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Operator: Greetings, and welcome to the INmune Bio's 2026 First Quarter Earnings Call. As a reminder, this conference is being recorded. A transcript will follow within 24 hours of this conference call. At this time, it is my pleasure to introduce Mr. Daniel Carlson, Head of Investor Relations of INmune Bio. Daniel Carlson: Thank you, operator, and good afternoon, everyone. We thank you for joining us for the call for INmune Bio's 2026 First Quarter Financial Results. Presenting on today's call are David Moss, CEO and Co-Founder of INmune Bio; Dr. Mark Lowdell, Chief Scientific Officer and Co-Founder of INmune Bio; and Cory Ellspermann, INmune Bio's CFO. Before we begin, I remind everyone that except for statements of historical fact, the statements made by management and responses to questions on this conference call are forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that can cause actual results to differ materially from those such as forward-looking statements. Please see the forward-looking statements disclaimer on the company's earnings press release as well as risk factors in the company's SEC filings, including our most recent quarterly filings with the SEC. There is no assurance of any specific outcome. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made as the facts and circumstances underlying these forward-looking statements may change. Except as required by law, INmune Bio disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances. Now my pleasure to turn the call over to INmune Bio's CEO, David Moss. David Moss: Thank you, Daniel, and good afternoon, everyone. For our first quarter 2026 earnings call, today, I'll review key takeaways and provide an update on our platform programs. Following my review of recent developments at INmune Bio, I will pass the microphone to Dr. Lowdell, INmune Bio's CSO and inventor of CORDStrom, who will provide an update on our CORDStrom MSC platform and particularly our RDEB program. Next, Cory Ellspermann will provide our financial results, after which I'll conclude our prepared remarks. We entered 2026 with clear priorities and strong momentum across our platforms. Most importantly, our CORDStrom platform remains on track, and we are now approaching a key milestone with our regulatory filings. Based on the progress of our analyses, manufacturing readiness and regulatory preparation, we expect to file for approval beginning in the near term, and we remain confident in the time line that we previously outlined. CORDStrom represents a potential first systemic therapy for RDEB, and we believe the data continue to support both its clinical benefits and its broader platform potential. Execution against this filing is our top priority. Turning to XPro. While CJ is not speaking today, I want to emphasize that we continue to make meaningful progress. We are advancing additional imaging analysis from the MINDFuL study, including MRI data focused on myelin preservation and structural integrity. These data sets are important as they further characterize XPro's potential as a disease-modifying therapy. At the same time, we're exploring potential rare disease trials for XPro and potential partners as we define the path forward, including regulatory alignment late-stage development strategies. Naturally, we'll update the markets as these milestones develop. Overall, we believe we're well positioned across both platforms as we move through a catalyst-rich period for the company and a marked change potentially for the company as we get closer to commercialization. With that, I'll turn the call over to Mark Lowdell to provide more details on CORDStrom. Mark? Mark Lowdell: Thank you, David, and thank you to everyone that's joined the call. As David said, since our last earnings call, we've moved forward significantly in bringing CORDStrom to market, and it is our central aim. First, we submitted the pediatric investigation plan known as a PIP to the U.K. medicines regulator in February, and we were approved for rapid assessment and receiving their response on the 9th of April. No substantial issues were raised, and we anticipate submitting our final response in the next few days. The approval of the PIP is an essential step to complete prior to submission of the marketing authorization application in the U.K. and then to the EMA for Europe. We've started the first of the 3 process validation manufacturing runs on time and the remaining 2 are scheduled to meet our MAA submission deadline. Most significantly, we've concluded negotiations with the Anthony Nolan U.K. Cord Blood Bank this month to ensure secure supply of umbilical cords and allow testing by U.S. laboratories to meet the requirements laid down by the FDA in our Type B meeting last year. This agreement was signed yesterday and is the final step in getting the UCMSC isolation part of manufacturing process validated, ready for commercial manufacture. Facilitating our ability to manufacture consistent batches of CORDStrom, we're pleased to announce that we recently signed an amended material transfer agreement with Anthony Nolan. This expanded strategic collaboration secures the long-term reliable supply of these high-quality umbilical cord tissues from their world-class cord blood bank to further our CORDStrom platform. Having a consistent supply is essential for us, not only for regulatory authorities, but also to enhance our ability to take the CORDStrom platform forward into other disease indications. The marketing authorization application submission requires completion of a very significant body of documents in 5 sections. These are now well underway. And as part of the product definition section, we've had to determine the formal names for CORDStrom as applied to RDEB to show it's different to other formulations targeting other diseases in the future. The active ingredient was named by the World Health Organization as pobistrocel, and we've chosen a commercial drug name of Ebstracel for the formulation to be used in recessive dystrophic EB. In 2 weeks' time, we will meet with the MHRA for further advice about the marketing authorization submission filing in the U.K. and then start to finalize those documents. Some minor regulatory delays have meant that we expect to submit to the MHRA in early Q3, and we've contracted a U.K. company, TMC Pharma, with expertise in rare disease submissions to run the EMA and the FDA submissions in parallel to meet the end of the year deadline that we described before to you. Finally, I had the great privilege to speak at the Cure EB Annual General Meeting in London last month, which is one of the largest EB charities in the U.K. I presented our data and our plan was overwhelmed by the response from patients and carers who attended. They're desperate for us to get Ebstracel to the market and to open the next phase of the clinical trial in the U.K. We're doing our utmost to deliver on our promises to them and to you to get into commercial manufacturing and supply in 2027. I'll hand over to Cory now for an update of the current financials. Cory? Cory Ellspermann: Thank you, Mark. At this time, I'll provide a brief overview of our financial results. Net loss attributable to common stockholders for the quarter ended March 31, 2026, was approximately $5.4 million compared with approximately $9.7 million for the comparable period in 2025. Research and development expenses totaled approximately $3.6 million for the quarter ended March 31, 2026, compared with approximately $7.6 million for the comparable period in 2025. General and administrative expenses were approximately $2.2 million for the quarter ended March 31, 2026, compared with approximately $2.3 million for the comparable period in 2025. And at March 31, 2026, the company had cash and cash equivalents of approximately $21.4 million. Based on our current operating plan, we believe our cash is sufficient to fund our operations through Q1 of 2027. And as of May 7, 2026, the company had approximately 26.6 million shares of common stock outstanding. And now I'll hand the call back to David. David Moss: Thank you, Cory. To close, our focus is straightforward. We're executing towards regulatory filings for CORDStrom, which we believe represents a major inflection point for the company. At the same time, we're continuing to build the case for XPro through additional imaging data, exploring the future rare disease trials and ongoing partnership discussions aimed at advancing the program efficiently. We believe these efforts position INmune Bio for a significant year ahead with multiple opportunities to create value for both patients and shareholders. Due to travel schedules, we'll not be taking questions, and this concludes our prepared remarks. If you have further questions, please reach out to the contacts at the end of our press releases, Dan Carlson or myself via those phone numbers or e-mails. Thank you for joining us today. Operator: And thank you, ladies and gentlemen. This concludes today's conference call. We thank you for your participation, and you may now disconnect.
Operator: Hello, everyone, and welcome to Astrana Health's First Quarter 2026 Earnings Call. [Operator Instructions] Today's speakers will be Brandon Sim, President and Chief Executive Officer of Astrana Health; and Chan Basho, Chief Operating and Financial Officer. This press release announcing Astrana Health's results for the first quarter ended March 31, 2026, is available in the Investor Relations section of the company's website at www.astranahealth.com. The company will discuss certain non-GAAP measures during this call. Reconciliations to the most comparable GAAP measures are included in the press release. To provide some additional background on the results, the company has made a supplemental deck available on its website. A replay of this broadcast will be available at Astrana Health's website after the conclusion of this call. Before we get started, I would like to remind everyone that this conference call and any accompanying information discussed herein contains certain forward-looking statements within the meanings of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terms such as anticipate, believe, expect, future, plan, outlook, and will, and conclude, among other things. Statements regarding the company's guidance, continued growth, acquisition strategy, ability to deliver sustainable long-term value, ability to respond to the changing environment, liquidity, operational focus, strategic growth plans, and acquisition integration efforts. Although the company believes that the expectations reflected in these forward-looking statements are reasonable as of today, those statements are subject to risks and uncertainties that could cause the actual results to differ materially from those projected. There could be no assurance that those expectations will prove to be correct. Information about the risk associations with the investing in Astrana Health is included in the filings with the Securities and Exchange Commission, which we encourage you to review before making any investment decisions. The company does not assume any obligation to update any forward-looking statements as a result of new information, future events, change in market conditions, or otherwise, except as required by law. Regarding the disclaimer language, if you would like to refer to Slide 2 of the conference call presentation for further information. With that, I will turn the call over to Astrana Health's President and Chief Executive Officer, Brandon Sim. Please go ahead, Brandon. Brandon Sim: Good afternoon, and thank you for joining us on Astrana Health's first quarter 2026 earnings call. Today, I'll begin with our first quarter results. Then discuss how we have built and positioned Astrana anchored in our AI-enabled platform and longitudinal payer-agnostic care model and why that model is increasingly advantaged. I'll then provide updates on our 4 strategic pillars and our progress against each. And finally, I'll provide some color on the Prospect integration, expansion market performance, and recent regulatory updates before turning the call over to Chan. Astrana delivered a strong start to 2026. We saw continued disciplined growth, well-controlled medical cost trend, meaningful operating leverage, and early performance from new full-risk contracts that continue to track in line with our underwriting expectations. More importantly, this quarter reinforces our broader thesis. As the health care environment becomes more complex, advantage will accrue to organizations that can integrate care delivery, data, and financial accountability into a single operating system. Astrana has built that operating system. And we believe that advantage is widening. In the first quarter, Astrana delivered revenue of $965.1 million, up 56% year-over-year and adjusted EBITDA of $66.3 million, up 82% year-over-year. Non-GAAP adjusted EPS was $0.74, up 76% year-over-year and free cash flow was just over $64 million in the quarter. Deleveraging also continued to progress ahead of schedule with net leverage declining to approximately 2.3x on a pro forma trailing 12-month basis and to 2.2x based on the midpoint of our full year guidance. As a reminder, when we announced the Prospect transaction, we communicated a path to deleveraging below 2.5 turns of net leverage within 24 months. We have now achieved that milestone in just 3 quarters. And we anticipate ending the year at or below 2 turns of net leverage. We are pleased with the consistency of our performance and execution against our priorities in the first quarter. And our results increasingly reflect the advantages of the platform we have built and the way we are embedding AI across our platform. Our view is straightforward. AI can improve individual tasks. But the greatest value accrues to the orchestration layer where data, workflows, clinical decisions, and financial accountability are integrated across the system. In health care, that means connecting how care is financed, coordinated, and delivered and, ultimately, improving outcomes for patients. We believe that requires deep architectural alignment. Unlike fragmented health care technology stacks assembled across multiple third-party vendors, our platform was designed internally as an integrated operating system because an embedded orchestration across workflows, care delivery, and financial operations requires that. As a delegated payer-agnostic platform, we sit at the center of the health care ecosystem with a continuous longitudinal view of each patient across plans, settings, and time. We are not tied to a single payer or a single line of business. We follow the patient throughout their health care journey. That creates 2 structural advantages. First, it creates long-term value. The continuity we build with our patients allows us to engage and manage care over extended periods of time, driving better clinical outcomes, more efficient resource allocation, and more predictable financial performance. Second, it creates a compounding data advantage. Our longitudinal view allows us to build a more complete and persistent understanding of each of our patients, which improves our ability to predict risk, intervene earlier, and coordinate care across settings. And on top of that foundation, we have built a proprietary data ontology and AI models that translate intelligence into action, embedding real-time insights, next best actions, and workflow orchestration directly into provider workflows and care management operations. Across our platform, our AI agents are increasingly embedded into operational and clinical workflows, helping manage authorizations, claims processing, care management, quality outreach, and next best actions in real time. Because these agents operate within our broader platform and data infrastructure, they act with longitudinal context across the patient journey rather than within isolated workflows. And these capabilities are embedded directly into the day-to-day workflows of our providers and care teams, driving measurable improvements at the point of care. Providers actively using our platform achieve a 24% higher gap closure rate and a 30% higher annual wellness visit completion rate. And those outcomes are increasingly powered by AI-enabled patient engagement at scale, including around 500,000 automated member interactions across voice and text each month, the equivalent of several hundred personnel worth of outreach capacity. We are seeing similar leverage operationally. For example, our AI claims agents have reduced provider payment cycle times to less than half that of manually processed claims. Taken together, these capabilities translate directly into improved clinical outcomes, more efficient operations, and ultimately, more predictable financial performance. Importantly, because we operate the system our AI is improving and because we maintain longitudinal relationships with patients across payers, the benefits compound over time within our platform. As more patients flow through our system, our models improve, our predictions sharpen, and our ability to allocate resources becomes more precise across the patient journey. That combination of longitudinal relationships, data continuity, and integrated workflows is what really enables us to translate AI into durable clinical and economic value. We continue to see those platform advantages translates into consistent clinical performance across the enterprise. In the quarter, medical cost trends slightly outperformed our full year trend assumption of approximately 5.2%, with strong performance across both our core and legacy Prospect populations as we continue integrating Prospect onto the Astrana operating system. Our original Medicare populations in both ACO REACH and MSSP also performed well, reinforcing the scalability of our platform and the ability of our technology and clinical infrastructure to drive consistent outcomes across lines of business. We are also seeing that leverage reflected in our operating structure. In the first quarter, G&A as a percentage of revenue was 6.4%, a 70 basis point improvement year-over-year. As we continue embedding agentic workflows and intelligence across the platform, we expect additional operating leverage over time and believe that we will exit the year at levels below where we are today. Turning to membership. We ended the quarter serving approximately 1.55 million members in value-based care arrangements. On Medicaid and Exchange, trends in the quarter remained generally in line with expectations with puts and takes across the portfolio, largely offsetting one another. Medicaid membership attrition tracks modestly below expectation, while acuity has remained favorable, reflecting less adverse selection than modeled due in part to our longitudinal patient relationships. On the exchange, attrition tracked somewhat ahead of expectations during the quarter. And overall, we continue to manage these dynamics with a disciplined and appropriately conservative approach. And our broader assumptions and outlook for 2026 remain unchanged. On prudent risk progression, we delivered on the commitment we made in late 2025 to convert key contracts to full risk arrangements. At quarter end, approximately 80% of care partners' revenue and around 40% of owned membership were in full risk arrangements. Importantly, new contracts that commenced this quarter are performing in line with our underwriting, reinforcing the discipline of our approach. Collectively, our results reflect continued execution across the 4 strategic pillars we have discussed consistently over the past several years: Disciplined growth, prudent risk progression, strong clinical and medical cost performance, and expanding operating leverage through our platform. Now, turning to Prospect. Integration remains on track and continues to validate the strategic rationale for the transaction. We have completed financial standardization, established full visibility into medical economics and aligned clinical workflows under the Astrana Care model. Gross provider retention remains above 99% for the quarter. And we continue to track towards the high end of our $12 million to $15 million annual synergy target. In our expansion markets, Southern Nevada, which reached run rate profitability in 2025 with a 20% year-over-year improvement in MLR, continues to perform well. In Texas, the launch of our full risk delegated model with a large payer partner on January 1 is progressing in line with expectations. And we expect our platform and operating model to drive a similar maturation curve over time in Texas as we've observed in our other markets. Finally, some quick comments on the regulatory environment. On the 2027 Medicare Advantage final rate notice, we believe there continue to be structural tailwinds for Astrana. Our model is not dependent on diagnosis sources that are being disallowed. And our historically conservative and counter-based approach to risk adjustment positions us well under the revised framework. More broadly, as regulatory changes continue to minimize risk adjustment as a source of alpha, we expect relative performance across the industry to be increasingly driven by underlying clinical execution and cost management. That is core to how we operate. To close, our first quarter results reinforce the structural advantages of the Astrana platform. We are growing with discipline, progressing risk responsibly, managing medical costs with consistency, and continuing to widen a durable technology and AI advantage that compounds with every patient we serve. With that, I'll turn the call over to Chan. Chan Basho: Thank you, Brandon, and good afternoon, everyone. Our first quarter financials reflect solid execution and a strong start to 2026, driven by the commencement of new full risk contracts, continued contribution from Prospect and disciplined platform-wide performance. Total revenue for the first quarter was $965.1 million, up 56% versus the prior year period, driven by the full quarter contribution from Prospect, commencement of full risk contracts and continued organic growth across our Care Partners segment. Adjusted EBITDA for the quarter was $66.3 million, up 82% versus the prior year period. Both revenue and adjusted EBITDA came in at the higher end of our guidance range, reflecting the durability of our model. Net income attributable to Astrana was $14.4 million and adjusted EPS was $0.74 per share. Medical cost performance in the quarter was in line with expectations. Our 2026 plan assumes a blended cost trend of approximately 5.2%. And Q1 actuals across both legacy Astrana and legacy Prospect were consistent or better than planned across all lines of business. G&A as a percentage of revenue was 6.4% compared to 7.1% in the prior year first quarter. This 70 basis point improvement reflects continued operating leverage as we scale revenue and continue to embed AI capabilities across the enterprise. Free cash flow for the quarter was $64.1 million due to strong operating performance and conversions to full risk. We continue to expect strong full year free cash flow generation as new full risk contracts ramp, working capital normalizes, and integration-related investments decline. We ended the quarter with $478.4 million of cash and $586.8 million of net debt. Net leverage on a pro forma basis was approximately 2.3x, down from 2.6x at year-end, reflecting strong free cash flow generation and continued EBITDA growth. We remain committed to meaningful deleveraging over the next 12 months through profitable growth, free cash flow generation, and disciplined debt reduction. We are reaffirming our full year 2026 outlook. We continue to expect total revenue in the range of $3.8 billion to $4.1 billion, adjusted EBITDA between $250 million and $280 million, and free cash flow between $105 million and $132.5 million. We're pleased with our first quarter performance and continued execution and remain disciplined in our approach to full year guidance. Our outlook continues to assume conservative Medicaid membership trends and 0 contribution from HQAF. We expect greater clarity on both items as the year progresses. And until then, we will continue to apply an appropriately conservative approach to full year guidance. As a reminder, the midpoint of our 2026 guidance reflects our operating plan. The low end assumes a stacked downside case rather than a shift in underlying execution. On the headwind side, we have embedded expected declines in Medicaid and exchange enrollment, adverse selection, losses associated with new cohorts and expansion markets, conservative medical cost assumptions, and 0 contribution from HQAF. On the tailwind side, we have modeled improved 2026 Medicare Advantage rates, continued realization of Prospect synergies, ongoing maturization of full risk cohorts, and operating efficiencies driven by automation and AI deployment. For the second quarter of 2026, we expect revenue between $965 million and $1 billion and adjusted EBITDA between $65 million and $70 million. Taken together, our first quarter results give us continued confidence in our ability to deliver against our 2026 framework. With that, operator, we're happy to take questions from the audience. Operator: [Operator Instructions] Our first question is from Jack Slevin with Jefferies. Jack Slevin: Candidly, crazy afternoon, so a little trouble processing information. Maybe just to hit on what I think are like the 3 biggest things for everyone here. I heard the commentary on the trend better or in line with what you're expecting across all books. If I just think about enrollment and trend in Medicare Advantage on the HIC side and in Medicaid, can you just give me the rundown on sort of where that stuff landing versus expectation and how to think about the progression there versus what you sort of already expressed at the last quarter call? [Technical Difficulty] Operator: Will the speakers please check and see if their line is muted. Brandon Sim: Sorry, can you guys hear me? Operator: Yes. Brandon Sim: I apologize. Sorry, I know that, that was -- that was a busy quarter, Jack. Thank you for joining anyway. Happy to give an update per line of business on enrollment and trend. For -- starting off with Medicare, enrollment came in, as we had described before, mid-single-digit growth in eligibility. I'll start first with enrollment and then go to trend. On Medicaid, as I mentioned in my prepared remarks, enrollment or disenrollment tracked slightly ahead of the midpoint of our range. And so we're looking at probably on the high end of our range for disenrollment for the year. And then finally, for exchange, things came in better than expected in terms of disenrollments as has been noted industry-wide. In terms of trend, we were able to come in at or above our full year range for trend, which is a blended 5.2% cost trend year-over-year. And so trend has performed very well across all lines of business. Notably, trend came in better in Medicaid as well relative to our expectations. So there was lower adverse selection so far throughout the year than we expected even with the slightly higher disenrollment than expected. So as I mentioned in the prepared remarks, Medicaid and exchange kind of puts and takes there ended up balancing out. And trend ended up performing better than expected really across all lines of business and for both core and legacy Prospect populations. Jack Slevin: Just one follow-up for me. The balance sheet, obviously now getting to a better position. I know you called it out and then sort of a lot of where you had been messaging and things progressing nicely and good free cash flow generation in the quarter. I guess maybe just thinking about, you had done some M&A, nothing obviously on the scale of Prospect beforehand. But as you sort of get that leverage ticking down and think about what you can do with excess free cash, would love to get your thoughts just on what you think the best use of cash is here. If there's ample tuck-in opportunities? If the buyback is something you should look at? Just curious to sort of hear what you're thinking about there. Brandon Sim: Yes, of course. Overall, our approach to capital allocation, I think, is going to remain disciplined and consistent with the priorities we've previously communicated. First and foremost, of course, our near-term focus is on deleveraging following the Prospect transaction. As I mentioned in the remarks, we're very pleased with the pace of progress so far. As I mentioned, net leverage already declining to approximately 2.3 turns on a pro forma TTM basis. And that's far ahead of the timeline we originally communicated when we announced the transaction. And so when we think about capital deployment, I think our highest priority continues to be investing organically into the platform, including our technology infrastructure, AI capabilities, clinical operations, and expansion markets. And we see strong returns and a meaningful runway ahead in those efforts. On M&A, though, it's really a question about capital allocation efficiency. I think we already -- we believe we already have the core capabilities required to operate a fully integrated AI-enabled health care operating system internally. So the question is less about acquiring technology capabilities and more about determining the most capital-efficient way to expand membership provider relationships and market density over time. So it's going to be a bit of a buy versus build question in terms of M&A. That being said, we continue to believe the platform is extremely well positioned to integrate and scale M&A acquisitions over time. Because we've built that proprietary operating platform, I think we've proven that we're able to operationalize acquired assets very efficiently and very consistently across the platform. And we've demonstrated that capability, as you noted, with Prospect, but also with things like collaborative health systems, CFC, and more in the past. So it's going to be an important opportunity to continue growing the platform. But we're going to remain disciplined and highly selective in the approach. And finally, on share repo, we did continue to do share repurchases in Q1 as we have in Q4 of last year. And we'll continue to evaluate that capital allocation strategy dynamically based on where we believe the risk-adjusted return for repo will be and where we think we can create kind of long-term shareholder value. So given the strong cash generation so far and that integration is on track and ahead of schedule, we're pleased with where we are. And we think we have a lot of flexibility over time as we continue growing the platform. Operator: Our next question is from Ryan Daniels with William Blair. Ryan Daniels: Congrats on the strong start to the year. Brandon, I thought you gave a great overview of the Astrana operating platform and the advantages it gives you both on care and operating efficiencies. So I'm curious how much more leverage do you have there to drive maybe G&A efficiencies? And what type of new programs are you launching? And then as a follow-up, I'd love to learn more about how you plan to commercialize that in the market as other vendors kind of struggle sometimes to manage care as effectively via your care enablement partner offering. Brandon Sim: Hello, Ryan, thanks for the question. I think there's a lot of -- I described some of the examples of how we're using technology so far. It's really deeply integrated into the system. And it helps that we have a fully delegated capitated model where we do act as a single payer. And we have the visibility across authorizations, claims, care management, and the entire ecosystem. So far, as I mentioned, we've really been using a lot of AI in terms of our risk stratification models, our next best action models, creating a suite of agents on both the payer-facing and provider-facing side. On the payer side, for example, on claims adjudication and prior authorization, on the provider and patient side in terms of engagement through voice and text as well as clinical documentation and gap closure. I think some opportunities remain in further expanding our agentic care management workflows, something we've developed over the last half year or so that we're -- that is already in use, but certainly can lead to further efficiencies on both the OpEx and, hopefully, over time on the cost of care line as well. We're also looking at, of course, continuing to finish off the integration of Prospect onto the Astrana operating system, which can drive further operating leverage as well as over the medium term, medical cost leverage, and continuing to expand our clinical decision support capabilities embedded directly into the provider workflow as part of the Astrana operating platform. So I think there are going to be continued opportunities. And like I mentioned in the prepared remarks, already reduced G&A as a percentage of revenue, 70 basis points year-over-year and expect to exit the year even lower than where we came in around -- sorry, lower than where we came in, 6.4% in Q1. On the second question in terms of commercializing this in the market, I think perhaps an underappreciated part of our story is that there is a segment that we report in which we do commercialize some of these tools to the market in our Care Enablement segment. That segment continues to grow rapidly, has a strong gross margin and EBITDA margin profile. And just in this quarter, we added a new client, which we had disclosed kind of on earnings -- on a previous earnings report to that client base in the Care Enablement business. So we continue to grow that business rapidly. And we think there is potential to not only improve groups and clients in that business, but also one day potentially, as we did with the Community Family Care acquisition, to look for deeper ways to partner and get them perhaps into our Care Partners business. Ryan Daniels: And then one quick follow-up. This is more housekeeping. But with the quality assurance fund, I know that's not included in your guidance. Has there been any update there or any thoughts on when we might get timing on that to see if there could be potential contribution to this fiscal year for you guys? Brandon Sim: Thanks, Ryan. Yes, I think that's unfortunately going to have to wait until later in the year. We don't have an exact date in mind, but probably in the third or fourth quarters. So again, out of conservatism, we've left that contribution out of the guidance for 2026. But we look forward to hearing more and updating the street when that happens. Operator: Our next question is from Jailendra Singh with Truist Securities. Jailendra Singh: Congrats on a strong quarter. Brandon, I know you have been cautiously optimistic around your 2027 EBITDA target of $350 million and you've said that there is still a path to get there. But in recent few months, there have been some positive developments around 2027 CMS MA rule. You just said that Medicaid and HICs have been trending better to at least in line to better than expectations and then you're also driving AI-driven efficiencies. Are you feeling better about that target now versus 3 months back? Or at least you're willing to say that current consensus, which is around $340 million, seems to be at least in a reasonable range. Just trying to understand like how your views about 2027 might have shifted in the last couple of months or 3 months. Brandon Sim: Hello, Jailendra, thank you for the question. When we originally provided that 2027 adjusted EBITDA framework, this was back in 2024. Of course, we're in a meaningfully different regulatory and industry environment than the one we're operating in today. But with that being said, I think the more important point, the more salient point is the continued strength and adaptability of the Astrana platform over all environments. Our model was designed to operate across cycles, as I've mentioned many times before. And we believe the consistency of our performance over really decades of performance. But certainly even in the last 5 or 6 years, certainly reflects that. As an example, from 2019 through guidance for 2026, we've grown revenue at approximately a 32% CAGR and adjusted EBITDA at a 25% CAGR while continuing to generate operating leverage and free cash flow along the way as we grow very, very rapidly. And against that context, looking forward into '27 and beyond, we think that the business has continued to be positioned to grow organically at a mid to high teens rate while continuing to deliver on free cash flow as well. We see meaningful opportunities, of course, to accelerate that growth past the mid to high teens growth rate through disciplined and selective M&A potentially over the long-term, particularly given the scalability of what we've built. But even without M&A, we still think that it's a mid to high teens organic grower. And so that being said, I think the key takeaway here is really the operating model and its durability across all regulatory and economic cycles. Our ability to continue compounding growth as we have, 25%, both organically and inorganically over the last 6, 7-year period and our continued expectation that off of the 2026 number, that mid to high teens CAGR on the EBITDA line is firmly within reach over the short to medium-term future. Jailendra Singh: And then my follow-up on the AI investments. You talked -- I think in the presentation, you said that your G&A has been benefiting from AI-enabled tools. And is the message that all of the 70 basis point year-over-year improvement was driven by these AI tools, which would imply like $7 million benefit in the quarter alone. I just want to confirm that. And then as we think about broadly your AI investment strategy. How are these investments split between focus on administrative aspect of the business where savings might directly fall to bottom line right now versus investing in clinical workflow, so that these will drive more savings down the road? Just help us understand how do you allocate your AI investment strategy and the dollars there? Brandon Sim: Yes, of course. I think it's a little hard to say exactly how much of the 70 bps is driven directly by AI. Certainly, AI is being infused across the board. So I would say a meaningful part of that without quantifying is driven by AI and its ability to help us scale the business without increasing G&A costs associated with that rapid revenue growth. In terms of the split between more administrative functions and maybe clinical or coordination and navigation-related functions that could potentially have an impact on medical costs in the short and medium-term future. I think it certainly started off on the payer side and on the G&A side. We built agents around claims, around authorizations, around eligibility. And I think over the last probably year or 2, we've been building a proprietary suite of more clinical-facing tools such as risk stratification, care management, workflow orchestration, and identification that I think will lead to MLR improvements over time. And you can see that a little bit as we -- maybe getting a little off topic here. But you can see that a little bit with how Prospect has performed as we continue to onboard them onto the Astrana operating system. Prospect, prior to the acquisition had medical cost trend running 6%, 6.5% or so. We modeled around 50 basis points of improvement in 2026 versus that number. And we're outperforming that by a bit here even in Q1, even though we've already improved by that 50 basis point margin. So I think you'll really start to see even more MLR improvement in the medium term. But I would say the improvement is largely skewed towards G&A at this point in time. Operator: Our next question is from Craig Jones with Bank of America. Craig Jones: So Brandon, I want to follow-up on your comments around your encounter-based risk adjustment model MA. So it sounds like CMS keeps mentioning like leveling the playing field in MA and really wants to rewrite the current MA risk adjustment model. So if you were in the room with them redoing the risk adjustment model, what would you recommend changing? And then how do you think the potential changes end up making potentially going to this encounter-based model would help Astrana? And then do you think you could see something along these lines as soon as the 2028 technical notices fall? Brandon Sim: Thanks for the question. Yes. I think the future of risk adjustment is really interesting. As you can see in the ACO lead preliminary model details. There is the phasing in of an AI inferred risk score, which would depend not necessarily on an organization's ability to document and submit codes, but rather trying to use AI to infer the true acuity of the member and reimbursing appropriately based on that kind of "gold standard" kind of determination of a member's risk. Again, I think, ultimately, because we've been conservative on risk adjustment, because we see members over a longitudinal period of time and we try to be very appropriate in terms of capturing the clinical complexity of the population. We think that either way, we're well structured, we're well positioned for that future. We think that because we haven't relied on documentation or coding optimization to generate savings and value for the health care system in the past, it may even be beneficial for us, for example, to have a true determination of what a patient's risk is via AI that the government or CMS is going to determine rather than everyone playing a game to try to improve their risk scores over time on a relative basis. So I think really, regardless of how all that shakes out, we think we're structurally well positioned for the long-term. That being said, if I had my way, I do think that the -- that risk adjustment as a source of alpha is not really, I think, in the benefit of the health care ecosystem in the long-term and for the Medicare Trust fund in the long-term. So I would recommend without knowing more that some of these approaches that are being suggested like AI inferred risk models seem very appropriate and seem like a much more efficient way to standardize what risk determination looks like across the American population. Operator: Our next question is from Michael Ha with Baird. Michael Ha: So when it comes to AI, clearly, everyone is talking about it this earnings season, all the large national payers, providers. But the thing is most of them have pretty legacy old infrastructure, fragmented data, as you said yourself. So when I think about Astrana versus, I guess, almost all of your peers. It's the fact that you built an AI-native tech platform many years ago. And the fact that you yourself are spearheading foreseeing AI adoption across basically every facet of your company. I think that's still widely underappreciated. So I was wondering if you could talk more about this specifically, the structural differences between you Astrana versus your peers when it comes to unlocking the power of AI? In other words, like what still has to happen -- what still has to be done by your peers to get there versus what can already start to happen at Astrana? Brandon Sim: Yes. Thanks so much for the comments, Michael. I think broadly, that's right. I think our thesis has always been building internally. And I think that thesis is being rewarded in an era where it is easier than ever and faster than ever to build internally because of the advent of generative AI and its use in coding. And I think as long as you have the integrated data infrastructure to support that, the ontology is on top of that, the definitions, the concepts and the relational -- and the relationships between those concepts so that the AI understands how to operate on each of these concepts and how they relate to each other and how they ultimately translate into actionable insights. I think that's hard to replicate, right? I think if you're operating a system where you've acquired a bunch of stuff. And you haven't integrated them into a unified data layer with a unified set of concepts and vocabulary on top of that, on top of which the AI and the agents can operate. You're going to find it very difficult to kind of build the fifth floor of the building without having the structural supports in the ground floor and the lobby built out. And I think that's a lot of what our peers are doing perhaps without getting too much into what our peers are doing. I think there's a rush to chase the kind of the sexiest parts of AI to build the top floor, the penthouse unit without having the foundational approach, without having the pick axis, the knowledge about how to dig the hole and the foundation into the ground to build that in an effective manner. And I think we've spent a lot of time, myself personally, given my engineering background to build out that foundation. And now we think that's going to unlock our business in terms of rapidly adopting AI across the enterprise and embedding it deeply into each and every workflow, both operationally, clinically and on the quality of care side. So we're really excited about where we can take this platform. We're already seeing the G&A improvements. We're starting to see some of the trend improvements as we continue to integrate new businesses onto the platform. And we're seeing great success as well in terms of our Care Enablement business, selling the tools, and the integrated workflow that we've built to other provider groups and helping them succeed also in an accountable care relationship. Michael Ha: So next question on the final MA rate notice. So I'm getting roughly like 4% net rate increase for Astrana if I exclude -- on the chart reviews. And when I think about Astrana's margin expansion, just how sensitive it is to the rate environment? I know your cost trends are running, I think, 4% to 5% roughly for MA. So at face value, right, that would imply rates are basically they match up. But if I start at 4%, add maybe 1% to 2% coding, maybe another 1% to 2% help from plans, benefit design pricing. Then we're getting into a different sort of ballpark of 6% to 9% rate versus trend of 4% to 5%, up to 400 basis points of margin expansion. So it feels quite considerable. And that's not even including right, your regular cohort maturation dynamics, any other trend vendors or G&A. So at a high level, am I missing any major components? Is this even the right way to start thinking about 2027? Brandon Sim: Yes. Mike, as always, your math is great. So I would broadly agree with your comments. I think the final rate notice was constructive overall. And the overall top line kind of effective growth rate of 5.33% does more appropriately reflect underlying medical cost trend. As you mentioned, the disallowed diagnosis -- or the diagnoses, sorry, are expected to be immaterial for Astrana, given our historically conservative and encounter-based approach to risk adjustment. So as you had noted correctly, the average change for us might be the 2.48% plus the 1.53% or approximately 4% in aggregate. And as we think about '27 more broadly in our models, at our current RAF levels, we probably expect to maintain MA margins consistent with 2026 with that 4% kind of average rate book increase. Beyond that, we continue to see tailwinds and opportunity for more accurately capturing the complexity of our populations and risk adjustments. And there's potential tailwinds above and beyond the 4% from those sources. Operator: Our next question is from David Larsen with BTIG. David Larsen: Congratulations on the great quarter. Can you talk a bit about your margins for like, I guess, full cap books of business that would include inpatient? And can you remind me what regions or how many members are full cap, including pharmacy, doc, inpatient? Brandon Sim: Thanks for the question, Dave. Thanks for tuning in. Our fully capitated arrangements start off in lower kind of EBITDA margin arrangements as we transition them from full risk because as we talked about before, you get the kind of increase in percentage of premium without yet necessarily flowing through the decrease in inpatient utilization as we take on additional portions of the risk dollar. Over time, the maturation of the full risk cohorts, as we've seen over the past years as we've moved members cohort at a time into full risk arrangements as we continue to do that as we did in Q1 of this year. You see that margin profile mature and ultimately get to hopefully a similar point as the kind of partial risk members as well. So I think that's what we expect as we continue to move members selectively and prudently into full risk arrangements. We underwrite kind of this margin maturation cycle. We've seen that happen now over several years. And each of those has matured as expected. And so we can kind of space out our membership moving into full risk as appropriate. I do want to mention that almost all of our full risk arrangements do not include Part D as in dog risk. So there are a handful that do and most of them do not. In terms of the geographies where we are full risk, it really varies. Most of our membership, 80% of the revenue approximately comes from California. So I would say still that California does have a large percentage, a majority of the full risk members. However, we have moved over 14,000 Medicare Advantage members into a full risk delegated construct arrangement with a payer partner, for example, in Texas in the first quarter of this year. So -- and we also have full risk delegated contracts in Nevada. And of course, the ACO REACH business is in some aspects, the full risk business also. So we're really in the business of properly underwriting and then appropriately and proactively reducing the cost of care for our populations and then making sure that our financial contractual arrangements are conducive to us capturing some of the value that we're generating for our patients and for our communities over time. David Larsen: And then for Prospect, I think you may have mentioned this earlier. Is it still $80 million of EBITDA? Is that on track? Brandon Sim: Yes, that's right, Dave. Prospect was on track for around $80 million of adjusted EBITDA on an annualized basis. And at this point in time, it is currently tracking a bit ahead of those expectations. David Larsen: And then just one quick one. It looks like your stock has been doing really well over the past couple of months. I guess what do you attribute that to just at a high level? What? Brandon Sim: Sure. I mean we're always happy to see that as it's our job to continue generating shareholder value, of course. I think I hope it's a continued recognition of our leadership and our consistency and stability of our model. The differentiation of our technology platform, the 35% revenue CAGR, the 25% adjusted EBITDA CAGR that I mentioned, which I think is fairly unheard of in health care services over a very long period of time, over 7 years. And ultimately, of course, definitely helps that there's been -- there have been regulatory tailwinds, including the adjustment, the more appropriate, in our view, 2027 Medicare Advantage final rate notice. So I think overall, a lot of positive kind of macro tailwinds lining up and hopefully, an increased recognition of the unique platform that we've built that has really generated free cash flow, profitability, and now rapid growth for over 3 decades. David Larsen: The best health care is when you don't actually have to see your doctor. And that's the model that you guys have created. So nice quarter. Operator: Our next question is from Ryan Langston with TD Cowen. Christian Borgmeyer: This is Christian Borgmeyer on for Ryan. So looking at the second quarter guidance and EBITDA margin, how should we think about puts and takes within the cost of service revenue and G&A lines? For example, any seasonal considerations within medical utilization, in particular that are different this year? Or on the G&A side, any sequential savings from AI or Prospect synergies embedded in that? Chan Basho: In terms of our 2026 guide, probably the best way to think about this is in the first half of the year, we're probably going to see a little over 50% of profitability coming in consistent with what's happened in historical years. As you think about puts and takes, the puts and takes, as we mentioned, it's around HQAF. It's around opportunities with MA and ACO as well as watching in terms of what's going to happen around the Medicaid membership trend. Brandon Sim: And then maybe to answer the other part of your question. We didn't see any abnormal utilization necessarily in Q1. I know there's been talk about weather and the flu season and whether that was heavier or lighter. I don't think things came in pretty operationally clean is how I characterized the quarter and tracked pretty consistently both on the inpatient and outpatient side with the broader medical cost trends that we reported across the business, even drilling down into each line of business as I started off the Q&A session with. So we felt pretty comfortable this quarter. And we're maintaining guidance primarily because we want to take a disciplined and conservative approach early in the year here. Christian Borgmeyer: I actually had a quick balance sheet question actually. I see the accounts receivable balance and the medical liabilities balance are each up like $90 million to $100 million sequentially. Anything to call out there related to any one item or program in particular? Or is that the full risk conversions contributing to that? Chan Basho: Yes, that's the full risk conversion that you're seeing in Q1. Operator: Our next question is from Gene Mannheimer with Freedom Capital Markets. Eugene Mannheimer: Congrats on a good start to 2026. So coming in or tracking at the high end of cost synergies with Prospect. Can you discuss potential revenue synergies there and when you may start to see that realized? And my follow-up would be on the MLR trends at or better than the 5.2% or so that you called out. Did you or can you break that out across the legacy Astrana and the Prospect book? Brandon Sim: Hello, Eugene, thanks for calling in. Sure thing. So on the revenue synergies, we haven't -- those are not included in the $12 million to $15 million synergy range. So we haven't quantified that yet. But we do expect over time that our partners and our providers and ultimately, our members will see the value of our denser network and our ability to drive access to care, high-quality care in a faster way because of the larger network that we now have. So over time, we do think that, that value will be realized by the platform, but we haven't yet quantified necessarily what that looks like. On the trend item, I would say that, as I mentioned before, Prospect came in 6% to 6.5%, 6.2%, 6.3% trend prior to the acquisition. And we are underwriting a 50 basis point improvement in that trend year-over-year. Our overall trend for the year is around 5.2% on a consolidated basis. And I would say that both core Astrana as well as legacy Prospect businesses performed better than expected here in Q1. Again, it's still early on in the year. We don't have perfect visibility, claims visibility yet, for example, on March. So we wanted to be conservative, but things are tracking well here to start the first quarter. Operator: Our next question is from Matthew Gillmor with KeyBanc Capital Markets. Matthew Gillmor: I wanted to follow-up on the full risk contract transition discussion. I think this quarter, you had 40% of members in full risk. I think last quarter, you set an expectation of 36 members in full risk as of the first quarter, so maybe a little bit ahead of schedule. I wanted to see if I had those numbers right and then just get an update in terms of how you're thinking about the pacing of members moving to full risk over the course of the year. Brandon Sim: Hello, thanks for the question. Yes, I think that's approximately right. Around 40% of our members are in full risk arrangements. And that translates into around 80% of our care partners revenue being -- coming from full risk arrangements. And of course, that's because the percentage of premium that we receive in the full risk arrangements per member is obviously higher than the partial risk arrangements. So I think you're continuing to see that the percentage of both membership and revenue continue to grow. In Q1, this took a step up because of the forwards contracts that we had started in the first quarter as we had guided to late last year. And all of those have now been completed. And so that's what's led to the spike here in Q1. On a go-forward basis, I think in our supplemental presentation deck. We did note that we do expect continued growth in the percentage of full risk members. And we'll be phasing that in over time kind of on a regular course basis. Matthew Gillmor: And as a follow-up, we've been particularly interested in your ability to bring this delegated model into new markets. And so the news out of Texas that you've updated us on has certainly been encouraging. I did want to take your temperature in terms of expanding a delegated model either into new markets or even just new states or even just new markets within states like Texas, which many of those places traditionally haven't had fully delegated models. Brandon Sim: Yes, it's a great point. And you're absolutely right. A lot of parts of the country have not necessarily operated in a -- don't even mention delegated model. They haven't even operated really in a value-based care setting in a broad way. And so we recognized the challenges of kind of gone 0 to 1 in a very short period of time. And I think that's why we've been really working on a gradated kind of approach to helping providers and payers along as we continue to take the Astrana delegated model outside of California, outside of Nevada, outside of Texas, and through the rest of the country. And what that looks like really is, first, entering into partial risk arrangements, ensuring that the data feeds that we need are on the ground and ready to go. Ensuring that our relationship with our downstream providers, primary care specialists and even hospitals are strong. Ensuring that our technology platform is integrated directly into the workflow of those providers. And ensuring that kind of our care management orchestration is in place and kind of allowing the economic contractual relationships to kind of follow behind the wake of the operational changes that we're making in terms of how health care is delivered in these new states and/or geographies. So it is a created kind of stepwise approach to getting folks into the validated model. We think that it ultimately will win out because, frankly, at the end of the day, it's just a more efficient model. It's a more valuable model to the health care system and a more efficient one for both payers and kind of the overall system. So we think that logic will take the day here and the economics of it will take the day. But we do recognize that change management takes time. And we're prepared to and have engaged in Florida, I mean, sorry, in Texas and Nevada, for example, on that path forward step by step. Operator: Our final question is from Andrew Mok with Barclays. Thomas Walsh: This is Thomas Walsh on for Andrew. You shared that acuity in the Medicaid population remains favorable in part due to your longitudinal patient relationships. Can you help us understand how those patient relationships mitigated the acuity impact in practice? And are there any other factors on the mix of members disenrolling or otherwise that mitigated the adverse selection? Brandon Sim: Yes, definitely. I think what I was alluding to, to put it more clearly is that the patients that tend to be Astrana members, which -- and the patient attribution mechanism is the choice. The selection of a primary care provider who is an Astrana primary care provider. The members that tend to be attributed to us, tend to not be the members who have low to no utilization because they are almost making an active choice to be an Astrana member and to be engaged in our care model and to be engaged in the longitudinal nature of the care model that we have with our patients as we follow them, for example, across line of business. I mentioned before, the example during COVID, members who lost their jobs and had to switch from a commercial line of business to commercial insurer to potentially something on the exchanges or something on Medicaid, for example, could continue to be in the Astrana ecosystem, continue to have the same care management, continue to see their same PCP and same specialist network. Those are the benefits, I think, of being in the Astrana network. And that tends to insulate us or we think partly insulate us from the level of adverse selection we expected from the disenrollment of members and kind of potentially their lower MLR. That didn't end up playing out the way that -- or to the degree that we thought it would. And that's what's led to some of the improved acuity in the Medicaid population. Thomas Walsh: And following up on ACA attrition tracking better than expectations, similar to trends across the industry. Could you share the actual disenrollment you experienced there? And at what point in the year would you expect to have enough visibility to make an informed revision to the full year membership expectation? Brandon Sim: Yes. I think at the beginning of the year, embedded in our guidance, we thought it would be a 30% to 40% disenrollment number in exchange throughout the year. And I think we had quantified that at a kind of mid-single-digit EBITDA impact headwind, of course. What we're seeing so far this year is not quite the 30% to 40%, really closer to high single-digit attrition in the ACA population. It still is early. We're still in May here. And there could be further disenrollments after the 90-day grace period. But across the industry, as we think about projections for actuarial firms and what others have been saying as well as our own experience. We're now projecting a decline of, call it, 20% to 30% instead of 30% to 40% internally at least. Again, we haven't reflected that in the guidance yet of conservatism, but that's kind of the quantum of the numbers we're talking about. Operator: There are no further questions at this time. I would like to turn the conference back over to management for closing remarks. Brandon Sim: Thank you, everyone, for joining our call today. We appreciate your time. And we hope to see you in the near future at one of our -- one of several conferences we'll be attending or we can catch up at any time if you e-mail investors@astranahealth.com. Again, thank you so much for joining and have a great evening. Operator: Thank you. This will conclude today's conference. You may disconnect at this time. And thank you for your participation.
Operator: Hello, everyone, and welcome to the Johnson Outdoors Inc. second quarter 2026 Earnings Conference Call. Today’s call will be led by Helen P. Johnson-Leipold, Johnson Outdoors Inc.’s Chairman and Chief Executive Officer. Also on the call is David W. Johnson, Chief Financial Officer. Prior to the question-and-answer session, all participants will be placed in a listen-only mode. After the prepared remarks, the question-and-answer session will begin. If you would like to ask a question during that time, please press star then the number 11 on your telephone keypad. This call is being recorded. Your participation implies consent to our recording this call. If you do not agree to these terms, simply drop off the line. I would now like to turn the call over to Allison Gitzaro from Johnson Outdoors Inc. Please go ahead, Ms. Gitzaro. Allison Gitzaro: Good morning, and thank you for joining for a discussion of Johnson Outdoors Inc.’s results for the 2026 fiscal second quarter. If you need a copy of today’s news release, it is available on our website at johnsonoutdoors.com under investor relations. I also need to remind you that this conference call may contain forward-looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance. Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors Inc.’s control. These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have any additional questions following the call, please contact David W. Johnson or Patricia G. Penman. It is now my pleasure to turn the call over to Helen P. Johnson-Leipold. Helen P. Johnson-Leipold: Thanks, Allison. Good morning, everyone. I will begin by sharing perspective on our second quarter and year-to-date results as well as give an update on each business. David will review the financial highlights, and then we will take your questions. Improved retail conditions and ongoing success of our product innovation helped drive 15.5% revenue growth in the second quarter, with all business segments contributing to the improvement. Operating income for the second quarter was much improved versus the prior-year second quarter due to increased sales volume, and our cost-savings initiatives continued to boost profitability as well. Year to date, our net sales are 21.5% higher than last year’s fiscal six-month period, with operating income and gross margin also up for the fiscal year-to-date period. We are pleased with our second quarter and year-to-date results and are particularly proud of our market-leading brands, which continue to resonate with consumers and reinforce our leadership position across our portfolio. Our Fishing business delivered strong results in the second quarter, driven by improved trade conditions, continued robust demand for Humminbird’s Explorer Series and MEGA Live 2 fish finders, and Minn Kota’s full lineup of trolling motors, as well as pricing action. These factors combined to reinforce our momentum and position in the marketplace. We remain focused on investing in innovation to deliver fishing technology that sets the standard for anglers worldwide. In Camping and Watercraft, growth during the quarter was supported by our expanding digital and e-commerce capabilities, with Old Town and Jetboil maintaining their leadership position in competitive categories. During the quarter, Jetboil also launched TrailCook, a new innovation designed to expand the brand beyond boiling water into broader backcountry cooking. In both brands, we will continue to build on our strengths to drive sustained growth through innovation and deep engagement with outdoor enthusiasts. Lastly, in our Diving business, improved conditions across the global markets and continued growth in e-commerce helped drive a solid increase in second quarter sales. Digital engagement continues to play an increasingly important role, enhancing connectivity between our SCUBAPRO brand, retail partners, and consumers. As we continue to lean into digital channels and strengthen our global footprint, we are optimistic about SCUBAPRO’s ability to grow and further reinforce its position in the market. Overall, we are pleased with the quarter and year-to-date results. By investing in and executing our strategic priorities—consumer-driven innovation, digital and e-commerce excellence, and operational efficiencies—we are strengthening our market position and taking the right steps to navigate macroeconomic uncertainty while building long term. Now I will turn the call over to David for more detail on the financials. David W. Johnson: Thank you, Helen. Good morning, everyone. Our strategic cost-savings program remains critical and continues to deliver meaningful benefits to our bottom line. Gross margin for the second quarter improved to 38.8%, up 3.8 points from the prior-year quarter. Overhead absorption from higher volumes and cost savings were the main drivers of the improvement in gross margin. Year to date, gross margin is 37.9%, up 4.9 points from the prior year-to-date period. Operating expense increased 11.2 million from the prior-year second quarter, due primarily to increased sales-volume-related costs as well as increased variable compensation costs. Profit before income taxes for the second quarter was 10.2 million compared to 4.2 million in the previous-year quarter, driven mostly by the improvement in operating income. As we prepare for the upcoming selling season, we modestly increased inventory levels. Our inventory balance at the end of the second quarter was 186.9 million, up about 6.8 million from the previous year’s second quarter. Our balance sheet remains debt-free, and we continue to pay a meaningful dividend to shareholders, with the Board approving our most recent dividend announced in February. Looking ahead, despite ongoing economic uncertainties, we remain firmly focused on financial discipline and actively managing the business to balance near-term pressures while continuing to invest in priorities that support sustainable growth. Now I will turn the call over to the operator for the Q&A session. Operator: Thank you, ladies and gentlemen. If your question has been answered and you wish to remove yourself from the queue, please press 11 again. One moment for our first question. Our first question comes from Anthony Chester Lebiedzinski with Sidoti. Your line is open. Anthony Chester Lebiedzinski: Thank you, and good morning, everyone. Certainly nice to see the really strong revenue growth, especially in Fishing. So as it relates to Fishing, how much was revenue helped by pricing versus better market conditions and a stronger competitive position? David W. Johnson: We saw strong unit volume growth in our business, and that was a big driver for the quarter. Pricing certainly helped, and we are also seeing really strong demand for our broad line of trolling motors. That is very helpful. Anthony Chester Lebiedzinski: Gotcha. Thanks, David. So do you think this is perhaps a sort of replacement cycle from the bump from COVID, or is there something else going on? Helen P. Johnson-Leipold: The market is very hard to predict, but we have innovation that continues to drive purchases. Consumers are a little cautious with all the things going on, but innovation is the catalyst to get things moving. We are hoping this is the beginning of an upward trend, but it is going to be challenging, and innovation will be the key going forward. Anthony Chester Lebiedzinski: Gotcha. Okay. Thanks for that. So as far as the other two segments, you highlighted the increased sales through e-commerce. Can you expand on that a little bit and, if possible, give us some numbers as it relates to the growth you saw in the quarter? And how are you thinking about the rest of fiscal 2026 as it relates to Diving and Watercraft and Camping? Helen P. Johnson-Leipold: E-commerce is one of our growth initiatives, and we have put a hard core press on that. It reaches a much broader consumer base, and we are really excited about it. Our bricks-and-mortar partners remain important, and both channels complement each other. We have been up and running in a true digital mode for only about a year, so it is early, and we have a lot to learn, but it is a good opportunity to reach a broader audience. I think it will continue to grow. It is a smaller piece of the pie than our other sales, but from a growth standpoint it is helping us. We do not do a lot of forward-looking commentary, but as we look at the third quarter, the signs in the second were good and better than they have been in the past. The world is complicated, and consumers have a lot going on, but it comes back to the product line, the brand, and our positioning in the market. We feel really good about where we are as a brand and as a company, and we are hoping the markets cooperate as well. It is good to have a quarter that feels very strong. Anthony Chester Lebiedzinski: That is very helpful context. As far as the world out there, as you talk to your retail customers, since the Iran conflict started in late February, gas prices have gone up quite a bit. From the point-of-sale data you can access, have you seen any notable impact for your brands? David W. Johnson: I would say not yet, Anthony. We have not seen a direct impact, but like a lot of companies, we are looking at inflationary pressure and higher input costs. Helen P. Johnson-Leipold: And we are mindful of worried consumers whose confidence levels are down. David W. Johnson: So far it is okay; we have not seen a direct impact, but we are looking at things in a neutral fashion over the next couple of quarters. Anthony Chester Lebiedzinski: Understood. As far as gross margin, you had a strong improvement versus last year. You talked about fixed-cost absorption and cost savings. Was that kind of a 50/50 split? And second, regarding cost pressures, how should we think about gross margins for the rest of the fiscal year? David W. Johnson: Most of the improvement was operating—so fixed-cost absorption. Our cost-savings program is also critical and helped as well. We are seeing cost pressure going forward. Like many companies, electronic industry component costs are dynamic for us, and that is something we have our eye on and are monitoring. That could be a bit of a headwind over the coming quarters, so it is a good thing we have our cost-savings efforts in place to help offset that. Anthony Chester Lebiedzinski: Got it. In terms of operating expenses, they came in higher than we expected. Roughly, how much of the year-over-year increase came from sales-volume-related costs versus incentive compensation? And how should we think about operating expenses for the rest of the fiscal year? David W. Johnson: A decent portion was volume related—probably about a third—and then we had some variable compensation accrual adjustments that made up about a third. There are some other items in there that we did not call out, like certain health care costs and consulting expense. But the two big ones were the volume-related items and the variable compensation. Anthony Chester Lebiedzinski: And do you expect that to continue near term? Any general comments there? David W. Johnson: The expense structure will probably settle down a little bit. Volume drives some of that, but in terms of our spending and our ability to manage, I think it will settle down over the next couple of quarters. Helen P. Johnson-Leipold: We are investing and putting foundational systems in place, and we are investing against our key priorities. It is good spend, and it may not be long term. As David said, it will settle down, and we are investing in the right things to set us up for long-term success. We will get more efficient on the other side of this. David W. Johnson: Agreed. We expect to be more efficient as these investments mature. Anthony Chester Lebiedzinski: Lastly from me, the tax rate came in lower than we expected. David, can you address that and how we should think about the tax rate for the balance of the fiscal year? David W. Johnson: Because we have the valuation allowance on the U.S. income right now, the tax rate will be up and down depending on the mix of profits we see in the quarter and what we are forecasting for the full year. A practical way to think about it is probably 4 to 5 million of tax expense for the year. How that is spread over the quarters depends on the mix of profit, so it is hard to give you a rate quarter by quarter. Anthony Chester Lebiedzinski: Understood. That is definitely helpful. Thank you very much, and best of luck. David W. Johnson: Thanks, Anthony. Operator: I am not showing any further questions at this time. I would like to turn the call back over to Helen P. Johnson-Leipold. Helen P. Johnson-Leipold: Thank you, everyone, for joining us today. If you have additional questions, please contact David W. Johnson or Patricia G. Penman. Have a good day. Thank you. Operator: Thank you, ladies and gentlemen. This concludes today’s presentation. You may now disconnect, and have a wonderful day.
