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Mathew R. Ishbia: Thanks for joining today. I appreciate you all. Obviously, a little different format this quarter. Hopefully you like it. We would love to get feedback on it. This probably fits my style more. Hopefully, if possible, I would love to be able to see you too. I do not think we set it up that way this time; maybe next time. I appreciate everyone being here today. I have a bunch of questions, so I am going to go through them. I know last quarter we did not do Q&A and people missed that, so I am happy to do this and make it valuable to you in any way possible about the industry and about UWM Holdings Corporation. I have a whole variety of questions. I will try not to duplicate and will tie some together. I will read a person’s name, read the question, and go through it. If anyone has any follow-up questions, I know I cannot take them live this way, but our investor relations team, Blake and everybody else, will be able to handle your questions and help you with anything you need. Let us get started. We will jump into it right now. First question, I have Doug Harter from BTIG: What is the status of bringing servicing in-house? What is the latest timeline transitioning all servicing to our own platform? Status of bringing servicing in-house: it is going fantastic. We feel really great about where servicing is right now and how it is going. We have fewer than 100 thousand loans on today, but all new are going on, and we have moved a bunch of loans over from Cenlar already. We feel really good about that. The process will be this year. Over the whole year, we will bring all of our loans in-house so there will be no subservicers by the end of this year. UWM Holdings Corporation will handle it all. It is going really great. Our technology process is going great. We partnered with Black Knight, we partnered with BILT, and we have also built a bunch of stuff ourselves. We feel really good about how that is going. Our client service has been excellent. All the metrics that people look at are fantastic, so we feel really good about that across the board. So servicing in-house is great. Transition timeline: that is this year. Hopefully that answers your question, Doug. I know there are a lot of servicing questions. I am sure I will get to them as we go through it. Next one, Ryan Nash, Goldman Sachs: What are your thoughts on future gain-on-sale margins? What does the competitive landscape look like in a heightened rate environment? Rates went up in March from February. I think the 10-year finished at 3.95%. And so seeing rates go up, how does that impact competitive landscape and gain-on-sale margins? We are in a really great position from a margin and competitive position standpoint. The competitive landscape is very competitive right now. A heightened rate environment means purchases more than refi. However, you looked at our first quarter—we did a heck of a job on the refinance side. I see gain-on-sale margins in the range they are in right now being the right range, and I think that will continue: not significantly higher, not significantly lower. I actually think there is upside in the margins. Our margins were pretty strong in the first quarter. I expect them to be in those ranges again in the second quarter. If rates come down, you could see margins increase. The competitive landscape is very competitive out there right now. We had a great first quarter—you saw the numbers and what we did—and first quarter is usually the slowest quarter. Rates going up, the war going on, and uncertainty create issues in the rate environment, but we feel really good about where it is at right now. Ryan Nash also asked thoughts on the Knicks winning it all. They have a very, very good team. We just lost to Oklahoma City, who is an amazing team too. The East is open. The Knicks have a real good chance. Not really cheering for anybody—I am just watching and learning. Good luck to your Knicks. Next question, Mark DeVries from Deutsche Bank: What is the strategic value you see in Two Harbors, and what updates can you share regarding its progress or impact? The Two Harbors thing is out there right now; it is interesting. When we originally went to acquire the company, they had something really great: a pristine servicing book. When we originally agreed on the deal before all the work was done, we thought there would be a lot of synergies also—capital markets expertise, maybe some finance expertise, and their servicing platform we could learn from. As we went through due diligence, we learned there was a really great servicing book, and we still like that servicing book. We originally put an offer out there. Where that stands now: we do not see as much value in their management team. Their team members are very good, but their leadership team—we were not as impressed with. They went out and tried to get another bid, and they did. Whether it was appropriate or not, we can discuss that at a later point. If they would have engaged with us, we always planned on paying $12. Quite honestly, based on when the stock price went down, I would rather pay it in cash than in stock. I feel like I am giving my stock away at a really low price. They never engaged—they just went out to another offer. We made another offer; they basically ignored it. We made another one and said, okay, we will go to $12—what we originally planned on paying. I think it was maybe $11.95, but you can do the math based on when the stock was at $5.11 or $5.15 the day we cut the deal, I think. We still feel really good about that deal. It is very clear that their management team and their board, which has had its own issues in the past with lawsuits and such, may be playing some games because they realize that we do not see any value for them specifically. They have really great shareholders, which we are excited to bring on to UWM Holdings Corporation. But their board and their management team do not have any value to us. Now they are trying to do anything they can to potentially engage with someone else so that they have jobs and sustainability. It will play out. The strategic value is their MSR book. Their shareholders have some value because we got a chance to get to know them during that process and feel like they are really good shareholders; we would love them to be UWM Holdings Corporation shareholders. Whether they take cash or stock does not matter to me. We feel really good about that. For the shareholders of Two Harbors, they obviously would prefer taking $12 in cash or UWM Holdings Corporation shares than taking $11.30 in cash. That is obviously going to play out that way. We feel good about the strategic value. It is very clear to us that it is the MSR book and the shareholders; we do not have any value for their leadership team, which is obviously not what they like to hear. Next, Mikhail Goberman from Citizens Bank: How do you foresee the balance between origination income and servicing income evolving, especially given the post-war reversal of rates seen since February? We are an origination company. We are the biggest and best originator in the country. We feel great about where we are in origination. You saw an amazing first quarter. We have been the number one originator for four straight years and the number one wholesale lender for eleven straight years. Origination is our game. As we bring servicing in-house, we will have more servicing, and we will continue to retain the servicing. Are we still opportunistic if someone gives me a bid that we believe is more than the intrinsic value? I will sell the servicing. I have those options. With the lower cost of servicing by bringing it in-house and the better level of service, which will help retention, we feel like we have the best of all of it. We will see with the income levels—origination versus servicing—but origination is still our game. We will continue to build out the servicing book, but we are always opportunistic. People call us all the time. Even with Two Harbors—some of the “pristine” servicing book they have happens to be our old servicing book that we sold them. We feel good about the paper we originate every day and servicing the loans, but if someone wants to offer us a great opportunistic price, we will always look at that. Jason Stewart from Compass Point: Was there an increased number of high-producing brokers affiliated with UWM Holdings Corporation during the quarter supporting wholesale channel growth? Good question. High-producing broker shops affiliated with UWM Holdings Corporation—I always say the numbers roughly—there are about 12 thousand to 12.5 thousand brokers that work with UWM Holdings Corporation, and maybe there are 400–500 that are not all-in with UWM Holdings Corporation. So there are not that many high-producing shops to bring over. Almost everyone in the market works with UWM Holdings Corporation. That is why we have almost 45% market share—I think it is 44.7% or 44.8% market share for the year last year in the pro channel. Our big focus is to grow the channel, help brokers do more, and help more originators realize that broker is the place to go—whether they join a broker shop or start their own—and that has been a really big focus. As the broker channel grows, UWM Holdings Corporation will grow, even if our market share happened to go down. I feel great about growing the broker channel. Are brokers coming over to join UWM Holdings Corporation? Yes, every single day people see the value of what UWM Holdings Corporation does. A separate note on the “all-in” thing with brokers from years ago: one of the biggest adversaries of UWM Holdings Corporation was a guy named Mike Fawaz at Rocket who was saying negative things about UWM Holdings Corporation and about what we do and how UWM Holdings Corporation was not best for brokers. Recently, he left Rocket, started a broker shop, called me, and now he is working with UWM Holdings Corporation. Someone that knows every detail at Rocket came and learned about UWM Holdings Corporation, started a broker shop, and picked to work with UWM Holdings Corporation. That sends a message. There are not that many big broker shops left out there that do not work with us, but that is an opportunity. The bigger thing is to grow the broker channel and continue to grow. The broker channel is continuing to be very positive, and we are excited about the growth. I have a couple of questions on Mia and the AI initiative, so let me combine them. One person asked about Mia’s text messaging capabilities and customer response to Mia generally. Let me give you a Mia update. Mia has been fantastic. It has been almost a year—I rolled it out at UWM Live last year—and it has been amazing. I would say roughly in the range of 80 thousand to 100 thousand closings over the last year have come from Mia. The last report I saw was very strong with Mia’s initiation of refinance opportunities. If you look at our servicing book, people ask, “You have 2% or 3% of the servicing book, but you did 12% or 13% of all refinances.” Mia is a big part of that. Brokers do a great job with the consumer upfront; consumers want to come back to the broker. The problem was brokers did an average to below-average job of following up with their past clients. They would do the purchase and then would not talk to them again. Now, with Mia, she is keeping the broker in front of the consumer. When the consumer goes to refinance, they work with the broker because the broker offers a better deal anyway; they just know who to call. Mia leaves voicemails and sends a text message out. She calls, and about 40% of her calls get picked up, which is higher than we expected, so 60% go to voicemail and we send a text message also. A lot of those call the broker back: “Was that AI or was that real?” Then they connect and do a loan. On the 40% that pick up—on a 40 thousand-call day, about 16 thousand—borrowers talk to Mia and have two-, three-, four-minute conversations. Some of them know it is AI and some do not—it has gotten that good. We send a follow-up email to the broker: “You have a call scheduled at 3 PM with Jenny, the borrower,” and it has been very successful. We are continuing to enhance it and make it better. The scale we are doing with our IT team has been phenomenal. I do not know anyone in any industry doing it at this scale. It is going to get better next week at UWM Live and beyond. We have big enhancements coming. It helps brokers win. That is a big part of how with 2% or 3% of the servicing book we are doing 12%–13% of refis—Mia and great brokers staying in front of their clients. Kyle Joseph asked to review industry competitive trends, current broker share, and how we anticipate it evolving. Current broker share is about 28%. Five years ago, in early 2020, it was 14%–15%, so it has almost doubled. Will it double again? We are working on it. Our goal is to help brokers be the number one overall channel—50.1%—and we are on a path to doing that. Our share has been very steady—over 40% for years now, roughly between 40% and 45%. That has never been done in the wholesale channel. It is because we provide value: we help brokers grow, look good to real estate agents, do more business, make the process easier, and be successful. We train them, coach them, and give them tools to win more loans. We will continue to be the best and the biggest in wholesale and overall. Being the largest lender in the country for four straight years, we only have a chance at 28 out of 100 loans. Every other lender is competing for 100 out of 100. If that 72 out of 100 that is retail moves to 65, 60, or 50, that is growth for UWM Holdings Corporation. That is why we are bullish on our growth and the broker growth—we are all going to win together. I also got a couple of questions tied to expenses. You saw our expenses went down. We invested a lot for years, and now we are starting to see the harvesting or success of those investments—TrackPlus, free credit reports to help brokers grow, and more. You will see more of a leveling out of expenses. They went down. Our investments are starting to pay off. You saw a little in the first quarter. Compared to the industry, we had a great quarter. Last year’s first quarter was $32 billion; this year we did about $45 billion. That is significant. Our gain on sale was up and volume is up year-over-year. Expenses are flat or down. We feel good about where we are from an expenses perspective. I think of them as investments, and they are paying off. Mikhail Goberman had another question on the new VantageScore rating system for borrower credit. Kudos to the leadership of FHFA on rolling out a new way. FICO scores and credit reports have gotten really expensive. With a competitor in there, you have options. Options create better outcomes—that is why wholesale works. Now FICO and Vantage are both striving to be the best. There were very few companies put on the pilot; we were one of them. I think it rolled out less than two weeks ago from FHFA Director Sandra Thompson with the support of Fannie Mae and Freddie Mac. Four business days later—Wednesday of last week—we rolled it out. VantageScore has been an enormous success. Not just saving $50 a credit report, though that is possible too. We have both FICO and VantageScore and are making sure borrowers get the best opportunity because they have different models. Vantage looks at thinner credit differently, can add rent and other things so more people can qualify or qualify with a little bit higher score. Under current comparability, you take a 20-point haircut from Vantage to FICO. So if a Vantage score is 744, that is equivalent of 724 in FICO. If the FICO score was 719, I just got that borrower a better deal with lower LLPAs. That is a win for consumers. In five business days, the amount of emails I have gotten on loans we have helped brokers win and consumers grateful that they can qualify for a home or got a better interest rate and lower fees has been phenomenal. Kudos to FHFA, to Fannie and Freddie for getting it out. We rolled it out with VA loans today, and FHA will be soon. MI companies like Essent and Enact are on it too. FICO is still great in many ways. It is not one or the other—both are great. We want to help consumers qualify for a mortgage and have better credit profiles. The rollout was done in four business days and worked flawlessly—our IT team did a heck of a job. Others may have it out in May or June. We are rolling with it now—saving loans, helping loans, giving better deals right now because of Vantage. I have a couple of questions on the BILT partnership. Indications of the BILT card relationship, increased leads, status of the partnership, and infrastructure in place. BILT—Ankur Jain, the CEO—is phenomenal. Their vision is great. UWM Holdings Corporation is a servicer; we brought servicing in-house. We are controlling everything. We chose a platform on the front end that provides rewards points to consumers for making their mortgage on time without using a credit card—they can use ACH and still get points. That has never been done in our industry. Rewards points for making your mortgage on time. People love points. You can also link your credit card and get points—your American Express points and BILT points—and use them for flights and other things. It is really cool. Beyond that, the servicing platform is slick. We built this with them, because they had never done this before on the front end for mortgage. It is great for consumers. BILT has over 6 million consumers and, depending on the year, 8%–10% of them buy houses. Those are curated leads. They will want to stay on the BILT platform and work with a mortgage broker. That is a huge opportunity. We already had that in pilot. There is a concierge service that gives our consumers—our brokers’ consumers—an amazing platform to get things done and make their life easier. It is a cool neighborhood experience. Ankur is going to speak at UWM Live next week—if you are there, you will understand it better. The vision is awesome. The key is UWM Holdings Corporation has servicing in-house. We have been the best originator in the country for a long time; we are going to be the best servicer because we are focused on it. It will help retention for our brokers and make the consumer experience better, with ancillary benefits too. The partnership is launched, rolling, fully active, and getting better every day—as we do with everything at UWM Holdings Corporation. We do not have all 700 thousand consumers on it yet; those are moving on to it. I have shadowed the team. The servicing process has been really great. You asked in the past why we did not do it—I always said focus on originations. We still do. The cost/expense will be great on servicing, not outsourcing anymore. Better yet, retention and experience for consumers and our brokers will be even better. We are excited about that. I also got questions on what we see in the business for the next three to five years (and even ten). Here is my high-level view. Over a five-year window—call it 2027 to 2031—we are expecting to do over $1.3 trillion in mortgages. There might be one year in there with $400 billion, and a year with $150–$200 billion, but I believe $1.3 trillion is the north star over five years. While that happens, my expenses basically stay the same. With our AI initiative and our technology, the expenses you see today—call it roughly $600 million in the quarter (I think it was about $590 million)—I expect that to be the level even as volume more than doubles. On top of that, I see another roughly 20%–25% in other revenue coming into UWM Holdings Corporation starting to happen with some ancillary products that are picking up steam. So revenue growth outside of just volume and gain-on-sale. To summarize: $1.3 trillion over five years, gain-on-sale margins in these ranges (maybe slightly higher), expenses flat or down (I will call it flat), and other revenue tied to AI initiatives that are starting to produce margin and other revenues. If I did not answer a shorter-term detail, Blake Kolo and investor relations are happy to talk anytime. Kyle Joseph: How are you thinking about the Homebuyer Privacy Protection Act (trigger lead rule) and potential impacts on competitive environment and overall margin? The trigger lead rule (effective March 4) definitely changed things. When a consumer used to pull credit, 50 people would call them. Now it is the servicer, the original lender, original broker, maybe their bank—three or four. That has changed the competitive landscape and is probably a better experience for consumers (fewer calls). On the flip side, consumers may not get as many options. You might get offered 6.5% with $5 thousand of fees and not know you could have gotten 6.25% with $3 thousand of fees working with a mortgage broker—going to mortgagematchup.com. Trigger leads made people compete more. From a competitive landscape, you could argue it is maybe not as good for consumers on rates and fees, though experience is better. If you are only winning on rates and fees, you will not be around long in this business. I could argue it may increase margins a little because there is less “low-ball to win” with fewer calls. It has been about 60 days—still early—but that is what we are seeing. Brokers who used trigger leads are finding other ways to buy data. It is still competitive, just a lot less noisy. A couple have asked about debt ratios: Why did secured debt go up relative to other aspects of the balance sheet, and how do we look at the debt ratio? We look at the debt ratios every day. The debt ratio was really good a couple of years ago when volume was not as good. Now the business is really good, and the debt ratios are not as good as we would like. Some of those ratios and liquidity numbers are a little bit of an anomaly based on trades we have out there to help balance the MSR book, which can move around. At the end of the quarter, it was up; it has already come down a bit now. Those fluctuations can throw the ratios off a little; they are better than they appear. We feel really good about it. We watch the numbers closely. The key is earnings. You saw we had a good earnings quarter in the first quarter. There will be quarters with bigger earnings. We are monitoring and managing it. We believe in delivering value to shareholders—dividends, which we have been doing, and potentially buybacks or other things. Overall, our leverage ratios and debt ratio—we feel really good. We monitor and manage them, and there are a lot of levers we can pull to make those ratios better while still doing more business and having higher earnings. You will see some of those in the second quarter and beyond. Jason Stewart from Compass Point: During periods of heightened volatility at the start of the year, how do you manage lock duration and pricing cadence? Do you increase frequency of rate sheet updates? How much volatility is absorbed? And impact of things like Purchase Boost 50 and pricing initiatives? The market has been very volatile. We have an extremely experienced capital markets team. Yes, sometimes you have two or three different rate sheets in a day—maybe four or five on rare days. If rates get better, we put an improvement out there to ensure brokers have the most competitive opportunity. If pricing gets worse, we worsen pricing. These numbers move all day. We have thresholds that move pricing up or down; when we hit those, we act. Some days you put a rate sheet out at 10 AM and nothing changes all day, or not enough to change pricing—we want some consistency for our clients as well. That balance is why you saw really strong margins in the fourth quarter and first quarter, and you will see strong margins in the second quarter. Built-in rewards have nothing to do with gain-on-sale or pricing; it is just another benefit for brokers and consumers because they get rewards points through BILT. On Purchase Boost 50 and other pricing initiatives: all are designed to help brokers succeed and win. Our brokers are not “I need the lowest price” to succeed. If lowest price alone won, they would cut comp in half and all use Provident. That is not how it works. A lot of our price incentives are more strategic. They incent brokers with price to use a tool of ours. For example, we had an incentive tied to 40–45 bps if you used hybrid or virtual closing because it makes the consumer experience better. That makes the consumer more likely to like you and refinance with you in the future. We track borrower happiness on every single loan. A lot of those are investments and are reflected in gain-on-sale. We did some of that in Q4 and Q1, and gain-on-sale is still much higher than last year’s Q1—about 123 bps in the first quarter (about 122 in the fourth). We track it daily and understand where we are. We give a very competitive price to our brokers, add significant value to help them win more loans, and provide the best service in the industry. We come out with AI tools and technology; we invest with free credit reports to help brokers compete even more and help more consumers. Many of these decisions are strategic to help brokers win. Sometimes a broker has never done a virtual closing, and the extra 45 bps gets them to do it, and then they continue doing it because they realize it is best for the consumer and helps them build their business. If brokers win, UWM Holdings Corporation wins. When consumers realize the fastest, easiest, cheapest way to get a mortgage is through brokers, UWM Holdings Corporation wins. Real estate agents win. We are one team because it is best for consumers. When a consumer goes to a random commercial or their local bank, they usually pay higher rates. When a consumer goes to mortgagematchup.com, they will find a broker who will get them a better rate, better fees, and a better experience. Anything I can do to drive more business there is what I will do. UWM Live is next week. It is the biggest mortgage event of the year. Please come. I will be there all day. We have great speakers. It is really cool to see the broker community. I will meet with investors and analysts—happy to spend time. We have covered a lot of the questions. Let me know how you like the format. Maybe next month, I can see you too, and we can have more interaction. Hopefully you like the format. I know last quarter you did not like that we did not do Q&A, so I am here for it. I love this. I will do this anytime. I enjoy talking about our business and the industry. Please give us feedback—give our investor relations team feedback on the format. If I did not answer your question, investor relations—Blake and the whole team—will answer all your questions. We appreciate you. Thanks for being partners of UWM Holdings Corporation—shareholders, investors, analysts. Anything we can do to help make your life easier. We are going to keep winning together with our brokers. The broker community and UWM Holdings Corporation will continue to grow with my amazing team members here. Thank you for your time. I am excited about the future here at UWM Holdings Corporation. The second quarter is going to be great as well. We will do the same format again unless we get a lot of feedback that you did not like it. Hopefully you did, and hopefully it was valuable to spend this time with me. Have a great day. Blake Kolo: The video is not, but we can hear you. They can hear you. Okay.
Operator: Hello, and welcome to Geron Corporation First Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the call over to Dawn Schottlandt, Senior Vice President, Investor Relations and Corporate Affairs. You may begin. Dawn Schottlandt: Good morning, everyone. Welcome to the Geron Corporation First Quarter 2026 Earnings Conference Call. Before we begin, please note that during the course of this presentation and question-and-answer session, we will be making forward-looking statements regarding future events, performance, plans, expectations and other projections, including those relating to our 2026 financial guidance, our current RYTELO commercialization strategy and related opportunities in the U.S. and the EU, the therapeutic potential of RYTELO, other anticipated clinical and commercial events and related timelines, the sufficiency of our financial resources and other statements that are not historical facts, which, of course, involve risks and uncertainties that could cause actual events, performance and results to differ materially from those contained in these forward-looking statements. Therefore, I refer you to the risks and uncertainties described in today's earnings release and under the heading Risk Factors in Geron's most recent periodic report filed with the SEC, which identify important risk factors that could cause actual results to differ materially from those contained in these forward-looking statements and future updates to Geron's risks and uncertainties disclosures, including its upcoming quarterly report on Form 10-Q. Geron undertakes no duty or obligation to update its forward-looking statements. Joining me on today's call are several members of Geron's management team: Harout Semerjian, Chief Executive Officer; Ahmed ElNawawi, our Chief Commercial Officer; Dr. Joseph Eid, Executive Vice President of Research and Development and Chief Medical Officer; and Michelle Robertson, our Chief Financial Officer. With that, I'll turn the call over to Harout to review Geron's progress and strategy. Harout Semerjian: Thank you, Dawn, and good morning, everyone. In the first quarter, we made progress on our 2026 strategic priorities. We grew RYTELO through focused commercial execution and advanced our European commercial and pricing strategy while maintaining our financial discipline. We also further strengthened our leadership team by welcoming Timothy Williams, our new Chief Legal Officer and Corporate Secretary for Geron, along with 2 new Board members, Patricia Andrews and Constantine Chinoporos. Collectively, they bring decades of experience leading and advising biopharmaceutical company and will be instrumental as we execute on our strategic priorities and drive commercial growth for RYTELO. RYTELO first quarter net revenue was $51.8 million, an increase of 31% year-over-year and 8% quarter-over-quarter, placing us on track to achieve our 2026 net revenue guidance of $220 million to $240 million. We continue to see strong tailwinds in the treatment landscape complementing our refocused commercial strategy and driving RYTELO demand. We are focused on 3 key initiatives fueling our RYTELO U.S. growth strategy. On the commercial side, we're continuing to increase awareness and education for RYTELO amongst U.S. health care professionals with a refined engagement plan to help identify appropriate second-line patients faster, and complementing our field force efforts by increasing our in-person and digital presence across hematology forums through accelerated investment in our surround sound approach. From a medical affairs perspective, we are expanding our research partnerships and investigator-sponsored trial programs with the U.S. hematology community to increase our knowledge and real-world experience with RYTELO. Growing RYTELO demand in the U.S. market remains our priority. And we know from patients at HCP, there is an unmet need for low-risk MDS treatment options in Europe and an interest in RYTELO to help address that need. This quarter, we engaged in conversations with European medical experts, made progress with health technology assessment and conducted detailed research to better understand the European pricing environment. As a biotech company, we have an obligation to make our medicines available to patients, but we also have a responsibility to maintain a value that reflects our innovation and support our next wave of growth. We know the demand in Europe for RYTELO is real, and we are exploring an agent commercial strategy that could maximize RYTELO's value in Europe while maintaining its pricing integrity in the U.S. We expect to communicate our commercial plans for Europe before the end of the year once we have clarity on pricing and market opportunity. Financial discipline remains another top priority for Geron. We reported total operating expenses for the first quarter of [ $50.4 million ], down about 9% year-over-year, a testament to our financial discipline. A few first quarter dynamics such as annual bonus, severance from last year's restructuring and CMC investments to strengthen our supply chain for RYTELO led to a decrease in cash, which was in line with our expectations. We are on track to achieve our 2026 total operating expenses of $230 million to $240 million. With that, I'll turn it over to Nawawi to provide more detail on RYTELO's commercial performance and execution. Ahmed ElNawawi: Thank you, Harout. RYTELO's first quarter performance was incredible. Our strategy is built to support sustainable growth and ensure RYTELO reaches more eligible patients at the right point in their treatment journey when they are most likely to benefit. In the first quarter, we were able to grow demand 6% quarter-over-quarter and approximately 12% increase in prescribing accounts, expanding our footprint since launch to approximately 1,450 accounts. First and second-line patient starts on a rolling 12-month basis was 33%. RYTELO has the potential to make the biggest impact for lower-risk MDS patients in the second-line setting, which we currently estimate to be approximately 8,000 patients in the U.S. This patient segment is our primary commercial focus and our strategy is supported by the current NCCN guideline. The movement of luspatercept into the first-line setting, backed by RYTELO's broad label and growing real-world experience. And last but not least, the IMerge data, including the data presented at ASH 2025, suggesting treatment-emergent cytopenias are consistent with on-target activity. Our commercial execution is focused on 3 core initiatives. First, targeted engagement with high-volume community accounts. We are prioritizing centers that treat earlier line and second-line patients with our field engagements. Additionally, we continue to engage with lower volume accounts for those privately seeking salvage patients through digital tactics. Second, we are investing in the most effective marketing channels. This includes a strong emphasis on digital non-personal promotion and third-party educational platforms to create what we describe as 3D surround sound for RYTELO, ensuring consistent, high-quality messaging across multiple touch points. Third, we are executing cross-function through effective account management, leveraging data presented at ASH 2025 to proactively address the cytopenias and highlight the potential association with response while positioning RYTELO as the standard of care in appropriate second-line patients regardless of their RS. We believe our commercial strategy and investments are well aligned to bring RYTELO to eligible lower-risk MDS patients in the U.S. and position us to grow demand in 2026. I now turn it over to Joe to discuss our Medicaid and scientific engagement. Joseph Eid: Thanks, Nawawi. In the first quarter, we continue to engage closely with the hematology community to increase RYTELO's share of voice. Since the start of the year, we've had a presence at several medical meetings, including the Aplastic Anemia and MDS International Foundation, ASCO, and the 2026 Pan-Hematology Clinical Updates meeting. These are targeted peer-to-peer conferences that provide the opportunity for more detailed clinical dialogue and practical discussion among healthcare professionals. We are also looking forward to attending ASCO and EHA, where we will engage with hematologists to articulate the clear differentiation of imetelstat in low-risk MDS based on clinical efficacy, quality of life benefit and mechanism of action, generate advocacy within the KOL community and support investigator interest in research opportunities aligned with our medical strategy. These medical meetings enable us to further educate the hematology community on RYTELO's deep body of scientific evidence. Our messaging continues to be focused on the ASH 2025 data suggesting treatment-emergent cytopenias are consistent with off-target activity. We are seeing increasing interest from community hematologists understanding these data and learning how to incorporate these insights into their clinical practice. We were pleased to further reinforce the significance of these data with our recent publication in Blood Cancer Journal that examined the association between treatment-emergent cytopenia and clinical responses to RYTELO. We are also engaging with academic centers to support the high interest in imetelstat to advance ISTs and real-world evidence studies. Notably, we are seeing increased interest from centers in Europe wanting to contribute to preclinical, clinical and real-world evidence data generation. We expect initial real-world evidence data to be available in the second half of 2026. In addition, we are pleased to have achieved the inclusion of imetelstat in the National Comprehensive Cancer Network or NCCN, chemotherapy order template. This inclusion positions imetelstat as an active therapeutic versus supportive care for lower-risk MDS. The order template provide healthcare practitioners with clear guidance on administration, enabling imetelstat to be seamlessly incorporated into oncology practice workflows and supporting standardized and appropriate administration across treatment centers. This follows the NCCN guideline update in September 2025, recommending imetelstat as the preferred second-line treatment option in lower-risk MDS. Turning to our Phase III IMpactMF trial in relapsed/refractory myelofibrosis. The fully enrolled trial is projected at this time to reach the interim analysis death event triggered in the second half of this year. Imetelstat works on the foundation of the disease, which is why we believe it has the potential to be a first-in-class therapy in myelofibrosis. In myelofibrosis clinical trial conducted with imetelstat, we saw evidence of disease-modifying activity correlating with clinical benefit and overall survival through a reduction in mutation burden, specifically JAK2, CALR and MPL driver mutation. An improvement in bone marrow fibrosis and reduced telomerase activity, which is important as telomerase is significantly upregulated in cancers. For our IMpactMF trial, overall survival is the primary endpoint, and our confidence in this endpoint is supported by encouraging survival outcomes observed in the Phase II EMBARK trial, which informed the design of the IMpactMF trial. While our base case from a planning perspective remains progression to the final analysis in the second half of 2028, reaching the interim analysis represents an important milestone as we continue to advance the potential beyond lower-risk MDS. An earlier positive outcome would represent an upside scenario to our plan. I'll now hand it over to Michelle to walk through the financials. Michelle Robertson: Thank you, Joe, and good morning, everyone. For more detailed results from the first quarter, please refer to the press release we issued this morning, which is available on our website. Our first quarter 2026 results reflect our dedication to commercial execution and financial discipline which positions us well to achieve our 2026 financial guidance and advance our strategic priorities to create long-term value for patients and shareholders. In the first quarter, total net revenue for the 3 months ended March 31, 2026, was $51.8 million compared to $39.6 million in Q1 2025. Gross to net reductions increased to 21% for the 3 months ended March 31, 2026, compared to 13% for the same period last year. As volume increased, there was wider 340B utilization and expanded GPO contracting, which we foresee continuing as the business matures. For the remainder of 2026, we expect gross to net to be in the low to mid-20s. Research and development expenses for the 3 months ended March 31, 2026, were $15 million, consistent with $15.1 million in expenses for the same period in 2025. For 2026, we expect continued investment in CMC and our clinical development program and lower employee costs driven by the decrease in headcount as a result of the workforce reduction in December 2025. Selling, general and administrative expenses for the 3 months ended March 31, 2026, were $35.4 million compared to $40 million for the same period in 2025. This change was primarily due to lower general and administrative personnel-related expenses and decreased headcount, partially offset by additional investment in marketing programs. For 2026, we expect continued investment in our RYTELO commercialization strategy and lower G&A personnel-related expenses driven by a decrease in headcount as a result of the workforce reduction in 2025. Total operating expenses excluding cost of goods sold for the 3 months ended March 31, 2026, were $50.4 million compared to $55.1 million for the same period in 2025. The reduction is primarily related to decreased headcount as a result of the workforce reduction in December 2025. As of March 31, 2026, we had approximately $341 million of cash, cash equivalents, restricted cash and marketable securities compared to $401 million as of December 31, 2025. As a reminder, in the first quarter, we typically see a larger cash outflow due to the timing of annual bonus payouts. In addition, severance related to the strategic restructuring we announced in December 2025 was paid out in cash in the first quarter. The decrease in our cash also reflects CMC investments to strengthen our supply chain for RYTELO. We are reiterating our 2026 financial guidance. We expect RYTELO net revenue of $220 million to $240 million with a greater portion of growth anticipated in the back half of the year. Our total operating expense guidance of $230 million to $240 million reflects strong financial discipline and investment to support our commercial strategy. We are in a strong financial position and are on track to achieve our 2026 financial guidance as we execute on our strategic priorities to grow RYTELO while maintaining financial discipline. With that, I'll turn the call back to Harout for closing remarks. Harout Semerjian: Thanks, Michelle. We continue to build a patient-focused performance-driven culture at Geron, marked by a high level of cross-functional collaboration. Last month, we hosted our first all company national meeting, which was a great opportunity to bring this energized group together and rally around the mission, values and goals that drive us. We have the right team in place to execute on our strategic priorities, bring RYTELO to eligible patients and achieve our 2026 financial guidance. For the remainder of 2026, we are focused on growing RYTELO in the U.S., pursuing pathways to bring RYTELO to patients outside the U.S., advancing our IMpactMF trial, remaining financially disciplined and evaluating opportunistic innovation as we build Geron into a leading hematology company. Thank you again for your time and interest in Geron. Operator, we're now ready to start the Q&A session. Operator: [Operator Instructions] Your first question comes from the line of Tara Bancroft of TD Cowen. Tara Bancroft: So I have a question on MF. So I know we've been hearing this theme that physicians are very data sensitive in terms of awareness. So I was wondering if you had any updated thoughts on how you'll communicate the MF interim analysis this year. Like would you consider giving any numbers in that release at all? And then with that, I'm also wondering if you think that the interim outcome could have any read-through to potential uptake of RYTELO in MDS. Harout Semerjian: [ IMpactMF trial ] as you know, is fully enrolled, and we do project that we will do our interim analysis in the back half of this year. So that's still on track. Typically these thing, Tara, you know, the DMC would meet and obviously, we're blinded and we continue to want to stay blinded, depending on the outcomes obviously. But the highest likelihood, at least from a planning perspective, we see is that they tell us keep on going. And if they tell us anything else, then all the material, obviously, that we would communicate to the market accordingly. But Joe, do you want to add anything more? Joseph Eid: Yes. Tara, I think your question is how do physicians react to it. The second is disease or indication where you do have a proof of concept and an overall survival impact. So it definitely will have an effect, a positive effect because our message at MDS is that this is a disease-modifying agent, and having this proof of concept in Phase III with overall survival from an MF would definitely enhance and augment that awareness and that value [indiscernible] hematology. Operator: And our next question comes from the line of Gil Blum of Needham & Company. Gil Blum: Congrats on the progress. Just a quick one for us. As it relates to European markets, you guys said you may have conducted some market research. Just sounding -- listening to your messaging, it kind of sounds like you're considering moving forward on your own. Is this fair? Or is this still a question mark? Harout Semerjian: Gil, yes, in line with what we have said is we want to explore all options to bring RYTELO to patients in Europe. As you know, the European opportunity from a patient numbers perspective can be in line with U.S. opportunity. So it's quite significant from a patient numbers perspective. Of course, the second part of that is the pricing, which is a very key inflection point for us. That needs work, and that's kind of the work that we're doing. If you think about options for a company like us, it's really 3 different areas. One is the classical built-up model. The second on the other end is a full partnership with another pharma. We are not doing the first to be clear. That's not where we're pursuing a very big classical buildup. That's really not for us. Partnerships are always an option. But also what we are seeing in the marketplace still is an emergence of new models and new partners in Europe that can complement what we're doing because there are a lot of companies, U.S.-based biotechs that are having to put their thinking cap on and see how they can serve European patients. Many of them are choosing not to do anything about it, which we think is unfortunate for patients and for the mission. But at the same time, we want to make sure that we're doing a thoughtful work. So we're pursuing all these different opportunities, Gil. And before the end of the year, we will update the market in terms of where we land and what we think is the optimal way to bring RYTELO commercially to ex U.S. market. Gil Blum: And as a follow-up, will there be real-world data from imetelstat in low-risk MDS patients presented sometime this year? Harout Semerjian: Yes. Maybe I'll hand it over to Joe to address that question, it's a good question. Joseph Eid: Yes. Gil, we have a slew of research -- investigator-sponsored research, including real-world data that will be presented at the upcoming meetings in the second half of this year as we have been saying. Some of it will include the real-world utilization in MDS and how it's playing out in the real world. And the early indication that we have mentioned in the past is that the data reflects the IMerge data from responses as well as [indiscernible]. Operator: And our next question comes from the line of Corinne Johnson of Goldman Sachs. Corinne Jenkins: So I think you've talked about this one L2L share, and it's been pretty stable in the 30% range. Maybe you could talk to us about the tactics you're using to increase adoption in the earlier line population. And when you think we could start to see those educational efforts flowing through to changes in actual prescribing patterns in a more meaningful way? Harout Semerjian: Yes. I think if I heard you right, your question was about the first-line, second-line share of patients versus later. Okay, yes. So what we are communicating today, Corinne, is the share of our utilization in the first line, second line versus the later line is 33% this quarter with a 12-month look back. As you remember, last quarter, it was at 30% with a 12-month look back. So we continue to make progress in getting more and more of our patients in the first line, second line. And that's how we see our performance going forward is continuous progress, continuous growth quarter-over-quarter and that's the strategy we're pursuing, iterating our guidance for the top line between [ $220 million and $240 million ]. Operator: Our next question comes from the line of Emily Bodnar of H.C. Wainwright. Emily Bodnar: In terms of the 6% increase in demand in this quarter, what's your confidence in the sustainability of that for future quarters in 2026? And were there any seasonality impacts or other factors that you could specifically point to that helped increase demand in the first quarter? Harout Semerjian: Yes. Thank you, Emily. Yes, look, I mean, we're very pleased with where we are in Q1, where we have landed is in line with our expectations in terms of both top line growth, but also on the investment side. And our plan is to continue to grow quarter-over-quarter. That's the strategy we're pursuing regardless of seasonality, different things that will happen every year. We know that. But at the same time, we do expect a gradual and continuous growth quarter-over-quarter. This is one where we are communicating -- we have communicated that. We have a guidance for the year in terms of the top line. And we have also communicated that we think that growth would be more accelerated in the second half of the year, purely by the fact that we have done significant surgeries in Q4 and Q1 and a lot of these programs do need time to kick into action. And we want to continue to fuel this growth quarter-over-quarter. It's not -- we don't see it as like a total transformation inflection point between one day to the other. This is a story for us of continued growth quarter-over-quarter. We do believe that the potential is tremendous in this low-risk MDS area, and we look forward to serving more patients and continuing to grow the business. Operator: [Operator Instructions] And our next question comes from the line of Stephen Willey of Stifel. Stephen Willey: Just curious about the data you're seeing on the treatment duration and persistency front. I know that you've been in the market now, I guess, messaging the correlation between cytopenias and clinical benefit. Has that driven any measurable improvement in patient persistency over the last 4 to 5 months? And I just have a follow-up. Harout Semerjian: Yes, what we see in real world is really quite close to what we've seen in IMerge data in terms of patients -- average duration of patients staying on therapy on RYTELO. What we are pursuing is more patients in the first line, second line, and that would obviously increase the persistency of patients on treatment, right? So this quarter, we're up to 33% versus last quarter with a 12-month look back at [ 34% ]. So we want to see that number continuously and gradually grow. But within the line, at this point, what we see is really in line with what IMerge has shown us in terms of average duration of patients on therapy. Stephen Willey: Okay. And then I just guess with the business approaching breakeven and presumably some level of confidence into achieving profitability, at least on a non-GAAP basis before the end of this year. Just curious how active some of the peripheral BD efforts might be right now. And just whether or not there's a specific stage of development that you're looking for in an asset and whether you think there's both the appetite and bandwidth to potentially execute on a transaction before the end of this year? Harout Semerjian: Yes. Thanks, Steve. Look, I mean, ultimately, our main focus is on growing RYTELO, especially in the U.S. for the time being, exploring ways to bring RYTELO to ex U.S. patients as well. We continue to do that. We have a healthy cash position with even more disciplined from a financial perspective to ensure that we're executing per plan but doing it in a financial disciplined manner. And that provides us, Steve, with a lot of different optionality in terms of wanting to do deals, not having to do deals, staying opportunistic, looking at where else can we build our company in terms of our long-term aspiration of building hematology company that's consistent and sustainable. So that's ultimately where we want to go. So we do have optionality, Steve. It's too early for us to comment on will we do a deal or not. We're always in the market looking for opportunities, but our very focused efforts are now on execution and making sure that RYTELO grows in line with our expectations and really by focusing on those 8,000 patients in U.S. in the second line, which we believe we can really help more and more of them as the quarters come. Operator: I'm showing no further questions at this time. I'll now turn it back to Harout Semerjian for closing remarks. Harout Semerjian: Thank you very much, everyone, for joining our call today. We look forward to updating on our progress over the next quarters to come. Thank you very much. This concludes our call. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Dine Brands Global, Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host, Matt Lee, Senior Vice President, Finance and Investor Relations. Please go ahead, sir. Matt Lee: Good morning, and welcome to Dine Brands Global, Inc.'s First Quarter Fiscal 2026 Conference Call. This morning's call will include prepared remarks from John W. Peyton and Vance Yuwen Chang. Following those prepared remarks, Lawrence Y. Kim will also be available along with John and Vance to address questions during the Q&A portion of the call. Please remember our safe harbor regarding forward-looking information. During the call, management will discuss information that is forward-looking and involves known and unknown risks, uncertainties, and other factors, which may cause actual results to differ from those expressed or implied. Please evaluate the forward-looking information in the context of these factors, which are detailed in today's press release and 10-Q filing. The forward-looking statements are as of today, and we assume no obligation to update or supplement these statements. We will refer to certain non-GAAP financial measures, which are described in our press release and available on Dine Brands Global, Inc.'s investor relations website. With that, it is my pleasure to turn the call over to Dine Brands Global, Inc.'s CEO, John W. Peyton. John W. Peyton: Good morning, everyone, and thanks for joining us. Today, I will walk through Dine's Q1 results and share insights on consumer behavior as well as our brands' performance in the current environment, and then I will hand it over to Vance for a deeper dive into our financials. We started the year building upon the momentum from last quarter, achieving flat to positive sales growth across all three brands for the first time in several years. This performance reflects progress against our key priorities, which include enhancing the guest experience through operational improvements, strengthening and simplifying our marketing to better connect with guests, particularly through more targeted, culturally relevant engagement, and advancing menu innovation and everyday value platforms to meet evolving consumer needs. As the quarter progressed, the operating environment became more dynamic and, in many ways, more challenging as inflation for food away from home and higher gas prices put a strain on households. With consumer sentiment declining to historically low levels, discretionary spending has become harder to justify, prompting some guests to more carefully evaluate lower-cost alternatives across restaurants, grocery, and other food channels. We are seeing the most pressure on lower-income consumers. As a result, this is driving greater focus on offerings that combine compelling price points with quality, abundance, and differentiated experiences like Applebee's 2 for $25 platform and IHOP's everyday value menu. Against this backdrop, the importance of our strategy and the relevance of our brands becomes even more central to our performance. We operate scaled, well-recognized brands built around value and everyday occasions and offering experiences that cannot be easily replicated at home, delivered at an accessible price point. This remains a strength of our business even within a more challenging landscape. While we recognize there is more work to do to strengthen our financial performance this year, we are pleased with our first quarter sales performance and believe our focus on value, cultural relevance, and disciplined execution positions us well to compete and deliver sustainable results. I will now turn to our key financial highlights for the quarter. All of our brands outperformed Black Box on comp sales. Applebee's reported a 1.9% increase in comp sales, and IHOP posted flat comps, despite weather impacting Applebee's by 94 basis points and IHOP by 80 basis points in the quarter. Our EBITDA was $50.8 million compared to $54.7 million in the same quarter last year. Our decreased profitability reflects our investments in our dual brands and company-owned portfolio initiatives, and we expect these investments to create value over the long term. We returned $24 million of capital back to shareholders. Overall, our results reflect the balance between continued investment in the business and solid top-line performance across the portfolio. Now some updates across our portfolio starting with Applebee's. Building on our sales momentum from 2025, Applebee's posted positive comp sales in the first quarter, outperforming Black Box. The continued focus on our 2 for $25 value platform and new menu innovation serves as our primary sales drivers as these initiatives continue to resonate with our guests. Our strategy this quarter remained consistent: communicating new menu innovation through high-impact targeted marketing and maintaining strong execution in the restaurants. Rather than relying on broad-based campaigns, we are leaning into our 2 for $25 value platform and demand-led activations tied to cultural moments, allowing us to connect more efficiently and compete more effectively for share of wallet. The OM Cheeseburger launch is an example of our value strategy in action. Since its introduction in January, the burger has driven high interest and engagement, supported by its compelling $11.99 price point and inclusion on our 2 for $25 value platform. In just a few months, it became the highest-ordered burger on that platform, reinforcing Applebee's everyday value positioning. Because OM Cheeseburger launched in time for Valentine's Day, we further pushed our 2 for value platform to deliver an affordable yet experiential date night occasion. The OM Cheeseburger news generated more than 9 billion impressions, reached 96 million people on social media, and sparked nearly 80 times more organic reviews than typical campaigns. By providing guests with incredible value during this seasonal moment, it drove the highest single-day sales volume in Applebee's history, with the full week ranking among the top five sales weeks ever. Across digital channels, off-premise comp sales increased approximately 3.5% in the quarter, supported by third-party delivery and targeted promotions tied to key occasions like the Super Bowl and the NCAA Basketball Tournament. From an operations standpoint, our strategy is centered around driving excellence through simplicity, focus, and accountability. We are implementing initiatives that simplify kitchen operations, increase manager presence in the dining room, and improve off-premise order accuracy. During the quarter, manager visibility contributed to higher guest satisfaction scores as reflected in improved guest surveys and Google review scores. As part of these efforts, we are preparing for a systemwide launch of a new Toast point-of-sale platform. We expect this to meaningfully increase beverage order incidences, reduce voids, and increase tips while providing better data and tools for our teams. Collectively, these efforts position us to operate more efficiently and support long-term growth. While April sales have softened against tougher prior-year comps, our focus on value, targeted marketing, and operational discipline will support our performance in a dynamic environment. Turning to IHOP. For the second consecutive quarter, IHOP outperformed Black Box in both sales and traffic in a category where traffic remains under pressure. This reflects the brand's focus on great value, product innovation, culture-driven marketing, and an improved guest experience, all of which are helping to build momentum. Comp sales were primarily supported by check improvement as we balanced IHOP's everyday value menu with increased awareness of premium offerings. Breakfast combos tied to our Bottomless Pancakes campaign performed well, alongside limited-time offerings, including this quarter's featured Spotlight Stack, New York Cheesecake Pancakes. This approach continues in Q2 with the promotion of IHOP's signature Stuffed and Stacked Omelets, including the new bold Barbecue Pulled Pork Omelet, and the launch of a new proprietary coffee blend, the first new coffee introduced at IHOP in almost 20 years. IHOP continued to see momentum in off-premise, with comp sales increasing 2.6% year over year, largely driven by incremental third-party delivery volume. Beyond driving comp sales, third-party channels enhance brand visibility and enable engagement with guests across multiple channels. Off-premise represents 22% of sales, with continued opportunity across delivery, digital ordering, and emerging areas like catering. While early, we are already seeing an approximately 16% improvement in comp sales in catering, and we have made targeted investments over the past year in digital ordering, packaging, and local store marketing to further support the catering channel. IHOP's differentiated breakfast offering translates well to group occasions, and we are seeing meaningful upside in this channel as it continues to scale. Beyond expanding how guests access the brand, we are also focused on how to connect with them. We are showing up in culturally relevant moments that have resulted in incredible buzz for IHOP, allowing us to engage with new fans and consumers. Initiatives like National Pancake Day and the Bottomless Pancake campaign with NFL star Malik Nabers have been successful in driving engagement and keeping the brand top of mind. During National Pancake Day, we saw a 316% year-over-year increase in engagement across social channels, demonstrating the effectiveness of our investments to reach a broader audience. Underpinning all of this is a relentless focus on operational excellence and the guest experience. Speed is progressively improving, with table turns approximately 6% faster than they were in Q4. Guest complaints are down year over year, reflecting strong execution and consistency across the system, while investments in our new POS and hand-helds continue to enhance order accuracy and efficiency in our restaurants. Overall, IHOP continues to deliver steady performance in a challenging environment, with April sales holding steady behind our value menu and barbell strategy with premium offerings. Turning to Fuzzy's. The momentum from our Q4 promotions carried into Q1, contributing to Fuzzy's posting positive comp sales for the first time in three years, enabling the brand to outperform its competitors in sales every month in Q1. This progress is a result of the hard work we have done to strengthen the business with a focus on improving technology, streamlining the menu, and enhancing the in-restaurant experience. We are encouraged by Fuzzy's performance this quarter and remain focused on sustaining and building on this progress. Now for dual brands. It has been one year since we opened our first domestic dual brand in Seguin, Texas, and our confidence in the platform continues to grow. Across the system, most of these restaurants are generating about 1.5 to 2.5 times the sales of the original stand-alone restaurant while maintaining a healthy check balance across both brands. The Seguin restaurant is still delivering roughly two times its pre-conversion sales levels. Today, we have 43 dual brand restaurants open, with 13 additional locations under construction, and we remain on track to have approximately 80 open domestically by year-end. Interest in our dual brands remains strong among existing and new franchisees. We now have 10 different operators that have opened a dual brand restaurant, and of these, two are new franchisees to the Dine system. The dual brand model provides a flexible path to unlock additional value across our existing footprint. It allows franchisees to reposition lower-performing restaurants, including those that may have otherwise reached the natural end of their life cycle, while also enhancing performance at higher-sales restaurants. A long-standing Applebee's franchisee opened its first dual brand in Hawthorne, New York, just a month ago. The successful conversion of a high-sales single-brand restaurant validates that the dual brand model is adaptable and scalable across a range of sales profiles. The unit was already a strong-performing restaurant, and since converting and reopening in March, it has delivered an approximately 1.8 times sales lift. During the last few months, we have learned more about these restaurants from a guest perspective. A few highlights include: guests are excited to have the option to choose between two complementary iconic brands; 62% of our dine-in tickets contain at least one item from each brand; guests who purchase from both brands are spending on average 24% more than those who purchase from just one brand, leading to an overall higher check average at the dual brand restaurants; and sales remain balanced across all dayparts, proving our thesis about the complementary nature of these brands. We also made operational improvements, including updating our online ordering flow to make the experience more seamless for guests, which has driven an increase in average off-premise check, and improving efficiencies in back-of-house operations such as kitchen design. We continue to improve our pre-opening training at restaurants and are seeing newer restaurants achieve faster table turn times. Taken together, these results reinforce our confidence in dual brands as a big idea and a compelling growth vehicle, driving strong unit economics and continued franchisee demand. Turning to our broader development initiatives. We maintained momentum this quarter in new restaurant openings, opening 24, up from 10 at this time last year. We remain on track to meet our full-year domestic development guidance. Development remains a key priority for long-term growth driven by our dual brand formats, the Applebee's Looking Good remodel program, and targeted investments in our company-owned portfolio. In addition to new unit growth, we are also seeing meaningful opportunity within our existing footprint through relocations and real estate optimization. Two recent new restaurant openings are relocations within their existing markets, and while early, in both cases sales increased over 50% compared to the prior location, highlighting both the continued relevance of the brand and the importance of site selection in unlocking incremental growth. We made progress on the Applebee's Looking Good remodel program, completing 11 remodels this quarter. This program has consistent engagement among franchisees, and early results remain encouraging with, on average, a mid-single-digit percent sales lift. We expect about a third of the system to be remodeled by year-end. At IHOP, we are beginning a three-year renovation cycle with a fresh, modern design called California Heritage. It is a light, bright, and joy-filled design that brings a warm, welcoming feel to the restaurant while staying unmistakably IHOP. Before turning the call over to Vance, I note that while we expect to see some near-term headwinds, we remain focused on executing against our priorities and positioning the business to drive sustainable long-term growth in this challenging environment. I will now turn the call over to Vance. Vance Yuwen Chang: Thanks, John. On the top line, consolidated total revenues increased 4.8% to $225.2 million in Q1 versus $214.8 million in the prior year, primarily driven by the acquisition of company-owned restaurants since 2025. Excluding advertising revenues, franchise revenues in Q1 decreased 2.1% primarily due to a decrease in proprietary product sales and performance of our international franchisees. Increases in comp sales for the quarter were offset by closures. Rental segment revenues for 2026 were consistent with the prior-year period. G&A expenses were $53.1 million in 2026, up from $51.3 million in the same period last year, due to annualization of last year's investments in training, development, and operations to support our remodeling, dual brand initiatives, and our larger company restaurant portfolio. Adjusted EBITDA for 2026 decreased to $50.8 million from $54.7 million in 2025, primarily driven by the following factors: first, IHOP's proprietary product sales decreased due to sales timing to our distribution partners; and second, we have more company restaurants and dual brand restaurant openings than last year that resulted in higher G&A and pre-opening support cost. In addition, EBITDA was impacted by restaurants taken back since the prior-year quarter, which are still in turnaround stage and not yet at steady state. I will touch further on the progress we have seen in our company restaurants, particularly around the dual brand conversions, in a moment. Adjusted diluted EPS for 2026 was $1.07 compared to adjusted EPS of $1.03 for 2025. Turning to the statement of cash flows. We had adjusted free cash flow of negative $3 million for 2026 compared to $14.6 million for the same period last year, primarily driven by higher CapEx for company restaurants and the year-over-year impact of performance plan compensation payments. CapEx through 2026 was $12.1 million compared to $3.3 million for the same period in 2025. Nearly two-thirds of the CapEx year to date is tied to remodels and dual brand conversions of company-owned restaurants. Our lower adjusted free cash flow and increased CapEx this quarter is timing, as we expect to end the year with CapEx in the range that we previously provided. We finished our first quarter with total unrestricted cash of $104.2 million compared to unrestricted cash of $108.2 million at the end of the fourth quarter last year. On buybacks and dividends, we returned $20 million of capital to shareholders in Q1, including $22 million of share repurchases, which was approximately 5% of our shares outstanding at the beginning of the year. Our total shares repurchased in Q4 and Q1 were $52 million, which is above what we had committed to on our Q3 2025 call. We continue to believe our shares are undervalued and remain committed to share repurchases. Next, Applebee's performance. Q1 same-restaurant sales increased 1.9% year over year. Domestic average weekly franchise sales per restaurant were $56,300, including approximately $13,500 from off-premise, or 23.9% of total sales, of which 11.9% is from to-go and 12.1% is from delivery. Off-premise saw a positive 3.5% lift in comp sales in 2026 compared to the same period last year. IHOP's Q1 same-restaurant sales were flat. Domestic average weekly franchise sales per restaurant were $38,300, including $8,300 from off-premise, or 21.5% of total sales, of which 7.5% is from to-go and 14% is from delivery. Turning to commodities. Applebee's commodity cost in Q1 increased by 6.3% and IHOP's commodity cost increased by 3% versus the prior year. Our supply chain co-op, CSCS, continues to expect commodity costs in 2026 at mid-single digits for Applebee's and low-single digits for IHOP. The primary driver for both brands' commodity costs is higher beef prices, including the lapping of favorable beef contracts at Applebee's. In 2026, we implemented projects resulting in over $4 million of annualized savings across both systems, and we continue to partner with CSCS to leverage our scale. Lastly, our company-owned portfolio remains instrumental in strengthening brand performance and supporting the overall health of our system, and our goal is to ultimately refranchise the locations at the right time. At the end of Q1, we operated 86 company-owned restaurants totaling about 2% of our system, which is in line with our asset-light model. This includes 12 Applebee's restaurants that we opportunistically took back in February in the Virginia area, with the potential to complete approximately five dual brand conversions out of this portfolio. As has been reported, one of our franchisees, Neighborhood Restaurant Partners, filed for bankruptcy protection. As part of its proposed plan, they are selling approximately 53 restaurants. Dine is stepping in as a stalking horse bidder because we believe that securing these restaurants gives us direct operational insight and allows us to invest in the units through our development initiatives. Although closures for construction impacted profit in our company-owned portfolio, we are making progress. Q1 comp sales outperformed the system with close to a mid-single-digit comp sales improvement year over year. During the quarter, we completed six remodels and two dual brand conversions, bringing our total to 20 remodels and four dual brand conversions since taking back these restaurants. By the end of 2026, we expect to have completed or be under construction on over 30 remodels and eight-plus dual brands. While early, at our four company dual brand restaurants we are seeing sales lifts of approximately 2.5 times, which further supports our confidence in our dual brand strategy. We are maintaining our full-year financial guidance at this time. With that, I will hand it back over to John. Thank you. John W. Peyton: To wrap up, we are pleased with the start to the year and are confident that our strategy will enable us to navigate near-term headwinds. We remain focused on disciplined execution, supporting our franchisees, and investing in initiatives that position us for sustainable long-term growth. Thank you for your time today. We look forward to your questions. Operator, I will turn it back to you for instructions on how to access our queue. Operator: Certainly. We will now open the call for questions. In the interest of time, we ask that you please limit yourself to one question and one follow-up. You may get back in the queue as time allows. Our first question for today comes from the line of Jeffrey Bernstein from Barclays. Your question, please. Jeffrey Bernstein: Great. Thank you very much. My first question is on the comp trends more recently. John, I think you mentioned that the Applebee's comp slowed and you referenced tougher compares. How do you think about that on more of a relevant two-year basis, and what is the underlying trend? You talked about lower income being a focus for your brands and perhaps more vulnerable. Could you discuss that, and whether the spike in gas prices had an outsized hit versus what you have seen in the past? And then I have a follow-up. John W. Peyton: Good morning, Jeff. That is exactly the answer. Our value-conscious, price-sensitive guests are very sensitive to increases in gas prices, the basics, and the cost of living. There is a lot of statistical data broadly and within our company that demonstrates that, and that is what we think we saw happening in April. We are encouraged by recent news where it seems to be lessening a little bit. More broadly, that reinforces our strategy around making sure that we have the right value message at Applebee's for those guests that are price sensitive. We continue to lean into the 2 for $25 message, strengthened by new and exciting news. Last quarter it was OM Cheeseburger, and we will have something new this quarter as well. Jeffrey Bernstein: Got it. And my follow-up is on the asset base. On the dual brands, I think you confirmed 80 in the U.S. by year-end. Where do you think that could go over time? You are picking some markets where you think it will work best, but clearly there is a very strong sales lift you are seeing. Where could the dual brand mix go over time, and more broadly, how has franchisee engagement been of late? Are they more open to the idea, relative to just opening more Applebee's on their own, or opening more of the dual brands in future years? John W. Peyton: We have modeled the opportunities across the country, looking at market size, demographics, competition, and daypart traffic. We have identified 900 opportunities in the U.S. to open a dual brand restaurant or convert an existing restaurant to a dual that would have minimal to no impact on an existing restaurant. Of those 900, 450 would be new builds, and 450 would be adding a second brand to an existing restaurant. We think that is achievable over the next eight to ten years. Franchisee enthusiasm is growing. Our pipeline is strengthening. We are very confident in the approximately 80 we have discussed for this year, and we are building a pipeline into 2027 and beyond. That pipeline includes franchisees that will be new to the dual brand system, and it is becoming equally balanced between existing Applebee's and existing IHOP franchisees. Operator: Thank you very much. Our next question comes from the line of Nerses Setyan from Mizuho. Your question, please. Nerses Setyan: Thank you. On guidance, specifically the EBITDA guidance, can you update us on approximately how much investment in company-owned stores is embedded in that guidance? Vance Yuwen Chang: Hey, Nick. Good morning. We are keeping guidance, and Q1 EBITDA was a little softer, but we are maintaining guidance for two reasons. We have the franchise business and the company restaurants. Overall, the franchise business is steady. Though it is a complicated operating environment, we believe our formula of value, targeted marketing, and operational execution will improve sales trends in the coming quarter. Company restaurants will continue to improve. It is not going to be a straight line, but we have more work to do in terms of construction and store execution. This short-term EBITDA pressure should moderate over time as we start to leverage the investments we have made. In Q1, we had more than 75 closure days due to remodels and program conversions. This is not going to happen for the rest of the year, so we will have fewer closure days. That is what is baked into our guidance. Nerses Setyan: In terms of alcohol licenses, is that behind us, or is that still an ongoing headwind? Vance Yuwen Chang: That is mostly behind us at this point, so it is a tailwind for us. Nerses Setyan: On the company-owned mix going up, you talked about the potential acquisition post the bankruptcy. Are you comfortable with the mix now, or could it continue to go up through the rest of the year and potentially into 2027? John W. Peyton: We are more amenable today than we were in years past to taking back restaurants or a portfolio of restaurants to strengthen them, strengthen the system, prevent closures, and then refranchise them, typically about three years after we acquire them. We will continue to do that when it is the right portfolio, right for the brand, and we can use those restaurants to advance our initiatives like proving out the remodel, converting to duals, and testing programs and technology. While our goal is not to get to 5% of the portfolio company-owned, I am comfortable getting to 5% and still being asset light. That is the threshold you should think about for where I am comfortable going, but it is not the goal to get there. Operator: Thank you. As a reminder, ladies and gentlemen, if you do have a question at this time, please press 11 on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press 11 again. Once again, we ask that you limit yourself to one question and one follow-up. Our next question comes from the line of Dennis Geiger from UBS. Your question, please. Dennis Geiger: Great. Thanks. I wanted to come back to the focus on quality and price points, value in particular. You spoke to having the right value message at Applebee's, the 2 for $25, and something new coming this quarter as well. Where was the value mix for both brands in the quarter, and on the go-forward, is it 2 for $25 plus something new as the playbook for the balance of the year, or do you think you have to do more given current consumer pressures? John W. Peyton: Good morning, Dennis. I will start with Applebee's, then Lawrence will address IHOP. For the quarter, about 26% of our tickets had value items on them, which would be either 2 for $25 or an LTO. That number is down from about a third, which is what it has been for many quarters. The reason is we had the Ultimate Trio as a national promotion in Q1, and we moved it out of the national price point to being priced individually by franchisees, so technically we do not count it. In terms of the trend, including Ultimate Trio sales, we are still running at about a third of our tickets including some sort of value item. That has been consistent for five to seven quarters. 