through kind of the balance of the year. But you've also then flagged some incremental cost pressures and potentially reevaluating maybe taking, I think you said some more pricing. Would those offset each other? Would you undo what you did? Is it partly just a function of differentiating it by SKU that you've got the breadth of the portfolio, the comment you mentioned some of the ability to do that? Or how should we think about all those moving parts? William Cyr: Yes. Michael, let me take a shot at that, and Nicki or John might have something to add. But I would just start with, we're very comfortable with the pricing that we have in the market today. We feel like it's made us very competitive. It's delivering the household penetration growth we'd like. And at the same time, we're expanding our gross margin. So we feel good about where we are. The comments that we made about pricing and the inflationary environment going forward is more perspective. We're just telling you that if, for example, there is some increase in the cost that is a more sustained increase in costs over time that we are willing to take pricing as we have in the past. we would be glad to take the right pricing. But we also will work on efforts to improve productivity, formulation changes and whatnot because we want to do everything we can to make this category as affordable as we can to make it -- to let it grow as big as it can be. So we will drive as much affordability as we can into the category. But from a fundamental perspective is we are committed to expanding our margins over time. And if there is inflation that would require us to take pricing, we are willing to take pricing. I don't know if you guys want to have anything to add to that? Michael Lavery: Okay. No, that's helpful. And I just want to follow up on a bit of the manufacturing you've characterized the scale and expertise as an advantage. And I think we're seeing that as much as ever. If you've got the lower cost and higher quality position, how long would you estimate it could take somebody else to replicate that? William Cyr: It's obviously a very difficult question to answer. All I can tell you is it took us a long time to figure out what we figured out in a long time and a lot of money to build the scale that we've built, and we're very committed to continuing that. So we are investing heavily in R&D and in new technologies. We're not standing still. Our expectation is that if somebody could figure out what we're doing today, spend a lot of money in a couple of years trying to catch up by the time they catch up, we'll be on the next generation of technology, and we'll be further ahead again. So our focus here is that we always want to be the brand that is leading the category in terms of driving the technology advancements that give us highest volume and lower cost. I also want to point out that if you think about our product lineup, -- we have a variety of different product forms. And the innovation that we've been focused on right now is on our bags and technology advancements on our bags, and we made huge gains there. But we have other product forms that we can continue to invest in and develop new technologies to make them even better as well. So I just -- I don't know how long it's going to take somebody to catch us. They'd have to spend a lot of time and a lot of money. That's what we did. But by the time they get to where we are today, we expect to be further ahead and on the next generation. Operator: Our next question comes from the line of Eric Serotta with Morgan Stanley. Eric Serotta: First, in terms of the lite version of the new technology, now that you're further along in the testing and validation phase and it looks like you're going to be -- or you said that you plan to roll that out to more lines. Can you help us dimensionalize the order of magnitude of savings versus your existing lines? I know you've spoken before about, well, it's less than sort of the full fat version from scratch, but any help dimensionalizing that would be helpful. And should we think of any benefits from that as just in terms of phasing, more benefiting '27 than '26. And then a follow-up on the questions around the large club retailer. As you speak to them and look at their store base and where they have the double-wide fridges, what's your sense as to how much more expansion for refrigerated fresh space is still to come at that retailer as they add it to more stores, sort of leaving aside the question of what the mix will be between your product and their private label and potentially others? William Cyr: Eric, I'll take the first part of that question, and I'll have Nicki take the second part. But as we said on the call, we don't want to give anybody any specific numbers on what the improvements are that we're going to see on this technology until we get further into the year, and we've had a chance to run it for an extended period of time. But you should take from the fact that we made the decision to install a second light line as a confirmation that this is a good technology and it's delivering on our expectations or exceeding. The metrics that we're focused on are input costs, which is really a measure of yield through the throughput that we get and the quality that we get. And what I can tell you so far is that we're seeing all those benefits, and we're at this point, just trying to dimensionalize how big are those benefits. And because the capital cost in these light lines is relatively small and also the time to disruption, meaning the time that we have to take a line down to retrofit it is also very brief. It's a very attractive technology investment for us. In terms of its impact this year, because it's only going to be impacting a portion of the line and we have to convert meaning a portion of our product lineup, and we have to convert parts of the lineup over time, it will have an impact in this year. It will be skewed towards the back half, and it will be relatively modest because we have to ramp our way into it. It's much more of a 2027 event. And in 2027, you should expect to see some benefits from it. Remember, what we said on the call was the technology, we should be, by the end of this year, have about 35% of our bag volume could be produced on lines that will have this technology. And we feel