Operator: Ladies and gentlemen, thank you for standing by. Hello, and welcome to XPLR Infrastructure First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Kanghee Jeon, Director of Investor Relations. Please go ahead. Kanghee Jeon: Thank you, Dustin. Good morning, everyone, and thank you for joining our first quarter 2026 financial results conference call for XPLR Infrastructure. With me this morning are Alan Liu, President and Chief Executive Officer of XPLR Infrastructure; and Jessica Geoffroy, Chief Financial Officer of XPLR Infrastructure. Alan will walk through our business highlights, and Jessica will provide an overview of our financial results. After that, our executive team will be available to answer your questions. On this call, we'll be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect or because of other factors discussed in today's earnings news release, in the comments made during this conference call, in the Risk Factors section of the accompanying presentation or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our website, www.xplrinfrastructure.com. We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for the definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. With that, I'll turn the call over to Alan. Alan Liu: Thank you, Kanghee. Good morning, everyone. We delivered a solid start to 2026. Performance across the business was consistent with our expectations as we continue to advance our strategy to simplify our capital structure and maximize the value of our portfolio. The portfolio continues to deliver steady performance, and the team continues to execute in a disciplined manner with progress across our key focus areas. Our repowering program continues to progress well. To date, we have completed approximately 30% of the repowering projects planned for 2026. The remaining projects are on track and are expected to enhance output and longevity of XPLR's fleet and support overall portfolio performance over time, while positioning XPLR for the future in this growing power demand environment. We also completed the final expected draw from our project financing commitments secured in 2025, successfully funding certain of our repowering investments with long-term and low-cost asset level financing. With the successful execution of planned refinancing and recapitalization activities in 2025, we have a relatively modest financing plan ahead of us with the next major corporate refinancing activity not expected until 2027. With respect to the previously announced interconnection sale and battery storage co-investment agreement with NextEra Energy Resources, XPLR completed its evaluation and exercised its options to co-invest in the storage projects. XPLR will participate with a 49% expected interest in each of the four projects, which are expected to add approximately 200 net megawatts of battery storage capacity to our portfolio by year-end 2027. As a reminder, after asset level financing proceeds, the net equity required for XPLR is expected to be approximately $80 million, which XPLR plans to fund through the sale of certain interconnection assets and rights to NextEra Energy Resources and to the four to-be-formed joint ventures. We believe that the structure for the joint ventures represents a disciplined and capital-efficient way to add incremental growth, leveraging our existing platform while maintaining a focus on balance sheet strength. Lastly, we continue to see improving power market fundamentals that we believe are supportive of the value and the optionality of our assets, and those favorable market dynamics are starting to translate into tangible opportunities. We recently recontracted roughly 90 megawatts at an existing wind site at a rate that is roughly $25 per megawatt hour higher than realized pricing on that project's generation over the past year. It's a small project, but the revenue uplift is meaningful on a percentage basis. And more importantly, we are optimistic that this is an early example of a broader opportunity set as legacy contracts expire. Our team is pursuing additional opportunities to recontract and optimize existing contracts across multiple markets where there is strong demand growth. With that, let me turn it over to Jessica, who will review our first quarter 2026 results in more detail. Jessica Geoffroy: Thank you, Alan, and good morning, everyone. Let's begin with XPLR Infrastructure's detailed results. For the first quarter of 2026, XPLR portfolio generated approximately $435 million in adjusted EBITDA and $89 million in Free Cash Flow Before Growth. First quarter results from existing projects were affected by lower wind resource, which came in at approximately 99% of the long-term average compared to 103% in the prior year period. This impact was partially offset by contributions from repowered assets, which continue to enhance generation and cash flow across the portfolio. Favorable weather and strong execution during the first quarter allowed us to pull ahead planned major component work from later in the year, which was the primary driver of higher year-over-year O&M costs. In addition, the results for both adjusted EBITDA and Free Cash Flow Before Growth reflect the impact of asset dispositions completed in 2025. The year-over-year decline in Free Cash Flow Before Growth was consistent with the company's expectations as it was primarily driven by higher financing costs resulting from the balance sheet simplification and capital plan funding activities in 2025. Specifically, XPLR Infrastructure's First Quarter 2026 Free Cash Flow Before Growth includes approximately $74 million of incremental corporate interest expense from the approximately $1.75 billion of unsecured notes issuances in March 2025. It also includes approximately $12 million higher year-over-year interest expense from project financings raised in 2025. As a reminder, Free Cash Flow Before Growth reflects actual cash interest payments within the measurement period. As a result, quarterly results can vary based on the timing of interest payments, along with the natural seasonality of wind and solar generation. Taken together, these factors typically result in a lighter contribution in the first quarter. Specifically, XPLR's First Quarter 2026 Free Cash Flow Before Growth is expected to represent roughly 12% to 15% of its expected full year results. Additional granularity on the timing of expected interest payments can be found in the appendix of today's presentation. For 2026, we continue to expect adjusted EBITDA of $1.75 billion to $1.95 billion and Free Cash Flow Before Growth of $600 million to $700 million. As always, our expectations assume our usual caveats, including normal weather and operating conditions. Let me close by reinforcing the key elements of the XPLR platform. XPLR is a contracted infrastructure platform generating stable cash flows supported by long-term agreements and high credit quality counterparties. Our strategy remains focused on two priorities: continuing to simplify the capital structure and executing on attractive investments into the existing asset base to create value for unitholders. We believe that consistent execution against these priorities supports both our financial flexibility and our strategic positioning. We believe that the combination of stable cash flow generation and a disciplined capital plan allows XPLR to allocate retained cash flows in a value-maximizing manner over time. That discipline underpins our strategy and positions XPLR to capture long-term value as U.S. power demand continues to grow. That concludes our prepared remarks, and we will now open the line for questions. Operator: [Operator Instructions] We will take our first question from Nelson Ng from RBC Capital Markets. Nelson Ng: Alan, you mentioned there was a small recontracting during the quarter with a $25 improvement in the power price. Are you able to provide the power price prior to the recontracting? I was just wondering what the percentage improvement was. Alan Liu: We didn't provide the prior contract price, so just commercial sensitivity of where the ultimate PPA landed here. But I would say, if you think about it, right, and we've given you some disclosure previously about on average, kind of the uplift. This is in line or even slightly better than kind of the uplift that we would have expected for this market. The opportunities, obviously, we've highlighted before, right? They're generally in SPP and ERCOT, and WACC. So it's a project in one of those markets and in line with where we expected, which is it's a multiple above where the previous price was. Nelson Ng: Okay. And then just on the battery storage front, I think you previously agreed to sell interconnection rights to raise $45 million of the $80 million required for your equity contribution. Have you identified the rest of the projects that you're looking to sell? And then just a follow-up on that. Is there a time line in terms of when there could be another batch of projects that XPLR could co-invest in? Alan Liu: I'll address the first question, which is the funding for the existing storage JV. We're certainly working through a list of potential opportunities with NEER. As a reminder, construction for these projects aren't slated to begin until at the earliest end of this year, but most likely, it's throughout 2027 and then they are COD in late 2027. So we have some time. But with the list and the opportunities that we're looking at, we feel confident we will be able to fund those with additional asset sales. I think your question about will there be additional storage opportunities? I think the right way to think about it is across our 10-gigawatt portfolio, we certainly have multiple gigawatts of surplus interconnection. Those represent potential opportunities. We certainly feel out of that set, there are opportunities for additional co-located storage or other development opportunities. But whether or not those projects are ultimately attractive to XPLR site location specific. It comes down to a lot of factors, including the demand and the pricing that can be achieved for those specific projects. And then ultimately, whether or not we participate or monetize those, the value of that interconnect is going to fall under our existing capital allocation framework, right? It's subject to what else can we do with our money, are there better returning allocations or and then also it's subject to the balance sheet and our cost of financing. So a long way of saying, yes, there's opportunity. We have not committed to any incremental investments at this time, but we'll keep you posted. Nelson Ng: And then just one last question. You mentioned the balance sheet. So looking at the balance sheet, there's about $943 million of cash and equivalents. I presume a lot of that cash is at the project level. But like roughly how much of that cash is readily available at the corporate level? Jessica Geoffroy: Nelson, it's Jessica. So you can see in our SEC filings, we break out the amount of cash held in reserves at the projects. Our 10-Q for this quarter will come out after market close today. But looking back at the last quarter, there's roughly $300 million held in reserves at the projects. Operator: [Operator Instructions] And we will take our next question from the line of Mark Jarvi from CIBC Capital Markets. Mark Jarvi: Just going back to the recontracting opportunity. Can you comment at all in terms of like how big the funnel would be? Like how many megawatts across your portfolio are something you're actively exploring? And we're sort of -- I assume it's more weighted to wind just given the vintage of the contracts and assets. Is that right? Alan Liu: Mark, this is Alan. That is correct. I think that's the right way to think about it. The majority of the opportunity will exist in wind projects and obviously, in the specific markets. We've highlighted this before in prior presentations. In the near term, and we've given you a schedule a rough kind of chart that shows there are increasing opportunities as we get closer to 2030. But there's definitely going to be tangible opportunities that we're working on as we speak. But the majority, I would say, roughly 70% of the kind of opportunity exists beyond 2030. And we're hoping to continue to execute in the next few years leading up to that. Mark Jarvi: And obviously, the pricing you received was attractive. I think NextEra said around $20 a megawatt hour what they got. So that's a good uplift. Just curious in terms of what the tenor of the contracts are out there and sort of that trade-off between price and duration. Alan Liu: I believe it was a 15-year contract, but we'll confirm. Mark Jarvi: But that's generally what the counterparties are looking for, that sort of that term at this point? Or is there a real range out there of shorter duration? Yes. Alan Liu: Yes. So just to confirm, it was a 15-year busbar contract here. And as you know, there's always a trade-off between tenor, right, whether it's hub settled or busbar. And ultimately, for us, this made the most sense, right, between duration of the contract, like the fact that in this particular market, we prefer the busbar over a potentially higher hub settled contract here. Mark Jarvi: Got it. And just on the battery projects co-investment, are the costs all locked down for those projects, like everything locked down in terms of equipment, EPC, all that kind of stuff, just so that you know that the $80 million investment is more or less firm at this point? Alan Liu: So this is a true equity co-investment alongside NEER Energy Resources. So as with any equity investment, we -- if there are cost overruns, we, of course, would be as a partner funding that. But we feel good about this project. It's well advanced. Supply chain, we have the same benefits, right, the benefit of having NEER as a co-investment partner here is that we have access to that supply chain and the equipment. We feel very good about having secured. Operator: There are no further questions on the queue. That concludes our question-and-answer session for today. That also concludes our call for today. Thank you all for joining, and you may now disconnect.
Operator: Good morning, and welcome to the PennantPark Floating Rate Capital Ltd.'s Second Fiscal Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, all participants have been placed in a listen-only mode. The call will be open for a question-and-answer session following the speakers' remarks. Simply press star 1 on your telephone keypad. If you would like to withdraw your question, press star 2 on your telephone keypad. It is now my pleasure to turn the call over to Art Penn, chairman and chief executive officer of PennantPark Floating Rate Capital Ltd. Mr. Penn, you may begin your conference. Art Penn: Thank you, and good morning, everyone. Welcome to PennantPark Floating Rate Capital Ltd.'s second fiscal quarter 2026 earnings conference call. I am joined today by Jose Briones, Senior Partner at PennantPark. Richard Allorto, our CFO, was unable to be with us today due to a prior commitment. Jose, please start off by disclosing some general conference call information and include a discussion about forward-looking statements. Jose Briones: Thank you, Art. I would like to remind everyone that today's call is being recorded and is the property of PennantPark Floating Rate Capital Ltd. Any unauthorized broadcast of this call in any form is strictly prohibited. An audio replay of the call will be available on our website. I would also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Our remarks today may include forward-looking statements and projections. Please refer to our most recent SEC filings for important factors that could cause actual results to differ materially from these projections. We do not undertake to update our forward-looking statements unless required by law. To obtain copies of the latest SEC filings, please visit our website, pennantpark.com, or call us at (212) 905-1000. At this time, I would like to turn the call back to our chairman and chief executive officer, Art Penn. Art Penn: Thanks, Jose. I will begin with an overview of our second quarter results, including our dividend adjustment and an outlook for net investment income. I will then discuss the current market environment and how we believe we are positioned going forward. Jose will follow up with a detailed review of our financial results after which we will open up the call for questions. We are pleased with the continued strong performance and quality of our portfolio in what remains a challenging market environment. The risk-reward profile of the core middle market remains meaningfully more attractive than that of the upper market. NAV was flat quarter-over-quarter. Median portfolio company leverage remains moderate, at 4.6x. Last twelve months, PIK interest is only 2.2% of total interest and nonaccruals are less than 1% of the portfolio. We do not have material software exposure. The substantial growth of the PSSL 2 JV this past quarter provides a solid base and positions us for growth in NII over time as the JV ramps. Let me now walk through our quarterly results. For the quarter ended March 31, core net investment income was $0.27 per share. During the quarter, we continued to scale our new joint venture PSSL 2, investing $148 million in new and existing investments. At quarter end, the portfolio totaled $340 million. We are encouraged by the pace of deployment and remain focused on methodically scaling PSSL 2 to over $1 billion of assets consistent with our existing joint venture. Based upon the current market environment, we expect this ramp to occur over the next 12 to 18 months while maintaining our disciplined underwriting standards. In light of the current market dynamics, in consultation with our board, we are updating our dividend framework to better align with net investment income. Beginning with the July dividend, we will set a base monthly dividend at $0.08 per share, a level we believe is well supported by current earnings. In addition, we will introduce a variable supplemental dividend equal to 50% of the excess NII above the base dividend. The supplement will be declared and paid monthly along with the base dividend. Let me now turn to the broader market environment. M&A activity has increased over the last six to nine months. Although overall conditions remain uneven, private equity sponsors remain active, and we are seeing a growing pipeline of attractive opportunities across both new originations and add-on investments. However, activity levels remain below the unusually strong levels observed in 2024 as the market transitions toward a more normalized backdrop. We expect increased transaction activity to drive repayments across the portfolio, including opportunities to monetize equity co-investments and redeploy capital into income-generating investments. Notably, we expect a meaningful realization from our equity co-investment in Echelon this quarter. Echelon is a leading defense technology company sponsored by Sagewind Capital, our long-term sponsor relationship. Echelon announced that it has agreed to be acquired by Shield AI, another cutting-edge defense technology company. Upon closing, we expect our $3.2 million equity co-investment to generate approximately $47 million in total proceeds. Proceeds will consist of $40 million of cash and $7 million of value in Shield AI stock. This represents nearly a 15x multiple on invested capital and demonstrates the value of our equity co-investment program. Given the current geopolitical environment and the Echelon news, it is important to highlight approximately 20% of our portfolio is exposed to government services and defense. In the core middle market, pricing for high-quality first lien term loans remains attractive, typically ranging from SOFR plus 500 to 550 basis points with leverage of approximately 4.5x EBITDA. Importantly, these structures continue to include meaningful covenant protections in contrast to the covenant-lite structures prevalent in the upper middle market. We believe that the current environment favors lenders with strong private equity sponsor relationships and disciplined underwriting, areas where we have a clear competitive advantage. During the quarter, we invested $295 million at a weighted average yield of 9.3%, including $117 million invested in six new platform portfolio companies, with a median debt-to-EBITDA ratio of 3.0x, interest coverage of 3.4x, and a loan-to-value of only 44%. Our portfolio remains conservatively positioned. PIK income represents just 2.5% of total interest income, among the lowest levels in the industry. Median leverage was 4.6x. Median interest coverage was 2.0x, and median loan-to-value was 44%. We ended the quarter with three nonaccrual investments, representing just 0.8% of the portfolio at cost and 0.5% at market value. These results reflect the rigor of our underwriting process and the discipline of our investment approach. Turning to software exposure, which has been an area of recent market focus, our exposure remains limited at approximately 4.3% of the portfolio and is structured consistently with our core middle market strategy. These investments are primarily cash-pay, covenant-protected loans with moderate leverage and shorter durations. Importantly, they are concentrated in mission-critical enterprise software serving regulated industries such as defense, healthcare, and financial institutions. We believe this represents a meaningful point of differentiation relative to our peers. We continue to believe that our focus on the core middle market provides us with attractive investment opportunities where we provide important strategic capital to our borrowers. Core middle market companies, those typically with $10 million to $50 million of EBITDA, operate below the threshold of the broadly syndicated loan and high-yield markets. In the core middle market, because we are an important strategic lending partner, the process and package of terms we receive is attractive. We have many weeks to do our diligence. We thoughtfully structure transactions with sensible leverage, meaningful covenants, substantial equity cushions to protect our capital, attractive spreads, and equity co-investment. Additionally, from a monitoring perspective, we receive monthly financial statements to help us stay informed on the performance of our portfolio companies. Regarding covenant protections, while the upper middle market has seen significant erosion, our originated first lien loans consistently include meaningful covenants that safeguard our capital. Our credit quality since our inception over 14 years ago has been excellent. PennantPark Floating Rate Capital Ltd. has invested $9 billion in 551 companies and we have experienced only 27 nonaccruals. Since inception, our loss ratio on invested capital is only 12 basis points annually. As a provider of strategic capital that fuels the growth of our portfolio companies, in many cases we participate in the upside of the company by making an equity co-investment. Our returns on these equity co-investments have been excellent over time. Overall for our platform from inception through March 31, we have invested over $618 million in equity, and co-investments have generated an IRR of 25% and a multiple on invested capital of 2.0x. Looking ahead, our experienced team and broad origination platform position us well to generate attractive deal flow. Our mission remains consistent: to deliver a stable and well-covered dividend while preserving capital. Everything we do is aligned to that objective. We continue to focus on investing in high-quality middle market companies with strong free cash flow generation. We capture that value through first lien senior secured loans, and we pay out those contractual cash flows in the form of dividends to our shareholders. With that overview, I will turn it over to Jose for a more detailed review of our financial results. Jose Briones: Thank you, Art. For the quarter ended March 31, GAAP net investment income was $0.26 per share, and core net investment income was $0.27 per share. Core net investment income includes the add-back of $1.1 million of debt issuance costs related to the refinancing of our securitization due 2038. Our operating expenses for the quarter were as follows. Interest expense on the debt was $24.1 million. Base management and performance-based incentive fees were $12.8 million. General and administrative expenses were $2.1 million. Credit facility amendment and debt issuance costs were $1.1 million. Provision for taxes was less than $100 thousand. For the quarter ended March 31, net realized and unrealized change of investments, including the provision for taxes, was a gain of $3 million. As of March 31, NAV was $10.47 per share, essentially flat from $10.49 per share last quarter. As of March 31, our debt-to-equity ratio was 1.6x, and our capital structure is diversified across multiple funding sources, including both secured and unsecured debt. Subsequent to quarter end, we paid down our revolving credit facility and reduced our debt-to-equity ratio to 1.5x, which is within the target range of 1.4x to 1.6x. As of March 31, our key portfolio statistics were as follows. The portfolio remains well diversified, comprising 162 companies across 51 industries. The weighted average yield on our debt investments was 9.8%, and approximately 99% of our debt portfolio is floating rate. LTM PIK income equaled 2.2% of total interest income. The portfolio is comprised of 87% first lien senior secured debt, 1% in second lien and subordinated debt, 3% in equity of PSSL 1 and PSSL 2, and 9% in equity co-investments. Debt-to-EBITDA on the portfolio is 4.6x and interest coverage was 2.0x. With that, I will turn the call back to Art for closing remarks. Art Penn: Thanks, Jose. In conclusion, I would like to thank our exceptional team for their continued dedication and our shareholders for their trust and partnership. We remain focused on delivering durable earnings, preserving capital, and creating long-term value for all stakeholders. That concludes our remarks. We will now open the call for questions. Operator: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We will take our first question from Brian McKenna of Citizens. Brian McKenna: Thanks. Good morning, everyone. NAV per share was roughly flat in the quarter. That is a pretty notable standout here within the group for the first quarter. What is driving the resiliency here? You do have the fairly sizable realization event, I believe, coming in the next quarter or so, so I am assuming that drove some incremental gains across the portfolio. But anything else to note across the rest of the portfolio? Art Penn: Yeah. Thanks, Brian, and good morning. Yes, Echelon is a big piece of the equation there, really showing the value of equity co-invest. We also have a few other equity co-invests that are percolating along nicely, and you will see those in the SOI. We have one called Guild Garage, which is an equity co-invest that has already been exited, and we have some others that are certainly not the size of Echelon but are percolating along and provide us some nice singles and doubles. Just to zoom out, that is really part of the reason we do equity co-invest. Many of our peers do it; some of our peers do not. It is nice to have something in the portfolio that can give you some lift that can offset the inevitable nonaccruals that you are going to have in a broadly diversified loan portfolio. The program in this quarter is certainly meeting its mission and providing a stable NAV. Brian McKenna: Got it. That is helpful. Thanks, Art. And then when you look at your pipeline of new originations today, where are you leaning in? Is it a lot of the same sectors? I know you have been active in defense and government services, but what is the mix of the pipeline there? And then how do spreads compare on these transactions versus spreads tied to the prepayments that have come in over the last quarter or two? Just trying to gauge where the spreads are coming in today versus the recent prepays. Art Penn: Yeah. Jose, do you want to answer that one? Jose Briones: Sure. Good morning. With regards to areas of opportunity and what we are seeing, defense and government services is a big part of our investment philosophy as well as healthcare and some business services. We are quite active with our private equity sponsors looking at those type deals in these industries, and you saw the benefit of our exposure to defense with Echelon. With regards to spreads, by and large in our market we are in that 500 to 550 over SOFR, and our view is that it is pretty consistent over the last couple of quarters. Art Penn: I will also add on the industry focus. Obviously, government services and defense are a big one. We also have substantial exposure to healthcare, which we think can be a resilient area of the economy. It is certainly a big part of GDP. Some of our peers have stumbled a little bit in healthcare over time. Thankfully for us, by and large, we have done very well with it. We keep leverage low. We do not get out over our skis. We keep leverage reasonable. I think where you have seen stumbles in healthcare, it is higher leverage situations, and when you have higher leverage, you just do not have the cushion to be able to withstand bumps in the road. We are pleased with healthcare. We also have a big business services book. Consumer services are a big area we have been doing quite a bit in, kind of services around the home. That has been an active area. Those are some of the areas where we focus. Brian McKenna: Very helpful. Thank you, guys. Operator: And as a reminder, that is star 1 for questions. Art Penn: Okay. We do have an extra question here. Please. Operator: We will go next to Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: Hey, guys. Apologies if I missed part of the call. Art, on your comments earlier on the dividend adjustment, should we look at that as a proxy for the run-rate direction for PennantPark Floating Rate Capital Ltd.? Art Penn: Yeah. It is a great question. We still believe that as we ramp this joint venture, this JV 2, we can earn over time north of $0.30 a share per quarter. If you were to model it out, Chris, I think you would see that. With what is going on in the M&A market, which was not quite as robust as we would have hoped, we said, let us not force it. Let us take our time in this more muted M&A market. Forcing investment usually does not pay off. So we said, let us take this time to adjust the dividend to be more comfortable. We clearly want to position ourselves as a prudent, stable BDC. BDCs today are a little bit out of favor, and as the market turns—and we hope they will be in favor again—we want to come out of it well positioned as a BDC that easily and comfortably covers its dividend and also has dividend upside. It was an opportunity for us to clear the table a bit, align the dividend comfortably to the NII, which is why we have chosen the $0.24 a quarter—$0.08 a month—plus 50% of the difference between the base and GAAP NII. We will pay that out monthly. We have already stated that for the month of July there will be an $0.08 per share base dividend and a $0.33 supplemental dividend for July, August, and September. We will announce earnings in August, be back here in a few months, see what GAAP NII was, and adjust the supplemental to whatever that was. We thought it was a good time, given what is going on, to reset the table, make sure our investors know that we can comfortably cover it, and not force the issue on ramping the JV in a more muted M&A market. I hope that makes sense. Christopher Nolan: Yeah, it does. And from a broader perspective, you see a lot of deals. For this quarter, at least from my chair, it looks like asset quality for BDCs in general seems to be deteriorating. I am not isolating PennantPark Floating Rate Capital Ltd. or any PennantPark entity, but in general, where do you see us in the cycle for credit for these middle market companies? Art Penn: For us—if you missed the first part of the call—our nonaccruals are under 1%. For us, that is pretty good. We will take below 1% in any environment. Let me comment on the broader picture. Those BDCs that have significant software exposure, by definition, had to mark those loans down. Hopefully, they will perform well and pay off, but by definition there was a mark-to-market, particularly for those with big software exposure. We have very limited software exposure, so we did not get hung up on that. I will highlight that where we do have our minimal nonaccruals—and where everyone in the industry has some nonaccruals—is what I will call the post-2021/2022 deals. Right post-COVID, there was a lot of money flowing around, and there was a perception that the era we were in—for instance, consumer products were doing well and other areas of the at-home economy—would persist long term. Here we are in 2026; there has been a reversion to the mean. Some of those companies that were doing really well in 2022 or 2023 are doing less well. For us, in our below-1% nonaccruals—and you see it elsewhere in the industry—that is where you are seeing some of the nonaccruals hit. Does that answer your question, Chris? Christopher Nolan: Yes, it does. Thanks for the color. Operator: At this time, there are no further questions. I will turn the call back to Art for any closing remarks. Art Penn: Thank you. Thanks, everybody, for being on the call today. We look forward to speaking with you in early August after our next earnings release. In the meantime, wishing all the mothers out there a great Mother's Day. Have a great summer, and we will speak to you in August. Thank you very much. Operator: This concludes today's conference. We thank you for your participation.
Operator: Thank you for your continued patience. Your meeting will begin shortly. Star zero and a member of our team will be happy to help you. Please standby, your meeting is about to begin. Welcome to the Post Holdings, Inc. Second Quarter 2026 Earnings Conference Call and Webcast. At this time, participants have been placed on a listen only mode. Lastly, if you should require operator assistance, please press 0. I would now like to turn the call over to Daniel O'Rourke, Investor Relations for Post Holdings, Inc. Good morning. Thank you for joining us today for Post Holdings, Inc.'s second quarter fiscal 2026 earnings question and answer session. Daniel O'Rourke: I am joined this morning by Robert V. Vitale, our Chairman and CEO, Nicolas Catoggio, our COO, and Matthew J. Mainer, our CFO and Treasurer. This call is being recorded, and an audio replay will be available on our website at postholdings.com. During today's call, we may make forward looking statements that are subject to risks and uncertainties that should be carefully considered by investors, as actual results could differ materially from these statements. These forward looking statements are current as of the date of this call, and management undertakes no obligation to update these statements. The press release and written management remarks that support today's call are posted on our website in the Investors section. This call will discuss certain non GAAP measures. For a reconciliation of these non GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. We hope you had a chance to review our management remarks. The key highlights are that our diversified portfolio delivered strong performance in Q2 and adjusted EBITDA above expectations. However, given new headwinds from the conflict in the Middle East, we maintained our previous adjusted EBITDA guidance. Meanwhile, we continued aggressive share repurchases, and fiscal year to date, we have reduced our share count by 15%. Finally, our strong cash flow, liquidity, and credit metrics continue to afford us significant flexibility for opportunistic capital allocation. With that, I will briefly turn the call over to Matt. Matthew J. Mainer: Thanks, Daniel. Setting aside the business performance, I am sure you all saw our announcement yesterday on our CEO succession plans. First of all, on behalf of our whole team, congratulations to Nicolas. Really well deserved. You have done a fantastic job leading PCB. We are confident that will translate to more of the same as you transition into leading Post Holdings, Inc. To Rob, we have all learned from the best and truly appreciate your leadership over the past twelve years. As much as Rob is respected by so many on this phone call, it is even more so within the walls of our company. With that, I will turn the call over to the operator for Q&A. Operator: The floor is now open for questions. Again, thank you. Our first question comes from Andrew Lazar with Barclays. Your line is now open. Andrew Lazar: Great. Thanks so much. Rob, congratulations to you on a terrific run as CEO, and glad you are staying on as Chairman, and I can say, as I think many other packaged food names would benefit mightily from taking a page from your operating and capital allocation playbook. And Nicolas, congratulations to you on being named CEO. Maybe to start, just a question on pricing for the industry and Post Holdings, Inc. I realize there is still quite a bit of uncertainty, but should the industry face another round of more significant inflation, do you think pricing could be one of the levers used this time around given consumers have been pushing back on price points where they are today? Some are actually lowering prices with less than stellar results thus far. I am curious on your view on that and how does Post Holdings, Inc. sort of think about that? Robert V. Vitale: Thanks, Andrew. Nicolas Catoggio: What I would say is it depends on where inflation falls. If it is in the low single digits, I think we will see more of CPGs trying to absorb that within their P&L, and that could be in the form of maybe lowering promotional intensity. If it is more than that, we will probably see more targeted pricing. Andrew Lazar: And then maybe just on pet food. Trying to get a sense of what our expectations should be going forward in pet, because I think this current quarter is when the restage really happens in earnest in the marketplace. How do you think about turning a brand around in a subcategory of dry dog food that is struggling a bit right now relative to some other parts of pet? Nicolas Catoggio: Yes. Let me frame pet in three big buckets. One is a bit out of our control: the category has been slower than what we anticipated, especially dry dog food. Sixty percent of our portfolio is dry dog food. As we shared in our remarks, that was 4% down in pounds. So that is about 20% of our problem tied to the category. The rest you can think about half and half in two buckets. One is what we shared on 9Lives. We raised prices on a third of the brand that is more functional. As we raised prices, we saw higher elasticities than what we anticipated, and we lost distribution in a couple of retailers. That, in our mind, is fairly straightforward. If you remember less than a year ago, we were having the same conversation about Grape-Nuts when we raised prices. Remember that these brands have lower margins, and that is why we do what we do and we focus on profit. We raised prices on Grape-Nuts, we saw the same elasticities, we fixed that with rollbacks in the short term, and now we have fixed it with price pack architecture, and that brand in one of our larger retailers is growing at 40% in pounds now. So we see that as the same playbook. We tried price points, elasticity was a bit higher, we can solve it in the short term with rollbacks, and then longer term, call it a couple of quarters from now, we should fix it with price architecture. So it is fairly straightforward. And then the third bucket is Nutrish. We are in early stages of the relaunch, and that will take probably the entire Q3 to fully hit the market. It is happening, it is flowing in, but it is still, especially in the food channel, taking a bit longer to be fully reflected on shelf. That one, if you remember, is a full relaunch: new positioning, new packaging, and new price points. We feel encouraged about where it has been fully relaunched. In one of our largest retailers, we are already seeing sequential improvement week after week, and the last week of April, we already saw the brand flat to last year in a category that is again declining. So that is a positive, but it is still early on and we probably need a couple more months. By Q4, we should start seeing the carryover showing at least flat to slight growth versus a year ago. That is how we think about that. Andrew Lazar: Great. Thanks so much for the color. Congratulations again. Nicolas Catoggio: Thanks so much. Operator: Thank you. Our next question comes from Matthew Edward Smith with Stifel. Your line is now open. Matthew Edward Smith: Hi, good morning. You had another strong EBITDA and cash flow performance in the quarter, and the guidance reiteration referenced caution around new cost pressure and uncertainty. Are there specific areas of the business where you are seeing these higher costs, and are you seeing an impact from a more cautious consumer? Is the uncertainty more focused on the cost side? Matthew J. Mainer: I think directly we are seeing the cost impacts, Matt, really around fuel charges and surcharges. We have some coverage or hedges in place, but this is exposure beyond those coverages. Given the dramatic increase in diesel, that flows through across the company, especially in North America. So that is really the key driver. Nicolas Catoggio: Thanks, Matt. Matthew Edward Smith: Just a follow-up. The cash flow performance has been strong and supported the share repurchases to date while holding leverage flat. You called out the strong liquidity position Post Holdings, Inc. maintained. How would you characterize the M&A environment? Are you seeing an increase in asset availability? Do you think seller expectations are reasonable? And has there been an impact to deal flow from Middle East disruption and uncertainty? Thank you. Matthew J. Mainer: Yes. I think it continues to be a bit more of the same. You certainly have some assets, some private investments, that have not come to market yet, and I think that is a nod to where public multiples are and where a clearing price might be. So there are still some potential transactions sitting on the sidelines. That aside, we continue to see some of our larger competitors talk about maybe separating portions of their portfolio. We have seen it happen already in a couple of cases in the last year. I think those are larger, more transformational transactions. We look at everything, but that is something we would evaluate. Then I think it is a bit of a barbell: you have the smaller tuck-ins that are available that are, for us, more synergistic and obviously easier to digest. But the backdrop for us is really where our share price is trading and the implied multiple. Again, we laid that out in the prepared remarks, and that is really our benchmark, our comparison. It continues to be a high bar, but we continue to look at all that is out there. Matthew Edward Smith: Appreciate it, Matt. I will pass it on. Operator: Thank you. Our next question comes from David Sterling Palmer with Evercore ISI. Your line is now open. David Sterling Palmer: Thanks, and congratulations on your career so far, Rob, and all the value creation. And back to you, Nicolas. Nicolas Catoggio: Thank you. David Sterling Palmer: I want to ask a first question on foodservice profitability. Clearly, there was a moment of a lot of trade-in to higher-margin value-add. Prices were higher and egg prices have come down, and it has been a darn good profitability run here. I am wondering how you are thinking about profitability evolution going forward, maybe rising to sort of a mid-cycle profitability from here as you see some of your accounts doing better lately. In other words, I am trying to figure out if $125 million a quarter is really going to be the right run rate into fiscal 2027 or if you see upside to that. And I have a follow-up. Nicolas Catoggio: We still see that as the run rate. Again, in the quarter there were many puts and takes between lapping HBI supply constraints and pricing and cost in excess of pricing last year. But our supply and demand remain balanced. While we do not provide guidance segment by segment, we see us going back to our run rate. David Sterling Palmer: Got it. And then similar to the previous question on Pet, I just want to get a sense on cereal of your confidence in getting what I think would be your goal of a low-single-digit decline rate just to really have that pull its own weight. Cereal has been rough. What is the confidence in getting to that, and what is the outlook there? Thank you. Nicolas Catoggio: Let me start with the category. As we shared in the remarks, it has been better compared to where we were a year ago. For the quarter, the category was down 3% in pounds, and if you look at April, it is 2.5% down. So it is improving. It is still not where it was pre-pandemic, but it is getting there. For our portfolio, you have seen some of the data; we are extremely pleased with where we are. Q2 was another quarter where we were still working through the transition assortment, especially in the food channel, to be better prepared or have higher return on promotional spend. Because of that, our promotional spend was down a bit versus prior year, and still we were the only large player that held flat dollar market share year over year. So we feel really good about our portfolio, and we feel good about the improvement in the category. David Sterling Palmer: Thank you. Operator: Thank you. Our next question comes from Thomas Palmer with JPMorgan. Your line is now open. Thomas Palmer: Good morning. I would like to echo my congratulations to both of you and appreciate all the help, Rob, as I have ramped on Post Holdings, Inc. I wanted to follow up on David's question on the foodservice business and some of the egg dynamics. Obviously, in the quarter, falling egg prices seemed to be a tailwind for earnings, especially based on some of the disclosures about input costs. But I did want to ask about the prospect of either lowering prices in your view here, or whether you are seeing any shift by customers, given how cheap whole eggs are, to shifting in the direction of the more labor-intensive side of starting with whole eggs instead of buying prepared egg products. I want to make sure that neither of those is something we should be looking out for. Thanks. Nicolas Catoggio: Sure. On the potential switching, that is obviously a risk we evaluate. But honestly, given the value proposition, what we find—especially in the larger operators—is once they switch to our value-added products, they are able to take that labor out of their system, and they see the benefits of consistency, food safety, and other attributes of the products. It is quite sticky. I would say that maybe the risk is around some of the smaller independent operators, which is a much smaller component of our business, where they have a little more flexibility in the back of the house to make that switch. But, again, by and large, the majority of the portfolio sees that change as quite sticky. Thomas Palmer: Okay. Thanks for that. And I wanted to ask on Weetabix. On the license commentary and how reported sales were a bit worse than underlying consumption trends for the broader business, how big is the license impact that we should be thinking about, and to what extent is 2Q reflective of the full magnitude we should be thinking about in the quarters that follow? Robert V. Vitale: Sure. That was related to the OREO licensing agreement that we had, and I believe we have another quarter before we fully lap that going away. In terms of volume, looking out to the balance of the year, we would expect better year-over-year performance as we lap that in the second half. As a reminder, we have seen the category come back to more flat, which is historically the right spot for what we have seen out of cereal in the UK. Weetabix—the yellow box product in particular—has strong momentum and continues to outperform. As we lap the OREO license going away as we get into Q3, we expect to see better performance overall out of our portfolio with that. Operator: Thank you. Our next question comes from Scott Michael Marks with Jefferies. Your line is now open. Scott Michael Marks: Hey, good morning. Thanks for taking our questions, and again, congrats to Nicolas and Rob. I wanted to touch on Weetabix off the back of Tom's question, more on the profitability side. Obviously, margins are still significantly below what they had been. Can you help us understand the path back toward that 30% level and how we should be thinking about opportunities within that business? Matthew J. Mainer: Sure. Scott, first a reminder: UFit continues to grow nicely within the portfolio. It is a co-manufacturing business, but as it grows, EBITDA margins compress, which is fine because we are still growing profit dollars. In terms of sequential improvement from where we are now, we executed some network optimization at the March quarter-end and closed a facility on the private label side, given our RTE acquisition a couple of years ago. That was part of the plan. We were able to execute it, and that will lead to better profitability in the second half. So, as you look at EBITDA margins, expect noticeable sequential improvements in Q3 and Q4 relative to the first half. Scott Michael Marks: Okay. Appreciate the thoughts there. Shifting over to Refrigerated Retail, very strong volume performance in the quarter. I know you called out a little bit of Easter timing benefit. Can you help us understand the magnitude of benefit there and how we should be thinking about run rate for that business in the back half? Matthew J. Mainer: Sure. We saw a pretty significant lift in dinner sides for the business—12% growth. The biggest driver certainly was Easter, and historically when Easter falls, it is a big lift. I would say that is the majority of the year-over-year movement, given Easter was in Q3 last year and in Q2 this year. The other contributor was the new private label products we rolled out at the beginning of the fiscal year. Those continue to do well. Arguably, they probably had a little Easter momentum behind them as well, but those are really the two drivers. Easter will fall away, but we will be lapping the private label introductions until we get through the end of the year. Nicolas Catoggio: Scott, I would add that there was some underlying volume growth for our branded portfolio. Of the 12%, call it roughly a third underlying volume growth, a third private label, and a third Easter timing, give or take. Scott Michael Marks: Okay. Appreciate it. Thanks. I will pass it on. Operator: Our next question comes from Marc J. Torrente with Wells Fargo Securities. Your line is now open. Marc J. Torrente: Hey, good morning, and thank you for the questions. Rob and Nicolas, congratulations as well. First, on the incremental cost impact from energy that you are expecting, has that started to flow through the P&L yet? Is it more of a ramping dynamic to the back half? And when would you decide to take pricing action if needed, and how quickly could that provide some offset? Matthew J. Mainer: Sure. We certainly are seeing the impacts as we got to the end of Q2 and into the beginning of Q3. It is pretty consistent, depending on the level of hedges we have in place, through the balance of the year. You can think of it as a steady run rate assuming the war extends to the end of the fiscal year, which is our base assumption. Nicolas Catoggio: On pricing, it is business by business, but for the most part, right now we are assuming we will absorb that through the P&L this fiscal year. We will probably then consider pricing, but it depends on where inflation falls. Right now we are seeing it in fuel and a little bit impacting packaging. If things get worse, we will have to think about pricing, and it is probably going to be in the new fiscal year. It is way too early to say. Marc J. Torrente: Understood. Thank you. And then maybe an update on the performance of the APAP Nuisance holding in the business. What was the contribution in the quarter since this was the first quarter of just having the ongoing business? And how is the integration and synergy capture progressing? Thanks. Nicolas Catoggio: The underlying business performance is in line with the deal model, so we are pleased. Some puts and takes—some slightly better, some slightly worse—but for the most part, in line with the deal model. The integration is going extremely well. Synergies are a bit ahead of the plan, and we should be hitting run-rate towards the end of this fiscal year as we anticipated. We feel really good about the combination. The team stayed focused with no distractions, the business is performing, and we are probably overdelivering on the synergies. Marc J. Torrente: Thank you. Operator: Thank you. Our next question comes from John Joseph Baumgartner with Mizuho Securities. Your line is now open. John Joseph Baumgartner: First off, to Rob, really fun ride the past decade and many thanks for all your insights and interactions over the years. It was a great learning experience. Thank you, and all the best in your future endeavors. Nicolas, congrats on the opportunity as well. First, relating to the ready-to-drink protein shakes: you understand this category very well, and you made the capital commitment to the manufacturing facility. I am curious about your perspectives on the sustainability of category growth and your participation as a manufacturer, given the influx of new brands coming in. How do you think about the competitive environment through a manufacturer’s lens? And second, given the de-rating of public equities in RTD—and maybe private assets as well—do you think about reengaging RTD as a brand owner again? Presumably, it is growth accretive and free cash accretive, and you would get synergies from repatriating the volume with a vertical operator. How do you think about your position in that category now and going forward? Robert V. Vitale: Yes. I think we have to be careful about questions that we answer from the perspective of BellRing. It is entirely appropriate to answer questions from a manufacturer’s perspective but not as a brand owner. I will let Matt talk about the manufacturing side. Matthew J. Mainer: In terms of the shake business, we continue to see opportunities to grow with BellRing. We are a key supplier of theirs. We have gotten our house in better order in terms of volume on the shake side, so we are feeling better about that business. We have talked about some higher costs we are trying to work through in terms of higher-than-anticipated costs around the manufacturing process—some of the costs we are absorbing. But on the volume side, we are seeing better performance, and there is certainly demand for the volume that we are pulling through on the BellRing side. John Joseph Baumgartner: Thanks for that. And then my follow-up: we are seeing some pockets of the industry where foodservice brands are making nice inroads in retail grocery and making that channel crossover—soup, french fries, mashed potatoes. You have the presence of Bob Evans already. Given how tough volume growth is for a lot of traditional retail brands, how do you think about leveraging the manufacturing assets to maybe expand Bob Evans into new categories or license other foodservice brands to enter additional categories within your meals orientation? Have you considered that as a means of growth, leveraging your assets? Nicolas Catoggio: I think you said it right. That is a lot of what the Bob Evans business is—it leverages a lot of the Michael Foods assets. Expanding to other categories is something our teams assess all the time, and it depends on where they see the ability to win in a category. I would highlight that the Bob Evans business is essentially that model: it leverages the Michael Foods assets. Operator: Thank you. We will go next to Carla Casella with JPMorgan. Your line is now open. Carla Casella: Hi, thanks for taking the question. You talked a bit about private brand today, and it raises the question: how much of your business today is private brand, and in which category are you the highest as a percentage of the segment? Is there more opportunity there, and is that a margin opportunity as well? Nicolas Catoggio: Post Consumer Brands is where we have the largest private label business and the highest as a percentage of total business—around 20% of the business. In terms of our position, we have a very strong position in cereal, granola, and peanut butter. We are a smaller player in private label pet; we have more of a premium private label presence in pet. In terms of opportunities, we see opportunities in all of those categories. In general, in all categories we play in, we consider how to leverage the branded and private label portfolio. Carla Casella: It sounds like you are growing more on the Refrigerated side. Is there any private label in Europe? Nicolas Catoggio: There is with Weetabix, yes, and that has been the case for years now. We are growing faster in Refrigerated because we made the decision to reengage with private label in that category—going from essentially nothing—so we see it as an ongoing opportunity. For now, it is targeted on fewer retailers, but there is opportunity there as well. Carla Casella: Is the opportunity similar to where you are in brands? Do you see those categories get to 20% private brand? Nicolas Catoggio: It is difficult to say. We never set a target like that. In the UK, it is higher than 20%. Matthew J. Mainer: Weetabix, from a category standpoint, operates where private label is much larger in the UK than the US—obviously a much smaller market overall—but our shares are in line with the category in terms of branded versus private label. Private label is north of 40% for us over there. We feel really good about having alternative price points, just like we do at Post Consumer Brands. We think that gives us a competitive advantage and inroads with retailers both on the branded side and with that private label presence. Carla Casella: Okay. And can I ask one quick finance question? You have done a lot with share buybacks and a bunch of refinancing lately. How much cash should we model that you need to keep on the books just to run the business? Matthew J. Mainer: We generally think about $150 million of cash on the balance sheet for working capital purposes. Given our Weetabix offices as well as international operations, that is about the right level of cash needed for daily operations. Carla Casella: Okay. Great. Thank you so much. Operator: Thank you. This does conclude today’s question and answer session, as well as Post Holdings, Inc.'s second quarter 2026 Earnings Conference Call and Webcast. Please disconnect your line at this time. Have a wonderful day.