2 for $25 is our primary value communication—two entrées and an appetizer for $25, or $12.50 per person. We keep it fresh with consistent messaging throughout the year and by introducing a new item to it. In addition, we will have value-driven LTOs designed to drive traffic. One other point: almost 62% of the items on 2 for $25 are the upsell tiers, not the entry level $25. Guests are paying increments that franchisees set based on their market. It is doing what it is supposed to do: driving traffic with the $25 message and upselling about two-thirds of the time. Lawrence, can you address IHOP? Lawrence Y. Kim: At IHOP, value mix in Q1 was 22%, slightly higher than Q4 at around 20%, and fairly consistent overall. The uptick in Q1 was primarily due to our Bottomless Pancakes promotion. Our value mix consists of the $6 Everyday Value Menu in addition to promotions like Bottomless Pancakes, our free pancake promotion on National Pancake Day, and our Senior Menu. Going forward, we are staying consistent with the $6 value message; it resonates extremely well. Since launching the weekday $6 value message in October 2024 and evolving it into the $6 Everyday Value Menu in September 2025—and further in March by adding a new BLT to expand daypart propositions—we have outperformed Black Box in traffic every month in 2025 and continue to do so into 2026. We will continue that momentum and balance value with innovation as part of our barbell strategy, including Stuffed and Stacked Omelets and our new coffee introduction, with more to come. Dennis Geiger: As a quick follow-up on check management, beyond value mix, what are you observing around appetizers, beverages, desserts, and other categories over the last couple of months? Lawrence Y. Kim: In 2025, we were laser-focused on driving value to build equity in the value landscape, which supported consistent traffic outperformance. In 2026, we are complementing value with innovation under the barbell strategy. You will see a cadence of both value and innovation through summer, fall, and winter to create awareness and balance across platforms. John W. Peyton: At Applebee's, average check remained about $39, including a slight menu price increase franchisees put in place in Q1. We did see some migration toward lower-priced items at the expense of a drink or an appetizer, but we maintained the average check at $39. Operator: Thank you. Our next question comes from the line of Brian Mullan from Piper Sandler. Analyst: Hi. This is Allison Marsh on for Brian Mullan. Thanks for taking the question. At IHOP, on the California Heritage remodel, can you talk more about what we should expect to see with the remodel—the cadence, how many units are eligible, and how you expect it to roll out? John W. Peyton: Thanks, Allison. Lawrence will take that. Lawrence Y. Kim: The California Heritage redesign is a bright, modern design that is distinctively IHOP, based on a platform we have seen across international and our dual brands. We are very early in the process and are working with our franchisee partners on the incentive program, similar to Applebee's. We will have more to share over the next several quarters. We are excited as some remodels are starting now, but again, we are early in the stage. John W. Peyton: I would add two things. First, on our IR site we have a dual brand video; the IHOP interior featured there is the California Heritage design, which gives a sense of its fresh, modern look. Second, the Applebee's Looking Good remodel program continues into year two. Franchisees are enthusiastically participating, and we expect about 40% of the portfolio to be considered current by the end of this year. Operator: Thank you. Our next question comes from the line of Todd Brooks from Benchmark. Your question, please. Todd Morrison Brooks: Thanks for taking my questions. John, to start, you talked about the stalking horse situation with the franchisee for the 50-plus units. Looking at the base, what is your assessment of franchisee health as we get into a tougher consumer environment? Would you expect more growth in the corporate-owned base—not necessarily up to the 5% cap you mentioned—but with the environment, to keep stores in operation? At this point, beyond willingness to invest and convert to dual, is there still a lot to learn from running stores? John W. Peyton: A couple of thoughts, Todd. The NRP situation is specific to that owner and decisions within their fund about financing. The restaurants we are potentially taking back via the stalking horse bid are a healthy portfolio, so they will be accretive. I do not think it is appropriate to project the NRP situation onto the broader portfolio. As to learning, I disagree that there is little left to learn. It has been a while since we owned restaurants, and having about 100 gives us the ability to test new POS technology, roll menu innovation faster, run tests in-market, and implement guest service and training programs. That is valuable, in addition to renovating and converting to duals. We are seeing progress in restaurants we own—trending positively, particularly on EBITDA and profit—and believe they will be accretive when we refranchise them in three years. I am all in on that. Vance Yuwen Chang: Hey, Todd. On franchisee health, these are franchisee self-reported financials that we collect a quarter in arrears. Based on what we are seeing, on average margins are steady, supported by steady sales performance and cost management initiatives that CSCS and franchisees are doing together. Franchisees are aligned with our strategy and remain committed to growing with us. We are proactively making workout programs to accelerate incentives, remodels, relocations, and unlock dual brand territories. Ultimately, as we have said, dual brands can provide a step-function change to franchisee unit economics outside of normal comp growth. We are enthusiastic about pushing that agenda, and franchisees are as well. Todd Morrison Brooks: As a follow-up on duals, you mentioned a 1.5 to 2.5 times sales lift versus individual branded locations, with strong lift in Hawthorne. What type of lift do you need for a conversion to pencil? Does 1.5 times get the return you or franchisees look for, or do you need closer to 2 times? Vance Yuwen Chang: The flow-through on incremental sales from a dual conversion is much higher than the traditional four-wall margin because you are generally not paying more rent and labor does not increase proportionally. That flow-through should be north of 30%. Using simple math, if a $2 million restaurant adds another $1 million in sales, that is about $300,000 of flow-through to the franchisee's bottom line. The cost of conversion is a little over $1 million, depending on deferred maintenance or structural work that is site-specific. On $1 million of cost with $300,000 of flow-through, that is a very attractive payback for franchisees and for company restaurants. Operator: Thank you. Our next question comes from the line of Brian Vaccaro from Raymond James. Your question, please. Brian Vaccaro: Hi. Thanks, good morning. Could you double-click on underlying consumer dynamics? You noted softness within lower income. Anything worth noting by daypart or weekday versus weekend for either brand? And could you comment on the average check and traffic trends within the comps in Q1 for each brand? John W. Peyton: When it comes to income cohorts, the primary change we have seen this quarter and in recent quarters is that our price-sensitive, more value-oriented guests seem to be staying home a bit more or looking for lower-cost alternatives. Among other cohorts, we did not see significant changes in behavior worth noting. Looking at dayparts, weekdays, and geography, there is no clear pattern—largely consistent with recent quarters. The consumer behavior issue is concentrated among guests most impacted by gas prices and the economy in general. On average check and traffic, Vance can add detail. Vance Yuwen Chang: Brian, average check for Applebee's was about $39; for IHOP, about $35. Menu pricing for Q1 was approximately 4% for Applebee's and 3% for IHOP. Applebee's saw positive PMIX this quarter; IHOP was negative PMIX. Both brands saw negative traffic, but IHOP outperformed Black Box every month for the quarter. Brian Vaccaro: Thank you. Lastly, on closures, it seemed to step up in Q1—I think 20 at IHOP and 32 at Applebee's—but you maintained net development targets for the year. Could you help square that? Vance Yuwen Chang: Typically, closures run about 1% to 2% of the system. In the last year and this year, it is slightly elevated because more franchise agreements are coming due than in normal years. Also, we are proactively making workout programs with franchisees to accelerate relocations and unlock dual brand territory, which is reflected in closure numbers. We are maintaining net development because we have a strong pipeline of dual brands and stand-alone IHOPs opening, and that is baked into guidance. Also, closures tend to be lower-sales restaurants, and openings are larger-sales restaurants, so it is not one-to-one in unit count—there is accretion as we relocate and build new restaurants while closing older, lower-volume units. Operator: Thank you. This does conclude the question-and-answer session of today's program. I would like to hand the program back to John W. Peyton, Dine Brands Global, Inc. CEO, for any further remarks. John W. Peyton: Thank you for guiding us today. Your expertise is valued as always. Thanks, everybody, for your questions and the time you spent with us. As we said in our release and on this call, we are pleased with the brands' performance during the quarter despite a tough environment. We have plans in place to continue to appeal to our guests, particularly those who are increasingly value oriented over the next quarter, and you will see some new news in the next couple of weeks that we think will drive a lot of traffic to both brands. Thanks, everybody, and have a great day. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Greetings, and welcome to The ONE Group Hospitality, Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please signal an operator. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Nicole Thaung. Please go ahead. Nicole Thaung: Thank you, operator, and hello, everyone. Before we begin our formal remarks, let me remind you that part of our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Please also note that these forward-looking statements reflect our opinion only as of the date of this call. We undertake no obligation to revise or publicly release any revisions of these forward-looking statements considering new information or future events. We refer you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. However, the presentation of these measures or other information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliations of these measures, such as adjusted EBITDA, restaurant operating profit, comparable sales, annual adjusted operating income, and total food and beverage sales at company-owned, managed, licensed, and franchised units to GAAP measures, along with a discussion of why we consider these measures useful, please see our earnings release issued today. With that, I would like to turn the call over to Emanuel Hilario. Emanuel Hilario: Thank you, Nicole, and good afternoon, everyone. I appreciate you joining us today. I want to start where I always do by thanking our teammates. Every day, our teams across every brand and market show up focused on creating memorable experiences for our guests. These days, consistency is more important than ever and I appreciate all that they do in executing with excellence and upholding the Vibe Dining experience that defines our brands. Today, I will begin with an overview of our first quarter performance, and then I will walk you through our progress with respect to our strategic priorities before turning it over to Nicole for the financial details. We are excited about our continued momentum. Our operational performance is resulting in strong financial results. Total GAAP revenues grew year over year and comparable sales are sequentially better than the previous quarter. Owned restaurant cost of sales improved to 19.4% from 20.8% in the prior-year quarter. Operating income increased 30%, adjusted EBITDA increased 12.1%, and capital expenditures, net of tenant improvement allowances, reduced 23% year over year as we prioritize capital efficient growth and free cash flow generation. Total GAAP revenues for the first quarter were $[inaudible], an increase from $211 million in the same quarter last year. First quarter consolidated comparable sales were relatively flat at negative 0.3%, representing a continuation of the positive momentum we experienced exiting the fourth quarter. For clarity, consolidated comparable sales are reported on the same number of days year over year. Looking at each brand, U.S. STK total comparable sales reported another positive quarter at 1.4%. Benihana comparable sales were flat, reflecting stable demand for the brand, and our growth concept comparable sales, while down 4.9%, represented the strongest quarterly performance since early 2023, and growth transactions were positive for the quarter. Each segment continues to improve from the previous quarter. What is most notable, particularly in a period of elevated inflation, is the strength of our margin performance, a direct result of the hard work we have been doing across our supply chain, including, most importantly, beef sourcing. Restaurant operating profit increased 11% to $40 million, while restaurant operating profit margins expanded 100 basis points to 19%. The margin improvement was driven by a 140 basis point reduction in food and beverage costs, reflecting menu optimization, integration synergies, and supply chain efficiencies. We also achieved a 40 basis point improvement in restaurant operating expenses as a percentage of restaurant revenues. STK delivered particularly strong results with restaurant operating profit margins expanding 280 basis points to 21%, while Benihana margins improved 130 basis points to 21%. Adjusted EBITDA grew 12% to $29 million. The improvement was driven by cost management discipline, our contracted beef pricing, continued Benihana integration synergies, and the benefit of portfolio optimization actions. The key point I want to make is that these results are execution driven. We are not dependent on macroeconomic recovery or shifts in consumer sentiment, but would certainly welcome them. Over the past eighteen months, we have implemented a series of strategic initiatives—operational improvements at Benihana, the barbell strategy at STK, portfolio optimization across the growth concepts, and rigorous cost management. It is those initiatives that are driving our performance. Now, let me update you on our four strategic priorities. Priority one, accelerating comparable sales through execution. Our first strategic priority is accelerating comparable sales through disciplined execution. I want to highlight that Valentine’s Day 2026 was a record-breaking day for our portfolio. Easter was also strong across our brands, with sales up high single digits compared to last year. These results are a testament to both the operational capabilities we have built and the strength of our brands as a celebration destination. As we look ahead, we are gearing up for what we expect to be a strong Mother’s Day and graduation season. Both occasions are critically important to us and our teams are focused on delivering exceptional guest experiences during these high-volume periods. Through the first five weeks of the second quarter, the company has positive comparable sales and transactions. Momentum has continued through all of our brands with STK and Benihana so far delivering positive comparable sales, and the growth concepts sequentially improving. We have made operational improvements to position the brands for a strong spring and summer and are seeing encouraging trends as happy hour has been a real driver and is working well, while lunch traffic is also returning. Our Friends with Benefits loyalty program continues to gain momentum. Since launching last year, we added over 8,000 new organic members into the program per week. Newly enrolled guests continue to show strong repeat participation and we are seeing loyalty members spend more per visit compared to non-loyalty guests. We will be actively targeting our Friends with Benefits members for Mother’s Day and graduation celebrations, leveraging personalized outreach to drive traffic during these occasions. We continue to focus on growing membership, driving organic sign-ups, and increasing engagement within the program to strengthen brand connection and repeat visits. We are driving growth through seasonal innovation, launching new food and beverage menus four times a year across all brands. This keeps our offerings fresh, differentiates us from competitors, and generates strong engagement on social media. We are expanding our off-premises business with a focus on core operations. Highlights include burgers and sides, which continue to drive strong takeout and delivery volume across all brands, and Benihana and RA Sushi’s fried rice burritos for takeout and delivery, which have performed well. Priority two, capital efficient growth with disciplined expansion. We currently have two company-owned STK restaurants and one company-owned Benihana restaurant under construction: an STK in Phoenix, Arizona, a relocation of STK Downtown in New York City, and a Benihana in Seattle, Washington. We intend to open six to ten new venues in 2026 as we prioritize locations requiring $1.5 million or less in net capital investment to open. Capital expenditures, net of TI allowances, were 22% lower at $10 million in the first quarter compared to the year-ago period. Of this amount, $6.5 million was related to new construction with the remainder supporting existing restaurants. This reduction reflects our disciplined approach to capital allocation as we focus on high-return, capital efficient growth. On the franchise side, our 10-unit California Benihana and Benihana Express development agreement continues to progress, and our commitment for a franchised Benihana and a licensed Benihana Express in the Fort Keys remains on track. The Benihana Express format continues to generate strong franchise interest as it delivers the Benihana food experience without the teppanyaki tables, making it more labor efficient and more appealing from a cost-of-entry perspective for potential franchisees. In January, we completed the relocation of our Kona Grill in San Antonio, Texas to a smaller footprint location. And in February, we converted a franchised Benihana in Monterey, California to a company-owned restaurant to accommodate a long-term franchise partner who wished to retire. Both are tracking in line with our expectations. Priority three, portfolio optimization to improve returns. We have made significant progress improving the quality and returns of our portfolio. As we discussed last quarter, we are converting growth locations to higher-performing STKs and Benihanas. In 2025, we exited six RA Sushi and Kona Grill locations. And in January 2026, we exited one additional RA Sushi location that did not fit our conversion criteria. The remaining growth locations are healthy, profitable restaurants in quality real estate and we expect them to generate approximately $10 million in restaurant-level EBITDA and over $100 million in revenue. Five growth locations closed on 01/05/2026 for conversion to either Benihana or STK, with construction in progress and all five expected to reopen by the end of 2026. Each conversion is expected to cost between $1 million and $1.5 million and to be EBITDA accretive. As a reminder, our first conversion, the RA Sushi to STK in Scottsdale, Arizona, is currently operating at a run rate of approximately $7 million in annual sales, delivering an increase of over $4 million in sales and a return on investment of approximately four times. This validates our conversion strategy and gives us confidence in the pipeline. As we have said before, we will continue to evaluate the portfolio as leases expire. We have approximately one to two growth leases that come up each year as part of the natural end-of-cycle process, and we will make decisions on a case-by-case basis. Priority four, maintaining balance sheet strength and flexibility. Our fourth priority for 2026 is conserving cash and optimizing the balance sheet. We are significantly reducing discretionary capital expenditures, targeting company-owned development to projects requiring on average $1.5 million or less in build-out costs. We are also working through our existing lease pipeline rather than adding new commitments. This discipline gives us flexibility in an uncertain environment and positions us to invest selectively in the highest-return opportunities. We finished the quarter with $6.6 million in cash, cash equivalents and restricted cash. We have $33.7 million available under our revolving credit facility. Under current conditions, our term loan does not have a financial covenant. Cash flow from operations was a strong $22 million compared to $9 million in the prior-year quarter. This improvement was primarily attributable to increased net income and collections on holiday credit card receivables. We also reduced our debt with $2 million in repayments under the credit agreement and $7 million in repayments on the revolving facility, bringing our revolving facility balance to zero. As we discussed on our previous call, we expect to generate free cash flow in 2026. Debt reduction and creating shareholder value remain a top priority. Before I turn it over to Nicole for the financial details, I want to reiterate the items that I have outlined today are fundamentally execution driven and within our direct control. We are focused on strategic initiatives that position us to deliver results regardless of broader economic trends. With that, I will turn the call over to Nicole. Nicole Thaung: Thank you, Manny. As a reminder, beginning this year, we are reporting financial information on a quarterly basis using four thirteen-week quarters, with the addition of a fifty-third week when necessary. For 2026, our fiscal calendar began on 12/29/2025, and our first quarter contained 91 days. Consolidated comparable sales are reported on the same number of days year over year. Let me start by discussing our first quarter financials in greater detail, before introducing our outlook for 2026 and reiterating our fiscal 2026 guidance with the exception of an update to our expected effective tax rate. Total consolidated GAAP revenues were $212.8 million, increasing 0.8% from $211.1 million for the same quarter last year. Growth was driven by two primary factors: the fiscal calendar shift that moved New Year’s Eve into fiscal 2026, which added approximately $8.3 million to our top line, as well as contributions from new openings and conversions completed in the second half of 2025. These gains were partially offset by the closure of underperforming growth locations as part of our portfolio optimization strategy, which reduced revenues by approximately $1.8 million. Included in total revenues were our company-owned restaurants’ net revenues of $209.3 million, which increased 0.9% from $207.4 million for the prior-year quarter. The increase was primarily due to the change in the fiscal year calendar, which resulted in a shift of New Year’s Eve into fiscal year 2026 and the sales generated by eight new restaurants. These gains were partially offset by a decrease in revenue from the growth restaurants closed and a 0.3% decrease in comparable restaurant sales. Management, license, franchise and incentive fee revenues decreased slightly to $3.5 million from $3.7 million in the prior-year quarter. The decrease is primarily attributable to the exit of a management agreement in Scottsdale, Arizona, in 2025. As Manny noted, we converted a former RA Sushi to a company-owned STK in that market. Now turning to expenses. We continue to implement targeted cost management initiatives. Last year, we made strategic adjustments to our beef tenderloin sourcing and have contracted pricing through September 2026, eliminating our exposure to significant U.S. base price fluctuations and providing significant cost certainty. We also optimized our labor structure across the business last year by improving scheduling management, and we are still realizing synergies from the Benihana acquisition. Company-owned restaurant cost of sales as a percentage of company-owned restaurant net revenue improved 140 basis points to 19.4% from 20.8%. This improvement was primarily due to menu optimization, integration synergies, supply chain initiatives, increased menu pricing, and more efficient cost of sales associated with New Year’s Eve and our record-breaking Valentine’s Day. Company-owned restaurant operating expenses as a percentage of company-owned restaurant net revenue improved 40 basis points to 61.7% from 62.1%. This reflects improvement in labor costs. Restaurant operating profit, excluding growth concepts restaurants closed, was $39.9 million, or 19.1% of owned restaurant net revenue, improving by 100 basis points from 18.1% in the prior-year quarter. On a total reported basis, general and administrative costs increased $1.9 million to $15 million from $13.1 million in the prior-year quarter, driven by inflation on salaries and bonus, higher audit-related fees, investments in information technology, specifically AI-related technologies, and increased marketing expenses. When adjusting for stock-based compensation of $1.1 million, adjusted general and administrative expenses were $13.9 million compared to $11.5 million in 2025. As a percentage of revenues, adjusting for stock-based compensation, adjusted general and administrative costs were 6.0% compared to 5.4% in the prior year. Depreciation and amortization expense was $10.4 million compared to $9.8 million in the prior-year quarter. The increase is attributed to new restaurants opened during fiscal year 2025. Lease termination and restaurant closure expenses were $2 million for this quarter, primarily as a result of the growth portfolio optimization, which included $0.5 million in non-cash expenses related to closed restaurants. Preopening expenses were approximately $1.5 million, primarily related to preopening rent for restaurants under development, including $0.5 million in non-cash rent and payroll costs for Kona Grill Landmark, opened in January 2026. Preopening expenses decreased by $0.2 million compared to the prior-year period. Transition and integration were $0.5 million, down significantly from $3.7 million in the prior-year quarter, as we are nearing completion of the integration of the Benihana and RA Sushi acquisition. Operating income was $13.9 million compared to operating income of $10.7 million in 2025, an increase of $3.2 million primarily due to improved restaurant operating profit and the reduction in transition and integration costs. For a reconciliation, please refer to our press release issued earlier today. Interest expense was $9.7 million compared to $9.8 million in the prior-year quarter. Our weighted average interest rate was 10.2% compared to 10.9% in the prior-year quarter. Provision for income taxes was $1.2 million compared to $0.3 million in the prior-year quarter, as a result of an increase in pre-tax book income. Net income attributable to The ONE Group Hospitality, Inc. was $3.2 million compared to net income of $1 million in 2025. Net loss available to common stockholders was $6.2 million, or $0.20 net loss per share, compared to $6 million in 2025, or $0.21 net loss per share. Adjusted EBITDA attributable to The ONE Group Hospitality, Inc. was $28.8 million compared to $25.7 million in the prior-year quarter, an increase of 12.1%. We finished the quarter with $6.6 million in cash and cash equivalents and restricted cash and cash equivalents. We have $33.7 million available under our revolving credit facility, subject to certain conditions. And as Manny said, as of quarter end, we had no borrowings outstanding on our revolving facility, nor does our term loan currently require a financial covenant. Now I would like to provide some forward-looking commentary regarding our business. This commentary is subject to risks and uncertainties associated with forward-looking statements as discussed in our SEC filings. We remind our investors that the actual number and timing of new restaurants for any given period is subject to factors outside of the company's control, including macroeconomic conditions, weather, and factors under the control of landlords, contractors, licensees, and regulatory and licensing authorities. Based on the information available now and the expectations as of today, we are issuing the following financial targets for 2026. Beginning with the top line, we project total GAAP revenues of between $[inaudible] and $[inaudible], which reflects our anticipation of consolidated comparable sales of 1% to 2%. Management, license, franchise and incentive fee revenue are expected to be approximately $3 million to $4 million. Total company-owned operating expenses as a percentage of company-owned restaurant net revenue between 81%–82%. Total G&A, excluding stock-based compensation, between $13 million and $14 million. Adjusted EBITDA of between $24 million and $26 million. And finally, restaurant preopening expenses of between $1 million and $2 million. Based on the information available to us now and our expectations as of today, we are reiterating the following financial targets for fiscal year 2026, with the exception of increasing the range of the effective tax rate. We project total GAAP revenues of between $840 million and $850 million, which reflects our anticipation of consolidated comparable sales of 1% to 3%. Management, license, franchise and incentive fee revenues are expected to be between $14 million and $15 million. Total company-owned operating expenses as a percentage of company-owned net revenue of approximately 82% to 83%. Total G&A, excluding stock-based compensation, of approximately $53 million. Adjusted EBITDA of between $100 million and $110 million. Restaurant preopening expense of between $5 million and $6 million. An effective income tax rate of approximately 10% to 20%. Total capital expenditures, net of allowances received from landlords, of between $38 million and $42 million. And finally, we plan to open six to ten new venues. With that, I will now turn the call back to Manny. Emanuel Hilario: Thank you, Nicole. Before we open up for questions, I want to emphasize how excited we are about our business. Although the current environment remains challenging, our future looks bright. With our proven ability to execute, strengthened portfolio and expanded franchise capabilities, we are well positioned to capture significant opportunities ahead of us. We thank you for your continued support and look forward to sharing our progress in the quarters ahead. And as always, a special thanks to all teammates all over the globe that live our mission every day—creating great guest memories by operating the best restaurants in every market by delivering exceptional and unforgettable guest experiences to every guest every time. Nicole and I look forward to your questions. Operator, Operator: Thank you. We will now open the call for questions. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star and then one. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. The first question we have is from Joe Gomez of Noble Capital Markets. Please go ahead. Joseph Gomes: Good afternoon, Manny and Nicole. Thank you for taking my questions. I just want to start. You know, the revenues were a little below what the guide was for the first quarter, and the comps were a little off from where the guide was. Maybe give us a little more color there, Manny, on what transpired during the quarter to cause that slight miss? Emanuel Hilario: Hi, Joe. Hey, Joe. Yeah. I mean, I think the only thing that was less than we expected in the quarter was the volume at our STKs in malls. Really the first year where we have had two restaurants fully operating in the first quarter in the mall. I think that the first quarter is a little different from the other quarters for those restaurants. So I would say just the seasonality of our mall STKs was a little bit different than what we expected. But other than that, I think that the quarter was solid. I think the only other noise in the quarter was just spring break this year seemed to have a lot of different changes in terms of how people took their holidays, and then I think just Easter being much earlier, it is just a little bit of a different cadence of sales in the year. But overall, I thought the business was very strong in all our brands. Joseph Gomes: I think also last quarter, you talked about the conversions—you were hoping to have them all done by mid-July, and now it sounds like at the end of the year. Anything there? Is it just extended construction cycles or just being a little more conservative in the conversion opportunity? Emanuel Hilario: No. I just think it is the pacing and resources to reopen them properly. I mean, they are reloads and, if you will, conversion sites, but you still have to go through the full training cycle. So I think the timing of all these restaurants is really based on how we feel about the right pace of opening the units without being negatively impactful to operations. It is really just timing, pace, making sure that you are moving your opening teams to the right places at the right time. So it is just an internal judgment relative to when we want to open the restaurants. Joseph Gomes: Okay, great. And then last one for me, I will jump back in queue. Anything new on the franchising front or some more of the nontraditional venues? You had some success that you reported in the past couple of quarters, but just wondering if there is new in the pipeline there. Emanuel Hilario: Yeah. I think franchising—still lots of interest. We are actively talking to people all the time. We have amped up our resources behind getting new deals. So I think that it is progressing really well, and interest is very high. I am very pleased with the progress, and I feel very positive about the outlook relative to franchising, particularly for Benihana. Joseph Gomes: Great. Thank you. I will get back in queue. Emanuel Hilario: Thank you, sir. Operator: The next question we have is from Anthony Lebiedzinski of Sidoti & Co. Please go ahead. Anthony Lebiedzinski: Good afternoon, everyone, and thank you for taking the question. So Manny, just wondering if you guys saw any notable regional differences in terms of your same-store sales performance in the quarter? Emanuel Hilario: Yeah. I mean, I think for us, if there was one market that stood out a little bit differently, it was Texas. We did see a little bit of different trends in Texas. But other than that, everything was relatively very similar. So that is probably the only market, and if I had to drill down a little bit more, I think Dallas per se was one of the markets where we saw a little bit more softness in the business. But other than that, as our results show, coming into the second quarter, we have a lot of momentum and sales are positive for the company in sales and transactions. So in this environment, I believe that to be a really strong testament to the initiatives and all the activities that we are doing in building traffic and sales. Anthony Lebiedzinski: Mhmm. So as it relates to Texas, was there any change in the competitive landscape, or was it something else that drove some of the softness there, you think? Emanuel Hilario: I think in Dallas specifically, it is just a very competitive market, and there is always a lot of competition coming into that market. So at least from our perspective in that market, there are a lot of people playing in that market. It is an attractive market, it is a large market, and everybody wants to have a restaurant in Dallas. So I think it is just a matter of what competitors are doing in the marketplace. Anthony Lebiedzinski: Mhmm. Understood. Okay. And then in terms of the commentary about the second quarter same-store sales, which are tracking positive, can you give us a sense as to traffic versus ticket? What is the kind of breakdown approximately? Emanuel Hilario: We are up in traffic. So it is a good lead-in, and I think that to me, that is the most important part of that mix of sales—that our initiatives, particularly around value and our continuous messaging around happy hour and some of the great price points we have at lunch and at dinner, are starting to really resonate, and our marketing is starting to really make lots of progress in communicating those value points. So I feel very good about that. And then Benihana, we also launched our power lunch offering, which is a starting at $15.95 forty-five-minute guarantee. Lunch is starting to also gain traction. So I feel really good about all the initiatives, and we are starting to see progress made on building traffic. Anthony Lebiedzinski: Got it. Okay. And the last question for me. Nicole, you mentioned that there were some Benihana cost synergies realized in the quarter. Can you expand on that? And are there any other synergies that you think may be realized this year as it relates to the Benihana acquisition? Nicole Thaung: Yeah. I think one of the biggest synergies we are still realizing is beef contracts—you know, combining the different brands that are both very heavily reliant on beef products. We are able to secure a pretty decent contract. So that is something that we will continue to see through the coming months. We are also seeing some of our other contracts that we placed over the last year or so in terms of linens and other operating supplies that we are still realizing synergies on as well. Anthony Lebiedzinski: Got it. Okay. Well, thank you very much, and best of luck. Emanuel Hilario: Thank you, sir. Thank you. Operator: The next question we have is from Mark Smith of Lake Street Capital. Please go ahead. Analyst: Hi, guys. You have got Alex Turnick on the line for Mark Smith today. Thanks for taking my questions. Just, you know, first one for me. Looking at capital allocation priorities, you made good progress on the balance sheet—with the revolver now paid down to zero, free cash flow generation improving. As leverage comes down further, how are you guys thinking about balancing debt reduction, conversion investments, and potentially becoming more active on share repurchases? Emanuel Hilario: I think as you saw in the quarter, our focus has been that, because we did pay the revolver as well as term loan, and so that will continue to be a priority—to really focus on debt and really balancing that with a growth portfolio of restaurants that is really cost effective. So that is really, in the short term, our primary objective. Of course, capital allocation and shareholder value creation is always a priority of our board. So we always are actively looking at anything and everything that makes sense in terms of creating value for the shareholders. Analyst: Okay. And last one for me, just switching over to the restaurants. Benihana Express seems to be getting a lot of traction from a franchise interest standpoint. Maybe just talk about how you view that long-term opportunity for that format relative to the traditional Benihana concept, and what you think franchisees are finding most attractive about the model today? Emanuel Hilario: Yeah. Good question. The franchise interest is around the product itself—the fact that we have fantastic fried rice products and protein offerings going with it. So there is excitement about the product offering. There is also excitement about the price point positioning of that product, because it being a Benihana product, it is a premium in market. They do like that. Then of course, franchising economics are paramount. Within the Benihana Express, we get the best of Benihana in great COGS, and then we also get a very beneficial labor equation, meaning that we do not have to service at the table, at the teppanyaki table. So there is a relatively predictable and strong labor on that. And then, obviously, the fact that these footprints are small—occupancy is also very effective. And the smaller footprint allows for a lot more flexibility in terms of what real estate is available for that brand. And the cost of development is also very affordable relative to building other full-size stores. So once you add all those up, the franchisees are very interested in pursuing that. Analyst: That is very helpful. Thank you for taking my questions. Emanuel Hilario: Thank you. Operator: The next question we have is from James Sanderson of Northcoast Research. Please go ahead. James Sanderson: Hey, thanks for the questions. I wanted to go back to your update on same-store sales and traffic and build on that. Any feedback on what your bookings are looking like for Mother’s Day and graduation events relative to where you were, say, one year ago? Emanuel Hilario: I mean, without getting to precise numbers, I would say that traffic is positive coming into the quarter. And I think in general, our bookings—because we do manage that very closely—are very solid, so I feel very good about the forward look on the books. James Sanderson: Excellent. Shifting over to your store margin guidance, I noticed that relative to the first half of the year, you are probably expecting some modest margin compression. Can you walk through how margin is going to progress over the year? Emanuel Hilario: I mean, for us, it is always the third quarter, right? First, second, and fourth quarters are always very good margins. And our third quarter is our lowest-volume quarter, and so we do always get that shift in margin in the third quarter just because of seasonality. Other than that, everything in the margin, as Nicole reported during her update, is strong. We have great momentum in COGS. As a matter of fact, our cost of goods is the lowest we have ever reported as a company, and I think the margin overall outlook for the year is very solid. James Sanderson: And then speaking to margin a little bit more, you mentioned you have got beef visibility until September. Any thoughts on what you are looking at for locking in those prices as we get to the holiday quarter? Emanuel Hilario: I mean, we are in active dialogue about what we do with beef. I do not have a crystal ball, so I wish I could give you an exact fourth-quarter look on beef. Our view on beef is it is still a tough market right now, and so there is a lot to manage there. Our focus for now is looking at alternative cuts and promotional windows to try to take advantage of other cuts that might be lower cost than maybe a filet or something else. So it is really more about PMIX management, and starting to really plan out for Q4 promotional windows that are not so reliant on filets, because that takes pressure off the cost line. James Sanderson: Very good. And I think you also reported your weighted average interest rate was down. Could you walk us through what is driving that and what your outlook for the rest of the year is? Emanuel Hilario: I think that the Fed rates came down a bit, which impacts overall rates. So I think that is the big part of it. And again, our focus right now is—as much as we have free cash flow—to bring debt down, and that is our number one objective as we go forward: to really balance growth and be effective on growth, and still have free cash flow to service debt so we can bring that principal down. James Sanderson: Alright. Last question for me. Any feedback on what your off-premises mix was in the first quarter and how that was broken up between third-party delivery and pickup? Emanuel Hilario: As I reported in previous quarters, very low double digits is our percentage of mix in delivery and takeout. The majority of our mix right now is still reliant on delivery—it is more delivery than pickup at the restaurants—and, as you might imagine, our focus right now is building up that pickup at the store because that is more P&L effective, and we think that there are also big opportunities on that. James Sanderson: Very good. I will pass it on. Thank you very much. Emanuel Hilario: Thank you, sir. Operator: The next question we have is from Roger Lipton of Lipton Financial Services. Please go ahead. Roger Lipton: Yes. Hi, Manny. Hi, Nicole. Thanks for taking my question. A great number of my potential questions have been answered. I did want to just explore a little bit more the store-level margin, which it looks like you could have been in a position to bring down the operating expenses, bring up your margin a little bit in terms of your full-year guidance—doing, beating the first quarter by, I guess, 150 to 160 basis points over the mid-80, the 19.1% instead of 17.5%, the midpoint of your previous guidance. And in the second quarter, you are 81% to 82% instead of 82% to 83% in terms of expense totals. So it looks like maybe you have got a little room for the full year to improve upon that 82% to 83%. Emanuel Hilario: Thanks, Roger, and good to hear from you. I think our view on this, as I answered the previous question, is our third quarter is really a big factor, and I just want to make sure that we have numbers that we are super comfortable with. I am very happy with our first quarter results, and I think that we are making tremendous progress in the second quarter and forward. But I always want to make sure that we are realistic about the environment. It is still a challenging environment. Lots of noise with gas prices, and as you know, gas prices over time can impact your supply chain. So again, I am not saying that we believe that is ultimately going to happen, but we are just being cautious about how we go about guiding for the rest of the year on the margin. Roger Lipton: Okay. That is fair. It went over so quickly—the new economics on that Scottsdale conversion. You are saying increasing the ROI by four times. Could you just run by those numbers one more time quickly? Emanuel Hilario: That is a good question. So just for clarity, that restaurant was doing about $3 million to $4 million in revenues. It is now north of $7 million. So we grew revenues there by about $4 million, we think, year over year on an annual basis. We spent about $1 million getting that $4 million in sales. So it is really four times return on sales on the investment we put in the site. The ROI will also be very good because that $4 million increase in revenues will drive a significant amount of incremental EBITDA. So our ROI on that conversion will be very, very high. Roger Lipton: Got it. Okay. Well, I am glad you clarified that. Thank you so much. Emanuel Hilario: Thank you, Roger. Operator: Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the conference call back to Manny Hilario for closing remarks. Emanuel Hilario: Thank you, everyone. I appreciate everyone taking time to be with us here today. As I said earlier, we are very excited about the future for the company. And as I always tell everyone, nothing of this would be possible without the incredible contributions from all our teammates who live our mission every day. So I want to thank them all once again, and I look forward to running into all of you in our restaurants. Everybody have a great summer. Back to you, operator. Operator: Thank you. This concludes today’s conference. Thank you for joining us. You may now disconnect your lines.
Operator: Good day, everyone, and welcome to the Littelfuse, Inc. First Quarter 2026 Earnings Conference Call. Today’s call is being recorded. At this time, I will turn the call over to the Vice President of Investor Relations, David Kelley. Please proceed. David Kelley: Good morning, and welcome to the Littelfuse, Inc. First Quarter 2026 Earnings Conference Call. With me today are Greg Henderson, President and CEO, and Abhishek Khandelwal, Executive Vice President and CFO. This morning, we reported results for our first quarter, and a copy of our earnings release and slide presentation is available in the Investor section of our website. A webcast of today’s conference call will also be available on our website. Please advance to Slide 2 for our disclaimers. Our discussions today will include forward-looking statements. These forward-looking statements may involve significant risks and uncertainties. Please review today’s press release and our Forms 10-K and 10-Q for more details about important risks that could cause actual results to differ materially from our expectations. We assume no obligation to update any of this forward-looking information. Also, our remarks today refer to non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is provided in our earnings release available in the Investor Relations section of our website. I will now turn the call over to Greg. Greg Henderson: Thank you, David. Thank you to everyone for joining us today. This morning, I will start with highlights from our first quarter, then provide an update on the progress we are making on our strategic priorities. We delivered a strong start to the year, with first quarter results exceeding our expectations. Net sales were $657 million, up 19% year over year, 9% organically, and we delivered meaningful margin expansion across our segments. Our teams executed well as we capitalized on broad-based demand strength across several key markets. We continue to benefit from our leadership position in safe and efficient electrical energy transfer as our markets and applications transition toward higher power and higher energy density architectures. Our strategic focus and customer-centric go-to-market model are enabling us to engage earlier and more deeply with our customers. Importantly, we are seeing early tangible benefits from our salesforce realignment as we solve our customers’ increasingly complex challenges with our full technology portfolio. Taking a closer look at our performance by end market in the quarter, we delivered strong double-digit growth in data centers and grid utility infrastructure, where demand continues to be fueled by the broader electrification megatrend. Across our diversified industrial market, we drove meaningful revenue growth supported by broad-based demand and strong channel execution. In construction and industrial equipment markets, we are seeing mixed demand trends as strength in construction and industrial automation was partially offset by continued soft residential HVAC demand. Finally, passenger vehicles sales were up high single digits, reflecting content expansion and share gains amid a soft global production environment, while commercial vehicle sales expanded mid single digits driven by solid execution. We exited the first quarter with a book-to-bill well above 1.0, while bookings were again up more than 20% versus the prior year. We expect continued growth momentum and focused execution in the second quarter. I want to recognize our global teams for delivering a strong start to the year and for positioning the company well going forward. Now let us shift to our strategic priorities, starting with our sharpened growth focus. A key pillar of this strategy is our expansion within the grid and utility infrastructure market. Having closed the Basler acquisition this past December, we have already begun to see the transformative impact of this integration. Basler significantly strengthens our position in high power applications, and I am pleased to report that Basler outpaced our initial expectations during its first full quarter as part of the Littelfuse, Inc. portfolio. We are seeing an acceleration in demand for high power protection and excitation systems driven by the critical need for grid modernization to support the global build-out of data center infrastructure. As an example of our momentum in the quarter, we secured a strategic design win with a market leader for data center power system solutions. This customer chose our protection, automation, and control capabilities for a new 800-volt system deployment due to our advanced feature set and differentiated high-voltage DC solution. Our integrated system ensures comprehensive high power protection while enhancing system reliability and reducing architectural complexity for the customer. We also secured a significant design win with a leading U.S. grid infrastructure utility for our high power excitation systems in the quarter. Shipments are slated to begin in 2027; this win provides meaningful long-term visibility into Basler’s growth trajectory. We are in the early stages, and the potential for Basler and Littelfuse, Inc. revenue synergies is increasingly clear. The complementary nature of Basler’s technologies and our protection capabilities allows us to move up the value chain, offering more comprehensive and higher power solutions to our customers. Now turning to our second strategic priority, which is to partner more closely with our customers to help better understand and solve their technology challenges. We mentioned in our 4Q call we went live with a new go-to-market model at the start of 2026, where our sales teams are realigned to our customers and enabled to sell our complete portfolio. Today, I wanted to update you on recent progress we are making in our transportation market. In transportation, we are a market leader for low-, medium-, and high-voltage overcurrent and overvoltage solutions. Even though the end market is growing slowly, the rising complexity of electronic architectures is driving unique requirements for our advanced protection solutions. By partnering closely with our lead global OEM customers and demonstrating very high reliability solutions and predictable delivery, we have been able to increase our share in a number of key overcurrent and overvoltage protection platforms. In the first quarter, share gains led to our high single-digit growth. In addition to our collaboration on next-generation platforms, we have been meaningfully expanding our pipeline and are on track for double-digit design win growth in the transportation market in 2026. Now turning to our third strategic priority, enhancing operational excellence. As we continue to scale best practices across the organization and take a more programmatic approach to measuring execution, we are seeing clear evidence that these efforts are delivering tangible results. By applying consistent operational and financial discipline across the company, we are driving meaningful margin expansion across the portfolio. Transportation is a good example of how this discipline is translating into results. With targeted productivity initiatives and improved execution across our footprint, we are driving solid profitability expansion despite mixed underlying market conditions. The results are reflected in a strong 200-basis-point increase in transportation margins for the quarter. Turning to our semiconductor products business, we see meaningful long-term profitability enhancement opportunities. This starts with Protection, a model franchise within Littelfuse, Inc., with a demonstrated track record of execution and operating discipline. Once again in the quarter, Protection delivered significant revenue growth and attractive profitability as we capitalized on accelerating customer demand. In power semiconductors, we are applying the same disciplined approach. As we outlined last quarter, we are increasing our focus on higher growth, higher value applications while rationalizing lower value products and optimizing our footprint. We are seeing signs of improving power semiconductor demand, but we are balancing that momentum with continued portfolio actions as we work toward long-term structural profitability improvement. We remain early in this process, and as we finalize our path forward, we will continue to update you on our regular progress. Across Littelfuse, Inc., operational excellence remains a key pillar of our long-term strategy. As we execute on this framework, we believe we are positioning Littelfuse, Inc. for sustainable and scalable long-term margin expansion. We look forward to detailing our full financial playbook at our Investor Day next week. Taking a step back, we are encouraged by our momentum as we move into the second quarter supported by strong backlog, high customer engagement, and disciplined execution. We are looking forward to sharing additional details on our strategy, long-term growth drivers, and financial objectives at our Investor Day on May 14 in New York. With that, I will turn the call over to Abhishek to walk through the financials in more detail. Abhishek Khandelwal: Thank you, Greg, and good morning, everyone. Today, I will walk you through our first quarter results followed by a second quarter outlook. Please turn to Slide 8 for details on our first quarter performance. All comparisons are versus the prior year, unless noted otherwise. Net sales in the first quarter were $657 million, up 19% year over year, 9% organically. The Basler acquisition contributed 6% to sales growth, while foreign exchange was a 3% tailwind. Adjusted EBITDA margin finished at 22.9%, up 180 basis points, reflecting strong volume leverage, favorable mix, and operational execution. Adjusted diluted earnings per share were $3.31, up 51% versus the prior year. We generated solid cash flow in the quarter. Operating cash flow was $80 million, and free cash flow was $66 million, up 55% year over year. We ended the quarter with strong liquidity, a net leverage ratio of approximately 1.0x, and returned $90 million to shareholders through our dividend. Please turn to Slide 10 for our segment highlights. Starting with the Electronics Product segment, sales for the quarter increased 18% year over year, with organic growth of 15%. Passive products again delivered strong growth, up 22% organically. Semiconductor products grew 8% organically, driven by strong demand for protection semiconductors. Across the Electronics Product segment, we benefited from increased data center and diversified industrial demand. Adjusted EBITDA margin for the Electronics segment was 25.1%, up 300 basis points, reflecting strong volume leverage and execution. Into the second quarter, we expect to deliver on broad-based demand strength and continued execution as we balance power semiconductor product rationalization. Moving to our Transportation Product segment, on Slide 11, sales increased 5% year over year. Organic growth was 1%, driven by strength in passenger vehicle content expansion, share gains, and pricing that drove passenger vehicle organic sales of +4%. This was partially offset by lower commercial vehicle volumes due to the impact of the marine business exit. Excluding the marine exit, commercial [inaudible] sales were flat versus the prior year. Adjusted EBITDA margin increased 200 basis points to 19.1%, reflecting disciplined execution and productivity initiatives. Our teams remain focused on driving operational excellence, and we expect continued progress on our transportation profitability initiatives through 2026. Turning to Slide 12, Industrial segment sales increased 45% year over year. Organic growth was up 5%, supported by strong grid and utility infrastructure and data center demand, which was partially offset by soft residential HVAC volumes. The Basler acquisition contributed 39% of growth, outpacing our expectations. Adjusted EBITDA margin increased 340 basis points to 21.9%, driven by volume leverage and mix. We will continue to execute on our favorable industrial positioning in evolving markets to drive growth and profitability expansion. Turning to our outlook for the second quarter on Slide 13, we expect continued solid demand across several of our key markets supported by strong backlog and customer traction. Based on current market conditions, we expect second quarter net sales in the range of $690 million to $710 million, which represents 14% growth versus the prior year. We expect 8% organic growth and a contribution of 6% to growth from the Basler acquisition. We also expect second quarter adjusted diluted EPS to be in the range of $3.65 to $3.85, with an adjusted effective tax rate of 21% to 22%. We look forward to sharing our full strategy with you next week at our Investor Day in New York. With that, operator, please open the call for Q&A. Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. We will go first to Christopher Glynn at Oppenheimer. Christopher Glynn: Congrats on the really strong results across the board. I did want to drill into the Electronics growth a little bit. Data center side is a continuing, transparent story. I just want to double click on the comment about increasing diversified industrial demand. If we could go in a couple layers there in terms of new design wins flowing in, specific end markets driving traction? Greg Henderson: Thanks, Chris. I will start just by saying yes, we had very strong performance across our Electronics segment. If you drill down to our market-based view, as we said, we had very good performance in the quarter in data center. Pipeline was up meaningfully again as well, so we had strong performance in data center, and we have strong growth in the pipeline. In the industrial market, we have significant momentum as well. We mentioned on the call that last quarter we were starting to see broadening. If you go back to last year, it was largely about data center. We are seeing broadening across the industrial segment, and actually all of our industrial segments, with the exception of HVAC, are doing well. We did see very strong performance in diversified industrial. Just as a reminder, our diversified industrial segment includes things like aerospace and defense and medical, so we have good, strong strength across the portfolio. Abhishek Khandelwal: And, Chris, just to add, book-to-bill in the quarter was well above 1.0 as well. So again, this supports what Greg is talking about, which is broad-based demand and broad-based momentum supported by a strong book-to-bill. Christopher Glynn: Thanks for that, Abhishek and Greg. I did want to ask a little further on book-to-bill. I know you are not quantifying them discreetly each quarter, but curious if the book-to-bill or the absolute orders expanded sequentially—if that kind of trend through the back half is continuing—or if there is a characterization of the overall orders growth. Any metrics there, directional or quantitative, would be great. Abhishek Khandelwal: Absolutely, Chris. Good question. As I think about the order momentum and Q4 to Q1, we saw sequential improvement. Even within Q1, as I look at the progression of the quarter, we saw sequential improvement as we went through the quarter. Book-to-bill was north of 1.0, and bookings were higher than 20% on a year-over-year basis. So continued momentum across the board, and sequentially we saw improvement as well. Christopher Glynn: Okay. That covers a lot of ground. And then just curious—I think I heard in the prepared comments, Greg, you spoke quickly—did I hear you expect for commercial vehicle double-digit design wins this year? Greg Henderson: I will let Abhishek speak to the exact number, but across the Transportation business we have good momentum. As you know, production is kind of soft, but we had good performance. We are seeing content and share gains across Transportation—both passenger and commercial vehicles—and we also see good momentum in our pipeline. So I think we see strong growth. I will let Abhishek speak to the exact numbers we quoted. Abhishek Khandelwal: Yes, Chris, your statement is absolutely correct. Greg did state that in his prepared remarks. Operator: We will move next to Luke Junk at Baird. Luke Junk: Greg, maybe we could start with data center but go a bit off where we usually talk about this. The growth has been quite visible in your Passives business, but hoping we could double click on the Protection portfolio where it seems like we are seeing some pretty material benefits this quarter and in the data center piece of Industrial from a segment standpoint as well. Thank you. Greg Henderson: Yes. One of the good things about our position in data center is that all of our segments participate in the data center market, and we are seeing good strength across them. That includes our passive electronics portfolio; our semiconductor portfolio—both protection semiconductors and power semiconductors; and our Industrial portfolio, including high power fuses. In our Transportation segment, we also have circuit breakers that participate in data center applications. We have strong growth in on-rack solutions, which tend to be more onboard solutions with electronics content in both semiconductors and passives, and we also have strong growth in the infrastructure. I mentioned the design win we had in the quarter from Basler—that is part of their control and protection-related solution which goes into data center infrastructure. We also have power semiconductor design wins in the infrastructure that go into transfer switches and UPS solutions. So we are really seeing broad-based strength in data center from all of our segments and across the ecosystem—we talk about solutions that go from grid to chip. Abhishek Khandelwal: And, Luke, just to build on what Greg said, we grew strong double digits in data center within the quarter, and it was one of the leading contributors to Littelfuse, Inc. growth in the quarter. You should expect similar performance again from a data center end-market standpoint in the second quarter as well. Luke Junk: That is helpful. In terms of the design award activity so far this year, especially in data center, hoping we could get some color there as well. I think in total in 2025, those design awards more than doubled year over year. What is the early momentum vector here in the beginning of 2026, and maybe the mix of those opportunities? Some are fast-moving things you could maybe turn on later this year as well as longer-dated things tied to future architectures. Greg Henderson: Thanks, Luke. First, to reiterate what you said, in 2025 our design wins were up more than double year over year, and we were pleased with that. We attribute some of that to our new go-to-market model, which we put in place for data center last year and are now scaling across the company. Our pipeline is up meaningfully in Q1. This continues to be the fastest growth market for us; Q1 was also the fastest growth market. We continue to see momentum broadly, from solutions that go on rack all the way through the infrastructure. Luke Junk: Maybe switching gears, Abhishek, hoping you could walk us through some of the margin dynamics this quarter. There was pretty strong breadth across each of the segments from a margin percentage, despite higher commodity costs coming into the quarter—copper, precious metals, those sorts of things. Can we talk about some of the offsets—operational or price recoveries into the channel—and really building to an incremental margin that was quite a bit better than the 25% that you had guided to underlying? Thank you. Abhishek Khandelwal: Absolutely. At the highest level, our flow-through in the quarter was about 38%. Long term, we have said you should expect a 30% to 35% flow-through for the enterprise. For the quarter, we came in at 38%. If you look at the guide for Q2, it is at 31%, so again, in the range of 30% to 35%. On commodities—silver, copper—we are seeing pressure, similar to last year. Our teams are working diligently to offset those inflationary pressures through supply chain savings, incremental productivity, pricing, or surcharges. Our goal is to be price-cost neutral, just like we were in 2025. Operator: We will take our next question from David Williams at Needham. David Williams: Good morning. Thanks for taking the question, and congratulations on a really strong performance here. Abhishek, on the margin pass-through you just talked about—given where your guidance is, it looks like about 25% to 26% of the top line falling directly through to the bottom line. Is that a pace we can continue as we move through this cycle, or could it get better from a top-line-to-bottom-line pass-through? Abhishek Khandelwal: At a high level on flow-through, it is hard to call quarter by quarter because things happen and we make investments. Long term, as we continue to grow and put organic growth in the books, a 30% to 35% flow-through on an annual basis is how I would think about it. Quarter to quarter you could have noise. Q1 was 38%. Q2, our guide contemplates 31%. But long term, think of it as a 30% to 35% flow-through business. David Williams: Appreciate the color. On data center—not to beat this horse—but across the different areas you play in, how should we think about the magnitude? Is there a way to size that TAM or Littelfuse, Inc. exposure across the entire data center footprint? Greg Henderson: We participate broadly across data center. We will provide a lot more color at our Investor Day next week on all of our markets, specifically focused on the high-growth markets like data center. We will share more on the SAM and our opportunities in data center at that event. David Williams: Great. One last one. On the Electronics margin, do you think you could ultimately get back to where you were maybe in 2022 in the lower 30% range? What would it take—volume, mix from portfolio rationalization, and the self-help you are putting in? Abhishek Khandelwal: On the Electronics margin profile, I will not commit to a specific prior number, but there are a few things going on. The segment really has two pieces. Passives is a big part—we love the business and its margin profile; it is all about growth for us. The other part is the Semiconductor business unit, which has two pieces. The Protection franchise is one of the most profitable, growing double digits with a great margin profile. The area we are working through is power semiconductors—product rationalization and footprint optimization. That work takes time given factory consolidation and whatnot. You should expect margin improvement in the Electronics segment over the mid to long term as that work comes through. Operator: As a reminder, if you would like to ask a question, please press star 1. We will pause just a moment. We will go to Christopher Glynn at Oppenheimer. Christopher Glynn: Thanks. You have your hands full—Investor Day coming up, working on the power semis portfolio, go-to-market strategies, and integrating Basler. How is the acquisition pipeline? Is it better to think about another day to continue pursuing attractive deals, or how do you think about bandwidth? Greg Henderson: On the one hand, it looks like we have a lot going on; on the other hand, we have a very clear strategy with three priorities, and a strong team. We are focused on what matters and it is going well. On acquisitions, our growth strategy will continue to be both organic and inorganic. We will talk more about our model and how we are thinking about acquisitions at Investor Day. We continue to have an active pipeline and remain disciplined, focusing on acquisitions that align to our strategy. You should expect to continue to see us doing acquisitions. The integration of Basler is going extremely well—we are very pleased and are building a playbook around acquisition integration. We see momentum and are pleased with our ability to support Basler and others as they come. Abhishek Khandelwal: And we have ample capacity for acquisitions given our balance sheet. Our net leverage is about 1.0x. It is a big part of our strategic imperative and focus area. We will lay out clear targets next week in terms of what we expect to do over the next five years. Our balance sheet supports it. Christopher Glynn: Thanks. One more housekeeping item, then I will hold my horses until Investor Day. The residential HVAC market—anything interesting sequentially in terms of stocking or regulatory transitions? And should we assume the second half comparison there is pretty accommodating? Greg Henderson: This market tends to have cycles. We have reasonable exposure in our Industrial segment, which is why we see some impact. There is regular seasonality and some timing effects. Medium to long term, we expect to continue to see good performance and growth, but there can be short-term noise. Operator: That concludes our Q&A session. I will now turn the conference back over to Greg Henderson for closing remarks. Greg Henderson: Thank you. I want to close by thanking our team. We had a very strong start to 2026. We see continued momentum across the markets and the breadth of that momentum. We feel good about our start to the year and our momentum into the second quarter, and we look forward to seeing many of you next week in New York for our Investor Day. Thank you very much. Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, everyone, and welcome to EVERTEC, Inc.'s First Quarter 2026 Earnings Conference Call. Today's conference call is being recorded. At this time, I would like to turn the call over to Loyda Montes Santiago of Investor Relations. Please go ahead. Loyda Montes Santiago: Thank you, and good afternoon. With me today are Morgan M. Schuessler, our President and Chief Executive Officer, and Karla Cruz-Jusino, Chief Financial Officer. Before we begin, I would like to remind everyone that this call may contain forward-looking statements and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC report. During today's call, management will provide certain information that will constitute non-GAAP financial measures under SEC rules, such as constant currency revenue, adjusted EBITDA, adjusted net income, and adjusted earnings per common share. Reconciliations to GAAP measures and certain additional information are also included in today's earnings release and related supplemental slides, which are available in the Investor Relations section of our company's website at evertecinc.com. I will now turn the call over to Morgan M. Schuessler. Morgan M. Schuessler: Thanks, Loyda, and good afternoon, everyone. I am pleased to announce strong first quarter results that demonstrate continued execution against our strategic priorities and momentum across our core markets. Today, I will begin with an overview of our M&A framework and how it is translating into value creation across our portfolio, including the closing of the DIMENSA acquisition and an update on Sinqia and Tecnobank. Each of these reflects a different phase of the same strategy: acquiring, integrating, and scaling high-quality assets. I will then review our Q1 performance before turning the call over to Karla for a more detailed discussion of our financial results. Let me start by outlining how we think about M&A. Our framework is a disciplined approach built around a clearly defined set of criteria. First, we focus on scalable assets with transferable capabilities, which allow us to drive efficient growth while minimizing incremental costs and simplifying integration. Second, client overlap and regional footprint are also key considerations. We look to expand our services with the right financial institutions and retailers while leveraging the attractive growth characteristics of businesses with core operations across Latin America. Finally, we prioritize high-quality revenue and strong underlying economics, emphasizing profitable business models supported by recurring or volume-based revenue, with clear opportunities for accelerating growth and expanding margin over time. Consistent with that framework, I am pleased to announce that we have successfully closed our previously announced acquisition of DIMENSA. Strategically, this acquisition represents an important step forward, positioning us amongst the largest financial SaaS providers in the market. DIMENSA adds a meaningful set of new client relationships, strengthens existing key partnerships, and significantly expands our opportunities within the region as we continue to build a comprehensive one-stop-shop portfolio of services. This acquisition simultaneously supports growth and efficiency, reinforcing our leadership in existing markets while expanding our presence into new segments. From a financial perspective, DIMENSA is expected to be neutral to slightly accretive in 2026, reflecting integration timing and financing cost. We anticipate realizing synergies beginning in 2027, which should further enhance the earnings contribution over time. On a pro forma basis and inclusive of the synergies, the acquisition multiple compares favorably with EVERTEC, Inc.'s current valuation. Given we are only days into the acquisition, near-term focus is integration execution and building momentum through 2026 and beyond, as we expect DIMENSA to become an increasingly important contributor to our growth as we move forward. Turning to Sinqia, integration priorities remain focused on operational discipline, product rationalization, and go-to-market effectiveness. The commercial pipeline remains balanced between new customer wins and cross-sell opportunities, supported by our expanded product offering and modernization of existing platforms and the complementary acquisitions we have completed across Brazil. While the competitive environment remains active, our scale, local expertise, and increasingly integrated offering continue to differentiate us. As we look ahead, our focus remains on driving operational efficiency and positioning the business for sustained margin improvement over time. Lastly, Tecnobank continues to validate our M&A strategy in Brazil, strengthening our local scale and capabilities while demonstrating our ability to integrate founder-led platforms and position them for sustainable growth, reinforcing confidence in our ability to execute strategic acquisitions in the region. Now turning to slide seven, I will cover some highlights from our first quarter results. Revenue for the quarter was approximately $247.9 million, an increase of 8% compared to the prior year, driven in part by the full-quarter contribution from the Tecnobank acquisition as well as organic growth across most of the company’s portfolio. On a constant currency basis, revenue also reflected the continued stability in the underlying business momentum with approximately 5% year-over-year growth. Adjusted EBITDA for the quarter was approximately $97 million, up 9% year over year. Adjusted EBITDA margin was 39.1%, consistent with the prior year despite headwinds from the 10% discount to Popular and unfavorable foreign exchange dynamics. This performance reflects our continued focus on disciplined cost management and operational efficiency. Adjusted EPS was approximately $0.90, an increase of 3% from the prior year, driven by strong adjusted EBITDA growth and the lower share count reflecting the impact of the share repurchases completed during the current and prior year. From a capital allocation perspective, during the quarter, we paid approximately $3.1 million in dividends and repurchased approximately 700 thousand shares for a total of $20 million. We exited the quarter with approximately $130 million remaining on our share repurchase program, providing us flexibility going forward. Our liquidity remains strong at approximately $460 million as of March 31, allowing us to execute on the DIMENSA acquisition. Let me now provide an update on Puerto Rico beginning on slide eight. Merchant acquiring revenue grew 2% year over year, driven by higher sales volume despite a modest decline in spread that was consistent with our expectations. Payment Services Puerto Rico grew 6% year over year, driven by transaction growth and continued strength in ATH Móvil, primarily ATH Móvil Business. Business Solutions revenue declined approximately $6 million, or 9% year over year, primarily reflecting the 10% discount to Popular as well as a one-time hardware and software sale executed during the prior year period. Overall, economic conditions in Puerto Rico continue to remain stable, with positive trends in total employment and strong tourism performance. The unemployment rate remained at 5.6%, while consumer spending continued to demonstrate strength and stability. Turning to slide nine. In Latin America, revenue increased 32% year over year on a reported basis. Tecnobank delivered a strong full-quarter contribution in Q1, supporting revenue and EBITDA growth in Latin America and reinforcing the reacceleration we have been seeing in Brazil. We also benefited from continued organic growth across the region, including contribution from recent client wins. Results also benefited from a $6.8 million foreign exchange tailwind, primarily in Brazil. On a constant currency basis, our Latin America business grew 24% compared to the prior year. In summary, we are pleased with our first quarter performance and the continued progress across our strategic initiatives. Our diversification into Latin America continues to drive growth. Our Puerto Rico business remains resilient. And our disciplined M&A strategy continues to deliver tangible results. We remain focused on sustainable organic growth, disciplined capital allocation, and long-term value creation. With that, I will now turn the call over to Karla Cruz-Jusino, who will provide more details on our Q1 results and discuss our updated outlook for the remainder of 2026. Karla Cruz-Jusino: Thank you, Morgan, and good afternoon, everyone. Turning to slide 11, I will begin with a review of EVERTEC, Inc.'s first quarter results. Total revenue for the quarter was $247.9 million, an increase of approximately 8% compared to the prior year, driven by organic growth across most of our segments and the contribution from Tecnobank, which closed on October 1. On a constant currency basis, revenue growth would have been approximately 5%, with reported results this quarter benefiting from favorable foreign currency fluctuations primarily in Brazil. Adjusted EBITDA for the quarter increased to $97 million, up 9% year over year with a 39.1% margin, consistent with the prior year despite several known headwinds during the period. These headwinds included the full impact of the 10% discount to Popular as well as higher-than-anticipated unfavorable foreign exchange dynamics, particularly in countries where our contracts are denominated in U.S. dollars while our expenses are in the local currency, including Uruguay and Costa Rica. Our ability to maintain margin stability in this environment reflects continued execution against our cost discipline initiatives and a strong focus on operational efficiency across the organization. We continue to actively manage expenses while supporting growth initiatives, which have allowed us to absorb these headwinds and deliver consistent profitability. Adjusted net income was $56 million, broadly consistent with the $56.3 million in the prior year, reflecting strong adjusted EBITDA performance. This resulted in solid bottom line stability despite the anticipated increase in the adjusted effective tax rate to 10.9% for the quarter, driven by the continued growth in our Latin America operations, which are subject to higher statutory tax rates. Results also reflect higher operating depreciation and amortization as well as the impact of the 25% non-controlling interest from the Tecnobank acquisition. Adjusted EPS was $0.90, an increase of approximately 3% from the prior year, reflecting adjusted net income results and the benefit of a lower share count from repurchases completed during the current and prior periods. Moving to slide 12, I will now cover our first quarter results by segment. Beginning with merchant acquiring, revenue increased approximately 2% year over year to $448.4 million in sales volume. Sales volume and transactions both grew approximately 4%, with growth driven by new high-volume merchants as well as from existing customers. As expected, we did see a modest decline in spread reflecting a change in the mix consistent with more recent trends, which was partially offset by higher non-transactional revenues from pricing initiatives implemented in the third quarter of prior year. Adjusted EBITDA for the segment was $19.5 million with an adjusted EBITDA margin of 40.3%, down approximately 240 basis points from the prior year. The margin decline was primarily driven by higher processing costs related to CPI increases in our Payment Puerto Rico segment. Overall, performance continues to demonstrate stable demand and healthy underlying transaction activity. On slide 13 are the results for the Payment Services Puerto Rico and Caribbean segment. Revenue for the quarter was $58.4 million, an increase of approximately 6% year over year. Growth was driven by the continued strong performance in ATH Móvil, particularly ATH Móvil Business, which delivered double-digit growth in both volumes and transactions. We also saw solid growth in POS transactions, which increased approximately 8% year over year, supporting the overall segment performance. Results also benefited from higher services provided to our Latin America segment, reflecting organic growth and new client activity. These were partially offset by the 10% discount to Popular. Adjusted EBITDA was $34.7 million, an increase of approximately 11% from the prior year, with an adjusted EBITDA margin of 59.4%, an increase of approximately 240 basis points. Margin expansion was driven by incremental volumes, including increased volumes across merchant acquiring and Latin America. Overall, the segment delivered strong year-over-year growth and continued to demonstrate its ability to scale. Turning to slide 14, I will cover our results for Latin America Payments and Solutions, which was the largest contributor to revenue and EBITDA growth during the quarter. Revenue for the quarter was $110.3 million, an increase of approximately 2% year over year. Currency tailwinds in the quarter benefited segment growth by approximately $6.8 million, or 8%, mainly driven by the appreciation of the Brazilian real. On a constant currency basis, revenue growth for the segment would have been approximately 24%. Growth was driven by the full-quarter contribution from the Tecnobank acquisition, continued strength in Brazil, solid performance from Granada, and overall organic growth across the region. These were partially offset by the attrition impact from the MELI relationship, which will anniversary in the second quarter, and pricing actions to extend key client contracts. On a reported basis, adjusted EBITDA was $32.8 million, an increase of approximately 32% from the prior year, with an adjusted EBITDA margin of 29.7%, aligned with prior year. Adjusted EBITDA benefited from strong revenue growth but was partially offset by foreign currency headwinds from the higher-than-anticipated appreciation in markets such as Uruguay and Chile. Overall results reflect strong execution across the region, positioning the segment well for the remainder of the year. Moving to slide 15 are the results for our Business Solutions segment. Revenue for the quarter was $59.5 million, representing a decrease of approximately 9% from the prior year. This decline was in line with our expectation and was primarily attributable to the 10% discount to Popular that began in October of last year, as well as a nonrecurring hardware and software sale completed during the prior-year quarter. Adjusted EBITDA was $21.6 million, slightly below the prior year, reflecting the impact of the 10% discount to Popular. Adjusted EBITDA margin increased approximately 240 basis points to 36.3%, mainly driven by lower expenses associated with the prior-year one-time hardware and software sale, which came in at lower margins, as well as lower operating costs tied to nonrecurring projects executed in the prior-year quarter and cost-saving initiatives implemented within the segment. Overall, segment profitability remained resilient, with margin expansion reflecting disciplined cost management and the absence of prior-year one-time items. Moving to slide 16, you will see a summary of our corporate and other expenses. Adjusted EBITDA was negative $11.7 million for the quarter, representing 4.7% of total revenue, slightly below our expectations. Moving to slide 17, I will now review our cash flow performance. We continue to effectively manage our working capital, generating net cash from operating activities of $31.2 million during the quarter. Capital expenditures were $22.7 million for the quarter, reflecting ongoing investments to continue modernizing our platforms and enhancing our information security capabilities. During the first quarter, we paid down approximately $6 million in debt and returned approximately $23.1 million to shareholders through share repurchases and dividends. We repurchased 683 thousand shares for $20 million during the quarter, and as of March 31, we had approximately $130 million remaining under our authorized share repurchase program available through 12/31/2027. Our ending cash balance for the quarter, excluding cash and settlement assets, was $314.5 million, a decrease of approximately $17.3 million compared to year-end 2025. Turning to slide 18, our net debt position at quarter end was $826.2 million, comprised of $1.1 billion in total long- and short-term debt offset by $290.9 million of unrestricted cash. Our weighted average interest rate was approximately 6%, a decrease of approximately 55 basis points year over year, reflecting the benefit from debt repricing actions executed during the prior year and lower interest rates. Our net debt to trailing twelve months adjusted EBITDA was approximately 2.15 times, compared to 2.04 times a year ago, remaining at the lower end of our target leverage range of two to three times. This continues to reflect our disciplined approach to capital allocation and balance sheet management. As of March 31, and prior to closing the DIMENSA acquisition, our total liquidity, which excludes restricted cash and includes available borrowing capacity, was $450.3 million, slightly above the prior year. Turning now to our outlook for 2026 on slide 19. Based on our first quarter performance and the closing of the DIMENSA acquisition, we are increasing our full-year expectations. For 2026, we now expect reported revenue to be in the range of $1.073 billion to $1.085 billion, representing growth of 15.1% to 16.4% year over year. This outlook includes approximately 135 basis points of foreign currency tailwinds, driven primarily by the current appreciation of the Brazilian real relative to the 2025 monthly average exchange rate. On a constant currency basis, we now expect revenues for 2026 to grow between 13.8% to 15%, an increase from our prior constant currency range of 8.7% to 10%. This outlook reflects two primary factors: the inclusion of DIMENSA following its closing, and the continued solid performance across our existing businesses, which remains largely in line with the assumptions we previously shared. Starting with the legacy business, we continue to have a positive outlook supported by sustained momentum across payments, resilient performance in Puerto Rico, and continued growth across key Latin American markets. We are seeing consistent execution against our commercial and operational priorities, driven by a strong pipeline and disciplined cost management. As a result, our underlying assumptions for the core business remain intact, and in several areas are tracking modestly ahead of our initial expectations. With respect to DIMENSA, the updated outlook reflects the incremental revenue contribution from the acquisition. DIMENSA has strengthened our position in Latin America and aligns closely with our long-term strategic priorities. While the business currently operates at a modestly lower margin profile than our Latin America segment average, it has scale and strategic adjacencies that we expect to enhance our growth profile over time. For 2026, we are not assuming any synergies, as we expect the majority of cost and scale benefits to begin to materialize in 2027 and beyond. At the segment level, for merchant acquiring, we continue to expect mid-single-digit growth in 2026, supported by stable transaction activity, sales volume, and the implementation of key merchants. In Payments Puerto Rico and Caribbean, we also continue to expect mid-single-digit growth, driven by continued strength in ATH Móvil and POS volume, including processing services provided to the Latin America segment, partially offset by the impact of the Popular discount. For Latin America Payments and Solutions, we now expect revenue to grow in the high 30s on a reported basis and mid-30s on a constant currency basis. Finally, in Business Solutions, we continue to expect revenue to decline in the low- to mid-single digits, reflecting the anticipated reset following the Popular discount. Adjusted EPS is now expected to grow between 6.6% and 9.9% from the $3.62 reported for 2025, or between 5.2% and 8.6% on a constant currency basis. This outlook assumes an adjusted EBITDA margin of 39% to 40%. The updated range reflects the higher anticipated contribution from Latin America while continuing to incorporate the operating discipline and cost initiatives we have discussed in prior quarters. From an earnings perspective, our updated guidance assumes that DIMENSA will be neutral to slightly accretive in 2026, reflecting the balance between operating contributions, incremental interest expense, and integration timing. Below the line, our outlook reflects the post-transaction capital structure, financing costs, and related tax considerations. We continue to expect our effective tax rate to remain within a range of approximately 11% to 12% for the full year. Capital expenditures are also expected to remain at approximately $90 million. In addition, we expect to continue returning capital to shareholders through dividends and, when appropriate, share repurchases. Overall, our increased 2026 outlook reflects confidence in the performance of our existing business and the strategic and financial contribution of DIMENSA. While our focus in 2026 remains on integration and execution, we continue to see meaningful long-term value creation opportunities. In summary, we delivered a solid first quarter, increased our full-year outlook, and remain well positioned to execute against our priorities for 2026, supported by a strong balance sheet, disciplined capital allocation, and continued focus on execution. With that, operator, please open the line for questions. Operator: Thank you. We will now open the call for questions. The first question comes from an Analyst with Raymond James. Analyst: Hey, good afternoon. I appreciate you taking the questions. I wanted to start on the updated outlook. I appreciate the color on the expected EPS impact from DIMENSA, but as we think about the $40 million raise to the midpoint of revenue, can you give us a more detailed sense of how much of that is driven by the deal versus some of those other factors you talked about? Morgan M. Schuessler: Hey, thanks for the question. We do not break that out, as you know, historically, but let me give you a little bit of color on DIMENSA since you asked. We are extremely excited about the deal because this year it will be neutral to accretive, and our leverage ratio will still be 2.4 times or less. And in 2026, we have no synergy baked in. So what you are seeing in the guide does not include synergies, which we think we will realize in 2027 and 2028, which make the deal even more valuable. It is mostly, about 95%, recurring revenue. It gets us into two verticals we are not in today—insurance and risk—and then it also helps us double down on funds and banks. So we think there are a lot of synergies not only on the expense side, but also on the revenue side. But we cannot really break out the specifics on the numbers for the deal. Analyst: I appreciate that and the extra color. And then just a quick follow-up on the corporate revenue headwind. It grew pretty meaningfully year over year. Can you provide some color on what drove this in the quarter? And to the extent you can give any expectations, is this the right run rate for the year, or do you expect it to step down as we progress throughout the year? Karla Cruz-Jusino: Corporate revenue is impacted by, obviously, intercompany transactions that we have pulled out as part of some of the growth on some of our segments. So that is the expected run rate as we think about the next couple of quarters. Morgan M. Schuessler: Very good. Did we lose you? Analyst: That was all. Thanks. Appreciate it. Morgan M. Schuessler: Thank you. Operator: The next question comes from James Eric Friedman with Susquehanna. James Eric Friedman: Hi. I am sorry for the background noise. I want to know, Morgan, in terms of your prepared remarks and the observation on slide four about the transferability of the acquired assets, could you elaborate on that? In particular, the transferability—like in which use cases have you had the most success so far in transferring the assets either regionally or to other verticals? Morgan M. Schuessler: Yes, so what I would say is there are a couple of pieces to this. One is Sinqia specifically. A lot of what we have done in Brazil with Sinqia is primarily focused on the current market. We do have some products that we have exported, but it has been limited. PayStudio is the platform, Place to Pay is a platform, and Risk Center is a platform that we have localized throughout the region. That is what Santander is running on, that is what Banco de Chile is running on, Grupo Aval, and even BCR now in Costa Rica. Those are some of the platforms we have regionalized. In Brazil, we have done a good job of leveraging the platforms from a cross-sell perspective. Looking at this deal, they have four verticals; two of those verticals we are not in. They are in the insurance business with about 65% of the market. With the insurance companies, they are dealing with the brokers, the underwriters, and the consumers. They also have a risk management product for financial institutions. We are able to cross-sell our products to their insurance and risk customers and vice versa. On the fund side, we have a similar product with very different customers. We have the mid-size banks, and they have the larger banks. In terms of transferring capabilities, we think we can take LOT45, which is one of our products that we acquired with Sinqia, and bolt it on to the DIMENSA product. That is where we can take these products in Brazil and bolt them together. DIMENSA has a set of clients we do not have, and we have a capability they do not have, so we can broaden the value proposition. In that concept of transferability and platforms we can leverage across deals, we have those that we can leverage across the region, which are a lot of the payment products. Then within Brazil, we can combine some of these products that we have between Sinqia, DIMENSA, and Tecnobank, and there are large transferable client bases and integrations we can do to make these products work together. James Eric Friedman: That is a great answer. And then I want to ask, at a higher level, about the prospects of inflation—maybe for Morgan or for Karla. Some of the other payments companies are talking about it. Could you share your perspective on how inflation impacts the business, whether it is wage inflation or gas inflation? Any commentary at a high level on inflation would be helpful. Thank you. Morgan M. Schuessler: There are multiple impacts like in anybody's business. The good thing is that some of our payments businesses are tied to the size of the ticket, so if there is inflation in some of our merchant acquiring businesses, we actually get a lift from that. We see incremental revenue. Also, some of our contracts, particularly with banks, are tied to CPI. The way that interacts and plays is that in some ways we benefit from inflation. But just like any other business, when there is inflation and it impacts our costs, those are costs we have to absorb. I think we have demonstrated that when we have significant cost increases across our base—whether it is the $18 million discount we had to pass to Popular or inflation in general—we have done a good job of managing it and keeping our margins at about the 40% level. Operator: The next question comes from Vasundhara Govil with KBW. Vasundhara Govil: Thank you for taking my questions. Morgan, a high-level one on AI. Given the market's focus on potential for AI to reshape software economics, how do you think about that potential risk, and are you seeing appetite among financial institutions in Latin America to embed AI into their own workflows? How might that affect you? Morgan M. Schuessler: Great question, Vasu. We are bullish on AI generally—around software development and the enterprise overall. This year we have been very focused on appropriate governance and experimentation to see where we think the biggest benefits are. There are three areas where we think we will see a big impact, and that is not baked into 2026 guidance. I think that will impact us in future years. Number one is efficiency; it will change our cost structure, and we can be much more efficient in certain areas. The second is growth—the ability to add new features to improve our products so that we can grow faster. And the third is quality—the ability to have better quality and better SLAs because AI is helping how we manage service. Two examples: incident management—our Place to Pay product, which is our online gateway, is using AI to manage incidents. If there is a system problem, we can resolve the issue five to eight times faster using AI. It is better quality for our customers and keeps our systems up and running in a more durable way. On the growth perspective, in our Risk Center product—which users employ to monitor fraud—we are using AI to make it easier for users to interact with the software, so they do not have to know all the formulas to build logic. They can use natural language to create those rules more quickly. What we are seeing is 40% fewer alerts, meaning fewer false positives, and a 20% increase in fraud detection because the tools are easier to use and AI is flagging fraud more quickly. We are seeing real use cases across all those areas. We think it will help margins, help us grow faster, and improve our quality and service management. Vasundhara Govil: That is helpful. It does not sound like you think it is a big threat in terms of banks using AI themselves to disrupt some of the software products you offer today? Morgan M. Schuessler: No. I understand that theory with some software and technology companies, but we are processing financial transactions where there is reconciliation involved, settlement between financial institutions, and risk management products. We think the products that we provide we will be able to provide more quickly and more cost effectively. We actually think AI is a catalyst and a tailwind for our business. I do not see it as a negative. Vasundhara Govil: Thank you. That is very helpful color. And if I may ask a follow-up on the Banco de Chile partnership. I think last quarter you mentioned it is now operational. How is that tracking relative to your internal expectations, and how long before it ramps to its full run rate? How should we think about the revenue potential relative to the Santander relationship today? Morgan M. Schuessler: Great question. The deals we have talked about on previous calls are going as expected. Any benefits we see in 2026 are already baked into the guidance. All of the projects we have announced as far as new clients are going as anticipated. Operator: The next question comes from an Analyst with Deutsche Bank. Analyst: Hey, thanks for the question. A follow-up on DIMENSA—I get that you do not break out the inorganic contribution, so let me ask about historical performance. The former owner of DIMENSA disclosed some numbers for 2025 and 2024 in Brazilian reals. Is there any accounting consideration with net-to-gross revenue or anything we need to keep in mind when looking at the historicals? And if you look at the 2024 to 2025 growth rate they disclosed, it was pretty healthy. Was that all organic, or did DIMENSA benefit from some inorganic contributions? Any sense of how DIMENSA had been performing, leaving aside what exactly is baked into the 2026 guide? Morgan M. Schuessler: What I would say about DIMENSA is very similar to Sinqia. Some of their growth was M&A. If you look at their historical numbers, it includes some M&A. They did have some softness in their business a couple of years ago—just like we did—because of the general circumstances in Brazil. After Lula won, people were more cautious about IT spend, and they also had some legacy platforms that were outdated. Looking forward, we think there are cost synergies that are meaningful that we will take out in 2027—again, not included in 2026. We have talked to clients, and they are excited about us acquiring this asset because they want us to do with DIMENSA what we have done with Sinqia—modernizing the platforms so they can grow with the business—and they are looking forward to having multiple relationships with a vendor like Sinqia. As I said earlier, we think there are a lot of cross-sell opportunities. DIMENSA has some of the biggest banks in the funds business. We can bolt on LOT45 to provide other capabilities using some of our other products. We think the revenue synergies and the growth tailwind from combining these products, modernizing them, and cross-selling are compelling. Analyst: Got it, helpful. A higher-level one on capital allocation: You have done a bunch of acquisitions. Leverage is in a healthy spot, and you have about $130 million on the repurchase authorization. How should we think about prioritizing buybacks versus paying down debt versus other opportunities to continue building the business, especially in Latin America? Are there prospects for potential attractive deals you are looking at? How should we think about the priority of each of those in 2026? Morgan M. Schuessler: Great question. We just bought DIMENSA and we just bought Tecnobank, so we are very focused on integrating those, and that is a key priority for us. As you know, we are now a little over 45%—closer to 46%—of our revenues outside of Puerto Rico, and a lot of that has been M&A. We will continue to focus on M&A, and we continue to have a healthy pipeline, but right now we are focused on DIMENSA and Tecnobank. We believe the stock is attractive, as you can tell by our previous buyback. We are opportunistic. We understand the stock price is low compared to where it has been over the last year or two, and we will continue to balance that as we look at capital allocation. But right now, we will focus on the deals we have and continue to consider buying stock. Operator: The next question comes from Cristopher Kennedy with William Blair. Cristopher Kennedy: Good afternoon. Thanks for taking the question. You provided some good updates on the economy in Puerto Rico. Any comments or observations on some of the markets outside of Puerto Rico that you can talk about, given macro uncertainties? Morgan M. Schuessler: We do not have anything specific to call out. We are still confident in 2026, and even with some of the things that are going on in different markets, we do not see anything that we would specifically call out. Cristopher Kennedy: Understood. And last call you talked about one of the biggest pipelines for the company. Can you talk about how the conversion of the pipeline is progressing? Morgan M. Schuessler: Great question. Flipping to the organic side, we posted some pretty big deals—Banco de Chile, Grupo Aval, Financiera Oh!, among others we have talked about. We still have a very healthy organic pipeline, and we are optimistic this year that we will continue to have wins that we can announce throughout the year. Thanks for taking the questions. Operator: Thank you. That does conclude the question and answer session. I would like to turn the floor to management for any closing comments. Morgan M. Schuessler: I want to thank everybody for joining the call. We look forward to seeing you at conferences and speaking to you individually over the coming quarter. Everybody have a good night. Thank you. Operator: Thank you. That concludes today's conference. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Greetings, and welcome to Gulfport Energy Corporation's First Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I would now like to turn the conference over to your host, Jessica Antle. Please go ahead. Jessica Antle: Thank you, Carrie, and good morning. Welcome to Gulfport Energy Corporation's first quarter 2026 earnings conference call. I am Jessica Antle, Vice President of Investor Relations. Speakers on today's call include Michael Hodges, Executive Vice President and Chief Financial Officer, and Matthew Rucker, Executive Vice President and Chief Operating Officer. I would like to remind everybody that during this conference call, the participants may make certain forward-looking statements. Actual results and future events could differ materially from those that are indicated in these forward-looking statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we may reference non-GAAP measures. Please refer to our most recent earnings release and investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. An updated Gulfport presentation was posted yesterday evening to our website in conjunction with the earnings announcement. Please review at your leisure. At this time, I would like to turn the call over to Michael Hodges. Michael L. Hodges: Thank you, Jessica, and thank you for joining our call today. Before we begin, I would like to take a moment to welcome a new leader to Gulfport that I know many of you are already familiar with. Last evening, we announced that Nick Delazzo will be joining Gulfport as our President and Chief Executive Officer beginning May 28. Following a thorough search process, the board unanimously agreed that Nick is the right leader at the right time to propel Gulfport into its next chapter. He brings more than two decades of energy industry experience, a sharp focus on operational and financial discipline, and a proven track record of delivering value to shareholders. Nick is joining Gulfport at a time when the company has never been stronger, and we are excited to work with him to create long-term value for all stakeholders. Nick looks forward to engaging with our employees and shareholders in the coming months, and joining us to take your questions on our next quarterly call in August. With that said, we are off to a great start to 2026 at Gulfport, highlighted by the successful completion of our previously announced discretionary acreage acquisition program and a record quarter of share repurchase activity. I will share additional details on our land acquisition accomplishments a bit later, but we believe the swift and decisive actions we have taken over the past three years in the Ohio Utica have delivered significant value to the company as the demand for high-quality, low breakeven inventory across the industry continues to increase. When combining these initiatives to grow net asset value with our ability to repurchase nearly 10% of our market cap over the past two quarters at prices well below the underlying value of our business, it has been a very successful close to 2025 and start to 2026. Turning to our first quarter results, it was an especially strong kickoff to the year financially as the company generated $264 million of adjusted EBITDA and $119 million of adjusted free cash flow, driven by strong commodity pricing and the continued development of our high-quality asset base. Average production totaled 997 million cubic feet equivalent per day, which was consistent with the expectations we provided in February and keeps us on track to deliver on our previously stated full-year production guidance of 1.03 to 1.055 billion cubic feet equivalent per day. Cash operating costs for the first quarter totaled $1.38 per million cubic feet equivalent, also in line with our expectations and similar to last year. We expect this to be a quarterly high point for Gulfport as we anticipate declining per-unit cost as we move through the year. With our production cadence expected to accelerate later in 2026, the fixed charges embedded in our operating costs are expected to decline on a per-unit basis over the course of the year and land within the range of our full-year guidance. For full year 2026, we are reaffirming our per-unit operating cost guidance, which includes LOE, midstream, and taxes other than income, of $1.23 to $1.34 per Mcfe. On the capital front, we incurred a total of $118 million related to drilling and completion activity and $4 million related to maintenance, land, and seismic investment while achieving the significant operational success that Matt will address in his comments. Most importantly, and as I mentioned earlier in the call, we wrapped up our previously announced discretionary acreage program, investing approximately $102 million over the past four quarters to add more than two years of high-quality inventory adjacent to our core positions in Belmont and Monroe Counties. These acquisitions were made at an average cost of just over $2 million per net location, significantly below implied recent valuation metrics from larger inorganic transactions in the immediate area. We have focused our efforts over the past few years in the wet gas and dry gas windows of the Ohio Utica, areas that generate some of the strongest returns in our portfolio and where we can convert these locations into producing assets in short order. As a reminder, since 2022, our targeted discretionary acreage acquisitions have added over 4.5 years of high-quality net locations, enhancing the durability of our asset base and reinforcing the significant value uplift we are achieving through the execution of our ground game leasing program. We continue to monitor opportunities to further strengthen our leasehold footprint and increase our resource depth. We believe these opportunities continue to rank extremely high as we evaluate the uses of free cash flow in 2026 and beyond. Turning to the balance sheet, our financial position remains strong and we recently completed our spring borrowing base redetermination, adding 10% to elected bank commitments and reaffirming the borrowing base at $1.1 billion. Our trailing twelve-month net leverage exiting the quarter was approximately 0.9 times and, pro forma for the increase in elected commitments, at the end of the first quarter, Gulfport’s liquidity increased by $100 million and totaled $872 million, comprised of $2.9 million of cash plus $869.3 million of borrowing capacity under our revolver. We greatly appreciate the support of our bank group as we position the company to opportunistically deliver value to our shareholders, and our liquidity position is more than sufficient to fund our development needs for the foreseeable future, providing significant financial flexibility as we continue executing on our capital allocation strategy. As I mentioned earlier, with this balance sheet strength and liquidity in place, we continue to deploy capital towards shareholder returns through our share repurchase program. During the first quarter, we repurchased 866 thousand shares of common stock for approximately $172.8 million, representing the highest quarterly investment in company history and well ahead of our previously announced plans in February. As of March 31 and since the inception of the program, we have repurchased approximately 8.2 million shares of common stock, including the preferred redemption in 2025, at an average price of just over $133 per share, more than 30% below our current share price and totaling nearly $1.1 billion of capital returned to shareholders over the past four years. Over just the last two quarters alone, we have allocated over $300 million towards repurchasing what we believe to be our undervalued common stock, resulting in the retirement of nearly 10% of our shares outstanding. Given our current valuation and the strength of our underlying fundamentals, we expect share repurchases to remain an attractive capital allocation priority and plan to maintain an active repurchase program through 2026, supported by adjusted free cash flow and available revolver capacity, all while maintaining leverage at or below one times. In closing, Gulfport is delivering consistent financial results, maintaining disciplined capital allocation across asset bases, and returning significant capital to our shareholders, all while preserving flexibility to navigate market conditions and pursue value-enhancing opportunities. With a strong foundation in place, and a proven leader joining our company, we are confident in our ability to continue executing our strategy and creating durable long-term value for our shareholders. Now I will turn the call over to Matt to discuss our operational highlights for the quarter. Matthew H. Rucker: Thank you, Michael. Operationally, during the first quarter, the company completed drilling of eight gross wells, comprising of two Utica wet gas wells, four Marcellus wells, and two SCOOP Woodford wells. We entered the year with three operating drilling rigs running and, as planned, released the SCOOP rig at the end of the first quarter and currently have two rigs drilling ahead in Ohio. We plan to release one rig at the end of the second quarter, transitioning to a one-rig program in Ohio for the remainder of 2026. On the completions front, we brought five gross Utica dry gas wells online during the first quarter, including our first two U development wells, which continue to perform consistent with recently developed straight lateral offsets. Importantly, this activity has unlocked approximately one year of additional high-quality inventory that can be strategically placed in our future development plan, providing additional flexibility. Looking ahead, we have an active completion and turn-in-line schedule with approximately two-thirds of our remaining 2026 turn-in-lines expected to include a significant liquids component in their production profile. This mix highlights the company's balanced approach to developing our assets and provides exposure to dynamic market conditions, allowing us to capture value across changing commodity price environments. Lastly, I would like to compliment our team's continuous focus on operational improvements, as we delivered strong results during the quarter. In the period with our highest level of activity, the operational teams executed with zero recordable incidents or spills, underlying our commitment to safety and the environment in tandem with best-in-class operations. Our drilling team delivered an exceptional quarter, achieving incremental efficiency gains in each area of our core operations. In the Utica, we maintained our record all-in footage per day realized in 2025, and as we continue to extend lateral lengths across our asset base, we have concentrated our efforts on improving performance in the vertical section of the drilling phase to enhance overall cycle times. During the quarter, our average top-hole drilling days improved by 8% compared to full year 2025, and we set a new company record for the fastest Utica top hole drilled for Gulfport to date, completing the section in just 5.4 days. Not only did we set a single-well record, the four-well pad delivered an average top-hole record of 5.9 days per well, demonstrating the opportunity for long-lived efficiency gains. In the Marcellus, we finished drilling a four-well pad during the first quarter, and when compared to the prior two Gulfport-operated pads in the area, we delivered a 20% improvement in footage drilled per day. Lastly, and perhaps most notably, I am extremely proud of our team's performance in the SCOOP and the drilling results achieved on our recent HERO pad. On average, the team delivered the pad with a spud-to-rig-release time of approximately 40 days per well, beating our internal expectation of 55 days. These results highlight the team's ability to apply learnings from our best-in-class operations in Ohio and deliver more consistent execution in the SCOOP, where drilling is more challenging. Collectively, these results underscore the strength of our operating team's leadership and our ability to consistently deliver best-in-class execution across all of our operating areas. As we have discussed previously, the completion side of our operations has been continuing to perform at very high levels and our emphasis there remains on maintaining those efficiencies. With that consistency, we have been able to deliver our first two pad turn-in-lines of the year on time and on budget. In summary, our operational results this quarter mirror the broader performance Michael outlined—disciplined execution, continuous improvement, and a focus on creating long-term value. The consistency we are seeing across our operating areas positions us well to support Gulfport's strategy. And with Nick preparing to join our team, we are confident our operations are well aligned to support the next phase of execution and deliver durable returns over time. With that, I will turn the call back over to the operator to open the call up for questions. Operator: Thank you. We will now be conducting a question and answer session. We will now open the call for questions. Our first question will come from Neal Dingmann with William Blair. Neal Dingmann: Good morning, all. Michael and Matt, thanks for the details. My first question is probably for you, Michael. It is on capital allocation. Specifically, how do you all think about allocating for further discretionary acreage—which, again, the stuff you have done seems to have fantastic upside—versus your stock buybacks, where you have been very active? And maybe add one more twist to this: in a quarter like the one we are in now, which is probably your lowest free cash flow quarter of the year, would you consider using debt to do either of those if the opportunity existed? Michael L. Hodges: Hey, Neal. Thanks for the question. I think it is an excellent one. Our approach has been consistent over the last few years—it has been to capture as many of those high-quality locations as we can. The opportunity set there has been available to us, and we think those generate some of the highest returns when you can drill those in the near term. That has been a priority for us and continues to be a priority. We believe there is still more running room there, and we will likely update the market a little later in the year on what that looks like for the rest of the year. I would say that has consistently been a high priority. We think the equity is still undervalued; it has been a good opportunity for us to get that back at what we think are attractive prices. So I would say it is a combination of the two. The health of the balance sheet allows us that flexibility, as you pointed out, to lean on that a little bit in quarters where we may have a little bit less free cash flow. As we go into the second quarter, we do still have quite an active development program that Matt talked about. If we see opportunities to use the revolver to get some equity back at a good value, we would consider doing that. Our approach has been dynamic; we have stayed away from formulaic approaches, and that has worked well for us. I would summarize it by saying it is a combination of all of them, and it is something we evaluate continuously. The priority around locations over the last few years has been a strategically advantageous move for us, and we think others are starting to follow along more closely with that. We will keep you updated as we have more details, but that will continue to be one of the highest priorities. Neal Dingmann: Great to hear. Your inventory sort of speaks for itself now. Secondly, on marketing—you talked about optimizing the marketing strategy. How has that evolved, and how are you thinking about that strategy? Do you have any constraints if you wanted to crank up production—thinking more about takeaway—if you wanted to expand production? Michael L. Hodges: It is a good question, Neal. There are really not any constraints around that. We have a very strong firm transportation portfolio that gives us good access to various locations, and that has been an advantage over the last few years. We have Gulf Coast access that gives us LNG-type pricing. We have Midwest exposure that we think is advantaged, certainly in the seasonal periods—the winter season tends to trade very well. We are able to sell gas locally as well. There is a lot of excitement around data center demand, and, as we talked about on the last call, there is some improving outlook for prices even in the Northeast. So no constraints around being able to sell additional gas. We are always thinking about maximizing free cash flow, and so far we feel like the right way to do that has been to keep our production relatively flat. Certainly, if there were a signal that would be rewarded—or an opportunity to move the needle from a pricing perspective—it is something we could consider. But the strategy has been very successful the last few years and, at least at this point, makes sense for our company. There are no constraints around midstream or downstream markets that would keep us from considering that type of option. Operator: And our next question will come from Zach Parham with JPMorgan. Benjamin Zachary Parham: Yes. First off, congrats on Nick joining the team. I think that is a great hire. My first question for Matt—you talked a lot about drilling gains in both the SCOOP and in Appalachia. Could you unpack that a little bit more? Where do you think we are in the evolution of those drilling gains, and what is the runway in front of you to continue to shave days and hours off? Matthew H. Rucker: Yes, sure. Thanks, Zach. I would categorize that as kind of the sixth inning, if you will, in a baseball analogy. We have talked for a while about our completion side of the business achieving things like 22-hour pumping days, and obviously there are only 24 hours in a day, so it is really about maintaining efficiency there. We have talked a lot about the drilling side and the opportunity set in front of us. This quarter demonstrates that focus that the team has had and the ability for us to keep chipping away at that. What I am most proud of is hitting that in all three core areas and finding those gains. In the Utica, where we have been operating for a long time, outside the curve and lateral we are finding opportunities in the top-hole section of the wells, which are incremental days you can gain back. The Marcellus is relatively new to us as a company, but not to our operating team, and just now on our third pad there, we have been able to see that 50% increase even with the longest laterals that we have drilled in that play to date. Then in the SCOOP, being able to achieve roughly 40-day cycle times in a pretty challenging environment speaks to us becoming a more consistent program in that asset where we feel more comfortable continuing to deploy capital. I think there is more room to go, to be fair, but we have made great headway heading into 2026 where that has been a key focus area for us. Benjamin Zachary Parham: And my follow-up—are you seeing any inflation on service prices at this point? There has been some volatility in the commodity, but we have seen some modest activity adds, and some service providers think there is more coming—maybe not so much in Appalachia, but in other parts of the U.S. What are you seeing? Matthew H. Rucker: We are certainly seeing it around diesel. That is not only straight fuel price, but it can bleed into logistics and trucking as well. I would say that is where we are seeing the biggest move. A lot of our heavy service contracts around pressure pumping, rigs, and things like that, we do a good job of locking in for the year ahead or being constructive around that. So no real impact to the capital—we are not changing guidance. Some of these efficiencies we have talked about could help offset those recent impacts around diesel. We try to mitigate those things by maintaining and improving our efficiencies and continuing to work with our service providers in this challenging fuel environment. All in all, I would say we are kind of net neutral at this point, but keeping an eye on it and working with our providers as the year progresses. Operator: We will hear next from Tim Rezvan with KeyBanc Capital Markets. Timothy A. Rezvan: Good morning, folks. Thank you for taking our questions. Mike, I want to start on repurchases. You gave specific targets the last two quarters—I know you exceeded it in the first quarter. You did not give one going forward. You used more ambiguous language about it being an attractive use of capital, and we are looking at the first quarter, which was about half of the total for 2025. Should we think about 100% of free cash flow and land there in the ballpark for this year? And is there a reason you did not put a number now and why you did put a number the last couple of quarters? Michael L. Hodges: Hey, Tim. Thanks for the question. If you think back to the fourth and first quarters: in the fourth quarter, we had some CapEx where we were doing appraisal work and had some acceleration of capital. There was logic around giving a target to ensure the Street understood that we were not borrowing against what we had otherwise allocated to share repurchases—that the accelerated capital was in addition to that. That was the thought process there. We got into the first quarter, saw some opportunity in the equity, and also had the wrap-up of our discretionary acreage program. Those were the quarters where we gave more of a target, and as you noted, we ended up exceeding it in the first quarter because we saw some opportunities with a block we were able to pick up and changes in what we felt like the underlying value versus the opportunity to buy at was. Going forward for the rest of the year, we will be more consistent with what we have done the last four years—think about things on a full-year basis, not marry ourselves to a formula, and be dynamic. We will not allocate quarter by quarter; we think about it annually. The balance sheet, at nine-tenths of a turn, gives us some opportunity with a lot of free cash flow coming later this year. We have a lot of liquids development coming up, and we see the environment for liquids as pretty positive right now. I do not think we will allocate all in the later part of the year; we will see what near-term cash flows look like—second quarter, third quarter, even into fourth quarter—see where the equity trades, and allocate accordingly. I understand it is a little bit ambiguous—it is intentionally that way because we want to be dynamic—but we do see a lot of value and plan to continue the repurchase activity. Timothy A. Rezvan: Okay. That makes sense. As a follow-up on liquids—you put a bar chart in your deck showing the increase in liquids skew. Can you help us ballpark that? Is that like a 15% exit rate or back-half liquids skew? You were at 9% liquids in the first quarter. Should we assume you are going to lean in and maybe be at a 15% plus level going forward? Michael L. Hodges: I think the nice thing is we have the option to make those changes. Thinking back a few years ago when Matt and I joined, Gulfport did not have that flexibility in the program. Now those things are available to us. You are right—we will become a little more liquids heavy as the year progresses. We have a couple of wet gas Utica pads coming up, some Marcellus development, and our SCOOP, which has the liquids component. There is a fair amount of liquids coming online for us at a very opportune time. As we go into 2027, we can make those decisions as well. In terms of being 15% liquids—we are a gas company with a mature asset base, so moving that needle to that level may be a bit ambitious. But I do think as we go through the year, you will see us get to more of a low-teens liquids percentage, with the opportunity over time to take that even higher. For this year, back-half weighted, call it low teens, and then we will assess where we want to go for 2027. Operator: Our next question will come from Carlos Escalante with Wolfe Research. Carlos Escalante: Hey, good morning to you. Thank you for taking our question. Matt, on the North Marcellus pad or appraisal that you are drilling later this year, can you outline this for us? What is the gross resource that the well spud is testing for, and what is the EUR you need to see to justify a programmatic Marcellus North development versus considering maybe a one-off? I know that there is some production from one of your competitors up there that looks good, but wondering if you see anything particular in your specific area. Matthew H. Rucker: Sure, Carlos. Thanks for the question. I would bracket that there is not as much delineation for us. When we think about the types of EURs and deliverability we will see there, we approximate it very similarly to our Marcellus South. Quite simply, for us it is a new pocket of development without an infrastructure component at the moment with a third party. We are going in with a two-well approach—one north, one south—to confirm our assumptions and make sure the liquid percentage—both NGLs and oil—and composition are understood so that we can then go to our potential midstream providers to get the best economic outcome for that block of acreage. There is nothing specific we need to see to pull the trigger; it is more about confirming our type curve from a liquids-weighting perspective and then immediately going into contract negotiations with a midstream and processing provider to unlock that development with good economic parameters. Carlos Escalante: Thank you. That is very helpful. A quick follow-up for Mike on hedges. You are targeting roughly 30% to 40% hedge coverage in 2027. Presumably you would start to work on that in the near term. At what NYMEX level do you accelerate that or contract that? Is there a floor below which you choose to stay unhedged on the view that the curve is too low? Michael L. Hodges: It is a good question, Carlos. On the hedging side, we try to remain flexible. Your observation on where we sit for 2027—we have talked previously that we like to be in the 30% to 70% range as we enter a year. We are near the lower end of that if you think about 2027. We have six or seven months left here in 2026. We are pretty bullish on gas going into next year. The volatility earlier this year, and what some of our peers have talked about, indicates there will be opportunities to create value through the hedge program. We like that we have that baseline amount in place already for 2027. From here, we can nibble when there are opportunities. I do not feel like we have to go do anything in the near term unless we see those opportunities, and typically this time of year is not where you get a lot of them. As we get into next year, we will continue to adjust. There have been years where we are a little more bearish and at the higher end of the range, and years where we are more bullish. Right now, we are a little on the bullish side, so we may keep that a little bit lower, but it will be a dynamic process as we continue to assess what 2027 looks like. Operator: We will go next to Jacob Roberts with TPH. Jacob Phillip Roberts: Good morning. I wanted to start on the SCOOP. Obviously, decent results there. You have said in the past that the SCOOP was competitive with your Northeast assets, and the implication here is that it has become even more competitive. What do you need to see in the market to allocate a more meaningful amount of capital to that asset, and where do you see this asset participating in that growth scenario you spoke about if the market calls for it? Matthew H. Rucker: Thanks for the question, Jake. I will start and Michael can add his comments. The results on the drilling side are a great step in the right direction for us. We have talked about the last couple of years really being about finding operational execution consistency in the SCOOP. If we are able to get those drilling days to 40, sub-40, and do it consistently and repeatably, it gives us a lot more confidence in that asset if the time calls for us to flex activity there. On a single-well IRR basis, it competes in our portfolio. When you blend that in, it is still a capital-intensive asset with longer cycle times, and we are very mindful of that when we think about our calendar-year cadence and what that does for the company. For this year, we will get these wells completed and turned to sales later in 2Q, evaluate those results, and then it will be part of our program going forward. To the extent we flex more into that in later years, we will always be looking at that within our overall capital allocation program. It is really about seeing that consistency every time we go to drill. With this one being the best we have done so far, we would like to see that again before we make any radical changes. Jacob Phillip Roberts: Thank you. That is helpful. As a follow-up, on liquids hedging—I saw you added some swaps in addition to the collars on the oil side during 2027, as well as some propane swaps for 2027. What is the thinking there, and should we expect that number to move higher throughout this year? Michael L. Hodges: Great observation, Jake. That market improved in the last couple of months, and we really did not have a lot in place for that component of our revenue stream. We saw an opportunity to put a position in. As I mentioned earlier, we like to be in that 30% to 70% range, so we layered those in. That is an area where you have to monitor geopolitical events and decide whether they get resolved in the near term or longer term. We are not going to try to get too cute with it. If there are opportunities where we can capture a little more value, we could do that, but we made some good progress looking out into next year at prices that are very attractive based on where we have seen realizations for both WTI and NGLs. We will assess our program for 2027. To the extent that we want to continue to lean in on the liquids side, we have unhedged barrels that you can always shift around, and that is a way of adjusting your hedge percentages through your own activity. We will continue to monitor this as we think about the right blend for 2027. Operator: Moving next to Peyton Dorne with UBS. Peyton Rogers Dorne: First question on my end, maybe for Mike. Gas pricing was really strong in the first quarter. Could you provide some color on how you see differentials trending in 2Q and as we progress into the summer months? Michael L. Hodges: Hey, Peyton. Thanks for the question. I want to give a pat on the back to our marketing team. A number of operators in the Northeast saw opportunities with the setup going into February and captured some of the first-of-the-month pricing. Our team did an excellent job there, which led to some outstanding differentials and overall realizations for the quarter. That is something we work on consistently. It does not get a lot of airtime because it is a routine process here. Looking forward, we are still bullish on differentials overall. We talked about this on the last call, and some of our peers are starting to talk about it as well: a lot of the demand we are seeing coming in the Northeast—specifically around data centers and power demand—seems to be lifting the long-term view on basis in the Northeast. It is an important component of our differential. We have exposure to the Gulf Coast and the Midwest, but still do have some Northeastern exposure that we think is only going to rise going forward. Our full-year guide on differentials is still appropriate. I think there is opportunity for some improvement as we go into later years—2027/2028—as some of that demand starts to show up. Those are meaningful to our company. Even a $0.05 move in differentials can be important to free cash flow and EBITDA. We are set up well for the year and feel bullish about where things are headed in the future. Peyton Rogers Dorne: Great, thanks. Just to go back to the Valerie pad in the Marcellus—it was nice to see the drilling efficiencies you obtained there. I know you changed the completion design a bit in the Marcellus when you went from the Hendershot pad to the Yankee pad and targeted the formation a bit differently too. How did you attack Valerie, and what learnings did you incorporate from Hendershot and Yankee into this most recent pad? Matthew H. Rucker: Some of the completion design testing you spoke of was around the Hendershot being a two-well, one-in-each-direction unbounded delineation test initially. The Yankee four-well pad was more of a true development on our spacing. We learned a lot from that and landed our spacing assumptions where we wanted them. The designs around the Valerie are more about optimizing economics—well spacing and how much sand and water you need to effectively drain the wellbore. We took those learnings and applied them here to look at the best economic outcome. On this pad, that is what we did. With the ability to have four wells, we did a bit of incremental testing on two of the inter-laterals as well—minor tweaks to continue to get more economically efficient. More to come there, but that is the evolution of what we have been doing. Peyton Rogers Dorne: Sounds great. Look forward to seeing those. Thanks a lot. Michael L. Hodges: Thanks, Peyton. Operator: We will go next to Gabe Daoud with Truist. Gabe Daoud: Thanks, operator. Good morning, everyone. Thanks for the time and congrats on bringing Nick aboard. Mike, on the back of your comments around in-basin pricing improving later this decade, are there any transport agreements that could be rolling in that period that you would let roll to provide a tailwind to the cost structure and margins? Michael L. Hodges: It is a good question, Gabe. We are always assessing what we have. There are always smaller pieces within the portfolio that are not as critical and that you consider letting go from time to time, which can help a little bit. There are also opportunities to optimize your book and offload some of those on a shorter-term basis to other operators that need space. As basis improves in the Northeast, there are probably more netback decisions you can make around your firm portfolio and whether it makes sense to hold all of it. From a strategic perspective, we feel really good about the diversity we have and the exposure to different basins. I would not forecast making significant changes. Having exposure in the Midwest and at the Gulf Coast—and even the diversity from a risk mitigation perspective—makes a lot of sense. You may see some small improvements on the cost structure within the portfolio around our Northeastern position, but nothing I would describe as a wholesale strategic shift for Gulfport at this point. Gabe Daoud: Got it. Thanks, Mike. That is helpful and makes sense. David Adam Deckelbaum: As a follow-up, your discretionary land program has been pretty successful over the last several years extending inventory life. How should we think about that program for 2026 and moving forward? Michael L. Hodges: I am glad you asked, David. It really has been a big part of our success over the last few years. We are in the process right now of formulating our thoughts around it. We like to have a very clear path when we come out and talk about it. We think there continue to be some exciting opportunities around the basin. It is typically something we talk about around midyear. Our next call is likely to be in August. Over the last few years, we have done somewhere between $50 million and $100 million of discretionary acreage programs annually. To the extent that we have been successful—and we have—we like that allocation of capital. I think there is a strong likelihood we will have something to talk about midyear that is a pretty exciting opportunity to capture more land this year. It is not unlimited—you have to be smart about it. There are areas where we can find locations that move into the near-term development plan, which is what enhances the economics the most. It is not a carpet-bombing exercise; it is us going out and making sure we have that line of sight before we allocate the dollars. We will talk about it more later this year, but you can probably sense in my tone that I am pretty excited about what we will have to share later on. David Adam Deckelbaum: For sure. Thanks, Mike. Great color—really appreciate it. Gabe Daoud: Great. Operator: This now concludes our question and answer session. I would like to turn the floor back over to Michael Hodges for closing comments. Michael L. Hodges: Thank you, operator, and thanks to everyone for taking the time to join the call today. Should you have any questions, please do not hesitate to reach out to our Investor Relations team. This concludes our call. Thank you and have a great day. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.