like that's going to be -- would contribute meaningfully in 2027. But again, it's a little bit too early because every one of these lines is a ramp-up, and you don't really want to lock in and say this is going to be until you've tested under a lot of different circumstances over an extended period of time. Nicki, on the club question. Nicola Baty: Thanks, Billy. So regarding club, those wide double fridges that are in at the moment are in 416 club stores. So that's around 70% of the estate. What it's done is it's opened up both a lot of holding capacity, but also an opportunity for incremental products, both from us and from others to be listed in those fridges. Those fridges are not planogrammed. So I think the key piece is that no matter which club store you're going into, the range may look a little bit different in there. We would never expect to only have Freshpet in those fridges. And we believe that this Fresh as a segment is still a very big growing segment within the category, and there will be more competition coming in. But we do believe those fridges has opened up a lot of opportunity for Freshpet to put more product assortment in. And we're seeing very encouraging signs by having the highest level of distribution of any fresh product in there today. Eric Serotta: And just to follow up on that, Nicki, of the 30% of stores that don't have the double-wide fridges, are those stores that will potentially -- some of those that they're still rolling out to? Or do you think the customers kind of tapped out the store base that the double wide fridges would be appropriate to, given the demographics of the consumer at the store or the store footprint or things like that? Nicola Baty: I think that's a decision for the retailer to make. We don't see any space constraints today beyond expanding those double-wide fridges, but clearly, that's not really within our control. Operator: Our next question comes from the line of Matt Smith with Stifel. Matthew Smith: A follow-up question on the omnichannel growth. You referenced 82% of orders fulfilled through the fridge network. In the past, there's been some constraint on fridge space and out of stocks. Where does that stand today? Is there still a capacity constraint on omnichannel growth from availability of product? Does that improve as fridges expand? And are you seeing greater incremental fridge interest from retailers as they look to participate in more omnichannel growth with more capacity on the floor? William Cyr: I'll let Nicki take that. Nicola Baty: Thanks. I think we're seeing a lot of interest in moving more to multiple fridges, which might be the standard fridges, but also concepts like fridge island or open-air fridges, which is obviously what you're seeing in club retail at the moment. Many of our conversations with retailers are all about maximizing holding capacity so that they can compete very effectively with online sales, but also having the right assortment in. The big bit of research that we've done shows that the biggest unlock for that MVP shopper is actually access. An MVP shopper is buying across multiple channels. They want to buy online and they want to buy in-store and they buy very frequently. So as we continue to partner with retailers, they're looking for help in how they unlock that MVP access, and they're also wanting to compete very much with local fast delivery versus maybe some pure-play retailers. So we believe we will continue to steadily expand multiples, but we also believe there'll be more opportunity in the future for different fridge configurations, whether it's open air or items. Operator: Our next question comes from the line of Marc Torrente with Wells Fargo. Marc Torrente: Last quarter, you talked to the expected bridge on underlying SG&A, which was limiting some of the sales and gross margin flow-through to EBITDA this year. Has anything changed on those underlying assumptions? And any color on the cadence of those items through the year, particularly on media spend? William Cyr: I'll have John take that. John O?Connor: Marc, no change to what we outlined last quarter and no change also to the cadence of media. So we expect to be front half weighted. You saw some growth in the media as a percent of sales in the quarter year-over-year, which was planned. And we'd expect that media intensity to be stepping down as a percent of sales as we go through the year. In terms of other G&A, excluding logistics and media, we'd expect that to be generally flat on a sequential basis as we go through the year. There will be some comps that will drive differential growth rates, but overall flat sequentially as we go through the year. Marc Torrente: Okay. I appreciate that. And then I guess just building on that a little more, part of the SG&A step-up is investment behind omnichannel, and this is going to be a growth channel over time. So just trying to get a sense of how much of the SG&A step-up is, I guess, onetime versus more going in nature. John O?Connor: Yes. So there's kind of 2 elements of it that are onetime, right? I'll remind you of the step-up in variable comp expense, which we said was about 1/3 of the increase in dollars on the year. The remainder is capability investments, and there will be ongoing capability investments over time, but not to the scale that we saw this year. And a lot of it, Nicki has outlined in terms of driving the things we're doing from an omnichannel perspective that we weren't before. Those are investments we needed to make in '25 that are carrying into '26. And so that's really just a big step-up. And so there were 3 items that we said were roughly equal in size, driving growth in dollars year-over-year, media, in dollars, variable comp expense and then the investments in our capabilities being the other one. Operator: Our next question comes from the line of Jon Andersen with William Blair. Jon Andersen: Two quick ones. On the technology, the new tech, you've talked a lot about quality and cost. I'm wondering if there is an element here around product range, innovation, differentiation that this tech can also enable, if you could speak to that? And then second, Billy, you mentioned product forms earlier. I wanted to ask a broader question about forms in super premium and ultra-premium pet food. Are you seeing any changes by