Operator: Good day, and welcome to the PAA and PAGP First Quarter 2026 Earnings 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, you will need to press star 11 on your touch tone telephone. Please note this call is being recorded. I would now like to turn the call over to Blake Michael Fernandez, Vice President of Investor Relations. Please go ahead. Blake Michael Fernandez: Thank you, Michelle. Good morning, and welcome to Plains GP Holdings, L.P. First Quarter 2026 Earnings Call. Today's slide presentation is posted on the Investor Relations website under the News and Events section at ir.plains.com. An audio replay will also be available following today's call. A condensed consolidating balance sheet for PAGP and other reference materials are in the appendix. Today's call will be hosted by Willie Chiang, Chairman, CEO and President, and Al Swanson, Executive Vice President and CFO, along with other members of our management team. With that, I will turn the call over to Willie. Willie Chiang: Thank you, Blake. Good morning, everyone, and thank you for joining us. This morning, we reported first quarter adjusted EBITDA attributable to Plains GP Holdings, L.P. of $730 million. Al will cover the details on our results in his portion of the call. Let me start with the macro environment, which has changed significantly since our last call. Recent geopolitical events have reiterated the importance of reliable, secure, and responsibly produced energy. The closure of the Strait of Hormuz has significantly disrupted global shipping channels and Middle East supply, contributing to stronger commodity prices over the past couple of months. In response, excess floating storage has been drawn down, and strategic petroleum reserves are being released globally. While this helps balance the market deficit on a short-term basis, we are seeing a more constructive oil market developing on a longer-term basis. We expect this destocking environment to continue over the next number of months and ultimately drive a restocking phenomenon longer term as countries replenish depleted strategic petroleum reserves globally. Postwar, we would not be surprised to see several countries restock their SPRs above prewar levels, essentially creating an additional layer of demand into the future, which should support prices and incent producer activity. On the supply side, OPEC production capacity postwar remains uncertain, but we suspect spare capacity will be tighter based on a slower recovery of shut-in production and infrastructure damage during the war. We believe the conflict shifts the focus towards more geopolitically stable regions to ensure security of supply. Against this backdrop, North America, including the Permian, remains well positioned to play a critical role in meeting global demand. As this occurs, the value of existing infrastructure in the ground should continue to increase over time. For these reasons, we believe Plains GP Holdings, L.P. is well positioned for both the near-term volatility and longer-term macro environment. Based on these market dynamics and the growth trajectory that we see for our business, we have increased our initial 2026 EBITDA guidance. As highlighted on slide four, we are increasing the midpoint of our full-year 2026 adjusted EBITDA guidance by $130 million to $2.88 billion. The NGL segment EBITDA is now expected to be $170 million this year, following first quarter outperformance of $45 million and the updated divestiture timing now in May 2026. Our trajectory of growth this year is underpinned by three key drivers: the sale of our NGL assets, Cactus III synergy capture and streamlining. The growth of our EBITDA is paced with the execution of these initiatives and is enhanced by capturing optimization opportunities that have been substantially secured over the next three quarters. We are also seeing increased producer interest in both Canada and the United States for additional connections to our system. The combination of all these factors will ramp up through the year and position us well into the future. Our premier crude oil footprint continues to support stable fee-based cash flows in a variety of macro backdrops. As global markets turn to North America for long-term energy supply, we are well positioned across key producing basins and downstream markets to drive multiyear growth. We remain committed to our efficient growth strategy, generating significant free cash flow, optimizing our assets, maintaining a flexible balance sheet, and continuing to return cash to unitholders via our disciplined capital allocation framework. With that, I will turn the call over to Al to cover our quarterly performance and other financial matters. Al Swanson: Thanks, Willie. Slides five and six contain adjusted EBITDA walks that provide additional details on our performance. For the first quarter, we reported crude oil segment adjusted EBITDA of $582 million, which was broadly in line with our internal estimate and includes a full-quarter contribution from the Cactus III acquisition, offset by a number of one-off items, including winter weather impact in the Permian, system maintenance, and timing of minimum volume commitments. Moving to the NGL segment, we reported adjusted EBITDA of $145 million, reflecting a stronger-than-expected contribution from higher straddle production and improving frac spreads in March. A summary of 2026 guidance and key assumptions are on slide seven. Growth capital remains $350 million while maintenance capital was increased to $185 million reflecting ownership of the NGL assets into May. Regarding the $130 million increase in EBITDA guidance, key drivers are outlined in the waterfall on slide eight. The NGL segment increased by $70 million, driven by outperformance in the first quarter along with the ownership of NGL assets into May. The oil segment was increased by $60 million, driven by captured optimization opportunities, FERC tariff escalators, increased spot tariff volumes, and increased West Coast volumes. To the extent that the elevated commodity environment persists into the second half of the year, we would expect to capture incremental opportunities. For 2026 guidance, we continue to assume Permian crude oil production to be relatively flat year over year. While we have yet to see a meaningful shift in U.S. producer behavior, any increase in activity would likely benefit 2027 and beyond. We expect an improving back end of the crude oil curve and removal of natural gas takeaway constraints as new egress projects start up later this year to drive incremental activity throughout the year. Illustrated on slide nine, we remain committed to generating significant free cash flow and returning capital to unitholders while maintaining financial flexibility. For 2026, we expect to generate approximately $1.85 billion of adjusted free cash flow excluding changes in assets and liabilities, and excluding sales proceeds from the NGL divestiture. Our pro forma leverage at the end of the first quarter was 4.1x, reflecting the Cactus III acquisition. First quarter leverage pro forma for the NGL sale would decrease to approximately 3.5x, and we would expect leverage to migrate towards the low end of our target range of 3.25x to 3.75x by the end of the year. We expect net proceeds from the NGL sale to be approximately $3.3 billion, which is approximately $100 million higher than our prior estimate. Our acquisition of Cactus III last year has mitigated the tax liability of the unitholders resulting from the NGL divestiture. As a result, we no longer expect to pay a special distribution following the closing of the NGL sale. Before handing it back to Willie, I would note that both current and deferred taxes are elevated on the statement of operations this quarter because of the restructuring activities associated with the NGL sale. There was no cash tax impact in the quarter, as payment of the related taxes will be made in conjunction with closing or in future periods. With that, I will turn the call back to Willie. Willie Chiang: Thanks, Al. In the midst of volatile energy markets, we remain steadfast and focused on our three initiatives for 2026: closing the NGL sale, driving synergies on Cactus III, and advancing our streamlining initiatives. Our efficient growth strategy has positioned us well to execute through a range of market environments, generating durable cash flow and creating long-term value. Importantly, the improving oil macro environment is starting to present additional organic investment opportunities with strong returns. We continue to evaluate both organic and inorganic opportunities in a disciplined manner. Capital investments help underpin long-term EBITDA growth, but they must meet our return thresholds and provide visibility into future return of capital to unitholders. Our transition to a pure-play crude midstream company, coupled with the acquisition of Cactus III, is proving timely, as tensions in the Middle East position North America as a key source of global energy supply into the future. Before I turn the call over to Blake, I would like to make a brief comment about our pending transaction with Keyera. In terms of timing, as reported by both Keyera and Plains GP Holdings, L.P. in separate releases earlier this week, we are targeting to close the transaction this month. While it is unfortunate that the Competition Bureau has chosen to challenge the transaction, their lawsuit does not prevent the parties from closing the transaction, which both Plains GP Holdings, L.P. and Keyera are committing to do. I realize you may have some additional questions, but I hope you understand it would be inappropriate for us to comment any further on this matter, so we would appreciate it if you would refrain from asking questions regarding the transaction. Blake, I am now going to turn it over to you to lead us through Q&A. Blake Michael Fernandez: Thanks, Willie. As we enter the Q&A session, please limit yourself to two questions. This will allow us to address as many questions as possible from participants in our available time this morning. With that, Michelle, we are ready for questions. Operator: Thank you. If your question has been answered and you would like to remove yourself from the queue, please press 11 again. Our first question comes from Brandon B. Bingham with Scotiabank. Your line is open. Brandon B. Bingham: Thanks. Good morning, everybody. Just wanted to ask on the new guide. If I look at your sensitivity and the new crude price expectations, it would imply that, at least on price movements alone, the crude contribution should probably be higher than what is currently shown. Could you just walk us through what is baked into the new guide and maybe the embedded outlook in there? And, in light of some of the commentary in your prepared remarks about a more constructive longer-term market and the macro environment as it stands today, how are you thinking about the potential for the EPIC expansion at this point? Al Swanson: Sure, Brandon. Yes, our original guidance for the year assumed a $60 to $65 environment for 2026, call it a $62 average. We came into the year highly hedged at roughly those levels. The $85 environment that we are talking about for the future is roughly the strip from June through December when we looked at it. So there would be some benefit based on crude prices on our PLA, but we had hedged quite a bit before entering the year. That sensitivity we give is just a raw sensitivity; in order to make it more meaningful, we would have had to have disclosed the hedge position at the beginning of the year, which we have not historically done. So what I would say is that the first quarter performance and the nine months of our guide are very minimally impacted by actual PLA pricing. Jeremy L. Goebel: Brandon, good morning. We are excited about the opportunities around our entire long-haul portfolio and are having constructive dialogue with existing customers and new customers looking for secure supply from the United States. That results in some spot activity, but longer term, the expectation is to contract at higher rates than before with potentially new counterparties. That would apply to recontracting the existing pipeline capacity and expansions as well. We are looking at all of the above and hope to have updates in the coming quarters on how that looks. Operator: Our next question comes from Gabriel Philip Moreen with Mizuho. Your line is open. Gabriel Philip Moreen: Hey, good morning, everyone. Maybe I will just ask the Permian macro question, Willie, in terms of your best outlook. I think previous years you had talked about roughly 200,000 barrels a day year-over-year growth. Best venture at this point—do you think that goes significantly higher from here, 400,000, 500,000 in 2027? I am just curious what your latest thoughts are there. And then, can you talk about the sustainability of some of the marketing opportunities you are currently seeing—spreads, the value of dock space, whether you are debating terming some of those out at higher prices—and how the steepness of the curve and backwardation are impacting your storage? Willie Chiang: Gabe, the U.S. producers have remained very disciplined as far as capital allocation, and they are looking at the back end of the curve to see where it goes. WTI is roughly $70, and our view is when you start getting into $75 and above, increased activity happens. There are also some other short-term operating constraints limiting production a bit. The Permian has some natural gas takeaway constraints. There are new lines being built and being commissioned as early as later this year, so the thought is that alleviates itself. Our assumption for the Permian this year was flat, and if there is some upside, obviously, we benefit from it. We are not giving a formal guide, but we would expect growth going forward and probably some momentum of volumes behind that which is going to increase production here, maybe with a little bit of a flush later this year. So I think it really depends on the back end of the curve, but the systems are ready to go. Jeremy L. Goebel: Gabe, without getting into specific strategies—time, location, quality spreads and volatility—we benefit from all of those because we have the assets, the supply position, and the trading function to capture those opportunities. While it is hard to forecast those, when they arrive we can take advantage by, for example, selling a barrel now and buying it back later by emptying a tank, or capturing differences in grades between Canada and the United States and across Gulf Coast grades. We are excited about those opportunities. What we have put in the forecast has been substantially captured. It is a very volatile time period; we have only been in this 60 to 70 days, so it is hard to forecast that to continue. But if it continues, we would expect to capture more opportunities going forward. We also estimate there is close to 200,000 to 300,000 barrels per day of oil behind pipe in the Permian Basin. That flush production is substantial, and a lot of that is in the more constrained areas of the Delaware Basin, where we have a broader footprint, including New Mexico and other places. If you look at the Waha spread, flat price in Waha has been largely negative since last September; that is what is accumulating all of this behind pipe. As gas prices recover, productive capacity is already there to add. As you add more, that puts more pressure on potentially long-haul spreads and the ability to term up contracts at greater rates. We are seeing more demand from new customers, and we are seeing potentially flushed production. Those should all help convert short-term opportunities into longer-term opportunities. Willie Chiang: If you look at our numbers, long haul has increased and the margins on that have also improved. I think we are moving to a more structurally full-pipe situation as we go forward, which should be constructive for us. Operator: Our next question comes from Manav Gupta with UBS. Manav Gupta: Good morning. I just wanted to focus a little bit on the weather impact. I think it was about $49 million quarter over quarter. I am trying to understand the timing of minimum volume commitments. Is there a possibility some of this can be reversed in 2Q—some of what you lost in the current quarter comes back into the second quarter? And if you could also talk about the very strong NGL segment in the first quarter versus the last quarter—some of the drivers that helped you deliver much stronger earnings in that segment quarter over quarter? Al Swanson: Yes, Manav. Those are two different things. First, with regard to weather, weather is just production shut in for a period. You cannot make that back, but the flush production does come back. With regard to the timing of MVCs, that is continuous in our process. If you look at some of the earnings calls from others about their dock performance or other things in the first quarter, freight was really expensive and margins did not have people moving, so long-haul volumes were down across the industry. But that has completely reversed in timing, so you would absolutely expect that to be recovered. It is just a question of those MVCs accrued versus when they are paid. All the pipelines are full again, and the MVCs are being reversed. If you are referring to slide five, there are a bunch of one-time events in that negative $49 million that will not occur again as we go forward. Jeremy L. Goebel: On the NGL segment, higher border flows than expected drove stronger results. You had very full storage in Canada and continued production, which required volumes to be exported. Those were exported through our Empress asset, so higher border flows led to more straddle production, and that would all be unhedged and impact results. We also saw higher frac spreads toward the end of the first quarter. Those two factors continued into the second quarter, which is reflected in the increase in guidance for the NGL business through closing. Operator: Our next question comes from Michael Jacob Blum with Wells Fargo. Michael Jacob Blum: Thanks. Good morning, everyone. My question is on the guidance for the crude segment. It sounds like most of the increase is optimization that you have already locked in, and then maybe the rest is PLA. Is that right? And if prices stay elevated for the balance of the year, would there be upside to the crude segment guide, or is that already baked into the numbers? Willie Chiang: Michael, great question. Our assumptions are that the numbers in there are what we have captured that roll off through the year that we will actualize on optimization efforts. You are correct. If we have a stronger macro environment and higher prices, there definitely is upside. Michael Jacob Blum: Great. Thank you. Operator: Our next question comes from Jeremy Tonet with JPMorgan Securities. Your line is open. Jeremy Tonet: Hi. Good morning. What are you seeing locally, ear to the ground, as far as producer activity—rigs being picked up by the independents or larger drillers—and what would need to be seen across the strip to gain the comfort to do that? How do you think production could uptick here, and what do you see? And how do you think that impacts basis over time and what it could mean for future egress expansion? Jeremy L. Goebel: Jeremy, good morning. Since this started, you have already seen about 15 rigs added back, and we would expect some to continue. But as Willie mentioned, there is a bit of a throttle right now: you cannot add more natural gas to the system and flaring is not allowed. Productive capacity is there; rigs being added now would impact 2027. There is a bit of confusion in the market in that the products market and the physical crude market are substantially tighter than the financial markets would indicate, which means the back end of the curve has to come up. It is very difficult, even if you opened the Strait of Hormuz tomorrow, to get everything back in order the way it was. It will take a while for shipping to start; you have to empty tanks before you start back up production. Products markets are empty in some places. There is real dislocation that will take time. Some integrators have stated it is roughly three days to get back up for every day it is down, so it is potential for months to get out of this even if it were resolved today. Producers likely need more assurance on the back end of the curve before bringing rigs on. Service companies have stacked equipment; it takes capital and commitments to bring that back in. The longer this goes, the more likely that will occur, but the current dislocation on the back end of the curve is causing some hesitancy, and that prolongs the problem. On basis and egress, it is constructive for basis—more production and more demand on the water. Specifically to the Corpus market and some of the efficient docks on the water, you are seeing higher pricing relative to the screen. On a prolonged basis, that suggests new buyers coming to America and vessels re-pointed to the United States for a while. You are seeing that on the NGL side; you will see it on LNG and on crude. More buyers and more demand are generally constructive for spreads, and we would expect to match either our supply or our customers with that and hopefully offer service at a higher rate. Willie Chiang: On Cactus III, we have expansion capacity. As we have always said, we will pace that with market demand and commercial contracts. As we have gotten to know the project and assessed it, we have the ability to do that in a phased approach. It is fairly flexible for us to get additional volumes; it is not a binary big expansion. There are ways to do it in phases which should match customer demand. Generally speaking, in a higher price environment, there are more opportunities because there is a pull on the whole system. In that kind of market, market and optimization opportunities become more prevalent versus a lower price environment where less is moving and there are fewer opportunities. Operator: Our next question comes from Analyst with Goldman Sachs. Your line is open. Analyst: Hi, good morning. Thank you so much for the time. First, could you comment on the progress of your cost reduction initiatives? Are these on track with expectations at this point, and is there any potential for upside capture here? When should we expect Plains GP Holdings, L.P. to realize more significant efficiencies through the year? And then shifting to capital allocation—with debt reduction as a near-term focus, particularly following the pending NGL sale—when do we expect a shift from debt paydown to a larger focus on potential buybacks or preferred paydowns? Christopher R. Chandler: Good morning. We are on track to capture the efficiencies—$50 million by 2026 and an additional $50 million in 2027. We have already made a number of changes, some unrelated to the NGL transaction and some in anticipation of the NGL transaction. We feel confident in the number. There is always upside; we are always looking for additional opportunities and we will certainly pursue any that we find. We are not prepared at this time to change the $100 million target we have through 2027, but we are on track and things are going well. Al Swanson: On capital allocation, with the proceeds from NGL, we anticipate paying down a little over $3 billion of debt, which would be the term loan, the outstanding CP we have, and a $750 million note that matures later this year. Post that, we expect to be right at the midpoint of our leverage range, about 3.5x, and expect that to migrate down toward the low end, which will put us back where we were for several years prior to the EPIC acquisition—leverage toward the low end of our range. Our capital allocation priorities remain: maintaining distribution growth; funding investments, whether organic or M&A-related; taking out preferreds should leverage remain at or below the bottom end of the range; and opportunistic share repurchases. So once we get through the NGL sale and deploy the proceeds, we return to the framework we have been operating under for the last several years. Operator: Thank you. I am showing no further questions at this time. I would like to turn the call back over to Willie Chiang, President, CEO and Chairman, for closing remarks. Willie Chiang: Michelle, thanks. We appreciate everyone’s support and attention, and we look forward to seeing you on the roads. Stay safe. Thank you very much. Operator: Thank you for your participation. You may now disconnect. Everyone, have a great day.
Operator: Morning, ladies and gentlemen. Thank you for standing by. Welcome to the Wheaton Precious Metals Corp. 2026 First Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad, or type your questions in the Q&A box of the webinar. If you would like to withdraw your question, please press star 1 again. Thank you. I would like to remind everyone that this conference call is being recorded on Friday, 05/08/2026 at 11:00 AM Eastern Time. I will now turn the conference over to Emma Murray, Vice President of Investor Relations. Please go ahead. Emma Murray: Thank you, Operator. Good morning, ladies and gentlemen, and thank you for participating in today's call. I am joined today by Haytham Hodaly, Wheaton Precious Metals Corp.'s President and Chief Executive Officer; Vincent Lau, Chief Financial Officer; G. Wesley Carson, Vice President, Mining Operations; and Neil Burns, Vice President, Corporate Development. Please note, for those not currently on the webcast, a slide presentation accompanying this conference call is available in PDF format on the Presentations page of our website. Some of the comments on today's call may include forward-looking statements. Please refer to Slide 2 for important cautionary information and disclosures. Please note that all figures referred to on today's call are in U.S. dollars unless otherwise noted. With that, I would like to turn the call over to Haytham Hodaly, Wheaton Precious Metals Corp.'s President and Chief Executive Officer. Haytham Hodaly: Thank you, Emma, and good morning, everyone. Thank you for joining us today to discuss Wheaton Precious Metals Corp.'s first quarter results of 2026. I am very pleased to be speaking with you today on my first quarterly conference call as President and Chief Executive Officer of Wheaton Precious Metals Corp. Wheaton delivered a strong start to 2026 with Salobo and Peñasquito outperforming expectations and contributing to record quarterly revenue, earnings, and cash flow. We continue to build on our track record of disciplined capital allocation, announcing several transactions that further enhance the quality, diversification, and long-term growth profile of our portfolio. Most notably, during the quarter, we announced the Antamina silver stream with BHP, the largest transaction in Wheaton’s history and the largest fresh-metal stream transaction ever completed. Antamina is one of the world's premier base metal operations with a long track record, strong performance, significant exploration potential, and a demonstrated ability to replace reserves and extend mine life. The transaction meaningfully increases our exposure to high-quality silver production and reinforces Wheaton’s position as one of the largest companies globally. Subsequent to the quarter, we were also pleased to announce the Jervois stream with KGL Resources, marking Wheaton’s first stream in Australia. In addition, we announced a royalty on the Spanish Mountain project in British Columbia, which Neil will outline shortly. Collectively, these transactions further strengthen our portfolio, expand our geographic reach, and broaden our counterparty base while maintaining the disciplined approach to capital allocation that has underpinned Wheaton’s success. Looking ahead, we continue to see strong interest in streaming as a financing solution across the mining industry. Our corporate development team remains active in evaluating opportunities, and we will continue to focus on transactions that are accretive, well-structured, and aligned with Wheaton’s long-term strategy. Importantly, Wheaton’s growth is not dependent on additional transactions. Our existing portfolio already provides a strong organic growth profile of approximately 50% by 2030, supported by multiple development assets advancing through construction, ramp-up, and optimization. We believe that Wheaton is in a position of exceptional strength, supported by a high-quality portfolio of long-life assets, a robust pipeline of significantly de-risked growth projects, and a business model that has continued to deliver strong margins and meaningful exposure to precious metals. With that, I would like to turn the call over to G. Wesley Carson, our Vice President of Mining Operations, who will provide more detail on our operating results. G. Wesley Carson: Thanks, Haytham. Good morning, everyone. Overall production in the first quarter was 212,000 GEOs, a 22% year-over-year increase, primarily driven by stronger performance from Salobo and Peñasquito. Salobo delivered 69,000 ounces of attributable gold production in Q1, a decrease of approximately 3% year-over-year, primarily driven by lower grades and partially offset by higher throughput and recoveries. As highlighted in Vale Base Metals’ recent public disclosure, coarse particle flotation is the main near-term growth driver at Salobo, supporting the expansion of 12 million to 18 million tonnes per annum, targeting a total throughput of 42 million tonnes per annum by 2029. Vale Base Metals noted that studies and permitting are underway with construction expected to begin in 2027 and implementation by 2029. In addition, Vale Base Metals indicated that it continues to advance a series of growth-focused initiatives to enhance efficiency and support medium- to long-term production growth across its global complex. In Q1, Antamina produced 1.6 million ounces of attributable silver, an increase of approximately 48% relative to 2025, primarily due to higher grades and improved recoveries. Attributable production to Wheaton is expected to increase significantly starting in 2026, reflecting the addition of the new BHP stream, which became effective on April 1, and supported by higher throughput and stable grades and recoveries. Peñasquito produced 2.6 million ounces of attributable silver in Q1, representing a 46% increase year-over-year, supported by higher grades and improved recoveries. After a strong Q1 performance from Peñasquito, we anticipate attributable production to be lower in Q2, reflecting reduced grades and lower throughput due to plant maintenance. Blackwater produced 129,000 ounces of attributable silver and 5,000 ounces of attributable gold in Q1. During the quarter, Blackwater experienced a seven-day unplanned mill shutdown due to a ball mill gearbox failure. Artemis noted that strong grades helped offset the lower throughput resulting from the interruption, and they are maintaining their full-year production guidance with plans to recover the lost production over the balance of the year. Several development projects are in the process of ramping up production, including Mineral Park, Phoenix, Goose, and Platreef, all of which reached initial production in the last eight months. Construction activities advanced on a number of development projects, including the Koné project, where Montage reported that the project remains on track for first gold pour by the end of the year via the oxide circuit, with the hard rock comminution circuit expected to be completed in 2027. Wheaton’s production outlook for 2026 remains unchanged, with attributable production expected to fall between 860,000 and 940,000 GEOs. Production is expected to be weighted to the second half of the year with approximately 45% in the first half and 55% in the second half, driven by mine sequencing at Salobo and Peñasquito, the start of Antamina’s BHP contract in Q2, as well as the ramp-up of the newly operating assets throughout 2026. Production at Salobo is expected to increase through the remainder of 2026 with improved grades as per the mine plan and consistent throughput and recoveries across Salobo I, II, and III. Looking ahead, we project annual production to grow at an industry-leading rate of approximately 50%, reaching 1.2 million GEOs by 2030. From 2031 to 2035, attributable production is currently forecast to average approximately 1.2 million GEOs annually, supported by incremental contributions from additional pre-development assets. That concludes the operations overview. I will now turn the call over to our CFO for the financial results. Vincent Lau: Thank you. As detailed by Wes, production in Q1 was 212,000 GEOs, a 22% increase year-over-year. Sales volumes were 182,000 GEOs, a decrease of 3% from last year due to an increase in produced but not yet delivered, or PBND, due to timing differences between production and sales. On April 1, we closed the previously announced transaction on Antamina with BHP, and we expect Q2 deliveries to include two of the typical three quarterly shipments, with a full-quarter contribution expected thereafter. At the end of Q1, the PBND balance was approximately 184,000 GEOs, representing 2.8 months of payable production. We continue to expect PBND levels to remain between 2.5 and 3.5 months for the remainder of 2026, with the higher end of the range reflecting the potential impact of ramp-up activities at new mines throughout the year. Strong commodity prices, coupled with solid production, led to record quarterly revenue of [inaudible], an increase of 92% compared to last year and driven primarily by a 98% increase in the average realized gold equivalent price. 51% of this revenue came from gold, 47% from silver, and the rest from palladium and cobalt. Net earnings increased by 129% from the prior year to a record $582 million, while adjusted net earnings increased by 132% to a record $583 million. Operating cash flow increased to $766 million, representing another quarterly record, an 812% increase from last year. During the quarter, we made total upfront cash payments for streams of $90 million, including $50 million for Spring Valley and $40 million for Marimaca, as our portfolio of development assets continues to advance toward production. Partially offsetting these disbursements, we received a repayment of $30 million relative to the upfront payment for Santo Domingo, with the amount to be re-advanced at a later date. We strategically monetized a portion of our long-term investment portfolio, generating $323 million in proceeds and a $150 million gain, and redeployed the capital into our core streaming business to support funding of the Antamina BHP stream, which closed on April 1. Overall, net cash inflows amounted to a record $1 billion in the quarter, resulting in a cash balance of $2.2 billion at March 31. On April 1, subsequent to quarter-end, we funded the $4.3 billion upfront payment to BHP for their 33.75% portion of the silver produced at the Antamina mine. The upfront payment was funded through a combination of the cash on hand at closing, a draw on our previously undrawn $2 billion revolving credit facility, and a new $1.5 billion term loan. The term loan and the revolving credit facility provide flexible, non-dilutive financing that may be repaid at any time without penalty. After advancing the upfront payment, the company is now in a pro forma net debt position of $2.1 billion, which, based on our annualized Q1 2026 EBITDA, represents a modest leverage ratio of approximately 0.7 times. With the strength of our production guidance outlined by Wes, we believe we are well positioned to generate strong operating cash flow through 2028 under base case commodity price assumptions, supporting accelerated debt repayment over a relatively short period of time, while continuing to build and grow our already strong capacity to fund existing commitments and potential future stream acquisitions. This concludes the financial summary. I will now hand things over to Neil to walk through the details of our recent corporate development activities. Neil Burns: Thanks, Vincent. It has been a busy start to the year for the corporate development team, and I am pleased to provide an overview of our two most recent deal announcements, which further reinforce Wheaton Precious Metals Corp.’s already exceptional growth profile. On April 1, we entered into a definitive agreement with KGL Resources for a portion of the gold and silver production at the Jervois project located in Australia. The Jervois project represents an important milestone for Wheaton Precious Metals Corp. as our first streaming transaction in Australia, one of the world's leading mining jurisdictions. This fully permitted copper project is positioned to commence construction imminently, with a concentrator designed to process 2 million tonnes per year, producing a copper concentrate with silver and gold by-products. In addition, we believe the project holds significant exploration potential. Under the agreement, Wheaton will purchase 75% of payable gold and silver until a total of 45,000 ounces of gold and 4.3 million ounces of silver have been delivered. After those thresholds, we will purchase 37.5% of payable gold and silver until an additional 15,000 ounces of gold and 1.7 million ounces of silver have been delivered, after which we will purchase 25% of the payable gold and silver for the remaining life of mine. In return, we will make ongoing payments for the gold and silver ounces delivered equal to 20% of the spot price. Each of the step-down thresholds will be subject to adjustments if there are any delays in deliveries relative to an agreed-upon schedule. This mechanism helps to mitigate timing risk. The known resources at the Jervois project are spread across multiple prospects that extend along a 12-kilometer strike length in the shape of a J-curve, which can be seen on the slide. The tenements are underexplored; KGL is utilizing integrated 3D modeling to focus exploration on high-grade areas to expand the Jervois mineral resource and support an extended mine life. The main deposits—Reward, Bellbird, and Rockface—remain open along strike and at depth. High-priority targets include Reward North, Reward South, and Cockatoo Spring. There are more than 20 targets identified and ranked within our area of influence. We feel the project is very prospective, and we are impressed by KGL’s approach to exploration. On April 20, we entered into a definitive agreement with Spanish Mountain Gold to acquire a 1.5% NSR on the Spanish Mountain project in British Columbia, in exchange for consideration of $55 million staged payment. The Spanish Mountain project is an attractive addition to our portfolio, located in a stable, low-risk jurisdiction, with PEA studies projecting a mine life over 20 years and a land package supporting significant exploration potential. Overall, the project's scale and long-term potential align with our disciplined approach to growth in established mining jurisdictions. We are pleased to partner with the team at Spanish Mountain to support its development. With that, I will hand the call back over to Haytham. Haytham Hodaly: Thank you, Neil. In summary, the first quarter was a strong start to 2026 and highlighted the continued execution of Wheaton Precious Metals Corp.'s strategy. We delivered solid revenue, earnings, and cash flow, resulting in record quarterly performance; completed the Antamina stream with BHP, the largest transaction in Wheaton’s history, which adds meaningful additional exposure to one of the world’s premier mining assets and significantly enhances our long-term silver production profile; and our development pipeline continues to advance with multiple assets progressing through construction, ramp-up, and optimization, supporting Wheaton’s sector-leading organic growth profile. Wheaton’s strategy remains clear: stay disciplined in pursuing high-quality, low-risk, long-life, accretive precious metal streams and deliver sustainable long-term value for all stakeholders. We will now open the call for questions. Operator? Operator: Thank you. Ladies and gentlemen, we will now conduct the question and answer session. First question comes from Daniel Major from UBS. Please go ahead. Your line is open. Daniel Edward Major: Hi, thanks very much for the questions. First, on Salobo—you mentioned the Vale commentary on coarse particle flotation. Can you clarify the catalysts and timing on permitting, the expected incremental GEO contribution for Wheaton, and whether there is any incremental capital required from your side? Haytham Hodaly: Thanks for the question. Vale is still working on the capital; they are finalizing their studies right now on this project, and the capital will come out of that work. We are looking at an increase that effectively takes Salobo III from 12 million to 18 million tonnes per year. What will be fed there will be slightly lower-grade material; we are not expecting a dramatic increase in mining rates, but there is quite a bit more material to be fed through. The increases you will see from that will be reflected in our guidance next year as we work through the full impact. In parallel, beyond coarse particle flotation, Vale is looking at a number of other upgrades across the overall project. On permitting, it is much in line with permits for a CTF of this size. As they go further, there may be additional permits required to get up to a higher rate beyond the 42 million tonnes per year that they are targeting right now. In terms of capital from Wheaton, there is no additional capital requirement on our behalf. Daniel Edward Major: That is clear, thank you. Second, now that you have a position in Australia, relative to other regions—there is not as much streaming exposure there—are you seeing other opportunities in the region? Haytham Hodaly: Absolutely, Daniel. When we first went into Australia with a small royalty, it opened up a lot of doors. Now that we have shown we can do streams in Australia and come up with structures that make sense for both parties, we are seeing a lot more interest on that continent. We hope to get more done, and as always, we are looking at a lot of different opportunities—some of them are in Australia for sure. Daniel Edward Major: Final, more model-oriented question: any guidance on what you would expect finance costs booked through the P&L in Q2 to be, including any additional costs associated with the debt drawdown? Vincent Lau: Daniel, it is Vince here. The bank term loan and the RCF debt service costs would be about a 5% interest rate on the current approximately $2.1 billion net debt position. We see repayment happening relatively quickly. Q2 is a somewhat heavy quarter in terms of cash outflows—we made the $4.3 billion Antamina payment and we have two dividends going out—so debt repayment would not be as quick in Q2, but going forward we see that rapidly coming down. In terms of setting up the loan itself, all of those costs were incurred in Q1. There are no additional setup costs. Daniel Edward Major: So about 5% on roughly $2 to $2.5 billion for the P&L—around $30 million or so? Vincent Lau: Yes, that is appropriate. Daniel Edward Major: Okay. Thank you very much. Operator: Our next question comes from Tanya Jakusconek from Scotiabank. Please go ahead. Your line is open. Tanya M. Jakusconek: Great, thank you. Just continuing on the modeling questions, I also think you have the global minimum tax payment going out in Q2. Is that correct? And with two dividends, the Antamina payment, and the global minimum tax, should we expect only a modest debt reduction in Q2 and then a more material paydown later in the year? Also, you mentioned a few mines that will be ramping, and that production split of 45%/55% between H1 and H2—could you flag the ones that may come off in the back half? Vincent Lau: That is right—the global minimum tax will be going out in June, and the amount is about $150 million. We do see some debt paydown in Q2—not a very significant amount—but thereafter, very material repayments going forward. G. Wesley Carson: On the ramp-ups, we will see Phoenix ramping through the year, and Goose coming up to full production by the end of the year. Platreef will also be ramping through this year. The one that would come down in the back half of the year is Constancia—there was some stockpile material from Pampacancha in Q1 that pulled up gold grades; that ended in April, so it will come back down. Tanya M. Jakusconek: Thank you. On the deal market, in prior quarters you mentioned most opportunities were in the $200 million to $500 million range, with a few potentially in the $500 million to $1 billion range, focused on construction financing for large-scale copper and some gold projects. Is that still the right range and mix? And are you seeing any changes to deal structures given competition? Haytham Hodaly: I will pass it over to Neil for an overview. Neil Burns: Sure. The range is quite similar, Tanya. Our pipeline remains very robust around the same levels as Q4. The opportunity mix is probably about 70% gold and 20% to 30% silver. The value range is in the $200 million to $500 million area. We are seeing a few potentially in the billion-dollar range, maybe a couple, but those do take longer to incubate and are paid out as construction advances. M&A-driven opportunities—asset sales—are still out there, and we are hearing rumors of a few more non-core asset sales where we could finance purchasers. Haytham Hodaly: On structure, we understand what competitors are doing, but we stick to what has worked for us and our counterparties, because it is the easiest to execute and deliver into. We continue to look for security, corporate parent guarantees, and the lowest-risk structures for our shareholders—that has not changed. Typically, you see streaming plus, where appropriate, a modest equity component if requested, and we do offer cost overrun facilities. Traditional debt at the corporate level is not something we are looking to provide; it usually makes more sense to expand a stream rather than provide debt. Tanya M. Jakusconek: Has Australia opened any other jurisdictions for you? Haytham Hodaly: There have been a couple, and you may see something soon—smaller in size. We are trying to dip our toe into various areas, but only in very low-risk jurisdictions—nothing that would increase our risk profile. We are focused on postal codes you will recognize. Operator: Our next question comes from Brian MacArthur from Raymond James. Please go ahead. Your line is open. Brian MacArthur: A couple of questions on commitments going forward. With Santo Domingo, you received some money back and will pay it out in the future. Are there other deals where that could potentially happen, or is that a one-off? And on Salobo, you have an $8 million ongoing payment for ten years related to high-grade. Originally you did not think you would pay it until 2027, but in the fourth quarter you moved it in. Is that fixed now—starting 2027/2028—or could that still change with the new plans? Haytham Hodaly: We are always looking to be good partners. If things are delayed and they do not need the capital after an advance, we may allow deferrals so they do not have to pay delayed payment mechanisms they would otherwise owe. Our objective is to see projects advance as smoothly as possible, not to collect delayed payment ounces. We have not seen others come to us for that now, but if needed, we would consider it case-by-case. Vincent Lau: To add, the upfront payments in question are early deposit payments, typically paid before permitting, and they are a small portion of the ultimate upfront payment. In this case, permitting was delayed, we wanted to ensure our cost of capital, and Capstone had other means to satisfy that—so they repaid it temporarily. Good outcome for both parties. Haytham Hodaly: On the Salobo $8 million ongoing payment, that could still change. We are constantly talking to Vale. The plan has shifted more towards increasing throughput rather than the high-grade plan we originally viewed. So timing and amount may still move. Brian MacArthur: On accounting—with the second Antamina transaction, will you report it as one segment or two? Will depletion be higher, and any tax structure differences? Vincent Lau: We will treat it as one segment; you will see just “Antamina” in our statements. The depletion rate will be a bit higher—around $26 to $27 per ounce on a combined basis. Tax is the same agreement as the first stream, subject to the GMT tax. We deplete the asset from an accounting perspective, and the tax is 15% on the accounting income for our Cayman subsidiary. We will provide updated depletion rates next quarter for all assets. Operator: Our next question comes from Cosmos Chiu from CIBC. Please go ahead. Your line is open. Cosmos Chiu: Thanks, Haytham and team, and congrats again on the appointment and a solid start to 2026. First on produced but not yet delivered—it increased again in Q1, the fifth consecutive quarter. With the new start-ups, when could it reverse and draw down? Specifically for Phoenix and Platreef, when could we see sales come through—sometime in 2026? G. Wesley Carson: Thanks, Cosmos. PBND moves in a reasonably predictable manner. It tends to build in Q1 and then we see drawdown later in the year. With new streams coming online, we will see some build, and we will see more with Antamina coming on—Q2 will include two shipments instead of the usual three, so PBND will tick up for Antamina. For Phoenix, the payable period is relatively short—on the shorter end, about one to two months. For Platreef, it is quite long—on the upper end, around five to six months—before we see sales. Cosmos Chiu: On Spanish Mountain, it is a 1.5% NSR royalty. Historically, Wheaton preferred streams over royalties. Is that still the case, and is this just a unique situation? Haytham Hodaly: We still prefer streams over royalties. This royalty came through a ROFR on future financings for stream financing. It is our way of locking in our position when they go to finance the larger project. Cosmos Chiu: On Bill C-59 (Budget 2025) enacted on 03/26/2026 with amendments to transfer pricing—given past debates, is this something we need to worry about? And what changed? Vincent Lau: No, not at all. Our structure is well understood, and the settlement we had with CRA is applicable up to 2025. Going forward under the new legislation, we will operate the exact same way. For example, the Antamina transaction was funded by our Cayman subsidiary—they borrowed at that level and have all the cash flows and their own management team and board. The structure is well defined, and we do not expect changes. At a high level, the government is more specifically defining transfer pricing mechanics, particularly with respect to other companies that may structure their affairs differently than ours; for us, it has no impact. Cosmos Chiu: Lastly, on your 2026 cash outlays excluding Antamina, I get about $196 million for 2026. You have already paid a lot in Q1—$40 million for Marimaca and Koné after the quarter. The big ones still outstanding are Spring Valley and El Domo—what are the triggers? Vincent Lau: El Domo is tied to achieving completion status, at which point we fund—we do expect to fund El Domo potentially in 2026. Spring Valley is based on obtaining key permits; we are hopeful they will achieve that in the near term, so we would look to fund in 2026 as well. To be clear, Q2 is heavy—we will disburse about $4.6 billion including the Antamina acquisition—and the remainder of the year is much lighter at about $200 million. Cosmos Chiu: Great. Thanks again, Haytham, Vince, and Wes. Operator: Our next question comes from Richard Hatch from Berenberg. Please go ahead. Your line is open. Richard Hatch: Thanks a lot. Hey, Haytham and team. Has the Middle East conflict and its impact on global markets affected your ability to write new business at all? Haytham Hodaly: No, not at all, Richard. Operator: Our next question comes from Martin Pradier from Veritas Investment Research. Please go ahead. Your line is open. Martin Pradier: On Salobo, are you changing the number for the year—what is the expectation now with the new items underway? Also, there was a big difference between production and sales this quarter, especially at Salobo; production was down 3%, but sales were down 30%. How should we think about that going forward? Haytham Hodaly: There will be no changes on Salobo for the year. All of the upgrades are over the next several years and, as mentioned earlier, will be reflected in guidance next year as they come online per Vale’s plan. For the production versus sales variance, Q1 is typically lower for sales due to logistics in Brazil—Carnaval actually has a significant impact on the movement of material. We usually see a build of PBND at Salobo in Q1 and a drawdown in Q4. This year is no different. Operator: Our next question comes from John Tumazos from John Tumazos Very Independent Research. Please go ahead. Your line is open. John Tumazos: Thank you for taking my question. Looking back at the Antamina transaction and the $4.3 billion outlay, should we think of that as a unique, once-in-a-generation sort of deal—given you were already in the asset and intimately familiar—or could there be more transactions like this? And as a follow-up, producers seem to trade around $8 per ounce of silver reserve and resource (including inferred), while the silver price is much higher. Relative to Antamina pricing, would it be cheaper to buy a producing silver company? Why do you think producers trade at $8 per ounce—does the market expect a much lower long-term silver price? Haytham Hodaly: Antamina at $4.3 billion is quite unique—you do not often see streams that can provide that much production in any given year. That said, it does open doors for billion-dollar-plus streams over the next few years. With BHP validating streaming as a source of funding, a lot of diversifieds are actively considering portfolio actions to unlock value or deleverage, and streaming will be considered. I would not say another $4 billion deal is around the corner, but billion-dollar deals would not surprise us. On acquiring producers, our shareholders value that we do not add operating, capital, or execution risk. Producers face volatility around growth capital and operations; from our perspective, it does not make sense to move away from streaming with high-quality partners who operate the assets. Vincent Lau: On the valuation question, producers still face the costs to mine that ounce—both initial capex and ongoing opex—whereas under our streams we typically pay 20% of spot (or fixed low cash prices in some cases). That is why our margins are so strong—on silver we are close to 84% margins, on gold close to 86%—you do not see that with producers. That margin difference is a key piece in that comparison. Operator: Our last question comes from Joshua Wolfson from RBC Capital Markets. Please go ahead. Your line is open. Joshua Wolfson: Thank you. Following up on Salobo—there was a comment about grades expected to increase through the year. Q1 results were strong; can you disclose the grade processed or discuss what drove the outperformance? And would it be reasonable to assume production increases over the course of the year if grade increases? G. Wesley Carson: Thanks, Josh. Grade will improve through the year. This is pretty standard for Q1 at Salobo—they usually try to stay out of the bottom of the pit in Q1 due to the rainy season, so they stay in the upper phases (Phase 5/6) and then move back into Phase 4, which has stronger grades, through the rest of the year. That is what drives the increase over the remainder of the year. And yes, it is reasonable to assume production increases over the course of the year with improving grades. Haytham Hodaly: Thank you, Josh. And thank you, everyone, for your time today. The first quarter represented a very strong start to 2026 as we continue to execute on our strategy while entering this new chapter of growth for the company. With continued geopolitical uncertainty driving increased demand for precious metals, we believe Wheaton Precious Metals Corp. offers one of the most attractive low-risk ways to gain exposure to gold and silver. As the purest precious metals streaming company, our pipeline continues to advance, and the strength of our cash flows provides the capacity to pursue new opportunities while maintaining our commitment to disciplined capital allocation. I am incredibly proud to be leading Wheaton in this next phase of growth and look forward to continuing to build on the strong foundation that has made Wheaton a leader in the streaming and royalty sector and a foundational stock in any portfolio. Thank you again, and we look forward to speaking with you all soon. Operator: This concludes this conference call for today. Thank you for participating. Please disconnect your lines.