Operator: Hello, everyone. Thank you for joining us, and welcome to Natural Resource Partners First Quarter 2026 Earnings Conference Call.[Operator Instructions] I will now hand the conference over to Tiffany Sammis, Investor Relations. Tiffany, please go ahead. Tiffany Sammis: Thank you. Good morning, and welcome to the Natural Resource Partners First Quarter 2026 Conference Call. Today's call is being webcast, and a replay will be available on our website. Joining me today are Craig Nunez, President and Chief Operating Officer; Chris Zolas, Chief Financial Officer; and Kevin Craig, Executive Vice President. Some of our comments today may include forward-looking statements reflecting NRP's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in NRP's Form 10-K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP measures are included in our first intend to discuss the operations or outlook for any particular coal lessee or detailed market fundamentals. Now I would like to turn the call over to Craig Nunez, our President and Chief Operating Officer. Craig Nunez: Thank you, Tiffany, and good morning, everyone. I would like to start off by apologizing in advance for my voice. I'm a little under the weather today, and I will do my best to speak clearly so you'll be able to understand me. NRP generated $34 million of free cash flow in the first quarter of 2026 and $167 million of free cash flow over the last 12 months before accounting for the $39 million capital investment we made into our soda ash business during the quarter. Metallurgical and thermal coal producers continue to operate in challenging conditions, while soda ash producers are struggling amid what is arguably the most significant global supply glut in a generation. To date, we have not experienced any material impact on our Mineral Rights segment from the war in Iran. However, the closure of the Strait of Hormuz has caused some European countries to look at delaying coal plant phaseouts to ensure power security, similar to ongoing discussions in the United States. U.S. metallurgical coal prices are realizing a modest benefit from increased demand for safe haven domestically produced steel. At the same time, sharply higher diesel and shipping costs are compressing producer margins and any slowdown in global industrial activity resulting from elevated energy prices could put downward pressure on steel demand and metallurgical coal pricing. There is another second order effect worth noting. Higher oil prices may also lead to increased U.S. oil production and greater volumes of associated natural gas. Given the limits of LNG export capacity, a portion of this gas may become stranded domestically, placing downward pressure on North American natural gas prices and in turn, on thermal coal demand and pricing. Commodity markets have a way of solving one problem by creating another. In the soda ash market, higher energy and transportation costs, combined with war-related slowdowns in construction activity, particularly across Asia, have worsened condition for an industry already burdened by oversupply. While lower-cost U.S. producers may ultimately gain market share as higher cost competitors struggle, we have not yet seen clear evidence of this shift. In short, the war in Iran has taken an already difficult outlook for soda ash and made it worse. Despite these headwinds, NRP continues to generate substantial cash flow and remains on track with our deleveraging strategy. Although outstanding debt increased to $73 million during the quarter as we funded the $39 million investment in Sisecam, Wyoming. we subsequently reduced debt to $60 million by quarter end and have paid it down to $45 million as of today. Our objective is straightforward: pay off debt so that more cash can ultimately flow to unitholders. Before the conflict in Iran, both metallurgical and thermal coal markets were showing early signs of stabilization. While we cannot say with confidence that coal prices have reached a cyclical bottom, there are indications that the worst may be behind us. Looking ahead, my primary concern remains our soda ash business. Despite being one of the lowest cost producers globally, Sisecam Wyoming is currently struggling to generate positive free cash flow. While we were early to call for a soda ash downturn, I underestimated both its severity and duration. Our prior stress testing did not envision a decline of this magnitude. Had you asked me a year ago whether we would be making a capital infusion earlier this year, I would have said no. We are reevaluating our assumptions regarding global soda ash markets in general and Sisecam Wyoming in particular. Recent events have demonstrated that even low-cost producers like us are not immune to prolonged adverse conditions. Since acquiring our interest in Sisecam Wyoming 13 years ago, NRP has received $0.5 billion in distributions so far. Annual distributions have ranged widely from a low of negative $39 million to a high of $81 million, averaging roughly $38 million per year. As of today, those distributions already received have already delivered to NRP an 11% compound annualized return and a 1.6:1 multiple on our investment. Those calculations assign 0 residual value for our interest in Sisecam, Wyoming. In reality, the reserve information filed with our Form 10-K indicates that at current production levels, Sisecam Wyoming has approximately 50 years of remaining reserves. Simply extrapolating historical average distributions over the 50-year remaining reserve life would equate to roughly $1.9 billion of potential future distributions to NRP, an unusually long runway for a natural resource asset and an important component of NRP's intrinsic value. While our internal evaluation of our interest in Sisecam Wyoming is more detailed than that, incorporating projected pricing, cost, capital expenditures and the time value of money through discounted cash flow and internal rate of return calculations, these high-level numbers give you an idea of our view of the economic characteristics of that investment. Before turning it over to Chris to cover the financial results, I'd like to leave you with 3 key takeaways. Number one, NRP's financial health is not dependent on the success of Sisecam Wyoming. Our balance sheet is strong, liquidity is ample and free cash flow generation is exceptionally robust at this stage in the commodity price cycle. Preserving this hard-earned financial strength is our top priority. Number two, we remain on track to increase NRP unitholder distributions this year, but continue to caution that challenging environments for all 3 of our key commodities, particularly soda ash, increase the likelihood that some event or combination of events could push that timing back. I expect we will increase distributions in November, but will not be surprised if something happens to cause that to be delayed. We will continue to update you each quarter with our latest thinking. And number three, decisions to invest additional capital in Sisecam Wyoming will be evaluated through the same lens we would apply to all investments, maximizing NRP's intrinsic value per unit while maintaining a conservative bias and an appropriate margin of safety. Put simply, every dollar invested is a dollar that cannot be distributed to NRP unitholders today, and that trade-off must be justified by compelling returns on capital and the expectation of higher unitholder distributions in the future. For those of you who are new to NRP, I refer you to the unitholder letters in our annual reports for more information on our investment philosophy and approach to capital allocation. With that, I'll turn it over to Chris now to cover the financials. Christopher Zolas: Thank you, Craig. For 2026, NRP generated $20 million of net income and $33 million of operating cash flow. NRP's free cash flow in the first quarter of 2026 was negative $5 million, which takes into account the $39 million capital investment into Sisecam Wyoming. Of these consolidated amounts, our Mineral Rights segment generated $34 million of net income, $42 million of operating cash flow and $43 million of free cash flow in the first quarter. When compared to the prior year first quarter, Mineral Rights segment net income decreased $12 million and operating cash flow and free cash flow each decreased $1 million. The decrease in net income was primarily due to lower metallurgical and thermal coal sales volumes as compared to the prior year period and increased depletion rates at certain thermal properties. The declines in operating and free cash flow were also primarily due to lower metallurgical and thermal coal sales volumes, partially offset by higher recoupments of prior period minimum payments in the first quarter of 2025 compared to the first quarter of this year. Regarding our met thermal coal royalty mix, metallurgical coal made up approximately 65% of our coal royalty revenues and 45% of coal royalty sales volumes in the first quarter of 2026. For our soda ash segment, net income for the first quarter decreased $12 million compared to the prior year quarter. This decrease was driven by lower sales prices and volumes due to the oversupplied international soda ash market and weakened demand for flat glass. Operating cash flow decreased $3 million and free cash flow decreased $42 million when compared to the prior year period. These decreases were due to not receiving a distribution in the first quarter of 2026 as compared to receiving $3 million of distributions in the first quarter of 2025. In addition, free cash flow was further impacted by the $39 million capital investment made in Sisecam Wyoming in the first quarter of 2026. In March of this year, NRP and Sisecam Wyoming's managing partner made a capital investment into Sisecam Wyoming and NRP's pro-rata share was just $39 million. NRP does not expect distributions from Sisecam Wyoming to resume until soda ash market demand rebounds or there is a significant supply response to this weakened market. Moving to our Corporate and Financing segment. Q1 2026 net income, operating cash flow and free cash flow each improved $3 million as compared to the prior year period. These improvements to the Corporate and Financing segment were due to less debt outstanding, resulting in lower interest costs and less cash paid for interest. Regarding our quarterly distributions, in February this year, we paid the fourth quarter distribution of $0.75 per common unit. In March, we paid a special cash distribution of $0.12 per common unit to help cover unitholder tax liabilities associated with owning NRP's units in 2025. And today, we announced our first quarter distribution of $0.75 per common unit to be paid later this month. And with that, I'll turn the call over to our operator for questions. Operator: [Operator Instructions] Our first question comes from the line of Stephen Bols with Yellowgate Investment Management. Steven Balsam: Can you discuss the minus $7.8 million loss on the equity and earnings from the soda ash segment? Was that a cash loss? Or does it include interest? Maybe if you could just give a little bit more detail on that. Christopher Zolas: Sure. No, that was -- that was our proportionate share of their net income during the first quarter. So that was their operating results. That includes all cash and noncash amounts. That's the U.S. GAAP number. Steven Balsam: Understood. So that means the total loss would have been double that. And I guess I'm trying to get a sense of whether that included any impairments or whether that was sort of represented by -- I guess, maybe if you have an idea, I know it comes in the financial statements, what the gross loss would have been like... Christopher Zolas: Yes. We have a footnote in our 10-Q that you'll see later here today that will disclose anything significant, but there was no significant onetime items that were in the net income amount. Steven Balsam: Okay. I'll take a look for that. Also talked that coal sales volumes this quarter were down about 20%, 21% versus the prior year, also down versus fourth quarter. Just my quick look, it looks like Illinois Basin was down a lot, Northern Powder River and Gulf Coast. Was that anything there that you see going forward? Do you have a sense of -- obviously, you guys don't have the production forecast, but do you have a sense of -- was there anything in particular going on there or what you think what things should look like for the year ahead? Craig Nunez: Well, as you know, we don't talk about any lessees particularly. And when we talk about Illinois Basin, we only have one lessee. But we didn't see -- there was not a systemic problem in Illinois Basin that resulted in lower production. It was really an issue of mining on adjacent land that was not owned -- had minerals that were not owned by us during the period, and you'll see that happen sometimes. You'll see our production volumes drop and increase rather dramatically from period to period as the operator moves from adjacent property on to us and back off of us again. Steven Balsam: Got it. So nothing systematic. Craig Nunez: Correct. Steven Balsam: Great. I just wanted to have another financial statement question, a quick one is in the cash flow statements for cash flow from financing, there was $8.6 million spent during the quarter just on other items net. Can you talk about what that was? Christopher Zolas: Sure. The biggest item there is taxes associated with equity awards. So when we settle equity awards, they get net settled and those taxes get paid by NRP. Craig Nunez: That happens every first quarter. Steven Balsam: Got it. Okay. And I guess that's also just the payables are probably also just catching up with the bonuses or other payments from the prior year. One last quick question is just noticed there's noncash, but there was a major increase in depreciation. I think you mentioned that there was increased depletion rates in certain thermal coal. Anything else, the number went from $4 million to $7.6 million this quarter. Christopher Zolas: Yes. You picked up on it. I mean that's exactly right. We continually do evaluations of our economic tons estimates that drive that depletion calculation. And as we get information from our operators and our lessees about their future mine plans, it can cause some adjustments to our -- those estimates of economic tons. And that's what happened last year. There wasn't just want to add there. You noticed there wasn't any associated impairment that was recorded as a result of those adjustments. So... Craig Nunez: Again, that's something that fluctuates from time to time. Your estimated reserve quantities will go up, they'll go down. And as they do, it affects your depletion rate each year on your financial statements and on your tax returns. Operator: Our next question comes from the line of David Spier with Nitor Capital Management. David Spier: Regarding the soda ash JV following the contribution, how much debt now remains at the JV? Craig Nunez: $60 million? David Spier: $60 million in total, not to NRP share. Craig Nunez: Correct. David Spier: Got it. And then earlier, when you mentioned you're potentially reevaluating the soda ash business, is it possible to further elaborate on potential options? Craig Nunez: Well, let me tell you what I mean by reevaluating. So those of you who follow us for a long time, you know that we are very focused on scenario testing, stress testing our business, trying to evaluate every possible thing or a combination of that could undermine our results. We do the same thing on soda ash. And quite frankly, the environment that we find ourselves in now is one that is worse than we had envisioned in our stress testing. So we have gone back to the drawing board and said, okay, let's start from scratch because since this scenario, this market situation has fallen outside of what we had envisioned was realistically possible, we need to correct our thinking. And so we're just reevaluating everything along those lines. As far as what are the possible scenarios going forward with respect to Sisecam Wyoming, two reasons I don't have a lot of meat to give you on that. The first is that we don't yet know what the operator of the venture is going to do. They are working, they're evaluating, they're making their decisions of what they would like to propose as a plan going forward. And the second thing is this is a very competitive market that we're in, in the global soda ash business right now, even more competitive now than during normal times. So I don't want to elaborate too much on the possible avenues that the operator may be considering because it could give competitors information that would not be helpful for us for them to have. David Spier: And I'd still imagine even in the current depressed environment, it's the partnership's view that this, the JV is still a large component of the company's value right now. Craig Nunez: It is our view that this is a world-class asset that has a very long life to it with very significant cash-generating potential in the future that's going through a very difficult time right now. And so yes, I mean, look, the concern that we have that you should have, I think that everyone should have is, are there signals here that this asset has lost the the investment characteristics that attracted us to it in the first place as it is the future going to be materially worse than the past. This asset has been operating for over 60 years. And is the next 50 going to be materially worse than the last 60? And are we unrealistically cleaning to bright memories of the past, allowing ourselves to be misleaded misled into making more investments into the future that shouldn't be made. And we're trying to be very careful that we don't fall into that trap. Operator: We have reached the end of the Q&A session. I will now turn the call back to Craig Nunez for closing remarks. Craig Nunez: Thank you very much, operator, and thank you, everyone, for your participation on the call and the questions. And I wish you a very good day and look forward to speaking to you on our next call. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Greetings, and welcome to Inter Parfums, Inc. First Quarter 2026 Conference Call and Webcast. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, [inaudible]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Devin Sullivan, Managing Director at The Equity Group and Inter Parfums, Inc. investor relations representative. Thank you. You may begin. Devin Sullivan: Thank you, Rob. Good morning, everyone, and thank you for joining us today. Joining us on the call today will be Chairman and Chief Executive Officer, Jean Madar, and Chief Financial Officer, Michel Atwood. As a reminder, this conference call may contain forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from projected results. These factors may be found in the company's filings with the Securities and Exchange Commission under the headings “Forward-Looking Statements” and “Risk Factors.” Forward-looking statements speak only as of the date on which they are made, and Inter Parfums, Inc. undertakes no obligation to update the information discussed. Inter Parfums, Inc.’s consolidated results include two business segments: European-based operations through Interparfums SA, the company’s 72% owned French subsidiary, and United States-based operations. It is now my pleasure to turn the call over to Jean Madar. Jean, please go ahead. Jean Madar: Thank you, Devin, and good morning, everyone. We started off the year broadly in line with expectations, with consolidated sales increasing 2% on a reported basis, reflecting growth from both our U.S.- and European-based operations. Despite mixed results across the portfolio, aided by favorable foreign exchange movements, we were able to generate significant growth across several key markets operating in a more difficult environment while enhancing profitability. Our results reflect the strength of our underlying business, the appeal of our brands, and the disciplined execution of our strategy across a diverse global footprint. Consolidated sales growth in the first quarter reflected strong brand execution and solid performance in select regions, partially offset by macro and regional headwinds. North America, our largest market, increased by 7%, driven by continued category growth and innovative brand extensions, particularly from Coach. Central and South America grew 23%, supported by strong momentum in women’s and men’s Coach franchises and the Montblanc Legend line. Western Europe sales were flat, driven by slow consumer demand. These results were partially offset by softer performance in other parts of the world. Eastern Europe declined 12% driven by operational difficulties in certain markets, which disproportionately impacted Lanvin and Lacoste. Middle East and Africa declined 12% primarily due to recent intensifications of regional wars and conflicts. Asia Pacific sales decreased 7% driven by distribution changes we implemented in 2025 in South Korea and India, and softer consumer demand in Australia and New Zealand, which were partially compensated by strong growth in China. Moving to performance by brand, we saw solid growth from several of our larger brands. Coach increased 30%, reflecting strong sell-in following the launches of new extensions within the Coach Woman and Coach Men franchises—Coach Cherry and Coach Platinum—as well as sustained healthy demand across most existing lines. Montblanc rose 14%, driven by the launch of Legend Elixir, the first launch of the Legend franchise since 2024, and the success of the Explorer Extreme line launched last year and the lower sales base in last year’s first quarter. GUESS, our largest U.S.-based brand, grew 11% in the first quarter, driven by ongoing success of the Iconic franchise, supported by launches of new extensions within the Iconic and Seductive pillars. Roberto Cavalli continued to generate robust results to start 2026, achieving a 32% increase in net sales. Our blockbuster launch from last year, Serpentine, remains a substantial success, opening many more doors for us across the world. The product was a finalist for the Prestige Popular Packaging of the Year award at the Fragrance Foundation last month. Growth during the quarter was also fueled by the latest innovation—Roberto Cavalli Wildheart extension dual gender duo Wild Pink and Wild Blue—and their Roma Soluto, the newest fragrance within the Roma pillar. Other key brands reflected tougher comparisons. Lacoste declined 12% driven by last year’s strong innovation-led growth and weaker Eastern Europe conditions. We launched a new extension late in the first quarter called Original Aqua for men, and we plan to launch several other extensions throughout the year to further elevate the brand. While Donna Karan/DKNY declined 3% off a high prior-year base, we did see a 16% rebound in the Be Delicious core, indicating renewed consumer demand and improving franchise momentum. The Cashmere Mist deodorant also remains a successful product within the Donna Karan/DKNY brand, as it continues to be incredibly popular on TikTok Shop and Amazon. Overall, with the global fragrance market normalizing toward historical growth rates following several years of exceptional performance, capturing market share has taken on greater importance as a key source of momentum. In order to do that, our portfolio offerings must be both diverse and distinguished to reach and appeal to multiple large consumer audiences, especially in a more difficult operating environment. In addition to launching exciting new innovation across our existing portfolio, we are expanding our portfolio with new brands to further amplify our offerings and appeal. During the first quarter, we resumed distribution of the existing lines of Anigbutal and reopened two store locations in Paris, with another one to open soon. We will continue to develop the brand’s reach and offering within the high-end fragrance market. Also, we are continuing to develop brand new fragrances for L’Enchant and Off White, and these launches will happen in 2027. We expect these two new brands to help us elevate our positioning in the high-end fragrance category. And in January, we announced separate exclusive long-term worldwide fragrance license agreements with David Beckham and Nautica; David Beckham joins our portfolio in 2028 and Nautica in 2030, respectively. Both will be essential for us to expand our offerings in the lifestyle fragrance space that we know quite well. Fragrance continues to stand apart within beauty for its resilience, supported by its role as an accessible luxury and everyday form of self-expression that consumers continue to prioritize even amid macroeconomic and geopolitical uncertainty and more deliberate spending behavior. The category is also benefiting from powerful e-commerce tailwinds, with an increasing number of fragrance products purchased through nontraditional retailers including Amazon, underscoring the growing importance of digital marketplaces in both discovery and conversion. Consumers are also increasingly seeking personalization, which we find through fragrance layering as well as personalized AI-driven recommendations. Whether through social media, major e-commerce platforms, or physical retail, the way consumers discover, evaluate, and engage with fragrance is rapidly evolving. These are powerful channels for discovery, and we are actively leaning into that shift with a focus on storytelling that can bridge multiple channels and offer consumers an immersive and consistent brand experience. To be successful, brands must inspire desire, whether as a gateway into the world of an iconic fashion house—such as Jimmy Choo, Ferragamo, or Coach—or that of a celebrity like the one we will do with Beckham. We are continuing to develop our portfolio to maintain desirability across all our brands. The travel retail market continued to perform well, representing approximately 7% of total net sales, consistent with prior periods. Brands including Roberto Cavalli, GUESS, and Coach have performed well to start the year, with several retailers overall currently showing strength in Europe in particular. We anticipate steady growth in our travel retail business going forward. Despite a dynamic macroeconomic environment, the global fragrance category remains resilient, and we are well positioned to deliver on our goals this year. We remain cautiously optimistic for the balance of 2026, reflecting war and disruption in the Middle East while capturing improving dynamics in other regions. We are confident in our ability to navigate near-term volatility, continue to operate efficiently and profitably, and drive disciplined, sustainable, long-term growth in service of our customers, brand partners, and consumers. With respect to the Middle East, I realize that oftentimes we can fall into the trap of viewing different parts of the world primarily through the lens of how it impacts our business. But our concern for our colleagues and partners in the whole Middle East extends directly to them, their families, and communities. We truly appreciate and acknowledge their contribution during this time of heightened conflict, and of course, we pray for better days ahead. Before I close, I want to highlight that alongside operating our business, strengthening our ESG profile remains a key priority. Our ESG strategy is now in its third year and is going strong. We have seen a great return on our investment in this program across supply chain visibility, our ability to respond to new regulatory requirements, and our external investor ratings. These actions and enhanced measures resulted in Inter Parfums, Inc. receiving its third consecutive ESG rating increase from MSCI. We now sit at BBB and have our sights set on A. Our goal is to continue addressing the environmental and social risks that are most financially material to our business. This approach bears long-term, return-on-investment-focused resiliency with ESG performance. With that, I will now turn it over to Michel for a review of our financial results. Michel? Michel Atwood: Thank you, Jean, and good morning, everyone. I will begin by discussing the consolidated results before breaking them down into our two operating segments: European- and United States-based operations. As Jean pointed out, we delivered sales of $345 million, representing a 2% increase on a reported basis. On an organic basis, which excludes the impact of foreign exchange and the headwinds generated by the Middle East conflicts, sales declined 3%. Excluding the 1% headwind related to the war in the Middle East, organic sales declined by a more moderate 2%. The foundations of our business remain strong and continue to go from strength to strength. For instance, our top 20 brand-region combinations, which represent 86% of our global sales in Q1, grew 9%. Our direct-to-retail channel, which represents 43% of our sales in Q1, grew 16%. This significant growth has had a sizable positive impact on our P&L, as the direct-to-retail channel has significantly higher gross margins but also requires more SG&A, especially A&P and logistics. Our reported growth benefited from a favorable 4.6% foreign exchange tailwind. While the stronger euro has continued to favor our top line, it also increases our cost base across the P&L and our balance sheet. We are continuing to implement a variety of actions to mitigate that impact and have been pleased with the results. Beginning with gross margins, they expanded by 140 basis points to 65.1% from 63.7% of sales, primarily driven by favorable segment, brand, and channel mix as described above, as well as lower-than-expected destruction costs, which reflect enhanced efficiencies in areas such as inventory management and forecasting. These gains were partially offset by tariffs, which represented an expense of about $6 million during the quarter. We are pleased with the positive effect of our tariff mitigation activities and ongoing cost savings initiatives. Our manufacturing optimization—whereby we are shifting manufacturing closer to the point of sale—continues to contribute favorably to our operations and our cost structure. In combination with select pricing actions we took last year, we expect gross margin stability in 2026. SG&A expenses as a percentage of net sales rose 200 basis points to 43.6% compared to 41.6% in the prior-year period. The increase resulted from a number of factors: royalty costs grew ahead of sales due to the GUESS license extension and unfavorable brand mix; we also had FX impacts as described above and higher logistics costs related to supply chain transitions and channel mix. Our A&P spending was stable at $52 million, approximately 15% of sales, and we continue to invest in line with anticipated sell-out by retailers to help drive traffic across all distribution channels, which we believe are higher than our reported sales. Overall, our consolidated operating income was $74 million for the quarter, a 1% decline from the prior period, resulting in an operating margin of 21.5%, or a 70 basis point decrease from a very high 22.2% in 2025. Below the operating line, we reported a gain of $1.1 million in other income and expense compared to a loss of €1.7 million, leading to a positive year-over-year impact of $2.7 million compared to the 2025 first quarter. Within these numbers was a million-dollar increase in interest income behind a stronger ROI on our excess cash. Moving to tax, our consolidated effective tax rate was stable at 24.6% compared to 24.5% in the prior-year period. These factors led to net income of $43 million, or $1.35 per diluted share, representing an increase of 2% compared to net income of $42 million and $1.32 per diluted share in the prior-year period. As a percentage of net sales, net income rose to 12.6%, broadly in line with the prior-year period. Now moving to our two business segments, starting with European-based operations: net sales rose 2% but declined by 4% on an organic basis. Gross margin expanded by 190 basis points to 67.4% from 65.5%, driven by favorable brand and channel mix, lower-than-expected destruction costs, and some of the pricing that we took last year. These were partially offset by tariffs which represented an expense of $4 million. SG&A increased by 9% to $104 million, with SG&A as a percentage of net sales rising 270 basis points to 41.4% of sales compared to the prior-year period. The increase in SG&A was driven by foreign exchange impacts along with increases in employee-related costs as we are building up our Korean subsidiary, and higher logistics costs related to increased warehouse fees. Royalty costs also grew ahead of sales driven by unfavorable brand mix. Overall, net income attributable to European operations grew 4% to $50 million for the quarter, representing 19.8% of sales compared to 19.4% in the prior-year period. Turning to United States-based operations, net sales rose 2%, helped by a positive foreign exchange tailwind; organic sales were broadly flat. Gross margin remained essentially flat at 58.9% compared to 58.7%, with favorable brand and channel mix as well as lower-than-expected destruction costs offsetting tariffs which represented an expense of about $2 million. While SG&A expense increased 3%, SG&A as a percentage of net sales remained essentially flat at 47.9% compared to 47.6% in the prior-year period. Overall, net income attributable to the U.S.-based operations was broadly flat at $8 million for the quarter, representing 9% of sales. This also reflected a higher effective tax rate of 19.7% in 2026 compared to 18.1% in the prior period, driven by lower tax gain from stock-based compensation. As of March 31, our balance sheet remains strong with $237 million in cash, cash equivalents, and short-term investments, as well as working capital of close to $700 million. From a cash flow perspective, accounts receivable was up 6% and days sales outstanding was at 78 days, up from 74 days in the prior-year period, driven by foreign exchange and changes in channel mix. Despite the increase, we are still seeing strong collection activity and we do not anticipate any issues with collections or accounts receivable, even amid foreign exchange headwinds. On our costs, inventories declined significantly to $370 million as of 03/31/2026 from $390 million a year ago. This represented a seven-day reduction in inventory on hand to 259 days. By effectively managing working capital relative to our sales growth, we again significantly improved our operating cash flow. Cash flow generated from operating activities was positive during the quarter, compared to operating cash usage of $7 million during the 2025 first quarter. We continue to expect strong free cash flow productivity in 2026. Now turning to our guidance and outlook. As outlined in our earnings release issued last evening, we are maintaining our full-year outlook. We continue to expect sales of approximately $1.48 billion and diluted earnings per share of $4.85. Our EPS guidance does not include any benefit from potential tariff refunds. While we remain proactive in mitigating the impacts of tariffs on our cost structure, we are also monitoring the possibility of IEPA tariff refunds this year, which could total approximately $17 million. These potential tariff refunds are not included in our outlook for 2026; however, should they occur, we would likely take the opportunity to reinvest at least partially in support of our brands and fuel momentum where we think we can get a strong long-term ROI. We continue to anticipate a return to stronger growth in 2027 driven by enhanced innovation, including the development and distribution of our newest brands. Overall, we are seeing moderating demand in several international markets, along with tariff-related pressures on our cost structures, and we are continuing to closely monitor potential inflationary impacts as suppliers adjust pricing. Nevertheless, we remain well positioned with a strong innovation pipeline, enduring global partnerships, and a resilient consumer base that collectively reinforce our confidence in our long-term growth and value creation. With that, operator, please open the line for questions. Operator: Thank you. At this time, we will be conducting a question and answer session. Please ensure your handset is unmuted before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Sydney A. Wagner with Jefferies. Your line is now live. Sydney A. Wagner: Hi, thanks for taking our question. So gross margin obviously expanded during the quarter, which was great. Just curious looking ahead, which of those benefits do you view as structural versus more quarter-specific? And then on the category, you have spoken to seeing some normalization, but you have also noted pockets of strength where we are seeing maybe above-category growth. So how do you feel about the portfolio’s ability to capture those pockets of above-fragrance algorithm growth? Thank you. Michel Atwood: Gross margin was really a combination of everything going favorably for us this quarter. We had the impact of the pricing increases that we took last year. We had a significantly favorable mix impact coming from our direct-to-retail channel. As you know, the gross margin on our direct-to-retail is significantly higher than when we sell through distributors. It was really a perfect storm. At this point in time, we expect this to normalize over the balance of the year, and this is one of the reasons why we are maintaining our gross margin target flat for the year. I would expect to see some of this mitigating particularly over the course of the second and third quarter. Regarding the portfolio—Jean, do you want to touch on the portfolio piece? Jean Madar: Yes. Regarding the portfolio, I would like to say that our bigger brands are doing better than our smaller brands. When you look at Coach, Jimmy Choo, GUESS, Montblanc, DKNY, they are all in good shape and they will grow this year. We will look at the smaller brands and, in time, we will definitely edit the portfolio—maybe brands that are doing less than $10 million should not be part of the portfolio. That is why we are looking at always increasing the portfolio of brands, looking for bigger brands and bigger potentials, and we are happy to have signed in the first quarter of this year two new licenses, one with Beckham and one with Nautica. Even though they will start later on, they will be a great addition to the portfolio. Regarding geography, we think that there is good potential in the U.S. We see strength in the U.S., primarily department stores, Amazon U.S., and TikTok U.S.; we will perform a bit better than other parts of the world. Michel Atwood: Maybe just to build on Jean’s comments: we did see very strong growth in the U.S. market. The market was up 7% in the quarter and was very strong in March; it was up close to 9%. That is really driving and fueling the momentum, reiterating our core portfolio. Our top seven brands grew actually 8% this quarter. So we have a very strong portfolio, and I think we have a very long tail that we need to continue to streamline over time. Overall, I would say a very healthy core. And then in terms of emerging consumer segments, we are playing in some of these small-size, trial-size, lower price points when you think about TikTok. And as you know, with Gutal as well as with Sulphurino, we are starting to play in the higher luxury space, which has historically been one of the faster growing segments in this category. Sydney A. Wagner: If I can just poke in one quick follow-up: on that 9% growth you saw in March, are you still seeing that level of growth quarter-to-date, or how did the trends in April compare? Michel Atwood: I do not have the April numbers yet. I think we will be getting them in the next couple of days. We are not hearing or seeing anything that seems to be limiting the growth. I think growth in the U.S. continues to be very healthy. Sydney A. Wagner: Great. Thank you. Operator: Our next question comes from Susan Kay Anderson with Canaccord Genuity. Your line is now live. Susan Kay Anderson: Hi, thanks for taking my questions. It sounds like you feel really good about U.S. growth continuing maybe even into the back half. How are you feeling about Europe and globally in a more normalized fragrance growth environment? And then on newness, no big launches this year, but are you expecting more newness to roll out in the back half versus the first half to maintain share until we get to more blockbuster launches next year and some new licenses? Thanks. Jean Madar: Michel, do you want to answer on Europe? Michel Atwood: Yes, sure. As much as the U.S. continues to do well, I think Europe is more of a mixed bag. You saw our numbers for Eastern Europe. Eastern Europe is particularly impacted by the war in Ukraine and the challenging economic situation there. There has been a dramatic slowdown in purchasing and consumption, and it is definitely impacting certain brands that have a strong presence there. If you look at Western Europe, it is also a mixed bag. There are certain markets like Spain that continue to do well, but we are seeing a significant slowdown in markets like France and Germany—very large fragrance markets. Those are two markets where we are seeing very sluggish growth, even some decline; the last couple of quarters have been declining in France. Conversely, on the positive side, Latin America continues to do well. As the economies improve and the middle class expands, that will represent a long tail of growth in the future. Asia has been a little bit more temporary; we have had to make some changes in our distribution both in Korea and in India, and that is weighing down a bit on our growth, but that should eventually pick up once that situation improves. Jean, I will let you address the innovation piece. Jean Madar: The second part of your question, Susan, was are we going to have a blockbuster in the second part of the year? The answer is, like we have said before, this year of 2026 is not a big year for blockbusters. We really have a concentration of new launches—new big blockbusters—in 2027. We knew that. That is why we animate the portfolio with flankers, so we still have innovation but not as big as what we expect in 2027. It is a coincidence that we have so many new big launches in 2027. Actually, all our biggest brands will have a new franchise, a new pillar, in 2027. So for a year without huge innovation, I think we are doing quite well. Susan Kay Anderson: And then maybe just one follow-up on pricing. You will start to lap the price increases you took last year in August, and you talked a little bit about inflation maybe impacting COGS a little bit. How should we think about pricing as we start to cycle those price increases from last year? Are you expecting to take any more price this year? Michel Atwood: Our priority is to make sure we are offering the right consumer value with the offering. We have historically been very prudent with pricing. Last year we had to take pricing because of the tariffs, and we mostly took pricing here in the U.S. Outside of the U.S., there was very little pricing. At this point in time, unless we see something dramatic happening, it is unlikely we will take any pricing, especially in light of our innovation program. We may take some pricing as we launch new lines next year—it is always an opportunity when you launch something new to elevate the brand and price up—but we are not taking straight pricing on the existing lines. It is going to be more innovation pricing. Jean Madar: I totally agree. We do not like pricing here. We do it when we are really forced. Pricing is not the right answer to maintain or increase sales. We think that the retail price of our fragrances is well adapted at a more democratic level. I do not see pricing unless something like a tariff happens like last year, where we were forced—like everybody else in the industry—to react, but to date, that is not the case. Susan Kay Anderson: Okay. Great. Thank you so much for all the details. Good luck for the rest of the year. Operator: Our next question comes from Hamed Khorsand with BWS Financial. Your line is now live. Hamed Khorsand: Hi. I just wanted to ask you, given that you are seeing the growth in the marketplace with demand outpacing your competitors, is this consumers just trying out your products because they are seeing your advertisements, or is there some sort of loyalty to your brands that you are seeing this year that you were not seeing in prior years? Jean Madar: Great question. It depends on the brand; I think it is a little bit of both. We have some loyal customers coming back when the bottle is empty and they buy again the first. We also have a lot of curious new customers that are targeted by our aggressive digital advertising and buy a fragrance from our portfolio. For instance, I was looking at young boys anywhere from 13 to 17 years old buying a lot on TikTok, buying a lot on Amazon, and buying quite expensive fragrances. They have, apparently, the resources to do so. This is very interesting for us, and we are going in the future to look at these customers. Of course, teenage girls were always part of our target, but this is for us a new trend, and we are going to look at this carefully. Michel, want to add something? Michel Atwood: I would just say this is a category where people are always exploring. You have people that are loyal to a fragrance and wear the same fragrance forever, and some have a core fragrance that they keep and then a couple of new ones that they try on special occasions. What is important is to always be present when the consumer is top of mind. It is one of the reasons that we have spread out our A&P more evenly across the year. As you recall, we used to spend everything in the fourth quarter; we are now spending more regularly, and I think that is helping sustain demand. It is also important to always look good in store and be present in all the right channels. A lot of the work we have done, whether it is with Amazon or with TikTok in anticipating emerging channels, has been quite successful for us. Hamed Khorsand: Yes, that was going to be my follow-up. Given that you are seeing some efficiency or response to your advertising online, does that make you want to change your A&P in any way or put more weight toward what you are seeing respond? I am just trying to gauge if there is a possibility of upside sales here. Michel Atwood: You love asking us questions about A&P ROI. The challenge with A&P is you know that it works; you do not always know how everything works. The tools have gotten better, but generally speaking, we have plenty of opportunities to spend more to get a better return. It is about managing profitable growth and managing the short term, midterm, and long term. Certainly, and that is one of the reasons why you probably heard this in my prepared remarks: if we see more upside coming through in the form of tariff refunds, we will try to reinvest some of that. We believe that there is more upside here. Again, we want to do this responsibly, in terms of managing the top and the bottom line. We are constantly looking at ROI. Ten years ago, everybody was doing TV, and now everybody is doing digital. We are constantly evolving. We are investing a lot right now on Amazon and TikTok. We are always looking for that edge and that ROI, and I think that is a constant optimization opportunity. Hamed Khorsand: Great. Thank you. Operator: Our next question comes from Analyst with Berenberg. Your line is now live. Analyst: Yes. Hi, Jean and Michel. Thanks for the presentation. I have two or three questions; I will ask them one by one, if that is okay. First, about Lacoste—could you help us understand how you are looking at the year as a whole for Lacoste given the soft start? I understand the comment on Eastern Europe, but it is quite an important growth lever for EU ops generally. Do you feel like you can recover some of what you lost in Q1 for that brand specifically? Jean Madar: I am not worried at all about Lacoste, to be honest with you. In the first quarter, we had difficult comparisons. I think we can recoup definitely toward the end of the year. What is important is that in 2027 we are going to have a very important launch for Lacoste. I saw the product; it is great. The advertising will look great. So Lacoste is in very good shape. It is true that Eastern Europe was too slow—this explains a weak first quarter—but nothing to worry about. Michel Atwood: I would just add that Q1 and Q2 last year were really insane growth. We grew 30% in the first quarter; we grew 60% in the second. We had a huge amount of innovation. We are feeling pretty good about Lacoste overall as a brand, and some of the challenges we are seeing this quarter are really related to footprint and disproportionate impact. Lacoste is primarily strong in Europe, and as growth slows down, it is impacting the brand disproportionately. But the brand is very healthy, and we are feeling really good about it. Analyst: Perfect. Thank you. Second, how did orders trend through Q1—maybe putting the Middle East to one side as an exceptional circumstance? Do you feel more positive on the rest of the countries now than you did in, say, January or February? Jean Madar: I can try to answer that. We put our guidance for 2026 in November 2025, when we said that we would do $1.4448 billion. We have not changed the guidance even though there is a big conflict in an important region—the Middle East—which represents 7% of our sales. That means that we think that we will be able to find some growth outside. It is also a good thing to have a conservative guidance at the beginning of the year because we sell in 120 countries, and with so many geopolitical threats that we cannot control, we do not have to lower guidance even though there are difficult times in important regions. As of now, business is doing well. The orders that we received are in line with our projections. Michel, you want to add something? Michel Atwood: Our orders have been broadly in line with our expectations. The dip in the Middle East really happened in March and impacted March disproportionately. We do expect that quarter two will also be impacted disproportionately. Today, if we think about Q2, we are seeing Q2 as being flattish versus last year. Until we see how this settles and eventually picks up, we are going to continue to be prudent. Analyst: Very clear. Thank you. Third and final question: on the direct-to-retail channel, I know you have taken in-house Korea because you had to, but are there any markets where you feel like you are closer to reaching a scale where you could potentially in-source those? Would love to hear more about any projects you are working on there. Jean Madar: Please, Michel. Michel Atwood: I would say we are very happy with the partnerships. At the end of the day, the question is: what are you looking for? Are you looking for gross margin, or are you looking for total shareholder return? In a lot of the markets where we are currently present, we have great distributor partners—many we have been working with for many years. We are quite pleased with the level of progress and return on investment. There are always opportunities, particularly as we grow, to consider certain large markets, but the question is what do you get for it? Yes, you might get a better gross margin, but you will also get more expense, more inventory to manage, and more accounts receivable. At the end of the day, where are we going to get the best TSR? With the footprint we have, I think we have the best TSR. If something comes up at some point which makes more sense, we may consider it. At this point in time, we are not really looking to convert distributors to affiliates. Jean Madar: I totally agree. Korea was an opportunity; we took it. We can reevaluate, but nothing forces us to change from a distributor to subsidiaries. Operator: We have reached the end of the question and answer session. I would now like to turn the call back to Michel Atwood for closing comments. Michel Atwood: Thank you again for joining us today. Thank you to our teams for their continued dedication and agility in navigating this uncertain environment and helping us drive the efficiencies supporting our ongoing success. I would like to mention that I will be participating in the Jefferies Conference in Nantucket in June. If you would like to participate, please reach out to your sales representative at Jefferies for information. If you have any additional questions, please contact Devin Sullivan from The Equity Group, our IR representative. Thank you, and have a great day. Operator: This concludes today’s conference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Greetings, and welcome to the Celanese Q1 2026 Earnings Call and Webcast. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to Bill Cunningham. Thank you, Bill. You may begin. William Cunningham: Thank Daryl. Welcome to the Southern East Corporation First Quarter 2026 Earnings Conference Call. My name is Bill Cunningham, Vice President of Investor Relations. With me today on the call are Scott Richardson, President and Chief Executive Officer; and Chuck Kyrish, Chief Financial Officer. Celanese distributed its first quarter earnings release via Business Wire and posted prepared comments as well as a presentation on our Investor Relations website yesterday afternoon. As a reminder, we'll discuss non-GAAP financial measures today. You can find definitions of these measures as well as reconciliations to the comparable GAAP measures on our website. Today's presentation will also include forward-looking statements. Please review the cautionary language regarding forward-looking statements, which can be found at the end of both the press release and the prepared comments. Form 8-K reports containing all of these materials have also been submitted to the SEC. With that, Daryl, let's go ahead and open it up for questions. Operator: [Operator Instructions] Our first questions come from the line of Ghansham Panjabi with Baird. Ghansham Panjabi: I guess, first off, based on your first quarter operating results, it seems like your major end markets are basically weak apart from some order pattern distortions specific to prebuys, et cetera. As it relates to your guidance for the back half of the year, are you basically assuming that the operating environment reverts back to what you were seeing prewar? And I guess I'm referring specifically to the $3 per share in EPS you're guiding towards for the back half of the year. Scott Richardson: Yes. Thanks for the question, Ghansham. I think we've been pretty consistent with where our focus is. And it really remains on cash generation while we position our businesses for long-term success. And that's because we're in a world where demand continues to be low at an end use level. And certainly, with some of the supply chain disruption, that we're seeing here in the second quarter, we're going to go capture that. But we are really building something that we believe is very resilient as we go forward. So as we look to the second half, we ran a lot of different scenarios. And as we look at the scenario, we do believe the right one to assume in the second half is one where supply chains start to unwind here by the end of the quarter here in Q2, and you see that kind of moderate on where volumes and margins are in the second half. And we just believe that's the right assumption at this point. Ghansham Panjabi: And then as it relates to some of the network moves you've made in terms of ramping up capacity in certain cases in Frankfurt, et cetera, VAM, VAE and so on and so forth. What happens in the scenario that demand normalizes, would you adjust accordingly given that you're ramping up this capacity again, obviously, based on search demand, et cetera? Scott Richardson: Yes. The words we use internally, Ghansham, are being positioned to respond. And that's not just here in Q2. This is how we operate every single day. And we've run Frankfurt, we've run Singapore as swing units, but we also swing our operating rates in the acetyl chain as needed. We pivot our supply chain in Engineered Materials as customer demand shifts and changes. And so we're going to continue to position the company and the day-to-day business where it needs to be to respond. And so if demand continues to stay where it is, we've got the assets running where they are. Demand changes, then we'll pivot as needed. Operator: Our next question has come from the line of Patrick Cunningham with Citi. Patrick Cunningham: Your U.S. production at Clear Lake has a pretty significant advantage. I guess how have operating rates trended in the first quarter? And how are they progressing into 2Q and I'm just curious if there are any limiting factors to maximizing those rates or any logistics bottlenecks you foresee across the complex. Scott Richardson: Yes. Thanks, Patrick. It really is about reliability of supply for our customers. And Clear Lake is a great asset that can flex really across the products that we make there. And then we've got downstream assets positioned around the world that can also flex. And as I just mentioned on the previous question, Frankfurt is one of those assets that we block operated in a way that can flex as needed. And we're going to continue to adjust those rates as needed, as you can imagine, just given where some of the supply chain challenges have been this quarter, Clear Lake is running at a relatively high utilization rate. Patrick Cunningham: Got it. And then just on EM. Can you talk a little bit about the playbook in sort of response or in context of the crisis in terms of pricing, share gain opportunities how is the Nylon 66 market performed? And any meaningful change in supply or trade flow dynamics at this point? Scott Richardson: Yes. Look, how we look at our EM business, these are the right products at the right time to drive growth in a world that is challenged for growth. And we do that by ensuring that we've got the right segment focus and then kind of drill down below that into a subsegment focus. And we are extremely well positioned with the asset base from a compounding standpoint, which is where we create the most value in that last step of the process, our assets are extremely well positioned in each region. And so we are able to move polymer or buy polymer in each region to be able to adjust as certain products may have scarcity because of supply chain challenges, or be able to adjust pricing to deal with rising feedstock costs. And it does tend to take a quarter or 2 for those feedstocks to really fully flow through in the Engineered Materials business. And so it was important that we work to try to get ahead of that from a pricing standpoint now. Operator: Our next question is come from the line of Jeff Zekauskas with JPMorgan. Jeffrey Zekauskas: Can you talk about prospects for [ benzene ] and how that will affect your Engineered Materials EBIT or EBITDA or equity income? Scott Richardson: Yes. Thanks, Jeff. When you look at benzene, in 2025, they actually had a fairly large turnaround. So earnings were a little bit lower last year. And so right now, as we estimate earnings 2026 versus 2025, we're assuming pretty much flattish, Jeff, on what rolls through equity earnings right now. Now the plant -- most of the assets there have not been operating for the last 6 weeks or so because of shipping constraints as well as a raw material feedstock disruption. And so you'll have to see kind of where that goes here into the second half, but given the fact that we are on a 1-quarter lag, there. And the fact that 2025 was a pretty low number, we're right now assuming flattish. Jeffrey Zekauskas: Okay. Great. And then in the acetyl chain, in the second quarter, you're going to make maybe a little less than $200 million more. Can you analyze that in terms of -- is it more acetic acid? Is it more VAM? Is it more China? Is it more U.S. exports? Can you give us an idea of how that improvement in the acetyl chain flows? Scott Richardson: Yes. So I would say it's not really dissimilar to kind of fundamentally how the business operates in most quarters. The majority of the profit, as we've said in the past, comes from the Western Hemisphere. And I think the lift here from Q1 to Q2 is definitely weighted heavier towards the Western Hemisphere as well. And it's that low-cost advantage that we have in our asset base in Clear Lake and being able to utilize that across the Western world. We have seen margins move up in Asia as well. I would say from a product standpoint, Jeff, very much disproportionate to the vinyls chain. So think VAM downstream into vinyl emulsions and then redispersable powder. So again, not dissimilar to how we've talked about the business to being a lot of the profitability coming less from selling acetic acid as acetic acid, but really monetizing downstream and then seeing pockets of growth opportunity. We've talked over the last year or so about the importance of vinyl emulsions as well as powder is kind of being a very small pocket of growth in certain parts of the world, and we're definitely seeing that right now. And vinyls chemistry has a nice advantage in a higher oil environment over competing systems. And so we're seeing and working with customers on growth opportunities to drive some switching as well. And so that's really where that focus is much more downstream in the product portfolio. Operator: Our next questions come from the line of Vincent Andrews with Morgan Stanley. Vincent Andrews: I wanted to ask on the second half in EM. There's some comments in the prepared remarks about what you're doing on the nylon side of the equation that you expect some inventory drawdowns and some structural inventory reductions that were already underway. So is that coming on the customer side of the equation? And you think that's going to accelerate because you're going to be reducing capacity? If you could just color on some of those lines for us, that would be helpful. Chuck Kyrish: Yes. Vincent, yes, in the second half, in Engineered Materials, we would expect an additional $50 million of absorption hit on the income statement. That is from drawing that nylon from the transition. But we've had, as you know, some other structural inventory production actions underway, right? So yes, I would say, even with all that, we are targeting to grow at the end of the year, which will more than offset these -- so absorption hits over the year, which is about $35 million, the turnaround expense, which is about $15 million here coming in Q2. Potential raw material cost pressures that Scott talked about or even demand pull back and also offsetting the Micromax earnings, right? So at the same time, I think it's important to remember, we're also fortifying the base in EM, reducing costs, reducing complexity, taking this inventory permanently out of the system. So it's really been in the plan and in place for some time. Vincent Andrews: Okay. And if I could just follow up on the Acetyl Chain. I didn't -- I don't think I saw this in prepared remarks. Does the second half assume that you're still running Frankfurt for the full second half? Or does it assume some reduction in operations there? Scott Richardson: Vincent, there's different scenarios that could potentially play out. And so we are assuming that Frankfurt is going to operate into the second half at this point. We do have some turnaround activity in two of our VAM units around the world. We've got both the U.S. VAM units in turnaround between now and the end of the year. And so just depending on where demand is at, we'll determine what that Frankfurt operating rate schedule will look like. And -- but certainly, the expectation is that it's going to operate into the second half. Operator: Our next questions come from the line of Michael Sison with Wells Fargo. Michael Sison: Nice start to the year. In terms of the second half, just curious, if nothing really changes in terms of the conflict here, does the run rate in 2Q for EPS kind of mirror third quarter, meaning does third quarter look like second quarter and then you sort of have a bigger drop in the fourth to get to your $3? Or is it -- are you assuming things get better and we're kind of $1.50, $1.50?. Scott Richardson: Yes. Let me hit kind of a high level there, Mike. And then I'll turn it to Chuck to talk about kind of the cadence. As we look at the second half guide, it was really kind of looking at a scenario where we start to see some of the unwinding of the supply chains here by the end of Q2 and then kind of continuing into the third quarter and then into the fourth quarter. Your question is, if we see things kind of stay where they are, I would look at how we think about our business. I mentioned that position to respond earlier. It's kind of like a coiled spring. And if the opportunity is there, then we're going to release that spring. And so if things stay where they are from a demand and a supply chain standpoint, then there's certainly upside in the second half. Chuck Kyrish: Yes, Mike, based on the guide, there's a lot of moving parts and a lot of uncertainty. But I think probably the easiest way to think about it right now is if you look at normal seasonality in any given year, Q3 versus Q4, it's about $25 million, $30 million in each business. I think for now, that's a pretty good place to start. I wouldn't be surprised to see a similar pattern this year. Michael Sison: Got it. And then just a follow-up on Clear Lake. I recall Clear Lake II was running full out or running pretty high. Is Clear Lake I now sort of ramped fully up to sort of take advantage of the higher pricing and such? And then where are industry margins now relative to the past peaks? Scott Richardson: Yes, Mike, let me answer your last question first. Certainly, we are nowhere near kind of what would be past peak demand levels globally or mid-cycle demand levels globally. And so I would not necessarily compare that to past periods from a margin or a volume perspective. And in terms of your first question, I would go back to the answer to Jeff's question is the majority of the opportunities that we're seeing are more downstream for acetic acid in the vinyls chain. And so as we look at Clear Lake operating rates, we've got both of those assets that we have there kind of dialed in at the right level to get the optimal usage, et cetera, and efficiency that we want from both assets and being able to pivot up or down as needed. So really, it's more of a downstream opportunity that we're seeing as opposed to fundamental acetic acid demand. Operator: Our next questions come from the line of David Begleiter with Deutsche Bank. David Begleiter: Scott, some of your peers have talked about 9 to 12 months until supply chains normalize post the end of the conflict. It looks like you're targeting maybe a shorter time line to normalization acetyls. Can you talk to that time line you're looking at? Scott Richardson: Yes. Thanks, David. Look, it's about scenario planning, and there's a lot of different scenarios that could play out. And as you kind of look at the assumptions that we've made here that we start to things begin to unwind and that begin of that unwinding. It just -- it depends on what that kind of decline curve looks like in terms of volume and price based upon the speed of that unwinding. And I think that is uncertain right now. But we felt like it was important to be prudent in terms of how things could play out because there's also a potential offset to demand with feedstock prices high and where they are, there could be an impact to underlying demand. And so we kind of put all those things out there. And again, felt like it was the prudent guide for the second half. But also, as I said earlier, look, we are ready. And our team has done a great job of responding to the environment here in the second quarter. And if we see that environment continue, then we'll go capture that upside. David Begleiter: Very good. And just on EM, you've announced some price increases. So what's the cadence of price cost as we go through Q2? Are you ahead behind or neutral? And how is it go into the back half of the year? Scott Richardson: Yes, we're starting to get some of that price flowing through as it is kind of a slow uptick here in the second quarter, but it's important that we really begin to achieve that because the cost, while flowing through a little bit here in Q2 is going to hit us heavier in Q3. And I think we should see that hopefully fully materialize in the P&L in the third quarter. And so it's important as we exit Q2 that we're achieving the maximum amount of that price. So we're certainly on the trajectory there. But the next 6 weeks here as we finish the quarter are going to be really important in that equation. Operator: Our next questions come from the line of Frank Mitsch with Fermium Research. Frank Mitsch: Terrific. And actually, David's question leads nicely into what I wanted to ask about, and that's on the acetyl side of things. I mean, as you look at the second quarter, my assumption, and please correct me and expand upon it is that you're raising price in the acetyls upstream and downstream. And the expectation would be that you're going to end the second quarter at a higher price level than what the 2Q average would be such that we're going to start 3Q at a higher level. I mean -- so a couple of questions. Is that how you're thinking about it as well? And based on your prudent guidance, are you factoring some measure of price degradation in the third quarter? Or how do you think about the price balance on acetyls and how we're going to enter the second half? Scott Richardson: Yes, Frank, I don't know on a global basis that, that necessarily is right assumption. We've already seen pricing in China start to moderate as from where it was in -- at the beginning of April. So actually, I don't think on a global basis, that's actually kind of the case of where things will be. I think we'll probably see that price in Asia, stay where it is or possibly moderate a little more as we work our way through the quarter. In the Western Hemisphere, where pricing is now is probably similar to where it will be at the end of the quarter, depending on where competitive dynamics are. So I actually think where we were in April was probably the higher watermark just as we look at the cadence today. Frank Mitsch: I understand what you're saying about China. My understanding is that some of that was also demand destruction. So they actually don't have -- you can't sell the products downstream at least here in the near term. But from -- in the Western world, would you assume that in North America, that you would give back something on price in the third quarter? Scott Richardson: I think it's TBD, Frank. I think volume, we've got a moderation of margins and price as you work your way through the third quarter. Just from a normal seasonality standpoint, Q2 tends to be the highest quarter from a volumetric perspective, typically in acetyl. So you would normally have some volume come off in Q3 from a seasonality perspective through the holiday period. And so we've kind of factored some of that into the assumptions for Q3. Operator: Our next questions come from the line of Hassan Ahmed with Alembic Global. Hassan Ahmed: Just wanted to sort of dig a little deeper about this sort of uneven sort of pricing dynamic regionally that you guys talked about within acetic. I mean my understanding is that as I take a look at the raw material side of things, just in the Middle East alone, there seems to be 26 million to 27 million tons of methanol capacity that is off-line, right? And obviously, methanol pricing across the globe has risen quite rapidly, including China, right? So I'm just trying to understand this recent dip that we've seen, particularly in Chinese spot acetic pricing. Where are the margins there? Are operating rates still relatively elevated? Just trying to sort of make sense of this uneven sort of pricing environment by region. Scott Richardson: Yes, Hassan, I think that's a good time to really call out the decisive actions that our team in acetyls has taken around the world in the quarter. They responded really quickly at the end of Q1 in order to take advantage of the margins started to move up there in China, in particular, and that's really the only place that we saw benefit from some of the supply chain disruption in Q1, but they were really working to position for the second quarter. And as we kind of look at it, your margins were highest probably here in Q2 in China at the very beginning of the quarter, and they've come off. But we're certainly not at margin levels where they were at the beginning of 2026. So you're kind of in between that -- where they were at the beginning of April and where they were when we started the year. And so it's somewhere in that zone. We did see -- China was in holiday last week, came back today. Pricing did move up a little bit. So we're going to have to kind of see where -- how that holds and where demand is. But demand has held relatively steady from what we can tell through the value chain in China. Hassan Ahmed: Very helpful, Scott. And as a follow-up, can you just give us an update on where you guys stand with regards to any further potential divestitures? Chuck Kyrish: Yes, Hassan. Yes, we continue to work that very aggressively. And I would say the current events haven't helped the M&A market. But regardless, we do feel good about signing another deal this year. It could be a smaller deal, but we're working hard to get one signed. We have not baked in any assumption for cash proceeds from a deal just from the uncertainty of kind of signing versus closing. Operator: Our next questions come from the line of Kevin McCarthy with Vertical Research Partners. Kevin McCarthy: Scott, can you speak to your mix of contract versus spot business within acetyls on a pre-war basis and speak to how that is evolving, if it's changing at all post war. For example, if we consider VAM and some of the parabolic price action there, is your philosophy to sort of strike while the iron is hot and take advantage of this windfall opportunity, you might say? Or is it to really focus on upgrading your contracts and the terms and the mix with an eye toward the medium to longer term or some balance of those? Maybe you can just kind of talk through that and how you're thinking about it.. Scott Richardson: Yes. Let me just kind of step back a minute, Kevin. Our team is first focused on being the most reliable supplier in each region, in each product. And I think we've developed a network pretty deliberately for over many, many years that can achieve this and give us flex to be able to respond to what happens and what kind of landscape changes happen. And so the pricing mechanisms that we have are different in each region, in each product, to be honest. We've got some formula pricing in certain regions, particularly VAM in the United States that we've talked about. It kind of moves with raw materials, gives us a nice base, gives us cost pass-through. We've got a lot more contracted business in Asia, but moves with how the market is moving very quickly. And then we've got blends in the balance of the business in the U.S. and in Europe on different mechanisms. And so this is about being ready in an environment like we are now. And so being able to flex with some extra volume gives us that ability to be that reliable supplier for customers and for new customers that are just coming to Celanese or just coming back to Celanese. And so it is about how do we get that business secured longer term. And we are securing business that we had -- didn't have under agreement for the second half. And so as that process works here in the second quarter, it will give us better clarity on what the third and fourth quarter are going to look like as we are able to utilize this flex capacity that we have. Kevin McCarthy: And then secondly, I wanted to ask about your new strategic initiatives in nylon that you announced last night in the U.S. and Singapore, I think you're targeting incremental cost savings of $30 million. So maybe you can step through what you're doing there and comment on the cash cost to achieve those savings? And the timing of the flow-through of the $30 million in coming quarters or years? Scott Richardson: Yes. Let me hit kind of the philosophy and the strategy around the changes, Kevin, and then I'll turn it to Chuck to talk about some of the details. When it comes to Nylon 66, we've been very open about this now for more than a year. And as we said in the past, our value is in the compounding step of the process. And that's not changing here. And in fact, we're enhancing our compounding capabilities in our specialty products where we need to, to ensure the reliability of supply to our customers. And we've had a very thoughtful step plan to ensure the short- and long-term sustainability of how we get polymer. And so being able to optimize this make versus buy on polymer is critically important. And so these announcements around polymer capacity for us is really the next big wave of that commitment to improving the fundamental profitability of the Nylon 66 business, and we believe these are the right news for us right now. I think as we go forward, we would expect about $30 million of savings. As you mentioned, about 1/3 of that will probably hit here in the second half of the year. And I'll turn it to Chuck to talk about the other details. Chuck Kyrish: Yes. Thanks, Kevin. Yes, like Scott said, about 1/3 of that $30 million starts rolling in this year. Your question on the cash costs, think about that as sort of less than a 1-year payback of that $30 million. That's been in our free cash flow forecast this year. So nothing incremental there. Operator: Our next questions come from the line of Laurence Alexander with Jefferies. Laurence Alexander: Just wanted to flesh out how you're thinking on working capital. How much you think in your base case, working capital will be a use of cash for this year? And as you think about this year and next year, is working capital just ebbing and flowing with your expectations around input costs? Or is there going to be some net drag on EBITDA at some point to work to reduce your working capital position? Chuck Kyrish: Yes. Thanks, Laurence. Let me talk about free cash flow this year and sort of talk about working capital within that. If you look at our midpoint of our earnings guide, that's about a few hundred million of EBITDA growth this year. That will translate into free cash flow, but it is likely that -- it will be split between '26 and '27 as it works its way through working capital. Right now to simplify, we're assuming we collect about half of that increased EBITDA this year and half next year. So that would mean about half of that gets tied up in working capital. I think before that, we were assuming this year actually that working capital would be a source of cash of, say, call it, $100 million as we continue to reduce inventory in EM. So maybe working capital in this scenario is closer to flat for the year. And then I think you kind of ebb and flow with demand, but we do expect to continue to take inventory out of the system and generate tailwinds in working capital. Operator: Our next questions come from the line of John McNulty with BMO. John McNulty: So on EM, with all of the work that you've been doing and I guess, some incremental work even this year, I guess, is there a way to think about -- maybe this year is not necessarily a normal year, I guess, is there a way to think about what you think the mid-cycle earnings power of the business is now just given all the changes that you're completing and also maybe a more normalized demand environment? Scott Richardson: Yes. Thanks, John. The words that we used in the prepared comments, I think, are important to think about here. It's really about growth and Fortify. And as we think about the Fortify piece, I mean that's -- we've been working that hard with the cost reduction actions that we've taken out, the efficiency that we've been able to drive, how we're adding technology to the business with our CAMIL platform, there is -- we are strengthening this business and positioning it to be able to ready to respond to customer needs. The other thing that the team has been working really hard on is kind of building a really deep segment approach focused on where we can win and where we can hold that business. So where we have a differentiated offering in growth subsegments in things like medical, electronics, data centers, some key growth industrial applications, high-performance athletic wear, there's just a lot of really great work the team has been doing in these high-growth areas. And so positioning well there, building the pipeline so that we can hit that growth piece going forward. And look, growth is always hard. Growth is even harder when the world around you isn't growing broadly, but there are pockets of growth here, and that's really where that focus is. And so it's hard to say what mid-cycle will look like. We do not believe we're anywhere near mid-cycle demand in kind of our historical key end uses as well as some of these emerging growth areas. So as we work that, as we continue to build out what we think the addressable market space is there, then we'll provide that color in the future. Operator: Our next questions come from the line of Matthew DeYoe with Bank of America. Matthew DeYoe: I think there's a desire amongst investors really sell side as well to just get a better handle on like what EM is now, given just the kind of asset aggregation and then closures and repolymerizations and closures. I get the core identity and thesis behind Fortify. But like at the end of the day, what is an achievable -- I don't know, I don't want to call it mid-cycle because it's not necessarily a pure commodity business. But what should the people or what should the market think about as like a reasonable expectation on profitability for this business under normal demand, normal kind of margin structure? Scott Richardson: Yes. Thanks, Matt. There's a lot to unpack there. What I would say is this is a business that is customer-focused with an eye towards building unique solutions. And it's a business that we've been working hard over the last 3.5 years to make sure that we're well positioned in the environment that we're now in globally with a lot of the competitive landscape that's changed to be able to win. And it's a business that has unique capabilities. It has unique products and it has a unique ability to be able to get polymer solutions to do just about anything. And we've got a great model that I think ensures that the things that we're working on are going to drive the profitability on our worth the time and effort that it takes to work these solutions. And so I think what we've been able to do now is take a business that was performing on an EBITDA basis in the low teens now to one that's now consistently performing north of 20%. And the idea is to keep moving that upward. Even if the world around us is not growing, we are focused on growth. And when you look at and kind of back into our assumptions for this year and you normalize out Micromax and the $40-or-so million of EBITDA that comes out of that, this is a business that's going to grow year-over-year, even though its end markets are not growing. And so I think that's the way to think about it. It's a business that should be able to grow like we did in the past, going back 5, 10 years ago at 5% to 10% minimum on the EBITDA line and a business that's consistently going to find a way to be able to deal with whatever the global environment is. And if we see a normalization of demand back to mid-cycle, and it's hard to say what that looks like because the world's changed quite a bit, then I think you also possibly get kind of a hockey stick lift on that at some point. So it's about being consistent. It's about being ready, and it's about continuing to take the hard steps to ensure that we have the cost structure in place to be able to win in a very competitive landscape. Matthew DeYoe: If I could just ask on the acetic side, right, like I've never really trusted some of the consultants when it came to U.S. acetic prices. But to your point, Asia is off peak. And that would lead me to believe like absent another leg higher, it remains maybe a bit curiously below Western markets. So how does that sustain -- well, first off, is that right? Because, again, I don't have confidence in the U.S. pricing, I get. But how does this sustain? And then how does weaker acid pricing not translate to weaker VAM? Or would that weaker acid back up into methanol? Like how possible is this just stays kind of relegated to one market? I would assume it's not, but I don't just want to hear you opine on it. Scott Richardson: Yes. Matt, as you know, I'm old, and I've been here at Celanese for 21 years. And when I joined Celanese, you are what we now call Acetyl Chain business was an acetic acid business. And now it is an acetyl chain business. And it's a business that doesn't rely on us just selling acetic acid in order to be successful. And back then, 20 years ago, over half of what we sold to an end customer in this business was acetic acid. That is very much not the case anymore. And so some of the dynamics that you talk about, we are very much less susceptible to those acetic acid movements. And yes, you are going to see acetic acid pricing in some regions roll through into the downstream, but it usually takes some time, both on the way up and on the way down. And so it's about managing that, and it's also then continuing to position for the pockets of growth that are in this business. And yes, they've been small, but there have been pockets of growth for us in the vinyl emulsions part of the business as well as in redispersible powders. And in the environment we're in now, we're finding ways at which to expand that. As I mentioned earlier, with some of the switching that customers want to do away from oil-based systems, this is giving us a nice advantage and the opportunity is now for us to go get that business, get it contracted and extend it into next year and beyond. Operator: Our next question has come from the line of John Roberts with Mizuho. Unknown Analyst: This is [ Eden Badiger ] for John. My quick one, Scott. So in this inflationary environment, like how concerned are you about demand disruption in the later parts of the year? And related to that, are you seeing any signs of prebuying by customers that trying to get ahead of price increases that they're seeing coming? Scott Richardson: Yes. Thanks for the question. Yes, look, it's something that we're very much concerned about, and we're watching very closely. And it factors into the scenarios that we put out for the second half. And there's no doubt that's something that we are looking at. And we put it in our prepared comments that particularly in Engineered Materials, that we may be seeing a front-loading of some of that volume. And so that certainly factors into the guide that we made for the second half. I don't think we're seeing much of that in acetyls, to be honest with you. I mean the products that we have there largely are liquid bulk chemicals. They have some element of shelf life as well as storage limitations around the world. So I don't think it's much of a factor there, but it's certainly something that we're cognizant of on the Engineered Materials side of the house. William Cunningham: Daryl, we'll make the next question our last one, please. Operator: Our final question will come from the line of Josh Spector with UBS. Christopher Perrella: It's Chris Perrella on for Josh. Can you size the Palm turnaround impact in the second quarter there? I might have missed that earlier. And is the later restart dependent on the ability to get speed out of benzene? Or can you make the economics work buying methanol to feed the plant there? And I guess the corollary is, are you seeing raw material sourcing issues, particularly in Asia at this point? Scott Richardson: Yes, Chris, let me start, and I'll let Chuck fill in the details. Let me hit the second part of your question first. No, we are -- we have already moved and we are moving methanol from our plant in the United States over to Europe. So our Palm unit in Europe either uses sourced methanol from the market or uses our own cost-based U.S. natural gas-based material. Chuck Kyrish: Yes. Let me talk about kind of walk Q1 to Q2, both the turnaround and some of the other inventory. So in Q1, we built POM inventory, hit the income statement, $25 million benefit in Q1. Now in Q2, we're going to draw that POM inventory down, but we will build some nylon for the transitions that we've talked about. Expect a net $10 million absorption hit to the income statement in Q2, plus about $15 million of turnaround expense. As you know, from the guide, we do expect to offset the majority of that $50 million sequential headwind through the volume improvement and pricing actions we've talked about. William Cunningham: Well, thank you, everyone. We like to thank you for listening in today. And as always, we're available after the call for any follow-up questions. Daryl, please go ahead and close out the call. Operator: Ladies and gentlemen, thank you so much for your participation. This does conclude today's teleconference and webcast. Please disconnect your lines at this time, and have a wonderful day.