customers or within any of your channels where customers may be leaning into kibble, kibble plus, fresh/frozen? Anything on that front or does kind of the fresh refrigerated remain the gold standard? William Cyr: Jon. I'll take the first one, and I'll have Nicki take the second one. One of the beauties of this new technology is its ability to produce a wider range of product forms, all within the context of our bags. But think of that as different shapes. It could include different proteins that we can't currently produce with today. And what it'll allow us to do is also give higher quality inclusions. So some of our products you might have noticed, we have very nice cranberries and carrots and whatnot, and we can get better looking and a more diverse supply of inclusions that go into the products. And so you should expect that a big part of the payback for the incremental investments in these new technology will come from a wider range of product innovation that will be both more appealing, but also higher quality than what you can get from some of the competitors going forward. So we spent a lot of time focusing on the economic benefits or the efficiency gains of input cost, throughput, yield, quality, whatnot, but innovation is going to be a big driver going forward. But that's not going to be a big driver until we have more lines installed because we have to have enough capacity to support those new items. I'll let Nicki take the second part of the question. Nicola Baty: Thanks, Billy. We are seeing some more shelf-stable products coming in that might have some claims of being sort of fresh, i.e., they can be refrigerated after being purchased. We're not seeing very much traction coming through certainly when we look at the Nielsen data on any of those products. We're definitely seeing a little bit more growth coming through in higher interest in functional foods and ingredients that might deliver functional benefits. We think that, that continues to be an opportunity more for Freshpet to explore. And then clearly, we see a lot of frozen entrants, which is a little bit of an easier barrier to entry to cross to get frozen products out there. But unless they're supported with very heavy brand investment, so advertising investment, also, it's a little bit hard for them to get traction, especially when they're head-to-head with a fresh product at retail. So that's really pretty much the gist of what we're seeing in the competitive landscape. Operator: Ladies and gentlemen, our final question this morning comes from the line of Yasmine Deswandhy with Bank of America. Yasmine Deswandhy: I just wanted to dig in a little bit more on your -- on the omnichannel unit economics. In your prepared remarks, you talked about adding new stores like Tractor Supply, where you recently announced expansion to up to 700 stores by year-end. The shopper there is a little bit different than some of the other retailers that you're in. So if you can maybe talk about your go-to-market strategy there, whether the approach will be different, product lineup, marketing, messaging and if it will impact mix at all for this year? William Cyr: Nicki, you'll take that one. Nicola Baty: Yes. So we've had the benefit of doing a long test with Tractor Supply. So we've really learned on what part of the portfolio is going to work for their specific shopper. As you may expect, we've got some larger pack and larger dog SKUs that have gone into that range. We also have put our Vital pet specialty range into Tractor Supply, combined with some of our top-selling home style creations lines as well. So the mix of products that we have has been performing very well, which is why we've had the green light to expand really through the year. In terms of margin positioning, there's nothing in that, that would be particularly either accretive or detrimental on the P&L. So broadly the same as where we stand today. And in media, very much supported with the same master brand advertising that we do overall. Yasmine Deswandhy: Okay. That's helpful. And then the 35% of that capacity using new tech by end of year, where does that number stand today? And as you continue to install new technology, will you be able to ramp at that same pace? Or as you manage through capital cost and margin impact, will it be kind of slower than the pace that you're doing it this year, faster? Or yes, any change there? William Cyr: Yes. I would tell you, it's a very low number right now as a percentage of our total capacity because as you heard, we started up the full version of technology in January, but it's a relatively small throughput line and is producing relatively limited SKUs. The lite version that we started up has only recently started up, and we're still in the ramp-up phase, but what we've seen so far is very encouraging. But between the 2, it's a relatively small percentage of our total volume. When we add on the third line and we get further out on the operating competency or expertise level, that's where you get to that 35%. The big question for us is going to be as we add these new lines, it will come in a little bit in fits and starts. It won't be a uniform pace, and it will in part be driven by the capacity needs that we have because at some point, we'll have converted all the products that are relevant to be converted to this. And then the question will be when do you need more capacity? Because as we add capacity, it's likely that we'll have to make a decision about which technology we use to add the capacity, and that will be really driven by when that capacity is needed and what product forms is needed to produce. So it's not going to be any -- it's not going to be linear. It's going to be more episodically driven than it is going to be something you can lay down on a straight line. Operator: Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to management for any final comments. William Cyr: Great. Thank you, everyone, for your time and attention today. I'll end today with a quote that I think is particularly appropriate for the challenging times we're operating in today. This is from an unknown. "The best therapist has fur and four legs." To which I would respond, "Pay them with Freshpet and give them treats as a co-pay." Thank you very much. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.