Operator: Good day, and welcome to the Fidus Investment Corporation First Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Jody Burfening. Please go ahead. Jody Burfening: Thank you, Debbie, and good morning, everyone, and thank you for joining us for Fidus Investment Corporation's First Quarter 2026 Earnings Conference Call. With me this morning are Edward H. Ross, Fidus Investment Corporation's chairman and chief executive officer, and Shelby Elizabeth Sherard, chief financial officer. Fidus Investment Corporation issued a press release yesterday afternoon with the company's quarterly financial results. A copy of the press release is available on the Investor Relations page of the company's website at fdus.com. I would also like to call your attention to the customary safe harbor disclosure regarding forward-looking information included on today's call. The conference call today will contain forward-looking statements including statements regarding the goals, strategies, beliefs, future potential, operating results, and cash flows of Fidus Investment Corporation. Although management believes these statements are reasonable based on estimates, assumptions, and projections as of today, 05/07/2026, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties, and other factors including, but not limited to, the factors set forth in the company's filings with the Securities and Exchange Commission. Fidus undertakes no obligation to update or revise any of these forward-looking statements. With that, I would now like to turn the call over to Edward H. Ross. Good morning, Ed. Edward H. Ross: Good morning, Jody, and good morning, everyone. Welcome to our first quarter 2026 earnings conference call. In today's call, I will start with a review of our first quarter performance and our portfolio at quarter end, and then share with you our outlook for 2026. Shelby will cover the first quarter financial results and our liquidity position. After we have completed our prepared remarks, we will be happy to take your questions. Fidus' first quarter results were extremely strong from an income statement perspective. With adjusted NII of 62¢ per share, our debt portfolio continued to over-earn our base dividend of $0.43 per share and to support a payout of excess earnings to shareholders. Adjusted NII grew 14.8% to $23.7 million, reflecting a 13.1% increase in interest income on higher average income-producing assets along with higher fee income than last year. We ended the quarter with estimated spillover income of $1[inaudible] per share. Deal activity was relatively modest during the quarter, including M&A transactions completed by our portfolio companies. Overall, our portfolio remains healthy, characterized by niche market leaders with traits that provide long-term barriers to entry that ensure their value proposition and competitive positioning. Through our strict underwriting process, we ensure that we are selecting companies with proven, resilient business models that generate recurring revenue and cash flow to service debt and to provide capital for growth. We remain focused on industries we know well in the lower middle market, leveraging our established relationships with deal sponsors. For the second quarter of 2026, the Board of Directors declared a total dividend of $0.62 per share, which consists of a base dividend of $0.43 per share and a supplemental dividend of 19¢ per share, equal to 100% of the surplus in adjusted NII over the base dividend from the prior quarter, which will be payable on 06/29/2026 to stockholders of record as of 06/16/2026. Net asset value held steady at $742 million at quarter end, or $19.55 per share. Originations in the first quarter amounted to $118.7 million, nearly all of which consisted of first lien debt investments in support of both M&A transactions and debt recapitalizations. We also invested $1.8 million in equity securities of two new portfolio companies, consistent with our investment strategy of maintaining a portfolio that is structured to produce both high levels of current and recurring income and the potential for capital gains from monetizing equity investments. Subsequent to quarter end, we invested an additional $21.5 million in one new portfolio company. Proceeds from repayments and realizations totaled $73.1 million for the first quarter, resulting from a mix of M&A and refinancing activity. We monetized equity investments in two portfolio companies, generating $3.9 million in realized gains. Offsetting these gains was a total of approximately $15 million in realized losses in connection with the conversion of Student Connector's debt into [inaudible]. Looking at net investment activity, which takes debt recapitalizations into account, our portfolio grew by $46 million in Q1. First lien investments comprised 87% of the debt portfolio, reflecting the ongoing migration towards first lien securities. Combined with our $149.6 million equity portfolio, we ended the quarter with a portfolio totaling $1.4 billion on a fair value basis, equal to 102.5% of cost. Overall, the portfolio remains healthy from a credit quality perspective, supported by very solid underlying portfolio company performance. We ended the quarter with only one portfolio company on non-accrual that accounted for less than 1% of the total portfolio on both a fair value and cost basis. Our portfolio remains well diversified by industry, consisting of a mix of manufacturing, distribution, and services companies. In addition, we have a well-diversified group of software and IT services names within our portfolio that are exposed to both opportunities and risks associated with AI. This group represents about 32% of our total portfolio on a fair value basis. We have not seen any negative impacts from AI on this portfolio. Importantly, nearly all of our debt investments in these companies are in highly structured first lien securities with at least two maintenance covenants, and all portfolio companies except for one are backed by high-quality sponsors with proven track records in the space. The weighted average loan-to-value for this portfolio was 42% this quarter, below our total portfolio weighted average loan-to-value of approximately 45% on a cost basis. In addition, the current contractual duration of our debt investments in this category is 2.2 years, enhancing our ability to manage any tougher situations we might encounter down the road. Equity investments in software and IT services companies totaled $16.1 million, or approximately 11% of our total equity portfolio on a fair value basis. In closing, our portfolio remains well positioned to continue to generate adjusted NII in excess of our base dividend and to realize gains from monetizing equity investments. Although M&A activity is currently lackluster in light of the geopolitical and associated market volatility, our pipeline of investment opportunities is decent, and our long-standing relationships with deal sponsors and lower middle market expertise position us to identify high-quality companies that meet our rigorous underwriting standards for investment. We will, as always, manage the business for the long term, staying focused on our goals of preserving capital and generating attractive risk-adjusted returns for our shareholders. I will now turn the call over to Shelby to provide details on our financial and operating results. Shelby? Shelby Elizabeth Sherard: Thank you, Ed, and good morning, everyone. I will review our first quarter results in more detail and close with comments on our liquidity position. Please note, I will be providing comparative commentary versus the prior quarter, Q4 2025. Total investment income was $47.5 million for the three months ended March 31, 2026, a $5.4 million increase from Q4, primarily driven by a $1.4 million increase in interest income due to increased average debt investments outstanding and a $4.1 million increase in fee income due to a $6.9 million fee related to the refinancing of our debt investments in American Always, partially offset by lower origination and prepayment fees from investment activity. Total expenses, including tax provision, were $22.9 million for the first quarter, a $0.4 million increase versus Q4, primarily driven by a $0.4 million increase in interest expense related primarily to higher average debt balances outstanding, a $1.4 million increase in base management and income incentive fees given the increase in assets under management and higher fee income in Q1, and a $0.9 million increase in G&A expenses. G&A expenses were higher due to the write-off of unamortized deferred financing costs and incremental legal expenses related to our new registration statement, and the timing of annual audit and tax compliance expenses incurred in Q1. These were offset by a $0.7 million decrease in the capital gains fee and a $1.8 million decrease in income tax provision related to the annual excise tax accrual in Q4. Net investment income, or NII, for the three months ended March 31 was $0.65 per share versus $0.53 per share in Q4. Adjusted NII, which excludes any capital gains incentive fee accruals or reversals attributable to realized and unrealized gains and losses on investments, was 62¢ per share in Q1 versus 52¢ in Q4. For the three months ended March 31, we recognized approximately $12.2 million of net realized losses related to a $15.8 million realized loss on the exit of our debt investments in Pseudo Connector, taking this non-accrual off our books, which was partially offset by $3.9 million in realized gains on our equity investments in CIH Intermediate and Zocd. We ended the quarter with $682.2 million of debt outstanding, comprised of $260.5 million of SBA debentures, $325 million of unsecured notes, $85.2 million outstanding on the line of credit, and $11.6 million of secured borrowings. Our net debt-to-equity ratio as of March 31 was 0.9x. Our statutory leverage, excluding exempt SBA debentures, was 0.6x. The weighted average interest rate on our outstanding debt was 5.2% as of quarter end. Turning now to portfolio statistics, as of March 31 our total investment portfolio had a fair value of $1.4 billion. Our average portfolio company investment on a cost basis was $13.8 million, which excludes investments in seven portfolio companies that sold their operations or are in the process of winding down. We have equity investments in approximately 85.6% of our portfolio companies, with an average fully diluted equity ownership of 2%. Weighted average effective yield on debt investments was 12.5% as of March 31, a slight decrease versus 12.6% at the end of Q4. The weighted average yield is computed using effective interest rates for debt investments at cost, including the accretion of original issue discount and loan origination fees, but excluding investments on non-accrual, if any. Now I would like to discuss our available liquidity. As of March 31, our liquidity and capital resources included cash of $50.4 million, $1.399 billion of availability on our line of credit, and $54.0 million of available SBA debentures, resulting in total liquidity of approximately $244.2 million. I will now turn the call back to Ed for concluding comments. Edward H. Ross: Thanks, Shelby. As always, I would like to thank our team and the Board of Directors at Fidus Investment Corporation for their dedication and hard work, and our shareholders for their continued support. I will now turn the call over to Debbie for Q&A. Debbie? Operator: We will now open the call for questions. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question is from Robert Dodd with Raymond James. Please go ahead. Operator: Excuse me. I just put Christopher Nolan on the podium. My apologies. Robert will be next. Christopher Nolan with Ladenburg Thalmann, please go ahead. Christopher Nolan: Obviously, they are preferring the person with the better look over Robert, so I am honored. Well done there. No offense, Robert. Shelby, were there any nonrecurring items in the quarter? Am I missing your comments? Shelby Elizabeth Sherard: No. We did incur a rather large fee that I would characterize as more of a one-time fee. It was about $6.97 million related to the American Always debt refinancing. So that drove the fee income in Q1 and the beat versus consensus. Christopher Nolan: Okay. That is really it for me. Thank you very much. Operator: Thank you, Chris. The next question is from Robert Dodd with Raymond James. Please go ahead. Robert Dodd: Good morning, and thank you, Chris, for letting me go second. I appreciate it. And congrats, Shelby and team, for a really good quarter. A question about that American Always fee. If I look, the position size is about $50 million now, and obviously it was smaller than that before. A $6.9 million fee on a refinancing of a position that size seems pretty high. Now, obviously, the first three last quarter was marked well above cost, so there were some odd differences in how the prior thing was structured. Is it a normal asset that just happened to repay and generate a really good fee, or was there something unusual about the structure of that asset? I am trying to get a feel—obviously it is probably not going to happen every quarter—but can this kind of outsized refinancing fee happen again in different assets? Edward H. Ross: Sure. It is a great question, Robert. Could it happen again to this magnitude? Anything is possible, but it is a pretty healthy fee, as you highlighted, and it is not the norm for every credit by any stretch of the imagination. We have a few other investments where we have fees that can be earned on the back end. In this case, American Always has been in our portfolio for a while. There was a point in time where there was a need for capital on a relatively quick basis, and we ended up being the source of that capital. We priced that capital in accordance with what we thought the numbers should be. This is not our business going forward or anything like that. We are a solution provider, we provided a solution that was needed, and we were paid accordingly for that solution. That is the way I would think about it. Robert Dodd: Got it. Thank you. I wonder if that was COVID-timing related because, obviously, it was before then. I appreciate that. And then more generally, you characterized the pipeline as decent, but the market is kind of lackluster, which is a theme across the space, not surprisingly with the number of macro uncertainties. Would you characterize that lackluster market as driven by these uncertainties—oil, macro, et cetera? And do you think the market needs more certainty for the PE market in your segment to show a little bit more life? Edward H. Ross: Great question. Let me give you a little color on what we experienced in Q1. As most people in this space felt, deal flow was more modest in nature, largely due to seasonal patterns in Q1. That was prior to the geopolitical conflict in the Middle East. At that time, general expectations were for an increase in both deal flow and investment activity throughout the year. As we sit here today, we still have confidence in a pickup in activity, but the pace will be somewhat dependent upon a reduction in the current level of uncertainty in the world today. There is quite a bit of pent-up demand in M&A—nothing new there. The good news from our perspective is the fragmented nature of the lower middle market and its large overall size. That should continue to provide ample investment opportunities for us to pursue, whether M&A picks up or not. We like that aspect of the lower middle market. There is still activity going on today, but it is not close to robust levels. We have investment opportunities with both existing portfolio companies and new opportunities. At the end of the day, we expect an okay to decent originations quarter. We expect repayments to be on the lighter side. A lot of things can change; deals that we expect to close may not close. But that would be our expectation today—some decent growth this quarter in the portfolio, but lighter on the repayment side overall. Robert Dodd: Okay. That is helpful. Thank you. And then following on, spreads—your portfolio yield ticked down a tiny bit versus Q4. Looking forward, there has been talk in the marketplace, certainly with larger buyers, about spread expansion, maybe impacted by flows in the private perpetual vehicles. What are your thoughts on spreads in your end of the market? Do you think stability is more likely, or is there a prospect for expansion in the smaller end of the market? And I would differentiate between the overall market and what you are seeing on the software side. Edward H. Ross: Great question. We are seeing wider spreads, but for truly great assets—great operating companies—there continues to be a high level of competition, albeit slightly better pricing relative to prior to the conflict. There is ample capital out there, so there is competition, but for the right assets we still think spreads are extremely attractive and the terms remain very strong in the lower middle market in terms of covenants, security, and so on. There are opportunities to increase spreads, but for great assets competition is still meaningful. Robert Dodd: Got it. I appreciate it. Thank you, and again, congratulations on the quarter. Edward H. Ross: Thanks, Robert. Good talking to you. Operator: Please press star then 1 if you would like to ask a question. At this time, we have no further questions in the queue. Operator: Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Edward H. Ross for closing remarks. Edward H. Ross: Thank you, Debbie, and thank you, everyone, for joining us this morning. We look forward to speaking with you on our second quarter call in early August. Have a great day and a great weekend. Operator: This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by, and welcome to Howard Hughes Holdings Inc. First Quarter 2026 Earnings Conference Call. Currently, 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. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Joe Vilain, general counsel. Please go ahead. Joe Vilain: Morning, and welcome to the Howard Hughes Holdings Inc. First Quarter 2026 Earnings Call. With me today are William Albert Ackman, Executive Chairman; Ryan Michael Israel, Chief Investment Officer; David R. O’Reilly, chief executive officer; Carlos A. Olea, chief financial officer; Jill Chapman, who leads investor relations at Pershing Square; and Mark Grandison, who joined the Howard Hughes Holdings Inc. board just yesterday. Before we begin, I would like to direct you to our website, howardhughes.com, where you can download both our first quarter earnings press release and our supplemental package. The earnings release and supplemental package include reconciliations of non-GAAP financial measures. Howard Hughes Holdings Inc. believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions; we can give no assurance that these expectations will be achieved. See the forward-looking statement disclaimer in our first quarter earnings press release and the risk factors in our SEC filings for factors that could cause material differences between forward-looking statements and actual results. We are not under any duty to update forward-looking statements unless required by law. I will now turn the call over to our Executive Chairman, William Albert Ackman. Thank you, Joe. William Albert Ackman: Those of you on the call probably have seen a presentation we put out providing some perspectives on how we think about Howard Hughes Holdings Inc. from a valuation perspective. The company is going through a transition in terms of its business model, and I think there has been a pretty meaningful transition, or at least the beginning of the transition, in our shareholder base. We thought this was a good time for us to share how we think about the company and to provide some, I would say, better metrics to think about valuation going forward. So our plan for the call is we are going to start with David R. O’Reilly giving a comprehensive brief update on the quarter. I will talk a bit about KPIs. Ryan will speak briefly about valuation, introduce Mark to the group, and then we will leave the substantial majority of the time for Q&A. So why do we not start with David? Go ahead, David. David R. O’Reilly: Thank you, Bill. Good morning, everyone. I am going to start with the first half of the presentation, and as you probably saw, it is organized into two parts. The first part really focuses on the first quarter results of Howard Hughes Holdings Inc. Communities’ real estate business. Using the slides from the supplemental, I am going to be covering the four key performance areas of our communities: master planned communities, operating assets, condominiums, and then other expenses along with our debt and liquidity position. As you saw, we are introducing several new KPIs this quarter, and we believe these better reflect how we manage the business and how long-term value accrues within each segment. I will reference those as I cover the results. Then we will turn to the second half of the presentation, where, as Bill mentioned, he and Ryan will do a deeper dive in what those new metrics reveal about our current valuation and the long-term growth of this platform. The goal is always to give investors a more complete picture of where Howard Hughes Holdings Inc. is headed, and why we believe the stock represents a compelling opportunity. I am also sure you noticed that our earnings release no longer includes annual guidance. Given the pending acquisition of Vantage, we have elected to remove annual guidance expectations and will instead shift our focus to longer-term objectives by platform, consistent with how we allocate capital and measure success internally. With that said, the first quarter results I am about to review, and specifically our land sales and MPC EBT, were ahead of our expectations. And if not for the transaction, we would have increased MPC EBT guidance for the year. With that, let us talk about the first quarter performance, starting on slide four with the company highlights. It was a strong start to 2026. The real estate engine did exactly what we needed it to do: it grew cash, it provided pricing power, and it converted more land into long-duration income. We saw strong MPC earnings growth, continued leasing momentum across the operating assets, and the company ended the quarter with substantial liquidity. On slide five, as part of this new supplemental, we are providing a simpler road map to show how performance of our communities connects to the overall valuation of this platform. We will be focusing on the following four key areas that we will step through in turn: Master Planned Community EBT and margin-affected residual land value; operating asset adjusted maintenance free cash flow; condo gross profit; and other expenses, which includes G&A and net interest expense. So let us start on slide six with the MPCs. Earnings before taxes was $84 million in the first quarter, up 33% year-over-year driven by higher residential land sales. In Bridgeland, we closed 62 acres at an average price of $60.188 million per acre. That compares to 37 acres and $605,000 per acre last year, with net new home sales in Bridgeland up 12%. In Summerlin, custom lots averaged $7.2 million per acre, and super pads averaged $1.8 million per acre. New home sales in Summerlin were up 6%. The point is not just that volumes were higher. The point is that we are converting scarce entitled, developer-ready land into cash at an increasingly attractive price in markets where we effectively control supply. We are not selling land. We are harvesting scarcity. As our communities mature, price becomes a primary driver of MPC value, which means we can generate more cash from fewer acres while protecting the long-term economics of the land bank. Shifting to operating assets on slide seven. Our operating asset NOI grew 2% year-over-year and 7% on a trailing twelve-month same-store basis. Within the portfolio, multifamily and office were the primary drivers of same-store growth, supported by continuing leasing activity and the burn-off of rent abatements. More important than the quarterly print is what this segment represents for the holding company we are building. Operating assets are the steady cash flow engine. As we move land into vertical development and lease-up, we convert one-time MPC proceeds into a growing, recurring base of NOI diversified by asset type, tenant, and market. This quarter, we are also introducing adjusted maintenance free cash flow because we believe this metric gives a cleaner read on the recurring property-level cash flow that is actually available to redeploy. Turning to condos on slide eight. At Ward Village, we completed ‘Ōlana and broke ground on Lē‘ahi, which is already 70% presold. Across the platform, we have approximately $5 billion of estimated future GAAP revenue at sell-up. Condo gross profit was roughly breakeven in the first quarter as expected and will increase meaningfully in the second quarter with Park Ward Village closings. Condo profit is always going to be recognized in large blocks when towers deliver, so the quarterly pattern is going to remain lumpy even though the underlying economics are largely locked in through presales. These projects are largely de-risked well in advance of GAAP recognition. We typically presell the majority of the units, fund construction with buyer deposits and nonrecourse construction loans, and lock in our margins years before delivery. Estimated future condo gross profit—the total projected gross profit from condo towers under construction or in active predevelopment, the vast majority of which are already presold—highlights the embedded condo cash flow well ahead of when it appears on the income statement. I want to spend a minute because I think the capital mechanics here are worth walking through. They make the economics of condo development unusually compelling. Our primary contribution to these projects is land, along with a modest amount of cash. We contribute that land, and that modest cash is our equity. From there, buyer deposits are collected at signing, often years before towers deliver, and they fund a meaningful portion of construction cost. Nonrecourse construction financing covers the majority of the remaining required capital. The result is that we are delivering towers worth hundreds of millions of dollars with very little of our own cash actually at risk. When units close, buyers pay the full purchase price, we repay the construction loan, and the profit flows to us. It is a model where our buyers and lenders are essentially financing the construction and we collect the upside at the end. That is what we mean when we say condos are a self-financing capital recycling tool. And it is why this business generates returns that are difficult to replicate. Beyond condos, projects like 1 River Row, 1 Bridgeland Green, and others in our pipeline follow that same land-to-income pattern: convert entitled land into durable NOI, grow the recurring cash engine, and raise the long-term earnings power of the platform. On slide nine, we will turn to other expenses. G&A expense was $25.8 million in the quarter, including $3.8 million of Pershing fees and $3.4 million of Vantage-related transaction costs. Net interest expense declined year-over-year due primarily to the amount of interest income we received from our invested cash balances during the quarter and on a trailing twelve-month basis. On slide 10, I will turn to the balance sheet and wrap up. We completed a $1 billion refinancing at the tightest credit spreads in the company’s history during the first quarter. Importantly, this execution occurred after announcing the Vantage acquisition, which we view as a strong external validation of both our balance sheet and our strategy. The transaction extended our maturities and added $230 million of incremental liquidity. We also closed on a $300 million mortgage at Downtown Summerlin. At the end of the quarter, we finished with $1.8 billion of cash, comprised of $[inaudible] at the HHH level, and $929 million at the HHC level, and significant additional liquidity. That position, combined with the Pershing preferred commitment, fully funds the Vantage acquisition and supports our current development pipeline, while continuing to preserve our flexibility for future capital allocation decisions. So the overall takeaway for the quarter: the real estate foundation of Howard Hughes Holdings Inc. is doing its job. It is generating strong cash flow, demonstrating pricing power in our MPCs, expanding our base of recurring NOI, and recycling capital in a way that supports our evolution into a multi-engine holding company. The first quarter performance primarily reflects the resilient demand in our communities that lead to bottom-line results. MPC earnings will continue to be lumpy quarter to quarter depending on when large parcels close. But what matters for us, and what I encourage you to focus on, is the multiyear growth in recurring cash flow and the value embedded in the land and condo pipeline, rather than the precise results of any given quarter. The new metrics Bill and Ryan are going to walk through in a minute are designed with exactly that in mind: to make it easier to connect reported results to intrinsic value. And with that, I will turn it over to Bill. William Albert Ackman: Thank you, David. So what we are doing here—maybe just to back up for a second. I think historically, the company had tried to create a quarterly number that shareholders could annualize and maybe put a multiple on. The vast majority of companies are valued that way. Analysts estimate earnings, the market assigns a multiple based on the inherent growth and predictability of that earnings stream, and that helps people come to a value. The problem with that metric is it does not really work for Howard Hughes Holdings Inc. We really have three different segments. Perhaps one of them, the operating asset segment, you could certainly value at a multiple of a metric. But the other two are a bit unusual. Our MPC business is really a business of owning land, and the goal of these communities is to make them really attractive places to live. And we have developed assets to meet that demand in our operating asset segment. Over time, what that has done is bring more residents into the communities, increase demand for land. That has led to continuous—well in excess of inflation—increases in the value for our land portfolio. But putting a multiple on the GAAP profit from a portion of the land sales for a quarter is not a particularly helpful metric. What really matters is: how much cash do we generate from our land sales during the quarter, and what is the value of our remaining land? And so our new metric is going to focus on those two levels. What is interesting about these communities is every acre of land, we know for a certainty we are going to sell. We do not know precisely which quarter we are going to sell it in. And so what matters to you is: how much cash do we generate during the quarter; what price did we achieve; and what is the value of the remaining land that we own? So that will play into the metrics we are talking about. With respect to operating assets, adjusted maintenance free cash flow—what are we doing here? We are starting with NOI and we are getting to an actual “free money we can spend” metric after all the costs associated with owning these assets. Our condominium business—so we do not have an infinite supply of land in Honolulu. We have a finite supply of land. We have an amazing team, and that team is actually a valuable asset of the company that we are not today assigning value to. We do think over time we will have more opportunities to access more land and continue that business. But today, for the purpose of keeping these metrics simple to understand and also conservative, what we are saying is: we have a finite amount of land today, and on the basis of that finite amount of land, we intend to build a certain number of condominiums. We estimate a gross profit. That is how we get—and we present value that today to keep track of the remaining value of that portfolio. So if we go to page 13 on the new metrics, we are going to give you the residual value of our remaining acreage, undiscounted and uninflated. What we mean to say is if we sell acres for $1.8 million in Summerlin, we are going to use that to value the remaining residential land portfolio at the end of the quarter. Now that, I believe, is a conservative metric because land values have compounded at rates well in excess of the cost of capital that you should discount them at at Howard Hughes Holdings Inc. And let me just make my case for that for a second. We have compounded land values at the teens in Summerlin. Correct? Correct. Okay. So let us pick a number. It has been what over the last five years? 15%? Five years, it has been just under 15% in Summerlin, and it has been, okay, 6% to 8% in Woodlands Hills—in Bridgeland. Okay. So in Summerlin, which is a further built-out community, you have got land that has appreciated at 15% per annum. Again, because it is a certainty we will sell this land—because these are fully developed communities—the discount rate I would use there would be a relatively modest spread over Treasury. So using today’s value for the land is one that I think is a very conservative measure of remaining land. If the land continues to appreciate at these kinds of levels and you discount them back at lower levels, the land values are even greater than what we are showing. For operating assets, adjusted maintenance free cash flow: we are starting with NOI and getting to the free cash after all the costs associated with maintaining assets and leasing. Then we project the profits from our remaining condominium deliveries. It is pretty straightforward to do this because, for example, for the units that we have under contract, we know exactly what price we are selling for. We generally have GMP contracts; we lock in, for the most part, the cost to build them; and then it is a present value calculation. With that, we are not going to take you through every page of the deck because we want to leave a lot of time for answering questions. Ryan is just going to focus on some summary valuation pages. We will start with today’s value and how we get to thinking what is possible over the next five years. Ryan Michael Israel: Sure. Thank you. So what we wanted to do, as Bill mentioned, in the pages that we provided that we will not walk through all the detail on this call, is show you how, using the metrics that we believe are the right way to think about long-term value—what we use in our own internal evaluation as well as tracking our progress over time. I will just highlight on page 27 the takeaway. We believe today, using those metrics, and as Bill mentioned, conservatively trying to come up with a value for Howard Hughes Holdings Inc., we think that the intrinsic value of the business based on those metrics is about $104 a share, which is more than 60% higher than the roughly $65 share price today. And when you look at that in detail, nearly 80% of that is coming from the Howard Hughes Holdings Inc. Communities real estate business, and about 20% of that is coming from the economic ownership percentage that Howard Hughes Holdings Inc. will have in Vantage, which we are on track to close very shortly. So we believe that the shares are very undervalued relative to our estimate today. If you go to page 42, what you will see is really our benchmark for how we believe we can grow the intrinsic value of Howard Hughes Holdings Inc. over the next five years. And we actually think that we have the ability—and it is one of the reasons we are so excited to have Mark join us, as he will be very helpful as we achieve these metrics—to grow the intrinsic value of the business to roughly more than $200 a share. We have about $211 that we have derived conservatively for our valuation in 2030, which is about 3.3 times the current share price of $65, or a 233% increase. And what is interesting about that metric is today, nearly 80% of the value of Howard Hughes Holdings Inc. is coming from the real estate business. But we actually think over the next five years we are going to have much more of the value coming from Vantage, other insurance, and some of the high durable growth companies we seek to acquire. So that ratio will shift to about two-thirds coming from things that are not related to real estate. And the way that we get there at a very high level is that we will be looking at the Howard Hughes Holdings Inc. Communities real estate business, and we will be using a lot of the excess cash we do not think is needed for reinvestment into the communities that could be allocated to higher returns in other parts of the business, particularly insurance. We have about $2.5 billion to $3 billion of cash that we are expecting we will be able to generate over the next five years, which can be somewhere in the order of 65% to 80% of the current market cap of the company, and we believe the insurance business—particularly having Mark’s help—will be a very valuable place to put that. With Vantage, which we are very excited about given the business and given the team that is there, we believe we can improve the returns on equity from something in the low to mid-teens to something that could be in the high teens or even better. If we can do that, we can allocate a significant portion of that $2.5 billion to $3 billion of free cash flow over the next five years to build up the capital base. And as the returns on equity at Vantage improve, the multiple that the market—and we—would assign to Vantage for being a higher return on equity business should also increase. As a reminder, we are buying this business at a headline purchase price of 1.5 times book value, but we believe by the time we close, given the accretion of the book value, it will be about 1.4. We think we can increase the intrinsic value of this business to something that is worth north of two times over the next five years. And so that is going to be a significant reason why the value at Vantage will be growing so quickly over the next five years and will really help become the driving force of the increase in intrinsic value of Howard Hughes Holdings Inc.’s equity over time and make Vantage really the leading asset that we will have in insurance—a key focus of that business. William Albert Ackman: Thank you, Ryan. I thought to introduce Mark Grandison, and he will be available, obviously, to answer questions. We actually began a conversation with Mark well more than a couple years ago in connection with an investment that Arch made in the Pershing Square management companies. We got to know Mark a bit there. Then we learned of his departure when we read about it in the press when Mark stepped down from being CEO of Arch Capital Group. In light of our plans for Howard Hughes Holdings Inc., a year ago we started a conversation with Mark. He was still otherwise encumbered at the time, and he was trying to decide what he wanted to do with his life and thinking about all kinds of different things. We kept the conversation going. We took a very significant step in signing an agreement to acquire Vantage, and we kept talking to Mark. Our thoughts here are, well, Ryan and I—other members of the Pershing Square team—have analyzed insurance companies from the perspective of an investor. Neither one of us has any operating experience in the insurance industry, and it is an industry where you can make a lot of money and it is an industry where you can lose a lot of money if you do not know what you are doing. While we are buying a company with a very capable team, I think it is as important that at a board level, we have one or more directors who really understand the industry. Mark was by far our number one choice—there really was not a close second—in terms of, without embarrassing him, really the iconic executive of the last, I would say, couple decades. Almost twenty-five years at Arch building one of the most profitable, most successful insurance platforms. We thought that experience was incredibly relevant. We were delighted to bring Mark to Howard Hughes Holdings Inc. So maybe, Mark, could you just give a little background because not everyone knows who you are, and then we will open it up for questions for the group? Mark Grandison: Well, thanks, Bill, for all the wonderful comments. I feel very honored and privileged to be part of the group. I am very happy that we got to this landing, and I am looking forward to help the whole team really develop your vision—your collective vision—of having a diversified platform with insurance being an anchor. I think, like you, I firmly believe if you do it well, it can really lead to wonderful results. I also like the fact that you are collectively wanting to wait for it. There is a timing issue going along, and it is not a quick hit, and it is really if we deliberately build it the right way, this will be a formidable business. I have been thirty-five years in the business. I was most recently ACGL CEO. I was one of the founding members back in 2001 after the terrible events of 9/11, with a very similar vision that you would hear me talk about all the time, which is about underwriting excellence, focusing on the cycle, focusing on allocating capital to the right places where it gives good returns, and really surrounding yourself with a good team—good talented individuals—focusing on underwriting expertise. The difference between a top quartile performer in insurance and the bottom quartile is 20% to 30%—meaning the ones at the bottom are actually losing and actually going by the wayside, and we have seen many of them. Bill just alluded to that. I am excited to join because I like the vision. I am here to help the board to understand the business, to demystify some of the things. I know it is not as easy to understand from the outside world. It can be opaque. A lot of the investors and shareholders of Howard Hughes Holdings Inc. have built, perhaps, no expertise or exposure to insurance, and we are going to make sure—or try to make sure collectively—that we are bringing you along into that journey altogether. What else am I going to bring to the table? Looking forward to working with everyone here, obviously, and also with Greg and his team. I have known Greg for twenty-five years. We were neighbors in Bermuda, and he is a great executive. The platform they built at the right time, right after the market turn in 2019—beautiful timing. Hard E&S legacy. It was highlighted in the package before, and it is really hard to create that kind of platform, and they did a very, very good job. It is both insurance and reinsurance, so it allows the company to really participate across the board in as many opportunities as possible—and again, being selective on the underwriting. I am very much looking forward to help demystify, help teach the board and the investors, and it is going to be a long-term play for everyone here. I have seen it before, and I think the playbook is there. It has worked. I have seen it work. I think we have all the elements to make it one of the best emerging and surging insurance platforms, alongside the real estate platform and whatever else Bill and Ryan will find along the way, to create something very unique and once in a lifetime. I am very excited to be here. Thanks for having me here, Bill. William Albert Ackman: Thank you, Mark. We will now open the call for questions. Operator: Star 11 on your telephone. To remove yourself from the queue, you may press 11 again. Our first question comes from the line of Anthony Paolone of JPMorgan. Your line is open, Anthony. Anthony Paolone: Great. Thanks. Good morning. First question, maybe for Bill. I am not that close to all the different things happening at Pershing Square and the specifics around that. Can you talk to whether anything on the capital-raising side there has any direct implications back to Howard Hughes Holdings Inc.—whether mechanically you have to buy shares or whether there is a greater commitment—or just anything we should think about related to Howard Hughes Holdings Inc. from the activities at Pershing Square? William Albert Ackman: Sure. Last week, we did two listing transactions: an IPO of an entity called Pershing Square USA, which is a U.S.-listed closed-end investment company listed on the New York Stock Exchange, and we also did a direct listing, in effect, of the management company that some people might call the GP of Pershing—the entity that receives fees from various funds that we manage. As part of the IPO pitch for Pershing Square Inc., we pointed out that it is a bit of an unusual alternative asset management company. Think analogies would be Blackstone or KKR or others, in that we are small relative to others in terms of scale, but the capital base is very unusual in that 98% of our assets are in permanent-capital vehicles. The three examples we gave were our London-listed entity, an entity called Pershing Square Holdings; Pershing Square USA, which is this new entity we launched; and then Howard Hughes Holdings Inc., which we put in the same camp. It is not an investment company per se; it is an operating company, a C-corp. But it is a very important, I would say, leg to a three-legged stool. I would say the significance of that transaction is not that we are—we actually cannot buy more stock in Howard Hughes Holdings Inc. We are contractually—our agreement with the board is to stop at 47%. But I would say the importance of Howard Hughes Holdings Inc. to the Pershing Square platform was something we emphasized to a great degree as part of the IPO transaction. We described Pershing Square—this is a permanent holding. We intend to be a forever owner of Howard Hughes Holdings Inc., and our goal is to build a valuable, diversified holding company led by this insurance platform over the next many decades. That is the idea. Anthony Paolone: Okay. Thanks for that. And then my second question is you show the demonstration of value and how much insurance plays a role in that. With it being such a big driver, why continue to hold things like multifamily or some of the other assets in real estate, and should we see that kind of move over to potentially add more to the insurance side over time? William Albert Ackman: Sure. If you look at Howard Hughes Holdings Inc. over the fifteen years we were a dedicated real estate company, basically every dollar of cash we generated we reinvested in real estate. For example, we bought another MPC as a result of having excess cash that we actually could not deploy in our existing MPCs. What the transaction accomplished a year ago is it widened the aperture of things that we could do. I think what we have learned over time is a dedicated pure-play real estate development MPC business is not one that the market will assign a high value to—or another way to think about it, the market assigns a very high discount rate to those kinds of cash flows. All that being said, as demonstrated by our expectations of $2.5 billion of cash that we are going to generate from that business over the next five years, it is a meaningful cash flow generator. So I think the pivot we are making is we are not going to reinvest every dollar of excess cash into things only in real estate. But our definition of excess cash is not just free cash flow. We intend to continue to build out—“the golden goose” for the real estate company is that we want The Woodlands, we want Summerlin, we want these communities to continue to be amazing—ranked in the top handful of places to live in America. In order to do that, we are going to be building apartments; we need more apartment buildings. We are going to be building office buildings; we need more office buildings. But there are some number of assets that may be non-core—that are not critical for us to own—that we are going to look at and examine and say, does it make sense for us to own this asset forever because it is critically important to our market share—say, in The Woodlands in office space—or is it a tertiary asset where there is a buyer who will pay a much higher price than our cost of capital would allow? That is an examination that we are going to do over time. The nature of the Howard Hughes Holdings Inc. real estate business is it is sort of self-liquidating, in a manner of speaking, in that we have a finite amount of land that over the next whatever number of decades we are going to sell. We have a finite amount of condominium development land, and we are going to build out those units and generate a bunch of cash. We have cash flows that come from our operating asset portfolio. We would expect those cash flows to grow on a same-store basis, and we expect them to grow because we are going to continue to develop whatever the communities need to make them really attractive places. But I would say, on the margin, if it is not critical and core, it becomes something that, if a stabilized asset is better owned by someone else, we will sell. Operator: Thank you. Our next question comes from the line of Alexander David Goldfarb of Piper Sandler. Your line is open, Alexander. Alexander David Goldfarb: Hey. Good morning, Bill and David, and welcome aboard, Mark. First, I want to say I love the new disclosure—much more streamlined, much more to the point, and much easier to comprehend. Thank you. Bill, on the Vantage deal, is there anything that could delay a second quarter closing? Any regulations, paperwork, anything like that, or are we on track that this will close in the second quarter? William Albert Ackman: This will close in the second quarter. We have a scheduled hearing date, which is May 19, with the Delaware regulator. Transactions typically can close within a couple weeks of that hearing date. I think we will beat our quarter-end estimate absent something unexpected happening, but I do not expect the unexpected here. Alexander David Goldfarb: Okay. Second question is I think you said the value of the company currently, as you do your math, is $104 a share. Bill, you bought your stock into the company at $100 a share. Is that the delta versus what you previously disclosed—$118 a share for the company’s value? I was a little surprised by the $104, but maybe it is just the math on the dilution. I would assume you guys have better insight into the value of the company versus what we estimate from the outside. William Albert Ackman: Yeah. I think, number one, we are being conservative because of the way we are looking at the— I mean, the true value of the company, you would build a DCF on the MPC community, and you would compound the land values over time and discount them back at a discount rate that I believe would be lower than the rate at which you would appreciate them. What we are saying is: let us come up with a simple metric that is hard to argue against. We are also—with the value of the commercial land—we are assuming a sale to a third party. Obviously, when you sell land to a third party, you are giving up the opportunity for a development profit and everything else. If we develop that land ourselves, we get the benefit of that development profit. So this is a quite conservative way to think about the value of the company. There is obviously some dilution associated with our $100 a share primary investment. Ryan, do you want to add anything else? Ryan Michael Israel: The $104 figure—another way to look at this. We tried to give a very conservative snapshot. Outside of the Howard Hughes Holdings Inc. context, when we value businesses at Pershing Square, we often think about what the business will produce over the next five years, and then we think about that as a value. We might discount that future value back to today. One thing you would note on page 42: we conservatively estimate $104, but we also then roll forward—we believe by 2030 the value will grow to $211, which is a 16% growth rate in intrinsic value over that period. The way to think about that is focus on the $211 and discount that back. I think we would argue that you should discount that back at a substantially lower rate than 16%, given the high-quality nature and the increasing predictability and high growth of the business. If you were to do something like that—using a more modest discount rate—you could get to numbers that are easily 25% to 30% higher than the $104 figure. So, to Bill’s point, there are a lot of different ways to look at this. The $104 would be by far the most conservative way to look. We just wanted to lay out a very simple explanation for people as to how they could start to think about the most conservative value for Howard Hughes Holdings Inc. relative to the current share price. William Albert Ackman: Another way to say it is I think of $104 as basically like a liquidation value of the company. It is after tax, after all various expenses. As opposed to almost like a going-concern type value where the expectation would be we would be building out all the commercial land, embedding a certain profit margin, assuming that we would be selling land at higher prices in the future and discounting it back at much lower discount rates. Those would all accrue to a higher value. But I think this is a very fair way to think about the company and provides a relatively straightforward metric for us to judge the company every quarter. It makes everyone’s life easier. I think simplifying the way people think about the company—in particular, the real estate assets of the company—will go a long way to making this a more ownable stock by a broader array of investors. Alexander David Goldfarb: That is helpful. And then the final question for you. Obviously, data centers are a huge topic these days. You guys have a lot of land. I realize the value of Summerlin or the Houston portfolios may not make sense to add a data center to that. But when I think about West Phoenix, you have a huge amount of acreage, and it would seem like that would be potential to have a colocated power generation/data center, etc. As you look at your land holdings and what is per-sellable for residential versus potentially if there is a bid from a tech company to do data center or a power plant combo, is that at all an option? Or is the view that residential is still the highest and best use, and as far as maximizing the MPC, you want to stick with the formula you have to date versus trying something new? Ryan Michael Israel: Yeah. I would say we have an extremely open mind with respect to West Phoenix. William Albert Ackman: It is an amazing asset. It has all the attributes that you have talked about—access to power, access to water—in a very, I would say, pro-business, favorable environment, and we have enormous scale. We bring a lot of value to any one of those players. There are AI companies raising money at trillion-dollar valuations. In the context of that, you look at this very, very valuable land we own—it might be an interesting transaction to ask someone not only where they want to build data centers or power, but there are some pretty aspirational people in the technology world that want to build cities, and they want to build a community around the company that they are building. One great outcome for us is we bring in a partner who writes a big check, and then we become an asset-light developer of whatever that community is. We make it an ideal place to live in the way that the company has historically built communities—for example, The Woodlands or Summerlin. We do the same in Phoenix. But the anchor is someone for whom having access to everything from nuclear power—to these small nuclear reactors—and all the interesting technology, and they do it with a blank sheet of paper. I think it is a pretty good opportunity. That is something we are totally open to and something that could be transformative in terms of value creation for the company. We are valuing that asset at cost in this context. We bought that asset, what, six years ago or so? David R. O’Reilly: Just over three years ago. William Albert Ackman: Three years ago. Okay. It seems like six years. But the world has changed, I would say. The world has moved at least six years in the last three years in terms of what that property can be used for. Alexander David Goldfarb: Thank you. Operator: Sure. Okay. Next question, please. Thank you. Once again, to ask a question, press 11 on your telephone. Our next question comes from the line of John P. Kim of BMO Capital Markets. Please go ahead, John. John P. Kim: Thank you. I have had some technical issues, so apologies if you have already addressed this. On the KPIs that you introduced as far as MPC residual value and the condo remaining profits, does that essentially incentivize you to maximize price going forward and, in essence, not sell and not generate as much current cash flow? William Albert Ackman: Our goal—we, and maybe David can speak to our approach—we generally take an approach to optimize the combination of volume and price and make sure that we are not stuffing—we do not want a bunch of homebuilders with excess land inventory, and we do not want to manage the supply in a manner where we can continue to grow the per-acre value of the assets. It is not critical to us whether we sell X dollars of land in any particular quarter. What matters to us is we are building these amazing communities, and we are managing our scarce asset in a thoughtful way. But, David, maybe you want to speak to that. David R. O’Reilly: I think, Bill, you summarized it perfectly, which is we are not selling assets to maximize any metric. We are selling assets to maximize the value of the company. We do that by selling just enough land to homebuilders to keep up with underlying home sales. Sell them too much land and they are oversupplied, and in a downturn, they will make a terrible decision that will negatively impact the rest of our dirt. Sell them too few, and we are going to strangle affordability in our communities. So we are tracking underlying home sales in each of our communities daily, making sure that we are preparing the right amount of lots to keep up with those home sales to maintain equilibrium as best we can across our communities. William Albert Ackman: Said another way, simply because we are changing the KPI, that is really just to help the market better understand the company—understand our progress in creating intrinsic value—but it has really no impact on how we think about how we auction land each quarter. John P. Kim: Okay. Makes sense. The KPIs—that information was already there before, but you just want us to focus more on the remaining values of your land and condo profits. William Albert Ackman: Look, one of the concerns I had is that people were looking at the company and saying, “I want to put a multiple on a next-twelve-month estimate of MPC EBIT.” It is really just not the right way to think about an asset like land, which you are going to sell over time and where the land values are going to appreciate over time. The right way to think about an asset like that is either on a present value basis or—maybe the simplest way to think about it is—how much did we sell during the quarter, how much cash did we take in, and what is the remaining land worth? It is a bit like we have oil in the ground. Unlike oil in the ground, which is incredibly volatile, our oil gets more valuable over time as people move into the communities. But there is a finite amount of it, and we want to be smart—kind of like OPEC. We do not want to dump it on the market at any one time. We want to be thoughtful about how we extract it and how we convert it into cash over time. But we do not want you to put a multiple on the amount of drilling that happens in any one quarter, because that is really just a function of, sometimes, rates. Sometimes rates back up a bit, and there may be a pause in sales. One thing is certain: people want to live in The Woodlands. People want to live in Summerlin. They want to live in our communities, which means we will sell this land, and the land just gets more desirable over time. We are at a place in The Woodlands now where there are really no more residential lots; it is only commercial acreage. We will get there at some point in Summerlin as well, which means we are going to sell every acre of residential land over time in Summerlin. I cannot tell you exactly what date, but I am confident that the land we sell in future years is going to be worth a lot more than land we sell today. That is why we are never in a rush. We would certainly not want management thinking about, “Oh, I put out a guidance number, and I want to make the number—let’s just discount the land a bit.” We want people to be focused on the things that matter for growing the value of the company. So these metrics are as much for internal use as they are for external observation. John P. Kim: And when you talk about allocating more capital to Vantage rather than reinvesting back into MPCs, besides selling stabilized assets that you mentioned before, what are some of those investments that you would have made that are now either being deferred or removed going forward in the MPC business? William Albert Ackman: I do not know that we—we had already arrived at a place where we had excess cash flow expected to be generated from condo sales and other parts of our business. But if we were a pure-play real estate company, we would have tried to figure out other places to put that money in real-estate-related assets. What we are doing now is we are saying, well, now we have a really good place to put that money. We think the driver of value in the slide that Ryan showed you is, one, the nature of the insurance business—a profitable insurance operation with assets managed by us for no cost—we think is approaching a 20%+ ROE business. Those are returns very hard to achieve in a relatively low-leverage kind of real estate company. So, one, the returns are higher. Two, the business we are buying here for effectively 1.4 times book value becomes worth something comfortably north of two times book value if we can achieve our objectives. Every dollar we can put in Vantage appreciates both because the ROE is higher and the value that the market will assign to that capital invested in Vantage is much higher. Therefore, our incentive is to invest every marginal dollar in Vantage as opposed to buying another MPC. If we had had this business plan three years ago, instead of buying West Phoenix, we would have put an extra $600 million into Vantage. John P. Kim: Thanks. Operator: Thank you. I would now like to turn the call back over to William Albert Ackman for closing remarks. Sir? Operator: Okay. Ending early. William Albert Ackman: I guess my closing remarks are the company is going through an important transition that we think is going to create a lot more value for shareholders over time. We are incredibly excited about it. We think we have all of the things needed to achieve that objective. We have a great core, very profitable business, and I think the team is thinking about it the right way, and the numbers are great. We have mayors around the country that are great for— including in New York City—sending people to business-friendly communities that are pro-business and pro-capitalism, and we happen to own assets in states that are aligned with that objective. So I think Howard Hughes Holdings Inc. owns real estate assets in the right places, and we are going to generate a lot of cash from that business. Now we have a very good place to put that capital. The Vantage transaction, I expect, will close earlier than the end of the quarter. We are excited about that. We are excited about the Vantage team. I think they are excited to be part of a permanent, long-term business. In insurance, you want to have a long-term owner, and we have achieved that. With Mark’s addition to the board, I think the board is now very well positioned to help oversee this important transformation. I think the only thing that is missing in the share price is some new shareholders, because I think we have scared away some of the real estate shareholders, and hopefully we will start to attract people who are excited about the business plan going forward. With that, absent any further questions, we will end the call. Hearing no further questions, thank you so much, and have a great day. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