Operator: Hello, and welcome to Alpha Teknova, Inc. first quarter 2026 financial results. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. I would now like to hand the conference over to Jennifer Henry. You may begin. Jennifer Henry: Thank you, operator. Welcome to Alpha Teknova, Inc.'s first quarter 2026 earnings conference call. With me on today's call are Stephen Gunstream, Alpha Teknova, Inc.'s President and Chief Executive Officer, and Matthew C. Lowell, Alpha Teknova, Inc.'s Chief Financial Officer, who will make prepared remarks and then take your questions. As a reminder, the forward-looking statements that we make during this call, including those regarding business goals and expectations for the financial performance of the company, are subject to risks and uncertainties that may cause actual events or results to differ. Additional information concerning these risk factors is included in the press release the company issued earlier today and they are more fully described in the company's various filings with the SEC. Today's comments reflect the company's current views, which could change as a result of new information, future events, or other factors, and the company does not obligate or commit itself to update its forward-looking statements except as required by law. The company's management believes that in addition to GAAP results, non-GAAP financial measures can provide meaningful insight when evaluating the company's financial performance and the effectiveness of its business strategies. We will therefore use non-GAAP financial measures for certain of our results during this call. Reconciliations of GAAP to non-GAAP financial measures are included in the press release that we issued this afternoon, which is posted to Alpha Teknova, Inc.'s website and at sec.gov/edgar. Non-GAAP financial measures should always be considered only as a supplement to, and not as a substitute for or as superior to, financial measures prepared in accordance with GAAP. The non-GAAP financial measures in this presentation may differ from similarly named non-GAAP financial measures used by other companies. Please also be advised that the company has posted a supplemental slide deck to accompany today's prepared remarks. It can be accessed on the Investor Relations section of Alpha Teknova, Inc.'s website and on today's webcast. And now I will turn the call over to Stephen. Stephen Gunstream: Thank you, Jennifer. Good afternoon, and thank you, everyone, for joining us for our first quarter 2026 earnings call. It was a relatively straightforward quarter for us across the board, with revenue and operating expenses delivering in line with or better than our expectations. Revenue grew 13% compared to the same period last year, led by 85% growth in Clinical Solutions. Gross margin, operating expenses, and free cash outflow were in line with our expectations, including the planned incremental spend in sales and marketing. From a macro environment perspective, we continue to see stabilization across our end markets, and as we learn more about how our customers are planning for late-stage clinical trials and commercial production, we are growing increasingly confident in our ability to deliver long-term, sustainable, above-market growth. Building on that, I would like to provide a little more detail around our thoughts on the current macro environment. In the first quarter, we saw an increase in the number and total dollar value of orders over $25 thousand compared to the same period last year, which we believe indicates that some of our customers are shifting their focus from cash conservation to strategic execution. While there are still accounts focused on conserving capital, we believe this headwind has now been offset by an increase in customers placing orders to move their research and clinical studies forward. Notably, we are seeing growth in nearly every end market segment we serve, including life science tools, diagnostics, and biopharma. Moreover, some of our leading indicators, such as customer engagement and funnel health, provide us more confidence in a predictable market backdrop going forward. We are therefore encouraged that we began ramping our commercial investment at the beginning of 2026. As a reminder, the roughly $2 million annual increase in commercial spend is split between marketing and sales to increase lead generation activities, build lead qualification infrastructure, and onboard sales associates with experience in tools, diagnostics, and large pharma. I am happy to say that these initiatives are on track and that we should be able to see their impact on revenue by early 2027. We believe these investments, combined with the rebound in biotech funding and the progression of our customers' therapies and diagnostics towards commercialization, should position us for approximately 20% revenue growth in 2027. Operationally, we continue to focus on driving throughput, process improvements, automation, and software implementation. In the first quarter, we increased our high-volume bottle production by tripling our single-batch size and implementing an automated aseptic filling line. This project allows us to not only scale production volumes but also to reduce labor hours per unit. From a software perspective, we have now migrated 90 of our 3 thousand-plus paper batch records to digital, providing enhanced data analytics, increased visibility, better documentation quality, and improved standardization. We are fortunate to have dedicated engineering and software development teams on staff to lead these initiatives as we look to scale and achieve profitability. In the meantime, we remain focused on executing our plan by driving growth in Lab Essentials customer wallet share and increasing our active Clinical Solutions customer count. We are excited about the traction we are seeing so far in 2026 and believe the substantial investments we have made over the past three years have positioned the company to scale and generate significant value for our customers and stockholders alike. I will now hand the call over to Matthew to talk through the financials. Matthew C. Lowell: Thanks, Stephen. Good afternoon, everyone. As Stephen explained, revenue was up 13% for the first quarter of 2026 compared to the same quarter in the prior year. This was also the first Q1 in which we earned over $11 million in revenue in nearly three years. I am also very pleased with our progress on key profitability measures and cash usage. Overall, we delivered strong financial results for the first quarter of 2026. For revenue, Lab Essentials products are targeted at the research use only, or RUO, market and include both catalog and custom products. Lab Essentials revenue was $8.4 million in the first quarter of 2026, up 3% compared to $8.1 million in 2025. The increase in Lab Essentials revenue was attributable to higher average revenue per customer, partially offset by a decreased number of customers. Clinical Solutions products are made according to Good Manufacturing Practices, or GMP, quality standards, and are primarily used by our customers as components or inputs in the development and manufacture of diagnostic and therapeutic products. Clinical Solutions revenue was $2.1 million for the first quarter of 2026, an 85% increase from $1.2 million in the first quarter of 2025. The increase in Clinical Solutions revenue was attributable to an increased number of customers and, to a slightly lesser extent, higher average revenue per customer. We expect revenue per customer to increase over time when a subset of these customers ramp up their purchase volume as they move through the clinical phases. However, this metric can be affected by the addition of newer Clinical Solutions or GMP catalog customers, who typically order less. Just as a reminder, due to the larger average order size in Clinical Solutions compared to Lab Essentials, there can be more quarter-to-quarter revenue lumpiness in this category. Onto the income statement. Gross profit for the first quarter of 2026 was $3.8 million, compared to $3.0 million in the first quarter of 2025. Gross margin was 34.2% in the first quarter of 2026, up from 30.7% in the first quarter of 2025. The increase in gross profit was driven primarily by higher revenue. Operating expenses for the first quarter of 2026 were $8.1 million, and for the first quarter of 2025 were $8.0 million. The increase in 2026 was primarily driven by higher spending in sales and marketing resulting from higher headcount and increased marketing expenses, partially offset by lower general and administrative expenses attributable to lower stock-based compensation expense and professional fees. Net loss for the first quarter of 2026 was $4.6 million, or negative $0.08 per diluted share, compared to a net loss of $4.6 million, or negative $0.09 per diluted share, for 2025. Adjusted EBITDA, a non-GAAP measure, was negative $2.0 million for 2026, compared to negative $2.5 million for 2025. Capital expenditures for the first quarter of 2026 and 2025 were both $200 thousand. Free cash outflow, a non-GAAP measure which we define as cash provided by or used in operating activities, less purchases of property, plant, and equipment, was $3.6 million for the first quarter of 2026, compared to $4.3 million for 2025. This decrease compared to the prior year was due to lower cash used in operating activities. Turning to the balance sheet. As of 03/31/2026, we had $17.8 million in cash, cash equivalents, and short-term investments, and $13.2 million in total borrowings. 2026 outlook. Turning to our 2026 guidance and outlook, we are reiterating our 2026 total revenue guidance of $42 million to $44 million. At the midpoint, this implies approximately 6% revenue growth compared to 2025. As our underlying end markets continue to recover, we have seen improvement in orders of custom products from both biopharma and life science tools and diagnostics customers. Customer conversations about future 2026 custom product orders continue to be encouraging, and we have started to see more large orders, those greater than $25 thousand, but are waiting to see more durability before we consider changing our guidance for the year. As we have indicated before, due to the high percentage of fixed costs associated with our operations, we estimate that each additional dollar of revenue drops through at a marginal cash rate of approximately 70%, with some variability quarter to quarter in reported results due to GAAP accounting. We continue to expect gross margin in the mid-30s percentage range for the full year 2026. The company posted operating expenses of $8.1 million in Q1 2026, which reflects our scaled investment in sales and marketing, which we expect to be approximately $2 million for the full year 2026. Our expectation is that these investments will pay off as soon as the end of 2026, but more likely in 2027, in the form of double-digit revenue growth rates. At this higher spending level, we expect to become adjusted EBITDA positive in the range of $52 million to $57 million in annualized revenue. As customer end markets are stronger in 2027 and our stepped-up commercial activity bears fruit as expected, we should report a positive adjusted EBITDA quarter by 2027. The company continues to see a reduction in free cash outflow during the first quarter of 2026 compared to the same quarter in the prior year. While the company saw an increase in free cash outflow compared to Q4 2025, this is consistent with the company's expectations for the year and is higher due to certain larger payments typically occurring during the first quarter. We anticipate lower average quarterly free cash outflow for the remainder of the year. As such, the company continues to expect free cash outflow of less than $10 million for the full year 2026, even with the increased investment in our commercial capabilities. With that, I will turn the call back to Stephen. Stephen Gunstream: Thanks, Matthew. Overall, we were very pleased with the start to 2026 and the progress we have made against our strategic priorities. We believe the outlook for our end markets remains positive, and we are committed to executing on our strategy to help our customers accelerate the introduction of novel therapies, diagnostics, and other products that improve human health. We will now open the call for questions. Operator: Thank you. Please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile. Our first question comes from the line of Mackie Tau with Stephens. Your line is open. Mackie Tau: Hey. Good afternoon, and thank you for taking my questions. Great to hear about the updated macro outlook. I have heard some of your peers talk about maybe a little bit of bifurcation between earlier-stage biotech and later-stage biotech. I would love to get your sense of what you are hearing at this point from these individual customers and whether you are seeing a similar trend in your customer base. Thank you. Stephen Gunstream: Yeah, thanks, Ben. In some ways, yes, we are seeing some similarities. We had some nice large pharma growth in the quarter, but on the clinical side of our business, we did still see some of these earlier-stage phase one, phase two place some nice orders with us. A lot of that probably has to do with the work we have been doing with them for some time. In the very early stage, on the research in the Lab Essentials, there is a little softness there, but we have not seen it as much. It could just be some of the accounts that we are supporting today, but we are starting to get more customer engagement from these smaller biotechs, and it is looking pretty encouraging right now. Mackie Tau: As we think about your different end markets, it sounds like all of them are coming back together as one. Are there any that are leading the pack more so than others? Stephen Gunstream: Yeah. Like I just mentioned, we had some nice growth in large pharma in the quarter. We did get some nice growth on the diagnostic side as well and the tools and diagnostics, but particularly on the biotech side we had some nice orders come in there. We are seeing some growth there. I think, like I said, the biopharma as a whole is a little bit slower, but you are starting to see some growth there. There are certainly pockets where we expect that to increase throughout the year. Mackie Tau: I appreciate the color. Thank you. Operator: Our next question comes from the line of Brendan Smith with TD Cowen. Your line is open. Brendan Smith: Great. Thanks for taking the questions, and congrats on the quarter. Following up on the commentary regarding customers advancing through clinical development, do you have a sense, even broad strokes, what percent of customers are in that preclinical/phase one bucket versus those in phase three or approaching commercial? I am wondering how that funnel is looking at this point, especially if the funding environment continues to improve. Stephen Gunstream: Yeah, Brendan. It is not that different than what we put out in our slides for the 2025 full year. We are supporting approximately 70 therapies. There are five therapies in phase two or phase three that are nearing completion at the moment, and then 12 in phase one, and then the rest are preclinical. We would expect those numbers to increase as we go throughout this year. That is our strategy as you onboard more of these clinical customers, and certainly if biotech funding comes back, we would expect that to continue, and we have done that really since we started targeting these clinical customers back in 2020. Brendan Smith: Got it. And as a quick follow-up, we have started to see some increases in wet lab spending activity as a result of customers rolling out AI capabilities and needing to validate models and new targets. It feels early, but do you have any sense of this materializing in your customers' ordering patterns, and is there any reason why that would not be a notable tailwind for Alpha Teknova, Inc. over the coming quarters? Stephen Gunstream: Yeah. I think these AI data generation programs are significant, and it is lots of reagents. They are generating significant amounts of data. We are supporting many of the customers that are supporting the end users here to generate that data, or directly. So the standard products we offer in our catalog, products like LB broth for bacteria, or the buffers and things to purify proteins, I would expect that to be a tailwind for us. There are customers we are supporting that we are seeing pick up their spend with us for those reasons, but it is not yet significant or material. Operator: Thank you. Our next question comes from the line of Matthew Richard Larew with William Blair. Your line is open. Matthew Richard Larew: Nice upside in the quarter relative to the Street, but the guide was maintained. You referenced wanting to see more durability before changing the guide. It seems like more companies than normal have called out benefit from more days in the quarter that reverses later in the year. Was there any timing impact like that or any orders that got pulled forward into the print, or is it just an effort to be conservative given the broader macro picture? Matthew C. Lowell: Good question, Matt. We do have some of this phenomenon where we have business days impacts, particularly in the catalog portion of our business, which is about 60% of the total business. I would say that was not really a factor for Q1. It will be and usually is for Q4. We saw pretty typical ordering and delivery behavior in Q1, so I do not think that really impacted the quarter. As you noted, and I did as well, there is still macro uncertainty, and while we are off to a good start here, we are certainly optimistic, but not ready to increase our guidance range at this time. It is definitely something that we are evaluating each quarter, and it is encouraging to have this great start. Matthew Richard Larew: You brought up 2027 in your remarks and being in position for 20% revenue growth. If I look at TTM revenue, it has improved over a year ago, particularly on the Clinical Solutions side, and Lab Essentials has stabilized at least in the mid-single digits. From where we are today, what elements do you see improving the most to get to 20% in 2027? Stephen Gunstream: A couple of things come into play. First is an improving backdrop. We have seen biotech funding now two quarters ahead of where it has been. From past data, we think it is pretty similar this time that we will start seeing an impact with about a three- to four-quarter lag, and we are expecting to see that towards the end of this year. That will drive a portion of that growth, so the baseline is picking up a little bit. On the clinical side, we are supporting more customers, and more of them are moving later into the pipeline, including where we would expect either diagnostic or therapeutic commercial approval by the end of next year. Even moving from phase one to phase two or phase two to phase three or phase three into commercial will drive significant growth. That base is relatively small, and on the diagnostic side there are a couple in there, including on the leukocyte side, that we may be supporting larger volumes for next year. In addition, the investment we are making on the commercial side, both in marketing and in the field, will take six to twelve months to ramp up, and that will help us as well. Historically, Lab Essentials has grown 11% on average since 2008. I think we start to see that pick up a little bit, and combined with these other things, that should get us into that 20% range. Operator: Thank you. Our next question comes from the line of Matthew Hewitt with Craig-Hallum Capital Group. Your line is open. Matthew Hewitt: Good afternoon, and congratulations on the nice start to the year. Regarding Clinical Solutions, phenomenal Q1, up 85% year over year. Was there a larger order that drove some of that, or was it more broad-based as you noted several large orders? And how should we be thinking about cadence for that bucket over the remainder of the year? Stephen Gunstream: I will let Matthew touch on the cadence in a minute, but when you look at the customers we supported in Q1—and we have talked a lot about the lumpiness—the question is right: Is this just a lumpy quarter, or is this more broad-based? In this case, it is more broad-based. In fact, we had a fairly large customer last year order, and then we came over that, and we had a number of customers that we delivered for in Q1. I would say it is pretty positive that this one is not just a one-time lumpy piece for a quarter. I will let Matthew talk a little bit about the cadence for the rest of the year. Matthew C. Lowell: I would echo what Stephen said. We are feeling pretty good about the diversity in that part of the business in Q1 and also based on the discussions we are having now for the rest of the year. That is an area where we should continue to see results at these kinds of levels, let us say in the $2 million range per quarter or better, depending on how things go later in the year. That is definitely going to be an important component of growth this year. All to say that part is looking good, and we should continue to see good results there. Matthew Hewitt: Thank you. Switching gears a bit, with the investments you have been making—digitizing paper, creating larger batch sizes—as I think about your target 60% to 65% gross margins in a few years, how much of that comes from volume leverage versus these strategic initiatives? Matthew C. Lowell: That is a good question. I believe the single biggest driver, and it will continue to be, is volume growth. But we are not going to sit and rest on our laurels and wait for that to play out. There are lots of other things we can be doing and are doing. The example you gave is a good one, and they are meaningful. These are not trivial things. Sometimes they play out as productivity benefits where we see the benefit more as we grow than immediately in terms of cost reduction. It can show up as cost strength as we grow. We have that digitization and a lot of other projects always going on, and there is a never-ending set of opportunities. But I would still say the main driver is volume growth, and we are seeing that happen right now, and we are excited about it. Matthew Hewitt: Got it. Thank you. Operator: Please stand by for our next question. Our next question comes from the line of Matthew Moriarty Parisi with KeyBanc Capital Markets. Your line is open. Matthew Moriarty Parisi: Hi. This is Matthew Parisi on for Paul Knight. Congrats on the quarter, and thanks for the question. You mentioned the onboarding of new sales associates during the call. How long does that ramp period take? Stephen Gunstream: Typically, my experience is six to twelve months until you really start to see the impact. I mentioned that probably towards the end of this year we will be able to see it. We are starting to see some early indicators with more meetings and more engagement with some of the target accounts that we are after. It has been great to onboard them, and we are very happy we started in January. I think all is going to plan. Matthew Moriarty Parisi: Thank you. That is all for me. Operator: Ladies and gentlemen, I am showing no further questions in the queue. That concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to the Flowco Holdings, Inc.'s First Quarter 2026 Earnings Call. Today's call is being recorded and we have allocated 1 hour for prepared remarks and Q&A. At this time, I would like to turn the call over to Andrew Leonpacher, Vice President, Finance, Corporate Development, and Investor Relations at Flowco. Please go ahead. Andrew Leonpacher: Good morning, everyone, and thanks for joining us to discuss Flowco's first quarter results. Before we begin, we would like to remind you that this conference call may include forward-looking statements. These statements, which are subject to various risks, uncertainties and assumptions, could cause our actual results to differ materially from these statements. These risks, uncertainties and assumptions are detailed in this morning's press release as well as our filings with the SEC, which can be found on our website at ir.flowco-inc.com. We undertake no obligation to revise or update any forward-looking statements or information, except as required by law. During our call today, we will also reference certain non-GAAP financial information. We use non-GAAP measures as we believe they more accurately represent the true operational performance and underlying results of our business. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP measures can be found in this morning's press release and in our SEC filings. Joining me on the call today are our President and Chief Executive Officer, Joe Bob Edwards; and our Chief Financial Officer, Jon Byers. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn the call over to Joe Bob. Joseph Edwards: Thank you, Andrew. Good morning, everyone, and thank you for joining us today. I'll start today's call with a review of our first quarter performance and key operational highlights, followed by an update on how our recent acquisition of Valiant Artificial Lift Solutions is progressing after we closed the transaction in early March. Jon will then cover our financials, including segment performance and provide additional detail on capital allocation and on the balance sheet. I'll close with our perspective on the current market environment as well as our outlook for the next quarter. Flowco delivered a solid start to 2026 during the first quarter, generating adjusted EBITDA growth and consistent execution across both operating segments. We generated $85.5 million of adjusted EBITDA during the quarter, at the upper end of our guidance range. We sustained our industry-leading margins, driven by the strength of our rental platform and modest sequential improvement in gross margins quarter-over-quarter. During the first quarter, we generated $52 million of free cash flow, enabling us to reduce debt while continuing to return capital to shareholders through dividends and share repurchases. Pro forma for the Valiant transaction, we remain conservatively leveraged with ample liquidity to continue executing on our strategic priorities. Turning to operational performance. Our rental platform continued to build momentum during the quarter. Rental revenues increased approximately 9% sequentially, driven by steady demand across our surface equipment and vapor recovery rental solutions as well as our newly added ESP offering acquired with Valiant. Customers continue to adopt these technologies to maximize production and optimized returns across the life cycle of the well. Spending a moment on each. Within surface equipment and in particular, high-pressure gas lift, we are seeing incremental demand in the early part of the year as operators increasingly deploy this technology to accelerate production in a constructive commodity price environment. Given its high uptime and ability to operate efficiently at elevated GORs, HPGL enables operators to bring on production earlier and sustain higher output, ultimately improving well-level economics. Our vapor recovery units are becoming increasingly ubiquitous in pad development as operators use this capital-efficient solution to capture and monetize gas that would otherwise be vented or flared, thereby turning emissions into incremental revenue with minimal additional investment. Importantly, these captured vapors include not just methane, but also the heavier hydrocarbons that are significantly more valuable, often resulting in gas stream values multiple times higher than dry gas, particularly in the current NGL pricing environment. As announced in March, we completed the acquisition of Valiant Artificial Lift Solutions, a leading pure-play provider of ESP systems with an established Permian Basin presence. This transaction expands our capabilities into the largest addressable segment of the artificial lift market, allowing us to offer ESPs where they are the optimal solution for a given well. Valiant performed slightly ahead of expectations in March and the integration is off to a very strong start. We are encouraged by the early alignment across the organization as we begin to identify incremental opportunities from the combination. Let me highlight 2 early examples. First, the Valiant team is now utilizing Flowco's in-house ESP cable installation capabilities, reducing reliance on third-party providers. Second, we are leveraging insights from ESPs on Valiant's well monitoring platform, Optimus, to better identify follow-on gas lift candidates as wells mature and become better suited for alternative forms of lift. Opportunities like these give me confidence in our ability to drive significant revenue synergies as we integrate Valiant's operations with ours. Across all 3 of these rental-oriented product lines, HPGL, VRU, and ESP, rental revenue is largely contracted and recurring in nature, supporting strong visibility and consistency in our financial profile. As a company, rental revenue represented nearly 60% of total revenue during the quarter. Shifting to product sales. We delivered another solid quarter with sequential growth driven by performance within our downhole components offerings. Within Natural Gas Technologies, we saw consistent demand in vapor recovery sales as well as third-party sales and natural gas systems. Our sales-focused businesses remain a key contributor to free cash flow given their minimal incremental capital requirements quarter-over-quarter. Overall, I'm very pleased with how the team executed during the first quarter. We delivered disciplined results, generated strong levels of free cash flow while returning capital to shareholders. And we successfully closed on the Valiant acquisition. We are very well positioned to build on this momentum as we move through 2026. And with that, I'll turn it over to Jon. Jonathan Byers: Thanks, Joe Bob. Turning to our financials. First quarter performance was at the higher end of our guidance range, driven by ongoing expansion in our high-margin rental business and 1 month of contribution from Valiant. Total revenue increased 6% sequentially to $209 million, primarily driven by growth within Production Solutions. Building on this revenue growth and supported by margins underpinned by our high-return rental model, adjusted EBITDA increased by $2 million quarter-over-quarter. As Joe Bob mentioned, we maintained our industry-leading margins in the quarter, achieving adjusted EBITDA margins of 40.8%, even while absorbing some incremental corporate costs in the quarter, which I'll touch on later. This performance reflects disciplined execution and strong operating leverage as customers continue to recognize the value of our differentiated solutions. In our Production Solutions segment, first quarter revenue increased 10% sequentially to $140 million, while adjusted segment EBITDA increased approximately 7% to $61 million, driven by growth in Surface Equipment and the contribution from the Valiant acquisition. Within the segment, Valiant is now reflected in downhole components as our ESP offering. Adjusted segment EBITDA margins decreased 125 basis points quarter-over-quarter, primarily driven by a revenue mix shift towards downhole components following the inclusion of Valiant. In our Natural Gas Technologies segment, first quarter revenue was consistent with the prior quarter at $69 million, while adjusted segment EBITDA was also in line at approximately $30 million. The segment benefited from growth in vapor recovery rental revenue and increased sale of natural gas systems, which were offset by a modest decline in vapor recovery unit system sales quarter-over-quarter. Turning to corporate costs. First quarter corporate expenses increased to $5.6 million from approximately $4 million in the prior quarter. This increase was driven by incremental filing and legal expenses associated with our S-3 filing on February 4, 2026, and subsequent secondary offering. Costs we do not expect to recur on a regular basis. Looking to the remainder of 2026, we expect corporate expenses to normalize to approximately $5 million per quarter. Overall, consolidated first quarter adjusted EBITDA was $85.5 million, reflecting continued execution and the resilience of our operating model. In the first quarter, we invested $26 million of growth capital, primarily to expand our rental fleet across surface equipment and vapor recovery and our annualized adjusted return on capital employed for the quarter was approximately 18%. Looking to the remainder of 2026, our capital outlook is unchanged from last quarter, supporting meaningful free cash flow generation. We will continue to pace investment alongside customer activity, focusing on high-return opportunities. With a 6-month lead time on our equipment, combined with our vertically integrated manufacturing model, we retain meaningful flexibility to adjust capital deployment as conditions evolve in the current market backdrop. On March 2, we closed the acquisition of Valiant Artificial Lift Solutions for approximately $200 million in total net consideration. Integration is progressing well with teams working closely across the organization to align operations, systems and commercial activities. Looking to the remainder of the year, we remain confident in Valiant's ability to generate approximately $52 million of adjusted EBITDA for the full year 2026, consistent with the expectations we previously outlined. As integration progresses, our focus is on executing a disciplined plan to capture incremental revenue opportunities. And we have the capacity and flexibility to support additional activity as those opportunities develop. Turning to our balance sheet, liquidity, and capital allocation. We ended the quarter in a strong financial position and have continued to build on that momentum. As of May 1, 2026, we had $333 million of borrowings outstanding under our credit facility. With a borrowing base of $722 million, this represents approximately $388 million of available capacity. On a pro forma basis for the Valiant transaction, leverage remains at a conservative level below 1x. Our balance sheet strength and cash flow profile provide flexibility for both reinvestment and shareholder returns. During the quarter, we utilized $16.5 million of cash flow to repurchase 780,000 shares in connection with the secondary offering by selling shareholders. As a related note, our average daily trading volume has more than doubled year-to-date following the secondary offering. And with our increased public ownership, we have emerged from controlled company status. Shifting to the dividend. On May 1, our Board of Directors unanimously approved a 12.5% increase to our cash dividend, raising the first quarter dividend to $0.09 per share. This decision reflects our confidence in our growing and sustainable free cash flow profile, which enables us to execute on our long-term growth plans while also returning capital to shareholders. In conclusion, we delivered a strong quarter with results at the high end of our adjusted EBITDA range. We've entered 2026 with a durable earnings foundation and strong cash flow generation, supported by our positioning within production optimization and a constructive market environment. Back to you, Joe Bob. Joseph Edwards: Thanks, Jon. Let's turn now to the market outlook. Recent geopolitical and military developments in the Middle East have heightened the world's focus on energy security and have reinforced the need for reliable, diversified sources of supply to satisfy energy demand. With the Strait of Hormuz closed and the U.S. Navy blockading Iranian oil exports, industry experts estimate that approximately 10% of global crude oil supply and 20% of global LNG supply is effectively offline. Emergency inventories are being depleted at a rapid rate. Approximately 60 days into this conflict, industry sources estimate that up to 15% of strategic petroleum reserves globally have been consumed to satisfy this supply disruption. And the longer this conflict endures, the tighter the supply chains that rely on this supply will become. Of course, we are all hoping for a swift conclusion to the current situation. But whatever the new normal looks like on the other side of this conflict, we believe the world will increasingly look to North America to produce the most reliable and secure energy to drive economic activity. So with that backdrop, what are we hearing from our customers? As others have reported, we are not seeing material activity increases as of yet. Rather, those with access to short-cycle opportunities to increase production, thereby taking advantage of today's improved pricing environment are selectively pursuing high-return investments. More broadly, though, our customers are increasingly focused on existing production. How do I optimize what I'm currently operating? How do I improve recovery factors? How can I manage my artificial lift system more efficiently to drive more production? Flowco's product and service offerings sit at the epicenter of these conversations. And I would expect us to contribute meaningfully to our customer success over the coming quarters. Against this backdrop, we are forecasting another quarter of profitable growth in the second quarter of 2026 with adjusted EBITDA expected to be in the range of $93 million to $97 million. We will benefit from a full quarter of contribution from Valiant. And we anticipate continued growth across our surface equipment and vapor recovery rental businesses. We remain focused on building our position as a leading provider of production optimization solutions for our customers. The addition of Valiant significantly strengthens our platform. Throughout the balance of 2026, we expect to identify additional revenue synergy opportunities as we integrate our commercial efforts. And of course, we will continue to look for creative and accretive ways to round out our product portfolio as we strive to deliver on our aim to offer our customers the right solution in each well every time. With that, I'll turn it back to the operator for Q&A. Operator: [Operator Instructions] Your first question comes from Derek Podhaizer from Piper Sandler. Derek Podhaizer: So I totally appreciate you're not necessarily seeing material activity increases as of yet. But obviously, we've had a lot of news flow over the last couple of days, players like Diamondback given the green light, Conoco adding another rig. So maybe just if you can help us understand the opportunity set as we work through the year, that call on short-cycle barrels, your ability to optimize production for your big customers. So how do you think about that when you're looking out, especially when we're hearing some of these larger E&Ps, the publics coming back to work along with the privates? Joseph Edwards: Yes, Derek, certainly, you've nailed it. Some of the larger and more nimble companies are starting to get -- to increase activity. And those are green shoots for us. As you know, our production-oriented business will follow incremental rig activity, incremental frac spread deployment. Companies that are accessing their DUC inventory to turn wells in line more aggressively to take advantage of this environment. All that is beneficial for us. So when we say we're not seeing material activity increases as of yet, we're certainly seeing the early days of what we think is sustained higher activity, which will drive business for us. I think it's a back half of the year kind of phenomenon for us and shaping up for a very strong 2027. Derek Podhaizer: And then maybe switching to VRUs. I mean, very interesting comments as far as how the VRU side can also benefit from more of this call on short cycle just given the elevated commodity price, especially NGL versus dry gas. Anything to read into as far as more rentals for VRUs versus more sales? I think that was one of your initial investment thesis where you wanted more of the rental market to pick up versus sales. But is this just an in-quarter phenomenon? Is this just more idiosyncratic to this quarter? How should we think about VRU, the rental versus sales mix as we move through the remainder of the year and into '27? Joseph Edwards: Yes. Listen, on VRU, we are listening to our customers' preferences and through commercial activities on our end. We are incentivizing them to rent more than they buy. But look, certain customers like to have these assets as a permanent installation in their production infrastructure. So if customers would like to buy them and rely on our aftermarket and our technology to help run them as an owned asset on their balance sheet, we'll certainly go that way as well. But we do see incremental demand for more rental units. Customers like the ability to size down the units over time as the pad matures. And so as you know, we've got every size of VRU imaginable. So we can work with customers along the way with rental terms that incentivize them to size these units down over time. But yes, we're seeing incremental rental demand from customers. I think you'll see that reflected in our CapEx estimates for the rest of the year. Operator: Your next question comes from Arun Jayaram from JPMorgan. Arun Jayaram: Joe, I was wondering if you could and Jon could maybe characterize kind of the growth opportunities you see over the balance of the year in natural gas technologies and perhaps compare and contrast that to what you're seeing on the Production Solutions side. Joseph Edwards: Yes, Arun, thanks for the question. I'll start in reverse order on the Production Solutions side. With the acquisition of Valiant, we now are having much more constructive conversations with customers around the right lift solution for the early stage of a well's life as newly completed wells get turned online. There are really only 2 choices that an oil company has. You can produce that well with a high-pressure gas lift system or with an ESP. And we've got both. So I would anticipate to the extent CapEx may be biased to the upside in this environment, I would anticipate those dollars flowing into our highest return investment opportunities, which are high-pressure gas lift and ESP. So I think that's going to be the priority for us is to look for ways to deploy incremental capital there. On the NGT side, mainly our vapor recovery offering, it's steadier. As I just said in Derek's question, we are incentivizing customers to rent more than to buy. And so yes, we'll see incremental demand there, but it's going to be a little steadier, a little later stage. But yes, we're very pleased with the market backdrop setting up for an incremental investment from us throughout the balance of the year. Arun Jayaram: And my follow-up is just your thoughts on scaling your business opportunities within the Valiant assets, ESPs. Jon, you guys reiterated your outlook for, call it, $52 million of annualized EBITDA from there. But Joe Bob did mention that things were trending perhaps a little bit better than you expected in March. But just wanted to talk about the scale because you did mention on the last call that the supply chain is a little bit longer than what you're seeing on the HPGL side. And maybe just an updated thought on CapEx because I think last quarter, you highlighted $115 million of CapEx for the full year. But I don't think you gave us an estimate on CapEx related to Valiant. Joseph Edwards: That's right. That $115 million did not include Valiant. For Valiant, we're expecting around $20 million to $25 million in incremental CapEx over the 10 months that we'll own it in the course of the year. Arun Jayaram: And Jon, just thoughts on scaling that business. Jonathan Byers: Yes. Arun, look, we are very optimistic. And I tried to convey this in our prepared remarks. This is a revenue synergy story. We're seeing some very early, very positive indications that we're going to be able to grow that business with customer overlap. And I'll highlight really 2 key areas there. Valiant's customer base consists of about 30 to 35 customers, Flowco's customer base more broadly consists of over 300 customers. In high-pressure gas lift alone, we work for over 65 individual oil companies. So you can understand the playbook when we say we're going to approach key accounts with a truly agnostic offering, whereas before, we were trying to convince customers for every one of their newly drilled and completed wells to use a high-pressure gas lift system. Now we can go in and actually be more thoughtful about the right solution for that well. So that's sort of point one. And then point two, it can't be emphasized enough. After you have a high-pressure gas lift system or now an ESP in a well for a period of time, call it, anywhere from 1 to 3 years, that well has to be handed over to another form of lift. And now that we have the ESP data that we're collecting every day in our proprietary digital technology that we can monitor remotely well conditions with each of the ESPs that we have in the well. We can get ahead of well handovers, failures that occur when a well gets out of spec for an ESP production. So we can be in a customer's office proactively with a gas lift solution or a plunger lift solution before a well goes down, before that customer goes out for bid on the well for the next phase. So that's a synergy opportunity that I think very few can have. And we're unlocking with the Valiant acquisition and our disciplined integration efforts. Operator: Your next question comes from Phillip Jungwirth from BMO Capital Markets. Phillip Jungwirth: When you talk about rounding out the product portfolio, could this at all involve going deeper into ESPs just given how large a market it is? Or are we more talking about unrelated production optimization areas that you're not currently in? And just the creative comment, was that meant to imply that you could look at avenues beyond just normal M&A? Joseph Edwards: So yes. We're -- we have a very active M&A pipeline, as you would expect. And I would hope that we can have the stars aligned on incremental M&A throughout the balance of this year and heading into 2027. We're in most every form of artificial lift. We are missing a couple of specific products that we've been pretty candid. We'd love to add to the portfolio. And there are some complementary services that go along with artificial lift that we evaluate similarly. What are adjacent to the lift systems that we are selling to our clients? What else does the customer procure as they think about the optimum lift solution for a well? So yes, we're evaluating how to enter these adjacencies, both organically and inorganically. Obviously, the easiest way is to buy a business that is already in those markets that comes with a group of people and a management team and a built-in book of business from clients. But we certainly are not afraid of standing something up from scratch. So we're going to continue to listen to our customers of what they are looking to us to do for them and try to add value as we look at our M&A pipeline and our organic efforts as well. Phillip Jungwirth: And then Flowco was never really impacted by tariffs, but I believe Valiant was as an ESP provider. Just curious what's the ability to recoup any past payments here? And if so, what's that process look like? Joseph Edwards: Yes. There is an opportunity to recoup the tariffs. That's a process that's underway. The portal, I believe, is open. And so we're in the process of trying to recoup those tariffs. Some of those may end up going back to customers. We'll see. But right now, the process is still a little bit murky. So time will tell on that. Operator: Your next question comes from Keith Beckmann from Pickering Energy Partners. Keith Beckmann: I wanted to ask, you kind of talked about the rental nature of high-pressure gas lift, VRU, and ESP. I mean, obviously, ESP and high-pressure gas lift go on the wells for a little while. I wanted to get a sense of maybe is there a typical or average contract term length for kind of each of those 3 between high-pressure gas lift, VRU, and ESP? Just trying to get a better sense on how the contract terms work there for the rentals. Joseph Edwards: Yes, Keith, it's all over the map, candidly. Customers on each of those have their own objectives they're trying to solve and it's complicated. So there's not a one size fits all. On the high-pressure gas lift product line, some customers are shorter term in nature. Some are multi-years. On the VRU, it's a shorter term by intent. We want to work with customers on the sizing down project that I described earlier. So a shorter-term contract is desired there. But we've done some extensive analytics, as you would expect. And the average time on location for a given VRU extends well beyond what the contract term is. And then for ESPs, look, it's even more complicated. Some customers prefer to own their fleet of ESPs. They view it as a CapEx item. Some prefer to rent and some prefer a hybrid model where they rent the surface drive unit that helps power the ESP and they buy the downhole. So hard to give you a one-size-fits-all answer. It's a pretty dynamic commercial model. Keith Beckmann: Then my second question I wanted to ask was just around the really strong free cash flow quarter. How should we kind of be thinking about free cash flow conversion for EBITDA through the rest of the year, obviously, as potentially increased CapEx with things getting stronger here in the back half of the year? Jonathan Byers: That's right. I think with $25 million of -- or $26 million of CapEx in the quarter, you can do the math and see that we expect to ramp into Q2 and Q3. So obviously, that's going to have an impact on free cash flow. Second, even though we added Valiant, that added about $50 million of working capital, the underlying kind of pre-Valiant business actually had a reduction in working capital that we don't think is sustainable into Q2. We'll see some of that come back. So I think we would expect to see free cash flow moderate a little bit in Q2. Operator: Your next question comes from John Daniel from Daniel Energy Partners. John Daniel: As the market begins to inflect here, can you guys just speak to how that impacts your pricing strategies over the next several quarters? Joseph Edwards: Yes. Good question, John. Listen, we've -- being in the production phase, we're not subject to the big swings in utilization and the supply-demand imbalances that come with businesses that are levered to drilling and completion like rigs or frac spreads, right? So we don't suffer the pricing decreases on the way down. And we don't get the benefit as much on pricing increases on the way up. It's much, much more stable. So we would anticipate pricing to be pretty consistent with where we've been. We will, of course, look for ways to drive price where we can, where we can still be constructive with our customer base. But I wouldn't say that pricing on any particular one of our products is going to be a particular driver for the back half of this year. John Daniel: And then going back to the growth opportunities from an organic perspective. If you were to feed some money to some guys to go start up something new, Joe Bob, like how much grace period will you give them to get it going? Like what's an expectation for time? Joseph Edwards: Yes, it's a good question. Within a business of our size and given the focus that we have and the discipline we have around free cash flow generation, John, the answer is very little. We want something to be immediately accretive to both earnings, free cash flow and returns. So if we don't see an immediate path to something earning its keep, we're likely not even going to hit the go button. Operator: [Operator Instructions] Your next question comes from Jeff LeBlanc from TPH. Jeffrey LeBlanc: You referenced the increased interest in artificial lift. But can you talk about regional trends and how prominent outside of the Permian? Joseph Edwards: Yes, Jeff, you're a little faint on your question. I think you were asking about regional trends on specific lift techniques across the U.S. onshore, not just the Permian. Is that right? Jeffrey LeBlanc: Well, more broadly, just the inflection in demand and activity outside of the Permian specifically. Joseph Edwards: Got it. So look, I think you'll see it in some of the oilier basins, okay, the Bakken, South Texas, parts of the DJ. But everything is dwarfed by the Permian, as you know. It produces half of the barrels that come out of the U.S. It's where most of the short-cycle inventory is located. So I think you'll see the vast bulk of activity increases there. But the other basins, I think, will -- they'll be there as well. But I think most of what we are seeing is going to be bound for Texas and New Mexico. Operator: And there are no further questions at this time. I will turn the call back over to Joe Bob Edwards, CEO, for closing remarks. Joseph Edwards: Thank you all for tuning in. And we'll talk to you in 90 days. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.
Operator: Good afternoon, and welcome to Chime's First Quarter Fiscal 2026 Earnings Call. Following the speakers' remarks, we will open the line for your questions. As a reminder, this conference is being recorded, and a replay of this call will be available on our Investor Relations website for a reasonable period of time after the call. I'd like to turn the call over to Peter Stabler, Vice President of Investor Relations. Thank you. You may begin. Peter Stabler: Good afternoon, everyone, and thank you for joining us for Chime's First Quarter 2026 Earnings Conference Call. Joining me today are Chris Britt, our Co-Founder and CEO; and Matt Newcomb, our CFO. Mark Troughton, our President, will participate in Q&A. As a reminder, we will disclose non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings release and our earnings presentation posted on our IR website at investors.chime.com. We will also make forward-looking statements on this call, including statements about our business, future outlook and goals. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our Form 10-K filed on March 6, 2026. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward-looking statements, except as required by law. With that, I'll hand it over to Chris. Christopher Britt: Thanks, Peter, and thank you all for joining us today. 2026 is off to a strong start. In Q1, we delivered strong active member growth, continued taking share from the largest banks, achieved GAAP profitability and accelerated product velocity. Last month, we launched Chime Prime, our new premium membership tier. Prime offers higher cash back rewards, high-yield savings, greater access to liquidity and premium perks for members who make Chime their primary financial partner. Early signs are encouraging, and I'll share more in a moment. The strength of our brand and offerings have never been clearer. We added nearly 700,000 active members in Q1, bringing total active members to a record 10.2 million. Consumers are drawn to Chime's expanding product suite and low-fee model. As a result, Chime again ranked #1 in U.S. checking account openings per J.D. Power's Q1 survey and 50% ahead of the next competitor, while members earning $75,000-plus remained our fastest-growing segment. Unaided brand awareness also continues to rise among consumers earning up to $100,000. Turning to the quarter. Revenue grew 25% year-over-year, exceeding the high end of our guidance range. Coupled with strong cost discipline, we delivered over 13 points of adjusted EBITDA margin expansion year-over-year, demonstrating the powerful fixed cost leverage in our business model. Q1 also marked our first quarter of positive GAAP EPS, a major milestone for our shareholders. And we expect to deliver positive GAAP EPS for our full year results. Our Q1 results highlight our core competitive advantages, primary relationships, our trusted brand, a low cost to serve and rapid innovation powered by ChimeCore now accelerated with AI. Understandably, the health of the American consumer is a major focus for investors today, fueled by geopolitical uncertainty, high energy costs and overall affordability concerns. We look closely at our members' behavior, and as we've reported for the past several quarters, we continue to see broad consumer resilience. Even with fuel spending up, overall purchase volumes and saving rates remain strong and consistent, and average account balances among our recurring direct depositors continue to grow, aided in part by year-over-year growth in the average tax refund. And we've yet to see any meaningful changes in the number of our members receiving unemployment benefits. In terms of lending, our credit loss rates continue to improve, reflecting the strength of our short duration loan portfolio underwritten by recurring direct deposits and our ability to rapidly fine-tune our lending risk models. These factors dramatically lower our loan portfolio risk and are what separate us from other lending businesses. Turning to our 2026 priorities. As we mentioned last quarter, our first priority is to extend our lead as the best financial partner for everyday Americans. This starts by leveraging our proprietary tech stack and cost-to-serve advantage to provide products and services that enable our members to unlock financial progress while maintaining our position as the market's low-cost leader. Our membership tiers embody our central brand promise of offering the most rewarding fee-free banking experiences in the market for everyday Americans. At the same time, they reinforce a simple idea: the more members engage with Chime as their primary financial partner, the more value they unlock. Our membership tiers drive deeper direct deposit relationships, increased product usage and expanded ARPAM as evidenced again this quarter. Building on the success of Chime Plus, our basic membership tier that rewards members who set up direct deposit, we're really excited about the launch of Chime Prime, which offers an even richer set of rewards to members making at least $3,000 of qualifying direct deposits per month. And as with Chime Plus, there are no fees. Chime Prime members unlock a market-leading 5% cash back on the category of their choice when they spend with their Chime Card. Categories include groceries, restaurants, gas, utilities, or travel. So for example, a family spending $1,500 on groceries per month would receive $75 in cash back on Chime Prime. Prime also includes 3.75% APY on savings, a rate 9x the national average, up to 70 points of credit score improvement, higher levels of liquidity through MyPay and instant loans and premium travel and lifestyle perks like access to exclusive airport lounges and special access to concerts. Early results show that our new Prime tier is increasing direct deposit intent and improving retention among existing direct depositors. Prime members are also more likely to adopt Chime Card for everyday spend, helping to drive a continued shift we're seeing from debit to credit spending, which delivers a higher take rate for us. The benefits from this more premium tier deepens our relationship with higher-earning members who are becoming a larger portion of our member base. Turning to our short-term liquidity products. Q1 was another strong quarter for MyPay, which is already a $400 million-plus run-rate business. We rolled out our variable MyPay pricing plan and expanded access to earned wages earlier in the pay cycle, addressing our most frequent member requests while at the same time, retaining our leadership as the low-cost provider in the market. With higher origination volumes, improved yields, and low, steady loss rates, MyPay transaction profit was up over ten-fold year-over-year. We're also making great progress with instant loans, which we believe positions the product to become a meaningful contributor to transaction profit growth over the coming quarters. Members qualifying for Chime Prime are prequalified for instant loans, and continued optimization of our underwriting models is enabling us to broaden member access while we reduce loss rates. Our first priority at North Star is to help our members unlock financial progress. In service of this goal, our product road map for this year will expand to meet even more of their everyday financial needs with investing, joint accounts, and custodial accounts all coming soon. With a broader portfolio of products, we believe we'll continue to deepen our member relationships. The evidence at the cohort level is clear and compelling. The longer a Chime member stays with us, the greater the average product attach rate, purchase volume and transaction profit. This compounding dynamic is the core of our long-term growth model. Our second priority is scaling Chime Enterprise, our expanded earned wage access and suite of financial wellness tools completely free to employees through their employers. As we've mentioned, the sales cycle for enterprise accounts tend to be long, but our pipeline and customer count is growing steadily. We're excited to announce that we've signed 4 new employer partners in Q1, including First Student, the largest provider of student transportation in the nation with over 65,000 employees. As we prepare to roll out with First Student, our Workday partnership will support seamless integration and implementation. Our third priority is to deeply embed AI across Chime and into the member experience. For a full-stack fintech like Chime, with proprietary data, integrated infrastructure, deep bank partnerships and a trusted brand, AI compounds our structural advantage and further differentiates us from incumbent banks. As the primary account for millions of members, we have a real-time view of their financial lives, paychecks, spending, bills, balances, all flowing through our platform. And because ChimeCore powers everything from the ledger to the app experience, we can take action, not just provide insights. With the member's permission, we can move money to where it earns more, extend credit in the moment it's needed, and stop unwanted charges before they post, capabilities no third-party app could replicate. With Jade, our AI copilot rolling out now, we're bringing this to life. Jade will help us move from reactive tools to proactive financial management, helping members spend smarter, save more, pay bills on time, borrow responsibly and build long-term wealth. Early results from scaled beta testing have been encouraging and we'll continue to expand access over the coming months. While AI will accelerate innovation across the industry, it won't replicate the foundations of our model, bank partnerships, payment networks and compliance infrastructure. As choice expands, consumers will choose the platform that delivers the best products at the lowest cost from a brand that they trust. AI is already transforming the way we work. In product and engineering, AI-powered development is quickly becoming the norm. 84% of the code we shipped in March was developed with AI, up from 29% just 4 months ago. That's driving a meaningful increase in velocity. We're now taking the next step with Archimedes, our AI-native "software factory" where we can move from idea to a shipped product with AI agents doing the majority of the development. More broadly, Archimedes represents a fundamental shift in how we build at Chime, from AI assisting humans to AI at the center of how we design and develop products, while maintaining the quality, control, and compliance our platform requires. AI is driving operating leverage at scale, increasing levels of output while keeping headcount flat. We're at a unique moment where AI is unlocking entirely new possibilities in financial services. Because we're not burdened by legacy systems, we can move faster, build better, and lead this transformation. With our platform, model and momentum, we're uniquely positioned to shape what comes next. AI isn't just a tailwind for our business. It's an accelerant of our core advantages, further expanding what we can deliver for our members and for our business. I'll turn it over to Matt to cover our financial results and provide an updated outlook for Q2 and the full year. Matthew Newcomb: Thanks, Chris. In Q1, our fourth quarter as a public company, we again demonstrated both strong execution and the resiliency of our model. We're continuing to execute on multiple dimensions of growth with 19% growth in active members, 5% growth in average revenue per active member or ARPAM, and a 9 percentage point improvement in transaction margin in Q1. These are compounding growth levers, and together drove 41% growth in transaction profit in the quarter. We're the clear #1 share gainer in a massive market with a radical cost-to-serve advantage and a technology and product innovation advantage that continues to extend our lead over the competition. And powered by our deeply engaged primary account relationships, we have a durable, low credit risk, 70% plus transaction margin business that we're scaling over a largely fixed OpEx base. These are the ingredients of a business model with strong long-term earnings power, and in Q1, we again demonstrated our rapid progress along that path. Our Q1 adjusted EBITDA margin of 18% improved over 1,300 basis points year-over-year. Our incremental adjusted EBITDA margin was 73% in the quarter, and we were GAAP profitable. Given the strength in the business, we are raising full year guidance. And, having exhausted our prior repurchase program, we are also announcing an additional $200 million share repurchase authorization. While markets are volatile, our long-term earnings power is not, and this authorization allows us to continue to opportunistically take advantage of market dislocations in our share price. Let me dive into more detail on our Q1 operating results, starting with Active Members. We have a consistent track record as the leading share gainer in a market of nearly 200 million Americans making up to $100,000. In Q1, we added nearly 700,000 net new active members quarter-over-quarter. Some of this growth was driven by particularly strong seasonal tailwinds. As a reminder, each year in Q1, tax refund related activity drives seasonally higher levels of reengaged Active Members. This year, we saw the number of members using our embedded tax filing service grow over 50% year-over-year. Also, this year's later start to tax season concentrated more of this reengagement later in the quarter. That said, our overall growth algorithm continues to perform well, with several other drivers contributing to this quarter's strong performance. First, our top of funnel remains strong. Our brand awareness continues to grow, and new value propositions like Chime Card's cash back rewards on everyday spend are clearly resonating with members. Looking ahead, we're excited about the opportunity to use rewards more broadly to drive both new member growth and retention and expect to continue to experiment this year. Second, our early engagement initiatives, which make it easier to get started with Chime continue to be successful. These initiatives have enabled us to engage members we wouldn't have otherwise engaged, driving all-time high activation rates, lowering our CACs, and improving our payback periods to 5 to 6 quarters. We're also finding that they are increasingly an on-ramp to more deeply engaged direct deposit relationships, not just lightly engaged members. Given this progress, we believe we are on track to exceed our original goal of 1.4 million net new actives for 2026. Second is ARPAM. We have a high-quality member base. We serve the majority of our members in the primary account capacity, which gives us deep levels of engagement, strong retention, and high levels of ARPAM. As our members' primary account relationship, we've also earned both the trust and mind share to drive strong product cross-sell. 15% of our active members use 6 or more products each month and their ARPAM is north of $500, double our average. In Q1 specifically, overall ARPAM increased 5% year-over-year to $263, driven by strength in both payments and platform revenue. Combined payments and OIT revenue increased 19% year-over-year. Resilient member spend trends, along with larger tax refund deposits drove PV and OIT volume growth of 15%. We're also continuing to drive strong adoption of Chime Card across both new and existing members. As of March, nearly half of our members are using a secured credit card, either our legacy credit builder card or increasingly our new Chime Card on a monthly basis. That's up from just over 1/3 of members in September prior to our Chime Card launch. This progress has increased the portion of total purchase volume that is on credit to nearly 25% in March, up from 16% in September. Chime Card is a win-win. Members benefit from cash back rewards on their everyday spend, and we benefit from the higher net interchange rates we earn on credit. And as Chris noted, we're excited for Chime Prime's potential to drive Chime Card adoption even higher. Platform-related revenue increased 50% year-over-year, driven by continued strong performance across our liquidity products. Our success earning direct deposit relationships enables us to offer liquidity products profitably, at low cost, and with low risk. In Q1, we completed the rollout of our new variable pricing model for MyPay, while also maintaining loss rates at our steady-state target of 1%. Together, this grew our MyPay transaction margin to 62%, and overall MyPay transaction profit dollars to $64 million, up 10x year-over-year. We're also seeing strong performance for instant loans, our 3- to 12-month installment loan products. We're scaling access. In Q1, we originated $180 million of instant loans. We're also offering longer duration loans to repeat borrowers, which come with better economics. In Q1, we doubled origination volume quarter-over-quarter for 9- and 12-month loans, and we're driving lower loss rates. We continue to see loss rates improve as much as 50% for repeat borrowers compared to first-time borrowers. Taken together, we're very excited about the progress with this product and its path to becoming a meaningful driver of transaction profit growth over the coming quarters. Third is transaction profit. Our low-cost operating model has enabled us to offer what we believe is the most compelling directive services for mainstream consumers, delivered at over 70% transaction margin. We don't believe any incumbent offers consumers anywhere near the level of utility and value that Chime offers, including for higher earners. In Q1, as a result of our recent transition to ChimeCore as well as continued strong loss rate performance, we improved our transaction margin to 76%, up 9 percentage points year-over-year. Together with our growth in actives and ARPAM, overall transaction profit grew 41% year-over-year to $491 million. So we're compounding growth across multiple dimensions and we're driving this growth with strong unit economics. We continue to acquire members efficiently with 5- to 6-quarter transaction profit payback period. But just as important is the durability of our cohorts driven by our deeply engaged, long-lasting primary account relationships. Our cohorts are underpinned by everyday reoccurring nondiscretionary spend. Our cohorts double in ARPAM as they season as members attached to more products over time, and our cohorts see over 100% dollar-based transaction profit retention, net of churn. Taken together, this drives LTV to CAC of over 8x. It's these unit economics that allow us to drive strong operating leverage while continuing to make meaningful investments in growth. In Q1, non-GAAP OpEx as a percent of revenue fell 5 percentage points year-over-year with leverage across all OpEx categories. And in Q1, we grew our adjusted EBITDA margin to 18%, up 13 percentage points year-over-year at an incremental margin of over 70%. In total, we delivered $119 million of adjusted EBITDA and $53 million of GAAP net income. Turning to our guidance. In the second quarter, we expect revenue between $633 million and $643 million, resulting in year-over-year revenue growth between 20% and 22%. We expect adjusted EBITDA between $72 million and $77 million, and an adjusted EBITDA margin between 11% and 12%. For the full year, we expect revenue between $2.66 billion and $2.69 billion, resulting in year-over-year revenue growth between 22% and 23%. And we expect full year adjusted EBITDA of between $416 million and $431 million, and an adjusted EBITDA margin of 16%. We now expect an incremental adjusted EBITDA margin of approximately 60% for 2026. There are a few things to keep in mind about our second quarter and full-year guide. As a reminder, we have a seasonal business. Many of our metrics, including Active Members, transaction volumes and ARPAM benefits from tax refund-related activity in Q1. In particular, because tax refund-related activity drives more members to reengage with us in the first quarter, we benefit from seasonally high quarter-over-quarter net adds each Q1, but lower net adds each Q2. We expect to see this typical seasonality again this Q2. We also see seasonally elevated transaction margin in Q1 due to higher purchase volume, as well as those lower utilization and higher repayment rates on our liquidity products. As such, we expect transaction margin to normalize from 76% in Q1 to between 70% and 72% for the rest of the year. Finally, while we'll continue driving operating leverage at attractive incremental margins, as we've noted previously, we are investing in the sales and marketing and member support costs to support the recent launch of our Chime Prime premium membership tier this year, particularly in Q2. With that, I'll open it up to Q&A. Operator: [Operator Instructions] We'll take our first question from Tien-Tsin Huang with JPMorgan. Tien-Tsin Huang: Great. Really great results here, guys. Nice to talk to you all. Just Matt, you went through a lot with the ads. So I won't ask you to go through it again, but just thinking about drafting off of the strong tax rebate season and some of the initiatives you guys have put in as you're thinking around, additions and how it's going to track for the rest of the year? Has that changed at all? And it does feel like you've gotten a little bit more momentum on instant loans and it's showing up already. So how impactful might that be here as we recast our forecast for the rest of the year? Matthew Newcomb: Thanks, Tien-Tsin. Yes, we're really pleased with the continued momentum that we're seeing on our actives growth. As I mentioned, our overall growth algorithm remains really strong. Top of funnel remains very healthy. Our brand awareness continues to grow. You're seeing this result corroborated by third-party data, J.D. Power, came out with their latest survey in Q1 where Chime again ranked #1 by a large margin in terms of checking account openings. I think our product velocity is really helping us as well. New products like Chime Card and more recently, Chime Prime are clearly resonating with members. And all of this also supports our early engagement initiatives. We're continuing to see great progress that led to shorter payback periods and LTV to CAC north of 8x. That being said, we also saw that some of the -- we also saw some outsized seasonal tailwinds on actives growth in the quarter as well. And as a reminder there, every Q1 we see seasonally high reengagement related to tax refunds. In this quarter, there are really sort of 2 factors that magnified this. We saw a later start to tax season than in years prior, and that concentrated more of the reengagement later in the quarter. As a reminder, we measure monthly actives as of the last month of the quarter. And then we also saw a really strong engagement with our embedded tax filing service this year. So in sum, we're continuing to see broad momentum, but it is true some of the performance in terms of net adds in Q1 was related to seasonal factors. But in aggregate, we're feeling very good about exceeding the $1.4 million annual target that we set out at the beginning of the year and broadly speaking, to follow the similar seasonal trends that we've seen in years prior. Maybe I'll pass it to Mark to touch on instant loans. Mark Troughton: Tien-Tsin, it's Mark. I think on instant loans, we've been very pleased with the progress there. And just to give you an indication there, we originated $180 million in the quarter of instant loans. We expect that to accelerate going forward. Just to remind everybody, Chime Prime members automatically qualify for instant loans. So we do expect some significant growth to come from the instant loan product. In addition to Chime Prime, we're continuing to offer a longer duration loans to our repeat borrowers. Those borrowers operate at 50% better loss rates. And so the model that we've developed here over the last 12 to 18 months seems to be working well. In terms of what it can do overall, we're not giving sort of specific guidance. And I do think this will still be small compared to MyPay. But I think it's fair to say that we expect instant loans can become a material contributor to transaction profit over the coming quarters. Operator: We'll take our next question from James Faucette with Morgan Stanley. James Faucette: Apologies for the background noise. A couple of quick questions here. You mentioned that the above $75,000 income over was kind of your fastest-growing segment. Can you just help us understand how you think about segmentation? And as part of that, I thought the comments around products attached, were also very compelling. How is -- how do those numbers as they come in at that higher income bracket, what is their attach rate or pacing compared to maybe a rest of the customer base as a whole? Christopher Britt: Thanks, James. It's Chris here. Yes. We're really excited about the progress that we're making across really a wide range of segments that we serve. We reported again, I think this is the third quarter in a row where we've announced that specifically the $75,000-plus segment of income is the fastest growing for us. We really have a mainstream service here that appeals to consumers across income segments. And I think we not only see it in our own data, but we also see it in the J.D. Power data, the external data that said that we open up the most checking accounts. When you double-click into reports, they actually break out by income levels, and you see Chime also near the top of the list for higher-earning demos as well. So when we look at the sort of higher income demo specifically, we see retention rates that are similar to -- or right at the same level as the rest of the portfolio. So just as a reminder, a 90-plus percent retention rates after the first year, and we see very high levels of product attached that are similar to all of our cohorts as they continue to age and just a reminder on that, we have some information in the supplemental that shows how our cohorts continue to drive outsized ARPAM as they age. The more tenured cohorts are doing over $400 of ARPAM and we see that of our member base that attach 6 or more products actually generate $500 or more of ARPAM. So obviously, a higher earning customer has the ability to spend more, which is the key driver of our economic model, but it also gives us an ability to offer a wider range of products, including lending and credit products. And now with our Chime Prime product, which gives you 5% in a category of your choice and 3.75% APY, this is extremely powerful and something that is broadly compelling. And so I think we now have even more reasons for our members to stick with us for life. And I think that's particularly relevant to these higher earnings segments as well. James Faucette: That's great to hear. And then I wanted to follow up on one of the other comments you made in terms of accelerating product development and the benefits that you're getting from some of the AI development tools, et cetera. How should we think about kind of what that accelerated product road map can look like? I mean -- and really I'm trying to think about it from a business and financial standpoint, does this help accelerate? Is it more so that it improves your ability to attract members, et cetera? Or should we think about it more as accelerating incremental products for your members and that instead of really accelerating member growth per se, that it's really about finding incremental ways to serve existing members et cetera? Christopher Britt: Well, I think we really see it as a force multiplier for us. It starts with the way that we actually get work done around here. We talked in our intro remarks about Archimedes, which is our software factory that allows our developers to basically run what is essentially a multi-agent development pipeline so we can build products much faster from idea into production with AI handling the vast majority of that work. So we're going to be able to get more products into the hands of our members even faster. We've got a really exciting road map for the rest of the year that we've outlined with investing in joint accounts and custodial accounts and the thing that I think we're most excited about is the progress that we're making on our actual AI copilot called Jade, which is going to allow our members to not just get financial advice, but -- and tips, but also to -- given our unique position of having -- enjoying this primary account relationship, we can give advice and then allow with their permission to take action on the behalf of our members to help them make financial progress. So you should expect to see exciting developments on that front. And I think it's going to give us one more reason for consumers to come to Chime, use us as a primary bank account and I think over time, you're going to see that this technology advantage that we have relative to incumbents is going to only expand in the coming quarters as we deploy these AI tools, both in development and in the consumer product itself. Operator: Our next question from Adam Frisch with Evercore. Adam Frisch: Great results here. Two questions for you. One, the fiscal year guide was increased more than the 1Q beat, which is great to see. So the business momentum is pretty obvious. Matt, was the second quarter guide more conservatism given the seasonality there and not a read on decelerated momentum in the business or anything like that into the second half? And my second question was for Chime Prime, what are the early adoption, eligibility or activation rates? Anything you can tell us about, if you're seeing kind of a lift, in direction deposit conversion and all that kind of good stuff that would go along with that program? Matthew Newcomb: Thanks, Adam, Matt here. I'll talk first about the guide, and then I'll hand it over to Chris to talk a little bit about our early results on Chime Prime. As you mentioned, we're really pleased with really the broad-based business strength we're seeing and the momentum heading into the rest of the year. And just as you said, we're raising our expectations on both revenue and adjusted EBITDA for the full year. As it relates to Q2 specifically, a couple of points to keep in mind. First, on the top line, we do face a more difficult year-over-year growth comparable in Q2. In the year ago period, we saw a 500 basis point revenue growth acceleration from Q1, which is primarily due to how we were scaling MyPay at the time. So if you were to actually look at Q1 and Q2 on a 2-year stack basis, what you see is that revenue growth in Q2 is very comparable to Q1. On top of that, with the launch of Chime Prime, that will also lead to some higher rewards costs beginning in Q2. So those are 2 factors as it relates to top line. On bottom line, 2 things to point out. On a sequential basis, we do expect to see our normal step down from Q1 seasonally high transaction margin. We mentioned in our prepared remarks that we expect transaction margin to land in the 70% to 72% zone for the remaining quarters of the year. And also, as we telegraphed last quarter, we expect to invest behind our Chime Prime launch in Q2, both in sales and marketing and member support. On an incremental basis, we expect adjusted EBITDA margins in the low 50s in Q2. So from a phasing perspective, this is all in line with our plans. And again, to reiterate, we're raising our expectations for the full year on both revenue and adjusted EBITDA. And on the full year, just as you said, not only are we flowing through our outperformance from Q1, we're raising our expectations for the remainder of the year as well. Christopher Britt: Maybe I'll talk about Chime Prime results. Thanks for the question on that. It's really early days, but we're feeling really good. Just as a reminder, we launched Chime Prime to the public on April 2. So a bit early to get a read, but we are seeing already that it is demonstrated to be effective in driving higher levels of direct deposits. So that's a plus, obviously, because as a reminder, you have to do $3,000 of direct deposit to get access to those benefits, including that hefty cash back on Prime of 5%. The other thing that we're excited about is just looking at the retention rates among people who qualify for Prime, we're already seeing that in the first month or so here that it does appear to drive higher levels of direct deposit retention. And at the same time, we're seeing overall continued increase in the adoption of Chime Card. In other words, Prime -- members who qualify for Prime are more likely to be adopting Chime Card. They're taking it up at a higher rate which is a great tailwind for our mix of payments volume, which is increasingly shifting towards credit. So these are all really, really great tailwinds for us. We've got lots of exciting marketing campaigns and product initiatives this -- over the next few months. In fact, you'll see tomorrow, during the NBA game, you'll see our first spot with our newest brand ambassador, John Cena, America's champ, he's going to talk about all the great benefits of Chime Prime and is very relevant to the consumers we serve. So yes, feeling like great progress on that front and continued great tailwinds on this mix of spend towards credit. Operator: We'll take our next question from Will Nance with Goldman Sachs. William Nance: Maybe I could just follow up a little bit on some of the commentary around Chime Prime. And specifically on unit economics, you're clearly embedding some incremental customer acquisition costs in the second quarter. How are you thinking about the impact of that push as it relates to net adds specifically and particularly in 2Q? I mean, is there any expectation of an offset to some of the seasonal weakness that you alluded to earlier in the second quarter? And just more broadly, what are you looking at to gauge success? And then maybe if I could just sneak in a numerical question for Chime Prime. I think you previously talked about like a 175 net interchange for the new card taking into account the higher rewards rate, is something in like the 130 to 140 range on the new card. Is that the right way to think about it? Just correct me if I'm wrong there. Matthew Newcomb: Thanks for the questions, Will. This is Matt. I'll chime in on both of those. So yes, as we discussed, we're really excited about this launch. We are ramping up a bit of investment behind the launch. That's going to be really across a wide range of marketing efforts. And so that's certainly part of our plans and OpEx phasing for the year. As it relates specifically to the cadence of net adds over the quarter, I think the best baseline expectation is to take a look at the cadence of seasonal net new adds that we've seen over the last few years. Again, Q1 being the outsized one, Q2 being the seasonally lower net adds quarter whereas Q3 and Q4 in the middle. So I think that is the right cadence to expect for us. As it relates to take rates, we've discussed in the past how, yes, Chime Card earns around 175 basis points. We've now launched both Chime Prime as well as a new 2% category of your choice cash back offer on Chime Plus. That's an improvement from the previous Plus offering. The way to think about take rates is on our plus offering for take rates to be in that 175 basis point zone whereas Chime Prime will be slightly below that, not as low as what you alluded to, but slightly below those ranges. Those are the ranges we see today. I'll have to caveat that things will shift a bit and fluctuate a bit over time as members choose the categories that they choose to spend in, but that's sort of the appropriate range to think about for us today. William Nance: No, that's awesome. Glad I asked on the Chime Prime side. And then just maybe sticking with the take rate commentary. I was wondering if you could help pick apart some of the sequential moves in take rates from 4Q to 1Q. I know there's been -- I mean, you just alluded to some of the movements in the rewards offerings. But I also know there's some seasonal factors that impacted in the first quarter. So if you could just unpack that and specifically in the context of credit mix going up several points sequentially from 4Q to 1Q. What are some of the offsets that drove the take rate this quarter? Matthew Newcomb: Yes, great question. There's really sort of 3 factors to keep it mind as it relates to take rates, specifically in Q1. We talked about one already, which is, of course, credit mix and how the continued adoption of Chime Card is continuing to drive higher credit mix. In Q1, that landed right around 25% of total spend, up from about 16% before we launched Chime Card in September. And on that front, what I'll say is, we're certainly continuing to see momentum both on new members but also existing members. New members coming into Chime, nearly 60% of them are spending with Chime Card. And among those, they're spending about 70% of their Chime spend on the card. And for existing members, we're seeing that those who have adopted Chime Card are using it for an increasing portion of their Chime spent. So good momentum on that front. And again, that's helping to drive take rates up in the quarter. The second thing to point out as you did, Will, is seasonality. So interchange rates are another metric in our business that are affected by tax refund related seasonality in Q1. More specifically, because outsized deposit volumes from tax refunds result in purchase volume with higher ticket prices, what you see is interchange rates because there's both a variable and a fixed component, are actually a bit lower each Q1. Again, that's a very typical seasonal pattern. We saw that again this year. So as I would encourage you to do with the rest of our business, you really got to look at things on a year-over-year basis. And then lastly, as we shared in our prepared remarks, we are doing more to experiment with member rewards to drive both new member growth and retention. That includes not just the cash back rewards on Chime Card, which is clearly doing well and resonating with members, but it's also included in initiatives like limited time cash back and referral offers, introductory bonuses and other initiatives. These types of member rewards are accounted for as contra revenue, which makes the calculated net take rate of payments revenue and purchase volume look a touch lower. That, of course, is all included in our transaction profit payback period. In the scheme of things, it's a fairly small amount, but we are excited about the potential. So that's one additional factor to keep in mind as it relates to take rates. Operator: We'll take our next question from Andrew Jeffrey with William Blair. Andrew Jeffrey: I wanted to ask a little bit about learnings from variable pricing in MyPay. And if that's sort of a lever you can pull to drive monetization, obviously, the performance there has been terrific with the tenfold increase in transaction profit contribution. But I wonder if you could just elaborate a little bit on what you've seen and what the outlook is for those initiatives? Mark Troughton: Yes, sure, I'll take that one up. Okay. At a high level, we've been very pleased with MyPay performance. $400 million business, now 62% transaction profit margins and still operating at a 1% loss ratio inside -- in a product that really has been on for less than 2 years. So from a pricing perspective, if you remember, as Chris outlined in the early remarks, the real reason we did this was so that you weren't limited by a fixed-fee model, the variable fee model enables us to actually give members access to greater MyPay limits earlier in the pay cycle. And that effectively, to your point, enables us to actually accelerate advancing more MyPay to members. Now having said that, we obviously want to make sure we're advancing this to people who can actually repay us in this situation. What we're not wanting to do here is to create a debt burden that our members cannot handle. So that's been an important part of developing our underwriting model. And I think as you look at the yields, you guys will probably have noticed that if you look year-over-year, our yield on MyPay increased about 35% and if you looked at Q1 relative to Q3 last year, it increased about 20%, and that was really driven by the price change that came in starting in Q4 and then finishing in Q1. And those are key contributors to that. So that takes year-over-year growth in the MyPay-to-MyPay profit. I think it's also important to continue to bear in mind that even at our 2.6% or 2.7% MyPay yield, we are half the cost of our newest competitors in the space. And that continues to be one of the reasons why we bring more people into upper funnel and continue to attract and retain members year after year after year. So I think we feel really good that we now have the pricing structure and the underwriting model in place to start to expand MyPay access to those who can handle it. Andrew Jeffrey: I appreciate that, Mark. And then as a follow-up, one of the things that I hear sort of keenly from investors is about the purchase volume per MAU KPI, which seems to me to kind of miss the point. Nonetheless, investors seem to care about it. And I know there were some seasonal factors influencing 1Q. Can you talk a little bit about your expectations for that KPI and whether it's something that should maybe get as much attention or not get as much attention as it seems to? Matthew Newcomb: I'll pick up that one. Thanks, Andrew. So at the highest level, what I would say first is, as we've shared the last few quarters, we're seeing very consistent overall trends in purchase volumes. And I would say that really is one of the key advantages of our business model and our focus on earning primary account relationships. Our spend is highly concentrated in nondiscretionary everyday categories. And that's been -- that's the type of spend that's very resilient across business cycles. If you take a look at our cohorts, our tenured cohorts, we're seeing very consistent growth in spending. That's true across both discretionary and nondiscretionary categories. It's true across income groups. At the same time, we're seeing account balances increase year-over-year. Again, this is a healthy consumer willing and able to spend and that's translated into a pretty consistent pace of payments in OIT revenue growth. That grew 19% year-over-year in Q1. As it relates to the per active metric specifically, as we shared previously, the reason that purchase volume plus the OIT volume per active is down on a year-over-year basis is largely the result of these early engagement initiatives that have been very successful for us. They've helped us engage new members, we wouldn't have otherwise engaged. This has strengthened our unit economics. That being said, it has had the effect of diluting the headline purchase volume per active metric since these initiatives have driven faster growth of the newly engaged actives who aren't yet spending as much on Chime. It's creating a larger denominator. We do expect these trends to start to normalize in the back half of this year, in particular, as we start to lap last year's launch of these early engagement initiatives. So this is just to kind of hit your question head on, this is really just a phenomenon of the successful early engagement initiatives. It's not a reflection of any sort of concerning underlying spend trends. On that front, we see a lot of resilience and consistent trends. Operator: We'll take our next question from Timothy Chiodo with UBS. Timothy Chiodo: Great. So on Chime Prime, I know the overall paybacks are very attractive 5 to 6 quarters, the LTV CAC is 8x or higher, those sort of great numbers. For Chime Prime, I heard you say obviously a much higher ARPAM. And I also heard that some of the early data suggest that the retention is even higher. So absent a meaningfully higher CAC, I would suggest really, really attractive LTV/CAC payback. So I was -- I was wondering if you could talk a little bit about that CAC and just how much higher it might be for these clearly more attractive customers and Chime think clearly that higher CAC is well worth it in the context of the ARPAM and the retention? Matthew Newcomb: Tim, it's Matt here again. We're really excited about Chime Prime. As Chris mentioned, early signs of a lot of potential benefits across the business. That's true across retention, that's true across Chime Card attach, that's true across direct deposit conversion and attach. And so yes, we're very excited about the potential there. That being said, it's very early days here. We've just started to roll this out. It is too early to give you a sense, specifically on sort of what the unit economic equation specific to Chime Prime looks like. But again, we think this is a great add to our overall product mix and value props and we're excited to keep you posted in the coming quarters. Operator: We'll take our next question from Patrick Moley with Piper Sandler. William Copps: This is Will Copps on for Patrick Moley. As it relates to Chime Enterprise, have -- are you thinking about any sort of future percentage of total member adds coming from the segment? And what's the CAC relative to other traditional channels for member acquisition? Mark Troughton: Will, it's Mark here. I'll pick that up. I think Enterprise is progressing really well, as Chris indicated in the prepared remarks. The value prop is really strong. It's a broader financial wellness product. The EWA is totally fee free. And anytime we approach a large enterprise, we find that 5% to 10% of their employee base is really on direct deposit with Chime, which gives us an edge. So it's resonating really well in the market. It's still early days for us. These enterprise sales cycles are quite long and it takes a little while to get the boat out of the water. I think the good news is we think the boat is out of the water, and that's actually translating into a good pipeline here with a steady drumbeat of conversions, including some large ones like we're announcing today with First Student, which is the largest student transportation company in the U.S. So yes, the momentum is strong, as we've indicated, it's one of our priorities. We're not giving specific guidance with respect to enterprises contribution to net ads. We think the fact that it's a priority, we'll probably tell you that we believe it has the potential for it to be a meaningful contributor. But we're not giving specific guidance related to that. As it relates to CAC, the CAC on Enterprise is materially lower. But really, it's -- the CAC there really is the fixed cost of the Enterprise division and the sales cycle rather than a sort of variable CAC. So that CAC will start off higher, although considerably lower than our consumer channel, and then it will reduce as we get more ads through that same sales cost base. That's how we think of the Enterprise channel. Operator: We'll take our next question from Alex Markgraff with KeyBanc Capital Markets. Alexander Markgraff: More questions, maybe 2, if I can squeeze the second one in. First on Prime for Chris. I'm curious, when we think about the ramp of this offering and some of the forthcoming products or features that you mentioned outside of the really strong initial offering. How do you think about the catalyst that those forthcoming products represent, whether it's account types or at some point, more unsecured credit. Just be curious to understand how those connect as catalysts for the ramp as we think forward? Christopher Britt: Yes, we think that the progress we've made year-to-date has been great. This new offering is incredibly compelling. I mean, if you think about the cost of fuel today, if you're a Chime member that selects the gas category and you're spending, say, $800 a month on gas, you're getting $40 cash back. It's a really, really powerful offering that I think is broadly appealing and that's very consistent with how we're thinking about our product road map. We want to create an even broader set of products for our members to engage with us and not just to avoid fees and not just to get access to short-term liquidity and credit building, but to also play a role in helping shape the long-term financial health and progress for our members. And that's why we'll be launching investment accounts and a combination of allowing people to buy equities directly, we'll have a robo offering for people who are maybe feeling a little less sophisticated or less comfortable investing in the market to try to get them moving in that direction. And we're really excited about using AI to guide people towards all of these exciting new products. We think that as we evolve them and we offer an even more comprehensive set of services that we can truly be even more broadly appealing to consumers even in the 100,000-plus category. We have the core products and services to meet their needs. So I think the combination of these services together will allow us to -- will be a catalyst to drive even more awareness of Chime's product offerings and open up new segments of the population. We've heard of Chime to really take another look at it and I think you're already seeing the progress in the net asset that we're adding each quarter. So expect more and more product offerings coming down the pike, including more products in the area of credit and lending. We're going to keep pushing on those fronts as well. I think Mark mentioned that the Chime Prime tier comes with an instant approved instant loan product. And so we're going to continue to have credit and lending products to serve that segment as well and certainly down the line we anticipate having some form of an unsecured credit card product as well, but that's not something we have on the sort of short-term road map. Alexander Markgraff: Understood. I appreciate that. And then maybe if I could squeeze one in, just on underwriting. Just having heard from some peers in the ecosystem, talked about step changes in underwriting model quality as a result of AI-related improvements. I'm just curious to maybe sort of a pulse check. Obviously, you guys have made a ton of progress in hitting target loss rates around MyPay. But just sort of curious to pull check the maturity of models and if there are opportunities that you all see that didn't exist 12 months ago with respect to model quality? Mark Troughton: Yes, I'll take that one up. I think, look, 2 things. One, it's important to just bear in mind the key advantages we have on the underwriting side. The first one is we -- as the primary account, we have a lot of unique data. Secondly, we're actually underwriting against a recurring direct deposits. So we sit top of the repayment stack. Those are two very, very significant advantages that we leverage. In addition to that, we obviously continue to use those data signals through increasingly sophisticated models. We've been using advanced machine learning on these things for some time. We do think there will be increased advantages with AI, and we will -- we want to continue to sort of lead that. But I think if you have a look at our underwriting performance and you look at something like MyPay, a year ago, we were sitting at 1.7% loss rate, and now we're sitting around 1%. So I think that while there are still meaningful improvements ahead with AI, I think a lot of the advantage is coming from the unique data and the position we have in the recurring direct deposit stack. Operator: At this time, we've reached our allotted time for questions. I'll now turn the call back over to Chris Britt for any additional or closing remarks. Christopher Britt: Great. Thanks again. I want to congratulate the team on a great quarter and looking forward to seeing you all on the road. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good afternoon, and welcome to the MannKind Corporation First Quarter 2026 Financial Results Earnings Call. As a reminder, this call is being recorded on 05/06/2026 and will be available for replay on the MannKind Corporation website shortly after this call for approximately 90 days. This call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from these expectations. For further information on the company's risk factors, please see the Form 10-Q for the period ended 03/31/2026, the earnings release, and the slides prepared for this presentation. Joining us today from MannKind Corporation are Chief Executive Officer, Michael E. Castagna, and Chief Financial Officer, Christopher B. Prentiss. I would now like to turn the conference over to Michael E. Castagna. Please go ahead, sir. Michael E. Castagna: Thanks, operator, and good afternoon, everyone. Thank you for joining us for our Q1 2026 earnings call. Here is today's agenda, and I will start with some opening remarks. In the first quarter, we continued to execute our strategy to evolve MannKind Corporation into a diversified company positioned to deliver sustained long-term growth. The company is fundamentally different than it was even a few years ago, and we are excited about the near-term milestones that will further advance the company's evolution. Today, we will discuss the recent positive developments with United Therapeutics and articulate our growth plans that we expect will drive significant shareholder value over the coming years. Let's begin with our announcement earlier today that MNKD-1501 has been unveiled as ralinepag DPI, which United Therapeutics optioned back in August. Our formulation team has been moving ralinepag DPI forward expeditiously, and we recently received a $5 million payment to prioritize the continued rapid advancement of this program. We have the potential to receive up to $35 million in development milestones plus a 10% royalty on net sales. Of those milestones, we expect about $15 million to be earned over the next 12 months. This expanded collaboration is significant for a few reasons. First, it deepens an already productive partnership with United Therapeutics. Second, ralinepag DPI has the potential to be used across pulmonary arterial hypertension, pulmonary hypertension associated with interstitial lung disease, idiopathic pulmonary fibrosis, and progressive pulmonary fibrosis, collectively impacting more than 250 thousand patients and representing a substantial opportunity to improve outcomes across these conditions. Third, it continues to validate our unique Technosphere platform. In addition to ralinepag DPI, we have also confirmed MannKind Corporation as the sole manufacturer of Tyvaso DPI under a supply agreement that includes contractual minimums. This provides us with a solid foundation as we continue to scale our Danbury, Connecticut facility for our own pipeline, including a manufacturing buildout to support the growth of FURO6 ReadyFlow. Now let's move on to Q1 performance. We delivered quarterly revenues of $90 million, a 15% increase over the prior year, as this now includes the addition of FURO6. Q1 was a challenging quarter for several reasons. Number one is structural. Each year, Q1 typically declines relative to Q4 due to annual deductible resets. As patients face higher out-of-pocket costs at the start of the year, we see both fewer fills and lower doses per prescription. For FURO6, doses per prescription were down roughly 20% in Q1 compared to Q4. Number two is transitional. As we prepared for our upcoming launches of Afrezza Pediatrics and the FURO6 ReadyFlow auto-injector, we reorganized field teams, leading to customer disruptions in Q1 as we did not want to disrupt the field in Q4 or the upcoming next two quarters given the potential launches. Additionally, we reallocated marketing resources away from Afrezza adult, which slowed the growth year over year as we thought it would be more prudent to shift these investments toward the pediatric Afrezza launch and FURO6 nephrology opportunity. We have made the adjustments, and the field teams in place today are talented, highly experienced in their therapeutic areas, and have the right resources to deliver quarterly growth over the balance of the year. Number three, as we prepare for the launch in Q3 of the auto-injector, we want to ensure an efficient conversion. We transitioned our inventory levels to minimize volatility and inventory stocking of the current on-body infuser at the specialty pharmacies. As this adjustment is now behind us, we expect future product outflows to better reflect underlying prescriber demand, which will help us accelerate the transition upon FDA approval. When you put these three things together, Q1 came in lighter on the revenue side, but even so, the underlying indicators were more encouraging than the top line may suggest. We saw growth in both overall writers and repeat writers of FURO6, hitting a record number of prescribers in Q1, and demand momentum improved as the quarter progressed. Doses dispensed are up nearly 60% through April compared to the same period last year. Chris will walk through the quarter in more detail. We are confident the underlying business is moving in the right direction, and we remain on track to meet our full-year 2026 FURO6 revenue target of $110 million to $120 million. Now let's walk through the Q1 highlights. The FDA approved the updated Afrezza label, which now provides clear starting dose guidance. That is an important enabler for the pediatric launch as this was the dosing used for the pivotal trial. We have also completed our launch buildout for Afrezza Pediatrics ahead of the May 29 PDUFA date. We completed the pilot phase enrollment in our Inhale First pediatric trial evaluating Afrezza in youth with newly diagnosed type 1 diabetes. That is the long-term goal I have talked about for years. Additionally, we settled the convertible notes, which strengthens the balance sheet. Finally, on the SC Pharma integration, we are now approximately seven months post-close, and I am very pleased with how the integration has progressed. For most functions, integration is substantially complete, and we have identified synergies that exceeded our $20 million annual target we previously set. I want to thank both teams for the way they came together. These integrations are always challenging, and ours is going exceptionally well. Now I will take a step back to talk about strategic evolution because this tells a really important story. Until 2022, we were essentially a single-product company with Afrezza. Since then, United Therapeutics and Tyvaso DPI specifically have played a critical role in funding our transformation, including enabling the SC Pharma acquisition last year. With that acquisition, we added FURO6, which brought an incredible team with deep cardiology experience. That has expanded our portfolio and our commercial infrastructure in a meaningful way. As we look at 2026 and beyond, we are now a diversified cardiometabolic and orphan lung company with multiple FDA-approved products, two near-term regulatory catalysts, and a potentially transformative pipeline opportunity with inhaled nintedanib DPI advancing into Phase 2. The United Therapeutics partnership will remain a reliable pillar of the business, providing stability and significant growth potential. It also gives us flexibility to advance the pipeline, reduce debt, and pursue business development opportunities. But the MannKind Corporation story is increasingly about the products and development candidates we own and the brands we are building for the long term. Turning to the major catalysts for 2026 and beyond, we have two regulatory catalysts and one clinical catalyst stacked up in a narrow window over the next three to four months. First is the Afrezza pediatric indication. If approved, Afrezza will be the first and only needle-free mealtime option for children and adolescents in more than a century and would address a long-standing unmet need with a highly differentiated value proposition. Importantly, this opportunity compounds over time as adolescents initiate therapy early and continue into adulthood, supporting durable long-term growth for the brand. Second is the FURO6 ReadyFlow auto-injector. If approved, this changes the administration profile for FURO6 from several hours to just seconds, which has real implications for patient convenience, training, and widespread adoption. It supports broader use and would significantly reduce our cost of goods. Third is the MNKD-201 nintedanib DPI program. There remains an urgent need for more effective therapies in IPF. Current options are limited by tolerability. Our lung-targeted delivery approach is designed to address those barriers, and we are on track to report Phase 1b top-line data in the third quarter, a key clinical de-risking step. In parallel, we are advancing MNKD-201 into a global Phase 2 trial this quarter. Each of these catalysts will be significant on its own. Having all three in a single calendar year is a powerful testament to our progress and execution over the last ten years. Together, these milestones strengthen our foundation and position us to potentially deliver meaningful growth in the years ahead. We have two near-term regulatory events, a growing commercial business, a strong revenue base from United Therapeutics, and a pipeline approaching important data milestones. Now let us go deeper on the upcoming commercial expansion opportunities for our products, starting with Afrezza. The pediatric opportunity is a well-defined new population entry point with the ability to expand across even broader populations over time. There are roughly 360 thousand people between 8 and 22 years old living with type 1 diabetes in the U.S., with about 30 thousand newly diagnosed each year. While our launch focus is type 1 in children and adolescents, when you look at the broader picture where Afrezza is already indicated, the long-term opportunity for inhaled insulin is significant with over 38 million patients that we are indicated for today. The pediatric opportunity is one of the most important for Afrezza since its initial approval, and our extensive research highlights why. Despite decades of technology and drug innovation in diabetes, A1c control is still not meeting goals, largely because of mealtime challenges that exist in the everyday life of patients. Afrezza is the solution. After more than a decade on the market, Afrezza is poised to finally live up to its potential. Managing mealtime insulin in children and adolescents often means multiple daily injections, rigid meal timing, and significant burden on both parents and caregivers. Afrezza directly addresses those challenges by eliminating mealtime injections through a novel route of administration, providing greater flexibility around meals, and easier timing for kids. When you think about what it means for a child with type 1 diabetes to not have to take a shot at lunch or wear a pump while playing sports, or count carbs at a birthday party or even forgo the cake, that is a really big deal to the average life of a child. This is a therapy backed by more than a decade of real-world data and now a completed Phase 3 pediatric trial. The American Diabetes Association now positions inhaled insulin as an equivalent option to multiple daily injections and insulin pumps including AID in their guidelines. This guideline support puts Afrezza on equal footing with the standards of care, a significant milestone that recently happened. The evidence base has never been stronger. Families and physicians continue to highlight the significant daily burden of diabetes management and are telling us that Afrezza has the potential to fundamentally change that experience. With peak share potential in the range of 23% to 37%, and each 10% share representing approximately $150 million in net revenue, the opportunity is significant and will continue to compound over the coming years. Pediatric represents a fundamentally different dynamic. As we look at our key areas at launch, we are continuing to be very disciplined. We are directly addressing the mealtime challenge for about 35% of patients who have real friction with insulin and mealtime today, compounded by the fact that 25% to 35% intentionally miss their mealtime injections or pump boluses. We are engaging consumers through highly targeted outreach—about 93% of families are motivated to speak to their HCP to request a change in the child's diabetes management, so patient requests matter. We are targeting roughly 60-plus prioritized academic medical centers with about 20 key account managers, where the highest-volume pediatric prescribers are. In parallel, the broader Afrezza sales team extends coverage by engaging community-based healthcare providers as well as these academic centers to ensure comprehensive reach and frequency at launch. We are enhancing the customer experience through ease of access, with commercial or Medicaid patients able to get on Afrezza for $35 or less. In parallel, we have engaged in a number of payer discussions to ensure formularies are positioned to support the pediatric launch, and we are seeing receptivity to expand access for children and adolescents as we approach approval. The pediatric approval for Afrezza offers the brand a new beginning—new patients, eager physicians, and a clear unmet need. If approved, we are ready to launch. Let us turn our attention to FURO6. As we look at the addressable opportunity, there are roughly 700 thousand fluid overload events we can address outside the hospital setting. There are multiple intervention points along the patient journey. Since launch, we were historically targeting when fluid first presented at home and oral diuretics were not enough. We are moving to address the post-discharge setting; it can impact length of stay and 30-day readmissions. With the FURO6 ReadyFlow, we believe we can unlock several additional intervention points both earlier and later in the treatment paradigm, where FURO6 logistics can break this cycle of admissions and readmissions. Next, let us talk about the ReadyFlow auto-injector and why we are so excited about it. We consistently hear from HCPs that the current FURO6 on-body infuser, while effective, can be a barrier to adoption in certain patient segments. With the PDUFA date of July 26, if the ReadyFlow auto-injector is approved, it will reduce the administration time of FURO6 from five hours to just seconds. That could broaden use among prescribers who have been more selective with the current presentation. Our research also supports this: 65% of HCPs anticipate they would expand their FURO6 use with the ReadyFlow auto-injector. Patients are already familiar with the auto-injector delivery format through other therapies. It is a simple, reliable delivery system with minimal training required. It has comparable efficacy and safety to IV and the current on-body infuser. The auto-injector allows earlier intervention and enhances patient independence because there is less hesitancy to use it. Importantly, the ReadyFlow auto-injector would significantly reduce our cost of goods, which improves our margins and frees up capital to reinvest. On FURO6 ReadyFlow launch readiness, we are building from a position of strength. To support the launch, we have identified four key tactics. Number one, approximately 60% of FURO6 patients require prior authorizations today, so simplifying access and reducing friction in the onboarding process is critical to ensuring patients can start therapy without delay. Based on recent payer conversations, they are receptive to removing access hurdles given the overall cost benefits of FURO6 and reducing the number of patients going into the ER related to fluid overload. Number two, from an adoption standpoint, our market research is encouraging. Roughly 85% of existing FURO6 patients are expected to convert to the ReadyFlow auto-injector, reflecting strong confidence in the ReadyFlow profile. In addition, 65% of healthcare providers anticipate expanding their use as they have earlier and more productive intervention. Number three, we have a clear focus on accelerating time to patient start. We are exploring alternative distribution partners that will improve our ability to get FURO6 in the hands of the patient the same day. Lastly, we have deployed our key account manager team to deepen integrated delivery network relationships and get FURO6 integrated into hospital discharge protocols. That is where the post-discharge intervention opportunity lives. It is where we believe we can make the most meaningful difference in reducing hospital readmissions. We have prioritized more than 60 key accounts supported by the entire sales force, in addition to our newly established key account managers who completed training in March. This approach should drive consistent uptake and appropriate utilization, which we expect will accelerate in the second half. Taken together, these tactics position ReadyFlow for rapid adoption by accelerating patient starts, establishing earlier use in the treatment pathway, and ensuring focused, disciplined execution across the accounts that matter most. Moving on now to the nintedanib DPI, our MNKD-201 program. IPF is a devastating disease. These patients cough up to a thousand times per day, and with the poor tolerability of current treatments, their quality of life is significantly compromised. Eight out of ten patients die from this disease within five years, and many would rather forgo treatment than endure the side effects of today's standards of care. Our approach is to bypass the GI tract through targeted pulmonary delivery. The Technosphere platform is a proven platform. We have two FDA-approved products with less than a 3% discontinuation rate due to instances of cough and demonstrated safety and tolerability in patients with underlying lung disease. So when you combine a proven molecule like nintedanib with direct lung targeting and consider our Phase 1 volunteer observations showing no GI tolerability issues and our Phase 1b in actual IPF patients showing no discontinuations due to cough or serious adverse events in the first 12 patients, we have strong confidence in the potential to improve tolerability while maintaining or potentially enhancing efficacy. Onto our MNKD-201 program updates. We have completed enrollment of Cohort 1 in our Phase 1b INFLow study, which is in active IPF patients. Our top-line data are expected to be shared during Q3. That is a key de-risking point as we generate safety and tolerability data in these patients. Simultaneously, we are initiating enrollment in our global Phase 2 study now that we have received our first country approval. We are advancing both programs in parallel to accelerate data generation and development timelines. Here are the key things that differentiate MNKD-201: a two-second inhalation, a proven delivery platform with no cleaning required, and the potential to dramatically reduce side effects while meeting or beating the efficacy of oral nintedanib. Each step further de-risks a program that we believe has tremendous potential to target a disease with limited treatment options. Taken together, our inhaled nintedanib DPI program, along with United Therapeutics’ Tyvaso DPI and ralinepag DPI, gives us three differentiated shots on goal in IPF. Importantly, nintedanib DPI is not only well positioned to serve as the backbone of therapy, but also opens the door to combination use alongside other current and emerging IPF therapies, which is increasingly how we expect this market to evolve. Together, these programs reinforce the potential for inhaled delivery to improve tolerability and play a central role in redefining how IPF is treated. Before I turn it over to Chris, I want to highlight some of the key upcoming scientific conferences we will be at, including the Respiratory Innovation Summit where we have a small presentation at ATS, the American Diabetes Association where we have almost 10 presentations at the Scientific Sessions, and the American Association of Heart Failure Nurses in San Diego in late June. These are exciting times with lots of data dissemination and hopefully upcoming FDA approvals. I will now turn it over to Chris to review our first quarter 2026 financial results. Thanks, Chris, and good afternoon, everyone. Christopher B. Prentiss: For a summary of our financials, please review our press release issued before this call and our Form 10-Q, which is now on file with the SEC. Let us start with FURO6. For Q1 2026, FURO6 net sales were $15.5 million. As a reminder, the acquisition closed on October 7, and only post-acquisition results are included in MannKind Corporation financials. Underneath the revenue number, the demand metrics for the brand remain strong. We had a record number of writers in the first quarter, and 75% of those writers are repeat writers, which is a really good signal. Doses dispensed grew 64% year over year, and our IDN business grew 97% year over year, reflecting the early traction of our key account manager team. If you look at 2025, approximately 14% of annual volumes were generated in Q1. If you apply this to our Q1 units dispensed, we remain on track to achieve our annual target and are reaffirming our 2026 FURO6 revenue range of $110 million to $120 million. Turning to Afrezza global sales, Q1 2026 net sales were $15.3 million, up 3% year over year. As we discussed earlier, we have shifted our marketing efforts toward our two anticipated launches this year and transitioned nephrology sales responsibility to the legacy Afrezza sales team. As expected with a new call point, this created some near-term disruption, which we expect to improve steadily over the remainder of 2026. Tyvaso DPI-related revenues provide a durable revenue base. Our collaboration services revenue is driven primarily by manufacturing revenue based on volumes sold through to United Therapeutics plus the recognition of deferred revenue. For the quarter, CNS revenue was $23.5 million compared to $29.4 million for the prior-year quarter. As we have noted previously, this revenue stream may fluctuate between periods depending on production scheduling at our Danbury facility across Afrezza, development programs, and Tyvaso DPI. However, it is important to note that the amendment to our Tyvaso DPI supply agreement we signed earlier this quarter established annual minimum quantities, effectively fixing our annual manufacturing revenue for Tyvaso DPI. As a result, period-to-period fluctuations are driven primarily by manufacturing planning and scheduling requirements, and to a lesser extent by the timing of revenue recognition from other collaboration activities. One such collaboration is our development of ralinepag DPI with United Therapeutics. We recently received $5 million to accelerate its development. We will begin to recognize this in Q2. An additional $35 million of development milestones remain, of which we expect to earn $15 million over the next 12 months. Q1 2026 royalties reflect year-over-year growth of 9% to $32.7 million. In 2026, royalty revenue will support key capital priorities including funding the March retirement of our senior convertible notes, our CVR obligations, and our pipeline programs. Turning to the bottom line, for Q1 2026, we reported a GAAP net loss of $16.6 million, or $0.05 per share. On a non-GAAP basis, we reported a net loss of $6.9 million, or $0.02 per share. For comparison, in Q1 2025, we reported GAAP net income of $13.2 million, or $0.04 per share, and non-GAAP net income of $21.6 million, or $0.07 per share. The year-over-year change reflects the planned increase in commercial spend associated with the potential FURO6 ReadyFlow auto-injector and Afrezza pediatrics launches, as well as the incremental cost structure associated with the SC Pharma acquisition, including amortization of acquired intangible assets, which is non-cash. For the full details on non-GAAP adjustments, please refer to our press release and 10-Q filing. On the expense side, R&D expenses increased over the prior-year period, driven by ongoing enrollment in the Phase 1b study and preparations to begin enrollment for the Phase 2 study of MNKD-201. We expect R&D spending to remain at this level as we advance the MNKD-201 program, as well as our pipeline programs such as our inhaled bumetanide program MNKD-701. Selling, general, and administrative expenses increased compared to the prior-year quarter, primarily driven by the expanded commercial infrastructure supporting the anticipated pediatric Afrezza and ReadyFlow auto-injector launches, as well as the full-quarter impact of the SC Pharma commercial team and operating structure. Having two PDUFAs within months of each other is unusual for a company of our size and makes 2026 a deliberate investment year. We are investing to ensure both potential launches are properly supported across the field and in promotion, which is reflected in SG&A this quarter. Going forward, we will continue to evaluate commercial performance and adjust investment levels with discipline as we execute on these launches. Turning to our balance sheet, we ended Q1 with a solid liquidity position after settling the remaining balance of our senior convertible notes. We believe we have sufficient capital to support our planned commercial launches and continue advancing our pipeline. In addition, our credit facility provides financial flexibility if needed, and we remain focused on deploying capital in a manner that maximizes long-term value for our shareholders. Before I turn it back over to Mike, I want to mention that we will be at the Jefferies Global Healthcare Conference in New York in June. We look forward to engaging with many of you there. With that, I will turn the call back over to Mike. Michael E. Castagna: Thank you, Chris. Let me close by summarizing why we believe MannKind Corporation is well positioned for the next phase of growth. Number one, as we look at the remainder of 2026, we are in the middle of a meaningful corporate transformation. Since 2022, we have evolved from a single-product company into one with multiple FDA-approved products and a more diversified growth profile. United Therapeutics revenue continues to provide a strong foundation while our revenue mix is shifting steadily toward MannKind-owned brands, with owned revenue moving from roughly 40% just prior to the SC acquisition to over 65% with the anticipated FDA approvals as we exit 2026. That represents a fundamentally different company than the one we experienced a few quarters ago. Number two is FURO6. We have a clear line of sight to achieving our $110 million to $120 million revenue range for 2026. The ReadyFlow auto-injector, pending its July 26 PDUFA date, represents a meaningful opportunity to extend and accelerate the brand's growth trajectory. The fact that 65% of healthcare providers indicate they would expand their use with the FURO6 ReadyFlow auto-injector reinforces our confidence in its potential. Number three is Afrezza. A pediatric approval would unlock a significant growth opportunity and represent the most important milestone since the approval of Afrezza in 2014. Pediatric demand indicators are strong, the value proposition is clear, and we are launch ready with disciplined, targeted investment. If approved, our team is ready to execute. Number four is our partnership with United Therapeutics. The Tyvaso DPI franchise continues to deliver durable economics with the potential for expansion into IPF, and ralinepag DPI extends the partnership into multiple indications, reinforcing both the strategic depth and long-term value of this relationship. Number five is nintedanib DPI. Completion of the Phase 1b in IPF patients—where we expect top-line data in Q3—and first patient enrollment in the global Phase 2 program this quarter represent important de-risking milestones and position this asset as the next meaningful pipeline value driver. When we put all these together—a durable revenue base from United Therapeutics, two near-term regulatory catalysts, and a pipeline with meaningful upside—our priorities are clear, our team is focused, and MannKind Corporation is poised to capitalize on some of the most fundamental and transformational moments in the history of the company. We will now open the call for questions. Operator: Thank you. At this time, if you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk. Then you will hear your name called. Please accept, unmute your audio, and ask your question. We will wait one moment to allow the queue to form. Our first question will come from Roanna Clarissa Ruiz with Leerink Partners. You may now unmute your audio and ask your question. Roanna Clarissa Ruiz: Great. Good afternoon, everyone. A couple from me. I will start off with ralinepag DPI and get a little bit more context. How long have you been working on it, and what additional formulation work do you think needs to be done from here to go from the oral ralinepag to an inhaled version? Any gating factors you might expect as you are working through this? Michael E. Castagna: Thank you, Roanna. Before I start, I just want to apologize to everyone for the technical difficulties we had and the length of the call. We will get to Q&A, but I just want to apologize. On ralinepag DPI, we have been working on this since we announced the agreement back in August. It takes a while to onboard powders and API. All that has been moving very smoothly. We had a bunch of prototype powders; we have selected some leading ones, and they are moving forward. There is always some fine-tuning as you go through manufacturing, but overall we are moving full scale ahead on United Therapeutics’ timelines. Roanna Clarissa Ruiz: Okay, great. And then I wanted to ask about the nintedanib DPI program as well. Now you have a few different shots on goal in IPF, with ralinepag DPI, etc. How are you thinking about these products evolving in the landscape given their different active ingredients, and any physician feedback you have heard so far? Michael E. Castagna: We believe there will be combination use going forward. We know the current orals have overlapping toxicities and the data in combination have not always looked that positive. But if you look at the TETON data 1 and 2, the combination of treprostinil and nintedanib looked very strong, and we know pirfenidone is a little bit weaker of an agent, so we see a bigger gap there. In general, I would see an evolution of a combination market. That is one of the reasons we are running a QID arm in our Phase 2, so that if you were on QID Tyvaso DPI or Tyvaso nebulizer, you could look at a QID nintedanib DPI as well. We are hoping to show in that trial whether using 4 mg twice a day or 2 mg four times a day, outcomes are comparable. If one is better, that is great and we will lead with that. That is one of the things we are exploring in Phase 2. Roanna Clarissa Ruiz: Great. Last one for me on FURO6. Any extra color on trends you saw in the quarter? You reiterated your guide, which is encouraging, but anything interesting you are watching for in the next couple of quarters in terms of underlying demand? Michael E. Castagna: First, we know two competitors launched last October. We are keeping an eye on that, but not much activity—maybe 40 to 50 scripts since launch, so nothing of significance. We did hear anecdotal reports of people switching back; some had tried the nasal and may not have gotten the efficacy they wanted and went back to FURO6. That is an early indicator of patient or physician satisfaction for us, which makes us more confident as we go forward. On the FURO6 side, new prescribers looked great, nephrology picked up a lot in March as we closed out the quarter. We think the transition of the sales force caused a pretty big disruption in January and February. As they get relationships re-established, lunches on calendars, and dinner events now taking place, we think nephrology will continue to accelerate throughout the year. Overall, especially with the auto-injector, FURO6 should grow a lot faster in Q3 and Q4. Looking at volume, the percent of units that shipped in Q1 last year versus Q1 this year gets you close to our reported number. Q1 co-pay resets are a headwind; we heard the same from other companies. March and April pick back up, which gives us confidence for the rest of the year. We feel pretty good, and all the feedback and anecdotal evidence we hear for FURO6 is very positive. Operator: Our next question comes from Wells Fargo. Please go ahead with your question. Analyst: Hey, good evening, and thank you. I also wanted to ask about ralinepag DPI that was disclosed this morning. Going back to what you were saying a minute ago, how far along in the process are you, and what gives you confidence that you can actually formulate this as a DPI? I believe there is also discussion in the disclosure that once-daily is on the table. What is the confidence around that as well? Michael E. Castagna: I cannot comment on the pharmacokinetics; I will defer to United Therapeutics and their modeling and all the work they have done and what they know about ralinepag. We will not know the real answer until we get into humans and see the pharmacology. Hypothetically, what they believe is probably the best we have today. In terms of my confidence, I feel pretty confident we have a lead powder that can go forward into animal and human trials now. The amount of powder we have to make for those things is not very significant, so that is ahead of schedule. United Therapeutics has done an excellent job moving this as quickly as humanly possible, and we are doing our best to keep up and stay ahead of them. Overall, there is a lot of energy to accelerate this as quickly as possible, and I think there will be good updates throughout this year and next year. Analyst: Excellent. On the two PDUFAs coming up—Afrezza pediatrics and FURO6—assuming both are approved, how soon after those approvals would you anticipate seeing the adoption curves impacted? Michael E. Castagna: On pediatrics, the approval should come the week before the American Diabetes Association meeting. If that timeline holds, it would be ideal because we have nine or 10 presentations and posters, as well as an evening event at ADA. That will be a good blast-off, not just for the U.S., but also internationally. We plan a staged rollout across the first 30, 60, 90 days to get into the top 10 to 15 institutions, set up best practices, and then expand. We are updating the reimbursement hub and leveraging the FURO6 hub model for a more white-glove service. We should see a little impact in Q2, but we will be watching Q3 and the summer closely. On the Inhale First trial, the first nine or 10 patients’ anecdotal feedback is really positive; first-insulin use in newly diagnosed children could be a game-changer if that continues. On FURO6, with a July 26 PDUFA, we expect launching in August. We would see a little impact in Q3 and a fuller impact in Q4. That one should go faster given the acute-use dynamic. Operator: Our next question will come from Cantor Fitzgerald. Please go ahead with your question. Analyst: Hey, this is Sam on for Olivia. Piggybacking on FURO6 questions, it is encouraging you are still confident hitting $110 million to $120 million in sales this year. Is that including both the on-body and the auto-injector? You mentioned weighting more toward Q3 and Q4. Is that due to the potential approval of the auto-injector, and do you expect the auto-injector to cannibalize the on-body infuser quickly? Michael E. Castagna: The forecast for the year basically looks at how units came out in 2025 and proportionately how demand curves look today; they are consistent with 2025. The auto-injector is a small portion of that range, not the reason we expect to hit $110 million. The on-body infuser should be able to get us in that direction, and the auto-injector will bring it there faster. Timing of launch and speed of rollout will determine the incremental. One challenge in the first half is we do not have samples this year as we prepare for the auto-injector and manage inventory. We are gearing up to sample the auto-injector to drive faster adoption. Operator: Our next question will come from Truist Securities. Please go ahead with your question. Analyst: Hi, it is Dinesh on for Greg. Congrats on the progress. One on the ralinepag DPI update: can you remind us on the relative positioning of prostacyclins and treprostinil-based drugs in PAH—patient applicability and physician choice—and how that frames your view on commercial and royalty opportunities to MannKind Corporation via United Therapeutics? Michael E. Castagna: It is a little early to speculate. United Therapeutics has Tyvaso DPI and Tyvaso nebulizer. Over the next two to three years, the major focus will be continued penetration, including IPF for the DPI scenario. Tyvaso should be a growth driver. As ralinepag launches, that probably goes earlier due to convenience, but that is United Therapeutics’ positioning and expertise. On IPF, you heard in United Therapeutics’ call that ralinepag DPI will be the predominant formulation in that development program, so we expect that to become the dominant driver overall for IPF. Operator: Our next question will come from Brandon Richard Folkes with H.C. Wainwright. Please unmute your line and ask your question. Brandon Richard Folkes: Thanks for taking my question. On Afrezza pediatrics, do you have to do anything on the contracting side post-label expansion, or does that fall into current coverage contracts? Secondly, how will you assess success of the pediatrics ramp early on, and what objectives would drive you to invest further versus keep investment where it is or pull back? Michael E. Castagna: Because it will be the same SKUs, we do not have to add another SKU to contracts, so no fundamental updates there. We have presented to large PBMs and some regionals, and we are exploring freeing up prior authorizations and simplifying access for pediatrics. There is appetite to reduce friction for kids. We are making sure Medicaid access exists and the big three PBM commercial lives have access. It will not all happen July 1, but through the year and into January next year, we expect updated clinical guidelines at most payers to support Afrezza use—even in adults—because ADA guidelines put Afrezza equal to AID systems and multiple daily injections. Step edits that put Afrezza behind those are now against standards of care, so we expect payer criteria to update in a positive way heading into 2027. In terms of pediatric success, the key metrics are breadth and depth of prescribing rather than early revenue: number of prescribers, number of institutions initiating and repeating use, and patient referrals into our hub. We will share those in the quarters ahead. We will have access programs to ensure payer friction is not a reason to avoid prescribing. We have also decided our 20 key account managers will be supported with local coverage to help with reach and frequency at launch. Operator: Next question will come from Yun Zhong with Wedbush. Please unmute your line and ask your question. Yun Zhong: Hi, good afternoon. Questions on the MNKD-201 program. It is encouraging to hear good safety and tolerability with no discontinuations. Given you will enroll the first patient in Phase 2 in Q2 without waiting for Phase 1b top-line in Q3, do you plan to confirm anything else besides safety and tolerability from the Phase 1 study? Also, United Therapeutics discussed a bridging study for Tyvaso DPI for IPF starting with healthy volunteers and then patients. Do you expect any impact on patient enrollment and your overall program? Lastly, including ralinepag, there will likely be three DPI products for IPF. Do you envision patients taking different inhalations with the same DPI, or is co-formulation reasonable to improve convenience? Michael E. Castagna: Several questions. On MNKD-201, we did a Phase 1a last year with healthy volunteers, particularly looking at cough-related incidents, FEV1, FVC, and GI side effects like diarrhea. We can confirm cough was not a major concern and GI side effects did not occur even at the highest doses, which gave us confidence. On FEV1 and FVC, there were no significant issues beyond expected variability. In the 1b study, we are in IPF patients, taking a stepwise approach to show you can dose a dry powder inhalation safely and effectively. After the first 12 patients at 2 mg TID (about 30 mg powder to deliver 6 mg nintedanib), tolerability, cough, and discontinuations presented no concerns. That cohort is now closed. The DSMB will meet next week, and hopefully post-meeting we will open Cohort 2. We are already screening and expect to enroll that faster and have top-line in Q3. That top-line will likely show that 8 mg BID versus 2 mg QID does not show a meaningful difference in tolerability or cough, which helps wrap up questions as we expand Phase 2. On Tyvaso DPI bridging, remember United Therapeutics is focused on Tyvaso DPI for the U.S. market in IPF. Our Phase 2 is, as of today, 100% ex-U.S. We are considering adding a few U.S. sites pending additional FDA steps. We have submitted the protocol to FDA and received comments, so we know what it would take. We are focused on accelerating European and other ex-U.S. enrollment, including Canada and Australia, to minimize any potential impact from Tyvaso’s IPF acceleration in the U.S. On co-formulation, our technology, given dose sizes and the common excipient, has potential for fixed-dose combinations. I have worked on fixed-dose combos previously. First we need to confirm dosing regimens are tolerable, which is the first step for any fixed-dose combo, and then you need two parties willing to come together. Stay tuned, but we are all moving in the same direction to help patients live longer, healthier lives versus today. Operator: Our next question will come from Mizuho Financial Group. Please go ahead with your question. Anthony Charles Petrone: [inaudible] Michael E. Castagna: Okay, may have dropped. Operator: Our next question will come from RBC Capital Markets. Please go ahead with your question. Analyst: Good afternoon, Michael. On discharge protocols and integrating FURO6 into the 60 key accounts, can you walk us through the process to open those accounts or have changes made to discharge protocols, and how long they may take? And a second one on Afrezza: of the 60 priority accounts, what would they represent in terms of your targeted market share of 23% to 37%? Over 50%? Can you fine tune that? Michael E. Castagna: They take time. If this were fast, we would be blowing out numbers now. Think six to 15 months, not three months. Every health system is different. I have met with several at the C-suite level, cardiac surgery, and discharge quality teams. Consistently, there are patient navigators responsible for 30-day readmissions. You need to engage quality, pharmacy, get local contracts set up, and get adoption into protocols—that all takes time. Cleveland Clinic is already doing it. Kaiser is running a large experiment in Northern California that looks promising. We expect trial results later this year looking at early discharge by a day or two, which is the type of data people want. Other clinics focus on ensuring patients leave with FURO6 so they are not coming back within 30 days. It is a hodgepodge of systems. As we find commonalities, we will get those across the finish line. Cleveland Clinic shares their protocol with other customers, which is great. On your Afrezza question, I would estimate roughly 75% to 80% of the target opportunity is concentrated in those key accounts. About 20% of patients fall in the community setting and 80% in the key account setting. It is very concentrated. Operator: Final question comes from Mizuho Financial Group. Please go ahead and ask your question. Anthony Charles Petrone: Thanks a lot. On FURO6 and the July 26 PDUFA date, are you expecting a panel meeting on the auto-injector? As a follow-up, FURO6 is moving from a hospital or infusion clinic five-hour infusion to under 10 seconds at home. What does that transition look like? How long to get adopted in the home, and what level of patient training is needed? It seems pretty seamless and a game-changer—just trying to frame the transition. Michael E. Castagna: We do not expect a panel. We have had various information requests from FDA—nothing that looks like a showstopper. We believe we are on track for that PDUFA date and are working on labeling and manufacturing so we are ready when FDA gives the green light. On the transition, because it is an acute-use drug—every cycle is new—conversion can happen very quickly. Today, probably 90% of use is preventing people from going into the ER and about 10% is post-discharge within 30 days, roughly. The auto-injector should really help with hospital discharge because it is much easier. We are targeting more local distribution and same-day delivery to the patient, which is important when someone is suffering fluid overload. That is harder with the on-body infuser given higher COGS. We expect a quick transition overall. There will be a group who still prefer the on-body infuser, and we will make it available, but we believe the preponderance of growth will come from the auto-injector. Operator: That concludes the question and answer portion of today's call. I will now hand the call back to Michael E. Castagna for closing remarks. Michael E. Castagna: Thank you for joining our call today. Apologies again for the technical difficulties. We appreciate your continued support and look forward to keeping you updated as we execute on the multiple regulatory and clinical catalysts expected in the months ahead. These are exciting times. We have never been busier here at MannKind Corporation—stay tuned for updates as we go. Thank you. Operator: That concludes today's call. You may now disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD First Quarter 2026 Operating and Financial Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions]. At this time, I would like to turn the conference over to Graeme Jennings, VP Business Development. and Investor Relations for IAMGOLD. Please go ahead, Mr. Jennings. Graeme Jennings: Thank you, operator, and welcome, everyone, to our conference call this morning. Joining us on the call are Renaud Adams, President and Chief Executive Officer; Martin Jason, Chief Financial Officer; Bruno Lemelin, Chief Operating Officer; Ankit Shah, Chief Strategy Officer; and Annie Katie Legacy, Chief Legal Officer. We are calling today from IAMGOLD's office, which is located on 2013 territory on the traditional lands of many nations, including the Miscageof the credit, Donabate and Hotusoni and the WindaPeoples. At HANGOLD, we believe respecting and upholding indigenous rates is founded upon relationships that foster trust, transparency and mutual respect. Please note that our remarks on today's call will include forward-looking statements and refer to non-IFRS measures. We encourage you to refer to the cautionary statements and disclosures on non-IFRS measures included in the presentation and the reconciliations of these measures in our most recent MD&A, each under the heading non-GAAP financial measures. With respect to the technical information to be discussed, please refer to the information in the presentation under the heading qualified person and technical information. The slides referenced on this call can be viewed on our website. I will now turn the call over to our President and CEO, Renaud Adams. Renaud Adams: Thank you, Graham, and good morning, everyone, and thank you for joining us today. Before I start, I'd like to welcome a will join IAMGOLD on Monday as our Chief Strategy Officer. Ankit, who many of you on the call are familiar with brings to our team nearly 20 years of strategy, corporate development and capital markets experience at a very exciting time for this company. So welcome Ankit. IAMGOLD is off to a strong start to 2026. In the first quarter, we produced 183,600 attributable ounces of gold. positioning us well to achieve our full year guidance of 720,000 to 820,000 ounces. The quarter was marked by robust financial results. with revenue exceeding $1 billion and mine-site free cash flow of $525 million. The cash flow we are generating is allowing us to execute on all fronts. As in the first quarter alone, we returned $260 million to shareholders through our share buyback program and repaid $100 million of debt on our credit facility while increasing our cash position. These results reflect the significant leverage of our business as to the current gold price environment and more importantly, the quality of the asset we have built and the teams that operate them. But what excites me most is where IAMGOLD is head. I believe we are entering 1 of the most catalyst-rich period of company's history. Over the next 12 to 18 months, we expect to deliver updated technical reports across each of our assets. Core gold, Westwood, Essakane and the Nelligan Mining Complex. These studies are expected to outline a larger, longer life production profile that we believe will redefine how the market views IAMGOLD. At Cote, the year-end technical report is expected to contemplate the significantly larger scale operations incorporating both the Cote and Gas, supported by an updated mineral resource estimate coming this quarter. At Nelligan, we are advancing 1 of the largest preproduction gold camps in Canada towards a preliminary economic assessment next year. And at Westwood and, we see meaningful potential of mine life extension and production growth. We will get into the detail on each of these through the presentation today. When I look at IAMGOLD today, with $2 billion of EBITDA generated over the last 12 months, a strengthened balance sheet and increasing production profile, catalyst that has every asset and meaningful capital being returned to shareholders. I see a company that is delivering on its promises and building something very exceptional. We are well positioned to create significant value in 2026 and beyond. and I look forward to walking you through the details. And with that, let's get into the quarter. Starting with health and safety. In the quarter, our total recordable injury rate was 0.44, a measurable improvement from the prior year period. I would like to highlight 2 big achievements in the quarter. As the Essakane mine achieved a milestone of 000 in the first quarter, and Westwood achieved its first full quarter at the 0 trip. Gold every mine side strives to reach. I want to thank our teams across our operation and in the field for the continued commitment to safe and responsible mining as safety is where it starts. for us. Looking at operation. And as I noted, IAMGOLD produced 183,600 ounces to our account in the first quarter. At -- good day, attributable production of 52,300 ounces was impacted by reduced throughput due to unplanned downtime associated with Warner on a conveyor belt as crushed ore volumes significantly increased following the commissioning of the second compressor. This belt will be replaced in May, after which we expect to operate at full capacity with an improving cost profile through the year as debottlenecking of the secondary crusher allows us to phase out the aggregate crusher. Meanwhile, Essakane and Westwood, both had a very strong start to the year, demonstrating the value of having a diversified portfolio of producing assets. Cash costs, including royalties, were $1,301 per ounce in a quarter, tracking well within our full year guidance range, including royalties, cash costs were $1,608 per ounce, and all-in sustaining costs were $2,124. It is worth highlighting that both Code and this carry significant royalty structure, which are directly linked to the gold price in a quarter where the gold price realized was nearly $4,900 an ounce. The royalty component is naturally higher than what our guidance assume at $4,000. As a reference, this worked out to around $115 per ounce increase in cash costs for $1,000 per ounce increase in the gold price from a royalty alone. Meanwhile, on the input cost, the ongoing conflict in the Middle East has introduced additional volatility to energy market, and we did see oil prices move higher towards the end of the quarter. scan in particular, has meaningful exposure given its reliance on diesel and heavy fuel oil to power both the processing and the mining fleet. On a consolidated basis, a $10 per barrel increase translates to approximately $12 per ounce increase in cash costs. We are actively monitoring energy price movement and potential supply chain impacts across all of our operations. With that, I will pass the call over to our CFO, to walk us through our financials matter. Martin? Marthinus Theunissen: Thank you, Renaud, and good morning, everyone. The current golf market and our operating results have resulted in good financial results and considerable free cash flow being generated, which is which allows us to continue to execute on our capital allocation strategy to maximize value. We produced $524.6 million of mine site free cash flow that is operating cash flow minus capital expenditure from each operation. $228.4 million of the funds was used to strengthen our balance sheet by repaying $100 million of the credit facility and we also increased cash by $128.3 million. For the shareholder return component, we purchased $260 million or $12.9 million of shares as part of the share buyback program. Subsequent to quarter end, we purchased an additional 2.1 million shares for $40 million, which brings the total shares repurchase by IAMGOLD since the start of the program last December to $350 million. or 18 million shares. In addition, we completed the debt repayment component of our plan and paid down the remaining $100 million balance of the credit facility, making the full facility available. The company tend to continue to use cash flow from Essakane to fund its share buyback program at approximately the same rate of cash generated and we parted from Essakane over the course of 2026. Naturally, the actual number of common shares that may be purchased if any, and the timing of such purchases will be determined by the company based on a number of factors, including the gold price, the company's financial performance, the availability of cash flows, consideration of uses of cash and our strategic allocation. In terms of the financial position, at the end of the quarter, IAMGOLD at $505.2 million in cash and cash equivalents with $100 million on the credit facility, resulting in liquidity at the end of March of approximately $1.1 billion. With the $400 million term loan we paid at the end of last year, and the repayment of our credit facility, IAMGOLD today is the net cash position, a significant milestone for a company that a year ago was carrying over $800 million in net debt. Within cash and cash equivalent, we note that $281.9 million was alpaca at the end of the quarter. The cash balance at this account increased during the quarter and will be used to fund tax payments in April. and the government Burkina Faso's portion of the 2026 dividend payable in June. The company uses dividends and shareholder account structure to repatriate funds in excess of working capital requirements from. Turning to our financial results. Revenues from operations totaled $1 billion from sales of 211,500 ounces. On a 100% basis, at an average realized price of $485 per ounce. The record gold price and operating results resulted in adjusted EBITDA of $666 million in the first quarter of the year. which brings the trailing 12-month EBITDA to a total of approximately $2 billion. At the bottom line, adjusted earnings per share for the quarter was $0.67. Looking at the cash flow reconciliation for the quarter, offers a good visualization of the major drivers in the quarter. We see good conversion of EBITDA into operating cash flow with $629.5 million of operating cash flow before working capital changes. As stated earlier, the significant operating cash flow allowed for the funding of our capital expenditure of $101.6 million $260 million under the share buyback program. We paid $100 million of the credit facility, while still resulting in an increase in cash of $128.3 million. As we look ahead with the debt prepayment golly, we will continue to see the share buyback flow by using cash flow from Essakane and the remaining cash going to our balance sheet. to further strengthen it as we evaluate the best use of the funds to increase value of the business. We are evaluating an appropriate time to induce a dividend that would likely be at the end of the year or early next year. It is worth reinforcing on how we think about our capital allocation framework today. The Canadian platform, consisting of Protego and Westwood is generating sufficient cash flow to fund the company's Canadian operations and corporate activities as well as our internal growth plans over the next 3 years. This is important because it means that the cash revenues account can be directed to fund our capital return to shareholders. that currently consists of the share buyback program. And we believe there is compelling logic to that. The market has historically applied the discounted cash flows generating with kinase. By repatriating those funds to Canada, and using it to repurchase our shares at current market value, we are effectively converting cash with the market discounts into full value equity for our shareholders. We continue to evaluate the program and believe that this is currently the most prudent use of capital. And with that, I will pass the call to Bruno Lemona, our Chief Operations Officer, to discuss our operating results and outlook. Bruno? Bruno Lemelin: Thank you, Martin. Starting with Cote go. Looking at the quarter, Cote produced 74,700 ounces on a 100% basis. Mining activity totaled 9.3 million tonnes of material mine with 3.6 million, representing a strip ratio of 1.6. Total tonnes mined were lower in January and February. The operation completed overburden removal activity required to open up the bid while managed seasonal winter condition. Mining activity in pre March drilling and blasting command in the pushback area. We mined in the quarter was 0.99 grams per tonne, in line with the mine plan. Net throughput in the quarter was $2.3 million as we noted in our results, was limited due to some time on the Citycon conveyor, which feeds material from the primary and secondary crushers to the screen of building. This downtime was primarily due to the increased load on the conveyor following the installation of the secondary crusher. putting additional stress on areas of the company or belts that have prime were in license. We were able to refine our repairs in early April. We then saw improved performance of the belt when the debt plant averaged 32,000 tonnes per day over the month. Later this month, we are installing a new heavier gauge belt, which will allow for the circuit to resume full operations above the -- in summary, the Citadel situation is not structural in nature, but an isolated, nonrecurring early mine item. We are seeing fewer of these as the operations stabilize margin and then we step forward versus the past 12 to 24 months. Cordis transitioning into a phase for first on operating discipline and consistent execution. Net grades for the first quarter was 1.07 gram per ton, in line with the guidance for the year of 1.1 gram per tonne with recoveries of 93% -- we continue to be very pleased with the reconciliation between reserve model, group, grade model to life and production. Production is expected to increase quarter-over-quarter as throughput increases in Q2 and on higher grades in the second half of the year. We remain on track with code-based production guidance of 390,000 to 440,000 ounces for the year. Looking at costs Coty reported first quarter cash costs, excluding real fees of $1,359 per ounce and an in sustained cost of $2,109 per ounce. We have been clear with our plan to lower our cost this year, and that 1 is still in place. Our goal is to exit the year at sub for that refund mining cost and processing cost in the mid-teens. The primary driver is to lower costs this year are fourfold. -- on increased from the mill and higher production. Second is to significantly reduce and remove the reliance on the contracted aggregate crusher. Third is with improved maintenance cycle inter-sales performance improvement and for is to realize the operational efficiencies and the fifth year of ducts. The second goad crusher is operating well, which has removed the bottleneck on this area of the secondary crushing circuit. Later this quarter, the increased capacity will allow us to phase out the usage of the aggregate crusher, which we contracted last year to allow the plant to its 2025 goal. We have already realized benefits beyond the additional volume capacity with the HPGR seeing an immediate debt reduction on where of its growers, which will translate to less rotor replacement over the course of the year. As Rene pointed out, cost at growth are affected by higher gold prices. In the first quarter, royalties accounted for $335 per ounce or 20% of cash costs. Further, and this is something that we've been asked about frequently of late is the impact of rising on price. The benefit to is that the plant in our are connected to the low-cost hydro risk. So effectively, only our mining fleet is directly impacted by fuel prices. Based on our estimates, this translates to about $7 per ounce increase in cost per $10 increase in the price of oil. With a fast forward this year to a higher production and lower costs, -- all eyes turned to what the next 2 is once. The first step is the upcoming of the mineral resources estimate, which will combine both the Coty and Galindo into a single block mall. The goal is to see additional upgrading of ounces into measured and in scale. The resource base will form the foundation of the Cote Garten expansion mine plan, which is still on track to be announced in the fourth quarter of this year. The report will envision a near-term expansion of the Cote plant to 50,000 to 55,000 tonnes per day targeting a significantly larger resurface from the updated resource. We expect the expansion to be highly accretive on a not basis as the near-term capital required for the plant expansion is relatively modest. The permitting and larger requirements for additional savings management and opening of Gardline will likely be staged out many years in the most time. Turning to S1. The mine continued its strong production proceeding 26,300 ounces of the quarter as underground activities very well with excellent marking and foisting performance. Underground mining totaled 106,000 tonnes in the quarter with an average head grade from underground of 9.85 grams per ton. Regards to compensate a lower or termed mine of 60,000 tonnes, operations prioritized waste stripping to open up access to additional or with opportunities to further extension maturity expansion. Net group in the third quarter was in line at $303,000 and turn at a blended average grade of 4.4 grams per tonne and recoveries of 92%. Together, Westwood produced $110 million of mine free cash flow in the first quarter, bringing the last 12 months of cash flow generation to $242 million. Westwood demonstrates what disciplined execution and incremental optimization can deliver safe operations stable collection, expanding optionality and strong free cash flows without step-change capital. As a result of the strong quarter, cash costs averaged $1,270 per ounce and all-in sustaining costs averaging $1,733 ounce, well below the guidance ranges for the year. We have seen a modest mining cost increases on a per unit basis associated with increased driven securities and higher explosive costs. Looking ahead, our teams are quite excited for the future of this year. This year, we are spending about $30 million on expansion capital that has been used to explore MTESthe Eastern extension of the mine, which you can see circle here on Slide 13. We are seeing the sticking of mineralization in this area -- our project teams are currently drifting into this area to come back both testing. The company plans to publish an updated technical report or westward in the second half of 2027, which is expected to extend the life of mine and highlight the potential for both mining in this Eastern zone. This approach would potentially support higher overall underground throughput, and this conceptually would allow for increased gold production at improved mining costs, allowing the mill to be filled with higher-margin material. Turning to Essakane. The mine reported record production of 111,900 ounces on a 100% base, as rates continue to benefit from the positive reconciliation as mining progresses deeper into Phase 7. As a result of the strong performance minifree cash flow from Essakane was $302.7 million in the quarter, bringing the total cash generated by Essakane the last 12 months to $803.6 million. On operation, mining totaled 11.9 million tonnes versus 2.2 million tonnes, translating to a strip ratio of 4.4:1. The higher proportion of waste was a result of the initial pushback of the DIP expansion in the now it. The mill reported in line throughput of 3.1 million tonnes, which was a good achievement as the plant completed its annatto. Head grade averaged 1.24 grams per ton coming off the record grade last quarter. Despite the positive reconciliation impact in Page 7 we are maintaining our guidance for the year of 1.1 grams per tonne additional ore from Gavin talk into the mine plan. Isaac came within guidance ranges with cash costs excluding core fees of $1,083 per ounce and all-in sustaining costs of $2,125 per ounce. Mining costs benefited in the quarter due to freely gain of the initial satellite ventures of the level pit, resulting in reduced exclusive consumption. While on a project basis, these savings were offset by higher synergy and consumable costs and the replacement of the liners. Atacand costs also have exposure to the gold price. In the first quarter, the strong oil price conflated royalties accounting for $597 per gram or 35% of cash flows. Further, Essakane heavily reliant on nice raise on the usage between living and mining, it is estimated that a $10 increase in the price of oil per barrel would equate to about $20 per ounce increase in cash costs and in all-in sustained costs respectively. At this time, our fuel supply has not been impacted by the conflict in the Middle East, to risk, the price and supply have increased. the company access effectively monitoring the situation and supplementing measures that are within its control. This account continues to be a highly cash-generative assets, delivering strong free cash flow while operating optionality to an updated mine plan for being a potential 5-year expansion of its current life of mine. In the first half of 2027, IAMGOLD going expect to release the updated plan, which would exemestane 2033. This work will also support the discussion with the government of Burkina Faso at end of license renewal in 2028. Today, this account post 4.4 million ounces of measured and indicated resources with ferro suppose by ongoing drilling. With that, I will pass it back to Renaud. Renaud Adams: Thank you, Bruno. This brings us to the Nelligan Mining Complex. The first quarter was the first full quarter that we controlled the consolidated district and our exploration teams have been drilling to expand mineralization at Filber Milligan and Monster Lake, while prioritizing targets for further discovery. This year, we will be drilling over 60,000 meters to advance the project so we can release our initial PEA study to the market in the first half of next year. The Nelligan Mining Complex already has a significant mineral inventory of over 4.3 million ounces of measured and indicated and 7.5 million ounces of inferred resources. And we believe there is meaningful upside to those numbers. Many of these deposits and targets have not had a sustained or well-funded exploration program behind them. That is changing now, and we expect the mineral inventory to continue to grow as we put capital to work across the district. We expect the study to outline a project with a central processing facility being fed from multiple ore sources within the 17-kilometer radius, considering the minerals wealth and potential for growth and the fact that IAMGOLD owns 100% of the Nelligan mining complex has the potential to be among IAMGOLD's largest mine. The Nelligan Mining Complex is already positioned as 1 of the largest preproduction gold projects in Canada. What makes truly compelling is the combination of district scale consolidation across multiple million ounces deposit. The ease of access, the combined of underground and open pit mining and the fact that is located in Quebec, 1 of the premier mining top premier mining jurisdictions in the world. Taken together, we believe this attributes positions Nelligan as a premium asset in our portfolio. and 1 where we expect to unlock significant value as we amend the project through the study process. So with that, I want to thank our shareholders for your support. We truly believe it will be an exciting year for IAMGOLD with significant value growth opportunities ahead, including the upcoming resource update at Cote, the code expansion study later this year, followed by next year where we outlined a mine life extension in face in the first half the year, an initial study wrapping economics around Milligan mining complex also in the first half of next year and a mine life extension expansion under goat Westwood in the second half of next year. So altogether, we have significant value accretion catalysts ahead. With that, I would like to pass the call back to the operator for the Q&A portion of the call. Operator? Operator: [Operator Instructions]. The first question comes from Sathish Kasinathan with Bank of America. Sathish Kasinathan: My first question is on Essakane. Are you seeing any risks in terms of potential supply disruptions for diesel or fuel oil over there? How much inventory do you currently have on site? You also talked about the direct cost impact from higher oil prices, but how should we think about the indirect inflationary pressures? Renaud Adams: So maybe, Martin, you take that. Marthinus Theunissen: Satish, we are we are derisking the fuel supply at Essakane. We have supply at site that's 5 to 6 weeks, and we try to maintain that at maximum capacity. But then what we've also done is we continue to secure additional fuel up the supply chain. So we have secured that field. So for the next 2 to 3 months, Acan has already secured sufficient fuel -- the impact, as we stated for the direct impact on the actual cost per fuel that is linked to the market price is about $20 per ounce for per barrel. There is other costs at Essakane as well there's taxes on fuel and those impacts. But we have not seen other inflationary pressures at Essakane or the other mines at this point, and it's hard to estimate those. If you look at our energy cost as a company, it's about 20% of our operating cost and our consumables is about 15% to 16%. So that's kind of like the level of our cost structure that could be impacted by inflationary pressures. But it's hard to, I think, for anyone to predict at this point. what exactly that would look like. Sathish Kasinathan: Okay. My second question is on Cote. How should we look at the quarterly guidance of production and cost, especially for the second quarter with the reduced operating capacity and the scheduled maintenance shutdown in May, should we expect the average milling rates and cost to improve versus the first quarter? Or is it more like a second half story? Marthinus Theunissen: On -- we expect that once we have completed the shutdown in middle of May, like it's meant to be on the May 20 -- we're going to be replacing the conveyor belt, we're going to be replacing also the HPGR tires that were supposed to be change earlier in the year. And -- we are going to make some adjustments in certain areas. But after that, we're going to resume to full operation and even going beyond the nameplate capacity. So it's what I did is that the expectations both on the mining side and mining side, the unit costs are expected to decrease and to have a sharp improvement in terms of gold production quarter-over-quarter. Graeme Jennings: This is Graham. And you'll note in our news release that we refined our throughput guidance for Cote for to 12 million to 13 million tonnes for the year. Sathish Kasinathan: Okay. congrats on a strong year-to-date buybacks. Operator: The next question comes from Anita Soni with CIBC. Anita Soni: I just wanted to ask a little bit about Westwood. So this quarter, a little bit lower production from the Grande deposit or from the open pit, I'm not sure if it's still granted. But how long does that -- how long do you expect to have that or I think I said into 2027? But I was just trying to figure out when it ends in sort of the ramp-up in 2026 in terms of the tonnage over the course of the year. Bruno Lemelin: It, this is Bruno. Good question. We are seeing net new from grade to be extended even beyond 2027. We have also options Phase 5 that put through even beyond till 2029. That's what we're doing right now. We are currently evaluating those options. So been like a great support for Westwood. And the moment that it will be tailing off, it would be also a great moment for the Eastern zone that I'm referring to the thicker part of the underground from at Westwood to replace that material. Renaud Adams: If I may add, Anita, -- so what I really like about the work that's been done and the drilling that took place in the last 2 years. our effort has always been to protect the production profile on the upside basis. the potential Phase Grand Duke should we be able to maintain this up to 2029, '30 followed after that by an increase of the underground in the East. So this is the focus right now. So you don't see any gap. And if anything, continue to increase profile -- it's a bit of about the same thinking, and I appreciate the kinases are different situations we monitor and so forth. -- the best, of course, would be to completely offset the gap and Ciplan can also being capable to maintain the production profile. So that's really the focus at this stage, understanding that we would be continuing to monitor the situation in the West Africa. Anita Soni: Yes. And I guess what I was driving at was on the Westwood was this quarter, you had very good cost and very lot of mining from the underground and with the Grand Duke ramping up. I'm just curious to see how the -- like the -- theoretically, the overall mining cost per ton should actually drive down more with more underground -- sorry, more of the open pit ore coming in. So I'm just trying to get a handle on, you've had a significant cost beat in the first quarter at Westwood relative to your guidance. So I'm just trying to figure out how those like how should be thinking about costs for the rest of the year. Marthinus Theunissen: It's Martin. So I agree, we had a great quarter, if you look at the dollar per tonne for the underground mine. We do expect it to maybe increase just above the 300 level again for the rest of the year that it might not be signed at that level. So it tries to do that $325 million for the full year, again, as we saw in the past. So Yes, we don't expect Q1 to be the norm for the recipe. Renaud Adams: We wish so, but we do understand that there are some zones, some areas in the mine that requires maybe more support and so forth. So you cannot really just it really depends where the guys would be where the team would be mining. But our focus is to remain at the lower cost, but I appreciate that we'll be mining out the sector as well, but higher comp. Anita Soni: Okay. And my other question on Cote on throughput was after in 1 of the other questions going above nameplate. So I'll leave it there and get back in the queue if I have any follow-up. Operator: The next question comes from Tanya Jakusconek with Scotiabank. Tanya Jakusconek: Kreat.on,. Maybe I'll do the financial 1 first. Martin, over to you to maybe talk about the $400 million dividend after tax that you're getting in from Essakane. Should I do think that all of that now could be going to share buyback in like Q2 or Q3? How should I be thinking the payment of the $400 million over for the share buyback from a quarterly perspective? Renaud Adams: Dana. So -- we have about $200 million left on the shareholder account for last year's dividend. We expect that cash to be repatriated by June or July of this year. And then the reason why this is a bit of a slowdown is because of the tax payments we have to make in Q2 as well as the government is getting the $100 million portion of the dividend. So the cash that we bring in, we expect for the remainder of this quarter to spend EUR 40 million to EUR 50 million a month. We readied EUR 40 million in April, so kind of like getting to that EUR 400 million for the year, likely on the this share buyback, we will continue to evaluate. But that EUR 400 million that we declared in June is then a new shareholder account of EUR 400 million and then as we then repaid at cash from Isaka, we would then continue to use that to potentially fund share buybacks for the second half of the year into next year. Gold price dependent is the exact sequence of that. But we could cut vision on the next quarter setting us through the middle of the year. Tanya Jakusconek: Okay. Great. That's very helpful. And then my other financial question is just on the taxes were quite low in Q1. When I look at your guidance and what you paid significantly lower, maybe just a little bit about what's happening there and how you see the rest of the year. coming out in terms of taxes? Marthinus Theunissen: So from a cash tax perspective, we've paid about 14%, if you take our guidance, cash taxes. We still think our cash tax guidance is impact. And maybe if you look at it for how we spread over the course of the year, like 14% to 15% in Q1 and Q4 and then the remainder is spread over Q2 and Q3 and that's again driven by a cash tax payment in Q2. And the withholding tax payment on the dividend, that's normally either end of Q2 or beginning of... Tanya Jakusconek: Okay. Yes. Okay. Perfect. And then just moving to some of the technical questions. maybe Rena over to you to -- as I think about this updated resource that is coming out on Cote Osland at the end of, I think, it's this quarter or in Q2. Should I be thinking, and I think I heard that we're upgrading the measured and indicated category. So should I be thinking that, that 20 million ounces that you have outlined should I be thinking that $2 million of inferred gets moved into measured and indicated and there will be no increase to the reserves that you reported of 7 million ounces or should I also be thinking that, that $20 million overall should get bigger? Just trying to understand what to expect. Renaud Adams: No, thanks for the questions. And we've been socializing this quite a bit. If you look at our year-end mineral resource where we're sitting below the $19 million and the $18.5 plus million of measured indicated. There were still some holes to be integrated in the database. We've done some work in the saddle as well. So in short, our confidence remain, as you say that there would be additional conversion to MI to our objective of 20 million ounces of measured indicated and as you drill, as you continue to improve your inferred as well. So we would all clarify this, but the most important thing is our objective remains $20 million of measure indicated, and that will form the basis for the reserves. We will not disclose the reserve, obviously, because we'll trigger the need for the report right away. So we're going to clarify in Q2 our resource and the reserve then will be a measure of a factor of conversion of the $20 million. Obviously, we're expecting a significant increase in reserves out of the $20 million. but that will be clarified in the study as we come out at the end of the year. Tanya Jakusconek: Okay. That's what I thought was going to happen, but I just wanted to make sure -- and then just maybe on -- I know we talked a little bit about these costs coming down at Cote on both the mining and the processing. As we think about this new study that's coming out in Q4 for this complex, should I be thinking that the new study should have cost under $4 a tonne for mining and processing in that $12 to $14 a ton as a combined entity. I mean, they were quite high this quarter, as we know, for various reasons, but I'm trying to understand if going to be benchmarking on that under $4 a ton and $12 to $14 on the processing. Renaud Adams: The -- you're absolutely right. I appreciate you know that in the short term, cost has been hired. And as we highlighted in Q2 last year, the use of the Gregor plan is a big portion of it. not having the capacity and the dry and short. All this have been tested. We've been using as well some external view as well to revalidate all this. We're talking about visibility level type of studies. So we remain extremely confident. We understand and appreciate our costs are higher, but I think we have good visibility about what has to be done. So this is a focus as we partly aggregate and focus on reducing. It's not going to be all in 1 year. It's going to be spread over a couple of years to 3 years. Our are highlighted heading to the expansion. So maybe Bruno just quickly what you see as the main focus in the second half of the year in terms of customers. Bruno Lemelin: Yes, like for the mining cost, you will see those mining cost rein the second and for the rest of the year, mainly First of all, it was a volume really good thing for Q1. And as we expect volume to increase or net costs are going to go down. Second is we have also made like great improvement in drill and blast increasing our performance by 65% of late. We're also going to receive 4 additional 7 mines increasing arm. So we're putting everything in place to be successful to be below the $4 a ton before the end of the year. Same thing happened for the mining costs at the moment that you take out to remove the aggregate crusher, the contractors and demonetization of other contractors, you will see also a sharp reduction in cost. We are also making improvements here and there. The is part of the optimization phase. And as Rene pointed out, that optimization phase is going to take a good 3 years make sure that we see within a downward pressure for the cost. So we're quite confident that the 43-101 is going to be well spotted by assumptions that are realistic. Tanya Jakusconek: Okay. Understood so a basis to go forward on that. And maybe just my final question, as I thought about the rest of the year. And I know in the previous in February, the guidance has been that Essakane production would be relatively stable through the year was Westwood and then Cote would see quarter-on-quarter improvement and we saw a stronger second half. So how are we looking at the overall company for production profile for first half, second half? Bruno Lemelin: Yes. It's going to be much stronger as we mentioned for Cote, the grades are going to be overing between and -- so we have to expect as far H2. For Essakane, it's going to be quite stable. We need to -- and we mentioned that we remain within guidance as we start implementing the ore into the mine plan. Westwood is just like the only thing that we use for was what it's just been a stable operations, stable and safe operation, 1,000 -- 1,000 ounces a month on average and coupling more, we can be a. So overall, you will see much stronger H2 as opposed to H1. And I think this is what we also disclosed last quarter that H1 would be the softer to take into account the winter conditions and soften changes for the HPGR changes and confidence. So I think right now, we're being. Tanya Jakusconek: Yes. No, that's what you had that. I just wanted to make sure. Operator: The next question comes from Hamed idea with National Bank. Mohamed Sidibe: Maybe if I could maybe ask a question on the underground -- we've now seen 2 quarters a mining rate above the 1,100 tonnes per day and grades over that 9.8 grams per tonne mined. So could you maybe help me understand how to think about the next few quarters in terms of mining productivity, Integrate over the coming quarters? Renaud Adams: The oiling, the marketing is going very well. Our targets are close to 1,000 tonnes per day. And in fact, we're exceeding those metrics every day now. It's done through our optimization and better engineering, better preparation. Hosting, you know we have a 4,000-tonne capacity at Westwood. So we have plenty of capacity at Oi. So it's not constrained. Therefore, the additional gives us great hope that whatever improvement that will be done at Fort will become new mags catalysts into the gold production in the -- but overall, what we plan is we grew we've done what we do and we do work on -- so trying to make sure that we have stabilized the patient, and we improve in an increment manner the Westwood operation on OmiFixbutemeter of admin per day, meter per manship -- the drilling is doing very well also, and we have a new Simberi coming in -- so the drilling performance is also improving very well. The ability of our mining crews to a new zone or improving also with the algorithm that we have developed over time. So overall, it's going well. Marthinus Theunissen: I appreciate that you've seen like quite a significant increase. I mean, again, it's a little bit of the questions on the cost side, depends a bit where you mine as well. what we want is reliable and safe operations. Are we going to see a continued increase. The focus is really to deliver sustainable and safe operations. So we're very comfortable, really like the last quarter. But I think like being in the zone of the 1,000 to the 1,200 is a good zone, and we're going to always prioritize the safe operations, Mohamad I appreciate your question. Mohamed Sidibe: That's very helpful. And maybe if I can ask a second question on AkoteGold on the improvement on the process cost, and sorry if I missed this, but is the improvement of the maintenance time line for the HPGR already reflected in that expected cost improvement you have for the end of the year? Or is that a positive surprise following the installation of the. Renaud Adams: No, I wouldn't call a positive surprise. I would say a validations of what has been our belief since the start, again, with the short of capacity in the dry. We knew we were feeding the HPGR slightly outside of its design criteria with the course of ore, which was accelerating the wear on the machine. So since we've commissioned the second column, we've been in capacity to return to the design criteria within an automatic and overnight change. And we expect the change of the tire now to get back to the life spend that we're expecting. So yes, we're not expecting another change of tire this year, and therefore, it is built in the reductions of cost post change. Operator: The next question comes from Josh Wolfson with RBC. Joshua Wolfson: I apologize. I just want to clarify a couple of things. I'm having trouble hearing some of the data points. Just going back to some of the details on Cote. -- this comment about the plants operating above nameplate in the second half of the year and some of the tonnage numbers that was provided. -- the numbers look to imply about maybe 10% to 15% above nameplate in the second half. I just want to clarify, does that sound correct? And then -- is it reasonable to assume that those throughput levels can be sustained beyond 2026 even before the expansion takes hold? Renaud Adams: Yes. When we say that we can produce about mantras we have more than many days above 36,000 tonnes per day, even 42,000 tons per day remit. With the addition of the second on crushers and also allowing the gain-of there protecting now the HPGR, which is going to be running very efficiently. We expect to remain into that loan between the 36,000 tonnes per day and 42,000 tonnes per day in average. So that's very promising for us. We with the shutdown that we have in August and other shutdown that we have in certain areas, we are still evaluating and planning an overall average throughput of 36%. But overall, like when you have a very well run rate, it goes well. Marthinus Theunissen: What we've experienced, Josh, with the second column is we're for only a few weeks, unfortunately, before we started to have the issues on the conveyor. So the objective has always been to stabilize at the 36%. So what we've seen is effectively, of course, if you want to reach 36 when you upgrade, you need to be above. But we also had Brunel earlier talking about slightly better grade as well. So it's not just a matter of throughput. It doesn't matter that we should access as well better grade in the second half. But the priority at this stage is to demonstrate that minimum 36 average all time in the dry in the wet, as you cross finer, you will unlock more potential in the web as well. So for the first stage 1 is as soon as we change the tire, we change the bell, we parked the aggregate plan. The focus in June is to demonstrate that we actually get operated an amply then will come the optimizations on a step-by-step basis. But so far, so good for what we've seen with the crusher. Joshua Wolfson: Okay. Got it. And then your comments about the better grade, as the number was mentioned on the call, again, I apologize for nothing of it here. It was said it was 1.1 to 1.2 in the second half. Is that correct? Bruno Lemelin: Between 1 and 1.2. Marthinus Theunissen: Yes. So we did $107 million in the first quarter, and we're you could see a quarter above the $107 million. So we said $1 million to $1.2 million -- and hopefully, we'll see quarters about the 11. Joshua Wolfson: Okay. And then last question. I know it's sort of been mentioned by some of the other participants just on mining costs for Cote. I mean I wouldn't necessarily extrapolate the current quarter. And obviously, there's a lot of volatility on the energy side of things. But what is a reasonable sort of mining cost for us to assume in the second half of the year would you factor in maybe I'm not sure what sort of energy price us. I'll let you guys figure that out. But maybe just at least high level, what would be the target steady state? Renaud Adams: Martin, you can get some details, but I can say that at this stage, the focus is absolutely to bring those mining costs below the as we exit the year. Martin? Marthinus Theunissen: Just 1 thing we didn't mention earlier was that we've actually put in some price protection for oil at Cote. So for June as well as for all of Q3 9% Cote oil is hedged at a price of about $80 per barrel. So if the price goes above $80 per barrel, it doesn't impact our cost further during that period. And we still participate if the price goes below that. So that will help offset some of that cost as well to get us close to that fall. So as we exit the year, as we achieve our objective to drop our mining below the floor and get the mailing more towards the 15% as we exit. That is the main focus at this stage, knowing that there would be some more optimization to continue to take place. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Graeme Jennings for any closing remarks. Graeme Jennings: Thank you very much, operator, and thanks, everyone, for joining us this morning. As always, if you have my initial questions, please reach out to Reno or myself. Thank you all. Be safe, and have a great day. Operator: Thank you. This brings to close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day. Thank you.