Michael Judd: [Presentation] Hi, everyone. Welcome to Opendoor's Q1 2026 Financial Open House Earnings Live Stream. I'm Michael Judd, Opendoor's Head of Investor Relations. A few quick housekeeping guidance before we get started. Like all things Opendoor, we're going to do this faster. Details of our results and additional management commentary are available in our earnings release, which can be found at investor.opendoor.com. The following discussion contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact are statements that could be deemed forward-looking, including, but not limited to, statements regarding Opendoor's financial condition, anticipated financial performance, business strategy and plans, market opportunity and expansion and management objectives for future operations. These statements are neither promises nor guarantees, and undue reliance should not be placed on them. Such forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in the Risk Factors section of Opendoor's most recent annual report on Form 10-K for the year ended December 31, 2025, as updated by our quarterly report on Form 10-Q for the quarter ended March 31, 2026, and other filings with the SEC. Any forward-looking statements made on this webcast, including responses to your questions, are based on management's reasonable current expectations and assumptions as of today, and Opendoor assumes no obligation to update or revise them, whether as a result of new information, future events or otherwise, except as required by law. The following discussion contains references to certain non-GAAP financial measures. The company believes these non-GAAP financial measures are useful to investors as supplemental operational measurements to evaluate the company's financial performance. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our website at investor.opendoor.com. And with that, let's get into the open house with Kaz and Christy. Kasra Nejatian: Good afternoon, everyone. I opened the Q4 financial open house by showing you a clip from the Q3 financial open house. I did this because I think among the most important things you can do to build trust is to just do what you said you would do. Don't promise and moon and deliver dust. Just do what you said you would do. Our last open house might as well have been called the look at the October cohort open house. With that in mind, let's once again take you back to our last financial open house. That the October cohort is going so well is not a plan, it's a proof point. The product launches I'm going to talk to you about aren't promises of things that might work. They're the explanation for why October happened and why it's repeatable. Now look, because we're committed to transparency, let me get ahead of a couple of things. October was not our largest cohort by volume. But it was about double the size of what we were doing just a few months ago. We're not getting lucky on a few homes in a friendly market. And given how the past few weeks have gone, I believe we're on track to significantly increase our acquisition size as we said we would do. What October shows is that the structural changes we made under Opendoor 2.0 are working. And then we're compounding those learnings into every single cohort going. During that call, I told you that Opendoor 20 cohorts would perform fundamentally differently than Opendoor 1.0. And back then, some folks said, October was a fluke or that we'd fall apart when the markets got harder or the sample set got larger. And one of my favorite investors said, look, 1 month does not make a trend. That was fair. Fair enough. So here are the facts. We now have a few more months of data, and we should compare the first full 4 months of Opendoor 2.0 against the last couple of years of Opendoor 1.0. Don't pay attention to me. Look at the chart. These are the cohort arrival curves. They show what happens when a group of homes margins on the y-axis as that group of homes sells on the X-axis. Every one of those purple lines is an old Opendoor cohort. They all do the same thing. They bleed margin as we sell through. Now look at the blue curves. Margin doesn't drop the way it used to. This is a step function change in how this company operates. 4 consecutive months tell us something October alone could not. This isn't an accident. This isn't small sample luck. Mortgage rates are still far too high and the listings are at all-time highs. But in a housing market that was supposed to break us, our cohorts are delivering. October wasn't a fluke. It was just the first month we could see it. We've now sold through over 80% of the October cohort and our trends have continued. Margins for our core cash products have come down only 90 basis points from where they were at 10% sold to over 80% sold. Last year, that same journey cost us over 260 basis points. So we've seen about a 3x improvement. And then November, December, January, they all showed the same pattern 4 months in a row. In fact, Q4 of '25 and January '26 cohorts have the best combination, the best combination of margin, margin stability and resale velocity of any cohort in Opendoor history, obviously, excluding the COVID era. Our cohort curves or the slope of our margins as homes sell-through are basically flat. And we're doing this at great speed. Every single cohort from October through January is selling faster than any corresponding cohort since COVID. And we're meaningfully scaling growth. In Q1, we entered into contract in over 5,000 homes. That's 2x bigger than Q4 and 3x bigger than Q3. In fact, when it comes to contracts, this was our single best quarter since 2022. Cohorts are performing better, resale velocity is improving, and we're scaling growth. But how can we do this? Well, let's talk about it for a second. Two quarters ago, I laid out the blueprint and told you exactly what we were going to do. Underneath this all, there was one simple goal, make Opendoor faster. Last quarter, we graded ourselves and we're green across the board, and I promise we will do this every single quarter. So let's do that. Step one, profitability, breakeven by the end of 2026. We're on track. We'll be ANI positive on a forward 12-month basis by the end of the year. And as of April 1, Opendoor is adjusted EBITDA profitable on a forward 12-month basis. Step two, unit economics that make the model work, positive contribution margin while increasing velocity. We're on track. Our contribution margin has increased every single month since we bottomed out in September and October, November, December and January cohorts. They're all selling faster than any corresponding cohort since COVID. We're improving margins, speeding up clearance, and we're doing all of it in a worst market. Acquisitions are growing. In Q1, we entered into contracts in over 5,000 homes, 2x what we did in Q4, 3x Q3. And our Q1 DTC acquisition contracts are up more than 4x compared to Q3 '25. This was our single best contract quarter since 2022. Step 4, we're making really good progress on our capital-light products for sellers and transacting directly with buyers. Opendoor Checkout has now helped us sell homes in a bunch of states and more than 1/3 of our acquisition contracts in Q1 were cash now more later. This time last year, that number was exactly 0. That's our scoreboard. We're green across the board. This quarter, the scaffolding came down and what's underneath is a company that finally knows exactly what it is and how it wins. For a long time, the core assumption of Opendoor was that we had to be better at predicting the future than the rest of the world. We operated like a front desk. We looked at the macro and made directional bets based on where we thought the prices were going to be in 3, 6, 9 months. And then we pushed billions of dollars on to the table. The issue was never the people and not the model. The problem was a wrong problem to solve. Even if our models had been perfect, they were still pointed in the wrong direction. Everything flowed from a single question, where are home prices going? That one guess drove everything. It set the spread, which set what we bought and determine whether or not we made money. And when we got the answer wrong, we blamed the market every single time. Macro became our excuse for everything. Look, when predicting the future is your North Star, a reflex in the down market is always the thing, widen spreads, slow down, pull back, wait for the market to recover. Every defensive move said the thing that was actually killing us. We were playing prevent defense when we were down by touch down. So of course, we were losing. We widened the spread to protect ourselves, but in doing so, we changed their funnel. We changed the thing that was making the company work. We got worse homes. Worse homes meant worse margins. Worse margins went back into the model. The system got more conservative and spreads widened even more. We didn't just have risk that we could not calculate. We actually built a machine that amplify it. Every move made everything worse. That was our fatal flaw. In a business where time is risk, the old model got us to slow way down. And once that reflex exists, every department in the company, product, operations, finance, everyone starts running the same defensive operating system. The default everywhere was slow down just to protect ourselves. Look, I'm a nerd's nerd. I think models are really cool, but they're incredibly worthless when you had the wrong strategy. So what we did wasn't just improve the pricing model. We changed the question that it was meant to answer. A year ago, the most important input into every decision was our home price appreciation forecast. Today, it's how fast we can sell the home we're looking to buy. Market makers do not win by being right about direction. They win by controlling their exposure to being wrong. They win by being right about time. When a prop that gets scared, it pulls right back. That's how the spiral starts. When a market maker sees risk, it does the exact opposite. It speeds up and prices to clear. The faster you move, the less any single home can hurt you. And velocity is how we know our pricing is right. A home that fits doesn't give us any signal. It just increases risk. Opendoor 1.0 was a Kobayashi Maru. It wasn't a game we should have played. Without fundamentally changing it, we will just totally kill the company. You don't beat that game by getting better at simulation. You beat it by changing the program. So we're now running on a velocity OS. The difference is totally structural. We have rebuilt our engine around a totally fast team of high-frequency thinkers. Our signal intelligence officers, hedge fund quants and they're all maniacally focused on data loops. They have a mandate, ship a change every single week, optimized for both margin and velocity. And as our models get better and they're getting better every single week, the whole machine moves faster. The whole company runs faster. We now run on a weekly cadence across the company. Products ship every single week. We don't need to be perfect in order for this business to work. We just need to be faster with hundreds of acquisitions a week, we see pricing signals, renovation costs and clearance patterns faster than anyone else in this market. Every home keeps to something. And every single day, we shave hold times, our capital turns go up and our returns go up. Speed. Speed pays for everything. In a bad market or a great one, the variable thing that actually matters is time. So when you ask what has made the change? What makes this whole thing work? It's one word. Faster. I wear a T-shirt at every financial open house that says one thing, Faster. You can see it. I'm wearing one right now. Most of you think it's just a personality quote, right? A founder nerd thing, a costume of a wartime CEO. It's really not. Look, we used to be in a business that lived or died and whether we got the future right. Now we're in a business that lives or die and whether we move fast. Faster isn't just our competitive advantage. It's an absolute moral imperative. Let me just say this again, so you don't think I'm being subtle about it. Faster is not just our competitive advantage. It's our whole reason for being here. It's our moral imperative. Every day, someone is stuck and cannot move is a day in their life that they cannot move on. They're on hold. If we're in the business of helping people move, then days matter. It's a job offer they haven't accepted, a planned retirement put on hold and finally not started. The traditional home sale process is more than just inconvenient. It holds these people back. 40 million homeowners in this country want to move in the next 12 months, but only 1 in 5 think they can actually do it, not because moving is too expensive, but because everything about it is just too uncertain. There's a simple test for any system. Would you design it this way if your family had to live in it? The legacy real estate system fails to test. It's our job to fix this. Every product decision Opendoor goes through does goes to one single filter. We only care about one thing. Are we returning time to people. Last week, across all sellers, Opendoor gave back over 100 years of time, over 100 years of time, over 500 families said yes to an Opendoor offer and reach certainty about 90 days sooner than they would have in a traditional process. You do the math. In just 1 week, we got rid of a century of human waiting, time that got returned to families who got to move on. Faster is a moral imperative. It is a good in and of itself, and that is what this company is for. Every product launch ultimately serves one question. How do we move faster for sellers, for buyers, for Opendoor for everyone? So let me run through some product launches. This quarter, we expanded cash down more later coverage. Every week, hundreds of families who would have heard, sorry, we can't help you are now getting the real offers. We totally rebuilt the foundations of our buyer apps. We acquired Doma's Escrow division. Noah, our AI underwriter, prices normal homes in Phoenix now. We rebuilt every message a buyer gets from us, 6 different systems became just one conversation. We rebuilt our offer page, giving customers the type of information they would have gotten from an expert who was at their kitchen table. We also built a portable assessment scheduling. You can now get your home assessment done on your own terms. More than half of our assessments are now seller-led, 6,000 in March alone. We migrated our component library to an AI-native front end. While we were in there, we killed our legacy cake service, a transition that had failed 3 times in 4 years, finished in 6 weeks. The platform is what makes everything else faster. Talk to any Opendoor engineer, and they'll tell you this is a really big deal. We built an AI audit tool that automatically reconciles inspection scopes with actual repair decisions, giving our field teams real actionable feedback to improve operating compliance and cost discipline. At title intake, it used to take us up to 5 hours. It now takes 15 minutes. We launched Opendoor Mortgage in Colorado. One of our marketing managers replaced our $0.5 million life cycle legacy e-mail system with one Claude skill. A field manager in our Southeast division runs 5 states on Claude. Afinance team turned 20 hours of SOX deliverables into 1-minute query. None of these people, by the way, were engineers. We also tripled our Cash Now, More Later product. Our voice bots dropped seller contract time from 30 minutes to 5. We replaced 72 manual exports a month with 1 pipeline. We built a new listing operated consoles in 8 days, we merged 8 different HR systems into one and end process. We built dozens of point solutions. Now that's not the full list. It's just what I had time for before they play to walk me off stage music. As you can tell, we've changed a lot, but I also want to tell you what we haven't figured out. Look, I'm a Leafs spin. I know what it feels like to we promise lots of things and get absolutely none of them. I know what it feels like to watch the same group of people over and over again, give you false hope and give you nothing. I thought about this more than I probably should, but I've decided that the promise is not the same thing as a proof. You do not get credit for what should have happened. You only get credit what actually did. I know what it feels like to have momentum in March and tears in May, which is why this t-shirt says faster and not done. Faster is a setting. It's not a destination. We don't get to celebrate signals. Every quarter is just another shift for us. We're not done. We're not even close. Mortgage is live, and the early data is honestly going a lot better than I thought it would go. We're getting really good attach rates and our customers love it. But look, it's early. We don't fully know how the product is going to work across different market conditions in different home price tiers. We have a thesis. It's working really well, but we haven't proven it at scale. Cash Now, More Later, it's growing really fast. It's over 1/3 of our growing pie. And that's just really remarkable for a product that didn't exist a year ago. And that was totally reworked just 3 months ago. We're iterating how it works. We're fine-tuning it, trying to get the balance right between what the seller gets and what Opendoor keeps. But let me be honest with you. Every product that Opendoor ships has to earn its place in our portfolio. Cash Now, More Later is earning it, but we're not done changing it. And like we said earlier, the housing market, look, it just remains what it is. We believe the model we have built on faster works across macro cycles. We're no longer dependent on the macro. We control our own destiny. October, November, December, January cohorts, they were all bought during the most aggressive expansion in our history in a market that I don't think anyone would describe as favorable, and this is the best evidence we have. But that's just what it is. It's evidence. It's not proof. Proof will take more time, more reps, more shifts, more aggression, more products shipped faster. And we've said this before, and you'll always hear us saying this. We're not asking you to take our word for it. We're asking you to watch and to hold us accountable. Christy is going to walk you through the numbers in a minute. But before she does, I want to close with this. I've been asked a lot what Opendoor is. We changed our LinkedIn profile from real estate to software, but software is too generic. Look, Opendoor is on a mission. Our job is to get people who are stuck moving. We're a machine that helps America move. When I joined Opendoor, I did it because the home ownership matters. It is the thing. It is the single thing that leads to better families, better neighborhoods. When people buy a home they love, they're buying a share in this country. We don't buy homes at Opendoor to hold them. We buy them. We buy them so we can get them into a next family faster, with less friction at a better price. And every family we help move is a family that is clear down roots. It's a neighborhood, we're getting better. It's children that get to grow up in a home that their parents love. Faster is what this company was built to do. This T-shirt, that's just a reminder. The Opendoor machine is now running and every day it runs, every single day it runs, friction disappears and people move. We do not need a better market. We just need a better machine. Last week, we gave back over 100 years. That's 100 years of human pain just gone. That's not corporate dragon. That's just families moving and building better lives. Please track it. Please hold us accountable. Christy? Christy Schwartz: Thank you, Kaz. I'm not wearing a T-shirt, but I promise I'll match the pace. Three things to know about Q1 before we get into the details. One, we reduced aged inventory from 51% to 10% in 2 quarters. The book is the freshest it's been in nearly 4 years. Two, margins bottomed out in September and have improved every month for 6 months straight. Q1 closed at 4.4%, up 3.4 points quarter-over-quarter, and we expect the upward trend to continue into next quarter. Three, acquisitions are up 45% from Q4, and Q1 was our strongest quarter for signed contracts since Q2 2022. And the headline behind those 3, starting in Q2 2026, we expect to be adjusted EBITDA profitable on a 12-month go-forward basis. The machine is working. Let's get into it. As a reminder, we are executing against 3 management objectives on our path to profitability. The table in our earnings release shows our progress on each. Let me walk through the highlights. First, scale acquisitions. We purchased 2,474 homes in Q1, up 45% from Q4. This is the second consecutive quarter of meaningful growth. And signed acquisition contracts, our leading indicator, tell an even stronger story. March was our highest single month for signed contracts since June 2022, and Q1 was our highest quarter since Q2 2022. An acquisition contract will typically close about a month later. Q1's 2,474 purchases are mostly from late Q4, early Q1 contracts. Late Q1 contracts will close primarily in Q2. Also, we want to be clear, we don't close on every home we go into contract on. Under Opendoor 2.0, we're deliberate about which contracts we take all the way to purchase. So the funnel narrows between contract and close. So more contracts mean more opportunities to be selective and the trajectory matters. In a short period of time, we've gone from our lowest contract volume since COVID to our highest since 2022. This is the tempo required to achieve the goals we set for ourselves, and we're building the volume and the discipline at the same time. You can continue to track our weekly progress on accountable.opendoor.com. Volume only counts if the quality holds, and our second management objective is the scorecard for whether we're delivering the right kind of growth. The second, improve unit economics and resale velocity. This is where the work really shows up, and there are 3 data points I want to highlight. One, resale contribution margin has improved every month since September 2025, closing Q1 at 4.4%, up 3.4 percentage points quarter-over-quarter. Two, our Q4 2025 and January 2026 cash acquisition cohorts have the best combination of margin, margin stability and resale velocity of any corresponding cohort in company history, excluding the COVID era. And three, the percentage of homes on the market for more than 120 days fell to 10%, down from 33% at year-end and 51% at the end of Q3, a 41 percentage point improvement in just 2 quarters. Let me stay at this point for a moment. Two quarters ago, more than half of our homes had been sitting on the market for over 120 days. At the end of Q1, that number was 10%. That is the lowest it's been since Q2 2022. To put it in perspective, the broader market was at 23% 2 quarters ago and rose to 33% at the end of Q1. We are now carrying a book that is materially fresher and healthier than the market. Inventory health is both a leading indicator of forward margin and evidence that our approach is working. A faster-moving book means lower holding costs, less market exposure, better resale outcomes and more efficient use of capital, and that's exactly what's showing up in our margins. This didn't happen because the market got friendlier. It happened because of tailored underwriting, disciplined close to listing workflows and resale systems designed to move homes quickly while protecting unit economics. Third, build operating leverage. Fixed operating expenses were $33 million in Q1, down $2 million quarter-over-quarter and down $6 million year-over-year. Our trailing 12-month operations expense as a percentage of trailing 12-month revenue held steady quarter-over-quarter at 1.3%. We are holding the fixed cost base flat while simultaneously investing in the AI and infrastructure that powers our product, and it's worth pausing here for a minute. We're going all in on AI, and we're doing it responsibly. There's a lot of noise right now about companies blowing their 2026 budgets on AI before the second quarter. That's not us. We're focused on results, not token leaderboards. We have an internal Slack channel called Default to AI, where teams celebrate measurable impact. Some highlights in addition to what Kaz shared earlier: an AI-powered repair negotiation tool cut our buyer fall-through rate by over double digits; field managers are using AI scoping feedback, helping to reduce pre-list renovation spend by up to 10% to 20% per home in pilot markets; and a ticket triage automation, redeployed 3 full-time employees from classification to resolution. What's notable is that most of these tools were built by operators, not engineers using the AI infrastructure we've invested in. We're cutting waste and reallocating into capabilities that move the business. Our flat fixed operating expense is the output of that discipline, not the absence of investment. 3 objectives, 3 quarters of consistent progress. The plan is working. Turning to the balance sheet. We ended the quarter with $999 million in unrestricted cash, our highest cash balance in years. That's a product of 2 things: the strength of our parent level capital position following the work we did last fall and the health of our inventory book. We held 3,420 homes in inventory at quarter end, representing $1.1 billion in net inventory. Our nonrecourse asset-backed borrowing capacity remains robust at $7.1 billion with $1.5 billion committed. Between liquidity, facility capacity and the quality of what we're financing under those facilities, we have meaningful flexibility to execute against our plans. Now let me give you the guidepost for Q2. Acquisitions. You can continue to track our acquisition contracts on accountable.opendoor.com. We've updated our contract road map for the remainder of the year. The ranges reflect our current outlook, inclusive of typical seasonality, and we'll continue to update them each quarter as we learn more. Revenue. Our Q1 increase in home acquisitions will start to flow through to resales, leading to expected revenue growth of approximately 25% quarter-over-quarter. Contribution margin. Our contribution margin bottomed out in September and has been improving every single month since then. We expect the contribution margin for Q2 2026 to fall in the middle of our 5% to 7% goal we shared in the first Opendoor 2.0 financial open house. Adjusted EBITDA. We expect Q2 adjusted EBITDA to be breakeven, plus or minus a few million dollars, and we see Q2 as an inflection point. We expect to be adjusted EBITDA profitable on a 12-month go-forward basis starting in Q2. In closing, last quarter, I said you can't build a great business in a spreadsheet. You build it by shipping product, operating with discipline and learning from the market. Q1 is what that looks like when the machine starts to work. Acquisitions, margin, resale velocity, inventory health and cost all moved the right way at the same time. That's not a lucky coincidence. That's a system that's working. Two quarters ago, we laid out our plan. Every quarter since we graded ourselves against it and delivered. We have a lot left to prove. We intend to keep doing exactly that. With that, Michael, I'll turn it over to you for questions. Michael Judd: Great. Thanks, Christy. Our first question comes to us via video submission from Mike Alfred. Mike Alfred: It's Mike Alfred, Founder and Managing Partner of Alpine Fox LP as well as Board Director in IREN and Bakkt. Great job on the execution side. I really like the way the business is integrating AI into everything you're doing. My question is about the longer-term implications of AI. Do you believe when you look at the strategic direction of the company that we are well prepared for all the things that AI is likely to change about the way the real estate market operates in the coming years? Kasra Nejatian: That's a great question. Look, I think the answer to this is like in a bunch of layers. And I can't think about the layers, so let me just go through them. Layer 1 is like the earnings call answer. AI is important. We're leaning right in. We're spreading across the entire business. If you kind of hear that from every corporate CEO. I mean it's true, but it tells you like nothing actually useful. Layer 2 is actually important. That's like the software leverage story. Like the original SaaS era, the insight was that you could take a CRUD database, wrap business logic around and some workflow around it. And then you'd find that people could do a lot more, right? Software would get cheaper, people could do a lot more because you could encode the rules and the processes and decision-making into software. And the leverage was just insane. AI extends that by quite a bit because you're now encoding judgment on top of rules and the leverage becomes really high. Like that's real and it's important. And we're capturing a lot of this. But that's just the story of software broadly. It doesn't say anything specific about Opendoor. We just happen to be honestly just really good at this. Layer 3 is actually fundamentally more interesting. It's like the automation versus the collaboration split. AI as collaboration software is very misunderstood. Let me talk about that for a second. Look, our goal isn't to use AI to cut 15% of our expenses by doing the same things we're doing just cheaper, right? Like that's the automation applied to cost. And the goal isn't like a black box replaces a human process end-to-end. That's just not what we doing. Like what we want to do, given everything AI can do is to rebuild our processes from scratch, from a blank piece of paper so that we can use AI to have a fundamentally different process. Layer 4 is actually our complexity as a structural advantage. This one is important to understand, and this is why we're not afraid of AI is the way like some software incumbents are. Real estate is atoms and risk and not just bits, it's also some bits. The underlying transaction involves a level of complexity and condition and local dynamics and human emotion and all of it like makes the system very complex, and that's actually our advantage, right? AI doesn't eliminate this complexity. It just makes navigating it a lot easier. So what we don't need to do here is just stick to some hypothetical end state. We just need to be meaningfully better than the alternative and the legacy process at every step. Like this is a Red Queen's Race dynamic, and it works in our favor here. Look, we've been running in this very complex environment for years, and we have a craft ton of operational knowledge, and that is deeply, deeply useful. The last -- I promise this is the last layer. I like 5-layer cakes. The fifth layer is about what AI does to the other side of the transaction. So there are 2 parts to this, right? What the customer feels and sees and what it does to the category. On the customer side, look, the traditional real estate process is defined by information asymmetry, right? That's just not an accident. That's the foundation of the whole process, but experts who know the market make profit from transaction friction because the parties themselves can't navigate it. AI totally dissolves this asymmetry, right? What that means is the customers are being like upgraded. We can build AI concierge that feel to the customer like the expert is sitting at the kitchen table, right? That's an incredibly important thing, and it's what we're doing. On the category side, this is the actual metabit, right? Every major Internet transition, every industry has had winners that didn't just jam the Sears catalog into a browser, they actually helped with the transaction, travel, retail, fintech, that's been true across of Internet. It just hasn't happened in real estate and real estate is like honestly, the last major holdout, not because the category is fundamentally immune from this, but because the underlying complexity made it a little too messy to transact at scale. AI just totally removes this constraint. I think I should actually start the answer by saying yes. But yes, we believe we're well positioned. It's honestly on the inside, it feels as though our business was built waiting for this mana to fall from heaven, and it now has. Michael Judd: Great. We got a few questions submitted via Say Technology that all kind of clustered around profitability. So I wanted to pull out 2. The first comes from Heejun C., who's asking, you said in the last earnings call that turning profitable by the end of the year was achievable. Now the first quarter has passed and interest rates remain high. Is that still a realistic goal? Also, Arun Jacob V. asks, how confident are you today in the Q2 positive EBITDA and year-end profitability forecast? And what are the key swing factors from here, which might influence it? Christy Schwartz: So great questions. Thank you. We reconfirmed our goal and expectations earlier on the call, and I'll say it again here. We expect Opendoor to be breakeven or profitable, adjusted net income profitable, by the end of this year on a 12-month go-forward basis. And Arun, to answer your question, we also shared in the call earlier that we're going to reach an important milestone on that path to profitability in that starting in Q2 2026, we expect to be adjusted EBITDA profitable on a 12-month go-forward basis. Our management objectives that we report every single quarter are the 3 legs to the stool that help ensure we're on the right path, and we're building momentum. Acquisition closes are up. Acquisition contracts, the leading indicator to closes, are also up. In fact, Q1 2026 had over 5,000 contracts. That's the highest quarter of contracts since Q2 2022. Retail contribution margin has improved every single month since September, and we guided Q2 to the middle of our 5% to 7% targeted CM range. Long-held inventory went from 51% to 10% in 2 quarters. And we did all of this while holding fixed OpEx down. The last time acquisition contracts exceeded 5,000 in a quarter, our fixed OpEx was double where it is right now, yes, double. And that's the AI investments and operator empowerment that we talk about every single quarter, that's what's happening here in fixed OpEx. We have made meaningful changes to what is required to run Opendoor 2.0, and we are beginning to demonstrate that those changes are durable as the volumes return. We're clear on our profitability goals, and we will continue to check back in every quarter with updates. Kasra Nejatian: Can I add something here? I think Warren Buffett famously said you find out who's swimming without shorts when the tide goes out. I have 4 kids, and they actually sometimes go swimming and I have to worry about them wearing shorts. So I feel for Warren. But right now, like the tide is out in housing, right? In the real estate market, the tide is out. And most CEOs will tell you that they wished conditions were friendlier. I'm telling you the opposite. When I took this job, I knew the tide was out. That was the entire point. I didn't take this job because I was hoping macro would turn and would bail us out. Like I wasn't looking for a company of sunshine patriots. I think Kelly Clarkson famously retweeted Nietzsche and said, what doesn't kill you actually makes you stronger. We chose -- I chose hard mode. We choose hard mode because that's what's going to make us stronger. Look, we do not need permission from the Fed to put on our shorts to go swimming. Everything we've accomplished so far, everything has been done in the face of an unforgiving macro. And I think we've told you how it looks like when we're winning. And some of you are watching this. But I think I should tell you what it would look like if we were losing, if we could not do the things Christy said we will do. This is the thing most company CEOs don't do because they're afraid they're going to end up losing and they want to be able to hide it, but I want you to hold us accountable. Here's how you would know. Cohort curves start looking like they did with the purple lines. They would start high, would have massive losses as we went through. Contracts would plateau at the low end of our range or below the low end of our range for a whole bunch of weeks and homes greater than 120 days in the market would go back to what we had in Q4. If those 3 things happen, if all those 3 things happen, then we're not doing what we said we would do, right? It's all about slope, acquisition, inventory health. That's the business. Those 3 things. Look, I don't think any of those 3 things are going to happen. I don't think all 3 of them are going to happen together because we believe we've built a model that works better. Faster is the key. We can't ignore the macro. We're not stupid, but it will never be our excuse. Good excuses don't make great companies, right? We control our own destiny. We don't need the market to recover. We don't need rates to fall. We don't need perfect conditions. We just need to keep moving more families faster and faster through a machine that's already working. So as I've said before, look, we're not asking you to take our word for it. We're just asking you to watch those 3 things that Christy talked about. Michael Judd: Great. The next question, Andrew L. asks, as you accelerate acquisition velocity, how are you ensuring that underwriting quality remains high and that you won't need to raise equity to fund this expansion? Christy Schwartz: Thank you for the question, Andrew. It's important to know that we're not accelerating acquisitions by driving like blunt spread compression. It is driven by a combination of tailored underwriting that allows us to give really compelling offers to high-quality homes, product expansion through our Cash Now, More Later product, geographic expansion and just conversion improvements realized from such things as making improvements to the offer page. While we've removed the requirement for an in-person visit from pre-contract to post contract, we still perform an in-person inspection before we purchase the home. This sequencing change helped remove friction from the contracting process, and it saved the cost of an in-person inspection for higher intent sellers. without compromising our understanding of the home we're about to acquire. But what I just described isn't proof that our underwriting quality remains intact and high. The proof is in the cohorts themselves. Our October, November, December and now January cohorts are each coming in with higher contribution margin, improved margin stability, increased resale velocity compared to their prior year cohorts. On the capital question, our cash position actually grew as we acquired more inventory, which reflects the underlying health of our inventory book. Younger homes with shorter days on market are structurally easier to finance, and we have sufficient warehouse capacity to more than keep up with our acquisition pace and plans. We also have warrant structures that provide additional capital optionality. To the extent any future capital decision is made, we expect to be opportunistic rather than necessary, and we will continue to evaluate the capital stack with an eye toward minimizing dilution. Kasra Nejatian: I say a couple of things here. Like first, there's a persistent myth that to move fast, you have to be sloppy. I just fundamentally reject this. Look, there was a rumor when I joined Opendoor that Opendoor was the best buyer of homes with foundation issues. Like whether or not that was true, it's definitely not true anymore. Today, we use AI to remove this toil we had accrued. We no longer have 11 people touching every single home so that one person that does touch it can actually do their job well, right? That's actually all I want to say about underwriting because I don't want to give away all of our secrets. But on the equity piece, let me add to what Christy said. I said it in my very first earnings calls, but I want to repeat it. I despite dilution. If we issue a share, it has only one job to make every other share worth more for our existing shareholders. We will never issue shares to extend the runway. That's not what we're going to do. The goal is for Opendoor to never be in a position where it has to raise money to survive. In the history of this company, it has raised way too much money. We're going to stop doing that. The discipline we need going forward is that we're going to fund this business from the cash flow we generate. I'm not interested in like building a company that needs a life graph every time. I'm interested in building a ship that actually floats, right? What Christy talked about isn't the best case scenario. It's the only way we were going to run this company. Michael Judd: Great. Our next question comes from Heejun C., who asks, I'm interested in your 4.99% mortgage promotion currently exclusive to Colorado. Are there plans to expand this offer to other regions or states soon? If so, please provide an estimated time line or a list of upcoming locations. Kasra Nejatian: Well, look, first of all, it wasn't a promotion. I want to be clear about that. That was the actual rate. We don't run rate connect here. We charge what the math allows us to charge, right? Look, mortgage is early right now. We're live in Colorado and loans are doing well without any optimization, right? Attach rates are above even my most optimistic expectations. And I'm not going to give you a launch calendar for every market, but we're in flight on licensing in about just over 20 states right now, and we expect to kind of roughly double that by the end of Q3, and we're rolling this out as fast as we can. But we've gotten some early feedback that I think is helpful. One of the customers told us that our rates blew the other lenders out of the water. And I want to talk about our math and why our rates below other lenders out of water, right? The math is simple. Big bank lenders take about 340 basis points in revenue per loan. Most of that is just a toil tax on the borrower, right? It pays for branch offices, loan officers, manual underwriting, paper shuffling, terrible ads and like expensive lunches. We've built an AI-native mortgage platform from day 1. No legacy system, no commission-driven sales force, right, as few humans as possible to get the job done. So we're not just discounting our way to a lower rate. We're actually building our way towards this. That structural advantage means that the regular mortgage on our homes will always be the lowest rate the customers can get, right? Today, our rates are running about 100 basis points below the market average. And that translates to about 10% to 15% lower mortgage rates per month. And that's the gap, right? Our job is to just chip away at this to make sure that we actually make housing affordable in this country. Michael Judd: Great. James M. on Say asks, tokenization of real estate? Kasra Nejatian: What's the question? That's the whole thing? Michael Judd: That's the question. Kasra Nejatian: Okay. Well, I think this is a question that gets asked frequently, and I have a rule of not announcing product launches before they're ready. I think the worst thing tech companies do is they make software for PowerPoint presentations, and that's just stocks, that's what makes people hate software companies. Opendoor exists to tilt the world in favor of homeowners, right? Simpler, faster, fairer, and you do that by reducing the friction tax. Like the embedded friction tax in the system today on a given transaction is a double-digit percentage of the home's value. And tokenization is an incredibly important way of reducing this. Here's like how I think about it. And it's important to be mindful of this. The patterns that we treat today as the natural order of things are usually just the last hack that someone installed on our machines, right? This is when Judd starts rolling his eyes. But it matters, so I'm going to talk about my favorite topic, history of money. Look, we went from barter to coinage to build an exchange to checks to ACH to SWIFT, right? And it really does feel like we're living in the future. But the entire system of money that we rely on runs on banks running COBOL software. This is a programming language from 1959. So the infrastructure powering our banking system that moves trillions of dollars is older than the moon landing. And we feel like we're in a stable place, but the people who were bartering also felt like they were in a stable place, right? These are not permanent solutions. None of them are permanent because of the following. They all require intermediaries between people to get anything done, right? That cannot be the end state. Onchain settlement is the first time in the history of money where you don't need permission from other people to move value between 2 parties. This isn't an incremental improvement. It's like an inevitable category end, right? And within our lifetime, we're going to see what it does and everything we do today will seem antiquated. And title is the same story. It's just about 100 years behind, right? Like animals mark their territory physically and humans mostly have done the same thing for most of history, right? The real innovation here was in Medieval England. We formalized this with a clot of dirt and some witnesses, and now we have some paperwork. All that has happened between then and now is that some of these are searchable on the Internet. That's the entire innovation that these paper records that live in courthouses are now searchable. Look, the fact that there is a lobbying group, defending the current way of doing things is the most reliable evidence that we'll do for the next thing. It's like the petition of the candle makers against the sun. When I look at the housing transaction, I find it really hard to imagine that title to the most expensive asset in our lifetime does not live on chain. It's hard to imagine that we have 3 transactions doing the same thing, Title, insurance, mortgage, and they all have data trapped in silos. These will all move on chain. Now look, I'm not announcing any of this today, but we are doing work that's on the green path to end. Our acquisition of Doma's escrow business is one example, right? We're taking the closing infrastructure of America, building checkout for real estate. And this is not tokenization, but it's clearly the step in the right direction. And in that world, title and mortgage and insurance, all of it can move on chain, and this all gets better. Operator: Thanks, Kaz. I can't wait for the TED Talk. Our next question comes to us from Dae Lee from JPMorgan. Kaz, you've now been leading Opendoor for over half a year and have had time to implement meaningful changes across the product and operations. As you reflect on the moves you've made, which specific change do you believe is having the most measurable impact on seller conversion rates and acquisition volumes today? And what does the data tell you about that's compounding across your markets? Looking ahead, where do you see the biggest opportunity to structurally drive more homes purchased per market without proportionately scaling OpEx? Kasra Nejatian: Dae, I want you to know that I noticed that was 2 questions. Let me answer them one at a time. On what's actually moving the numbers? Look, I don't think any single thing we shipped is moving anything by itself, but the real structure change in our system is, right? Like think about the classic sell me this pen story. The old Opendoor was the guy who would say, this pen is amazing. It's so smooth. It's lovely. The guy who would aggressively show up and give you one choice. Like that was the old cash offer world. We'd show at your door, give you one choice, say, yes or no. That's not how people transact, right? The new Opendoor starts by asking the customer what they want. What do they actually need? What are they worried about? How much cash they want upfront? What do they want later, what time line they want? Cash Now, More Later isn't a single offer. It actually allows the customer to change Opendoor's business logic so that it works for them, right? The new offer page also does the same thing. It is the digital equivalent of sitting down with someone and explain to them the realities of their neighborhood, their home instead of just flashing a headline number, right? We want the customer to have the full picture and make the right choice that is best for them, and we want to be helpful in that process. And most people think that in order to do that, you need a human at a kitchen table. I think that's just wrong. Most people just want the information themselves so they can decide for themselves what's best for themselves. That's the shift. That's driving the conversion improvement. We also used to believe we would need boots on the ground everywhere we had homes. I actually insisted on launching every state in the Lower 48 because I want to test this hypothesis. It turned out that if you have a good underwriting model, a good product and a good partner network, you can buy homes anywhere, like we closed a home in South Dakota this week, and we have 0 employees in South Dakota. So that actually helps a lot. And to your second question on OpEx, I mean, I think we've already answered a lot of this. But the same machine does both of these things, right? More offer types mean more sellers, more sellers per market means we can have more transactions without adding headcount city by city. But the big price, obviously, is the tens of millions of people who want to move who can't, right? Between supply and demand, there is friction, right? If you reduce friction, you move both supply and demand lines. I actually saw this every day at Shopify. We made entrepreneurship easier. Therefore, we created more entrepreneurs. The same dynamic is true in housing, right? As we make things easier in buying a house, selling a house, mortgage, title and eventually insurance, all of this will increase the demand and increase the supply. And none of this requires like significant incremental headcount. Now, look, now this works if the underlying engine isn't good, but I think we've shown you that we're no longer peanut buttering spread across cohorts. And we've shown you we have now 4 cohorts of data and Q1 was our largest contract quarter in years. The last time we had this many homes in contract, our fixed OpEx was twice as high. So I think that answers your second question. Michael Judd: Great. Andrew from Citizens is curious to help us understand a little bit more about seasonality kind of through the balance of the year. Christy Schwartz: I'm happy to provide some color on seasonality, and I'm sure Kaz will be happy to add something as well. Each quarter, we provide a series of macro charts, and those charts show a consistent pattern in every macro, strong macro, neutral macro, challenged macro, one thing remains the same, and it's the seasonal pattern. They present themselves year after year. Macro changes the level of the curve and seasonality is the shape of the curve. The selling season kicks off shortly after the Super Bowl, peaks in early summer, then tapers through fall and bottoms out in December. This affects our resale velocity, which is considered in our spreads and therefore, impacts our acquisition cadence. Days on market lengthens in the back half, margins compress in Q4. Our acquisition cadence runs inversely to market resale activity. We acquire less in late spring when we'll be selling into weaker demand, and we build inventory throughout the fall in anticipation of the spring selling season. You'll now see seasonality more reflected in our estimates on accountable.opendoor.com. We've updated our projected acquisition range with the shape easing through spring and summer and building through the fall. Kasra Nejatian: I will add something. Look, seasonality is just like gravity. It's like a rule of nature. You don't blame gravity and if you try to fight it, you tend to lose. We know how to fly planes. We don't do it by fighting gravity. We just build math to fly them, right? And while we can't flatten the curve entirely, we can collapse the impact over time, and that's what we're working on. Opendoor is like a retail like Walmart, like Home Depot, like Amazon, like Shopify, these retailers have known seasonality, but obviously, Q4 is a better quarter for them because of Christmas. And Q1 numbers are always lower than Q4. But no one would argue that Walmart's strategy has failed because January sales were lower than December sales. That would just be insane. The shape is just like the shape. The same general seasonal shape that shows up in housing in 2021 when the market was on fire, in 2022 when the rates spiked and in 2025, when delistings like hit record highs, that's the shape, the different macro environments, but the same calendar like since Pope Gregory invented it, I guess. Opendoor knows more about the shape of the curve than almost anyone else in the world, and we shape our underwriting engine around it, right? We underwrite homes based on when we plan to sell them. That's what our underwriting engine does. And I think it is working better and better every day. Look, I want to end this answer with what I said earlier. We committed to being ANI profitable on a go-forward 12-month basis at the end of this year. Hard macro or not, we will do that. Our floor model assumes this hard macro will continue. If there's an interest rate cut or the macro improves, our floor will be higher. So I think we're running out of time. So let me just close with this okay. Look, we're not asking you to believe in vibe here. We're asking you to watch the scoreboard, the cohort slope, acquisition contracts, inventory health. That's it. Those are the tells, right? If we keep moving the way we moved this quarter, then the machine is doing exactly what we said it would do. The market didn't bail us out here. Rates didn't save us. The team just did the work. They rebuilt the company's operating system. They shipped products. They cleaned up the book. They grew contracts, and they did it way more efficiently than anyone thought we could do it. That doesn't just give me optimism. It gives me confidence. we will have a lot left to prove, and we always will. When we reach profitability, the next part is how much? It just won't stop, right? We're going to keep shipping. We're going to keep showing you the data, and we're going to keep moving faster because families matter. Okay. That's it. Thank you. Thank you, and see you all next quarter.
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers Holdings Inc. First Quarter 2026 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. If you need assistance, please alert a conference specialist by pressing star followed by 0. Following the presentation, instructions will be given for the question-and-answer session. Please note that this event is being recorded. I will now turn the call over to Quynh McGuire. Please go ahead. Quynh McGuire: Thanks, and good morning. I am Quynh McGuire, Vice President of Investor Relations. Welcome to our first quarter 2026 earnings conference call. We issued our press release earlier today; you can access it via our website at coppers.com. As indicated in our announcement, we have also posted materials to the Investor Relations page of our website that will be referenced in today’s call. Consistent with our practice in prior quarterly conference calls, this is being broadcast live on our website and a recording of this call will be available on our website for replay through 06/08/2026. At this time, I would like to direct your attention to our forward-looking disclosure statement seen on Slide 2. Certain comments made on this conference call may be characterized as forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of assumptions, risks, and uncertainties, including risks described in the cautionary statement included in our press release and in the company’s filings with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking statements included in the company’s comments, you should not regard the inclusion of such information as a representation that its objectives, plans, and projected results will be achieved. The company’s actual results, performance, or achievements may differ materially from those expressed in or implied by such forward-looking statements. The company assumes no obligation to update any forward-looking statements made during this call. Also, references may be made today to certain non-GAAP financial measures. The press release, which is available on our website, also contains reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures. Joining me for our call today are Leroy Ball, Chief Executive Officer and Chair of Koppers Holdings Inc., and Brad Pearce, Interim Chief Financial Officer and Chief Accounting Officer. At this time, I will turn the discussion over to Leroy. Leroy Ball: Thank you, Quynh. Good morning, everyone. I am pleased to join you today to provide more insight on Koppers Holdings Inc.’s performance in 2026 as well as provide an update on how we are progressing towards our 2028 transformation targets. Let me start with our major news from this morning. At the present moment, I am in Chicago, where just a few hours ago I delivered the unfortunate news to our workforce here of our conditional decision to begin immediately winding down production at our Stickney, Illinois facility with a target to cease distillation by the end of this year. I note that I am using the word “conditional” because the decision is subject to the satisfaction of any bargaining obligations that might exist with the union representing certain employees at the facility. As outlined on page 4, this conditional decision impacting approximately 85 employees was driven by the continued challenging market conditions that have persisted for well over a decade. When we made the decision to close our other two U.S. facilities for CMC in 2016, approximately 565 thousand metric tons of coal tar were being produced and readily available in North America. After the most recent coke plant closure we announced earlier this year at Algoma Steel, the number has now dropped to 350 thousand metric tons, simultaneously putting pressure on raw material pricing and reducing our throughput. This has resulted in higher unit costs, which have not been able to be fully recovered in the form of higher pricing. Adding to the mix is that despite having spent over $100 million in capital at Stickney over the past five years, which is a multiple of the spending at any other Koppers Holdings Inc. site, we still find ourselves dealing with reliability issues, which means we would still have significant future capital requirements to address aging equipment. This is not a people issue, as the team at Stickney has done heroic work over the past ten years to try to get us to a better place, and I sincerely thank them for their efforts. But the bottom line remains that we feel we have done everything we can to make this operation viable, and we just do not see a credible path to get there. At this time, we are tentatively targeting 2027 for shifting production to our coal tar distillation facility in Nyborg, Denmark. In the meantime, we have further strengthened the supply chain from Nyborg to the U.S. through expanded shipping and terminal capabilities in order to ensure an effective transition for existing pitch and creosote customers. We anticipate investing between $10 million to $15 million to further strengthen that supply chain over the next few years, which can be done while staying within our annual $55 million maintenance CapEx as capital is freed up from Stickney. The discontinuation of production activities at Stickney is anticipated to result in pre-tax charges to earnings of $227 million to $262 million through 2029, which includes $170 million to $195 million of non-cash charges projected to be recorded in the second and third quarters of this year. Cash closure charges of $57 million to $67 million will be spent over a three-year period beginning in 2026. These charges will be funded by the operating and capital cash benefits generated by this action, which are expected to total $15 million to $25 million on an annualized basis and therefore will have little impact on our near-term free cash flow projections except for timing. At the same time, the longer-term result of this move will be significantly accretive to free cash flow. We are estimating that the adjusted EBITDA savings related to this action will reach an annual run rate of $15 million to $20 million in 2027 and beyond, which would result in a 75 to 100 basis point bump in adjusted EBITDA margin. Translating the adjusted EBITDA benefit to adjusted EPS would result in an increase of $1.00 to $1.20 per share. We also anticipate $8 million to $15 million in reduced future annual capital expenditures. I again want to thank our Stickney employees for their continued hard work and determination while operating under persistently tough circumstances. I understand that this situation is incredibly difficult and will have a real impact on our employees and their families, which we will make every effort to minimize. Our priority is to provide the support and assistance needed to help the employees navigate any transition as we map out the future of our CMC business. Now let us move on to page 5, which outlines our results for the first quarter, including adjusted EBITDA of $49.3 million, which is a 10.8% adjusted EBITDA margin. We had operating profit of $22 million and $0.57 in adjusted earnings per share. We generated operating cash flow of $46.3 million and free cash flow of $34.9 million, both cash flow metrics representing a first-quarter record. On a trailing twelve-month basis, operating cash flow of $192 million and free cash flow of $139 million also represent new highs. Capital expenditures, net of insurance proceeds and sale of assets for the quarter, were $11.4 million, and we also deployed $29 million in share repurchases and $1.9 million in dividends while keeping total debt consistent with December 2025. Now let us move on to our Zero Harm accomplishments, as seen on page 6. Thanks to the commitment of our worldwide team, 30 of our 40 sites were accident-free in the first quarter. Our European CMC and PC businesses, as well as our Australasian PC and CMC businesses, had zero recordables in the first quarter. Leading activities, a key contributor to our serious safety incidents, took a step back compared with the prior-year quarter; however, our recordable injury rate improved from prior year. The objective of Zero Harm is to constantly focus on what is most important, the health and safety of our team members, and we will never lose sight of our goal of zero by reinforcing the foundational elements of the safety culture, deploying additional tools and training, and driving environmental improvements in 2026 and beyond. Turning to page 8, we issued our 2025 annual report and 2026 proxy statement, which are available on the Koppers Holdings Inc. website. For more information, please use the QR codes to access these materials. As shown on page 9, Koppers Holdings Inc. gained additional recognition by being named to Newsweek’s 300-member listing of America’s Most Charitable Companies for 2026. This honor reflects our employees’ ongoing commitment to volunteerism and our corporate support of community initiatives and causes. It joins previous recognition of Koppers Holdings Inc. as one of Newsweek’s America’s Most Responsible Companies, USA TODAY’s America’s Climate Leaders list, and TIME’s America’s Best Midsize Companies. On March 30, our leadership team joined me to ring the closing bell on the New York Stock Exchange, celebrating 20 years of Koppers Holdings Inc. as a publicly traded company, as seen on page 10. In addition, I participated in an interview on the financial news program Taking Stock to share the story of our continuing path to sustainable profitability for our customers. Moving on to page 11, Koppers Holdings Inc. will be hosting an Investor Day on Thursday, September 17 in Atlanta. On September 16, the prior day, we will be conducting a tour of our research and development lab of our Performance Chemicals business. On Wednesday evening, the Koppers Holdings Inc. executive team will also host a meet-and-greet reception. Look for more details in the months to come. In the meantime, please mark your calendars and plan to join us for our Investor Day and related activities. I will return in a bit to provide my view on how we are seeing the current year within each business while also reviewing our outlook for the remainder of 2026. For now, I am going to turn it over to Brad to speak in more detail on our first quarter financial performance. Brad? Brad Pearce: My remarks today are based on the information in our press release. As seen on Slide 13, reported consolidated first-quarter sales of $455 million were essentially flat compared with prior-year sales. Relative to the prior-year quarter, RUPS sales decreased by $15 million, or 6%. PC sales were up $21 million, or 18%, and CMC sales decreased by $7 million, or 7%. On Slide 14, adjusted EBITDA for the first quarter was $49 million, representing a 10.8% EBITDA margin on sales, compared with $56 million and 12.2% in the prior-year quarter. By segment, RUPS generated adjusted EBITDA of $23 million, or a 10.3% EBITDA margin; PC generated adjusted EBITDA of $26 million, or an 18% EBITDA margin; and CMC reported adjusted EBITDA of $1 million, or a 1% EBITDA margin. Turning to the RUPS business, Slide 15 shows first-quarter sales of $220 million compared with $235 million in the prior-year quarter. Of the $15 million change in sales, approximately $10 million of the decrease came from the Railroad Structures business that we sold in 2025. The remaining decrease in sales can be attributed to customer mix and price decreases in our Class I crosstie business and lower activity in the Maintenance of Way businesses. These factors were partly offset by volume increases in our domestic utility pole business, higher commercial volumes, and $1.4 million in favorable foreign currency changes compared with the prior-year period, mostly attributed to our Australian utility pole business. RUPS delivered adjusted EBITDA of $23 million compared with $26 million in the prior year due to lower sales and lower sales volumes. Turning to Slide 16, our Performance Chemicals business reported first-quarter sales of $142 million, up from $121 million in the prior-year quarter. This increase was primarily due to a 15% volume increase, higher sales activity primarily in the Americas, and $2.7 million in favorable foreign currency changes from international companies. Adjusted EBITDA for PC increased to $26 million versus $20 million in the prior-year quarter. Profitability benefited from higher sales volumes and higher prices, partly offset by $2.4 million of higher raw material and operating costs. Slide 17 shows that sales in the first quarter for our CMC business were $93 million, compared to $101 million in the prior-year quarter. This decrease was primarily driven by $14 million of lower volumes related to our phthalic anhydride business, which was discontinued in 2025, and lower sales prices across most products, especially carbon pitch, which was down 9% globally. These were partly offset by volume increases in carbon pitch, naphthalene, and carbon black feedstock, as well as $7.6 million in favorable foreign currency changes from international companies. Adjusted EBITDA for CMC in the first quarter was $1 million compared with $10 million in the prior-year quarter due to lower sales prices and higher operating and raw material costs, partly offset by operating cost savings associated with discontinuing the phthalic anhydride business. Compared with 2025, the average pricing of major products was lower by 11% while average coal tar costs were slightly higher. As shown on Slide 19, we continue to pursue a balanced approach to capital allocation in terms of investments to position the company for the future. We spent $11.4 million in the first quarter for capital expenditures. We are anticipating a total of $55 million in gross capital spending for the full year of 2026. Our share buyback activity in the first quarter totaled approximately $29 million, including those associated with tax withholding from our incentive stock plans. We have approximately $45 million remaining on our $100 million repurchase authorization. We also continue to return capital to shareholders through our quarterly dividend of $0.09 per share. At March 31, we had $386 million in available liquidity and $877 million of net debt, representing a net leverage ratio of 3.5 times. We remain focused on our long-term goal of reducing the net leverage ratio to 2 to 3 times. Slide 20 provides additional detail on our total capital expenditures for the first quarter of just over $11 million. We deployed approximately $7 million to maintenance capital spending, with the remaining balance allocated to Zero Harm initiatives and growth and productivity projects. Capital expenditures were approximately $5 million for RUPS and $3 million for both PC and CMC. As highlighted on Slide 21, the Board of Directors declared a quarterly cash dividend on May 7 of $0.09 per share, reflecting a 12.5% increase from the prior year. The dividend will be paid on June 15 to shareholders of record as of the close of trading on May 29. While future dividends are subject to ongoing Board approval, maintaining a quarterly dividend at this rate will result in an annual dividend of $0.36 per share for 2026. With that, I will turn it back over to Leroy. Leroy Ball: Thank you, Brad. I will now review the market outlook for each of our businesses, starting with Performance Chemicals on Page 23. Despite a number of different headwinds on demand, such as the Middle East conflict, higher mortgage rates, lower housing turnover, and general inflationary pressures, our PC business still posted a healthy 15% top-line gain from volume in Q1. As we expected, the gains came from market share growth of about 9% and customer inventory build added about 6%, while organic volumes were mostly flat. Through Q1, that puts us reasonably on track to likely exceed our expected top-line increase of 11% as the inventory build will continue through Q2 and then taper off; however, we will only begin hitting our run rate for market share growth in Q2 as we finish the remaining plant conversions. As I mentioned, most external markers that drive the health of this business, such as mortgage rates, housing turnover, and repair and remodeling spending, are still lagging. But the recent move from our customers is more than it has been in some time that a recovery may be around the corner. We are discounting that optimism for now until we begin seeing it in the numbers. As a result, we are still forecasting flat demand on the base residential business, with a mid–single-digit volume increase expected for our Industrial Products segment as driven by growth in utility pole demand. On the cost side of the equation, there is a lot of noise in the system between potential ITC tariff recoveries, net exposure to the across-the-board 10% tariffs that were put in place in response to the EPA ruling, higher fuel costs from the spike in oil, and copper volatility. I would say we have more working against us than for us right now. With what amounts to a $5 million to $10 million current net exposure, our procurement team has been working hard to offset it by negotiating better pricing in certain materials, while our commercial team has been preparing to implement fuel surcharges. Copper has continued to hold its lofty pricing with modest periodic corrections, but it looks like mid- to high-$5 per pound copper is likely the new low water mark and we are now above the $6 threshold. That is going to require at least $50 million in price adjustments in 2027 to recover that increase. In summary, PC has gotten off to a strong start, giving us confidence to move our sales projection up slightly from our initial view of the year while holding our EBITDA projection where it was, as those additional sales get offset by a net cost increase. That is contingent on base residential volumes holding steady, and our ability to mitigate some of our cost exposure via pricing pass-throughs and other cost reductions. Moving on to our Utility and Industrial Products business, shown on page 24, market sentiment remains bullish for all the reasons we have continued to talk about, which include increasing electrical demand related to buildout of AI infrastructure, crypto mining, EV development, and new manufacturing. Our first-quarter sales increased by 12% due to volume, reflecting that bullishness, with 3% of that 12% resulting from the December 2025 acquisition of our Doug fir supply chain. In our targeted underserved regions, we grew volumes by 9% coming off growth in 2025 of 17%. Market demand remains concentrated on a limited range of pole sizes, and this has put pressure on fiber sourcing and driven up raw material costs, which we are working to recoup to return margins to our long-term target. We expect some cost relief on the whitewood side when our peeler in Leesville, which was damaged by fire last September, comes back online, which will enable us to bring more peeling capacity back in-house and lower our third-party costs. As mentioned earlier, our Doug fir acquisition is showing early dividends by increasing our access to this important fiber, enabling us to better compete for previously unavailable business. On the flip side, the Southern Yellow Pine market is under pressure due to closures of pulp and paper mills and lumber mills, as well as fires that destroyed tracts of timber in the Southeast. With sales volume strong and pricing relatively flat, we have more work to do to bring costs into check. Getting the Leesville peeler back online will help, along with the consolidation of Vance production into Kennedy, which began in Q1 and should contribute $2 million in savings by year-end. We are experiencing higher costs for fuel and freight that we are working to pass on. Additional Catalyst initiatives—our transformation program launched in 2025—are expected to generate further cost savings, which will help to overcome the additional corporate cost allocations that have been shifted to UIP this year and enable our pole business to contribute to the year-over-year EBITDA improvement projected for the RUPS segment. The market outlook for our Railroad Products and Services business is summarized on page 25. Our Q1 top line was down compared to prior year despite crossties sold being consistent with prior year. After adjusting for the sale of our KRS business last August, the main driver of our revenue decline was an unfavorable mix, with lower pricing having a smaller impact. We had a greater proportion of treatment-service-only sales in Q1 compared to prior year, combined with lower green tie purchases and black tie shipments. The severe winter storms that hit much of the country in Q1 knocked our plants offline for a number of days. This impacted production and shipping, which we began making up in March, but uneven customer car flow in and out of our plants also had an impact. Our customers have pledged to work on improving that situation, which should enable us to catch up as the year goes on. While we have had a few customers pull back on their demand for the year, most of it was known as we entered 2026, and a few others increasing demand are expected to more than offset the other railroad reductions. Commercial backlog remains as strong as ever, delivering 3% higher sales in Q1. The price reductions we exchanged for growing our piece of a smaller market this year will be made up through the year as we work to idle the Florence, South Carolina facility by October. We also continue to relentlessly go after costs, with Q1 representing the eighth consecutive quarter of reduced operating expense and direct SG&A compared to the prior-year quarter. While we expect to be in good shape from a demand standpoint this year, the overall lower industry demand is wreaking havoc on sawmills, resulting in reduced production and widespread mill closures. I mentioned our strong cash quarter during my earlier comments, while our RPS business led the way in that area with stellar working capital management, holding inventory in check during a period where we usually see a build. While we still expect strong sales in both RPS and UIP for the year, we are incorporating more of an unfavorable mix into our forecast for the year, also baking in some of the impact from higher oil. This is bringing our revenue projections down by $10 million on both the top and bottom end of our range, as well as bringing our EBITDA projections down proportionally. The outlook for our CMC business is summarized on page 26. Overall, the market continues to be in turmoil, with Q1 results reaching their lowest point since the beginning of our major restructuring efforts in 2016. The war in the Middle East, which began two days after our last earnings call, has only made the situation in this business more challenging as oil price shocks have resulted in rapidly escalating raw material costs. As higher oil prices hold, we will be playing catch-up over the next couple of quarters regarding passing on higher pricing. This is estimated to have a $5 million impact on CMC over the remainder of the year, in addition to the $1 million impact it had on Q1 for this segment. On the plus side, this could potentially create some market opportunity for Australian, European, and North American aluminum producers to fill the void of Middle East aluminum producers and will likely create an opportunity of more sales for Koppers Holdings Inc. The continued uncertainty in the carbon products markets only highlights the necessity to take a major action, which we are doing by ceasing production at our Stickney site. There is no need to repeat all the financial details I previously mentioned, but they are once again outlined on page 26 and speak for themselves. Once we felt comfortable that we had the capacity to reliably absorb the U.S. volume in Denmark and could beef up our logistics assets to further improve reliability, it became a very unfortunate but obvious no-brainer to move forward with shifting production to Europe. While there are no celebrations at Koppers Holdings Inc. to commemorate this action, it is an unquestionable win for our shareholders. This action is expected to pay for itself over the next few years while improving earnings and long-term cash flow significantly. In addition, by significantly strengthening our European operation, we increase the likelihood that weaker European competitors will eventually succumb to the challenging market conditions. For this year, though, we are going to have to reduce both our revenue and EBITDA estimates for CMC due to impacts from higher oil and generally worse market conditions. As shown on page 27, we are a little over a year into our Catalyst transformation and executing successfully on many initiatives. In Q1, we realized $14 million of benefits spread across our business segments and corporate functions. In PC, the driver was market share growth and new products. In RUPS it was the plant consolidation at Vance and market share growth. For CMC and corporate it was procurement savings. In addition, we are using Catalyst to improve our working capital discipline, delivering $16 million in benefits in Q1, driven primarily by inventory control in RPS. Adding the benefits from our Stickney announcement, we have now identified a minimum of $90 million of benefits to be realized from 2026 through 2028. Of that, we expect $30 million to $40 million of benefits in 2026, which is up by $10 million on the low end. This puts us squarely on track to deliver on our 2028 goals of adjusted EBITDA greater than 15%, a three-year EPS CAGR of more than 10%, net leverage of lower than 2.5 times, a three-year free cash flow average of a minimum of $100 million, and our combined PC and RUPS segments making up 80% to 85% or more of our sales. The result of reaching those metrics should result in significant shareholder value creation. Moving on to page 29, our consolidated sales guidance remains at $1.9 billion to $2.0 billion in 2026 compared with $1.88 billion in 2025, with higher sales in PC and RUPS more than offsetting lower CMC sales. The foundation of customer demand is proving to be solid four months into the year, especially for our PC and RUPS segments, as we have now turned the corner on PC market share loss from last year and are starting to see the needle move in the other direction. On Slide 30, we are lowering our adjusted EBITDA forecast to $240 million to $260 million in 2026 compared with $257 million in 2025. The major reason for shifting our previous range of guidance down by $10 million is the impact of higher oil across our entire enterprise. The war in the Middle East was not a variable we had contemplated when we communicated our 2026 guidance in February. While we believe it is contained to less than 5% on our consolidated EBITDA, we believe it is prudent to incorporate it into current guidance at this point while the various other puts and takes are projected to offset each other. Slide 31 shows our adjusted earnings per share bridge, which reflects a range of $3.80 to $4.60 per share in 2026 compared with $4.70 in 2025. Year over year, that represents a 3% increase at the midpoint and a 13% increase at the high end. Most of our projected improvement is expected to come from lower interest expense and benefits from a lower share count. On Slide 32, we now expect an even higher jump in both operating cash flow and free cash flow this year. This will provide the most cash we have had for debt paydowns since 2020, when we received the cash proceeds from selling our KJCC business. Not only would operating cash flow and free cash flow represent new highs at these projected levels, but more importantly, 2026 will represent an inflection point for our step change in cash generation as we expect these new higher levels to become the norm. Our current market cap equates to a 10% to 15% free cash flow yield and places Koppers Holdings Inc. at the top end of whatever industry you want to compare us to and provides several attractive options for how we deploy our excess cash. On Slide 33, in terms of capital spending, we continue to forecast $55 million for the year, consistent with $55 million spent in 2025. Currently, we are spending at a run rate lower than $55 million, but we will still likely spend at that rate for the year as we take dollars that we would have spent at Stickney this year and put them towards bulking up our logistics assets. The foundation we have built over the past decade has set us up to create significant shareholder value over the next several years, and I am confident we will deliver. We still maintain leading shares in niche markets that utilize our essential products with low capital requirements going forward. Coupled with the unlocking of significant cash flow, we find ourselves in a strong position to deliver shareholder value in multiple ways. While today represents a difficult next step, I believe it is the right one for our customers, our team members at Koppers Holdings Inc., and our shareholders who have patiently hung in while we have methodically built a model that is built to last. We will now open the call for questions. Operator: Thank you. We will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. At this time, we will pause momentarily to assemble the roster. The first question will come from Gary Prestopino with Barrington Research. Please go ahead. Leroy Ball: Hi, good morning all. Hey, Gary— Gary Prestopino: Throughout your narrative on what you are looking for going forward in a couple of your segments, you mentioned you have to get some price increases to offset some of these input increases. In the past, how successful have you been at driving those kinds of price increases, and what is generally the lag? How long does it usually take relative to where we are right now in the next cycle? Leroy Ball: Yes, that is a good question. I think it varies and it varies depending upon business unit as well, but I would say for the most part we have been successful. There is a timing aspect to it. There have been some changes that we have made in some of our agreements, coming through COVID in that big inflationary environment that we were in, where we got caught for a period and were hamstrung in terms of being able to pass on some of these increases. We were able to make some changes in certain contracts that give us more flexibility to pass stuff on a little more currently. Generally, as it relates to passing on fuel surcharges and those sorts of things, I think we have an ability to do that more or less currently, so there is little to no lag that needs to happen there. We have tried, with some of the larger relationships we have, to understand whether this stuff was going to be sustainable or short term, but we have obviously gotten to the point now where we are moving forward on trying to work with passing that on. As it relates to some of the bigger issues in terms of impacts on raw materials that we know are going to linger for a bit, most of our contracts on the CMC side are at least a quarter to six months from being able to pass that on, which is why we talk about the impact we see more or less in the back half of the year that we will get to catch up on until we probably turn the page into either the fourth quarter or into 2027. On the PC side, we tend to go through multi-year agreements and the latest cycle wraps up this year, so discussions will be happening in the back part of this year. Actually, discussions are currently happening about trying to give them some insight into where their overall cost structure looks at this point and what to expect. We will have more news on that as we get to the back half of the year. As we talk about often, we are mostly hedged for the biggest piece of that as it relates to copper, but there will be a reset on that as we head into next year. We are also continuing to work on new products that can help minimize the amount of copper that needs to go in and/or retention rates, so there are all kinds of things that we are working on to try to mitigate and minimize the impact on our customer, hopefully put a few more dollars in their pockets as well as ours, and create more success for the industry. It is a mixed bag, Gary, but bringing the guidance down by $10 million on both the top and bottom end of the range was our best attempt at, from an unmitigated standpoint, what we would expect for the year related to the oil impact, which is the biggest—other than copper, it is the biggest impact that we are currently facing on an ongoing basis. We feel pretty good that we have that captured there with a little opportunity for upside on pass-throughs. Gary Prestopino: That is a good explanation. As it relates to what you are doing within the CMC business, I realize it is a difficult decision. It is always hard to tell people of a decision. Is it mostly cutting excess capacity—there just is not the end demand there—and by folding everything into Nyborg, you would expect that you would get more utilization of that facility and you can get your margins up that way? Is that how we should think about it? Leroy Ball: It is another consolidation play, yes. We have excess capacity at Nyborg that has freed itself up over the past couple of years. At the same time, raw material availability in North America has come down. With what we have remaining here in North America, we found that we could comfortably fit that into our Nyborg operation and have very little incremental cost to do so. We could essentially source raw material from North America, process it there, and still serve the vast majority of our customer base here in North America, and cut out a significant level of fixed cost in the process. So it is a consolidation play. Gary Prestopino: Thank you very much. Operator: The next question will come from Liam Burke with B. Riley Securities. Liam Burke: Thank you. Leroy Ball: Good morning, Liam. Liam Burke: With the shifting of production from Stickney to Nyborg, do you anticipate any competitive disadvantage? Having your in-house creosote for the coatings has been a competitive advantage. Does the greater distance affect that competitive advantage? Leroy Ball: No, we do not believe so. That is really happening today. We already bring a significant amount of creosote into North America. With where the cost structure was at, we believe we will be able to actually improve the reliability of the supply chain because, while certainly distilling in Chicago is closer to your customers, there is no question, the aging equipment that we have there has created a host of reliability issues over the years. We would find ourselves scrambling at times despite the fact that we had operations right here. Nyborg is a beautiful facility, it has been incredibly well maintained, and we do not deal with those sorts of issues there. Yes, you are extending the time to get product back and forth, but we are adding tank capacity here. We already have terminal setups and a fairly mature logistics operation that has been doing this for a while, and our competitor makes similar shipments back and forth across the pond as well. This is not unique, it is not new, and we believe it actually improves the reliability and competitiveness for us, which is a driver for making the decision. Liam Burke: Great. On copper pricing, you have been able to increase prices to your customer with margin, or is that going to create a competitive pricing problem? Leroy Ball: We will be pricing to market because we are not the only one in this situation. Our margins fluctuate; they range anywhere in that 17% to 22% range over time. We had one year where it fell below that—in 2022 or 2023—when we ate a lot of cost, and it was not necessarily on the copper side; it was on other raw material pieces that we were not able to pass through at that point in time. That was an anomaly. On occasion we have bumped above the 22% range. I see no reason why, going through this round, we will not end up somewhere in that range coming out of it. We will have to be competitive, and we will be, while demonstrating to our customers our commitment to them and to the industry in terms of developing new products for them to take to market and helping them from a profitability standpoint. I think we are in a good position to maintain that 17% to 22% margin range overall. Liam Burke: Great. Thank you, Leroy. Leroy Ball: You are welcome, Liam. Thank you. Operator: The next question will come from Michael Mathison with Sidoti & Company. Please go ahead. Michael Mathison: Congratulations on the quarter—you guys were very impressive. Just turning to my questions, you mentioned a $10 million impact this year from the increase in oil prices, which of course fluctuate. They were down a lot the past few days. Is there a rule of thumb that we can use that if oil prices move by X, impact to Koppers Holdings Inc. is Y percent? Leroy Ball: I wish it were that simple because there are so many tentacles to it that it is tough to put your finger on it with that level of precision. You can look at the current situation as a bit of a guide. With oil prices rising suddenly in February up into the $100 to over $100 per barrel range, we are saying that is going to have what we believe up to a $10 million unmitigated impact over the year. That gives you some sense in terms of that level of sensitivity. We do have abilities to pass some of that on, to negotiate higher pricing, because these sorts of things do not just impact us; they impact our competition as well. It is not a situation where any of this is Koppers Holdings Inc.–specific. I believe we will get it back over a reasonable timeframe, and that is what we will work to do. Overall, I mentioned this number is going to be less than a 5% impact. It is meaningful to the numbers we gave out, but in the grand scheme of things, not necessarily so, and it is something that we will be able to pull back in over the next three to twelve months, I would say. Michael Mathison: Fair enough. Turning to the future of the CMC business, if we look forward to 2027 after the planned shutdown at Stickney, is there an EBITDA margin target for CMC that you can share with us? Leroy Ball: We have run those numbers internally, and I would say it would be in line with our overall consolidated margin target. We have talked about one of our transformation target goals being at a 15% or greater EBITDA margin from an overall company standpoint, and our expectation is that this particular business will be right around that number. Michael Mathison: Perfect. Very helpful. Turning to PC, the sales growth there was especially striking. With flat overall market residential sales, what drove the market increase? Leroy Ball: It was a stark change last year as we took a market share hit. We had talked in the back part of last year that we thought we had opportunities to win back some of that market share, and we were able to do that to some extent, while also picking up additional market share from some of our larger customers who still had a little bit of business out there with other suppliers. Through product development we had done, we were able to get them comfortable to make some conversions on plants that were not in our network and get them moved over. On the industrial side, Tommy Kaiser and his team in PC have done a really good job of continuing to develop that business; it is in a nice, healthy spot right now too. Our sales team has consistently done a good job of building that customer and relationship network, and we have been successful more often in winning that business than losing it. You go through phases—we went through a good eight years of wins, and that just made us more vulnerable at some point that some business was going to move away, which happened last year. We did a reset and have proven to our customer base that we understand they are incredibly important to us and it is our job to help them be more profitable and open doors for them to be successful, because their success is ultimately ours. We had signaled that near the end of last year, and now it is being put into action. Michael Mathison: Thanks for the information, and good luck in the coming quarter. Leroy Ball: You are very welcome. Thank you. Operator: The final question will come from an Analyst with Singular Research. Please go ahead. Analyst: Good afternoon, gentlemen. My question is with regards to all this volatility in commodity markets and inflationary pressure. What are you sensing with regards to your competitors? Are you finding any M&A activity opportunities as a result of all this volatility in the markets? Leroy Ball: Yeah— that is a good question. Three of our four businesses hold such significant share that any sort of M&A consolidation activities for us in those businesses are really unlikely from an antitrust standpoint. It does not really matter at the end of the day as it relates to RPS and, for the most part, PC—certainly in North America—as well as CMC. UIP is a different animal and certainly we would have much more flexibility in terms of M&A in that space. We continue to keep up our relationships and have our conversations and see where they go. There are a lot of companies, certainly on the smaller end, that are feeling the pinch, but there is nothing that we have to report at this moment as it relates to that. We continue to monitor and keep our eyes on it, and if something pops up, we will evaluate it. If it makes sense, we will do it. If it does not, we will pass and go on from there. It is really only one business—UIP—where we have that sort of opportunity as it relates to the core business. Analyst: Thank you very much for that insight. Leroy Ball: You are very welcome. Thank you. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to CEO, Leroy Ball, for any closing remarks. Leroy Ball: Thank you. I really appreciate everybody’s patience and hanging in. It has been a tough, hard-fought last year, but the company and our team continue to do an amazing job keeping their fellow teammates safe and keeping everybody focused on the bigger goals at hand. While today is an unfortunate and painful chapter in our history from a people standpoint, for shareholders it is clearly a win, and we are seeing that reflected in the market today. We look forward to continuing to execute on our plans and updating you in the future. Thank you, everybody, for tuning in today. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Operator: Greetings. At this time, I would like to welcome everyone to the Barings BDC, Inc. Conference Call for the quarter ended March 31, 2026. All participants are in a listen-only mode. A question and answer session will follow the company's formal remarks. Today's call is being recorded and a replay will be available approximately two hours after the conclusion of the call on the company's website at barings.com under the Investor Relations section. At this time, I would like to turn the call over to Albert Pearley, Head of Investor Relations for Barings BDC. Please note that this call may contain forward-looking statements. Albert Pearley: These include statements regarding the company's goals, beliefs, strategies, future operating results and cash flows. Although the company believes these statements are reasonable, actual results could differ materially from those projected in forward-looking statements. These statements are based on various underlying assumptions and are subject to numerous uncertainties and risks, including those disclosed under the sections titled Risk Factors and Forward-Looking Statements in the company's quarterly report on Form 10-Q for the quarter ended 03/31/2026, as filed with the Securities and Exchange Commission. Barings BDC, Inc. undertakes no obligation to update or revise any forward-looking statements unless required by law. I will now turn the call over to Tom McDonald, Chief Executive of Barings BDC, Inc. Tom McDonald: Thanks, Albert, and good morning, everyone. On the call today, I am joined by Barings BDC, Inc.'s President, Matthew Freund, Chief Financial Officer, Elizabeth A. Murray, Barings Head of Global Private Finance and BBDC Portfolio Manager, Bryan D. High. Before turning to the quarter, I will offer a brief perspective as we move through 2026 following the leadership transition earlier this year. I assumed the role of CEO on January 1. With nearly 30 years in the credit business across multiple cycles, my background is in fundamental credit underwriting, portfolio management, and leading leveraged credit platforms. That experience reinforces my conviction in the durability of BBDC's investment process and the importance of rigorous underwriting discipline as dispersion across credit markets becomes more pronounced. Indeed, we saw evidence of that dispersion in the past quarter and we believe it will be a clear differentiator for BBDC going forward. Our best-in-class direct origination platform focused on the core middle market is a key factor behind this differentiation. Our sourcing strength, conservative deal structures, and strong alignment with shareholders remain central to BBDC's ability to generate attractive risk-adjusted returns through the cycle. Our strategy, process, and philosophy remain firmly intact. My focus is on execution, optimization of asset-level yields, and enhancing returns on equity without compromising credit quality. Now turning to the quarter. Despite an onslaught of negative headlines in the private credit sector during the first quarter, BBDC delivered solid net investment income and maintained good credit performance, particularly within the Barings-originated portion of our portfolio. Net deployment in Q1 was slightly negative. We originated $109 million of investments against $126 million of repayments for net repayments of roughly $17 million. As a result, our total portfolio size and leverage remained essentially unchanged quarter over quarter. Our portfolio remains highly diversified and defensively positioned, and we continue to benefit from a benign credit environment. Our focus on the top of the capital structure, senior secured investments, and core middle market issuers—who tend to have lower leverage and stronger risk-adjusted returns—served us well. In addition, our emphasis on defensive, non-cyclical sectors and Barings' global footprint provides a level of stability to our portfolio across all market environments. We believe this combination of senior secured lending, a core middle market focus, defensive non-cyclical sectors, and global origination offers our investors strong relative value and meaningful differentiation within the broader BDC landscape. Overall, BBDC's portfolio performed largely as designed this quarter. Our diversified issuer base and disciplined credit approach have built an all-weather portfolio that we expect to hold up well through various macro conditions which, as Matthew will touch on in a moment, we view as broadly favorable at present. We are, however, beginning to see increased dispersion in performance across the BDC space, underscoring the importance of our disciplined credit selection and proactive credit management. Turning to our results, net asset value per share was $11.02 as of March 31, 2026, slightly lower than $11.09 at year-end 2025. This modest decline was primarily driven by the write-down in a legacy MVC asset. The core Barings portfolio continued to perform well. Net investment income for the first quarter was $0.25 per share compared to $0.27 per share in 2025. Digging a bit deeper into the portfolio, we continue to actively maximize the value of legacy holdings acquired from MVC Capital and Sierra. During the first quarter, we continued the rotation out of the Sierra portfolio, exiting approximately $19 million of legacy positions on a combined basis between directly owned assets and assets held in the Sierra JV. As Elizabeth A. Murray will comment on shortly, the benefits of active portfolio rotation are coming into sharper focus. Today, BBDC shareholders are benefiting from a nearly fully repositioned portfolio that can selectively deploy capital into the most attractive middle market opportunities across the Barings platform. Turning to the earnings power of the portfolio, the weighted average yield on debt and other income-producing securities at fair value was 10.1%. With the stabilization of base rates and spreads in private credit, we believe that portfolio yields are supportive of recent dividend declarations. Our Board declared a second quarter dividend of $0.26 per share, consistent with the prior quarter. On an annualized basis, the dividend level equates to a 9.4% yield on our net asset value of $11.02. As Matthew will discuss momentarily, we believe Barings BDC, Inc. is well positioned to navigate current market volatility and to deliver consistent risk-adjusted returns for our shareholders in the quarters ahead. I will now turn the call over to Matthew. Matthew Freund: Thanks, Tom. As you mentioned, there has been no shortage of headlines during the past few months related to the trends in private credit. These headlines have brought attention to the asset class, reflecting a mixed understanding of private credit—both what it is and how it is positioned in underlying investor portfolios. We believe that we are currently in a period of time where the news rhetoric has become a greater source of attention than fundamental performance. Rapid adoption of private credit within the retail wealth channel has turbocharged the broader industry. In a post-COVID world, sometimes referred to as the golden age of private credit, investors readily embraced the returns of private credit with good reason. That dynamic drove substantial fundraising, increased competition, and in many cases, tightening spreads and looser structures. We are now seeing a shift. Retail flows into non-traded vehicles have become more volatile due to heightened investor caution, and institutional allocators are pacing commitments more deliberately, reducing the incremental capital entering the space. From our perspective, this is a healthy development. A slower pace of capital formation should translate into reduced competitive pressures on new originations and upward pressure on spreads. We are already seeing early signs of this in the market. While base rates remain elevated, all-in yields have held firm and underlying credit conditions have remained largely stable. For disciplined lenders like BBDC, this is beginning to look like a more attractive deployment environment. Looking ahead, as we mentioned on our prior call and as Tom alluded to, we expect 2026 to usher in a period of manager dispersion. During periods of abundant liquidity and benign credit conditions, returns across the BDC sector can compress. When defaults are low, liquidity is plentiful, and refinancing is readily available, underwriting can be masked. In that environment, beta often overwhelms alpha. We believe that period is ending. Portfolio decisions made over recent years will drive divergent outcomes ahead. Managers who chased higher leverage, looser documentation, or cyclical sectors are now more exposed, while those who have maintained discipline—focusing on resilient business models, conservative capital structures, and robust creditor protections—are better positioned to weather volatility. One topical example of a trend within our ecosystem was the increasing frequency of annual recurring revenue loans in some BDC portfolios, which are highly correlated with software issuance. Notably, BBDC does not have any loans to issuers structured on recurring revenue. We took a conservative stance in avoiding such transactions, even if it meant occasionally ceding deals to other lenders. Our public filings use a broad industry classification that does not isolate software as a standalone category. However, by our analysis, roughly 13% of our holdings are primarily software-related. This figure compares to approximately 14% in the prior quarter. Importantly, this is an underweight allocation relative to most private credit portfolios and industry benchmarks, where software represents roughly 20% of assets in our sector. The software companies we do finance are typically vertically integrated providers with robust cash flows, diversified customer bases, and significant equity cushions. We are focused on the potential AI disruption within the software sector, but believe these risks will likely take several quarters, if not years, to play out. In the meantime, our cautious approach leaves Barings BDC, Inc. well positioned should turbulence persist in the sector. Turning to the macroeconomic backdrop, the current opportunities within private credit appear more compelling than they have in recent quarters. That said, we remain vigilant to broader macro risks. Barings' private credit strategies deliberately avoid investing in highly cyclical sectors among oil and gas, metals and mining, and construction. While our issuers are not immune to volatility within the energy markets, nor the possibility of economic contraction, we feel that our defensive portfolio is well positioned against an uncertain economic backdrop. Meanwhile, the path of monetary policy remains uncertain. While there is ongoing debate around the timing and magnitude of potential rate cuts, base rates remain elevated relative to the past decade. This fact pattern continues to support strong current income for our predominantly floating rate portfolio. We believe this environment creates a compelling case to be invested in Barings BDC, Inc. It offers attractive distribution yields on a defensive portfolio. Consistent with our messaging from the prior quarter, our outlook for M&A opportunities in the coming 12 months remains cautious. We see significant interest in early-stage activity, but the conversion rates to closed transactions remain low industrywide. In comparison to our large market peers, BBDC issuers do not have the ability to access credit markets to effect the refinancing of their facilities; they simply lack the scale. As a result, we are retaining some of our strongest issuers when EV multiples do not meet sell-side expectations. Turning to an overview of our current portfolio, 75% consists of secured investments with approximately 70% of investments constituting first lien securities, both unchanged from the prior quarter. Interest coverage within the portfolio remained strong, with weighted average coverage this quarter of 2.6 times, above industry averages and slightly improved from the preceding quarter. We believe strong interest coverage demonstrates the merits of our approach—focusing on leading companies in defensive sectors and thoroughly underwriting their ability to weather a range of economic outcomes. The portfolio remains highly diversified, with the top two positions within the portfolio, Eclipse Business Capital and Rocade Holdings, being strategic platform investments. Turning to the portfolio quality, risk ratings exhibited stability during the quarter, as our issuers exhibiting the most stress, classified as risk ratings four and five, were 6% on a combined basis, down slightly from 7% on a combined basis in the immediately preceding quarter. Non-accruals remain modest and are below industry levels. Excluding assets covered by the Sierra CSA, which protects us from legacy Sierra portfolio losses, non-accruals at fair market value amounted to only 0.6% of the portfolio, versus 0.2% in the prior quarter. On an inclusive basis, non-accruals were roughly 1% of the portfolio at fair value and 2% at cost, which is among the lowest in our industry. During the quarter, three investments were placed on non-accrual—EMI, TerriBear, and a junior capital position in Eurofence. Our team remains proactive in managing credit and we remain confident in the credit quality of the underlying portfolio. We expect BBDC's differentiated reach and scale, coupled with its core focus on the middle market and unmatched alignment with shareholders, to continue driving positive outcomes in the quarters and years to come. As previously noted, BBDC is a through-the-cycle portfolio designed to withstand a variety of economic environments. I will now turn the call over to Elizabeth. Elizabeth A. Murray: Thanks, Matt. As both Tom and Matt highlighted, BBDC delivered solid first quarter results in a dynamic market environment, achieving stable earnings and advancing our balance sheet strength. I will now walk through our financial results and key balance sheet metrics for 2026. NAV per share stood at $11.02 as of March 31, down modestly from $11.09 at year-end 2025. This 0.6% sequential decrease of NAV was primarily driven by net realized losses on a few portfolio exits, partially offset by net unrealized appreciation on investments, the Sierra CSA, and foreign currency. Net investment income for the first quarter was $0.25 per share. This compares to $0.27 per share in 2025 and $0.25 per share in the first quarter of last year. The decline in NII largely reflects slightly lower interest income due to a small dip in our weighted average portfolio yield, fewer calendar days in the quarter, and the absence of non-recurring fee income we benefited from in Q4, such as one-time prepayment and amendment fees. On the expense side, we saw a lower incentive fee accrual this quarter. Our base management fee was stable and interest expense declined approximately 10%, reflecting lower average debt outstanding. Net investment income per share of $0.25 fell just short of our $0.26 quarterly dividend, under-earning by $0.01. We had anticipated this possibility given the exceptional over-earning in recent quarters and the slightly lower portfolio income this quarter. Importantly, we maintain substantial spillover income of approximately $0.79 per share, providing us a cushion to support dividend income. In line with our commitment to consistent shareholder returns, the Board declared a quarterly dividend of $0.26 per share for 2026, unchanged from prior levels. This dividend represents a yield of roughly 9.4% on our current NAV of $11.02 per share. We will continue to manage our payout prudently. As we look ahead, we recognize that a higher-for-longer interest rate environment has bolstered our earnings over the past year, but if base rates begin to decline, we may see some natural compression in earnings and dividend coverage. Rest assured, we intend to carefully evaluate the dividend on an ongoing basis to ensure it remains appropriately aligned with our sustainable net income. Our spillover income and our industry-leading 8.25% incentive fee hurdle provide us with flexibility to maintain stable dividends even if short-term earnings fluctuate. Shifting to realized and unrealized gains and losses, we recorded net realized losses of $10.8 million in the quarter. These losses, approximately $0.08 per share, were primarily driven by a few discrete events, including the exit of our loans to Dexter Rec and the sales of five CLO investments in the legacy Sierra portfolio, as well as the restructuring of our debt investment in Transportation Insight during Q1. These realized losses were partially offset by a gain on the sale of our equity stake in Ocelot following the portfolio company’s exit during the quarter. It is important to note that the impact of these losses on NAV was largely muted by prior-period unrealized depreciation. In other words, we had already marked down these investments in previous quarters, so a significant portion of the realized loss was effectively a reclassification from unrealized to realized and did not materially reduce our current NAV. Our portfolio experienced a net unrealized appreciation of $4.9 million this quarter, or roughly $0.05 per share of NAV accretion. Key cost valuation movements included further increases in the fair value of our Sierra CSA, which I will detail in a moment, as well as gains on select performing investments in the portfolio such as Sky Vault and Security Holdings. This appreciation helped offset unrealized write-downs on a few challenged positions, including legacy MVC Auto and our debt investment in EMI. Overall, realized and unrealized results for the quarter amounted to an approximately $5.9 million decrease in net assets, which drives the slight dip in NAV I mentioned earlier. Our Sierra CSA continues to serve its intended purpose of insulating our NAV from the wind-down of the acquired Sierra portfolio. The valuation of the Sierra CSA increased by approximately $5.3 million from $60.5 million in the fourth quarter to $65.8 million as of March 31. This increase reflects continued paydowns and asset sales within the remaining Sierra portfolio—which is now down to only seven issuers with a total fair value of approximately $18 million, versus 12 issuers and $32 million at year-end—as well as updated assumptions around an accelerated termination timeline for the CSA. In fact, the Sierra joint venture exited its remaining investments and returned $16.4 million of capital to us during the first quarter. We are optimistic about terminating the CSA in the near term, which should eliminate structural complexity in our balance sheet and provide approximately $65 million for redeployment into income-producing assets. Our balance sheet remains conservatively positioned. We ended the first quarter with a net leverage ratio—defined as regulatory leverage net of unrestricted cash and net unsettled transactions—of 1.17x at quarter end, which is squarely within our target range of 0.9x to 1.25x. The net leverage of 1.17x ticked up only slightly from 1.15x at year-end. We continue to prudently manage our capital structure, which remains predominantly comprised of long-term unsecured debt. As of quarter end, roughly 80% of our outstanding debt was in unsecured notes—among the highest proportions of unsecured funding in the BDC industry—which provides significant flexibility in managing our liabilities. We ended Q1 with ample liquidity: about $95 million of cash and foreign currency on hand and over $530 million of available borrowing capacity on our $825 million credit facility. In total, we had well over $600 million of dry powder at quarter end for our financing needs and future investment opportunities. We remain an active and opportunistic participant in the investment-grade debt markets, giving us confidence in our ability to address future financing needs while preserving our balanced funding profile. Lastly, a quick note on capital allocation. As Tom mentioned, we remain focused on delivering value to our shareholders through both stable dividends and repurchases. During Q1, due to a company blackout period, we did not repurchase any shares. However, our Board authorized a new 30 million share repurchase program for 2026, reflecting our commitment to opportunistically buy back shares when trading at a meaningful discount to NAV. We intend to employ this buyback program as appropriate going forward, subject to market conditions and other considerations. In summary, Barings BDC, Inc.'s first quarter demonstrated the resilience of our earnings and the benefit of our disciplined approach. While we plan to carefully manage through potential interest rate normalization and credit headwinds, our diversified portfolio of senior secured investments, robust liquidity, and conservative balance sheet leave us well positioned to continue delivering attractive risk-adjusted returns to our shareholders. I will now turn the call back to the operator for questions and answers. Operator: We will now open the call for questions. Our first question today is coming from Finian Patrick O’Shea with Wells Fargo Securities. Your line is now live. Analyst (Finian Patrick O’Shea, Wells Fargo Securities): Hey, everyone. Good morning. Thanks. Question on the new non-accruals—just a few smaller names, but previously they were marked at, you know, in the low 90s. I am not sure if that applies to the European one, given the currency input. But can you talk about the sort of big picture, the why? Is it a tariff, inflation, commodities? And if this is sort of a concerning trend in that regard? Matthew Freund: Yes. Good morning, Fin. This is Matt. So the three adds to that list this quarter came in concert with removing some. With respect to the European position, that actually was carrying a fair market value of zero last quarter, so the consequence to the portfolio is immaterial. With respect to the two U.S. platforms, I would describe those events as being continued challenges in the portfolio. They do both have some element of export/import exposure, but that is not really the reason that catalyzed the move to non-accrual. Both are just operating in slightly more challenged end markets at the current moment, and after some negotiations with other members of the investor base—both on the debt and the equity side—we made the decision that it would likely be prudent to move those assets to non-accrual. In the case of one of them, we actually are in process of restructuring it and expect that to be a relatively short-lived presence with respect to the non-accrual designation. But, of course, time will tell. Analyst (Finian Patrick O’Shea, Wells Fargo Securities): Okay. That is helpful. And then, Elizabeth, you talked a bit about the CSA. I do not know that I caught all of that. So just to tease that out—to the extent you may settle the newer one early as you all did with the last one, is that something near term, just a matter of doing the paperwork? Or are there a certain amount of exits on the runway before we might see a, you know, conclusion of the other CSA? Elizabeth A. Murray: I would say that we are optimistic that the termination will happen earlier rather than later and likely at some point this year. Analyst (Finian Patrick O’Shea, Wells Fargo Securities): Great. Thanks. That is all for me. Elizabeth A. Murray: Thanks, Fin. Operator: There are no further questions at this time. I would like to turn the floor back over for any further or closing comments. Tom McDonald: Thank you, operator, and thank you to all who participated today. I look forward to deepening our engagement with investors and advancing our strategic priorities with the full BDC leadership team. BBDC is strongly positioned for the future and we remain focused on delivering consistent value for shareholders. Thank you. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Operator: Good day, and thank you for standing by, everyone, and welcome to the Amtech Systems Fiscal 2026 Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Jordan Darrow of Darrow Associates, Investor Relations. Please go ahead. Jordan Darrow: Thank you, and good afternoon, everyone. We appreciate you joining us for the Amtech Systems Fiscal 2026 Second Quarter Conference Call and Webcast. With me today on the call are Bob Daigle, Chairman and Chief Executive Officer; and Mark Weaver, Interim Chief Financial Officer. After close of market today, Amtech released its financial results for the second quarter of 2026. The earnings release is posted on the company's website at www.amtechsystems.com in the Investors section. Before we begin, I'd like to remind everyone that the safe harbor disclaimer in our public filings cover this call and the webcast. Some of the comments we made during today's call will contain forward-looking statements and assumptions that are subject to risks and uncertainties, including, but not limited to, those contained in our SEC filings, all of which are posted on the Investors section of our corporate website. The company assumes no obligation to update any such forward-looking statements. You are cautioned to not place undue reliance on forward-looking statements, which speak only as of today. These statements are not a guarantee of future performance, and actual results could differ materially from current expectations. Among the important factors, which could cause actual results to differ materially from those in forward-looking statements are changes in technology used by customers and competitors, change in volatility and the demand for products; the effect of changing worldwide political and economic conditions, including trade sanctions; and the effect of overall market conditions, including equity and credit markets and market acceptance risks; ongoing logistics, supply chain and labor matters and capital allocation plans. Other risk factors are detailed in our SEC filings, including our Form 10-K and Form 10-Q. Additionally, in today's conference call, we will be referencing non-GAAP financial measures as we discuss the financial results for the first quarter. You will find a reconciliation of those non-GAAP measures in our actual GAAP results included in the press release issued today. I will now turn the call over to Amtech's Chief Executive Officer, Bob Daigle. Robert Daigle: Thank you, Jordan. Revenue for the quarter was $20.5 million, which was up over 30% from the same quarter last year and up 8% sequentially. Our adjusted EBITDA was $2.5 million or about 12% of sales, an increase of $1.1 million from the prior quarter and $3.9 million from a year ago. While reported revenues were at the high end of our guidance range, our adjusted EBITDA margin was a significant beat, as we had guided to high single-digit EBITDA margins. Higher gross margins contributed to our improved profitability and cash generation. Gross margin approached 48% in the second quarter, up from 45% in the first quarter. Cash on hand at the end of the quarter was $24.4 million, an increase of $2.3 million from the prior quarter and $11 million from a year ago. AI-related sales accounted for over 30% of our Thermal Processing Solutions segment revenue in the second quarter and bookings were very strong. Momentum for AI-related demand continued to build in the second quarter. Advanced packaging has emerged as a critical bridge between silicon innovation and the escalating demands of artificial intelligence infrastructure. As traditional Moore's Law scaling slows, the ability to pack more computing power into a single footprint now relies less on shrinking individual transistors and more on how those chips are interconnected. By enabling high-bandwidth memory integration, reducing data latency through 2.5D and 3D stacking and allowing for massive system-on-package architectures, advanced packaging provides the physical foundation necessary for generative AI and large language models to thrive. In short, packaging is no longer just a protective housing for chips, it is a primary driver of the performance, power efficiency and scale required to fuel the next generation of AI processors. Capital equipment, which can deliver high yields and throughput is vital to support this AI revolution. As broadly reported, semiconductor OEMs and OSATs continue to increase investments to expand capacity to support the massive AI infrastructure build-outs. Demand has been very strong for our advanced packaging equipment and AI server board assembly equipment due to our differentiated capabilities that include TrueFlat technology and market-leading temperature uniformity, which enables high yields when producing these very complex and expensive products. Although we have limited visibility due to our short lead times, our channel checks support our belief that demand will remain very strong for the foreseeable future. Based on bookings and quoting activity, we expect the percentage of revenue from AI applications in our Thermal Processing Solutions segment to exceed 40% in the third quarter. We are also seeing increased quoting activity and bookings for panel-level packaging. These more demanding packaging technologies are serving more mainstream semiconductor applications, but their process requirements align very well with our differentiated capabilities. To accelerate growth, we're continuing to invest in next-generation equipment to support higher density packaging to address emerging customer requirements. We plan to launch the first product for higher-density packaging at the SEMICON trade show in Taiwan in early September. We believe the capabilities provided by our next-generation equipment will significantly increase our addressable market and help drive growth beyond 2026. Growth of our Thermal Processing Solutions parts and service business was also a highlight in the quarter. Customer outreach initiatives have helped drive growth with revenue up 10% sequentially and 56% year-over-year. I should note that while we are benefiting from demand for our products to support the AI build-out, we are also beginning to use AI software integrated with our ERP and CRM sales tools to help support customers and streamline our sales process. For our Semiconductor Fabrication Solutions segment, we continue to leverage our foundry service and technical capabilities to pursue applications from customers not well supported in the industry. We have built a strong opportunity pipeline and are expanding efforts to replicate successes and grow sales of legacy products. Overall, our IDI chemicals business revenue was up 15% year-over-year. We have also made significant improvements in the service levels we provide and have driven outreach initiatives to grow our parts and services business at Entrepix. Revenue for parts and service at Entrepix was up about 40% year-over-year. I'm very encouraged by the early results from our customer-centric growth initiatives. Unfortunately, much of the success from these initiatives in our Semi Fab Solutions segment has been masked by weak sales of our PR Hoffman products due to weakness in demand from our major silicon carbide customers. As I've stated before, 2026 will be an investment year for our SFS business as we execute on our strategy to overserve the underserved, but we believe that our customer-centric growth initiatives will deliver reoccurring revenue streams with meaningful profits beyond 2026. The operating leverage and working capital efficiency across the company resulting from our product line rationalization efforts and a migration to a semi-fabless manufacturing model over the past 2 years helped deliver improved results for the quarter and should result in continued strong cash flow and further increases in gross margins and EBITDA margins as revenues increase. Our semi-fabless model, which includes -- concluded the consolidation of our manufacturing footprint from 7 facilities to 4 should also allow us to significantly increase revenue with minimal capital expenditures. We ended the quarter producing 9 reflow systems per week and have the capacity and supply chains to accommodate the growth we expect with little or no CapEx. In summary, growth opportunities driven by AI infrastructure investments and our customer-centric set strategy, combined with strong operating leverage that results from our asset-light semi-fabless business model position us very well to deliver meaningful shareholder value. Before I hand the call over to Mark, I have 2 organization announcements to share. First, as we announced last week, Tom Sabol has been appointed as CFO and will be joining Amtech on May 14. Tom brings more than 20 years of CFO experience across publicly traded and private equity-backed organizations with deep expertise in developing and leading finance teams, driving financial performance, Investor Relations and SEC reporting. His background spans several industries, including financial services, software and advanced manufacturing. I look forward to working closely with Tom, as we continue to drive growth and profitability. I would like to take a moment to recognize and thank Mark Weaver for stepping in as interim CFO. Mark came out of retirement to help us with this transition, and I greatly appreciate his support and his leadership. I am also pleased to announce that Guy Shechter will be joining Amtech on May 19 in a newly created President and Chief Operating Officer role. Guy has held various commercial and general management positions with semiconductor equipment and advanced packaging equipment companies. The extensive experience, customer relationships and leadership skills that he brings to Amtech will be critical as we expand our portfolio of solutions for AI applications to accelerate growth. I'm looking forward to having Guy join the Amtech team. Now I'll turn the call over to Mark for more details concerning our Q2 results. Mark Weaver: Thank you, Bob. Once again, it's been a pleasure working with you and the folks at Amtech. I've truly enjoyed my time here. Now I'll review the financials for the fiscal '26 second quarter. Following the 2-year-plus transformation led by Bob, the company is finally at a place where year-over-year revenue comparisons are meaningful. The one consistent characteristic of our revenue comparisons over the past few years has been the positive impact of AI product demand within the TPS segment. In the second quarter of 2026, AI revenues accounted for more than 30% of TPS segment revenue. Bookings for AI applications remain strong, and we are experiencing both book and ship in the same quarter as well as book now and ship later on. This has led to the second consecutive quarter of company-wide bookings exceeding sales for the period. Other areas of TPS and SFS sales are also contributing growth on a consolidated basis, which is being partially offset by weakness in select product lines, as Bob discussed in his remarks. Total SFS revenues were $5.7 million in the second quarter, up 15% from approximately $5 million in both the first quarter of 2026 and the second quarter of 2025. Moving on to gross margins. The company's product line rationalization and our focus on growing higher-margin product lines, including AI advanced packaging solutions as well as our recurring parts services business are delivering their intended results, particularly as we are benefiting from greater scale. Gross margin as a percentage of sales increased to 47.7% in the second quarter of 2026, up nearly 300 basis points from 44.8% in the first quarter of '26. Comparison to the prior year period is not meaningful since that quarter included a $6 million noncash inventory write-down as part of our broader turnaround and transition, which took margins into negative territory in the second quarter of 2025. Selling, general and administrative expenses increased $0.3 million sequentially from the prior quarter and were relatively flat as compared to the second quarter of 2025. The increase is primarily due to expanding business activities, tax and IT consulting fees. Research, development and engineering expenses were relatively flat compared to prior periods. The company continues to invest with a measured yet opportunistic approach to R&D, including next-generation products targeting the AI supply chain and our specialty chemicals business. GAAP net income for the second quarter of fiscal 2026 was $1.2 million or $0.08 per share. This compares to GAAP net income of $0.1 million or $0.01 per share for the preceding quarter and a GAAP net loss of $31.8 million or $2.23 per share for the second quarter of fiscal '25. During the second quarter of 2025, the company recorded significant noncash inventory write-downs and impairment charges, which make the year-over-year comparisons for profitability not really meaningful. The company's second quarter of '26 GAAP net income includes $0.3 million of foreign currency exchange losses versus $0.2 million in the prior quarter, primarily driven by a weakening United States dollar against the Chinese renminbi. Unrestricted cash and cash equivalents at March 31, 2026, were $24.4 million compared to $22.1 million at December 31 and $17.9 million at September 30 and $13.4 million a year ago. The increased cash balances are due primarily to the company's focus on operational cash generation, working capital optimization, strong accounts receivable collections and accounts payable management. The increase in cash from the first quarter of this year is even more meaningful since we are carrying an additional $0.9 million in inventory to accommodate higher order flow. The company continues to have no debt. As for the $5 million stock repurchase program, the company did not use any cash for this, as no shares were repurchased since the plan was put in place on December 9. Now turning to our outlook. For the third fiscal quarter ending June 30, 2026, the company expects revenue in the range of $20.5 million to $22.5 million. At the midpoint of this range, our guidance is meaningful year-over-year and sequential quarter increase. AI-related equipment sales for the Thermal Processing Solutions segment is anticipated to drive the majority of our revenue growth and account for as much as 40% of the segment's sales in the third quarter of 2026. With the benefit of continued top line growth and the sustainable improvements in structural and operational cost reductions, Amtech expects to benefit from its operating leverage to deliver adjusted EBITDA margins in the low double digits range. The outlook provided during our call today and in our earnings press release is based on an assumed exchange rate between the United States dollar and foreign currencies. Changes in the value of foreign currencies in relation to the United States dollar could cause the actual results to differ from expectations. And now I will turn the call over to the operator for questions. Operator: [Operator Instructions] And today's first question comes from Scott Buck with Titan Partners. Scott Buck: Bob, I was hoping to get a little more granularity on gross margins in SFS. It looks like it was up about 800 basis points sequentially. So any kind of added color on what's going on there would be great. Robert Daigle: Yes. Again, I think a lot of -- revenue contributed -- the additional revenue contributed a bit to that. And I think the balance would really be mix related. There wasn't anything really structurally different quarter-to-quarter in that segment, more reflective of the mix of products through that business and then the incremental revenue. We have a lot of operating leverage. As you might imagine, with the -- basically the structural changes we've made over the past couple of years, we've positioned ourselves where we do get very solid flow-through of any incremental revenue to our overall results. Scott Buck: Great. That's very helpful. And then I want to ask about kind of geographic mix and how you're seeing demand trends across regions. Robert Daigle: Yes. So as you might imagine, Asia is really the hotbed for AI infrastructure build-outs. Traditionally, in the packaging area, it's been almost exclusively Taiwan, but what we're seeing is a significant build-out of packaging infrastructure in other parts of Southeast Asia, Thailand, Malaysia, Indonesia, India, for example. So we're seeing a broadening of geographic footprint in terms of major investments in the packaging area for almost all driven by AI infrastructure. And I'd say more recently, we're seeing quite a bit more activity, I'd say, in North America as well. It was pretty quiet, but we're starting to see some investments being made. I'd say more so on the enterprise level board assembly at this stage than chip packaging, but it's nice to see some increased AI activity in North America as well. Scott Buck: That's helpful. In terms of Asia, should we be keeping an eye out on any kind of trade policy, tariff or supply chain dynamics? Robert Daigle: Yes. Specific to the tariffs, we positioned ourselves pretty well there where if you go back a year ago, any equipment coming into the U.S. was basically being manufactured in China. And obviously, there were very meaningful tariff impacts as a result of that. But we did establish a partner where we now manufacture equipment for the U.S. in Singapore, Malaysia area. So we've kind of insulated ourselves quite a bit from the U.S.-China stress levels. And beyond that, there really haven't been a lot of, I'd say, across Asia issues. I'd say back to your supply chain question, everyone is talking about memory being more expensive. And obviously, that's same for us, and we have to adjust our cost and pricing accordingly if memory becomes more expensive. We really haven't seen any shortages, however, I would say it's more -- there's a little bit of price pressure that we need to deal with and pass along on the memory side. Scott Buck: Okay. Great. And then last one for me. Cash continues to improve. How should we be thinking about capital allocation? Or I should say, how are you thinking about capital allocation? You have the $5 million repurchase authorization out there. Is that a priority? Or is it more R&D investment in new products or even potentially M&A? Robert Daigle: Yes, let's -- Yes, I'd say growth is number one, right? Because back to the operating leverage discussion, as we grow with the strong margin leverage we have in our portfolio, and I should mention with all the product lines that we cut from the portfolio rationalization efforts, I would say really across the board, we have very healthy margins across the entire portfolio right now. So any of the product lines that grow are very meaningful in terms of improving cash generation, gross margins and EBITDA. I'd say from an investment standpoint, we are making those investments. We've been increasing -- we have our R&D efforts around next-generation equipment. There could be a little bit of incremental investment needed to drive that home. We're investing in resources to develop the pipeline for SFS in terms of trying to build out our IDI portfolio and the recurring revenue streams. We'll continue to incrementally invest in that. I don't see that having a meaningful impact on cash needs. And then the other factor I think we want to point out is with our semi-fabless model, we have the ability to scale without meaningful CapEx. As I mentioned in my comments, with -- even looking out a year in terms of high growth and demand for the equipment used for AI packaging, we don't really see the need for deploying meaningful cash for CapEx. Our semi-fabless model and our supply chain can handle that growth. So having said all that, long story short is if we find -- we're active, if we could find inorganic opportunities, we would deploy cash accordingly. But as I've said to many people, I spent over a decade doing corporate development in a prior life. And I would say we need to be prudent, cautious and make sure that what we do is generating real meaningful value. So we're going to be -- when people ask me, are you going to acquire? I always answer the question with maybe because if we find acquisitions that can create real value, we're going to do those to accelerate growth. But we do have a great pipeline of organic growth that I think can push us forward. And then back to your question about capital allocation, obviously, first priority is growth. If we don't have -- if we didn't have better uses for that, then, of course, we would look at providing the cash back to shareholders in some form. Operator: [Operator Instructions] And the next question comes from George Marema with Pareto Partners. George Marema: I just want to give you kudos for the tremendous transformation over the last 2 years and with the business and now you're starting to see the fruits of that operating leverage, it's fantastic to see this. So thanks for that. First question I have is on the change we've seen recently with being very GPU dominated to now a lot more of the CPU and CPUs being more advanced packaging requirements demand. I wonder if you can kind of size up and differentiate what this means to Amtech in terms of opportunities and velocity of capacity adds going forward? Robert Daigle: Yes. My sense, George, is I would -- it's a very favorable tailwind for us in that if you think about our business and in terms of how we package semiconductor packaging or enterprise board assembly for that matter, a lot of it has to do with units and size of those units, right? And I think as many on the call may be aware, you start -- even going back to the -- you look at the Blackwell versus Rubin GPUs where the size of the packages are getting much, much larger is very beneficial. Because what we do is we -- you can kind of think about what we're providing is very much based on area of production. So it's the size of the packages, and it's a number of packages. So when you hear people talk about the number of CPUs, maybe I've heard numbers as much as, what, 10:1 against GPUs, TPUs to do a lot of the localized processing for AI. I think that bodes very well for volume production in the industry, which typically bodes very well for us. So we think it's a tailwind. It's too early to -- we're going to try to get our arms around what this could mean in terms of additional acceleration. But I think it's very positive. It's hard to put my arms around the numbers at this stage. George Marema: Okay. I was curious on the silicon carbide side of the business, with the increasing demand drivers of lots more automotive AI content, power, higher voltages, thermal performance requirements, et cetera, do you see any demand outlook increasing on these areas in the next year or so? Robert Daigle: Yes. Possibly, but I do have -- I temper -- when I look at the big driver for silicon carbide was really the EVs, the electric vehicles. And a lot of that growth is really being driven primarily in Mainland China today, which is less of an opportunity for us than in the West. I do think the AI infrastructure will drive some demand increase. It's hard to -- I think we're quite a ways away from that impacting capital equipment needs because a lot of the Entrepix volume, if you go back 2, 3 years ago, was capital equipment as they were ramping up infrastructure for EV. I don't think there's enough demand there yet to drive any of that. And I do think the cost pressures on the silicon carbide side in the West and the tremendous capacity that's put into China that's competitive, it could come back. I just wouldn't put -- I'm not emphasizing that, frankly, George, as a major growth driver for us. It could be helpful, but I do think eye on the ball over here is really maximizing our opportunities around packaging and assembly and AI, and it's building out that specialty chemicals annuity business that if you want to -- in terms of where our best investments can be made to drive value. George Marema: Speaking of chemicals, on your chemical side of the business, are you doing much R&D in the -- for addressing all the polymers, adhesives, et cetera, for advanced packaging, semiconductor for like -- that addresses melting and warping and cooling and signal loss, all that sort of stuff? Robert Daigle: We're mostly cleaners, lubricants. We do have some coolants, however, in the processing of primary wafers, more so at the wafer level, though, than -- or optics. I would say optics is an area we're paying more attention to, as you might imagine, than the chemicals and the packaging area. But I do see opportunities -- significant opportunities, frankly, in optics or optical-related semiconductor production, and we're pursuing those. George Marema: Do your cooling chemicals and equipment, do they kind of help address these warpage yield problems that are emerging at the leading edge now? Robert Daigle: Not so much. I think no, but I wouldn't say they do. I think the warpage where we benefit is on the packaging, which is our TrueFlat technology. That's really where we shine, George. If you've got a $30,000 processor that you're trying to assemble, you need to keep it flat. And I would say that's where we really do well with our TrueFlat equipment. Operator: And the next question comes from Craig Irwin with ROTH Capital Partners. Craig Irwin: Last quarter, the small delay in one of your AI customers in taking some packaging equipment had a big impact on your stock. Did we maybe see the delivery of that equipment in this current period, or is it expected over the next couple of months? And do you expect the linearity or the overall business to have sort of a smoother trajectory given the size and the scale that you're gathering over the next couple of quarters? Robert Daigle: Yes. We did ship that particular equipment during the quarter. And I'd say that the visibility, I wouldn't say it's great, but it is getting better because there's a lot more activity in terms of new facilities being put in. And so we are seeing more bookings with deliveries out a quarter and in a couple of cases, actually a couple of quarters now, which is very unusual for our business because, as I mentioned before, we have very short lead times. We've got a very efficient supply chain, turn equipment around very quickly. So we've typically been a book and ship even in this large-scale capital equipment space. But having said that, because people are actually building new facilities now and don't necessarily need all the equipment immediately, we're seeing better visibility, which I think will translate back to -- I think a good point is that it should start to smooth things out a bit, frankly, as we get better visibility and bookings that aren't just current quarter, but out of ways. Craig Irwin: That definitely makes sense. The next question is one that I get asked fairly often, right? It's more of a big picture question, Bob. So can you talk a little bit about Amtech's moat in advanced packaging and AI? What's allowed you to dominate this space? There are others that would like to do business in here, but you've maintained a really strong reputation on technology. It's allowed you to have those long-term customer relationships and supplier relationships, too. What's different about what you're doing that gives you this moat? Robert Daigle: Yes, because, generally, we win when it's a demanding application, and there's actually 3 components that usually come into play. I'd say in advanced packaging, that TrueFlat technology, and it's -- unfortunately, we don't have graphics in front of you, but these are large conveyorized piece of equipment, let's say, almost half the length of a tractor trailer bed that are doing the reflow operations for these packages and you're raising things at very high temperatures. Most materials, most substrates, and I think George earlier was alluding to this tend to bow and twist and deform as you're heating them up. And we have technology which allows us to -- it actually pulls a vacuum, it holds the substrates down flat against the belt. So things don't basically shift during the assembly process. And what does that mean? That means high yield. So in applications where you're trying to process something that's very expensive, you need -- you're not going to sacrifice yield, you've got to have equipment that's going to be robust. The other thing I'd say is temperature uniformity. I think we have a significant advantage in terms of being able to provide uniformity across our refloat, across the belt within zones. Our latest equipment actually has reconfigurable zones that can be customized by customers, so we've provided capabilities that really are enabling for high yield, high throughput processing of these things. And I'd say the last thing, which I think I've mentioned before, like our Aqua Scrub technology, for example, where we can remove the contaminants from the processing fluxes out of the gas stream so that it reduces downtime in the ovens and reduces the risk of contaminating the product. So we've got a bunch -- I mean, it's not just one -- I guess that's the tough part, Craig. It's not one thing. We've got a portfolio of capabilities and IP around some of these capabilities that put us in a position where if you're trying to do -- you're trying to process an AI package, an AI enterprise board, it's expensive, we're worth it. I guess I'd say, which is why we've captured the strong position, market position that we have today and enjoy today. Operator: And this concludes today's question-and-answer session. I would now like to turn the conference back over to management for any closing remarks. Robert Daigle: All right. Thank you, operator. In closing, I want to thank everybody for joining our earnings call today. We look forward to seeing some of you later this month at the B. Riley Annual Investor Conference and then in June at the Planet Microcap Conference. We hope you can join us at either of these events. And thanks again for your continued support of Amtech Systems, and have a good evening. Operator: The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.