Operator: Good morning. My name is Rifka, and I will be the conference operator today. At this time, I would like to welcome everyone to the Bowman Consulting Group First Quarter 2026 Conference Call. All lines will be placed on mute for the presentation portion of the call with the opportunity for questions and answers at the end. Please note that many of the comments made today are considered forward-looking statements under federal securities laws. As described in the company's filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and the company is not obligated to publicly update or revise those forward-looking statements. In addition, on today's call, the company will discuss certain non-GAAP financial information such as adjusted EBITDA, adjusted net income, and net service billing. You can find this information together with the reconciliations to the most directly comparable GAAP information in the company's earnings press release filed with the SEC and on the company's Investor Relations website at investors.bowman.com. Management will deliver prepared remarks, after which they will take questions from research analysts. A replay of this call will be available on the company's Investor Relations website. Mr. Bowman, you may begin your prepared remarks. Gary P. Bowman: Great. Thank you, Rifka. Good morning, everyone, and thank you for joining our first quarter 2026 earnings call. Bruce J. Labovitz, our CFO, and Dan Swayze, our chief operating officer, are with me today. First, I would like to welcome all Bowman Consulting Group Ltd. employees on today's call, including those from Smith and Associates Land Surveying in Las Vegas, who are the newest members of the Bowman Consulting Group Ltd. team. After my introductory remarks, I will turn the call over to Bruce who will cover our financial performance and technology initiatives. Dan will provide more detail on the opportunities we are seeing across our end markets. Now turning to the first quarter. From a performance standpoint, we delivered double-digit growth in gross contract revenue, net service billing, and adjusted EBITDA. Our backlog reached a record level of over $650 million. These results were driven by both organic execution and continued contribution from our acquisition strategy. We saw growth across our diversified end markets. Demand remains robust, and we continue to benefit from markets where we have deep expertise, strong client relationships, and increasingly integrated service delivery. Our capabilities are increasingly important in high-barrier, high-demand sectors where our expertise, national scale, and ability to self-perform work position us to win and execute consistently. All this reinforces what we are seeing in the business: strong demand, durable revenue streams, and increasing opportunities to expand both organically and through targeted acquisitions. Based on our performance and outlook, we raised our full-year 2026 guidance and now expect over 20% revenue growth for the year. For 2026, we expect net revenue to be in the range of $520 million to $540 million, and we expect to report adjusted EBITDA margin between 17.25% and 17.5%. With that, I turn the call over to Bruce. Bruce J. Labovitz: Thanks, Gary, and good morning, everyone. I will begin with a review of our financial performance for the first quarter, and then I will turn the call over to Dan to bridge Q1 to year end. After that, I will return to share some thoughts on how we are thinking about technology and automation, and begin to draw a line towards its impact on the future of Bowman Consulting Group Ltd. The first quarter culminated with a record March that capped off a solid start to 2026. Our results reflect the durability of our end markets, the scalability of our operating platform, and disciplined execution of our long-term strategic plan. Gross contract revenue of $126.5 million represented a 12% increase over Q1 last year. At a 90% net-to-gross ratio, net service billing was $114.2 million, up 14% year over year. The increase was anchored by 6% organic growth enhanced by strong performance from recent acquisitions. Looking ahead, we expect to see our net-to-gross ratio come down by about 3 to 5 points based on new awards and new service lines with higher subcost ratios. Power was our fastest-growing sector, with 37% growth of gross revenue year over year. Transportation followed at 13%, with natural resources at 6%, and building infrastructure at 1%. Dan will talk more about where growth is coming from. Growth of organic net service billing was 6% year over year with the highest organic growth rate coming from natural resources at 16%, followed by transportation at 13%, power at 5%, and building infrastructure at 2%. I will point out that there is a significant amount of organic growth embedded in power and utilities revenue characterized as inorganic for now. Our mix of gross revenue continues to evolve with power up to 28% and building infrastructure down to 41%. In just one year, data center activities have more than doubled to a bit over 6% of revenue. Over the course of the next few quarters, we do expect to see a noticeable shift in mix as natural resources will expand by virtue of a significant new award being classified in that category. Contract costs represented approximately 48% of gross contract revenue at a 52% gross margin. When we combine a bit of a slow start in January and February with mobilization costs for assignments that begin in Q2, total overhead as a percentage of revenue was up around 50 basis points compared to last year. I will also point out that 2026 is the year we exit emerging growth company status, which generates some incremental costs this year that will normalize next year. With accelerating revenue and relatively stable overhead, however, we expect to see total overhead once again trend down as a percentage of revenue moving forward. For the quarter, we reported a GAAP loss of $3.7 million. Unlike adjusted EBITDA, that result includes noncash amortization of acquired intangibles, acquisition-related expenses, financing costs, and other nonrecurring items, including those associated with the CEO transition. Adjusted EBITDA was $16.8 million, up 14.7%, at a margin that expanded year over year. We generated $11.6 million of cash from operations in the quarter, representing approximately 70% conversion of adjusted EBITDA to cash. It is nice to finally report a quarter with no deferred R&D tax adjustments on the cash flow. During the quarter, we used cash to repurchase approximately $9.2 million of our stock and advance future organic growth initiatives through investments in data capture, automation, and internal-use software, among others. Big fund spending on geospatial and data collection assets associated with specific new future revenue opportunities represented about half of our CapEx in the quarter, along with another $1 million or so of OpEx spending which is not added back to adjusted EBITDA. To accommodate anticipated increases in CapEx this year, we expanded our revolving credit facility to $250 million, which provides sufficient liquidity to support continued investment in organic growth and acquisitions. Backlog increased to approximately $653 million, 56% year over year and 36% sequentially from year end. Backlog growth in the quarter was entirely organic. Net of one unusually large organically generated contract award, backlog grew at a 20% annualized pace. As Gary mentioned, we are raising our 2026 net revenue guidance to a range of $520 million to $540 million and increasing our margin forecast. The guidance increase implies more than 20% growth of organic net revenue this year and nearly 28% year-over-year growth of adjusted EBITDA at the midpoints. In terms of revenue cadence, we expect the remaining three quarters will build on each other as some consequential assignments ramp up through the second half, with third quarter being at or near the midpoint of the second and fourth quarters. It is notable that this is a bit of a change from prior years. With that, I am going to turn the call over to Dan. Dan Swayze: Thank you, Bruce. Today, I am going to spend a few minutes bridging the revenue gap from Q1 to our full-year forecast. Backlog is a foundation of any revenue bridging exercise, and we have discussed in prior calls that somewhere between 70% to 80% of our backlog typically converts to revenue within a 12-month period with timing influenced by contract structure, phasing, and notice to proceed. For the remainder of the year, approximately 60% of our expected revenue is supported by existing backlog, with the balance driven by sell-and-deliver activity. As we move through the year, the mix naturally shifts more heavily towards backlog conversion. Looking at Q2 through Q4, approximately $250 million of our remaining revenue is supported by backlog, leaving the remaining 40% or roughly $170 million to be delivered through new bookings within the year. When accounting for normal conversion timing between bookings and revenue, that translates to just under a 0.7x book-to-burn ratio to meet our full-year guidance. This remains at a manageable level given our ability to deliver book-to-burn above 1x on a consistent basis. The priority is ensuring our resources and capacity are aligned at the right time to deliver high-quality, on-schedule outcomes for our customers, something we actively plan for and manage every day. Let me cover where I believe our greatest opportunities are for new bookings. Transportation is in a strong position to continue delivering results. Required book-to-burn is lower than average based on substantial existing backlog coverage for this year's forecast. With many long-term and recurring revenue assignments across infrastructure design, construction engineering, corridor management, and inspection services, we are well positioned to deliver. Power and energy: Longer-than-desired timelines to secure power from the traditional grid are forcing end users to develop their own power solutions. When our customers move forward with alternative power solutions, we expand our wallet share. Recent acquisitions have significantly broadened our reach and opportunities within the energy services vertical. They have also transformed the characteristics of our assignments to include higher-velocity sell-and-deliver opportunities. To deepen our engagement with customers, address the resource void in the marketplace, and become more entrenched in long-term durable revenue, we have expanded to offer procurement services across the sector. Awards for services relating to midstream pipeline infrastructure, energy reliability centers, compressor stations, and terminal operations have shown meaningful increase of late and show no signs of abating. We are also seeing increased demand for renewable energy solutions, particularly as customers respond to upcoming expirations of IRA incentives. Natural resources includes a wide range of services and is a sector in which we will report the large government contract award going forward, as Bruce previously advised. It is also much of where our industry-agnostic geospatial data collection efforts are reported. Recent upgrades to our fleet of data collection assets have already been impactful, opening opportunities for new streams of revenue. As an example, a recent manned aerial award from a long-standing government agency customer was nearly triple that of last year. Accelerated activity in mining and renewed demand for water resources have likewise supported sustained demand. Geospatial, while not a vertical, is a service that sits at the core of everything we do across all our markets. High-resolution 3D imaging and complex GIS-embedded point clouds are increasingly the basis of infrastructure planning and management. Availability of intuitive and predictive real-time analytics is rapidly becoming a post-operational imperative. Having a comprehensive suite of data collection assets has led us to be engaged earlier and longer with customers. The key takeaways are these: We see the strongest bridge from work to revenue coming from mission-critical and adjacent energy infrastructure markets, along with transportation engineering and geospatial services. Our outlook for outsized organic growth this year is rooted in booked backlog conversion and predictable booking levels that are supported by a strong pipeline, a broad and expanding portfolio of capabilities, and disciplined execution. Continuing to ensure we have the capacity to deliver, the discipline to convert demand into profitable revenue, and the tools to innovate remain our top operational priorities. With that, I will turn the call back to Bruce. Bruce J. Labovitz: Thanks, Dan. Before turning the call back to Gary, I want to briefly address the narrative surrounding AI and automation in engineering, specifically in the context of pricing, margins, and long-term customer engagement. During our year-end call, I said, and I quote myself, we need to be sure we are prioritizing investments in processes and services relating to deliverables sold at stable values as opposed to efficiencies that merely cannibalize the value of work sold by the unit. That was true then, and it is still true now. But that was two months ago—a lifetime in this moment of technological change—and the message is expanding as we execute on our strategy. There is a misconception in parts of the market that AI will cause an unsustainable compression in pricing and margins across all engineering services. In a vacuum, without a broader understanding of what is really happening inside the industry, the concern that AI leads to fewer hours, which equates to lower billable revenue, sounds reasonable, but it is not a plausible reality for established multidisciplinary engineering firms. Before we go any further, let us acknowledge that engineers and infrastructure professionals operate in an environment where tolerance for error is nonexistent and where the deliverables are foundational to public safety and reliable infrastructure performance in the face of ever-changing environmental stresses. As a result, professional judgment, real-world experience, technical expertise, and accountability remain central to the engineering services value proposition, regardless of efficiencies deployed in the workflow. It is important to remember that this is not the first time technology has presented opportunity for process evolution in engineering. Our client engagements are not transactional; they are relationship-oriented, and that matters. A majority of our assignments are priced on a fixed-fee and not-to-exceed basis, where customers compensate us based on the value our deliverable produces over the entire life cycle of the asset. It is rare that we are engaged for one discrete individual hourly task. Where work remains on a cost-plus or time-and-materials basis, it is generally with large public clients who prioritize professional intermediation and judgment over expedience and bargain hunting. These clients understand the inclusion of indirect costs such as compute and processing on burdened rate structures, and are grounded in the long-standing foundations of professional accountability and dependability. It is important to remember that engineering services represent a relatively small portion of total infrastructure project cost. The larger opportunity is combining AI-enabled automation with engineering know-how to help clients improve outcomes beyond construction to the broader asset life cycle. As professional accountability, AI, process automation, and data analytics become more intertwined, we believe the conversation shifts from the pricing of individual tasks to the value of better decisions, reduced risk, and improved asset performance. The tools we are building are based on both inference and deterministic routines. Without getting too technical, this architecture allows for the harnessing of decades of engineering, construction, and operating knowledge in a platform that facilitates leveraging the collective expertise of everyone in the value chain. To date, we have developed and introduced more than 25 proprietary tools to our operations, with additional capabilities in process that include an integrated operating environment designed to better connect us and the data embedded in all of our systems both internally amongst ourselves and externally with our clients post-operationalization. While our architecture is designed to minimize the operating cost of compute, the tools are focused on generating higher-value deliverables to customers through better execution and faster delivery. With all that said, do not view the impending wave of AI as a driver of commoditization. Rather, we see it as an opportunity to enhance differentiation for firms that invest in the right capabilities at the right cost structure and integrate the tools effectively into empowering operating environments. From where we sit, this is not a race to the bottom. To the contrary, it is a race to the top. I am now going to turn the call back over to Gary for concluding remarks. Gary P. Bowman: Great. Thank you, Bruce. Stepping back, what this quarter demonstrates is that our strategy is working. We are building a business with strong visibility, diversified demand, and a scalable operating model that continues to deliver. The combination of record backlog, consistent growth across our end markets, and continued investment in our capabilities—whether through technology, integrated service delivery, or targeted acquisitions—positions us extremely well for the future. We are seeing a clear path to sustained growth, margin expansion, and strong performance, not just through the balance of 2026, but into 2027 and beyond. We will now open the call for questions. Operator: We will now open the call for questions. As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. The first question comes from the line of Aaron Michael Spychalla of Craig-Hallum Capital Group. Your line is now open. Aaron Michael Spychalla: Yes, good morning, Bruce, Gary, and Dan. Thanks for taking the questions. First for me, any more details you can share on the government contract—what you are doing and the cadence of revenue? It sounds like a little higher, maybe subcontract mix, so just your confidence in execution there. And then just broadly, it seems like you are starting to see some larger awards. Can you talk to the scale and capability and other drivers that are driving that? Bruce J. Labovitz: Aaron, good morning. I am going to take the first question on the government contract and reply that there is a limited amount of information that we can disclose based on nondisclosure agreements associated with the award. However, you are correct to infer from our commentary that it will operate at a slightly lower-than-average net-to-gross ratio, higher-than-average gross spread. If you think about the math behind lowering it by five points or so, that would indicate probably somewhere in the ~75% range for net-to-gross there. And that contract, as we have talked about, has a 36-month term to it and has a not-to-exceed value in total of about $177 million. We are mobilizing for it and have been mobilizing for increasing activity there as we speak. As the commentary suggests, we would think that it would have most consequential impact on the second half of this year and into next year. Aaron Michael Spychalla: Thanks for that color, and can appreciate that. And then on the margin front—you just hit on it—but it sounds like a slow start to the year for a couple months and then maybe ramp ahead of this and other projects. Just your confidence in the outlook for margin improvement and thoughts going forward there as you invest for growth? Bruce J. Labovitz: We have looked ahead at where revenue growth is going to be and assessed that relative to overhead growth and the multipliers that we will be able to achieve on work in the remaining three quarters of the year, and we feel confident that we will be able to deliver margins in excess of where the year guide is, because in order to compensate for first quarter, those obviously have to be at a higher rate than the 17.25% to 17.5% that we have guided to. We think about it from the perspective that it does not take a whole lot more machine to support the contribution margin coming from incremental revenue. It is not a zero-sum game, but it is a margin-expanding exercise. Aaron Michael Spychalla: Alright. Thanks for taking the questions. I will turn it over. Bruce J. Labovitz: Thanks, Aaron. Operator: One moment for our next question. Our next question comes from the line of Liam Burke of B. Riley Securities. Your line is now open. Liam Burke: Thank you. Good morning, Gary, Dan, Bruce. Bruce, I guess the fixed-price contracts are a competitive advantage for you. It is also a nice source of a pretty consistent margin. If I look at your backlog, is there a larger percentage of fixed-price contracts, or is the ratio pretty much the same? And on permitting, which is one of your competitive advantages, are you seeing any increase in that process to move projects along faster, or is it pretty much the same? Bruce J. Labovitz: I think we are seeing a migration to a higher percentage of fixed-price contracts as the mix is changing a little bit. I would not characterize it as off-the-charts dramatic in its movement, but it is steady-state moving. It is also that some industries we work in are really just resistant to that—it is the way it has always been done. But in any opportunity where we have a chance to price on a fixed price, that is where we are driving contracting. Dan Swayze: This is Dan Swayze speaking, Liam. Nice to talk with you. It is generally the same. We are seeing some hints that people would like to move faster, but we have yet to see a material shift that makes the permitting move faster than where it has been. Bruce J. Labovitz: And that is not necessarily a negative. The effort involved is the service we provide. Yes, we like to be able to do more of it more quickly, but it is also— Dan Swayze: We are hopeful we do see a shift on the NEPA front related to NEPA-type permits in the future, but we have yet to see it. Liam Burke: Great. Thank you. Bruce J. Labovitz: Thanks, Liam. Operator: One moment for our next question. Our next question comes from the line of Tomasano of JPMorgan. Your line is now open. Tomasano: Hi, good morning, everyone. I would like to ask about the 6% organic net service billing growth. What is the contribution from pricing, volume, new clients, and deeper penetrations of existing clients? And how sustainable do you see this growth for the next couple of quarters? Bruce J. Labovitz: Tom, the organic growth that we have delivered historically is related to increased workload and not a function of pricing. I would not say that it is always a zero contribution from pricing—there is always some appreciation there—but when we look at the growth of our workforce and the sustained utilization of our workforce, we see that it is more people doing more work for more customers. It is really about increased capacity, increased volume of assignments, and increased wallet share with existing customers. When we look ahead at organic growth over the course of this year, we expect it to be in excess of 20%, so we do not think that the 6% is unsustainable in any way. In fact, we think we are going to achieve a significantly greater amount of organic growth this year. Tomasano: Thank you. And then a follow-up on margins, especially SG&A as a percentage of the gross contract revenue, was up significantly year over year. What are the main causes, and how will you control these costs? And also, Bruce, you talked about adopting AI—do you see it becoming a key tool for improving SG&A efficiency going forward? Bruce J. Labovitz: The total cost of SG&A was about 50 basis points higher this quarter than last year's first quarter. The absolute amount grew, but the percentage of revenue grew modestly, and we acknowledge that. We think it will begin a downward trajectory again as higher-revenue quarters absorb more of that overhead. There is a level of cost to run the machine, and as we move forward to future quarters, we expect that to start coming down sequentially. Compared to last quarter, it was up about 200 basis points, but I think that is really a function of revenue, not anything else. Tomasano: I was asking about the SG&A percent of GCR, which was 57.8%, plus 730 basis points compared to last year. Bruce J. Labovitz: If you are talking about COGS, we generally try to focus more on total SG&A cost because the way we allocate labor cost into the payroll line can vary from quarter to quarter based on how timesheets are allocated. I think movements there are less consequential than overall movements in the overall cost of labor and SG&A. Tomasano: Okay. That is clear. Thank you. And any comments on AI with SG&A opportunity? Bruce J. Labovitz: Certainly. Part of what we are building are tools that will make operations—back office and front office—more efficient. Technology continues to provide process improvement opportunities throughout the business. I think that is going to be a natural evolution of technology. The higher-value orientation is really towards client engagement, client assignment, and client connectivity. We are not uninterested in what is going on in the back office, and yes, I think there are some points of improvement to be had there, but our primary focus is really on the front office. Tomasano: Thank you. Appreciate it. Operator: One moment for our next question. Our next question comes from the line of Mincho of Texas Capital Securities. Your line is now open. Mincho: Good morning. Thank you for taking my question. You had mentioned that data centers were about 6% of revenue. Can you remind us how many data center projects you have worked on in the past and what that looks like today? And can you talk about data centers in your current backlog? Bruce J. Labovitz: I am not sure any of us could give you an exact number of how many data center projects, other than to say that the fact we do not know exactly how many means it is a lot. I would also add that many of the data center clients are very strict about nondisclosure, so it is hard for us to talk about a specific project. When you aggregate all of the experiences that the collective here has had—between us getting into data centers early in the Northern Virginia cycle and extending that to what is now really a power solutions play for data centers—the intersection with data centers that we have has grown faster than the number of projects has grown. We are doing more for more data centers, including existing clients. I would say that even where the project is the same, we are doing more things for the project today. And I would say that it is relatively aligned in our backlog, maybe slightly disproportionate to recognized revenue. We see that as a continually growing space and, particularly coming off of the E3I, Laysen, and RPT acquisitions, there is just so much momentum in the space surrounding energy consumption—not just data centers, but other large-scale utility-size consumers—that it is a growing portion of our backlog. Dan Swayze: From an operations perspective, there is not a week that goes by where we are not trying to shift resources to accommodate additional data center work. It is continuing to come in, and it is quite a substantial portion of our growth. Mincho: Perfect. Thank you. Also, you announced the smaller acquisition of Smith and Associates. Can you talk about how that fits into your broader geographic and service expansion plan? And more broadly on M&A, how the pipeline is looking—are you still looking at smaller or larger projects—and any change in valuations recently? Gary P. Bowman: Hey, Minh. On Smith and Associates, the play was really adding talent and productive capability to an existing big client we have in that geography, in addition to expanding into the geography. We already had a small presence in Vegas; the client was demanding a lot more, so it is a production capability play. The pipeline is still robust. We are evolving to be more narrow, focused, and strategic in what we are looking at. We will continue to look at a mix of large and small ones. As we go to more strategic targets, the market is not driving multiples up—we see that fairly steady—but as we go to more strategic targets, the multiples are going up a bit because of the high demand in the energy markets, the utility markets, and so forth. Bruce J. Labovitz: I think Smith is a good example of “we acquire to generate organic growth.” It is a little bit of one of those conundrums of yes, it is acquired, but it is for an organic opportunity. Mincho: Got it. Okay, I think that does it for me right now. Thank you very much. Bruce J. Labovitz: Thanks, Minh. Operator: As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. One moment for our next question. Our next question comes from the line of Jeffrey Michael Martin of ROTH Capital Partners. Your line is now open. Jeffrey Michael Martin: Thanks. Good morning, guys. I wanted to dive into the decision that went into going after this large government contract. It is not the norm for Bowman Consulting Group Ltd. to pursue something like this. If you could walk us through the thought process and the competitive approach that you went in pursuing this contract, and secondarily, is this something that we could anticipate becoming more frequent in the future? Bruce J. Labovitz: Jeff, part of what happens is as you ascend through the tiers of size, opportunities present themselves to you that might not have otherwise presented themselves to you. I would not characterize this as a deliberate multiyear chase for an opportunity. We had assembled the right capabilities in the right place at the right time to meet the demand that a client had for work, and so it was opportunistic, but it was not accidental that it happened. In terms of contracts like it in the future, we certainly hope so. I think this establishes a precedent. It establishes a foundation and a threshold for the kinds of work that we can accept and complete. While I do not know that there is one in particular of like size, like kind sitting in our pipeline today, that does not mean that there will not be tomorrow. Dan Swayze: Just to further expand on what Bruce was saying, this contract and the reach-out that occurred to us aligns directly with some of our strengths in our core services. This was not a reach at all for us to submit a proposal, provide the required scope, and meet their objectives, because it is the core services that we provide and that we are really good at. Gary P. Bowman: Jeff, from a broad point of view, this contract really expands our paradigm internally of what we can do and what we go after. It has very positive cultural effects that are really cool to see. Jeffrey Michael Martin: Well, congratulations on the contract. Bruce, I wanted to dig in on scaling up the resources that you need on this contract. Is there any short-term margin impact that comes back to you in the back half of the year? How should we think about utilization? I know in the past you have staffed up in anticipation for contracts coming on. Is that the case in this situation? Bruce J. Labovitz: Yes. We have talked about margin in the business being a bit of a roller coaster based on the timing of notice to proceed and the accumulation of the resources needed. We do not capitalize any costs associated with future work in anticipation of it; it just gets expensed as incurred. There was definitely staffing up for the project. It is going to be consequential enough through the rest of the year that we are not really calling it out as any particular item, other than to point out that the revenue we are going to deliver through the rest of the year that is in backlog does take staffing in real time, and so it does have some drag on Q1 from a multiplier perspective across the portfolio, because there is labor that was not as productive as it will be. But that is absolutely a variable in the margin expansion equation. It is not just for that project, but for other projects as well—this was not a one-trick quarter. Backlog grew another ~5% independent of it, which also suggests having to staff up for growing revenue. Jeffrey Michael Martin: Appreciate the time. Operator: Ladies and gentlemen, as there are no further questions, we will conclude today's conference call. Thank you for joining. Gary P. Bowman: Thank you. Bye.
Operator: Please stand by. We are about to begin. Good morning, ladies and gentlemen, and welcome to Genworth Financial, Inc.'s First Quarter 2026 Earnings Conference Call. My name is Jess, and I will be your coordinator today. As a reminder, the conference is being recorded for replay purposes. We will facilitate a question and answer session towards the end of this conference call. I would now like to turn the presentation over to Christine Jewell, Head of Investor Relations. Please proceed. Christine Jewell: Thank you, and good morning. Welcome to Genworth Financial, Inc.'s First Quarter 2026 Earnings Call. The slide presentation that accompanies this call is available on the Investor Relations section of the Genworth Financial, Inc. website, investor.genworth.com. Our earnings release and financial supplement can also be found there and we encourage you to review these materials. Speaking today will be Tom McInerney, President and Chief Executive Officer, and Jerome Upton, Chief Financial Officer. Following our prepared remarks, we will open the call for questions. In addition to our speakers, Jamala Arland, President and CEO of our Closed Block Insurance business, Greg Caruana, General Counsel, Kelly Saltsgeber, Chief Investment Officer, and Samir Shah, CEO of CareScout, will also be available to take your questions. During this morning's call, we may make various forward-looking statements. Our actual results may differ materially from such statements. We advise you to read the cautionary notes regarding forward-looking statements in our earnings release and related presentation as well as the risk factors of our most recent annual report on Form 10-K as filed with the SEC. Today's discussion also includes non-GAAP financial measures that we believe may be meaningful to investors. In our investor materials, non-GAAP measures have been reconciled to GAAP where required and in accordance with SEC rules. Additionally, references to statutory results are estimates due to the timing of the statutory filing. And now I will turn the call over to our President and CEO, Tom McInerney. Tom McInerney: Thank you, Christine, and thank you all for taking the time to join our first quarter earnings call this morning. In the first quarter, we continued to execute across our strategic priorities and have once again generated strong shareholder value. We advanced our long-term growth strategy through CareScout, and we further strengthened the self-sustainability of our closed block. Before turning to our results, I would like to briefly address an update to how we present and evaluate our core operating earnings. As we have discussed, our closed block of legacy insurance products is separate from our other business lines and self-sustaining, and the quarter-to-quarter GAAP volatility does not reflect the underlying economics or how the business is strategically positioned for the long term. As a result, going forward, we will report Genworth Financial, Inc.'s consolidated adjusted operating income excluding the closed block. We believe this view of our operating performance better aligns with our strategy and capital allocation framework, driving current and future shareholder returns through Enact and long-term growth opportunities with CareScout. We will continue to report the adjusted operating income for the closed block separately in our disclosures. For the first quarter, Genworth Financial, Inc. reported net income of $47 million with adjusted operating income, excluding the closed block, of $109 million. Our results this quarter were led by continued strong performance from Enact, with adjusted operating income of $140 million. The holding company ended the quarter with a solid liquidity position, holding $166 million of cash and liquid assets. Turning to our strategic priorities, I am pleased with our progress as we execute with discipline across the businesses. First, we continue to create shareholder value through Enact's growing market value and capital returns. Our approximately 81% ownership stake in Enact remains a key source of cash flows to Genworth Financial, Inc. and helps fuel our disciplined approach to capital allocation. This strategy includes returning capital to shareholders through share repurchases while also investing in our long-term growth opportunities through CareScout. This balanced approach enables us to drive near-term value while still positioning the company for sustainable long-term growth. In the first quarter, we received $99 million in total capital returns from Enact. Supported by these strong cash flows, we continue to execute on our share repurchase program. Since the initial authorization of our current buyback program, we have bought back a total of $875 million worth of shares at an average price of $6.38 as of April 30, 2026. Turning to our next strategic priority, we continue to drive growth from CareScout, which represents a significant long-term opportunity given the growing demand for aging care, including from 70 million baby boomers now aged 62 to 80 in 2026. We are building a comprehensive aging platform designed to help people understand, find, and fund the quality long-term care they need, all in one place. We do this in three ways. First, comprehensive solutions, providing access to a full suite of services across the aging journey from care planning and guidance to finding providers to funding care. Second, expert guidance, leveraging our data, technology, and decades of claims experience to match individuals with the right care provider options and help them make informed decisions with confidence. And third, technology-enabled human connection, delivering that expertise through trained advisers who provide personalized local support and help families navigate what is often a complex, fragmented, and emotional process. Under Samir Shah's leadership, we are integrating these capabilities across the platform to deliver a seamless experience and build a capital-light, scalable business for long-term growth. During the first quarter, we continued to expand the CareScout Quality Network, or CQN, at an impressive pace across both home care and senior living communities. In the first quarter, we added our first senior living communities to the network. This development marks another important step in broadening access beyond home care and expanding options available to consumers in the marketplace. As we continue to integrate senior living communities from our acquisition of SeniorLeaf, we are building a more comprehensive network that can support people across different stages of the aging journey. By the end of 2026, we anticipate having more than 1,000 home care locations and approximately 2,000 senior living communities as part of the CQN. As a reminder, our revenue model for senior living communities differs from our home care model, with CareScout earning a one-time placement fee upon a successful move-in, consistent with how the broader industry operates. Over time, we expect this to complement our existing home care discount model and contribute to a more diversified, scalable, and substantial stream of revenue in the business. In home care, our network now covers approximately 97% of the U.S. population aged 65 and older. We continue to see strong interest from more providers every day as we expand into additional markets and strengthen coverage in geographies with high demand. As the network grows, we remain focused on optimizing coverage and pricing efficiency while ensuring quality, consistency, and long-term scalability. We facilitated approximately 1,500 matches between care seekers and providers in the first quarter, reflecting strong sequential and year-over-year growth. This was driven in part by the expansion beyond home care matches and into senior living communities. The Q1 figure includes our first direct-to-consumer matches, which we are making in both home care and senior living communities. While quarterly pacing may vary, we are building momentum and remain on track toward our previously discussed target of approximately 7,500 matches in 2026, compared to 3,255 matches in 2025. As our network continues to scale and brand awareness grows, we expect to drive increased traction across the platform. We also expect a higher share of Genworth Financial, Inc. policyholders to utilize CQN providers and benefit from more efficient care coordination by our team, helping to stretch their benefit dollars further while generating claim savings for the closed block over time. We also continue to work with other insurance carriers managing closed LTC blocks to leverage the CareScout Quality Network. Integrating other LTC insurance carriers along with select affinity groups represents an important opportunity to introduce more consumers to the CareScout brand, extend our platform beyond Genworth Financial, Inc., and generate additional fee-based revenues over time. In parallel, we are scaling our fee-for-service offerings that generate recurring revenue streams and create additional pathways for CareScout's growth. Overall, we continue to expect $25 million of CareScout service revenues in 2026, and we are making steady progress towards that goal. Turning to CareScout Insurance, we continue to build out our differentiated product offerings and expand our distribution capabilities. Our new CareAssurance product is clearly differentiated in the LTC insurance market by giving customers and their families access to a more holistic aging experience through our services business, including access to the CareScout Quality Network, wellness support tools, and care planning services. We believe this integrated approach provides a distinct advantage in a market that remains fragmented and very underserved relative to the growing demand for long-term care over time. Looking ahead, we plan to launch our CareAssurance worksite product later this year. The worksite channel will broaden access through employers and associations. We are also developing additional offerings, including hybrid LTC insurance products with innovative designs that pair a minimum LTC benefit with low-cost fixed income and equity accounts designed for accumulation. Hybrid products offer a broader set of funding solutions designed to meet evolving customer needs and solve critical gaps in retirement income and retirement security in the marketplace. As the U.S. population ages, CareScout will continue to broaden its capabilities with a focus on ensuring families can more easily access the support, guidance, and resources they need to navigate the complexities of aging. Turning to our third priority, we continue to actively manage our self-sustaining, customer-centric closed block of LTC, life, and annuity products. This business is being managed with a focus on delivering high-quality policyholder experiences, maintaining capital discipline, and ensuring long-term sustainability as we position Genworth Financial, Inc. for growth through CareScout. Our multiyear rate action plan, or MYRAP, remains our most effective lever for maintaining that sustainability. In the first quarter, we secured $5 million of gross incremental premium approvals. We have built on this progress in the second quarter, already achieving another $45 million. As we enter the later stages of the MYRAP program, we expect premium approvals to be lower and benefit reductions to be higher because the future premium runway is shortened as Genworth Financial, Inc. policyholders age, as shown on Appendix Slide 20. That said, we expect full-year 2026 premium approvals and benefit reductions to be broadly in line with 2025 levels, contributing approximately $1 billion of economic value on a net present value basis. Since the program began in 2012, we have achieved approximately $34.5 billion in net present value through a combination of premium increases and benefit reductions. We remain focused on executing this program with discipline to ensure the long-term self-sustainability of the closed block. Next, I will provide a brief update on the Absa litigation. The appeal hearing is scheduled for July. We expect the Court of Appeal to reach a decision within approximately three to six months of that hearing. If the judgment is ultimately upheld and all appeals are favorably resolved, we expect to recover a total sum of approximately $750 million, subject to exchange rates at that time. We do not expect to pay taxes on this recovery. As we said previously, any potential recoveries are not factored into our capital allocation plans. If proceeds are received, we would deploy them in line with our existing priorities: investing in CareScout, returning capital to shareholders, and reducing debt. Before I turn it over to Jerome, I would like to briefly address the current macroeconomic backdrop. We continue to closely monitor an uncertain and dynamic external environment, including uneven consumer spending and the potential for higher inflation and interest rates. We believe Genworth Financial, Inc. is well positioned to navigate a range of market conditions in 2026 and beyond. Enact continues to operate from a position of strength supported by disciplined underwriting and a strong capital position and provides Genworth Financial, Inc. with strong free cash flow. We continue to integrate new technology and operational capabilities across the organization, enabled by artificial intelligence. We have several AI and generative AI initiatives underway with key partners focused on improving efficiencies in claim management, enhancing the policyholder and customer service experience, and supporting more scalable growth across CareScout. Even as we advance these capabilities, our approach remains grounded in the tech-enabled, human-centered support our policyholders rely on throughout the aging journey. In closing, we are pleased with the progress we have made in the first quarter across our strategic priorities, supported by another quarter of strong performance from Enact. As we move towards the midway point of the year, we remain focused on disciplined execution and building long-term value for our shareholders. And with that, I will turn the call over to Jerome. Jerome Upton: Thank you, Tom, and good morning, everyone. We entered 2026 with strong momentum, and as Tom highlighted, we continued to execute against our strategic priorities while enhancing our financial flexibility and positioning the company for long-term success. Enact's first quarter results reflected continued strategic and operational strength underpinned by its strong balance sheet and liquidity profile that continue to create value and fuel our capital allocation priorities. We also made further progress scaling CareScout and strengthening the self-sustainability of our closed block. I will begin with an overview of our first quarter financial results and key drivers, followed by a discussion of our investment portfolio and holding company liquidity. I will then cover our capital allocation priorities and provide an update on our guidance for 2026 before we open the call for Q&A. Starting with the financial results on Slide 9, as Tom mentioned, going forward, we are updating the presentation of our consolidated earnings to exclude results from our Closed Block segment to better align with our strategy and capital allocation framework managing the closed block on a standalone basis. We will continue to report the adjusted operating income for the closed block separately in our disclosures. First quarter adjusted operating income, excluding the closed block, was $109 million, driven by strong performance in Enact, partially offset by losses in Corporate and Other. Enact delivered another strong quarter of performance with adjusted operating income of $140 million to Genworth Financial, Inc. Results included a pretax reserve release of $39 million reflective of continued strong cure performance. Results are down versus the prior quarter reflecting a lower reserve release and up versus the prior year reflecting increased investment income and favorable expenses. In Corporate and Other, we reported an adjusted operating loss of $31 million for the quarter, reflecting continued investment in CareScout and ongoing holding company debt service. The prior quarter included a benefit from favorable tax-related items. Our Closed Block segment reported an adjusted operating loss of $32 million. This was driven by a liability remeasurement loss related to the actual variances from expected experience, or A to E, of $36 million pretax, primarily in LTC. Our results in LTC were favorably impacted by net insurance recoveries in the quarter of $65 million pretax. Mortality in both LTC and life insurance was seasonally higher sequentially but lower than the prior year. While results can vary quarter to quarter, we expect to see A to E losses in the range of approximately $300 million for the full year 2026. As a reminder, these GAAP fluctuations do not impact our cash flows, economic value, or how we manage the business. Now taking a closer look at Enact's performance underlying its strong financial results beginning on Slide 10, new insurance written of $13 billion in the quarter decreased versus the prior quarter primarily based on seasonal trends but increased versus the prior year as a result of lower interest rates early in the quarter. Primary insurance in force increased year over year to $272 billion supported by the growth in new insurance written and continued elevated persistency. Earned premiums in the quarter were $243 million, down slightly versus the prior quarter and prior year. As shown on Slide 11, Enact's favorable $39 million pretax reserve release drove a loss ratio of 15%. Enact's estimated PMIERs sufficiency ratio remains strong at 162%, or approximately $1.9 billion above requirements. Genworth Financial, Inc.'s share of Enact's book value, including AOCI, was $4.3 billion at the end of the first quarter, down slightly from $4.4 billion at year-end 2025, driven by movements in the market value of the investment portfolio as a result of increased interest rates. While maintaining its strong balance sheet, Enact has continued to deliver significant capital returns to Genworth Financial, Inc. We received $99 million from Enact in the first quarter. Looking ahead, Enact remains well positioned to navigate the current macroeconomic environment supported by its strong balance sheet and disciplined underwriting. Turning to our Closed Block segment on Slide 12, we continue to proactively manage and reduce LTC risk and improve self-sustainability through prudent in-force management, including benefit reductions and premium rate increases. As of the end of the first quarter, we had achieved approximately $34.5 billion of benefit reductions and premium increases on a net present value basis since 2012. As part of our multiyear rate action plan, we offer a suite of options to help policyholders manage premium increases while maintaining meaningful coverage. These benefit solutions enable us to reduce our exposure to certain higher-cost features, such as 5% compound benefit inflation options and large benefit pools. Cumulatively, about 61% of policyholders offered a benefit reduction have elected to take one, lowering our long-term risk. These initiatives have helped reduce our exposure to the riskiest LTC policy features. Notably, our exposure to the 5% compound benefit inflation option has decreased below 36%, down from 57% in 2014, and the percentage of our policies with lifetime benefits has decreased to 11%. We remain committed to managing GLIC and its subsidiaries as a closed system, leveraging their existing reserves and capital to cover future claims. We will not inject capital into these companies and, given the long-tail nature of our LTC insurance policies, with peak claim years still over a decade away, we also do not expect capital returns. Turning to Slide 13, our investment portfolio remains resilient and is conservatively positioned. The majority of our assets are in investment-grade fixed maturities held to support our long-duration liabilities. New money yields continue to exceed those on sales and maturities, with cash in our life insurance companies being invested at yields of approximately 6.3% for the quarter. Our alternative assets program is largely comprised of diversified private equity investments and has targeted returns of approximately 12%. Quarterly realizations fluctuate, with first quarter transactions affected by geopolitical tensions. We remain committed to growing our alternative assets portfolio within regulatory limitations due to its robust track record of returns, diversification benefits, and natural fit with long-term liabilities. Next, turning to the holding company on Slide 14, we ended the quarter with $166 million in cash and liquid assets. When evaluating holding company liquidity for the purpose of capital allocation, and calculating the buffer to our debt service target, we excluded approximately $50 million of cash held for future obligations, including advanced cash payments from our subsidiaries. Moving to capital allocation on Slide 15, our priorities remain unchanged. We will continue to invest in long-term growth through CareScout, return cash to shareholders through our share repurchase program when our share price trades below intrinsic value, and opportunistically retire debt. During the quarter, we repurchased $66 million of shares at an average price of $8.61 per share. We repurchased an additional $19 million through April 30, 2026. We also retired approximately $5 million of principal debt in the quarter, bringing our holding company debt down to $778 million. We maintain a disciplined capital structure with a cash interest coverage ratio on debt service of approximately nine times. I will now turn to our outlook for 2026 and provide an update on the guidance we shared in February on our fourth quarter earnings call. As announced yesterday, Enact has increased its quarterly dividend and continues to expect to return approximately $500 million of capital to its shareholders in 2026. Based on our approximate 81% ownership position, we continue to expect to receive around $405 million to $450 million from Enact for the full year. Second, we continue to create value for our shareholders through our share repurchase program. For the full year 2026, we now expect to allocate between $195 million and $225 million to share repurchases. As we have said before, this range may vary depending on market conditions, business performance, holding company cash, and our share price. Third, turning to CareScout. As Tom indicated, in the services business, we continue to target approximately 7,500 matches in 2026, including matches across both home care providers and senior living communities. CareScout services generated $6 million in revenue in the first quarter, and we continue to expect revenue in this business of $25 million for the full year. We plan to invest approximately $50 million to $55 million in services in 2026 as we continue scaling the business and expanding its reach. These investments will support the continued build-out of our technology platform, the addition of new products and care settings, and growth across both consumer and B2B channels. We are also deepening carrier partnerships and enhancing operational infrastructure to support higher volumes, recurring revenue, and long-term scalability. For insurance, we currently do not expect any additional investments in 2026 following our $85 million investment to launch our inaugural product last year. As we expand our product suite, grow our distribution network and sales levels, and refine our operating platform, we will make appropriate investments in the business. We have made good progress overall with CareScout and remain confident in its continued growth in 2026. As we have noted previously, scaling these businesses and achieving breakeven will take time. In closing, we are delivering on our strategic priorities and enhancing financial flexibility while proactively managing our liabilities and risk. Our focus remains on driving durable growth through Enact and CareScout, which serve as a foundation of our long-term value creation strategy. At the same time, we are strengthening the self-sustainability of our closed block, maintaining our commitment to return capital to shareholders through share repurchases, and opportunistically retiring debt. These actions position Genworth Financial, Inc. to deliver long-term value for our shareholders. We will now open the call for questions. Now, let us open up the line for questions. Thank you. Operator: Ladies and gentlemen, we will now begin the Q&A portion of the call. As a reminder, please refrain from using cell phones, speakerphones, or headsets. Please press star 1 to ask a question. We will go first to a question from Joshua Estrach with Credit Insights. Your line is open. Please go ahead. Analyst: Hey. Good morning, folks. Thanks for taking my question. So, modest decline in the estimated RBC ratio at GLIC at quarter-end, and I know you folks have been adamant for years that no capital contributions to life entities are planned. But I am wondering if there is, like, a specific RBC ratio level at which you would either be forced or consider contributing capital, or, you know, alternatively, if there is a lever you can pull to bolster RBC in the life units to the extent it becomes necessary without a capital contribution. Tom McInerney: Thank you for your question, Josh. Our target is to have RBC at $250 million or more, and so we are very comfortable with where we are. Obviously, the RBC did go down in the first quarter because of the statutory loss, but that is why we have quite a bit of room. There is no requirement from a regulatory perspective. I mean, we are well above, at almost three times required capital, what the regulators require. Jerome Upton: Josh, good morning. Thanks for the question. Look, we felt some pressure in the first quarter, as Tom indicated, down to 2.89. That is still a good ratio. We did see mortality; it went up in the quarter, but it certainly was not at the level that we would have expected. I think that impacted LTC, but I believe that was felt across the industry as well. We also saw some life pressure from our post-level term block coming through and some reserve build. We do not expect that to continue. What I would highlight to you is we are going to continue to execute our strategy. That strategy and our statutory results are premised upon our ability to get the multiyear rate action plan, which, as Tom highlighted, has been very successful, our benefit solutions, and our Live Well, Age Well program as well as our CareScout Quality Network. We are active in achieving those benefits, and those will be key drivers of our RBC and our statutory results going forward. Operator: Thank you very much. Analyst: And if you do not mind, maybe I can sneak in one more here and pivot a little bit. I appreciate the color and the commentary you gave earlier on the investment portfolio front, but if maybe you can give a little bit more detailed color on the private credit portfolio, maybe even just at a high level, the characteristics either from a ratings or asset class or sector basis, and maybe you can just briefly tell us how you perhaps source the investments or any of the partnerships you might have to bolster your private credit capabilities. Jerome Upton: Sure. Thanks for the question. Kelly is on the call, so we will ask Kelly to comment. Kelly Saltsgeber: Yes, thanks, Josh, for the question. Private credit has been referred to in the media of late really as what we call direct lending or middle market loans, which are private loans to small companies, and we have very minimal exposure there. We have about 1% of our portfolio in middle market loans, and we access that market through a well-regarded and experienced manager through a separately managed account. Our direct lending portfolio actually has no exposure to what is classified as the software category, and so it is very different from what you are reading about with some of the BDCs. Now, we have other private investments. We have been in the private placement market for decades, and that is an investment-grade portfolio. We also have recently started accessing private asset-based finance, also primarily through external managers, and that is an investment-grade mandate with an average rating of single-A or triple-B. We also access the private equity market mainly through advisers that are very experienced in the space, including Neuberger and JPMorgan. I would say our private exposure is almost exclusively investment grade with the exception of the 1% in middle market loans that I mentioned. Analyst: Got it. Thank you very much. I appreciate everyone's time this morning. Jerome Upton: Thanks, Josh. Operator: Once again, ladies and gentlemen, it is star 1 if you have a question. It appears there are no questions at this time. Ladies and gentlemen, I will now turn the call back over to Mr. McInerney for closing comments. Tom McInerney: Thank you all very much for joining the call today and for your continued support and interest in Genworth Financial, Inc. At this point, I will turn the call back over to Jess to have her close it. Operator: Thank you, sir. Ladies and gentlemen, that will conclude the call. We thank you for your participation. You may disconnect at this time.