Operator: Good afternoon, and welcome to Silvaco's First Quarter Fiscal Year 2026 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Chris Zegarelli, Silvaco's CFO. Please proceed. Chris Zegarelli: Thank you. Joining me on the call today is Wally Rhines, Silvaco's CEO and Director. As a reminder, a press release highlighting the company's results, along with supplemental financial results, are available on the company's IR site at investors.silvaco.com. An archived replay of the call will be available on this website for a limited time after the call. Please note that during this call, management will be making remarks regarding future events and the future financial performance of the company. These remarks constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. It is important to also note that the company undertakes no obligation to update such statements, except as required by law. The company cautions you to consider risk factors that could cause actual results to differ materially from those in the forward-looking statements contained in today's press release and on this conference call. The Risk Factors section in Silvaco's annual report on Form 10-K for the year ended 12/31/2025, provides descriptions of these risks. With that, I'd like to turn the call over to our CEO, Wally Rhines. Wally? Walden Rhines: Good afternoon. I appreciate you joining us today. I am very pleased with our results in Q1. Momentum continues to build on multiple fronts. Financially, we delivered solid Q1 results and issued compelling guidance for Q2. In Q1, we saw bookings, revenue, and gross margin all above the midpoint of the guided range, which cut our non-GAAP operating loss in half sequentially. We delivered 26% year-over-year revenue growth. Our Q2 guidance confirms that we expect to reach an important milestone in the quarter, that is delivering non-GAAP operating profitability for the first time since Q4 of 2024. From a cash perspective, Q1 was the first sequential growth in unrestricted cash on the balance sheet since the IPO in May of 2024. Our focus on financial discipline and predictability is delivering tangible results. Our team has rallied around this cause and is delivering solid results and important milestones. I want to start with more good news on the AI front. For the second quarter in a row, we secured a new FTCO AI-driven manufacturing customer engagement in Q1. We're in discussions with several more companies and expect one of them to close in Q2. We also received an order from an existing FTCO customer for new functionality. Momentum continues to build for our AI-driven manufacturing strategy, both in terms of new as well as existing customers. While market adoption of FTCO is still in the early stages, these are signs that momentum is building, and the market is responding very positively to what AI manufacturing development can unlock for our customers. Before providing more details on results, I want to give you an update on the company's strategic pivot on which Chris and I have been focused since joining the company. Our guiding principles have centered on playing to Silvaco's strengths, leveraging AI, targeting markets where we can build a top franchise, customer obsession, and financial discipline. Leveraging Silvaco's strengths means extending our lead in target markets and deepening the moat around core technologies. That means delivering differentiated AI-driven solutions for power, memory, foundry, and display segments. In power, we have unique advantages, particularly for wide band gap semiconductor process and product development. For memory, our partnership with Micron is an example of how we can deliver real value to the biggest and best companies in the industry. In technology, we will widen our lead in core areas, including multiphysics simulation, which was critical to the introduction of FTCO. AI is a crucial element of our strategic shift. We've deployed AI internally and are already seeing phenomenal results. We've seen up to 6x acceleration in graphical user interface development, up to 10x acceleration in new feature design and accelerated verification testing of IP. We've also built AI directly into more of our solutions. The best example is clearly AI-driven manufacturing or FTCO. Virtualized process development is turning into a must-have feature across the semiconductor industry. Other examples include building better mathematical optimizers and simulators and rolling out AI assistant, which increase ease of use. Deploying AI in our EDA tools means customers get to SPICE models quicker, design optimized layouts faster and optimize power, performance, and area in everything they design. Our AI-first approach to road map acceleration means that we are all in on developing optimized solutions that meet the needs of customers. We also remain relentless about financial discipline. With our $20 million cost reduction initiative largely behind us, we're now building discipline into the culture of the company. We think in terms of efficient process, streamlined structure, and cost optimization. Taken together, we believe that these strategic priorities position us well to grow the top line faster than peers and to grow profitability faster than revenue. I look forward to reporting updates on these strategic initiatives in the quarters ahead. But now let's turn back to quarterly results. We continue to see significant strength in TCAD. In Q1, TCAD bookings grew 13% sequentially and 49% year-over-year to $10.5 million. Revenue grew 10% sequentially and 22% year-over-year to $9.6 million. Growth in the quarter was driven by significant milestones for FTCO, including securing a new customer and broadening the product line to include additional functionality. Looking forward, we see solid momentum for FTCO. We see strong potential from engagements with governments, power applications, and semiconductor equipment companies. On the government side, we inherited engagements in Photonics from our Tech-X acquisition. We have real opportunities to leverage the broader Silvaco portfolio for meaningful future engagements. With equipment companies and power applications, we see growing interest in FTCO and digital twin modeling that we expect to generate compelling growth opportunities going forward. We see these trends, AI-driven FTCO, government engagements and power and equipment companies as drivers that will drive growth for quarters and years to come. After a strong Q4, we saw our semiconductor IP product line pause in Q1. Semiconductor IP delivered bookings of $3 million in the quarter, down 41% sequentially, but up more than 200% year-over-year. IP revenue was $4 million, down 21% sequentially, but up 270% year-over-year. Sequential softness in IP was driven by timing of new customer wins. We had a few key designs push out by roughly 1 quarter. Year-over-year trends in IP reinforce the fact that this business has reached a new baseline with the integration of Mixel's industry-leading MIPI PHY IP. Our IP sales pipeline continues to grow, particularly for our automotive soft IP and for Mixel PRO, our production-ready set of products that were introduced in the first quarter. Our IP pipeline has roughly doubled over the past year. These leading indicators support our view that we expect to deliver steady growth in IP through the rest of the year. We expect IP to grow sequentially into Q2 and to be our strongest grower this year. Turning to EDA. We saw a decline in Q1 bookings and revenue. Q1 bookings came in at $3.8 million with revenue of $4.1 million. Here, we continue to focus on shifting priority to a handful of core products that we believe can deliver significant growth. We talked last time about potential for Jivaro as one of those core offerings. Another focus area is Utmost, which is a database-driven platform for device characterization and SPICE model extraction. We just released an AI-driven version of Utmost, which now delivers up to 10x performance improvements, a machine learning optimizer and other runtime enhancements. This is another example of how the team is building next-generation AI-driven solutions. Jivaro and Utmost are just two of the core EDA products that are positioned for growth as we focus development, sales, and field application resources on these drivers. We expect stability in this area of the business in the short term and then a return to growth as these new priorities deliver results. While I'm proud of the progress we've made in a short amount of time, I also recognize the task before us. We've made great strides in stabilizing the business, enhancing liquidity, and streamlining operations and focusing strategically on the core products that we expect will deliver accelerated growth and profitability. We all look forward to driving our semiconductor IP business to new heights, getting EDA back to growth, and seeding the momentum we see in FTCO. We all continue to believe that the best is yet to come. I look forward to seeing how far we go in the coming quarters. I'd now like to turn the call over to Chris, who will discuss our financial results and our outlook in more detail. Chris? Chris Zegarelli: Thanks, Wally. Good afternoon, everyone. In Q1, we delivered $17.2 million in bookings and $17.8 million in revenue, both above consensus and above the midpoint of our guided range. Bookings and revenue both grew 26% year-over-year. Strength in the quarter came from TCAD. We won another new FTCO customer in the quarter and partnered with an existing FTCO customer to add new functionality to their deployment. Looking forward, we see strong interest in FTCO and expect to close one more new FTCO customer in Q2. From a geographic perspective, we saw the most growth in Q1 from the Americas region, which grew 24% sequentially and accounted for 44% of total revenue in the quarter. Looking down the P&L, GAAP gross margin in Q1 was 86.4% and non-GAAP gross margin was 87.9%. GAAP and non-GAAP gross margin sequentially increased by 305 and 235 basis points, respectively, and came in ahead of guidance and consensus. GAAP and non-GAAP gross margin also increased 779 basis points and 788 basis points year-over-year, respectively. Both GAAP and non-GAAP gross margins have benefited from our restructuring activities. We believe gross margins will remain in this range of mid- to upper 80s going forward. GAAP operating expenses were down 4.5% sequentially to $21 million. Non-GAAP operating expenses were down 3.6% sequentially to $16.1 million, above the midpoint of the guided range. From a total cost perspective, which combines operating expenses and cost of sales, GAAP total costs declined 6.5% sequentially and non-GAAP total costs declined 5.6% sequentially. Q1 results are the first time since the IPO when total non-GAAP spending declined in 2 consecutive quarters. Our guidance into Q2 indicates that spending is expected to continue declining sequentially. GAAP operating loss improved quarter-over-quarter to a $5.7 million loss. Non-GAAP operating loss was $471,000, well ahead of Q4 and ahead of expectations. GAAP net loss in the quarter was $5.9 million, and GAAP EPS was a $0.19 loss. Non-GAAP net loss in the quarter was $574,000 and non-GAAP EPS, a $0.02 loss. Next, turning to the balance sheet and cash flow. Cash and cash equivalents at quarter end was $10.9 million. As of Q1, we no longer have restricted cash on the balance sheet. Recall, cash, cash equivalents and marketable securities at the end of 2025 was $18.3 million, which included $8.3 million of restricted cash. Therefore, unrestricted cash at year-end was $10 million. Unrestricted cash grew almost 10% sequentially in Q1, the first-time unrestricted cash grew sequentially since the IPO. Net cash used in operating activities in Q1 was $11 million, up from $9.5 million in Q4. Please note that this $11 million included the $8.3 million final litigation settlement payment as well as $1 million in severance payments. Net of litigation and severance, net cash used in operating cash flow would have been $1.7 million in Q1. Adjusting for these same two factors, litigation and severance, Q4 net cash used in operations would have been $7.4 million. The improvement from $7.4 million to $1.7 million speaks to the meaningful improvement in our underlying economics. The improvement also supports our view that we will see positive operating cash flow by Q3. During the quarter, we also signed a nonbinding term sheet with our banking partner for a $10 million revolving line of credit. We expect to close on this facility during Q2. Now turning to guidance. For Q2 2026, we expect bookings of $19 million plus or minus 10%, revenue of $18 million plus or minus 10% non-GAAP gross margin around 88%, non-GAAP operating expenses of $15.5 million plus or minus 5%. In closing, the team delivered on several milestones in the quarter. We secured a second AI FTCO customer in as many quarters. We delivered growth in unrestricted cash for the first time since the IPO. We delivered 2 sequential quarters of spending reduction for the first time since the IPO. We see gross margins at highs and see non-GAAP operating profitability coming in Q2. Wally and I want to thank the team for delivering these strong results. We look forward to continuing to deliver on our commitment to profitable growth. With that, operator, we will now take questions. Operator: [Operator Instructions] Our first question comes from Robert Mertens from TD Cowen. Our next question comes from Blair Abernethy from Rosenblatt Securities. Blair Abernethy: I apologize; I was not able to listen to the whole first part of your prepared remarks. So, if you've already repeated -- if this is a repeat, just let me know. But let's talk about the FTCO, in particular, the pipeline. It's interesting in your comments in your press release about governments looking at this, semiconductor equipment companies looking at this. Maybe, Wally, you can give us a sense of what does the market universe looks like to you today for the FTCO? Walden Rhines: Yes. I'm glad you brought this up because the diversity of users is surprising even us. We started out, our big partner, of course, was Micron, initially developing the basic capabilities. But we've found that it's applicable in a variety of other areas. It's applicable with equipment companies and a different application again this quarter. As we mentioned, we've engaged with more in the coming quarter and are quite confident that at least one of those will close. And I think it just reflects on the capability it brings. You bring together a lot of data, you generate a lot of synthetic data, you build models and then people can use it to guide the pathway for evolving their processes, whether they are developing manufacturing equipment or putting a process in place, moving to a next-generation node. It just seems to have a great deal of very broad applicability. Blair Abernethy: Is the equipment makers looking at this in terms of design and development of their own equipment or in terms of working with their customers? Walden Rhines: So, it's both. It is, in fact -- it does, in fact, give them an ability to tune their equipment, develop recipes, figure out results. But the -- one of the specific cases that was brought to my attention in the meeting with the customer this quarter was they want to accelerate the time it takes for setup of equipment. And by having a reliable model, they can, in fact, tune in what the ultimate results should be from the process step and therefore, drive how the setup should be done. Saves time. Time for capital equipment is depreciation cost. And so, their customers appreciate it and also appreciate the fact that they're able to process more in a shorter period of time. Blair Abernethy: So, is this -- if I got this right, Wally, is this a digital twinning for the install, effectively, the install and setup? Walden Rhines: It is indeed. It is a digital twin that is able to simulate the actual behavior based upon what variables are input to the equipment or in the process recipe, the inflow of materials. Blair Abernethy: So, is there an avenue here, maybe I'm stretching this, but is there an avenue here whereby the equipment makers could be your partner in selling the FTCO to an end fab? Walden Rhines: The existing engagements hadn't really addressed that, but I suppose that is a possibility going forward because, whereas they provide it for their particular piece of equipment, it's quite possible that the customers would ultimately want to license it more broadly, and we're able to address multiple different types of equipment because we have built a database associated or a set of tools associated with many different types of equipment. So, at the very least, it could be an introductory point. As far as will we set up an arrangement to OEM the product. Haven't done that yet, but that certainly is a possibility. Blair Abernethy: Okay. Okay. Interesting. And the other question I had was just around the IP business, which was up quite strong year-over-year. How much of that was really -- was Mixel? And how -- maybe how is the opportunity pipeline of the funnel looking for your IP business? Walden Rhines: Well, as we mentioned, the IP business looks very strong for the rest of the year, and much of the growth year-to-year comes from the addition of Mixel. So, we had engagements in both. They are both contributing. And I would expect that as we go through the year, we'll start to see some additional contributions from the off-the-shelf or the production ready. Right now, it's all the traditional Mixel business complemented by a near equal amount of the traditional IP business that involves memory compilers, cell libraries, and other standardized foundational IP. Chris Zegarelli: And as we had indicated earlier, Wally, to that point, the pipeline organically has roughly doubled for that business in the last year, and it's even more than that if you layer in the added opportunities that came from the Mixel acquisition. So, the pipeline trends are very encouraging in that business. While it did have a pause in Q1, we do see indicators of returning to growth sequentially in Q2. Blair Abernethy: Okay. Okay. Great. And then, Chris, just to ask you here, the -- it looks like your OpEx guide for next quarter, $15.5 million plus or minus. Are you -- is that -- are we down to the level that you wanted to be at? Is there more change or any more significant change as we kind of move from Q2 into Q3? Or is the business kind of where you want it? Chris Zegarelli: Good question. As Wally and I kind of indicated when we joined, we do want to drive the business to profitability at flattish revenue. And I think the guide into Q2 indicating positive non-GAAP operating income is an indicator of that. And so, there are still some costs to come out. Blair, some of the international reductions do take some time. So, there are some downward trends in there, but there are also some tactical things we're investing in like the AI tools that Wally alluded to earlier. And so, my sense of it is it's in a pretty good spot now. It probably trends down to flattish from here. And I think we're going to be focusing on those growth drivers that we talked about. I mean IP is a good example, lots of good indicators of strength on the FTCO side. And you can see that even in the TCAD product line number, sequential growth, good year-over-year growth, really encouraging. And as IP gets to growth, that will just be an adder to that, and we should see some good leverage from that continued growth from here. Blair Abernethy: Okay. Great. And last question for you, Chris. Did you -- I didn't see it, but is there a backlog number that you provided? Or will there be one in your queue? Chris Zegarelli: We indicated bookings. We talked about revenue. We didn't put a backlog number there, but you can look for the additional information posted online to see if you find what you need. Operator: Our next question comes from the line of Craig Ellis from B. Riley Securities. Rebecca Zamsky: This is Rebecca Zamsky on for Craig Ellis. My question is on TCAD bookings, which I believe you said was $10.5 million, which were up 50% year-over-year. Is this run rate sustainable? And how should we be thinking about TCAD going through this year? Walden Rhines: Yes. So, I think TCAD is a solid core business for the company. As you can see, it grew substantially year-to-year. I don't think the 50% growth continues, but we will see growth. I think it will be a solid business. And I'd note that our FTCO business is part of these TCAD numbers. It's reported in that segment. So, we have the benefit of the growth in a new and rapidly emerging business in FTCO. And then we have the basic strength of the TCAD business itself, which is doing well and should continue through the year. Rebecca Zamsky: Great. And on the FTCO wins, I believe you flagged there was one customer in Q1 and another one expected in Q2. Is this going to start becoming like a recurring quarterly event? Or would the new wins continue like, still be lumpy? Walden Rhines: Well, we certainly hope so. And based upon the customer visits and interaction that we've had, I think we're quite hopeful that we'll be regularly adding new FTCO customers. And as I mentioned, they don't have to be the same type of application as ones in the past. We're continuing to find new applications and that, too, should help the growth of and the discovery of new possibilities. Operator: Our last question comes from the line of Robert Mertens from TD Cowen. Robert Mertens: Thanks for letting me ask a question on behalf of Krish Sankar. I just wanted to maybe triangulate within your guidance for the June quarter, it looks like sales are kind of flat, slightly up sequentially, and you had mentioned in your commentary some strength in the IP business growing through the year. Is it fair to say that next quarter that TCAD is probably growing into the June quarter as well and then maybe the EDA business contracts? Walden Rhines: Chris? Chris Zegarelli: Yes, I can take that one, Wally. Yes, I think it's fair to say that IP does grow sequentially. EDA could be flat to downish a little bit. TCAD could be flattish to up a little bit is kind of the way that we're thinking about it. But I did just want to provide a little extra color. There was an earlier question on remaining performance obligations or backlog, that number is at about $46.6 million in the quarter. So down slightly from what we saw in Q4, but remaining in that elevated high 40s range for the business. Robert Mertens: Got it. And then maybe just a quick follow-up, just to get clarification. I think this was asked just in terms of the OpEx number. But are you sort of expecting these levels that you guided for the June quarter in the back half of the year? Is there any sort of savings on the SG&A line you expect to continue to bring down? Chris Zegarelli: From an OpEx perspective, yes, as I indicated, there are continued downward pressures on spend. There are some of the targeted reductions that will be playing out in the coming quarters, most notably on the international side, some reductions do take a little bit more time than they do in other jurisdictions. There are some targeted places where we're making some incremental investments. The AI tools are one of them, and Wally alluded to solid indicators that we see a good ROI from those investments in terms of accelerating and broadening the road map. So, we're encouraged to see those benefits roll through the business and deliver upside to revenue. So, I do see a continued trend to kind of down a bit to flattish, as I said, on the OpEx side. And the pipeline has been encouraging, and it continues to grow. Most notably, IP pipeline has been growing really nicely. And so, we do see room for growth from here, particularly on the IP front. But as that FTCO continues to roll through the business and the wins continue to build, that's an obvious tailwind on the TCAD side as well. Operator: [Operator Instructions] With that, this concludes the question-and-answer session. I would now like to turn it back to Walden Rhines for closing remarks. Walden Rhines: Well, thank you. We're pleased with the continued momentum in our business, looking forward to profitability next quarter and the AI-driven FTCO continues to provide a great opportunity for us moving forward. Like so many businesses, AI is helping us both internally and helping us with our customers and creating new business opportunities. We look forward to sharing them with you in the coming quarters. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good afternoon, and welcome to the Creative Media & Community Trust Corporation First Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key. Please note this event is being recorded. I would now like to turn the conference over to Steve Altebrando, Portfolio Oversight. Please go ahead. Steve Altebrando: Hello everyone, and thank you for joining us. My name is Steve Altebrando, portfolio oversight for Creative Media & Community Trust Corporation. Also on the call today are David Thompson, our Chief Executive Officer, and Brandon Hill, our Chief Financial Officer. This call is being webcast and will be temporarily archived on the Investor section of our website, where you can also find our earnings release. Our earnings release includes a reconciliation of non-GAAP financial measures discussed during today's call. During this call, we will make forward-looking statements. These forward-looking statements are based on the beliefs of, assumptions made by, and information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties, and other factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance, and some will prove to be incorrect. Therefore, our future results can be expected to differ from our expectations, and those differences may be material. For a more detailed description of potential risks, please refer to our SEC filings, which can be found in the Investor Relations section of our website. With that, I will turn the call over to David Thompson. Thanks. David Thompson: Hello, everyone, and thank you for joining us today. I would like to begin with an update on the strategic plan we outlined on prior calls: strengthen our balance sheet, improve liquidity, and sharpen our focus on premier multifamily assets. We made meaningful progress against those priorities in the first quarter. Over the past several months, we have taken actions to position Creative Media & Community Trust Corporation for long-term stability and growth. During the quarter, we completed the redemption of $243 million of preferred stock into common stock. This was a transformational step for the company that significantly improved our balance sheet and will improve our funds from operations starting in 2026. We expect the redemption to increase our FFO by approximately $16 million per year and return the company's capital structure back in line with our long-term targets. Since first announcing our plan to strengthen our balance sheet and improve liquidity in September 2024, the company has redeemed $396 million of preferred stock into common stock. In parallel, we have also shifted our financing strategy toward an asset-based approach. We have completed financings on nine assets and have fully retired our recourse credit facility. As a result, we now operate with minimal recourse debt, significantly reducing risk and improving our flexibility. We also sold our lending division in January 2026. After accounting for debt repayment, transaction expenses, and other related items, this transaction yielded net cash proceeds to the company of approximately $31 million. In summary, we believe that we have restored the company to a position of financial health. With a stronger balance sheet, improved liquidity, and a more focused portfolio, we are now well positioned for growth. Going forward, our primary focus is on improving FFO in 2026 and 2027. We believe there are two key levers that will enable us to achieve this. First, we are focused on improving property-level performance across our portfolio. Second, we expect a substantial reduction in preferred dividend obligations. As a reminder, we completed the redemption near the end of the first quarter, so the impact of that action was only minimally reflected in our first quarter FFO. The full benefit of that redemption will begin in the second quarter. In addition, we are continuing to take proactive steps to further strengthen our financial profile. We are actively working to extend debt maturities on a handful of assets, and at the same time, we will continue to evaluate selective asset sales where we see opportunities to unlock value, improve portfolio quality, or redeploy capital more efficiently. We believe that executing on these priorities is critical to reducing what we believe is a substantial gap between our current share price and the intrinsic value of the portfolio. To put that in perspective, on a cost basis, our undepreciated book value was approximately $147 per share at the end of the first quarter. We believe this highlights the underlying value of our assets and reinforces the opportunity ahead as we translate operational improvements and capital structure efficiencies into stronger financial performance. Now turning to net operating income and trends for the first quarter. Starting with office, NOI declined approximately $0.6 million year-over-year. This was primarily driven by a one-time benefit in the prior-year period related to a tax appeal we won and which should not recur this year. Excluding our Oak Glen 2 office asset, our office lease percentage was approximately 85.7% at the end of the first quarter, representing a 470 basis point increase year-over-year. In our multifamily segment, performance was notably stronger. Excluding our joint venture properties, NOI increased 64% year-over-year. When including our JV properties, NOI increased modestly, primarily due to noncash changes in appraised values. Occupancy across the multifamily portfolio improved to 89.6% at quarter-end, an increase of 940 basis points compared to the prior year. Importantly, after several very challenging years in Oakland, we are beginning to see early signs of recovery supported by improving fundamentals in that market. Turning to our hotel asset, NOI declined by approximately $0.7 million year-over-year. This was largely attributable to temporary factors, including renovation-related disruptions early in the quarter and an issue in one of the mechanical systems that temporarily removed a number of rooms from service in March. However, I am pleased to report that the renovation was substantially completed during the first quarter. Over the past two years, we have renovated all 505 guest rooms, along with the property's common areas, positioning the asset for improved performance going forward. In summary, we continue to see encouraging operating trends across the multifamily portfolio as well as in our Los Angeles and Austin office assets and at the company's hotel property in Sacramento. With that, I will turn the call over to Steve to provide additional color on our refinancing activities and property-level performance. Thanks. Steve Altebrando: The actions we have taken over the past several quarters have significantly improved our balance sheet and will strengthen our funds from operations. We are now well positioned to benefit from improving fundamentals, particularly in our multifamily assets in the Bay Area. Today, Creative Media & Community Trust Corporation owns 621 residential units across two premier Class A assets in the market. After several challenging years, we are beginning to see the recovery gain momentum, supported by a strengthening San Francisco residential market with demand increasingly bolstered by growth in AI-related employment and investment. At the end of the first quarter, our Oakland multifamily occupancy increased to 91.9%, representing an improvement of 860 basis points compared to the end of the first quarter last year. In addition, we are also seeing concessions ease in the market, particularly at our 1150 Clay asset. More broadly, in the adjacent Downtown San Francisco market, multifamily fundamentals have rebounded significantly. In 2025, rent growth reached 7.6%, the highest growth rate in 25 years, followed by an additional 7% increase in 2026. Vacancy has declined to 4.3%, the lowest level in nearly 20 years. In Oakland, we are also seeing encouraging signs of recovery. Vacancy has declined to 7.8% at the end of the first quarter, down from a peak of approximately 18% in 2021. Importantly, rent growth turned positive in 2025 after three consecutive years of decline and increased by 2.9% in 2026. Turning to Los Angeles, we have made solid progress across our two new LA multifamily assets. At 701 South Hudson, our partial conversion of office to residential is now 88.2% occupied. As we mentioned on our last call, we received entitlements in 2026 to build an additional 50 units on the back surface lot of the property. We are currently working on predevelopment and anticipate having the option to start that project later this year. At 1915 Park, our ground-up development in Echo Park, we achieved 52.8% leased at quarter-end. This 36-unit project delivered in the fourth quarter is located in a highly desirable, walkable submarket with significant dining and entertainment options. The development is a joint venture with an international pension fund and was built on land adjacent to our office property at 1910 West Sunset. Including our joint ventures, we now have five operating multifamily assets. Turning to the office segment, we executed approximately 20.162 thousand square feet of leases in the first quarter and continue to see an active pipeline of activity, particularly in LA and Austin. Excluding the company's one Oakland office asset, our lease percentage stood at 85.7% at the end of the first quarter, representing an improvement of 470 basis points year-over-year. At 11600 Wilshire Boulevard, we recently commenced a renovation program focused on several small suites. We believe this targeted investment will enhance leasing activity and tenant demand. This project is expected to be completed over the next few months. Finally, in our hotel segment, we have substantially completed the renovation of the property's public spaces, following the full renovation of all 505 guest rooms. This marks the first comprehensive renovation of the property since its acquisition in 2008 and positions the hotel well for improved performance in 2026 and beyond. We are also evaluating an opportunity to add eight new guest rooms by converting currently underutilized space, which we believe would be highly accretive. Turning to financing, we are actively engaged in three initiatives. At the Sheraton Grand, with the renovation now substantially complete, we believe there is an opportunity to both increase the loan balance and reduce the borrowing spread. At 1150 Clay, we are in active discussions with the lender and anticipate securing a one-year extension on the mortgage as we continue to work to improve the asset's NOI. Finally, at our Oakland office property, we are seeking an extension of the loan maturity. However, we cannot guarantee we will reach an agreement with the lender. For context, in 2025, this asset generated $0.8 million of cash flow after debt service. With that, I will turn the call over to Brandon. Brandon Hill: Thank you, Steve. Good afternoon. I am going to spend a few minutes going over the comparative financial highlights for 2026 versus 2025, starting with our segment NOI, which was $9.8 million in 2026 compared to $11.8 million in the prior-year comparable period. Broken down by segment, the decrease of approximately $1.9 million was driven by decreases of $0.728 million from our hotel property, $0.602 million from our office properties, and $0.59 million from our lending business. Our hotel segment NOI for Q1 2026 was $4 million versus $4.7 million in Q1 2025. This decrease was largely attributable to temporary factors, including a renovation-related disruption early in the quarter and an issue in one of the mechanical systems that temporarily removed a number of rooms from service in March. Our office segment NOI for Q1 2026 was $6.5 million versus $7.1 million in Q1 2025. The decrease was primarily driven by a decrease in tenant reimbursement revenue at an office property in Oakland, California, and an increase in real estate tax expense at an office property in Beverly Hills, California, driven by a tax refund recorded in the prior-year period. In January 2026, we completed the sale of our lending business, First Western, for a purchase price of approximately $44.9 million. As the lending segment activity was de minimis during the period it remained under our ownership during Q1 2026, related amounts were excluded from segment-level activity. Our lending division NOI was $0.59 million in the prior-year period. Our multifamily segment net operating loss of $113,000 remained fairly consistent compared to the prior-year comparable period. Below the segment NOI line, we had an increase in depreciation and amortization expense of $1.2 million, primarily due to an increase in tenant improvement amortization at an office property located in Beverly Hills, California, as well as an increase at our hotel property due to renovation projects that have increased depreciable assets. We also had an increase in loss on early extinguishment of debt of $0.705 million, which was incurred in connection with the full payoff of our lending division revolving credit facility during 2026. These were partially offset by a gain on sale of $1.7 million as a result of our sale of First Western during Q1 2026. Our FFO was negative $28.8 million, or negative $58.47 per diluted share, compared to negative $5.4 million, or negative $900.83 per diluted share in the prior-year comparable period. The decrease in our FFO was primarily driven by an increase in preferred stock dividends of $21.9 million, a decrease of approximately $1.9 million in total segment NOI, and an increase of $0.705 million in loss on early extinguishment of debt, partially offset by a decrease of $1.3 million in redeemable preferred stock dividends. Our core FFO was negative $5.9 million, or negative $11.89 per diluted share, compared to negative $5.1 million, or negative $846.5 per diluted share, in the prior-year comparable period. This decrease in core FFO is attributable to the previously discussed changes in FFO, while not impacted by the increase in loss on early extinguishment of debt or the increase in redeemable preferred stock redemptions, as these are excluded from our core FFO calculation. With that, we can open the line for questions. Operator: We will now open the call for questions. If you are using a speakerphone, please pick up your handset before pressing the keys. Showing no questions, this concludes our question and answer session. And the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the First Quarter 2026 Gogo Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jim Golden with Collected Strategies. Jim, go ahead. Jim Golden: Thank you, and good morning, everyone. Welcome to Gogo's First Quarter 2026 Earnings Conference Call. On the call today to discuss the company's results are Gogo's CEO, Chris Moore; and CFO, Zach Cotner. During the course of this call, Mr. Moore and Mr. Cotner may make forward-looking statements regarding future events and the future performance of the company. Participants are cautioned to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements on this call. Those risk factors are described in the earnings release filed this morning and in a more fully detailed note under Risk Factors filed in the company's annual report on 10-K and 10-Q and other documents that the company has filed with the SEC. In addition, please note that the date of this conference call is May 7, 2026. Any forward-looking statements made today are based on assumptions as of this date, and the company undertakes no obligation to update these statements as a result of more information or future events. During this call, Mr. Moore and Mr. Cotner will present both GAAP and non-GAAP financial measures. A reconciliation and explanation of adjustments and other considerations of the company's non-GAAP measures to the most comparable GAAP measures is available in the Gogo's first quarter earnings release. The call is being webcast and available at ir.gogoair.com. The earnings release is also available on the website. After management comments, Mr. Moore and Mr. Cotner will host a Q&A session with the financial community only. I'll now turn the call over to Mr. Moore. Christopher Moore: Thank you, and good morning. The defining theme of the first quarter has been the deliberate transition of our legacy base services in air-to-ground and global satellite services into our next-generation technology portfolio. Consistent with prior earnings calls, I will focus on the continued demonstratable progress made across the compelling new product portfolio. These include Gogo Galileo with two models, HDX and FDX, both of which are providing game-changing increases in capacity, functionality, speed and global consistency as well as our 5G rollout and our existing GEO offerings. We are making steady progress on shipments, installations and early activations across both 5G and Gogo Galileo. I will also highlight our recent fleet wins and long-term growth prospects from our military and government customer base. We believe these next-generation products are not only enhancing the value we deliver to existing customers, but also expanding our addressable market and creating a reoccurring revenue stream that sets the stage for free cash flow growth and long-term strategic value in the future. Let's start by reviewing Gogo Galileo, our global low earth orbit or LEO service in which we have two products, HDX and FDX and where we continue to see encouraging progress. HDX serves as our entry point LEO solution, purpose-built for smaller aircraft, while FDX extends that capability to mid- and large cabin aircraft with higher performance connectivity. And together, they position Galileo as a scalable full fleet solution spanning the breadth of our customer base globally. Our Q1 shipments were largely in line with what we projected. We shipped 92 units in the quarter, including 82 HDX and 10 FDX. This brings our total number of LEO terminals shipped to 410 units since launch and across 35 commercial supplemental type certificates or STCs. Our 35 STCs cover a total addressable market of approximately 7,000 aircraft. We have 14 additional STCs underway to be completed in the next few quarters, addressing another 1,500 aircraft for a total of 8,500 aircraft. Building on this progress, I want to highlight some significant fleet wins for our Gogo Galileo offering. VistaJet is rolling out Gogo Galileo across its fleet with approximately 100 aircraft currently in scope as part of the broader plan to equip more than 270 aircraft globally. Installations began in Europe and are now expanding into the U.S. with a steady cadence of roughly 1 aircraft every 9 days, supported by continued STC progress. Wheels Up, another significant fleet win is also rolling out Galileo across its 80-plus aircraft in coordination with its fleet modernization strategy. Finally, we plan to have fully rolled out the committed aircraft with NetJets Europe in the first half of 2026, which currently make up half of our Galileo units online and have also started installations with NetJets North America. We remain confident with our Galileo projections given the strong pipeline, which is demonstrated with the rollout at major fleet operators. We expect a great ramp of shipments as important installations at multiple OEMs are expected to start in the second half of the year with Galileo becoming a line fit option. Turning to our air-to-ground or ATG network. We are seeing significant momentum with our 5G rollout. Even though customers have been waiting a long time for 5G, we're seeing strong enthusiasm for the service. We sold an all-time record of 511 air-to-ground units this quarter, of which 52 were 5G, and we anticipate a very robust rollout throughout the rest of the year with units online ramping in late Q3 and Q4. We have a very robust total pipeline of over 500 units. In terms of our legacy products, we reported record C1 conversions of 254 in the first quarter. This momentum reflects a growing wave of customers upgrading to C1 to ensure a seamless transition from our EVDO network to our LTE network. Additionally, I'm also happy to announce that we've secured an extension from the FCC regarding our classic product migration with the program completion deadline now extended to November 8, 2026. Under the FCC reimbursement program, we've also allocated our full approved amount of approximately $334 million to cover the cost of removing and replacing covered foreign equipment across the U.S. network and ATG aircraft. We believe this gives us the necessary flexibility to transition our customers from our classic service to our C1 and AVANCE products, giving them the room they need to operate seamlessly between the old service and the new and adding robustness to our overall 5G and LTE rollout. We're also seeing strong support from our MRO and OEM partners in the network transition, including Duncan, who is outfitting their demonstration aircraft with 5G as well as Textron, who is updating all of their STCs in the quarter. We are getting more customers exposed to our exciting new 5G network, which will continue to improve, especially with the new LTE network, which we expect to be fully operational by the end of 2026. Finally, let's now turn our attention to our Geostationary Earth Orbit or GEO business. GEO units online declined by 15 in the quarter, a moderate reduction from the net reduction of 22 we saw in Q4, reflecting continued resilience in our installed base and demonstrating the strength of our OEM partnerships. Looking across the balance of the year, we do expect some attrition in our GEO fleet, driven by broader market evolution towards next-generation LEO and hybrid satellite solutions. and we are closely monitoring ARPU dynamics within our customer base. We continue to view GEO as a strategically valuable component of our network offering, particularly for customers whose mission profiles benefit from the global coverage and redundancy where LEO has regulatory restrictions and proven reliability and accessibility of geostationary networks. As recently announced, our Plain Simple Ku-band platform continued to gain traction in the first quarter across both commercial and military end markets. AirX selected our Plain Simple Ku-band solution to upgrade its Challenger 850 fleet. The selection was driven by the simplicity of installation and our ability to provide a fully integrated end-to-end connectivity solution for a high utilization global fleet. We were also pleased to receive U.S. Air Force Mobility Command approval to offer our Plain Simple Ku-band tail-mount. -- on the C-130 platform, opening access to a fleet of more than 1,000 aircraft and representing a meaningful new avenue of growth for our GEO franchise within the military and government vertical. I now want to spend some time on our important military and government end market in which we see significant expansion and growth for Gogo. Military and government service revenue increased by 7% sequentially compared to the fourth quarter of 2025, marked the second consecutive quarter of growth. Geopolitical uncertainty and a focus on sovereign communication requirements are creating a sustained need for secure, reliable connectivity and our network military and government offerings have proven to be well positioned to meet that demand in an unpenetrated market. As a result, we are seeing a distinct rise in communication spending that extends well beyond the United States and NATO as global governments actively invest to modernize their secure and airborne networks. During the quarter, we secured several contracts, the first being with the National Oceanic and Atmospheric Administration, or NOAA, totaling more than $8 million over a 5-year period. This represents a meaningful addition to our long-term backlog and a strong endorsement of our network-neutral platform's reliability for mission-critical applications. We also secured business with a U.S. civil government customer worth over $3 million for Galileo and 5G on their small to midsized airframes. We expanded further into the growing global UAV market with customer wins for both GEO and LEO services for border protection and surveillance with major drone manufacturers anticipated to deliver over $15 million in revenue over the contractual periods. Another major milestone in the quarter also demonstrated the importance of avoiding vendor lock to OEMs as we adapted the HDX so it can be fitted under an existing STC and the Escape hatch for a major airframe OEM for European deployment. Building on the growth we've delivered over consecutive quarters within our military and government end market, we are seeing high demand for our existing services driven by ongoing conflict in the Middle East, where the operational environment is also accelerating the cadence of adoption for next-generation communication systems across our global military customer base. The U.S. government can access our technologies quickly because of our blanket purchase agreement, which serves the U.S. Department of War. Outside the U.S., our partnerships with leading aerospace integrators and OEMs continue to deliver with strong demand for Galileo from international government customers. Taken together, this momentum has meaningfully strengthened our competitive position in the military and government end market for the long term. An important point to mention is that the following sunsetting of our legacy EVDO network, Gogo will operate the only fully U.S.-based data sovereign ATG network. Our data originates in the U.S., lands in the U.S. and is entirely protected within the U.S., which makes our offering more appealing than our competitors. This transition away from EVDO, which is expected to open up new opportunities since the EVDO hardware utilize foreign components that lock us out of certain opportunities due to national security requirements. Before I turn the call over to Zach, I want to highlight a few financial themes that his remarks will detail. The first is that our product portfolio shift is expected to ultimately increase the durability and resilience of our revenue as customers made the significant capital commitment to install these next-generation products on their aircraft as well as diversify our revenue across multiple connectivity solutions and mission profiles. Secondly, the expansion of our military and government business, which is based on longer contracts compared to shorter-term business aviation contracts should add to this revenue as heightened military and government activity continues. Lastly, our top capital allocation priority in the near term is to aggressively pay down debt. I will now turn the call over to Zach to walk through the Q1 numbers. Zachary Cotner: Thanks, Chris, and good morning, everyone. Our first quarter performance met our expectations as we built upon our strong finish to 2025. The quarter was driven by C1 and 5G demand, positive Galileo momentum, along with sustained growth in our military and government service revenue. This performance helped balance anticipated service revenue softness as we navigate ATG aircraft deactivations. Gogo's total revenue for the quarter was $226.3 million, down just 2% compared to both Q1 2025 and Q4 2025. Service revenue was $187.7 million, down 5% year-over-year and 2% sequentially. Total equipment revenue showed continued strength at $38.6 million, an increase of 22% compared to Q1 2025 and flat sequentially. Sustained activity with record C1 shipments and increasing adoption of our 5G-ready AVANCE LX5 platform for total ATG equipment sold of 511, up 8% compared to Q4 2025. We sold 184 AVANCE units, a 5% increase compared to Q4 and 327 C1 units, an increase of 10% sequentially, bringing our cumulative C1 units sold to 1,063. Gogo C1 solution is a simple box swap designed to allow connectivity for classic ATG customers on Gogo's new LTE network, which is expected to come online later in 2026. Galileo equipment shipments totaled 92 for the quarter, bringing our cumulative Galileo shipments to 410. Turning to our aircraft online. Total ATG AOL of 6,116 decreased 11% compared to the prior year quarter and 4% sequentially for the reasons Chris outlined in his comments. Advanced AOL now comprises 79% of our total ATG aircraft online and average monthly service revenue per ATG aircraft online, or ARPA, was $3,351, a 3% decrease compared to Q1 2025 and flat sequentially. Broadband GEO AOL increased 2% year-over-year to 1,306 but decreased 15 units from Q4 2025, largely due to aircraft sales in the quarter. Moving to our bottom line. Net income for the quarter was $13.1 million, a significant increase on a sequential basis. In Q1, net income benefited from 3 noncash items: first, a $4.9 million pretax reduction to the SATCOM direct earnout accrual; second, the nonrecurrence of a $10 million litigation accrual that occurred in Q4; and third, a $4 million pretax charge to reflect the change in the fair value of the convertible note that also occurred in the prior quarter. Adjusted EBITDA was $53.3 million in the quarter, a 14% decrease year-over-year, but a 41% increase on a sequential basis. Q1 2026 adjusted EBITDA includes $6.1 million of litigation expenses versus $8.4 million in Q4. The sequential increase in adjusted EBITDA of $15.5 million was primarily driven by improvement in equipment profit resulting from a favorable product mix and lower inventory reserves as well as a reduction in ED&D expenses. Year-over-year, the 14% adjusted EBITDA decrease of $8.7 million was largely driven by a drop in service profit stemming from declining ATG revenues. However, we partially mitigated this impact through disciplined OpEx management and strong execution on the synergy front with annualized synergies reaching $40 million, exceeding our prior targets. In addition, ED&D expenses benefited from the reimbursement of costs related to the FCC reimbursement program. Turning to our strategic initiatives. In Q1, our 5G program incurred $0.2 million in operating expenses and $1.4 million in CapEx. In addition, our Galileo project spend included $0.8 million in OpEx. Regarding our efforts to reduce our debt and improve our leverage profile, which, as Chris mentioned, remains our top capital allocation priority, we made a $21.1 million principal payment on the HPS term loan facility in April. This payment was executed as an excess cash flow or ECF sweep. Turning to our net debt leverage ratio. We ended the first quarter at 3.6x. Based on our 2026 forecast, we anticipate this leverage ratio will increase slightly in Q2 and Q3 before dipping back within our target range by the fourth quarter. Moving to free cash flow and the balance sheet. Net cash used in operating activities was $7.2 million and free cash flow was negative $19.2 million for the quarter, down from $30 million in Q1 2025 and down from negative $4.9 million in Q4. Our cash story this quarter was heavily influenced by a $14 million cash outflow related to our annual bonus payout as well as a reduction in accounts payable associated with our inventory ramp related to the Galileo product launches. We ended the quarter with $103.5 million in cash and cash equivalents. In our earnings release this morning, we reiterated our 2026 financial guidance. We project total revenue in the range of $905 million to $945 million. We expect adjusted EBITDA in the range of $198 million to $218 million, which includes $3 million in strategic investments and $8 million of ongoing litigation expense. Finally, we anticipate free cash flow in the range of $90 million to $110 million. This implies a 12% year-over-year growth rate at the midpoint, driven by the winding down of new product investment, sustained cost synergies and an expected strong ramp of new product revenue. Our guidance includes $30 million slated for strategic investments, net of any FCC reimbursements and net capital expenditures of $20 million, assuming $45 million in FCC reimbursement. To summarize, our first quarter results reflect continued strong execution, record ATG shipments and a 41% sequential increase in adjusted EBITDA. We are managing through near-term pressures in legacy service revenue while investing behind the two initiatives that we believe will define our next phase of growth, our 5G network and Galileo Broadband. We also repaid $21.1 million on our HPS loan in April, further strengthening our balance sheet. Together, these actions should expand our addressable market and position us to deliver long-term value to shareholders. I want to express my continued gratitude to the Gogo team for their hard work in driving our transformation and their commitment to outstanding customer service. Operator, this concludes our prepared remarks. Please open the queue for questions. Operator: [Operator Instructions] Our first question comes from Scott Searle with ROTH Capital Partners. Scott Searle: Nice to see you guys reiterating the outlook for 2026. Chris, maybe to start from a high level. It seems like there are a lot of shipments going out the door as it relates to Galileo and 5G, yet AOL has been slow to come online. I'm wondering if you could talk us through the comfort that you have in terms of that ramping up into the second half of this year in terms of dealer channel support, STCs, which seem like they're very much on track. And just maybe help us understand the competitive landscape out there, particularly as it relates to Starlink? Christopher Moore: It's going to take time. We've got the building blocks in place. We have the real estate. Our equipment revenue is up 22% year-on-year. We've got record ATG unit sales. Galileo AOL grew 50% sequentially and adjusted EBITDA grew 41%. And then if you look at the current shipments on Galileo, then most of that's with MROs at the moment. And really, as we've stated in previous calls, the OEMs come online really in Q3, Q4, and then you see that ramp going from there. So actually, we're really excited about what we're seeing with Galileo, and it's going to plan at the moment. Regarding competition, we're not really seeing any changes. I think the good news is this is probably the fastest product we've ever launched and the customer confidence is kind of showing with our results. Scott Searle: And Chris, I'm sorry, my phone blocked out for the 5G commentary. I'm wondering if you could just reiterate that quickly. Christopher Moore: Yes. I mean if you look on equipment revenue is up 22%. And then we've got year-on-year record ATG unit sales as well, which we said on the call. So if you look at 5G from a standing start, the pipeline is over 500, and it's a really solid start. We're seeing already partners like Textron already completing all their STCs. We've got good product shipments, good reliability. So we're very, very confident about 5G. It's actually a really good start to the product. Scott Searle: And then quick two follow-ups. Maybe just in terms of the classic conversion, what you're ultimately hoping that looks like by the end of this year? I know you got an extension there, but what's -- what do you think the attrition is versus retention and conversion over? And then lastly, just as it relates to the traditional SATCOM business, I'm wondering, given the growth that you're seeing in the military opportunities, when -- what's the long-term growth opportunity when you look at the traditional SATCOM business? And how much do you expect military to comprise of that as we start to look out 2 years to 3 years? Christopher Moore: Yes, that's a lot. All right. So let me start with kind of air-to-ground. If you look at record 254 C1 conversions this quarter and 1,058 overall, and our AVANCE base grew 3% year-over-year. So I think the tendency is just to focus on the quarter on suspensions, deactivations on the classic customers. They're not all deactivations. Some of those are suspension. So we expect some to come back. We, in the previous call, said that we expect to lose like 1,000 customers over the year. I think that's kind of holding. I think the big thing there, though, is the transition that we're showing with the new products is all of our customers have somewhere to go with a broadband experience, which they didn't have previously, which is pretty exciting. And we continue to believe the ATG portfolio kind of will be a very, very important part of our business moving forward. Going on to the Milgov business, I think just what we're seeing with the wins that we discussed today is kind of a very robust business unit that's growing, which is really exciting. And the value of the commercial-based products that we're putting into that, lower cost support global capability, robust cybersecurity and then the drone market, we see that as a really exciting area for the business to grow into and service revenue up 14% year-on-year, 7% from the last quarter. So we're really excited about that revenue segment for us. Operator: Our next question comes from Justin Lang with Morgan Stanley. This is Gaby Knafelman on for Justin Lang. Gaby Knafelman: You had mentioned that NetJets Europe will fully roll out Galileo in the first half of the year. I'm curious if you could give us a sense of expectations for the overall Galileo domestic international split through the end of the year? Christopher Moore: Yes, that's a good question. So let me just clarify a little bit on NetJets. I think there's a lot of misunderstanding around our NetJet relationship. And I want to clarify this is really going very well. If you look at the confidence in the broader fleet relationships along with NetJets, we're completing and rolling out NetJets Europe. We're starting to roll out NetJets North America. And we're also starting to see real big traction with VistaJet aiming for 270-plus aircraft, Wheels Up in their transformation with new aircraft, Luxe Aviation, Avcon Jet, AirX. So the confidence in the fleet operators, I think, speaks volumes for the business. And that 60-40 split is 60% North America, 40% overseas is really exciting for the business because previous to the Satcom Direct acquisition, Gogo was predominantly just a U.S. supplier. So we're seeing that kind of international expansion, confidence in the fleet operators and NetJets is still in the fold with Gogo, and we're excited about rolling out with them. Gaby Knafelman: Got it. Super helpful. And I'm just curious if you could comment on how GEO AOL figures this quarter compared against your expectations and whether or not you're thinking any differently at all about some of the pressures you had flagged around GEO coming into the year? Zachary Cotner: Yes. So effectively, GEO has held up exactly as we thought it would. The 15 units is sort of what we thought. I think the other kind of positive sign is, as we telegraphed in Q4, the minor drop was largely related to aircraft sales. I can tell you that's the same trend in Q1. So our sales guys are beating down the door to try to find the new owners and win those back. So I think GEO continues to be robust. The ARPA is down a little bit, but again, that's what we thought. So I think we've got a pretty good handle on GEO as of now. Operator: This concludes today's earnings call. Thank you for your participation in the conference. You may now disconnect.
Operator: Good day, and thank you for standing by, and welcome to the Ispire Technology Q3 2026 Earnings Conference Call. [Operator Instructions] Please note that today's event is being recorded. I would now like to turn the conference over to James Carbonara with Hayden Investor Relations. Please go ahead. James Carbonara: Good afternoon, and welcome to Ispire Technology's fiscal third quarter 2026 earnings conference call. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in its announcement are forward-looking statements. Forward-looking statements are based on estimates and assumptions made by the company in terms of its experience and its perception of historical trends, current conditions, and expected future developments as well as other factors that the company believes are relevant. These forward-looking statements involve known and unknown uncertainties, and many factors could cause the company's actual results or performance to differ materially from those expressed or implied by the forward-looking statements. Further information regarding this and other risk factors are included in the company's filings with the SEC. The company undertakes no obligation to update forward-looking statements to reflect subsequent or current events or circumstances or changes in expectations, except as may be required by law. I will now turn the call over to Michael Wang, Co-Chief Executive Officer of Ispire Technology. Michael, you may begin. Michael Wang: Thank you, operator, and thank you all for joining us. This quarter marked a turning point for Ispire. Our business has stabilized. Our operating model is sharper and more disciplined, and we ended the quarter with $18 million in cash, up $468,000 sequentially. This sequential cash growth is one of the clearest signs of progress in the quarter. It demonstrates the improving financial control and a more focused operating posture and reinforces our confidence in becoming cash flow positive in the second half of this calendar year 2026. The transition we set out to make is behind us. Now we are executing against a phased growth roadmap, multiple catalysts, each tied to billion-dollar markets where we have clear competitive advantages. The first and most immediate of these is Malaysia. Our Malaysia manufacturing platform is live today, and we believe this is one of the most strategically important developments in the company's history. In addition, Malaysia provides us with an estimated 25% tariff advantage over China, giving us both economic and strategic leverage as we pursue opportunities in the $73 billion global vape market. This is both a manufacturing milestone and a structural advantage that we believe can support margin improvement, customer acquisition, and long-term market relevance. Second, plans are underway to launch our Vapor ODM initiative in July. This initiative will initially serve small and mid-sized brands with larger brand opportunities targeted for 2027. We see this as another practical commercialization pathway that can convert our manufacturing, design, and regulatory capabilities into higher-value customer relationships. Beyond these near-term drivers, we continue to build long-duration optionality through differentiated technology. Through IKE Tech, we believe our Age-Gating platform has the potential to help unlock approximately $50 billion to $70 billion U.S. flavored vape market, a market that remains effectively inaccessible today under the current framework. In parallel, our G-Mesh Glass Technology is growing interest in a $24 billion plus legal global market, including licensing discussions with major tobacco participants. These are proprietary assets that could materially expand our strategic and financial opportunities beginning in 2027 and beyond. The accomplishments we achieved during the fiscal third quarter are clear. We strengthened liquidity, improved operating discipline, and advanced the roadmap with multiple high-value catalysts. We believe that combination gives Ispire a stronger foundation for both profitability and the long-term shareholder value creation as we move forward. I will now turn the call over to Jie for a more detailed review of our financial results. Jie? Jie Yu: Thank you, Michael. For the fiscal third quarter ended March 31, 2026, Ispire reported revenue of $18.7 million compared with $26.2 million in the third quarter of fiscal 2025 and $20.3 million in the prior quarter. The modest sequential decline primarily reflected seasonal factory downtime associated with Chinese New Year and represents the most resilient second to third quarter performance pattern in our history. Gross profit for the quarter was $2 million and gross margin was 10.7%. Importantly, gross profit was impacted by approximately $2.2 million of one-time product returns from legacy cannabis customer with whom we have ceased doing business. We view those returns as part of final cleanup associated with our strategic repositioning, not representative of the normalized earnings profile of the go-forward business. In that sense, we view this quarter as one in which reported margin observed a legacy headwind, while the underlying business mix continues moving in an improved direction. On the cost side, we continue to make meaningful progress. Total operating expenses, excluding credit loss were $5.9 million, down 36% year-over-year from $9.3 million, and down 3.7% sequentially from $6.1 million in the December quarter. This performance reflects the impact of sustained cost discipline and a more focused operating structure. It also reinforced our belief that profitability is increasing a matter of near-term execution and scale. Credit loss in the quarter was $5.6 million, down roughly $500,000 year-over-year. This improvement is another indication that the financial cleanup tied to legacy activity is moving in the right direction. And we are committed to continued discipline around receivables and working capital management. Net loss for the quarter was $9.5 million compared with $10.9 million in the year ago period and $6.6 million in the prior quarter. While the quarter still reflects transition-related pressure, the broader trend is encouraging. We have materially reduced our cost base while positioning the company for higher quality revenue streams and better operating leverage over time. We ended the quarter with $18 million in cash, an increase of approximately $468,000 sequentially. This sequential cash growth is a meaningful achievement in the context of an ongoing repositioning. It strengthens our balance sheet, support our near-term growth investments, and underpin our confidence in reaching cash flow positive performance in the second half of this calendar year 2026. From a financial perspective, the foundation for improved profitability has been built. The company is leaner, more disciplined, and better aligned with high-value growth markets. I will now turn the call back to Michael. Michael Wang: Thank you. This quarter marks the beginning of a new phase for Ispire. The transition in our business reflects reduced exposure to low-quality revenue and is now about converting that reset into a stronger earnings model, a stronger cash profile, and a stronger strategic position in global nicotine and compliance technology markets. Our priorities are clear. First, we are focused on profitability and the path to becoming cash flow positive in the second half of this calendar year 2026. We intend to build on the momentum we have established this quarter through operating discipline, working capital management and the ramp of new revenue catalysts. Second, we are focused on winning from a position of strategic advantage. Our licensed manufacturing presence in Malaysia gives us a highly differentiated foothold in a critical geography with regulatory exclusivity and tariff advantages that we believe can translate into both commercial and financial benefits over time. Malaysia is a platform for expansion. And finally, we are building a company with multiple avenues for value creation, near-term scale commercialization through Vapor ODM, and longer-term upside through Age-Gating and G-Mesh. Together, these initiatives create a diversified roadmap that we believe is unusual in our industry and compelling from an investor perspective. Thank you for your time and continued support. Operator, please open the line for questions. Operator: [Operator Instructions] And today's first question comes from Nick Anderson with ROTH Capital Partners. Nicholas Anderson: Congrats on the quarter. First for me, just on the vape news and the recent flavored approval, there was discussion around the digital leash software, which maybe was the reason the FDA viewed that application favorably. I guess 2 questions off that. Do you believe proximity-based restrictions will be the path the FDA takes? And if so, do you have the capability to incorporate that tech into your -- do you have the ability to incorporate that into your tech if you don't have it already? Michael Wang: Nick, thank you. The first part of the question, actually, I will go straight to the second part. Yes, we do have that built into our solution. And from day 1, that was the key differentiation between our technology and other solutions out there. So more importantly, our platform is now moving out of the old app model more into a platform model. So this, again, reinforced the continuous authentication capabilities. And more importantly, because it's a platform, we would allow for brands to customize and set their own, I guess, performance parameter, you can say, really brand -- from brand to brand, we provide that capability because we also want to make sure brands in dealing with different regulations across the world, they can set the parameters differently country by country depending on regulations, too. So the simple answer is, yes, we have the continuous authentication capability, and it's in our solution. And the advantage really is, so many solutions out there, especially solutions developed years ago tend to be either having the device turned on after initial age verification and then stay on forever, which is, of course, highly undesirable from a regulatory point of view or they would have a periodic reauthentication or verification. That also creates gaps where potential misuse of the device could happen. So that's why from day 1, our solution was continuous authentication and that proved to be very important to regulators, not only with the FDA, but outside the U.S. as well. Nick, I hope I answered your question. Nicholas Anderson: Yes, that's perfect and very encouraging. Second for me, just on partnerships. This PMTA announcement also validated Age-Gating positioning and getting flavors to market. I know this is maybe too early, but what have you seen with discussions with potential partners in terms of potentially accelerating off of this approval? What has changed in the last few days in terms of the clients you're talking to? Michael Wang: You're right. Indeed, in the last 48 hours, up to 72 hours, the ground was moving per se. So that's really encouraging to us. President Trump's pressure on the FDA, obviously, went a long way for the industry. And the immediate approval of the 4 additional SKUs for glass sent a strong signal to the industry. So I think all the key players in the industry are familiar with the pros and cons of different solutions. Collectively, we have shared consensus that our solution is most advanced versus other technologies. So with the news over the last couple of days, certainly, we got accelerated existing conversations with brands. In a couple of situations we actually have even moved one step further discussing using our technology in some of their existing PMTAs through a so-called supplemental PMTA to accelerate the approval of their flavored products. So it's clear the industry recognize the flood gate is opening and Age-Gating is the only way to get flavored approval. And lastly, with everybody's understanding for our solution being far ahead of competition. So we are absolutely getting -- I would say, yesterday, put it this way, I worked for 17 hours. That's much longer than my typical day of 12 hours. So it says a lot about the effort we put into entertaining those conversations. Nicholas Anderson: That's great to hear. If I could squeeze just one more in on the state-by-state structures. With regulators becoming more constructive around vape, how do you anticipate states will respond? Several markets still have banned flavors, some have banned foreign imports. How do you see the state landscape changing as potentially more flavors come to market, in the legal market? Michael Wang: I think from a flavor ban point of view, those, I think, 5, 6 states literally are aligned with FDA's flavor ban. So they are just reinforcing these bans accordingly. So from that point of view, there is consistency. I certainly hope with FDA feeling comfortable with Age-Gating Technology and start approving flavors, those states would align as well, would support approved flavors. But of course, we all know the general flavor ban in place right now is really trying to minimize the impact of black market from selling devices to underaged users. So that was a real goal by those states. So I think from that point of view, there is a perfect alignment with the FDA. I certainly hope the state would follow FDA's lead in terms of supporting approved flavors. But regarding other state-by-state situation, Texas, for example, is driving toward banning China-made vaping devices. So that is absolutely supporting our strategy of producing our product in Malaysia. So I think that's a plus for us. But some other state-by-state restrictions, I think, involved in probably banning disposables. We all know disposables are not environmentally friendly approach to vaping. So I think the industry is moving further, further into pod systems versus disposable. And California, I think, as we know, ban online sales to further protect consumers. So I don't think that is going to change. That is the right policy because online sales is so hard to regulate and verify, certify. But ultimately, the true solution in protecting under-aged consumers or people and to protect adult consumers from using risky dangerous product is by FDA approving flavored devices with age-gating built in. So I think I'm happy for the industry, knowing to us devices were approved, and this is a new beginning for the industry. I'm happy for consumers. And certainly, this is a major win for the regulators as well. Instead of doing nothing for flavored products, finally, this is the right thing to do, using technology here to solve the problem. Nick, that's my answer. Nicholas Anderson: Congrats. Operator: And this concludes today's question-and-answer session. I would now like to turn the conference back over to Michael Wang for any closing remarks. Michael Wang: Thank you, operator. Obviously, this quarter is a low quarter in terms of revenue for us, but it's not a surprise. Q3 has always been a low quarter due to the Chinese New Year shutdown of the factories. But generally, from Q2 to Q3, we saw over 30% drop in business. For this time, it's only 8% drop. That's really, as Jie indicated, the lowest drop in history. So -- but I do believe from top line and bottom line point of view, Q3 was a low point. And we feel very strongly, as Jie stated, our foundation is set solidly. We have a lot of work to do, certainly to prove to investors that we're over the hump and we are now on an upward trajectory. So I look forward to sharing more performance and developments with investors in the coming months. Certainly, we are here to show what we can accomplish this current quarter and the September quarter. I hope there will be a trend to regain some of the investors' trust and confidence, and we'll never look back again. So thanks again to everybody on today's call. This concludes it all. Thank you. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Telephone and Data Systems, Inc. First Quarter 2026 Operating Results Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press 9 to raise your hand and 6 to unmute when prompted. I will now hand the conference over to John Toomey, Treasurer and Vice President, Corporate Relations. Please go ahead. John Toomey: Good morning, and thank you for joining us. The presentation we prepared to accompany our comments this morning can be found on the Investor Relations sections of the Telephone and Data Systems, Inc. and Array websites. With me today in offering prepared comments are, on behalf of Telephone and Data Systems, Inc., Walter C.D. Carlson, President and CEO, and Vicki L. Villacrez, Executive Vice President and Chief Financial Officer. On behalf of TDS Telecom, Kenneth Dixon, President and CEO of TDS Telecom, and Christopher “Chris” Bautfeldt, Vice President, Financial Analysis and Strategic Planning. I will now turn the call over to Walter. Walter C.D. Carlson: Thank you, John, and good morning, everyone. Turning to slide three, this morning Telephone and Data Systems, Inc. announced a proposal to acquire the remaining shares of Array not currently owned by Telephone and Data Systems, Inc. in an all‑stock transaction. As Telephone and Data Systems, Inc. continues its transformation, this proposal is the next step in executing our strategy, simplifying our corporate structure, and enhancing our ability to invest in targeted areas of growth. Array has successfully completed its transition into a tower‑focused company with strong fundamentals, and we believe this transaction will position the combined company for long‑term growth. By bringing Array fully under Telephone and Data Systems, Inc.’s ownership, Array’s stockholders would retain a significant interest in the tower business while gaining exposure to Telephone and Data Systems, Inc.’s growing fiber business. Under the terms of the proposal, Telephone and Data Systems, Inc. would acquire all of the outstanding common shares of Array that Telephone and Data Systems, Inc. does not currently own by way of a merger in which each Array common share not owned by Telephone and Data Systems, Inc. would be exchanged for 0.86 of a Telephone and Data Systems, Inc. common share. This exchange ratio assumes that the previously announced spectrum license sales identified in our offer letter will have closed prior to the closing of the transaction contemplated by Telephone and Data Systems, Inc.’s proposal, and that the Array Board, consistent with its treatment of net proceeds from prior spectrum sales, will have declared and paid dividends of $10.40 per share to Array stockholders prior to the closing. At $10.40 per share, Array would distribute approximately $900 million in net proceeds. This exchange ratio reflects an at‑market offer based on yesterday’s closing prices for Telephone and Data Systems, Inc. and Array, subject to the assumptions just described. The transaction is expected to qualify as a tax‑free reorganization for U.S. federal income tax purposes. Telephone and Data Systems, Inc. expects the transaction to eliminate duplicative corporate costs, streamline corporate governance, increase share liquidity, and strengthen the capital structure of the enterprise, providing greater flexibility to pursue strategic investments across all our businesses, including towers and fiber. As noted in this morning’s press release, the proposal is subject to review and recommendation by a special committee of Array’s disinterested directors and the approval of the majority of the disinterested shareholders of Array based on votes cast. It would also require approval of Telephone and Data Systems, Inc.’s shareholders and the satisfaction of customary closing conditions. Telephone and Data Systems, Inc. does not intend to sell or otherwise transfer its interest in Array and will not entertain any third‑party offers for Array or its assets in lieu of this proposal. Telephone and Data Systems, Inc. continues to support Array’s previously disclosed intention to opportunistically monetize its remaining unsold wireless spectrum. Telephone and Data Systems, Inc. looks forward to working constructively with the Array Board’s special committee as they evaluate this proposal. Beyond what I just disclosed, and the information included in our press release and proposal letter to Array, we are not going to comment further on or take questions regarding the offer on today’s call. With that, let us turn to slide three. The enterprise is making good progress on its 2026 priorities. Our focus remains on advancing our strategy with financial and operational discipline. As I just mentioned, the proposal announced this morning will aid in strengthening Telephone and Data Systems, Inc.’s corporate and capital structure, and we look forward to working with Array’s special committee. Both business units continue to make progress toward their operational goals. TDS Telecom continued to add fiber addresses and customers in the quarter. Array is off to a strong start in 2026 and is making good progress growing tower tenancy. In the arena of spectrum, Array closed on a small transaction with T‑Mobile earlier this week and expects the remaining announced T‑Mobile and Verizon spectrum sales to close in the second or third quarter, subject to regulatory approval and other customary conditions. I am pleased with the progress each business unit is making and with the efforts we have underway to strengthen our culture as we go through this period of transformation. I would like to personally thank every associate across the enterprise for their continued commitment and contribution. I will now turn the call over to Vicki. Vicki L. Villacrez: Thank you, Walter, and good morning, everyone. Slide four updates you on our capital allocation priorities. TDS Telecom continues to make nice progress toward achieving its long‑term objective of reaching 2.1 million marketable fiber service addresses, delivering 40 thousand in the quarter. Ken and Chris will discuss more about the opportunities and momentum we are seeing in that space in a moment. We continue to evaluate M&A opportunities in a financially disciplined, accretive, business‑case‑driven fashion. In mid‑April, we announced an agreement to acquire Granite State Communications. As I have communicated in the past, we are primarily focused on small to medium‑sized opportunities that are already fibered up or have an accretive economic path to all fiber and support our clustering strategy. Granite is just like that: fully fibered with over 11 thousand service addresses that are adjacent to several of our existing markets in New Hampshire. We are excited to welcome these associates and customers into the Telephone and Data Systems, Inc. family and expect the transaction to close in the third quarter, subject to regulatory approval. Finally, in the area of shareholder return in the form of Telephone and Data Systems, Inc. share buybacks, we were not in the market during the quarter. At the end of the first quarter, we had a $520 million authorization for Telephone and Data Systems, Inc. share buybacks available, and we remain committed to executing on that program. Across all three priorities, the company intends to be disciplined, balancing the needs of the business and evaluating future returns along with market and other conditions as we move forward. Thank you. I will now turn the call over to Kenneth Dixon to discuss Telephone and Data Systems, Inc.’s fiber business. Kenneth Dixon: Thank you, Vicki, and good morning, everyone. At TDS Telecom, 2026 is focused on executing our fiber growth plan: building fiber addresses, driving fiber sales, and continuing to transform our operations. This quarter, we made progress across all three priorities as we scale our fiber network and advance our long‑term strategy. As shown on slide six, our fiber builds are off to a good start. We delivered 40 thousand marketable fiber service addresses in the first quarter. This is the highest first‑quarter total in our company’s history and nearly 3x our delivery in 2025. This performance reflects both effective execution and construction capacity, including our highest‑ever internal and external construction crew counts. While we are pleased with the record construction number, we still have more work to do. We continue to invest in our internal construction teams by adding headcount and upgrading tools and equipment to support increased build capacity, giving us a strategic advantage. We believe these investments provide greater control over our execution and improve long‑term efficiency. In addition, we have a robust pipeline of addresses currently under construction, positioning us very well for the spring and summer build season. This pipeline includes a mix of addresses from our fiber expansion into new areas as well as fiber upgrades in our existing markets through our Fiber Deeper program and the federal A‑CAM program. As a reminder, the A‑CAM program provides federal support that enables us to bring fiber to approximately 300 thousand service addresses, including those along the route where it would otherwise not be economical, helping to drive copper out of our network. Looking at sales, we ended the quarter with approximately 11 thousand fiber net adds, up 32% year over year. As we continue to scale our fiber footprint, we remain focused on converting new service addresses into customers and improving the overall customer experience. During the quarter, we strengthened leadership in key sales and customer‑experience roles to support these priorities. Our operational transformation is centered on efficiency, improving the customer experience, and simplification. We continue to make progress modernizing our systems and remain on track with our transformation roadmap. I am happy to announce that we have now completed the billing conversion in our cable markets and have also introduced a new Field Force platform to support our technicians. These updates simplify our back‑office processes and provide an improved customer experience. We are now able to launch multi‑gig speeds in our cable footprint. These areas are some of the best markets in the country, and we continue to see great opportunity here, so expect more to come. Finally, as Vicki noted, in mid‑April we signed an agreement to acquire a fiber‑based telecommunications business in New Hampshire. The transaction adds over 11 thousand fiber addresses that are contiguous with existing TDS markets and supports our clustering strategy. Approximately 30 associates will join the TDS team. We are excited about the opportunity to continue to deliver excellent service in this area, and we look forward to closing this transaction in the third quarter, subject to regulatory approval. Turning to slide seven, our long‑term goals reflect our continued focus on executing our growth strategy that delivers scale, speed, and long‑term value. With the delivery of 40 thousand fiber addresses in the quarter, we now serve approximately 1.1 million fiber addresses representing 58% of our total footprint, with 79% of addresses capable of gig speeds. While there is more work ahead, the progress we are making reinforces our confidence in the path forward as we continue transforming into a fiber‑centric company. I will now turn it over to Chris to walk through our first‑quarter results. Christopher “Chris” Bautfeldt: Turning to slide eight, the chart on the left shows our quarterly fiber service address delivery over the past five quarters. As Ken highlighted, our first‑quarter fiber address delivery nearly tripled year over year. This significant increase reflects the additional construction capacity we introduced last year and are continuing to scale this year. Our execution in the first quarter demonstrates the effectiveness of the strategy and the momentum we are building as we advance toward our long‑term goals. The chart on the right illustrates the continued expansion of our fiber footprint. Over the past three years, we have nearly doubled the number of fiber service addresses across our markets, demonstrating steady and meaningful progress. On slide nine, residential fiber net adds were approximately 11 thousand in the first quarter, a 32% increase compared to prior year, driven by continued footprint expansion and ongoing copper‑to‑fiber conversions. Residential fiber connections have also nearly doubled over the past three years, and we expect continued growth as we expand our fiber footprint. Turning to slide 10, the chart on the left depicts our residential revenue per connection, which increased 1% year over year. This growth reflects annual price increases offset by ongoing industry‑wide declines in video attachment rates. The chart on the right is new this quarter and breaks down total residential revenue between copper, cable, and fiber. You will see our fiber revenue is up 13% versus prior year, an uplift of approximately $11 million, which helps offset the legacy revenue stream pressures we are experiencing. In cable, revenues are down roughly 10% versus 2025. As Ken highlighted, we are increasing investment in our cable markets to stem these declines. Overall, total residential revenue declined $5 million compared to prior year; approximately $3 million of this decline is attributable to divestitures of markets that were predominantly copper‑based. We remain hyper‑focused on driving fiber revenue at a pace that is expected to more than offset legacy declines. Slide 11 summarizes our financial performance. Total operating revenues declined 3% in the quarter, or 1% excluding the impact of divestitures. This reflects continued legacy revenue‑stream pressures, partially offset by growth in fiber connections and modest improvement in revenue per connection. Cash expenses decreased 3%, driven primarily by benefits from our transformation initiatives, including lower costs for billing, circuits, and facilities. Adjusted EBITDA declined 3% in the quarter, driven largely by the revenue losses from divestitures. Capital expenditures totaled $126 million in the quarter, reflecting higher construction activity, a robust funnel of addresses under construction, and accelerated investments in our internal construction crews and equipment. Slide 12 reflects our guidance for 2026, which remains unchanged. We are projecting total Telecom revenues of $1.015 billion to $1.055 billion. Current headwinds in our copper and cable markets are guiding us toward the lower half of this range. Adjusted EBITDA guidance remains between $310 million and $350 million as we continue our transformation efforts. Capital expenditures for the year are projected to be between $550 million and $600 million to support our goal of delivering between 200 thousand and 250 thousand new fiber service addresses. Before turning over the call, I want to thank the entire TDS team for their continued execution and focus. Their efforts across fiber delivery, customer growth, and operational transformation are critical to the progress we are making toward achieving our long‑term objectives. I will now turn the call over to Anthony. Anthony Carlson: Thanks, Chris, and good morning. 2026 has got off to a busy but great start. The organization is laser‑focused on fully optimizing our tower operations and monetizing our spectrum. In the first quarter, we saw cash site‑rental revenue increase 64% over Q1 of last year, we also demonstrated sequential tower‑tenancy growth when adjusted for DISH, and we continue to move our announced spectrum transactions forward. Before I get to the details of the quarter, I want to acknowledge the Array Board’s receipt of Telephone and Data Systems, Inc.’s proposal to acquire the remaining public shares of Array. Our Board has formed a special committee of independent directors who have retained independent advisers to carefully evaluate the proposal and make a recommendation as to what is in the best interest of Array’s shareholders. Array will be providing updates as appropriate, but we will not be commenting further or taking questions regarding this proposal today. Moving along to slide sixteen, I want to provide an update regarding DISH. As previously disclosed, we received a letter from DISH Wireless in September 2025 in which DISH asserted that unforeseeable FCC actions impacted its master lease agreement with Array and, as a result, DISH believes it is relieved of its obligations under the MLA. Since early December, DISH has generally failed to make the required payments and is therefore in breach of its obligations. Array continues to take actions it deems necessary to protect its rights under the MLA. Given the ongoing nonpayment, in the first quarter, Array ceased recognizing DISH revenue, and all unpaid 2025 amounts have now been fully reserved. Accordingly, our tenancy ratio no longer includes DISH colocations. When normalizing for this impact, we continue to see sequential growth in our tenancy ratio as depicted on the right, from 0.95 in Q4 2025 up to 0.96 in Q1 2026. Importantly, in Q1 we grew revenue and healthy colocation application volumes while supporting T‑Mobile in its integration. As noted on slide 17, cash site‑rental revenue in Q1 increased 55% year over year from all customers, and when normalized for DISH impact, this increase was 64%. When layering in the T‑Mobile interim site revenue, the increase was 86% year over year, or 98% when normalized for DISH. Our application volume remains robust, and coupled with our existing pipeline, will drive additional revenue growth in 2026 and beyond. Turning to slide 18, T‑Mobile has until January 2028 to finalize its 2,015 committed sites under the new MLA. We continue to anticipate 800 to 1,800 tenantless towers after the integration is completed and all interim sites are terminated. Our ground‑lease optimization work remained a priority in Q1, and we are making progress in reducing the cash burden of these negative cash‑flow assets. As noted previously, this will be a multiyear effort focused on cost avoidance, additional lease‑up, evaluating long‑term command, and decommissioning in situations where it makes sense, a process we have already begun on a subset of sites with no path to economic viability. This approach allows us to thoughtfully assess all potential outcomes for the tenantless tower portfolio. As shown on slide 19 and presented in prior quarters, we have reached agreements to monetize roughly 70% of our spectrum holdings. As a reminder, the sale of spectrum to AT&T closed on January 13, 2026, with the Array Board declaring a $10.25 per share dividend that was paid on February 2. In Q1, the FCC approved the sale of certain 100 MHz licenses to T‑Mobile, and that transaction closed earlier this week. Additionally, the FCC approved the sale of the 600 MHz and AWS licenses to T‑Mobile and, pending closing conditions, we expect that sale to close in Q2. Verizon will close in Q2 or Q3 of this year, subject to regulatory approval and normal closing conditions. The remaining transactions with T‑Mobile are expected to close by the end of 2026, once again dependent on regulatory approval and closing conditions. We continue to pursue opportunistic monetization of our remaining spectrum, primarily C‑band. We view our C‑band spectrum as a highly compelling 5G asset with a mature ecosystem ready for carrier deployment, and with no near‑term buildout requirements, we have ample time to realize its value. Slide 20 summarizes the results of our partnership, or non‑controlling investment interests. As discussed last quarter, investment income and distributions for full‑year 2025 were impacted by several one‑time factors, including the impact of the Iowa partnership selling their wireless operations to T‑Mobile and distributions received from Verizon related to their transaction with Vertical Bridge. For Q1, equity income was elevated due to prior‑period adjustments recorded by the managers of certain investee entities. Regarding cash distributions, certain entities distribute cash only twice per year, resulting in an uneven distribution pattern throughout the year. Slide 22 summarizes Array’s financial results. Year over year, we continue to see the impact of the T‑Mobile MLA driving revenue growth. As noted last quarter, there was a prospective change in classification of property taxes and insurance from SG&A to cost of operations. As such, that is driving roughly half of the year‑over‑year increase in cost of operations. SG&A expenses continue to include costs to support the wind‑down of legacy wireless operations, but sequential quarter‑over‑quarter results are declining as planned. We expect these wind‑down expenses to persist throughout 2026, but with additional reductions over future periods. On slide 23, our guidance across all metrics—total operating revenue, adjusted EBITDA and OIBDA, and capital expenditures—is unchanged. As a reminder, our guidance ranges are wider than industry norm due to uncertainty with the T‑Mobile MLA and the timing of interim site terminations. In closing, I want to again thank Array’s associates for their continued passion and dedication to driving operational efficiencies and growth. We continue to move through our first year as a stand‑alone tower company. I will now turn the call back to Walter. Walter C.D. Carlson: Thank you, Anthony. As I noted in my opening remarks, Telephone and Data Systems, Inc. continues to make solid progress advancing our strategic priorities. Our first‑quarter execution, combined with the momentum we are seeing across the business, positions us well as we move forward into the year. I would like to again thank all of the outstanding associates across the Telephone and Data Systems, Inc. enterprise for their continued dedication and hard work in serving our customers and supporting the advancement of our business. Operator, please now open the line for questions. Operator: Thank you. We will now open the call for questions. If you would like to ask a question, please raise your hand. If you have dialed in to today’s call, please press 9 to raise your hand and 6 to unmute when prompted. Your first question comes from Richard Hamilton Prentiss with Raymond James & Associates. Richard, your line is now open. Richard Hamilton Prentiss: Good morning, everybody. You continue to be very busy. A couple of questions. On the fiber side, the TDS Telecom side, have you looked at whether there is an ability to put fiber into a REIT structure, or any desire at some point to put fiber into a REIT‑like structure to be more tax efficient? Vicki L. Villacrez: Yes, Richard, this is Vicki. I will take that one. We have looked at a number of structural options, but given where we are at today, they are just not optimal. I am not going to speculate going forward on what we may or may not do in the future, but as I think about our fiber program, we are in a really good position. We have a strong balance sheet, and we are focused on funding fiber with our cash. Richard Hamilton Prentiss: Okay. Second question, can you update us as far as the number of shares or percent ownership Telephone and Data Systems, Inc. has of Array Digital, just so we can understand exactly how many of the disinterested might be out there? Walter C.D. Carlson: Let me take that. I think the press releases that have been issued speak to that, Richard. I think 81.9% is the right rough number, and we can get back to you with precise numbers offline. Richard Hamilton Prentiss: That is great. We had some people asking; there were some Bloomberg numbers out there saying 70%. We knew it was 80‑something, so appreciate that. The last question for me, a little more strategic. I know you have been looking at maybe providing more reporting metrics on the fiber business. Any update to what you think you could provide to help people understand what is happening with the fiber business—any cohort analysis or trend lines to help us look at the value of that business as it is going through a capital spending cycle and some EBITDA pressure? Is there a burn rate, and what can you give us to help understand the traction and future look? Vicki L. Villacrez: Lots of questions there, Richard. We will piece those apart. On disclosures, this quarter we added disclosures for our residential revenues and broke them out by technology, so you will see reporting by fiber, cable, and copper. We think this is something that will be helpful to investors going forward. Furthermore, we have included metrics in our trending schedules on our Investor Relations website, so I will point you there. Ken, do you want to jump in on the rest of Richard’s questions? Kenneth Dixon: The metrics that are most important as we move to a fiber‑centric business are, first, how well we are delivering marketable addresses from a build‑plan perspective, and second, our fiber net sales as we sell into that new open‑for‑sale footprint while also increasing our overall penetration in those new cohorts. So build velocity and overall fiber net performance are the two big things. Richard Hamilton Prentiss: I am going to assume as you get fiber out there, the maintenance capital and ongoing capital once you are done with the build drops to pretty low levels. Kenneth Dixon: We definitely see the cash‑cost‑per‑customer improvements on everything—from trouble tickets, copper versus fiber, to a lower call‑in rate—so we love the fiber business. The faster we migrate away from copper and bring it to fiber, we will continue to see improvements in the bottom line. Richard Hamilton Prentiss: Great. That is helpful. Everyone have a great Mother’s Day weekend. Thanks. Operator: Thank you. Your next question comes from the line of Sebastiano Carmine Petti from J.P. Morgan. Your line is now open. Sebastiano Carmine Petti: Thank you for taking the question. Sticking with TDS Telecom and Ken for a second: you hired some sales folks and customer‑experience folks to support your priorities. Where are you from a process‑improvement standpoint—instilling some of your decades of experience running fiber businesses into TDS Telecom? What inning are we in? What near‑term low‑hanging fruit remains to improve process performance and construction build? And on investing in the cable footprint—something we have not heard discussed in a bit—is that strategic and core? How do you think about the blocking‑and‑tackling improvements needed for the cable KPIs to begin stabilizing, given the competitive backdrop and repricing pressures? Kenneth Dixon: Thank you for the question. I would say we are in the very early innings, and we are starting to make very nice progress. I am starting to see wind in our sails. On address delivery, I am very happy with the team’s 40 thousand service‑address delivery—almost three times more than last year. It was important to prove we could keep our crews working all winter, and we accomplished that. We have started the spring and summer months with record crew counts for the two most important quarters of the year. Through April we are at record numbers, a combination of internal and external crews, and we continue to see sequential month‑over‑month crew‑count improvements as we head into May. Going into the second quarter, I am bullish on what we can accomplish because we have the largest funnel of addresses under some form of construction in our company’s history. On sales and customer experience, we see the opportunity to penetrate new addresses as fast as we deliver them. We are very happy with our presales velocity; we typically go in 60 days before an address becomes marketable, and we are seeing excellent results in the low‑20% range. We have put a tremendous amount of sales capabilities into our door‑to‑door channel—adding several vendors in Q4 last year and more in April and May—and we have several others in our funnel. We believe we have to be in the markets and use door‑to‑door to drive our sales agenda. We have also expanded significantly our .com business, which is open 24/7/365; sales have improved significantly, and we will continue to put more resources there. We are now developing our MDU sales capabilities, which is a tremendous opportunity—again, early innings but starting to see nice progress. The 11 thousand fiber net adds—up 32% year over year—is a very good start, and we have momentum. On the cable business, I love our cable markets. We are in some of the best markets in the country. Last year, we decided to convert those markets first onto our new billing system and get them on a single stack across the company. We also made a significant investment in a new field service tool for our technicians to improve overall service delivery, and we are now positioned to move to multi‑gig in 2026. We are just getting started in terms of what we can do in those markets. A lot is going on, but I like what I am seeing, and we have more work to do. We are definitely moving in the right direction. Sebastiano Carmine Petti: For Vicki, on Granite—should we anticipate bolt‑ons like this going forward: smaller systems that are adjacent versus big chunky deals? And does combining entities make it easier to REIT the tower business over time versus the current structure? Vicki L. Villacrez: Sebastiano, thank you. On the second question, we are not going to comment on any impact or implications of the offer on the table, and we cannot speculate on what the future will look like at this point. On Granite, this acquisition is consistent with our capital allocation priorities—building fiber and M&A acquisitions in the fiber space. It is a tuck‑in, it is accretive, and it is adjacent to our current markets in New Hampshire. It is 100% fibered up. We are excited to bring Granite State Communications on board and welcome all of the associates. It brings 11 thousand fiber service addresses to our portfolio. Operator: Thank you. As a reminder, if you would like to ask a question, please raise your hand. If you have dialed in to the call, please press 9 to raise your hand and 6 to unmute. Your next question is a follow‑up from Sebastiano Carmine Petti from J.P. Morgan. Your line is open again. Sebastiano Carmine Petti: For Chris, on the cost‑transformation efforts, is the $100 million run‑rate savings by 2028 still the right figure? Are we at a point where the cost savings are falling to the bottom line in 2026, or is there reinvestment going back into the business? Christopher “Chris” Bautfeldt: Hi, Sebastiano. Yes, we remain on track to hit $100 million of run‑rate savings by year‑end 2028. As you heard in my remarks, we are starting to see some of those benefits this year. The bigger benefits you will see in 2027 and 2028, but we absolutely are starting to see some of those benefits drop to the bottom line. As I have said before, we do not expect that entire $100 million to fall to the bottom line because some of that is helping offset inflationary cost increases. As we continue to expand our fiber footprint and customer base, we do plan to reinvest some of those savings. We are seeing nice benefits and remain optimistic about the full potential of this program. Sebastiano Carmine Petti: Thank you. And for Anthony, on the upcoming AWS‑3 reauction and upper C‑band next year—any change in conversations regarding monetization of the remaining C‑band and CBRS? Anthony Carlson: Thanks for the question. We continue to believe that the C‑band spectrum we hold is excellent and valuable spectrum, with an ecosystem to support it today. We are not going to be a forced seller in these circumstances. We believe the carrying costs are modest. While we are open to a deal at a fair value, we do not feel it is burning a hole in our pocket. We do not have further updates on a sale of our C‑band spectrum at this time, but we remain very optimistic about realizing fair value at the appropriate time. Operator: Your next question is from Richard Hamilton Prentiss with Raymond James & Associates. Richard, your line is open. Richard Hamilton Prentiss: On the service addresses, Ken, is the build plan still targeting 200 thousand to 250 thousand service addresses this year, and what would cause you to miss it versus hit it or beat it? Kenneth Dixon: Yes, that is still the target. I have a very good degree of confidence based on the crew counts we have starting the second quarter and the funnel and pipeline of addresses at a new record in terms of construction. I am very confident we are going to deliver within that target. Richard Hamilton Prentiss: And, Anthony, one of the themes at Connect(X) was high‑rent relocation efforts. Do you have an appetite to do some new builds there, and what capital commitment might you put to work? Anthony Carlson: To be very clear, as we have stated multiple times, we are laser‑focused on optimizing the value of the assets we have in hand and see significant upside from our current portfolio. That is not to say we are not open to opportunities, but the going rates we have seen for high‑rent relocations and participating in new builds have not been consistent with what we think we can achieve by optimizing our portfolio. On our own churn, a small nugget: we had only one total tenant churn in the entire first quarter, which speaks to the strength of our portfolio and its relative susceptibility to high‑rent relocation. Richard Hamilton Prentiss: One for Walter—an obligatory satellite question. How are you thinking about the somewhat existential threat of satellite coming into terrestrial, given your assets in broadband fiber and towers? Walter C.D. Carlson: That is an excellent question. Satellite is a technology that has gotten substantial additional focus over the last 18 months and substantial additional investment over the last 12 months. I think satellites will have substantial influence going forward on the communications industry. That being said, we feel very strongly about the continued benefit of a terrestrial tower portfolio, and we feel very strongly about the superior capabilities of fiber networks delivering specific communication into individuals’ homes and businesses without interruption and without fear of being impacted by weather. We are paying attention, and we feel very good about the thrust of both of our businesses. We are watching. Operator: Next question comes from the line of Sergei Dluzhevskiy with GAMCO Investors, Inc. Your line is now open. Sergei Dluzhevskiy: Good morning. First question on the TDS Telecom side. Last quarter, you expanded the fiber build target by 300 thousand edge‑out passings in, I believe, 50 adjacent markets to your current expansion footprint. How do the demographics and churn profiles of these markets compare to your older cohorts? Among this new cohort, what types of markets are you prioritizing for a build sooner rather than later? Kenneth Dixon: We are looking at markets where we have already planted a flag—where we have established our brand and deployed fiber—so we already have technicians and sales capacity. We have looked closely at demographics, competitive intensity, build costs, and expected returns, and then prioritized accordingly. That is our edge‑out opportunity. These markets check the boxes I mentioned, and because we were first to the original market with fiber, the extensions are a natural fit. We believe we prioritized the right markets first with the highest opportunities and returns. Sergei Dluzhevskiy: On cable, what do you like most about your cable footprint? Can you comment on the competitive environment and the investments you are planning—where the dollars will go and how quickly you expect those investments to pay off? Kenneth Dixon: From an investment perspective, our focus now is going to a multi‑gig environment in our cable business, which is the opportunity for 2026. We are operating in highly attractive markets—some with among the highest housing growth in the United States—so we see a definite opportunity going forward. Sergei Dluzhevskiy: On the Array side, the wireless partnerships produce nice cash flow every year. Any updated thoughts on monetizing those stakes? For example, recent transactions valued stakes at about 11.5x cash distributions. At that multiple, your stakes could be worth a significant amount. What could move you closer to taking that step? Anthony Carlson: As we have said before, we like the cash flows from these assets. There are challenges for us with transactions similar to the ones you mentioned. We have them at a very low tax basis. If you looked at the performance of those investments over the very long term and did a DCF, it would be challenging to get a multiple commensurate with the full value. We are open to offers that would deliver full value, but they would have to deliver full value net of taxes. We like those cash flows, so we are not in a hurry to sell. Sergei Dluzhevskiy: Lastly on Array, EBITDA is expected to be somewhat depressed in the medium term, pressured by transition and wind‑down costs. Can you talk about your targets, qualitatively and quantitatively, to take cost out and improve margins in 2026 and 2027? Longer term, post T‑Mobile transition, what kind of margins are realistic? Anthony Carlson: We think there is significant opportunity to improve Array’s margins. We focus on tower cash‑flow margins. First, land is our largest cost, and we have a much lower rate of land ownership than many large public players. There is significant value to be realized by, where appropriate, purchasing more of the land interests under our towers. Second, as a new tower company, we believe we have opportunities to improve as we transition from a maintenance posture aligned with operating a full‑fledged wireless company to one aligned with a tower company. Those are the two big cost‑side opportunities to improve tower cash‑flow margins, in addition to expanding margins by increasing colocations, which we work hard to do every day. Operator: There are no further questions at this time. I will now turn the call back to John Toomey for closing remarks. John Toomey: Thank you again for joining us today. As always, please reach out to us if you have any questions. I hope everyone has a wonderful weekend. Thank you. Operator: This concludes today’s call. Thank you all for attending. You may now disconnect.
Operator: Good morning. My name is Aaron, and I'll be your conference operator for today. At this time, I would like to welcome everyone to the Better Home & Finance Holding Company First Quarter 2026 Results Conference Call. [Operator Instructions] And with that, I'm pleased to turn the call over to Tarek Afifi, Senior Corporate Finance and Investor Relations Manager. Tarek, with that, you may begin. Tarek Afifi: Welcome to Better Home & Finance Holding Company's First Quarter 2026 Earnings Conference Call. My name is Tarek Afifi I'm Better's Corporate Finance team. Joining me on today's call are Vishal Garg, Founder and Chief Executive Officer of Better; and Loveen Advani, Chief Financial Officer of Better. In addition to this conference call, please direct your attention to our first quarter earnings release, which is available on our Investor Relations website. Also available on our website is an investor presentation. Certain statements we make today may constitute forward-looking statements within the meaning of federal securities laws that are based on current expectations and assumptions. These expectations and assumptions are subject to risks, uncertainties and other factors as discussed further in our SEC filings that could cause our actual results to differ materially from our historical results. We assume no responsibility to update forward-looking statements other than as required by law. During today's discussion, management will discuss certain non-GAAP financial measures, which we believe are relevant in assessing the company's financial performance. These non-GAAP financial measures should not be considered replacements for and should be read together with our GAAP results. These non-GAAP financial measures are reconciled to GAAP financial measures in today's earnings release and investor presentation, both of which are available on the Investor Relations section of Better's website and when filed in our quarterly report on Form 10-Q with the SEC. More information as of and for the period ended March 31, 2026, will be provided upon filing our quarterly report on Form 10-Q with the SEC. I will now turn the call over to Vishal. Vishal Garg: Thank you, Tarek. Good morning, everyone. Q1 was a strong quarter for Better. We generated approximately $1.64 billion in funded loan volume, exceeding the high end of our prior guidance and growing funded loan volume approximately 89% year-over-year. Revenue from continuing operations grew approximately 52% year-over-year to $47.5 million, and our adjusted EBITDA loss was approximately $19 million, which was a 48% improvement year-over-year. Just as importantly, we continued scaling the Tinman AI platform and expanding our partnership ecosystem, which remain the core drivers of our long-term strategy. Before discussing product innovation and partnerships, I want to address the macro environment directly and explain how we are thinking about the business in the current rate backdrop. The company entered 2026 with strong momentum, generating funded loan volume of $450 million, $521 million and $673 million in January, February and March, respectively, a month-over-month growth of 16% and 29% in February and March. What's more in late April, pre-approval volume for our biggest Tinman AI platform partner went from approximately $100 million per day in preapproved customer volume to over $200 million per day in pre-approved customer volume. That being said, the prolonged conflict in the Middle East has started to show a market impact on interest rates across the mortgage industry with rates for consumers on our platform growing from 5.75% to well over 6.5% in the last few weeks. And this is causing consumers to get stuck in the middle of the funnel, hesitating to lock at a higher rate, particularly if they feel the rate increase is temporary due to the situation in the Middle East. With our partners' help, we are converting some of these customers who need cash now to HELOCs. But for those looking just for savings per month, we are in a waiting pattern where we will go back to them with a lock as soon as rates come back down. So the bad news is that conversion rates are down from where they were in Q1 due to macro factors. The good news is that partner volume continues to increase dramatically as the partner opens us up to a broader section of their customer base and products. Despite the macro noise, we are structurally better positioned than most mortgage platforms for three reasons. Our partnership model creates structurally lower customer acquisition costs and scalable distribution and doesn't require us to spend money upfront, which then can get hung up when conversion cycles blow during volatile market periods. Tinman AI continues to improve conversion efficiency and operating leverage. Our diversified product mix spans across purchase refi and HELOC. And when refis become more difficult, we can convert a segment of those into HELOCs, which is a tool we didn't have in prior rate cycles. That positioning is reflected in our Q2 guidance. We expect funded loan volume of approximately $1.65 billion, representing approximately 37% year-over-year growth, slower than what we had originally anticipated going into Q2. Importantly, while funded loan volumes are expected to remain approximately flat sequentially, revenue is still expected to grow meaningfully due to continued mix shift towards higher-margin HELOC products. We currently expect approximately 15% sequential revenue growth in Q2, which we believe is an important signal that the strategy works and the platform works despite the macro backdrop. We also continue to believe the business is positioned for substantial operating leverage as volumes recover. At the same time, we want to be direct with investors. The timing on when we achieve our $1 billion monthly funded volume target will depend in part on the rate environment. It looked highly doable this time last month. And right now, sitting for this month, it looks like it's going to be deferred. The long-term trend remains intact, but near-term visibility continues to be impacted by macro volatility and what that does to consumer benefit on a refi. That said, if rates improve meaningfully, we believe the lead funnel is already in place and positions us to accelerate towards that target relatively quickly. Regardless of the environment, we continue to execute aggressively. In April, we announced a series of deliberate steps to strengthen operations and continue our progress towards profitability. These actions are on track and are even more important against the backdrop I just described. First, we're removing at least $25 million of annualized costs from our operations beginning in Q2 2026. Second, we expanded our total warehouse capacity by 48% to $850 million since the start of Q1. And third, in early April, we raised $69 million in equity that further strengthened liquidity and operational flexibility. All of these actions, along with greater focus on AI efficiencies, deep cuts in corporate overhead and the adjusted revenue growth and the change in the mix to HELOC versus refis means we remain in sight of the target of adjusted EBITDA breakeven by the end of Q3 2026. Turning to partnerships. Our Credit Karma Finance of America and top five non-bank originator partnerships are all live and ramping. These partnerships are especially important because they leverage existing customer ecosystems rather than paid acquisition channels. For example, an increasing portion of Credit Karma's 140 million members are exposed to Credit Karma Home Loans powered by Better at zero upfront CAC to us. We believe that structural CAC advantage will become increasingly important as the industry consolidates. In late January, we marked the one-year anniversary of our partnership with NEO. NEO grew from a $1.5 billion run rate at onboarding to $2.9 billion in March 2026. Our Tinman AI platform generated approximately $821 million in funded loan volume during Q1, accounting for approximately 50% of total funded loan volume, up from 44% in Q4. That progression is important. Tinman represented 0% of funded loan volume in 2024, approximately 36% in full year 2025 and now approximately half of total funded loan volume. We expect that percentage to continue increasing in the coming quarters ahead. Now to product innovation. We had two recent launches I want to highlight, both of which serve buyers in this environment. Last week, we announced the launch of the Better Home Equity card in partnership with Stripe. The card is a Mastercard linked to a Better HELOC, letting customers spend funds drawn from their line with a single flight. Even more, customers get 1% cash back on all spend, which further lowers their total cost of financing and extends their stickiness in the Better ecosystem from a one-time transaction to a 30-year relationship. We believe HELOC demand remains durable across rate environments, and this product materially simplifies homeowner access to instant long-term liquidity against the value of their home. In March, we also launched the first Fannie Mae eligible token-backed mortgage in partnership with Coinbase. Qualified customers of Coinbase can pledge Bitcoin or USDC as collateral to fund their down payment without liquidating their holdings, triggering a taxable event. We have a large pipeline of Coinbase customers who are signed up on waitlist for the official commercial release of the product in Q2. We see digital assets increasingly becoming part of mainstream consumer finance infrastructure, and we intend for Better to lead that transition inside mortgage origination to leverage refi technology to fundamentally lower the interest rates on home finance products for consumers. We believe the foundation is now in place for Better across our tech platform. Our distribution partnerships, our product expansion and our cost structure and the proof points are becoming visible in revenue growth and path to profitability in sight despite a choppy macro environment. With that, I'll turn it over to Loveen. Loveen Advani: Thank you, Vishal. The Q1 financials reflect continued progress and growing operating leverage from our platform and improving efficiency in our business model. Funded loan volume grew approximately 89% year-over-year to $1.64 billion, while revenue from continuing operations increased approximately 52% year-over-year to $47.5 million. Importantly, total expenses grew approximately 27% year-over-year. That spread between revenue growth and expense growth reflects the operating leverage embedded within the Tinman AI platform. As Tinman AI volumes scale, revenue growth outpaces headcount and infrastructure growth. In Q1 2026, our adjusted EBITDA loss was approximately $19 million. That's a 48% improvement year-over-year and a 16% improvement quarter-over-quarter. Looking at product trends in Q1, refinance grew 542% year-over-year. Home equity grew 30% year-over-year, and purchase grew 2% year-over-year. By product mix, 50% of funded loan volume in Q1 was refinance, 36% was purchase and 12% was home equity. By channel, approximately half of funded loan volume in Q1 came through the Tinman AI platform and the other half through direct-to-consumer. As Vishal discussed, we're starting to see the impact of the prolonged conflict in the Middle East on rates. However, one of the most important dynamics in our model today is mix shift. HELOC products carry materially higher gain on sale economics, which allows revenue growth to outperform funded volume growth, which is reflected in our Q2 guidance. In Q2, we expect funded loan volume of $1.575 billion to $1.725 billion, of which the midpoint represents 37% growth year-over-year. We expect total net revenues of $53 million to $56 million, of which the midpoint represents 28% growth year-over-year. We also expect an adjusted EBITDA loss in the range of $12.5 million to $14 million, of which the midpoint represents 42% improvement year-over-year. Importantly, we continue making progress on our path towards breakeven while simultaneously strengthening the balance sheet and improving liquidity. We previously announced at least $25 million of annualized cost reductions beginning in Q2. These reductions are underway and include lower corporate overhead, vendor rationalization and the planned divestiture of our U.K. bank. On the balance sheet, we ended Q1 2026 with approximately $136 million of liquidity, which includes cash and cash equivalents, restricted cash and net assets held for sale. This does not reflect our recent capital raise of $69 million, which closed after quarter end. We believe the balance sheet today is materially stronger and appropriately positioned to support our path towards profitability. In addition, we expanded warehouse capacity from approximately $575 million at year-end to approximately $850 million today, representing a 48% increase. That expansion reflects both lender confidence in our platform and the infrastructure required to support future partnership growth. As Vishal discussed earlier, based on our current operating structure and ongoing cost initiatives, we remain focused on adjusted EBITDA breakeven by the end of Q3. The timing for reaching that level will depend in part on the macro environment and the pace of rate normalization, but the operating model continues to move in the right direction. We believe Better today is materially more efficient, more diversified and more scalable than it was even 12 months ago. With that, I'll turn back to the operator for Q&A. Operator: [Operator Instructions] Our first question for today comes from the line of Kyle Peterson with Needham. Kyle Peterson: I guess I just wanted to first start off and clarify a couple of the moving pieces in the guide. I guess, one, have you guys assumed that the macro and kind of this frozen pipeline due to some of the Middle East tensions, have you assumed any improvement or resolution in the back half of the quarter or more of a status quo? And then I guess also, could you guys just give us a quick reminder on some of the relative gain on sale rates, specifically on the HELOC side. Obviously, it seems like that's really offsetting some of the volume difference, but I think a reminder there would be helpful for everyone on the call. Vishal Garg: Sure. I mean we are assuming no resolution. And so I think we've been very conservative with respect to what we're guiding towards because going into April, we knew that volume top of funnel was about to almost double. And going into April, we were very confident in the number that we were quoting, which was $1 billion of volume. And then the rate spike, the escalation in the Middle East, basically, all that new volume came top of funnel. I think we shared that it went from about $100 million a day top of funnel for pre-approval volume to $200 million a day in the back half of April. But those customers are not converting at nearly the same rate. We're converting a bunch of them to HELOCs, but a bunch of them that come in just to do a rate term refi or do a debt consolidation to bring down all the rates. They're going to save more if they wait it out than they would getting into it right now. And so we have to give them the right advice for them, and that's what we've always done, prioritize the long term over the short term. So that's what we're doing. And we think that, that's a coiled spring for when things die down in the Middle East, you're going to see some bumper months as we convert all those customers who are effectively on a wait list to lock when rates come back down. On the gain on sale, HELOCs are averaging between six to seven points total gain on sale in combination of origination fees and gain on sale premium, whereas traditionally, mortgage on D2C has averaged 2.5 points and on NEO has averaged 3.5 points. Kyle Peterson: Okay. That's really helpful. And then I guess a follow-up on the HELOC card initiative that you guys have launched. That seems like a really interesting product, I guess. How are you guys thinking about when that goes live later this year, ways whether that increases engagement gives you a competitor edge or monetization opportunities? Just any more color there on how you think that fits in and could potentially help you guys kind of continue to accelerate growth in HELOCs would be great. Vishal Garg: Yes. So I think there are many utility functions of the home card. The first utility function is it tracks all your home spend. So it helps you effectively monitor that, and it provides discounts on things that you use for your home. Two, you get 1% cash back. So for a customer, they're effectively getting their rate or fees bought down as a result of that 1% cash back. Three, it creates a 30-year relationship with the consumer for us versus having a onetime transaction, which means that recurring refis for that consumer, cash out refis will be nearly instant and super -- creates a super engaged customer base for which then we can market other products like what we've done with homeowners insurance, which typically comes up for renewal every year, life insurance, any of these other products that we've traditionally had, we can then have an always-on relationship with the consumer versus a once every three-, five-, seven-year relationship with the consumer. I think it moves into basically Better being a home finance home operating system for the consumer rather than just a onetime home transaction system. And we think that our partners have already started asking for it. It's just another really good way for a partner to service their customer and maintain that. So a number of our partners are already asking us to replicate what we're doing internally for our D2C business for that. So it gives us another feather in our cap when we go and pitch HELOCs or home equity as a service to other companies or mortgage as a service to other companies. Operator: Our next question is from the line of Ramsey El-Assal with Cantor Fitzgerald. Ramsey El-Assal: Has the more challenging macro backdrop caused any slowdown in your partnership discussions or partnership pipeline conversion? Vishal Garg: I think it's accelerated, especially within the traditional mortgage broker and retail mortgage lender channel. A lot of people were hoping '26 was the year that they were going to thrive in. And it's looking like with the Middle East conflict, things are tougher. So more and more banks are still looking to get into the business. Of course, the Middle East conflict and higher elevated rates and oil prices has an impact on the number of customers eligible for refi, but it has an even bigger impact on unsecured consumer credit. And so we're starting to see a lot of inbound from other fintechs, other large consumer credit companies to pivot from their traditional unsecured offerings into a secured offering like a HELOC. Ramsey El-Assal: Okay. And could you also comment on the loan mix between Tinman and direct and kind of how the changing environment might play out in terms of your target there. I think it was 60% Tinman by the end of the year. I was just curious if the changing backdrop here has any impact on that target. Vishal Garg: I think we're well on our way to achieving that target. Loveen Advani: Yes. I think, Ramsey, you're hitting on a great point. Had we been a traditional D2C play, we would have spent money on these leads upfront and not have them convert. Because we're now relying on our partnership volumes, right, we're somehow derisking ourselves from that eventuality. Operator: Our next question is from the line of Rohit Kulkarni with ROTH Capital Partners. Rohit Kulkarni: One kind of just comparison of unit economics to the extent you can, can you just flag what's the difference between Tinman platform generated volume versus D2C specifically, like relative kind of CAC profile gain on sale? And longer term, do you see a scenario where the contribution margin for the platform volume would actually be structurally higher than your traditional D2C business? Vishal Garg: That's a great question. Right now, we try to price our platform partnerships. So, we make the same amount of contribution margin. Revenue can change, right, because different partners are asking us to do different services for them. But we try to make the same contribution margin that we do on D2C in our platform business. And so as we scale, we're hoping to make sort of around $2,000 per loan contribution margin on mortgage and slightly less than that on HELOCs in our Tinman AI platform business. Over time, as it becomes -- the sale becomes more and more software, like margin profile is much better on Tinman AI platform. But in the right now, the gains from AI are captured first in D2C, which is why you saw our continued improvement in our unit economics on the D2C business. And then we port those things that work in D2C into the Tinman AI platform business. Rohit Kulkarni: Okay. Got you. And regarding the current macro environment and rate kind of changes in the last 45 days. Historically, what is the typical lag in consumer behavior and how that impacts your business, assuming there's a pathway towards more stable macro in the next 60, 90 days. How does that -- how do you anticipate that to impact your business? And over what duration and -- sorry for a multi-quarter here and that, are you assuming any improvement in macro in your 2Q guide? Vishal Garg: We're assuming no improvement in the macro in our 2Q guide. And so, we're being conservative there. And we are -- the typical cycle is you can start to see on refis in particular, on rates on refi, in particular, you can see immediately within a week, if a consumer comes in as a pre-approval, if they're going to lock or not or if they're hesitant. And usually, when they are hesitant, we register in our data, the price point at which they would transact and then we hold them until they come back, kind of like -- think of it like a limit order in stock trading. And then -- so we see that behavior manifest itself out in refis. Purchase, as you know, is like a six-month cycle. And HELOC, depending on the use case, if it's for debt consol, it can take the consumer a month to decide on what debt to pay off or not and what things that they care about or not. If it's more for home improvement or tuition or other things like that, they typically have a need that needs to be satisfied within a week, two weeks, three weeks. Loveen Advani: Yes. Rohit, I think to go with this is, as we think about beyond the second quarter, if the environment stays where it is, we'll have increased indexation towards HELOCs and less so towards refi. And if the macro changes, then that equation will flip. Rohit Kulkarni: I see. I got you. And then I know you reaffirmed breakeven EBITDA by end of Q3. Q2 is still close to negative $13 million in EBITDA. Can you help us kind of what specifically bridges that Q2 to Q3? What are the factors under your control? And maybe just layer in the $25 million cost reduction program, how much of that is in Q2? And what other levers do you have in Q3? Loveen Advani: Absolutely. Yes, that's a great question. So today, our current financials exclude the U.K. business, which is we're considering that as discontinued ops, right? As we think about getting to our breakeven targets, our current cash OpEx is about $68 million. That's the guidance that we're giving, right? So for us to get to profitability by the end of Q3, we'll have to get to a revenue mix or a revenue component of around low to mid-70s for us to breakeven at the end of Q3. Operator: Our next question is from the line of Owen Rickert with Northland Capital Markets. Owen Rickert: Could you talk a bit more about how some of those newer partnerships are ramping today? Are you seeing encouraging trends in engagement and conversion rates so far? And how have those partnerships trended on a monthly basis throughout the quarter? Vishal Garg: The newest partnership are ramping extremely well. I mean we literally in the month of April, went from $100 million a day top of funnel to $200 million a day top of funnel. $200 million a day top of funnel just multiplied by 250 business days is $50 billion of pre-approval volume. And we're still just scratching the surface. Our biggest partner, Credit Karma, we are exposed in many of the products to less than 1% of their customer base. for the top five retail lender, we're just ramping up their salespeople on the HELOC product, and they have hundreds of billions of dollars of MSR on their books that we're going to be targeting, which has a very, very high conversion rate. Our top three fintech, they're scaling. They're becoming a reasonably decent size of our HELOC volume. And so you've seen like monthly HELOC volumes start to continue to trend up. A little bit of that has been. And then we've got a couple of banks in the queue off of our ChatGPT announcement that we did, I think, about two months ago, and we're hoping to get them closed and operational and live shortly. Owen Rickert: Got it. And then on the technology side, where are you seeing the biggest operational or customer-facing benefits from tools like Betsy, Tinman AI and the broader machine learning initiatives? Vishal Garg: The biggest benefit is in customer contact capability where consumers are now able to transact with Betsy 24/7, 365. And we're increasing the exposure of Betsy branded for our partners in their funnels. So I think the biggest uplift is going to actually be when we are able to fully deploy Betsy in our partner funnels, not just in our D2C funnel. Operator: [Operator Instructions] Our next question comes from the line of Kartik Mehta with Northcoast Research. Kartik Mehta: Vishal, one thing you've talked about are partnerships and your partnerships are growing. If in the interim, the mortgage market stays soft, but all of a sudden, we get a big bump up, the war is over and all of a sudden, you get a lot of activity. How do you manage the infrastructure if demand spikes? Vishal Garg: We are already getting geared up for something like that. The best thing that we can do is in the old days, we have to rely on humans to staff up and pick up the phone, work late shifts, work weekends. And now we are able to simply leverage Betsy. Betsy loan officer, Betsy loan processor, Betsy loan underwriter. And in preparation for some of that, we're actually taking off some of the gloves where Betsy was recommending a particular task or a particular path to both a consumer or an internal person and then the internal person was sending it out. We're now just having Betsy be on autopilot after close to over 1.5 years of learning data. And so I think that, that's just going to crush the operating cost framework and allow us to capture all the volume as it comes in. Kartik Mehta: And Vishal, on a couple of partnerships, you're not the only mortgage provider, but it seems as though you have a competitive advantage because of your technology. Have you seen your partners or talk to your partners about comparing your ability to serve their customers versus others that might be on the platform? And if so, what type of advantage is that giving you? Vishal Garg: Our partners typically see an improvement of 2x relative to the incumbent in terms of both productivity and customers served. So that's really the promise that we make to them is "We're going to help you double revenue, and we're going to help you cut your cost structure by 30% to 50%, and you'll make 4x, 5x, 6x more money." And that's how it's playing out for our existing partners. That's why there's a waitlist of people to get on the Tinman AI platform, the ChatGPT Enterprise Edition. We just are -- we're continuing to work through that and the value prop to the partners is high. But as you know, like the mortgage industry is an industry that the Internet basically forgot. And so we have lots and lots and lots of mortgage people who are still operating on really old antiquated systems. And what we're also finding is that their staff are used to just those systems. So frequently, we go in and they tell us that, "Hey, we'll keep this staff and then the rest of them, why don't you like adapt them to the new system?" And what they find eventually is that we have to do it all for them. So I think that is also upside in the margin profile that we land with a particular product or a particular implementation and then we expand from there. Operator: Our next question is from the line of Brendan McCarthy with Sidoti. Brendan Michael McCarthy: Just wanted to ask a quick question on Birmingham Bank, the U.K.-based bank. I know you classified it as discontinued operations held for sale. Can you give us any detail on when we might expect a sale regarding timing? Can you give us any color on potential capital release from that sale or perhaps sale proceeds? Loveen Advani: Yes. So Brendan, this is Loveen. We're in an active sale process. We had an investment bank to lead that. We're in active discussions with potential buyers, right? That's all I want to disclose at this time, given that we're in active discussions. Even if we do sign, there's a regulatory approval process in the U.K., which is going to take about two to four months. So think of the impact in Q4. Brendan Michael McCarthy: Understood. Looking at the Coinbase partnership with the crypto-backed mortgage product, can you kind of walk us through the economics of that, the revenue profile there and perhaps the launch time line of when we might see an impact in the P&L? Vishal Garg: The currently publicly stated launch time line is sometime in late Q2. The revenue profile from that product is starting to manifest itself. Obviously, we have more pricing power in that product than we do in your traditional direct-to-consumer product. And so you should start to see like NEO-like margins on that product. Brendan Michael McCarthy: Got it. That's helpful. Last question, just back to the Q3 breakeven guide for adjusted EBITDA. Just to clarify, I know you mentioned you're assuming a pretty stable environment as it relates to the macro. But is there any risk to achieving that breakeven if rates move meaningfully higher or maybe the Middle East conflict is more prolonged than expected? Vishal Garg: We're going to have to cut costs deeper. I think we're pretty committed to that number. Operator: And ladies and gentlemen, that will conclude our Q&A session for today. Vishal, I'd like to turn it back over to you for any closing comments. Thank you. Vishal Garg: Thanks, everyone. Q1 was a really good quarter for us. We signed a bunch of really big deals, and we executed on our plan and we beat guidance. I know it's disappointing for the Q2 guidance for us to not get to the $1 billion mark of loan originations that we had planned to in May, but we're going to make up for that in the context of cost cutting, deeper cost -- change to a HELOC product, which doesn't have a $350,000 balance, has a $100,000 balance, but makes basically the same amount of revenue and using that to continue to drive revenue growth and a path towards profitability, which is what we are expecting in our Q2 guidance, and we're confirming again that we will achieve by the end of Q3 2026. So, thank you all for continuing to have an interest in believing in Better, and we appreciate you all. Operator: Thank you, everybody. Have a great day.