Operator: Good day, and welcome to the California Resources Corporation First Quarter 2026 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Daniel Juck, Vice President of Investor Relations. Please go ahead. Daniel Juck: Good morning, and welcome to CRC's First Quarter 2026 Conference Call. Following prepared comments, members of our leadership team will be available to take your questions. I hope you have had a chance to review our earnings release and supplemental slides. We have also provided information reconciling non-GAAP financial measures to comparable GAAP measures on our website in our earnings release. Today we'll be making forward-looking statements based on current expectations. Actual results may differ due to factors described in our earnings release and SEC filings. [Operator Instructions] I will now turn the call over to Francisco. Francisco Leon: Thanks, Dani. Good morning, everyone. We're off to a solid start in 2026 with unprecedented energy market volatility creating meaningful tailwinds and opportunities for our business. Before getting into the quarter, let me share a few thoughts on the macro environment and why CRC's business is well positioned to create value through the cycle. Events across the Middle East have reminded the world of the importance of oil and energy security. Global supply chains have shown to be vulnerable and countries have been forced to seek reliable, diversified sources of energy. While the United States has been relatively insulated due to our strong domestic production, California faces a unique and precarious position. Today over 60% of the oil consumed in California comes from foreign sources. In recent weeks, our state's inventories have been reduced by more than 20% as oil destined for California has been diverted to Asia at substantial premiums. The importance of in-state production has never been more critical, both to ensure supply and preserve affordability. As the Golden State's largest producer, CRC is positioned to be this solution. Delivering local barrels that shorten the supply chain, lower transportation costs and associated emissions, and helping keep gasoline affordable for Californians. CRC has a deep, primarily Brent-linked, high-quality inventory of oil development opportunities, and recent legislative efforts to improve permitting are proceeding as expected. Our recent mergers were well timed with transactions priced well below today's strip, and set a strong foundation for future growth. We're now deploying capital into these assets to drive disciplined long-term value. California is starting to recognize that local production is essential to affordability, reliability and the state's climate objectives. And CRC is ready to support all 3. Today we're moving decisively to accelerate development. We are increasing drilling cadence this summer by 3 rigs: 2 in California and 1 in Utah. This will allow us to return to our long-term production maintenance capital program ahead of schedule and accelerate high-return projects to unlock value. In California, we're drilling new wells and adding capital-efficient workovers that will translate quickly into production. And in Utah, our highly contiguous acreage position provides meaningful upside that we have only begun to capture. Let me spend a moment on the Uinta acreage because this opportunity is compelling. Since 2020, production in the basin is up 100%, reflecting both improved results at the well level and expanded more mature regional infrastructure. Recently drilled CRC and offset wells have substantially derisked our acreage, and we're planning to perform additional appraisal work. With over 200 gross Uteland Butte locations already in the portfolio and additional benches under consideration, we have considerable running room to support a scalable growth platform. Our planned acceleration in activity to 7 rigs will meaningfully enhance our financial outlook. For the full year, we are now targeting approximately 1% entry-to-exit gross production growth, and raising our adjusted EBITDAX guidance by over 40%, outpacing the expected rise in Brent. We're also increasing our Berry merger synergy target, which Clio will cover in detail in a moment. Our carbon management business, CTV, is on the cusp of a historic milestone. We completed the construction and commissioning of California's first commercial-scale carbon capture and store project at our Elk Hills cryogenic gas plant, and we expect to receive final notice of the termination from the EPA any day now. That approval will clear the way to first CO2 injection, marking the first time in California's history that carbon emissions are permanently stored. It will also place CRC among a small group of U.S. oil and gas companies with active CCS operations. Put simply, this is a defining moment, not just for CRC, but for California's ability to deliver on its climate objectives while preserving energy reliability and affordability. We expect carbon capture at our Elk Hills cryogenic gas plant to be the first of many more projects to come. Our storage reservoirs sit within reach of approximately 17 gigawatts of baseload power generation across California that we believe has the potential to be retrofitted for CCS. And we have submitted over 350 million metric tons of carbon storage capacity to the EPA, with additional reservoirs tracking or draft permits through 2026. Our data center conversations continue to gain momentum. As previously announced, a top-tier national data center developer is investing several million dollars to accelerate early-stage site readiness and permitting at Elk Hills, a clear vote of confidence in the opportunity. As AI transitions from training to inference and other states face mounting power constraints, tech's appetite for scaled clean power in California is growing. CRC is uniquely positioned to meet that demand. We can permit, deliver firm gas supply, offer available land adjacent to existing infrastructure and [ pair it ] all with CCS. Power is the binding constraint for AI growth, and we are one of the few platforms that can solve it. On the Reliable and Clean Power Procurement Program, or RCPPP, we expect the next major update in the second half of 2026. Natural gas with CCS is not yet eligible, but support is building and [ 3 of 5 ] CPUC commissioners have publicly endorsed inclusion. California already offers some of the highest stackable CCS incentives globally. RCPPP eligibility would make the economics even more compelling. Our enhanced 2026 outlook reflects the positive impact of these developments as well as the continued execution of our strategy. With that, I will turn it over to Clio to walk through our first quarter results and updated 2026 guidance. Clio? Clio Crespy: Thank you, Francisco, and good morning. We delivered a strong first quarter with adjusted EBITDAX of $304 million, approximately 17% above the midpoint of our guidance, and we are raising our full year guidance. The combination of disciplined execution, higher oil prices and accelerated activity has improved our outlook for 2026. In the first quarter, operating cash flow before changes in working capital was $247 million, ahead of our expectations and reflecting the stronger Brent backdrop relative to our previous guidance. Net production averaged 154,000 BOE per day, with oil at 81% of the mix and realizations at 96% of Brent pre-hedged, in line with plan. Adjusting for PSC effects, underlying production was in line with our quarterly guide. G&A for the quarter was above guidance due to the timing of legal expenses and a higher cash settled equity compensation, reflecting share price appreciation. G&A is already trending down with further reductions driven by Berry synergies, which we expect to capture in 2026. Total capital deployed in the quarter was $131 million, at the high end of guidance. The increase in spend was by design as we pulled forward pre-spud timing on development wells and accelerated facility spend to support the activity ramp Francisco outlined. Even with that accelerated capital deployment, free cash flow before changes in working capital was $116 million, a strong start to the year. In March, we priced a $350 million add-on to our 2034 notes. We upsized from $250 million with a book more than 5x oversubscribed and used the proceeds to redeem our 2029 notes. This extends our weighted average maturity to approximately 6 years, lowers our interest expense and further strengthens the balance sheet. Net debt ended the quarter at $1.3 billion, with net leverage at 1.1x last 12 months EBITDAX. We returned $46 million to shareholders during the quarter, including $36 million in dividends and $10 million in share repurchases, bringing cumulative returns since mid-2021 to more than $1.6 billion, a track record that reflects the consistency and the durability of this business. Current conditions across domestic energy markets arguably provide the most constructive backdrop for our business and the industry than we have seen in quite some time. For the second quarter, we expect net production of 149,000 BOE per day, reflecting the impact of PSC effects at higher prices and a planned short maintenance window at our Elk Hills power plant. We expect capital deployment of approximately $130 million, reflecting increased drilling activity in June, G&A of $95 million, and adjusted EBITDAX of $390 million, assuming an average Brent price of $105 per barrel. As usual, we provide both quarterly and full year sensitivities to Brent to help frame the impact of commodity price volatility. For the full year, we are raising our outlook across the board. We now expect 2026 exit gross production of 175,000 BOE per day, roughly 1% entry-to-exit growth and building momentum into 2027. To deliver this growth, we are increasing full year midpoint of total capital guidance to $540 million. [ D&C ] and workover capital is $100 million above our prior plan, reflecting a second half ramp to a peak of 7 rigs. Partially offsetting this increase is a reduction to facilities capital of $10 million, reflecting ongoing field level facilities rationalization. Allow me to pull all of this together in one important comparison. We previously forecasted that our maintenance capital framework to hold production flat required 7 rigs and approximately $485 million of D&C and workover capital. This year, and given our portfolio's flexibility, we are expecting to deliver entry-to-exit growth with an average of 5 rigs and D&C and workover capital utilization of less than $400 million. Fewer rigs, less capital, and we are now growing. The return profile on our full year 2026 capital program is compelling. At current strip prices, we expect a multiple of approximately 4.5x on invested capital, up from 3.8x previously. And IRR is approaching 70%, roughly 40% higher than our prior estimate. We now expect full year free cash flow before changes in working capital to exceed $800 million. Turning to Barry merger-related synergies. We have already implemented over 80% of our original target and are now raising that target by 12% or an additional $10 million. That's driven by field consolidation and contractor-to-crude conversion across the combined footprint. Our cumulative synergy and structural cost reduction target through 2028 now stands at upwards of $460 million. We expect full year adjusted EBITDAX at a midpoint of $1.45 billion, assuming an average Brent price of $91 per barrel. This increase reflects both higher commodity prices and underlying margin expansion. Brent is up approximately 38% while our EBITDAX outlook has increased by approximately 42%, with a positive difference driven by high-return drilling, structural cost discipline and incremental synergies, all supporting higher cash flow per share. That gap between commodity upside and EBITDAX upside reflects the value of our integrated strategy compounding, and it is the kind of outperformance we can sustain through the cycle. Cash flow per share growth, high-return reinvestment, a derisked balance sheet and structural margin expansion, that is 2026 in a nutshell. With that, I'll turn it back to you, Francisco. Francisco Leon: Thanks, Clio. Before we open the line for questions, let me share a few closing thoughts. CRC remains a different kind of energy company. And this distinction could not be more evident. Our integrated strategy is delivering on 3 fronts at once: a low-decline conventional business accelerating into a stronger price environment, California's first commercial-scale CCS project on the doorstep of CO2 injection, and a power and data center opportunity gaining traction. The path forward is clear. We're scaling activity across California and delineating the Uinta. We're converting structural margin expansion into cash flow growth. We're returning capital through a durable dividend and opportunistic buybacks. And we're advancing our leading carbon management platform. Our priorities are unchanged: develop our resource base responsibly, unlock the full value of our portfolio, maintain a premier balance sheet, and allocate capital with discipline. That is how we create durable long-term shareholder value. Operator, we're ready for questions. Operator: [Operator Instructions] The first question comes from Scott Hanold with RBC Capital Markets. Scott Hanold: Looks like you have it all coming together. You got the permit reform, you identified the inventory, now you've got the price. So this growth path, I think, looks pretty attractive. But I was wondering if you could walk us through the 2026 program as it is now, just give us a sense of when the rigs are coming on and how that translates into when the production actually shows up throughout the year. And if you can give a little bit of context too on the permits, whether or not you've got the permits in hand to execute it at this point. Francisco Leon: Scott, thanks for the question. Yes, we came into the year looking to reestablish the permitting process, showcase the inventory and then the highly capital-efficient program. We think the updated 2026 guide reflects the progress on all these objectives. Let me explain. So we're going to be drilling a total of about 357 new wells and side tracks for the year. Happy to report that we have all permits for all 7 rigs now on hand and are working on our 2027 plan. Not only that are permits flowing, but the process overall is getting better. So with the permitting process being squared away, that allows us to focus back on more dynamic capital allocation. And that's where we see an advantage versus maybe the shale peers in the rest of the country. We have a lot of flexibility to deploy capital and have very short time to market. So time to markets are very quick, from spud to production is roughly 30 days on average, although we can beat that number. And we don't have the same level of service intensity or competition for equipment and crews. So we can try to connect to a window of price opportunity and deliver incremental production that way. So we're lining the incremental rigs to be ready in the summer and start producing in the -- early in the second half of the year. So then that allows us to focus on the overall picture, which is returning production to maintenance. We talked about and showcased that we have significant running room, 24 years of inventory. Our wells are performing extremely well. We're beating the [ tight ] curve. And you can see that in the numbers that Clio highlighted. Our entry production is 174,000 BOEs per day. Our exit is estimated at the midpoint to be 175,000 BOEs per day at the midpoint of the guide, and that's on a gross production basis. Why do I mention gross production and not net? Because that's a cleaner measure of reservoir performance. Gross is unaffected by PSC cost recovery variability. We have the contract in Long Beach where it's subject to PSC mechanics. So you look at growth in terms of being able to measure that efficiency. So now you can also back out the PSC effects from net production and you get to the same shape; you're staying flat to slight growth. But the really exciting thing that we're seeing come through as our team is executing is that we're staying flat with less rigs. So the improvement on capital efficiency has been significant. So let me turn it to Clio to highlight the capital efficiency and the returns of the program as well. Clio Crespy: Scott, really on the efficiency point, the comparison here is really compelling. So on how much our program has improved relative to what we outlined just last quarter. We had talked about the 7-rig program with about $485 million of D&C and workover capital. That will be needed to hold production flat next year, so in 2027. And today what we're outlining is we're delivering that flat to modest growth with roughly 5 rigs throughout the year and under $400 million of D&C and workover capital. So that's a meaningful step up in the capital efficiency. We're getting more out of fewer rigs, less capital, and we're bringing that forward in time. And most importantly there, that improvement is also showing up in our returns profile. And so the program-level returns, you're looking at roughly 4.5x MOIC, nearly 70% IRR, that's meaningful further increase from our prior program, which was already highly attractive. I'll unpack that just a bit further. It's coming from a few places, 3 things really: well economics, cost structure and portfolio sequencing. So first, we're seeing better capital productivity at the well level, both in terms of cost and also early time performance. Second, we've structurally lowered our cost base and particularly on the field and facility side. And third, sequencing and timing here. We're simply deploying capital more efficiently across the year and across our broader portfolio. So this isn't just one lever. It's a multiple of improvements compounding at the same time. And as you think about our activity increase here, Scott, the key is that it's tightly price-gated. So we remain capital disciplined at current strip free cash flow before working cap. That is expected to come in above $800 million this year. And we're also anchored to long-term pricing rather than near-term thought. So at around $65 Brent, our 4-rig program was fully supportive and generates strong returns. And each incremental rig from there, that requires roughly $5 Brent increase and long-term pricing to maintain those returns. So what effectively does here is create a clear decision framework internally. Every step-up in activity has to meet our return threshold. So even in a stronger tape that we're seeing today, we're not chasing volumes. We're scaling only where returns justify it. And as you move towards 6 rigs in California, we're underwriting that again something closer to a $70 or $75 Brent long term, which is broadly where the strip sits today. And tying back to what Francisco was mentioning earlier, that framework, it's really enabled by the flexibility and program. We can adjust activity quickly without putting really the base at risk. So key takeaway here, Scott, is it isn't a change in strategy; it's stronger execution and better economics. Scott Hanold: Yes. I appreciate all the color. That was very helpful. My follow-up question is, is on Uinta Basin. And then maybe if you could step back for us and talk about why invest in Uinta, and how do you look at the long-term strategy of that asset? Francisco Leon: Yes, Scott. So we're still in the evaluation stage of Utah. We have 4 wells that we want to drill before the end of the year. We have -- when we acquired Berry, we booked about 200 locations in -- but as you look at the stacked acreage and the horizontal development and what offset operators are doing, there's a lot more running room to go. But ultimately, we're looking to unlock the best value. And the way to think about it going forward beyond the 4 rigs is we are considering full development, but we're also considering monetization. So I'd say we are not in a holding pattern anymore. We're going to make a decision coming up. But we see some compelling opportunities to delineate and advance the evolution and the understanding of that asset base. I wouldn't call it a core asset, our core is California, but we're still in that evaluation stage. We see the rest of the country struggling to find high-quality inventory. We think the Uinta will provide that. And the nice thing for us is we attributed very low value to Utah in the very acquisition. So that leaves us with meaningful upside to unlock that best value. So more to come. For now, 4 rigs. We're still evaluating. Sorry, 4 wells, not 4 rigs. Operator: The next question comes from Betty Jiang with Barclays. Wei Jiang: I want to start first on the upstream and maybe impact a bit on the capital efficiency improvement that you're seeing in '26 and how that's impacting 2027. 2026 guidance is a bit noisy just with the PSC effects, but you guys spoke to a lot of those investments is really showing up in the second half, and Uinta is not going to peak until first quarter of next year. So I'm wondering how much of the 2026 investment is going to show up in growth in 2027. And then just on the CapEx side as well, is it fair to say that if you are at 5 rigs this year growing on the lower CapEx, is maintenance CapEx now lower than the $485 million before? Francisco Leon: Yes, Betty. And yes, it's early to guide and to start locking in 2027, but I get the logic behind your question. We are definitely seeing capital efficiencies improve and lower the maintenance capital. I think that is evident in the guide today. We do see longer term 7 rigs as the table stakes for the business. What that means is that is the view we have on the forward long-term baseline at mid-cycle pricing. Have, as Clio said, a lot of flexibility and we can adapt to market conditions, but from a planning perspective, we see 7 rigs as what we want to invest in given the quality and duration of our inventory. So in terms of the investment that we're making now, yes, the -- in conventional assets, you will see the shape of the wedge that peaks -- in this year, we invest, we peak next year, right? So a lot of the investment that we're making is not for 2026 [ expected ], it's really for the benefit of 2027. And having a view towards the long-term price curve and seeing -- and also with our strong hedge book, that gives us confidence to deploy capital thinking into 2027. Ultimately, 7-rig pace also yields a very resilient free cash flow profile. That allows us to have durable returns for shareholders. Ultimately, we'll have to look at a lot of elements as we start thinking about the rig deployment in 2027. So we have a great portfolio, a different mix of wells, different commodities that we can go after. I would not assume that we would -- seeing the split of 6 in California and 1 in Utah. That's still to be determined. But a total of 7 rigs is what we think is the long-term guide on baseline investment for the business. Wei Jiang: Great. That's helpful. For my follow-up, I want to ask about the data center development. You spoke to you're working with a top-tier data center developer to find sites or develop sites in Elk Hills. Can you just speak to the scope of that partnership? Is it fair to think about the value accrued to CRC long term could be on multiple fronts from the value of surface acreage, gas supply, CCS, et cetera? And then just how are the conversations going in general to move the project forward? Francisco Leon: Yes, Betty. So we're making really good progress. We have previously discussed the concept of land now, which means land that's permitted, it's powered, shovel-ready codeveloped and, ultimately, an adjacent to our Elk Hills facility. So we're getting the site ready and our data center partner is putting real capital behind the opportunity, investing several million dollars to accelerate the early-stage work. So we see a lot of people chasing headlines trying to talk about hyperscalers and data centers. We're really focused on project delivery and accelerating durable contracted cash flows. So it's a good way to think about it as we have an integrated view on data centers, from natural gas supply, which we have at Elk Hills, to land, which we have over 200,000 net acres of surface and a lot of it is around Elk Hills, to also being able to provide power and then decarbonize those electrons. We think it's a very compelling one-stop shop opportunity. And we're focused on the delivery. So you'll see more progress on the permitting, you'll see more progress on the advancement, and that's all coming together in a very nice way. We've developed a very strong core competency in being able to kind of navigate the California regulations. We've done it with oil and gas effectively, we've done it really well with carbon capture, and now we're going to do the same thing with data centers. So our partner is adding a lot of value in that design in anticipation of what hyperscalers need. So it's a real and exciting project we're developing. And we'll be ready to announce the specifics a little bit further along, but we're seeing really good progress. Operator: The next question comes from Josh Silverstein with UBS. Joshua Silverstein: Nice update on the Berry synergy front here. And I like that you guys give the 3 different bars there to help kind of break those out, where they're coming from. Can you just talk about how these are starting to trickle in through the course of this year? Will you start to see it in 2Q? Or is it later on this year where those benefits really start to show up? Francisco Leon: Josh, so yes, the integration with Berry is going extremely well. At this point, we've captured about 80% of the targeted synergies. We increased our target by $10 million, primarily in OpEx, and trending really well towards the cumulative target of $460 million of annual synergies between [ Era ] and Berry. So the trajectory, the trend is all going very well. So why the rate in OpEx? I'll give you a couple of examples. Our team is doing a fantastic job in field consolidation. So what that means is we're merging overlapping water and oil treatment facilities and ultimately also consolidating supplier contracts by leveraging our CRC infrastructure and vendor relationships. So that's going really well, probably better than anticipated. We also have a big opportunity for automation. Both Era and CRC were much stronger in automation than Berry. So now we can integrate the legacy Berry fields into our operational control center, which creates the scale and the automation that we need in the operating model. I'll turn it to Clio talk about more of the specifics. But one thing to also note, I see a lot of oil companies talking about AI and how they're incorporating AI into operations. We're working on the same things and seen efficiencies, but those numbers -- those impacts are not quantified yet in our numbers, right? So there is some upside assuming technology advancement and implementation works, but everything else we're really doing is more physical movement and placement of facilities alongside with reductions in G&A. But I'll turn it to Clio to provide a little more context on the synergies. Clio Crespy: Josh, I'll frame it from a broader financial perspective to start really on how those synergies benchmark and then look at your timing question and unpacking that. So on the benchmarking side, while the $10 million increase we announced today on the various synergies, that might look incremental in terms of absolute terms, it's actually quite significant relative to the size of the transaction. We're now roughly at 13% of deal value, which is well above what we typically see in the sector, where most of those transactions are in the mid-single digits, and more recently, we've seen deals trend even lower. So this is clearly a differentiated outcome. And importantly, it's consistent with what we delivered on Era. So we view this as a repeatable playbook for us. On the trajectory, we're largely through a lot of the action items. So we laid out last quarter that we had already delivered roughly $300 million of structural cost reduction and that ahead of schedule. This quarter, we've captured the 80% that Francisco was mentioning of our original Berry synergy targets. So we're well on our way. And the durability of the model is really proven on the synergy capture. And that is what gives us confidence in the path forward on the longer term and our ability to get close to that $0.5 billion of cost reduction. I'd say the remaining synergies that we're looking for are less about those onetime actions now and more about continuous improvement of the business, and you could expect those to come through more steadily over time. If you put it all together, it's really a sustained structural margin expansion story that's continuing to build. And you're already seeing that in our outlook where EBITDAX is growing ahead of the commodity price rise. Joshua Silverstein: Got it. I was hoping to shift over towards the power business for you guys. And I wanted to see how you guys are thinking about the evolution of this business for you? Is it something that could grow? I know it's something being integrated with other parts of the business, but how are you thinking about this? And then maybe just kind of a broader overview of what you're seeing in the California markets. Francisco Leon: Yes. California is fascinating. We keep seeing the same message. We just need more power in the state. And it needs to be clean, it needs to be reliable, it needs to be around the clock. And we're one of the very few companies that can go from molecules in the ground to electrons on the grid to carbon back on the ground. We think that's a big differentiator, and the geology and our expertise on subsurface is what makes it really difficult to replicate. If you then look at the interconnection queues in California, it just takes longer than anywhere else in the country. And so that puts a scarcity premium, capacity that's already tied to the grid. So having those assets, it's very meaningful. We have close to 1 gigawatt of power under our portfolio. But we're seeing some regulatory improvements. So the CPUC just started the procurement process of 6 gigawatts of new clean capacity by 2032. But what we really like to see is that 1.5 gigawatts of that is clean and firm. So that's the energy that we can provide, right, always on, dispatchable, zero emissions. So these are solar and batteries can fill that, it's gas, natural gas with CCS. So in terms of the dynamics that we're seeing, we see a resource adequacy payments that are compressed today because you have a lot of this intermittent supply solar and wind that's flowing in the market. But this new clean, firm requirement creates a structural demand for what we operate. So then the resource adequacy pricing is expected to follow and it's stronger over time. So ultimately, what we see in terms of power is the future natural gas with CCS. It's very California-specific solution. You might not be seeing that in other parts of the country. And you're expecting the CPUC to address it this year and moving forward. So we're well positioned either way, but we see a significant business opportunity as we think about California power dynamics. Operator: The next question comes from Zach Parham with JPMorgan. Zachary Parham: I wanted to ask on the buyback first. Buybacks were relatively smaller in 1Q at $10 million, and you bought back around $45 per share. So those buybacks were done mostly early in the quarter. The stock's moved quite a bit higher since, but so is the commodity, so you're going to still generate quite a bit of free cash flow this year. Can you just talk about how you're thinking about the buyback going forward? Francisco Leon: Yes, Zach. So the first priority for this quarter was to get the activity production back to maintenance level. And the reason for that is that, that gets us to sustainable capital returns. And that duration is what we think the investor is really looking for. And you look at the track record, $1.6 billion of buybacks over the years. So very much a part of our portfolio to be able to distribute cash to shareholders. So we continue to be very focused on that. It's just a matter of sequencing. So getting production back on track is -- was paramount, but the framework hasn't really changed since we started, right? So we want to be the company that you can own through the cycle, and that means good returns, steady returns as we go forward. So we will have to make the next decision right now that we're able to invest into a business to keep production flat, then the next opportunity to either grow from their or buy back shares or increase the dividend or ultimately accumulate more cash for that is something that we're going to have to continue to look at as we start thinking about the setup in 2027. But maybe let me turn to Clio to recap that framework and provide a little more of the specifics. Clio Crespy: Zach, the way I'd frame it is higher prices don't really change our framework, but they do shift the mix of where capital goes with a lot of more naturally flowing towards high-return reinvestment in the base business, with us continuing to build that long-term optionality. But importantly, we're doing that within the same disciplined framework that we've held. So we're still running a sub-40% reinvestment rate on the E&P side. The business continues to generate significant free cash flow. And with our leverage that's already low, the balance sheet isn't a constraint. It gives us the flexibility to lean into those opportunities while generating meaningful excess cash. And you asked about the buybacks, and I'll take a step back and saying shareholder returns more broadly, that remains a core part of our story. We've consistently grown the dividend over the past 4 years, and that yields around 2.5%, which we think is competitive both within the sector, but also more broadly. And we'll continue to approach buybacks in a disciplined and opportunistic way. We think that's been very effective. If you look since mid-2021, we've returned via buybacks about $1.2 billion, $1.6 billion in total as Francisco was mentioning. And we executed that at a meaningful discount to the intrinsic value. So we repurchased shares at an average price of about $43.50, and that's roughly 30%, 40% discount to where you've seen trading recently. And we've been able to also keep share count relatively flat even as our production has grown about 50% over that period of time. So you've seen us lean in and be opportunistic and be effective with that tool. But even as we lean into our E&P investment, we're not stepping away from returns, we're simply delivering more. And we're really not making a trade-off here. It's a dynamic allocation. Capital flows to the highest-return opportunity, while supporting our shareholder returns and also maintaining our long-term growth options. Zachary Parham: A follow-up I wanted to ask on the cost side. As you add back some activity, are you seeing anything on the inflation side? I'm sure you're seeing higher diesel prices have some sort of impact. But anything else you would flag from an inflationary standpoint? Clio Crespy: Good question. I'd say at this point on inflation, it remains modest and really manageable for us within the business. So we saw minimal pressure in the first quarter. But you're right, as oil prices have moved much higher, we're starting to see some impact, primarily in oil-linked inputs. But in terms of magnitude, we're estimating that's roughly $6 million to $8 million impact this year or $10 million on an annualized basis, so very manageable. If you look at what's driving that, about 1/3 -- well, actually 3/4 is fuel related, so driven by higher costs across our field operations and logistics. And the balance of that, so 25% to 1/3, is oil-based products where we're seeing moderate supplier increases there. But it's important to note that our team, we've done a significant amount of proactive work on the supply chain side, consolidating vendors, improving procurement, leveraging scale. And that really mitigates a lot of the exposure. So altogether, I'd say the level of inflation is modest so far and it's more than offset by the structural margin improvement we're delivering across the business. Operator: The next question comes from Michael Furrow with Pickering. Michael Furrow: I'd like to ask about risk management. Clearly it was a volatile quarter for pricing. It looks to probably continue in the second quarter. California market dynamics only add to volatility. When you look at the business today, the balance sheet is in a much healthier position than it's been previously. So does any of the market dynamic changes alter the company's hedging strategy moving forward? Francisco Leon: Michael, so as I mentioned before, we want to build a company that the investors feel good about owning through the commodity cycle, the ups and downs of the cycle. So we see our hedging strategy as a great tool to deliver that and to ultimately lock in attractive economics so we can execute regardless of where prices go. I'll turn it to Clio for a little bit more details on the go-forward impact. Clio Crespy: So our hedging and our hedging program, it's really about being able to deploy capital with confidence. So it's about having the confidence in our returns in our capital program and our ability to really deliver through the cycle. It allows us to lock in attractive floor economics and also commit to higher levels of activity participate in the upside. Last quarter, we shared what the business generates at around $65 Brent, and that underpins how we think about both capital allocation and hedging. We did put these hedges in place in a different forward curve environment that was delivered at the time, protecting the base business, the capital program and the dividend and while retaining a lot of upside participation. And if you look at our portfolio, that's how it's structured today. So in '26, roughly 2/3 of our volumes participate to the low to mid-80s Brent, and about 1/3 remains unhedged. So while we do have downside protection, we're not fully capped. Higher prices do translate into stronger margins and free cash flow across a meaningful portion of our portfolio. And if you look beyond '26, that exposure increases. So there's about 40% in '27 and roughly 80% in '28 of our volumes that are unhedged. I'd say stepping back, that visibility is what has allowed us to commit to the activity levels and to the returns we're outlining today. And the objective of that hedging program hasn't changed. It's about protecting the downside while maintaining meaningful exposure to the upside. Michael Furrow: Staying on the topic, in the first quarter, volatility weighed on the post-hedge realized pricing, or at least [ versus ] our numbers, negatively affected our EBITDA expectations. But looking forward, is that same timing dynamic that was a headwind for the first quarter act as a tailwind for 2Q? Clio Crespy: So what you're looking at there in terms of GAAP is we're really settling our hedges on a monthly basis. And if I look at the Street, I think most analysts are doing so on a quarter basis. So an average quarterly price will not reflect what happened, for example, in Q1 where you had January and February in high-60s and then March with the high 90s. So I believe that, that's what's driven most of the delta, if not all of the delta. If you do that average quarterly price versus the month-to-month, that yields, for example, a $30 million to $40 million delta in EBITDA loan for that order. So I do think that that's something that our IR team can work to make sure that we are closely calibrated. Operator: And the last 2 questions today will come from Nate Pendleton with Texas Capital. Nathaniel Pendleton: Congrats on the great update. Francisco, I wanted to go back to the RCPPP potential briefly. Could you provide a bit more detail about what the next steps are for that to be implemented and how that could impact demand for your CTV [ floor ] space and perhaps even your end-state natural gas volumes? And if I may add one more part to that, with the potential program, are you already having conversations with companies trying to get ahead of implementation? Francisco Leon: Nate, so yes, we see RCPPP as being a game changer if it passes. It's a very unique front of the meter opportunity. It's the recalibration of a grid that has been struggling to keep up over reliance on solar, wind and batteries when you really need that firm capacity to come back into play, and a state that focuses on decarbonization and reducing the carbon footprint very few ways to go and nothing really tangible other than carbon capture. So we see this as an incredible opportunity. The policy rule-making is advancing. We saw, as I mentioned earlier, call for procurement, 1.5 gigawatts of firm and clean, which really limits the pool of opportunities that we think -- I said CCS is the most tangible one. But you look at -- you step back and you look at about -- California has about 40 gigawatts of power generated through natural gas-fired generation. I assume that not all of all them will be able to be retrofitted with CCS. So our view is about 17 -- call it, 15 to 20, 17 midpoint, gigawatts, would be good candidates for retrofit, right? So you can start scaling the magnitude of the program. So we will have the ability to participate primarily in the transport and storage of CO2. But we also have the input, which is natural gas and we can grow that and have a dedicated natural gas flow of low-methane emission, very high-caliber or natural gas going in, that ultimately all goes into the calculation around carbon intensity. So we can provide a very scalable, big offering. And then we've seen progress, as a reminder, the CO2 pipeline moratorium was lifted earlier this year. So that allows us to start thinking about that transport in a much more tangible way. And then you come back to our Elk Hills project, we're at the doorstep of getting that permit from the EPA. We look at the project management dashboard, there's no red left in that dashboard, right? We're done, commissioned, we sent the samples into the EPA. They have been checked and confirmed to be adequate. So we're just waiting for that final approval. I think that is the final signal to the market that CCS is here, that we were able to clear all permits and have been able to make it to commerciality, and we see demand follow. We are having conversations. We do see a lot of interest, as the CPUC considers CCS, we see a significant uptick in those conversations on how do we get the CO2 from the point source into reservoirs. So massive front-of-the-meter opportunity, very tailored towards a California solution, a unique business model and one we're extremely well positioned on. Nathaniel Pendleton: Perfect. And then as my follow-up on the regulatory side, it seems you have been able to navigate the regulatory and permit process extremely well with the receipt of permits for the 2026 program and already working on '27. So can you comment on how your discussions with regulators have been to open up the permitting process? And could you share your views on the ongoing governor's rate given the potential impacts to the industry more broadly? Francisco Leon: The governor's rate, okay. Yes. On the first topic, we -- it truly is an incredible team effort from our folks in State Capital in Sacramento to our permitting team in Bakersfield. And there's been incredible progress throughout. Our view towards California is different than other energy companies. We're working to establish partnerships, to provide solutions, to be innovating alongside with the state. And that's giving us an opportunity to work very constructively with regulators and the politicians. And ultimately, our track record really to deliver projects that no one else can really puts us into a place of -- or really good placement on a go-forward basis. So really proud of what the team has been able to do. And it is a core competency. It's something that we do exceptionally well, better than most, and ultimately creates an incredible market opportunity if we continue being really good at it. In terms of the governor's rate, June 2 is the [ jungle ] primary, so the top 2 candidates regardless of the party move on to a general election in November. Ultimately, it's a fascinating dynamic with a lot of candidates that could ultimately end up as governor, so fairly open. Our view is we can work with all candidates. We support some campaigns and candidates that have a little bit more in tune with rational energy policy. We really want to focus the politicians on protecting and creating local jobs. And ultimately, we can partner and solve the affordability crisis in the state. So exciting times to have an election, and we're watching it closely. And looking for leadership that will continue to collaborate and make the state better going forward. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Francisco Leon, for any closing remarks. Francisco Leon: Great. Thank you, everybody, for joining us today. We look forward to seeing many of you on the road at upcoming investor conferences in the coming weeks. So thank you, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and thank you for attending Unifi, Inc.'s Third Quarter Fiscal 2026 Earnings Conference Call. During this call, management will be referencing a web presentation that can be found in the Investor Relations section of unify.com. Please familiarize yourself with page two of that slide deck for cautionary statements and non-GAAP measures. Today's conference is being recorded, and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Our speakers are listed on page three of today's presentation and include Albert P. Carey, Edmund M. Ingle, and Andrew J. Eaker. I will now turn the call over to Albert P. Carey. Please turn to page four of the presentation. Albert P. Carey: Thank you. Good morning, everyone, and thanks for joining our call. We are pleased to report that our yearlong effort to reduce our cost base and improve cash generation is providing results. As a matter of fact, we are a bit ahead of expectations for Q3. Andrew is going to take you through the full story in a few minutes, but here are the three top headlines. The Madison plant closure is complete. Number two, the much improved efficiencies in our current plant. And three, we have optimized our product lines and SKUs so that we do not have products that contribute no profitability to our lineup. These actions set us up for improved profitability, especially as revenue begins to pick up and we are able to see higher levels of capacity utilization. There was one area that did not see a reduction in cost over the last 12 months, and that was the work that we are doing on product innovation. These products will provide revenue growth for the future, so they are very important. We have begun to get traction with our customers on these products, and that will move us into a very important priority right now, which is to begin to commercialize these innovations. The innovations are, first, textile-to-textile recycling, second, products for categories that are outside of apparel and provide higher profitability, and third, products with performance benefits that customers and consumers are looking for. Now Edmund is going to take you through the full story on that in just a minute. The textile industry still has plenty of headwinds, especially as our customers navigate around the tariff complexities and the oil prices. We believe those headwinds will diminish and our profits will improve even in the current environment that we are in right now. I would like to say one last thing and turn it over to Edmund. We are very proud of our team, the executives, the managers, and the front employees as well. Over the last 12 to 15 months, it has been a rough road. But the team has worked through the challenges collaboratively. There really is a special resiliency about the people from Unifi, Inc., and their loyalty has been very evident throughout this entire time frame. So we are grateful for their big efforts over the last several months, and we are looking forward to returning to growth. So now I would like to turn the call over to Edmund and Andrew who will provide you with the full story. Thank you. Edmund M. Ingle: Thanks, Al. And, as Al just noted, this really was a stronger quarter for Unifi, Inc., and it clearly highlights the benefits of the actions we have taken to realign our cost structure, optimize our operations, and improve the conversion margins through portfolio management and, of course, targeted pricing that Al has inferred. We have kept our inventories flat. Spend was managed with discipline, and the margin improvement that you see in the numbers in part reflects this strong operational progress. We are a significantly more resilient business today, and despite geopolitical headwinds, we have managed our balance sheet very effectively. Structural changes to our customer contracts, combined with faster commercial decision-making, have positioned us well to be able to respond more proactively to today's market conditions. I am going to turn the call over to Andrew now to walk you through the financial details for the quarter, and then I will come back shortly to discuss our near-term priorities, our innovation progress, and what lies ahead for Unifi, Inc. Andrew? Andrew J. Eaker: Thank you, Eddie, and good day, everyone. I will start off by discussing our consolidated financial highlights for the quarter on slide four. Consolidated net sales for the quarter were in line with our expectations, down 11% year-over-year but up 7% sequentially. Our markets continue to be impacted by geopolitical events, as well as trade- and tariff-related uncertainties. Consolidated gross profit was 9.1 million dollars, and gross margin was 7% during the period compared to a gross loss of 400 thousand dollars and gross margin of negative 0.3% for the prior-year period. SG&A was 11.2 million dollars during the quarter, a 9% improvement from one year ago, while adjusted EBITDA during the period was 4 million dollars, a nearly 9 million dollar improvement on a year-over-year basis. These stronger results during the quarter, as Eddie and Al mentioned, reflect serious operational improvements, both on the cost and efficiency side, that we have implemented over the last several quarters now translating into real results. Turning now to slide five. In the Americas, net sales were down 16%, as the region continues to face volume headwinds. Despite the lower sales during the quarter, we did generate gross profit of 3.6 million dollars in that segment. This is the first time we have been able to deliver positive gross profit in the Americas for some time now, which further highlights the benefits of footprint consolidation and cost actions we have taken to improve our domestic operational efficiency. Slide six displays our Brazil segment, which saw net sales increase by 1 million dollars and gross profit decline just slightly by 200 thousand dollars. Overall, the performance in Brazil during the period was solid due to a particularly strong March with both volume and pricing contributing. This March for Brazil was our best sales volume month on record because of cost and price dynamics where the scales tipped in our favor. While this dynamic may normalize soon, we expect to see robust results in the fourth quarter for Brazil. On slide seven, our Asia segment net sales and gross profit declined to 22.6 million dollars and 2.7 million dollars respectively, primarily due to lower sales volumes associated with the tariff uncertainties and pricing dynamics in the region. Margins have continued to hold up well in Asia given the asset-light model we employ there, and we did see some momentum in the region improve during March that we are hopeful will continue. Slide eight outlines our improving balance sheet and capital structure. During the third quarter, we generated 7.2 million dollars of free cash flow, bringing year-to-date free cash flow to 20.5 million dollars. The positive free cash flow in the third quarter was a major beat against our expectations, as we were originally anticipating that we would experience some cash burn during this quarter. But thanks to our operational improvements and diligence, we experienced a nice increase in cash flow generation. CapEx for the quarter came in at just 800 thousand dollars, and our CapEx on a year-to-date basis was 3.9 million dollars, a 50% decline compared to the prior-year period as we continue to closely manage all spending. Net debt was reduced to 68 million dollars, a stark improvement from recent levels, and our working capital remains balanced, healthy, and lower due to our leaner operations in the U.S. This significant improvement to our balance sheet and capital structure was directly attributable to the hard work that our whole team has executed across the globe over the last few years. We aligned our cost, consolidated our footprint, and drove improved efficiencies, all of which have helped us establish a more efficient manufacturing base in the U.S. Looking at the fourth quarter, we do anticipate a moderate increase in working capital to accommodate a modest increase in sales and the higher-cost raw materials purchased thus far. We estimate between 4 million and 7 million dollars of working capital impact to the fourth quarter, which will obviously fluctuate in terms of amount and duration based on current geopolitical events. This concludes my financial review, and I will now pass the call back to Eddie. Edmund M. Ingle: Thank you, Adrian. And as you have just heard from Andrew in quite a amount of detail, we are continuing to see the benefits of our operational improvements and the business is demonstrating improved resilience and flexibility in what I would consider an ever-changing business environment. So let us turn to slide nine for an overview of our priorities going forward. As we look ahead, our focus continues to remain on returning Unifi, Inc. to long-term growth and enhanced profitability. In order to achieve this goal, we are keeping our efforts focused on four key areas. First, we will continue to build on the operational improvements that we have implemented and ensure we do not lose any of the enhancements to the business that we have made. At the same time, we will continue to invest in our capabilities and technologies and reinforce and scale our platform of sustainable solutions. Next, we have a culture built around innovation, and as Al mentioned, we have not given up on those efforts. In new product developments, we will continue to invest in resources necessary to advance the customer adoption of our innovative solutions to support future growth. And finally, we are focused on making sure we do everything we can to navigate the current trade and geopolitical environment that is creating some challenges for us. We are also maintaining a sharp focus on positioning the business to drive more consistent top-line growth as some of these global economic headwinds subside. It is good to see some momentum in a number of our innovative initiatives, especially in the U.S., with what we have called Beyond Apparel. You have heard us talk a lot about the potential we are seeing for our Beyond Apparel business, and while Q3 was still a work in progress, we are seeing real commercial success in Q4. Moving on to slide 10. A key highlight for the last quarter was the global launch of Luxel, a new yarn technology that delivers the look and feel of linen while adding performance benefits like moisture management, wrinkle resistance, and odor control. It is made with REPREVE recycled polyester, including a minimum of 30% textile-to-textile recycled content with our REPREVE Take Back. Luxelle is designed to help brands reduce environmental impact while maintaining the look and feel of linen with easy care. The innovation can be used in a wide range of applications from footwear, apparel, and home goods. And Luxelle is just another example of how we at Unifi, Inc. have continued to develop yarn technologies that can replicate the performance of natural fibers and enhance the technical performance beyond what nature can actually provide. And in our military and tactical markets, much of the success we are seeing is centered around our Fortisyn brand. We are seeing success here because we offer enhanced strength nylon yarns, natural white, all with color embedded into the yarns, and in addition, these products can be made with REPREVE nylon as the base polymer. These advancements that we have made in this market, with the performance promise backed up by Unifi, Inc.'s quality systems, alongside a sustainable offering, are finally starting to move into the serious commercialization stage. So alongside the Beyond Apparel growth of military and tactical, carpeting is getting more traction. Packaging has continued to perform well, with volumes growing in both these markets too. We expect to see further growth in the periods ahead. In Asia, we are beginning to see more activity in both REPREVE Take Back, our textile-to-textile fiber platform, and Thermal Loop, our innovative circular insulation product. In a couple of quarters, I expect to be able to discuss openly which additional brands and retailers have been adopting these offerings once they themselves go public. Turning to slide 11. In February, we released fiscal year 2025 sustainability snapshot highlighting progress in scaling our REPREVE recycled materials platform and advancing sustainable manufacturing. We announced a new goal to recycle 65 billion plastic bottles by 2030, and updated our other established goals, such as converting the equivalent of 1.5 billion T-shirts worth of textile waste into REPREVE products. The sustainability snapshot, as we call it, really helps telegraph to the brands and retailers how serious we are about helping them meet their sustainability targets and, of course, how committed we are at Unifi, Inc. to product innovation and building out our already substantial sustainable product portfolio. Turning to slide 12. In April, which is recognized globally as Earth Month, we celebrated our partners through our Champions of Sustainability program, announcing the winners of our ninth annual REPREVE Champions of Sustainability Awards, recognizing brands and mills who are advancing circularity and responsible manufacturing across the textile industry. This year's program introduced new textile waste awards to spotlight partners accelerating circular solutions, reinforcing our commitment to scaling recycled and traceable materials globally. And since the event was held in our main U.S. manufacturing location in Yadkinville, North Carolina, it gave those who attended a view into the production of REPREVE Take Back and the process. Moving to slide 13 for an overview of our outlook and how we anticipate sustaining our financial momentum. For the fourth quarter, we expect to see our Brazil segment benefit financially from the supply chain dynamics that currently exist in the market, and we will be able to leverage the long supply chain to our advantage in the coming months. In the Asia segment, there is an expectation that we will see increased adoption resulting in revenues from our technologies and circular solutions. The Americas segment should improve in terms of volumes and revenues, primarily from pricing actions and our value-added Beyond Apparel portfolio. However, we are still facing some demand challenges with our underlying business, specifically in Central America. To wrap up, we are encouraged by the progress that we have made, which is now being reflected in our financial results. Our business is in a stronger position today than it has been in some time, and we are continuing to remain focused on ensuring that our operational enhancements translate into sustained financial improvements that will help create value for our shareholders. And before I hand the call over to the operator, I would like to acknowledge that the improvements to the business were a team effort, and I want to take the opportunity to thank each of the teams in the regional businesses for their hard work and efforts. With that, let us open the line for questions. Operator? Operator: We will now begin the question-and-answer session. To withdraw your question, press 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your question comes from the line of Anthony Lebiedzinski with Sidoti. Your line is open. Please go ahead. Analyst: Good morning, everyone, and thanks for taking the questions, and yes, certainly nice to see the improvement in the earnings results and also the pretty good cash flow in the quarter as well. So first, just can you talk about pricing versus unit volumes in Q3 and how that might change in the fourth quarter here given the increased input costs and some of the supply chain dynamics? I think Brazil is probably the one where you would probably see the most in terms of pricing actions, but just wondering if you could comment on the quarter that you just reported, plus also give some more details about the pricing and volume dynamics that you may anticipate here in the fourth quarter? Andrew J. Eaker: Sure, Anthony. It is Andrew. A bit of a mixed bag. I will try to go slow on some of that and ask Eddie to help as well. But if we start from a year-over-year perspective, we have the majority of decline in the Americas is volume-based. There is some price and mix in there, but predominantly volume. When we look at Brazil, their year-over-year was predominantly price movement—again, Q3 versus Q3—that was based on a lot of the competitive activity, lower prices coming from imported product. And third, in Asia, year-over-year, we did have a larger pricing impact versus volume impact as well. So now when we look sequentially, Q3 to Q4, like you asked, we do see generally flat volumes in the Americas but certainly some pricing as we have had to make some responsive pricing actions given the movement in petrochemical markets. In Brazil, we will also see meaningful pricing increase, but also a bit of volume. And in Asia, we see a mix of volume and price there, again partly with petrochemical-related inflation and partly with some of the recovery that we mentioned beginning with the month of March in Asia headed into Q4. And I will ask Eddie to add on any more there. Edmund M. Ingle: Yes, he has covered most of it. I just want to add one specific thing around the velocity of the pricing. We are in a situation today where more of our pricing is order-to-order and not index like it had been in the past. So we are able to react more responsibly. We are being careful, of course, to talk to customers and be responsible suppliers. But because of the nature of the raw materials and the speed at which they have increased, we have had to react faster than we normally do. So during the fourth quarter, especially by the time we exit, we expect to be caught up on any raw material increases, unfortunately, that we have to pass on. Analyst: Got it. Thank you both. So just to clarify, you expect the pricing actions to essentially fully offset any of the cost headwinds that you are seeing at the moment, right? Edmund M. Ingle: I think there will be a little bit of lag in the U.S., but primarily most of the cost increases will be passed on as we move through this quarter, and we are seeing that already. Analyst: Got it. Okay. Thanks for clarifying that, Eddie. And then, in terms of the Asia segment, you highlighted that you expect improved adoption of innovative and sustainable platforms. Can you give some additional details in regards to that? And then as far as some of the new products that you have talked about, which one do you think has the most potential to make a difference in terms of the sales contributions? Edmund M. Ingle: Yes. Here in the U.S. on the Beyond Apparel, in Q4, we are expecting to see about a 2 million dollar uplift in the quarter from these Beyond Apparel initiatives, which is primarily from our military and tactical Fortisyn programs, our carpeting business, and also the packaging business that we have. These are all margin-accretive opportunities for us, and we are—especially on the Fortisyn product—we spent a lot of time. We talked a lot about this on the calls. It takes a long time to get traction, primarily because it is just such a technically difficult product to make, and then of course the customers are very sensitive to make sure that if they do make a switch, that they are switching to a product that can sustain itself and give them the advantages that we have described to them. We are at the point now where we are getting adoption, and I am very excited about that. I think the volumes potentially, overall for the whole market, will increase because of what is happening with Iran. But overall, we are certainly very positive about that market and where it can bring us in the next few quarters, but specifically in this quarter. It is not going to be huge, but we have got commercial programs that we did not have just a quarter ago. And then in Asia, it is a mixture of our Thermal Loop—which most of the insulated jackets are made actually in Asia, so we do not expect to see any of that here in the Americas—and we are starting to get traction. This is the season to make insulation for the fall jacket sales. We have good programs there. We have good programs in our REPREVE Take Back, which is our textile-to-textile, and also our technologies such as TruTemp 365 and SolveJek; they are also starting to create traction. So our revenues in Q4 will be up in Asia, primarily driven by our technologies. And in Brazil, they actually have increased the ratio of value-added sales, which is in part why the revenues will go up. Analyst: Thanks so much for all that color. This is more of a longer-term, bigger-picture kind of question. As we look at the Americas, it is your very asset-heavy segment where you have taken out a lot of fixed costs. So even with lower revenue, you were able to generate much better gross profit here in Q3. As the segment recovers at some point, how should investors think about gross margin potential here in this segment with better revenue that you may see at some point? Andrew J. Eaker: Sure, Anthony. I will start that and ask Eddie to add any. We are certainly proud of what was achieved in this third quarter, again beating expectations on what the team was able to accomplish in terms of getting cash back, cost out, and improving efficiencies in the facilities that remain. From a long-term perspective, we certainly want to get back to some of those better levels that were in the around 10 years ago. Those margin levels were certainly healthy in the Americas, and with a lot of what Eddie has outlined in terms of new programs, new customer penetration, and continued efficiencies and cost management in the Americas, we do see that as a relevant goal and an achievable goal when those catalysts do hit. Edmund M. Ingle: Yes. I just want to add, we are very, very careful about our spend—more than we ever have been before—and it is across every part of the organization. It is a new mindset. All we need is a little bit of volume to really get those margins that Andrew was talking about. We still expect it to come back, especially in Central America. We are getting the bright signals, but we are still just waiting patiently. While we are waiting, we still believe we can manage our spend relative to the revenues that we have to continue to give us positive profit in the Americas. Albert P. Carey: Anthony, this is Al. I would add one thing to the Central America business. In many conversations with customers, all indications are they are going to use Central America for near-shoring because it is a good option for them to not be so dependent on China, and it is also a good option for close-in supply chain. We are just waiting. I think what is happening in the sourcing organizations of these companies is they are trying to determine, with the tariffs changing so much, is it a better deal to buy from the U.S.? Is it better to ship from China to Vietnam over to the Americas? It is going to happen, but it has just been very confusing. We are waiting for it to happen. All indications are it will happen. Analyst: Understood. Thanks for all that color. And somewhat of a similar question in regards to Brazil. Obviously, the near-term picture looks bright there, but just looking back over the last few years, there has been quite a lot of volatility in the Brazil segment in terms of sales and gross margins. Maybe if you guys could talk about what is different now, other than the supply chain dynamics, and how should we think about the longer-term opportunities and challenges beyond the current quarter? Edmund M. Ingle: Thanks for the question, Anthony. The market is still continuing to grow because of the population and because of the general economy down there. We are the only large player down in that market. We have talked about the dumping that has been going on from Asia into Brazil. With this higher-cost dynamic, we are advantaged a little bit. So we do expect our margins to become a little bit more stabilized. Like we have said on this call, Q4 should be pretty strong, and going forward, we should get back to more normal EBITDA and more normal gross profits in Brazil on that business segment. The dumping has lessened simply because the Asians appear to be a little bit more constrained from a petrochemical perspective, and they are passing those costs on to the market. Analyst: Got it. That is very helpful context. Thank you very much, and best of luck. Andrew J. Eaker: Great. Thank you, Anthony. Operator: There are no further questions at this time, and this concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good afternoon, and welcome to Tarsus Pharmaceuticals, Inc. First Quarter 2026 Financial Results Conference Call. As a reminder, this call is being recorded and all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. At this time, I would like to turn the call over to David Nakasone, head of misalation, to lead the call. David, you may begin. David Nakasone: Thank you. Before we begin, I encourage everyone to visit the Investors section of the Tarsus Pharmaceuticals, Inc. website to view the earnings release and related materials we will be discussing today. Joining me on the call this afternoon are Bobak R. Azamian, our Chief Executive and Chairman, Aziz Mottiwala, our Chief Commercial Officer, and Jeffrey S. Farrow, our Chief Financial Officer and Chief Strategy Officer. I would like to draw your attention to slide three, which contains our forward-looking statements. During this call, we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors contained in our SEC filings for additional detail. With that, I will turn the call over to Bobak R. Azamian. Bobak R. Azamian: Good afternoon, and thank you for joining us. We are off to a strong start in 2026 with a quarter that reflects the continued momentum of XTENVI’s launch and the strength of our key growth drivers. We have always believed XTENVI would be revolutionary and our strong first quarter results reflect that. Every key metric we track, including the number of prescribers, depth of prescribing, awareness, and evidence generation, continues to grow substantially quarter over quarter. These are the same drivers we have committed to delivering on, and we are on track to achieve our full-year guidance, reach blockbuster status over the next couple of years, and realize $2 billion in peak sales potential. In the first quarter of 2026, XTENVI delivered more than $145 million in net product sales, an increase of more than 85% year over year, reflecting consistent patient outcomes and expanding eye care physician, or ECP, utilization across their practices. Having spent time in the field and at several medical conferences over the past few months, I can tell you what we are hearing directly from ECPs: they describe XTENVI as one of the most impactful medicines they have ever used, with consistent outcomes, clear utility across their practices, and broad access that is nearly universal. It works, it is easy to use, and access is outstanding. When those elements come together, behavior changes. ECPs are no longer looking only for the most symptomatic cases; they are beginning to screen every patient for collarette. That is what ultimately drives a larger addressable market over time—more patients identified, and more patients treated. What we are building at Tarsus Pharmaceuticals, Inc., however, is not a one-product story. We have developed a disciplined, repeatable playbook for identifying diseases with clear root causes and significant unmet need, and transforming how they are treated. That playbook is driving the future of our pipeline. In the first quarter of 2026, we initiated CALLIOPE, an approximately 700-participant Phase II trial of TPO5 for the potential prevention of Lyme disease. Enrollment is progressing well, with the first wave of participants already dosed, and we expect top-line data during 2027, which would support readiness for a Phase III trial. Lyme disease represents one of the largest and fastest-growing unmet needs in infectious disease prevention, affecting millions of Americans each year, yet there are no FDA-approved prophylactic options available today. It seems like I cannot go a week without reading something in the news about the impact of the disease and the increasing burden on the U.S. healthcare system. TPO5 is the first-of-its-kind investigational oral on-demand prophylactic designed to target and kill ticks before they transmit disease, and we believe it has the potential to fundamentally shift the current paradigm from management to disease prevention. We have seen tremendous interest in this program from patients, potential partners, federal agencies, and the broader medical community, reflecting both the scale of the opportunity and the need for a new approach. Another program I hear increasing excitement about is TPO4, particularly with the initiation of our Phase II CORE study in ocular rosacea. Ocular rosacea is another significant and underdiagnosed disease, affecting an estimated 15 to 18 million Americans, with no FDA-approved treatments today. Similar to Demodex blepharitis, or DB, it is a mite-driven disease that impacts the area around the eye, including the eyelids and surrounding skin, and can meaningfully affect how patients look, feel, and see. We hear it all the time from ECPs: a treatment like TPO4 could be game-changing, and they cannot wait to offer their patients an option like this. TPO4 is a novel sterile investigational ophthalmic gel designed to treat Demodex mites, the root cause of disease, and we believe it has the potential to become another first and only FDA-approved medicine for an underdiagnosed and underappreciated eye disease. The CORE study is progressing as planned, and we continue to expect top-line data in 2027. Turning back to XTENVI, the drivers are clear: broader physician adoption, a DTC campaign bringing more patients through the door, and an expanding evidence base—all pointing to a larger treatable population over time. XTENVI is only one piece of a larger story. We are deliberately building Tarsus Pharmaceuticals, Inc. to create and lead new categories in eye care and beyond, with the pipeline and playbook to do it repeatedly. And with that, I will pass it to Aziz. Aziz Mottiwala: Thanks, Bobak. As just highlighted, in Q1 we delivered more than $145 million in XTENVI net product sales, an increase of more than 85% year over year, and we meaningfully outperformed the market. Additionally, every key metric we track has grown, and as we have moved into the second quarter, prescriptions continue to grow, with some of the highest weekly numbers since launch. Our outstanding performance continues to be driven by three key factors: increasing depth of prescribing, expansion of the patient funnel, and ongoing evidence generation. In terms of depth of prescribing, we continue to see growth not just in the number of ECPs prescribing XTENVI, but in how often they prescribe. In the first quarter, nearly half of our 15 thousand target ECPs prescribed XTENVI at least once a week, up approximately 10% from Q4 2025. As Bobak noted, ECPs continue to see incredible outcomes with XTENVI and are looking for more patients they can serve across their practices. At the American Society of Cataract and Refractive Surgery, or ASCRS, conference, we met with countless physicians and heard in several podium discussions that they are broadly incorporating DB screening and treatment as part of their routine preoperative procedures, where every cataract patient is assessed prior to surgery. To further accelerate the growth we are seeing within our existing base of ECPs, we are preparing to deploy our key account leaders, or KALs. This is a highly targeted investment focused on our largest and highest-potential practices where ECPs are actively prescribing and there remains significant opportunity to expand utilization. This role attracted exceptional talent from across the industry, and we expect this team to be a meaningful driver of incremental growth starting in 2026. Additionally, retreatment rates are increasing to the mid-teens range as ECPs formalize long-term DB management protocols. As a reminder, we expect steady-state retreatment rates of approximately 20%. Turning to direct to consumer, or DTC, our DTC campaign is delivering strong and improving return on investment, or ROI, that is exceeding our expectations and is at the higher end of benchmarks. This is also reinforced by what we consistently hear from ECPs: more and more patients are coming into the office proactively asking about DB and XTENVI. Further, we continue to see millions of visitors to the xtenvi.com website, and high-value engagement—including quiz completion and use of the Find a Doctor tool—is up nearly 40% quarter over quarter, continuing to exceed even our own lofty expectations. With over a year of experience, we now have a much clearer understanding of what specifically maximizes DTC performance, and we are applying those learnings to continuously improve how and where we deploy our investment, focusing on the channels and messages that generate the highest-value engagement. In short, we are amplifying what is already working. Additionally, we have several exciting new things planned in the coming weeks, including a creative refresh and expanded disease state messaging designed to help even more patients recognize their symptoms, normalize DB, and ultimately drive more patients into the office. We are also continuing to make investments in evidence generation that reinforce the broad utility of XTENVI and expand how ECPs think about DB. One key example is the data we presented at ASCRS on the association between DB with chalazion and hordeolum—conditions that are estimated to impact several million patients in the U.S. These conditions can cause patients significant discomfort, impact their vision, and lead to invasive procedures in ECP offices. This data showed that a large portion of patients assessed also had underlying DB—more than 70% overall and even higher in recurrent cases—and we are hearing directly from doctors that they are excited about this data and are proactively screening and treating these patients. The takeaway is simple: our ongoing evidence generation is doing exactly what we intended—expanding our market opportunity by giving ECPs more compelling reasons to look for and treat DB across a broader and larger set of patients. As we look ahead, there is great momentum across the key drivers of the business, and we expect to build on that momentum with the deployment of our KAL team, the scaling ROI of our DTC campaign, new patient-focused initiatives, and additional evidence that further supports the broad utility of XTENVI. And as Jeffrey will discuss, these drivers give us confidence in achieving full-year guidance while continuing to expand the long-term opportunity for XTENVI. Over to you, Jeffrey. Jeffrey S. Farrow: Thanks, Aziz. Building on what Bobak and Aziz outlined, we delivered net product sales of $145.4 million, reflecting strong year-over-year growth from growing demand for XTENVI and exceptional execution by our team. As expected and highlighted on our year-end earnings call, the first quarter included typical seasonal dynamics such as deductible resets and higher out-of-pocket costs, as well as some impact from severe winter weather, particularly in the Northeast part of the country. Despite these factors, our underlying demand remains significantly stronger than our peers. According to third-party data, peers experienced double-digit prescription declines versus our low single digits, and as we entered the second quarter, XTENVI prescription trends rebounded to all-time highs. Turning to other revenue items, license fees and collaboration revenues were $16.7 million in the quarter. This includes a one-time $15 million regulatory milestone payable by our partner, Grand Pharma, following the approval of TPO3 for DB in Greater China, as well as approximately $1.7 million related to the required China withholding tax. This approval represents an important step toward helping the more than 40 million people in the region affected by DB and underscores our commitment to serving patients. Over time, we do expect to generate additional royalties from this partnership, although they are not expected to be meaningful in 2026 or 2027 as Grand Pharma seeks to secure payer coverage. We look forward to supporting Grand Pharma as they prepare for commercial launch later this year. For additional details on our Q1 financial performance, please refer to the earnings release issued earlier today. Looking ahead, we reiterate our full-year 2026 guidance of net product sales of $670 million to $700 million, SG&A expenses of $545 million to $565 million including approximately $40 million in stock-based compensation, R&D expenses of $115 million to $135 million including stock-based compensation of approximately $20 million, and gross margins of approximately 93%. Our guidance reflects continued strength in the underlying fundamentals of the business, including increased depth of prescribing, expansion of the patient funnel, continued execution by our exceptional sales force including the deployment of our new key account leaders, and ongoing evidence generation expanding the addressable patient population. From a quarterly perspective, growth in 2026 is expected to follow patterns consistent with our prior experience and broader sector dynamics—that is, strong growth in the second quarter, more modest growth in the third quarter, and robust growth in the fourth quarter. Finally, turning to the pipeline, as Bobak mentioned, we initiated our Phase II CALLIOPE trial evaluating TPO5 for the potential prevention of Lyme disease during the first quarter. Lyme disease is the most common vector-borne disease in the United States, with more than 35 million people considered to be at high or moderate risk of contracting the disease and hundreds of thousands of new cases diagnosed annually, yet there are still no FDA-approved prophylactic options. What makes TPO5 compelling is not just the size of the market, but the strength of the science and the differentiated nature of our approach. This oral, on-demand investigational therapeutic is designed to directly target the root cause of Lyme disease by potentially killing ticks before disease transmission occurs—an approach that is simple, fast, and practical for patients. In fact, it is already approved for Lyme disease prevention in dogs and cats, and they have benefited from prophylactic Lyme therapies just like TPO5. From a financial and operational standpoint, we are advancing this program with a clear development path and defined milestones, including expected top-line data in 2027. Similarly, our ocular rosacea program continues to progress as planned, with top-line data also anticipated in the first half of next year. Outside of the U.S., we continue to advance our global expansion efforts for TPO3 and are on track to complete the key technical work required to support potential future filings. At the same time, we are taking a thoughtful approach to timing and evaluating next steps in the context of the broader geopolitical, regulatory, and macro access environment. Before I hand the call off to Bobak, I want to restate that we firmly believe that we are well-positioned for the remainder of 2026 with strong and growing underlying demand for XTENVI and a robust and advancing pipeline with top-line results in 2027. With that, I will turn it back to Bobak for closing remarks. Bobak R. Azamian: Thanks, Jeff. Tarsus Pharmaceuticals, Inc. continues to execute on one of the most successful launches in eye care, and we have delivered so much that the addressable market continues to expand beyond our initial estimates. More patients are being identified, more patients are being treated, and more physicians are continuing to embed XTENVI into routine care. This is a direct result of how we deepened utilization in ECP practices, meaningfully grew awareness about DB, and generated compelling clinical evidence showing just how important it is to treat the condition. We are now applying that same category-creating model across our pipeline, including in Lyme disease prevention and ocular rosacea, as we work to replicate the success of XTENVI and establish Tarsus Pharmaceuticals, Inc. as a leader in creating new standards of care. Operator, please open the line for questions. Operator: Thank you. To ask a question at this time, you will need to press 1-1 on your touch-tone telephone and wait for your name to be announced. To withdraw your question, simply press 1-1 again. Please stand by while we compile the Q&A roster. Operator: Our first question comes from the line of Yuchen Ding with Jefferies. Your line is now open. Yuchen Ding: Hi, thanks for taking our questions. We have two. On the second quarter, I was surprised that you did not give bottle guidance, but when I look at consensus, which is $168 million, it should imply around 145 thousand to 150 thousand dispensed bottles. That is about 13% or 14% quarter-over-quarter growth and similar to the Q2 bounce that we saw in 2025. How do you feel about those numbers, and does our math make sense? And then second, Glaukos has a Phase II readout later this year for DB. They are delivering physostigmine, which is approved for glaucoma. You have mentioned before that you have looked at all these different assets, so I am curious what you think about the potential tolerability issues there since the drug actually constricts pupils. From your own due diligence, are vision changes or blurry vision a liability with that asset? Thanks so much. Jeffrey S. Farrow: Hi, Dennis—this is Jeff, and I will take the first part of the question and then turn it over to Bobak for the second part. As we have moved into full-year guidance, we have stepped away from the quarterly updates in terms of bottles dispensed and gross-to-net, absent some material change where we do not believe we are going to be able to meet that guidance. Our expectation is to continue to provide updates on the guidance that we provided earlier. We still believe in the full-year guidance, both on the revenue side and the SG&A side. To your question on growth between Q1 and Q2, just a reminder that 2025 was the second full year of launch and we were starting from a smaller base at that point in terms of total bottles, so we should not expect 30% growth similar to what we saw between Q1 and Q2 last year. Take into account the fact that we are starting on a bigger base now and make your adjustments accordingly. Bobak R. Azamian: Thank you, Dennis. With respect to how we see the landscape, we are really focused on XTENVI. We have been creating a really important market category for patients, and we see that growing. I think the evidence we are generating around XTENVI is robust, with more to come, so we believe that XTENVI’s profile is going to be the standard of care for the foreseeable future. We certainly track everything we see in terms of pipeline, and we are not surprised that people are also looking at this market, but in terms of XTENVI’s effectiveness, its safety, and the product profile, it is just such a great standard of care. I hear time and again, like I did in the field this quarter, how this is the best medicine a lot of doctors have seen, so we are really focused on building on that success and creating a lasting standard of care. Operator: Thank you. Our next question comes from the line of an Analyst with Mizuho. Your line is now open. Analyst: Hi, this is Emma for Greg. Thanks for taking our questions and congrats on the quarter. Maybe two from us. First, how much of the current growth is coming from the extension use cases under the Demodex blepharitis umbrella? Specifically, we are interested in the cataract surgery patient population. And then second, given the reaffirmed guidance of $670 million to $700 million, can you walk us through some of the assumptions and drivers required to achieve that guidance, including prescription growth, gross-to-net normalization, and overall run rate through the balance of the year? Aziz Mottiwala: When we think about the market and how the product is performing, one of the great things we highlighted in the prepared comments and what we are hearing clearly from physicians is the continued expansion of use throughout the patient population. We started early on with some of the most obvious cases—dry eye, cataract surgery, contact lens intolerance. We are definitely seeing a lot of utilization across all of those segments, and we have really shifted our strategy now to not only go after those segments but to go more broadly. There are 25 million Americans out there and they are coming into the funnel. We think about not just cataract and dry eye; we think about, as we mentioned, patients that have hordeolum or chalazia, for example, and even other cases. The way to think about this is physicians are using this across every segment we have highlighted, and they continue to expand to new segments—that is where our evidence generation strategy will fuel growth. In terms of some key drivers, I would highlight that coming off of this quarter, we saw progression in every metric we track commercially—depth, and all of our consumer metrics—which sets us up nicely for the rest of the year. We have our key account leaders deploying; they will start to make an impact in the third quarter and in the back half of the year, and we have some exciting things on our direct-to-consumer initiatives as well. A lot more drivers to come, and I will let Jeff speak to the mechanics in terms of the guidance. Bobak R. Azamian: Aziz, one other thing I would add—based on what I hear, these drivers are really playing out. I am hearing doctors that are treating regardless of symptoms, treating with any comorbidity, and in the setting of cataract surgery. I am excited about the evidence that we generated and evidence to come. I think chalazion is one of those examples where there are lots of reasons to treat, and that is really leading to the expansion of the patient population and the addressable market here. Jeff, I will pass to you. Jeffrey S. Farrow: Thanks, Emma, for your question. In addition to the broad strokes Aziz mentioned—growing depth of prescribing, DTC impact, and evidence generation that Bobak highlighted—and the impact of the KAL team, those will impact growth over the quarters, particularly in the back half of the year. We continue to see the seasonality that we saw last year and the year prior. Much like last year, Q1 was tempered, but we saw some nice robust growth in the second quarter as the deductibles got blown through by individual patients. We also see growth in the summertime, but much more tempered than between Q1 and Q2, and then Q4 tends to be one of our highest growth quarters as patients come into the end of the year, have run through their deductibles, and are trying to use up their FSA. We anticipate that type of seasonal impact as well. Operator: Thank you. Our next question comes from the line of an Analyst with LifeSci Capital. Your line is now open. Analyst: Congrats on the quarter. Just a couple of questions. I am getting some questions on ocular rosacea. You mentioned it is the root cause of the disease. I think with blepharitis, in the trials you were plucking eyelashes and you can legitimately see the mites, and it is a pathognomonic sign when you see the collarettes now. How comfortable do we feel that ocular rosacea is—Demodex mites are causing the ocular rosacea? Bobak R. Azamian: Thank you, Frank, and I appreciate that question. You have tracked our story for a long time, and you have seen the playbook that we applied in the development of XTENVI and are applying in OR. To your point, it starts with a disease that has a clear root cause and clearly identifiable patients, and we see that in OR. To your question, we see that the majority of patients with OR have Demodex. It is harder to measure—you do not have the benefit of a collarette that you can pull from around the eye—but you do have clear signs. Those are signs of inflammation, redness, erythema, and telangiectasia. We know that when patients have those signs, they are very likely to have Demodex as an underlying root cause. That is the basis of our approach here. I will also add we are hearing a lot of great interest in OR as well. When I am out in clinics or talking to doctors about XTENVI, they raise OR. They say, “I am looking at these patients; I have something great for the added margin, but I do not have anything for the inflammation around their eyes.” They are seeing how important this disease is now that they are taking a close look around the eyes. We see an opportunity to create a category with a very similar playbook. Analyst: Great. And then just on the endpoint side, to compare it to what you have done in the past, the collarette cure rate was very interesting for blepharitis. In this case, can you remind us what the endpoints are and the comfort on the regulatory side of those endpoints? Bobak R. Azamian: Absolutely. We are enrolling patients by OR, and we are looking at OR endpoints—those same telangiectasias and erythema. We have aligned with the FDA that we need to look at those endpoints and we need to see an improvement in one of them. That is how we are structuring the trial, and that is the bar we expect for success in the Phase II trial that we are conducting. Analyst: If I could sneak in a last one. In terms of the second quarter, Jeff, thanks for breaking out first-quarter seasonality and the cadence. In the second quarter, can you give any granularity as to what is to be expected in the months of the second quarter? Jeffrey S. Farrow: In terms of revenue, Frank? Analyst: Yes, or scripts. Sometimes there are weeks that are harder, or there are summer months with holidays and conference time. Any granularity on what goes on in the second quarter that we should pay close attention to? Jeffrey S. Farrow: Part of that was the impact of the spring break timeframe, which we have already passed through in large part in April, so that is behind us. There are some conferences that could pull some doctors out of the office, but we do not anticipate that to be much greater than what we have seen historically. You can think about this as on a growth trajectory upwards for the rest of the quarter. Analyst: Great. And do you break out how your patients are broken down between age groups? Is it the older crowd or the younger crowd you are treating? Jeffrey S. Farrow: We see utilization across a wide array of patients. Cataract patients are typically an aging population, so we see a lot of utilization there. But patients with contact lenses or dry eye span the entire patient population. While there is a higher propensity in elderly patients—you are right about that—we see more and more younger patients, professionals working and looking at the screen all day, noticing their eyes are bothering them. They see the ad, they are motivated to talk to their doctor. We are seeing utilization across the board—cataract is obviously an elderly population, and elsewhere it is a diverse population of patients getting treated. Operator: Thank you. Our next question comes from the line of Jenna Davidner with Barclays. Your line is now open. Jenna Davidner: Hi, thank you for taking my question. I had one on Lyme disease. As Bobak mentioned, there is a lot of elevated concern right now around ticks, so I was curious if you could remind us what your strategic priorities for this program are and whether or not this might make sense to partner out. Given the elevated concern and that there is no FDA-approved prophylactic treatment, do you think there is any pathway toward an accelerated approval timeline? Thank you. Bobak R. Azamian: Thank you so much, Jenna. Thanks for highlighting the Lyme program. We hear a lot of interest in this program. There is not really a week that goes by that I do not see something in the press or media about Lyme disease, and tick season has now started. We are very excited about the program. We have advanced it into this Phase II trial that is groundbreaking in many ways—700 patients across a broad array of participants and geographies. We are using a very novel investigational medicine, TPO5, which is an oral on-demand option—patients can take it where they sit and on demand—and that is a very unique potential medicine. In this trial, we expect to get good data on safety and dosing and be Phase III ready, as I mentioned. That will allow us to assess where this fits. Our base case is this is better in someone else’s hands as it goes to Phase III, but delivering a robust Phase II data set with FDA clarity on the path forward will be important. In terms of the FDA’s guidance, they have been very collaborative. There have been other vaccines developed in this space, so we are largely following that guidance. The Phase III is TBD based on our Phase II, but our base case is that we would have to conduct a large vaccine-like Phase III, and that is something we would have clarity around as we get ready for that and talk to potential partners. Operator: Our next question comes from the line of Jason Matthew Gerberry with Bank of America. Your line is now open. Analyst: Hi, this is Melanie on for Jason. Thanks for taking our question. You mentioned that with the addition of the key account leaders, most of that impact is likely to be seen in the back half of the year. How should we think about that incremental impact on top of the seasonality you flagged, with a stronger second half? Thank you. Jeffrey S. Farrow: Melanie, adding these key account leaders is going to be a great catalyst for us in a lot of ways. We have shown when we added people, we can get a response right away—we did this when we expanded our sales force prior, and we are using a very similar approach. The key account leader is a unique position targeted toward the increasing depth of prescribing we are seeing. Two things I will tell you: no one in our called-on audience, no physicians we are talking to, have capped out yet—even our top doctors have room to grow—and we are seeing a broader opportunity with doctors being able to prescribe more in general. These key account leaders are some of the most experienced and sophisticated sales individuals, and again, this is against a very high bar because we have a great sales team. They will be targeted against the highest-opportunity practices that are having good success but could be doing more. We are finalizing training, and they will be out there in the third quarter. I think you are going to start to see that. It is about 17 to 20 people; this is not a massive expansion of the sales force, but this will catalyze even more depth of prescribing and is a key element to drive to the targets we have this year. I would expect you to see that right away, and you will see that bear through the seasonality, but it does not alleviate the impact of seasonality—that is a patient-flow issue, not so much an execution issue. Think of this as depth of prescribing, change of behavior over time, and allowing us to continue a great growth trajectory. You will still see seasonality in the quarters, as mentioned. Operator: And our next question comes from the line of an Analyst with Oppenheimer. Your line is now open. Analyst: Hi, thanks for taking our questions. A couple from us. First, can you give any additional color on what percentage of prescriptions dispensed in the quarter represent retreatment patients versus new starts? Second, thinking about the $2 billion peak sales number, how much of that is predicated on retreatment becoming recurring annual behavior versus purely new patient identification? Aziz Mottiwala: Retreatment is something we get a lot of questions on and something we are tracking closely. It is also something we have seen progress nicely over the last several quarters. As a reminder, we have said we would expect retreatment to be at steady state around 20%, meaning at any given week of prescriptions, about 20% of the composition would be retreatments. What we are seeing so far is retreatment averaging in the mid-to-high teens, and that is up quarter over quarter—one of those key metrics—so we are seeing that steadily progress. We would expect that to even out at around 20%. To your question on long-term potential, at steady state you can assume about 20%, so in a peak-year revenue, approximately 20% would be due to retreatment. Operator: Thank you. Our next question comes from the line of Lachlan Hanbury-Brown with William Blair. Your line is now open. Lachlan Hanbury-Brown: Hey, thanks for the question. First for Jeff: you had stronger-than-expected gross-to-net in the first quarter. Can you elaborate on what drove that? Is that the mix shift, changes in Medicare, or some one-off items? How should we think about that flowing through? We typically have a cadence of gross-to-net stepping down throughout the year—should we still expect that, or is it going to be relatively flat from here? Jeffrey S. Farrow: Lachlan, good to hear you. We are not providing gross-to-nets on a quarterly basis now that we have moved to full-year revenue guidance. I would say we did see the typical seasonality in the first quarter in terms of copays resetting and driving some additional support. That said, we are very comfortable that we will be exiting Q4 in the 43% to 45% range. I would guide you to expect it to be somewhere within that range for the year. Lachlan Hanbury-Brown: Great, thanks. And maybe one for Aziz. The continued strong growth in web visits and especially the high-value activities on the website seems encouraging. Has the conversion rate—from website visits to e-scripts—to the extent you can track it, maintained constant so it tracks in line with the increase in visits? Aziz Mottiwala: On DTC, this is an area that is really compelling and one we are excited about. You highlighted the increased high-value activities. We are pleased because the ROI overall continues to improve and is already ahead of benchmarks and our expectations. We do not get into specific conversion metrics, but if the ROI is improving, it implies more patients are getting on therapy. Q1 is a patient-flow thing—there were lost days due to weather—so I would not think about Q1 versus those engagement metrics as the comparator. Patients are ready to go, and we are seeing the impact even early in Q2 with prescriptions near all-time high levels. I think you will continue to see that stack over time. The great thing about DTC is once you get to a great ROI—and I have seen this in my career—you can start to see a stacking effect where patients are primed and ready to go. This also validates the strategy of continuing to drive depth of prescribing. The more doctors looking for more patients, the better our conversion is going to be. This is the one-two punch we are working on, and you are seeing positive trajectory on both fronts. Operator: Thank you. Our next question comes from the line of Francis Edward Hickman with Guggenheim. Your line is now open. Francis Edward Hickman: Thanks for taking the question. Congrats on the progress. Another one on the gross-to-net. As this retreatment cohort expands toward that 20% that you have guided for, does the gross-to-net profile change between a refill prescription and a new start? Do you get better net price realization if a patient is coming back and does not need to go through the whole copay assistance program? Curious how that dynamic may shift beyond the typical seasonal gross-to-net changes you have already talked about. Jeffrey S. Farrow: Great question, Eddie. It is not likely to change on a refill patient. They still have to go through the prior authorization process as well as potentially provide some copay for that product as well, so it is not likely to change much. Francis Edward Hickman: Got it. And did you talk specifically about which federal agencies have interest in TPO5 and what that means for acceleration of the program? Jeffrey S. Farrow: Sure, Eddie. We have a strong government affairs team that has been engaged. As you and Jenna highlighted, there is a lot of interest here. There is a Lyme-focused group looking at opportunities to speed up approvals, particularly in the Phase III realm, and stepping away from the disease-prevention approach that vaccines typically do. They are invested in looking at diagnostics and other areas that can speed up the development pathway. And then RFK, who is part of the HHS program, has made this a high priority. As has McCarray. The FDA has taken an aggressive approach here and is looking to speed therapeutics to market as quickly as we can. Operator: Thank you. There are no further questions in the queue at this time. Ladies and gentlemen, this concludes today’s conference call. Thank you for participating, and you may now disconnect.