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ATRC 2026 Q1 财报电话会议

Operator: Good afternoon, and welcome to AtriCure's First Quarter 2026 Earnings Conference Call. This call is being recorded for replay purposes. [Operator Instructions] I would now like to turn the call over to Marissa Bych from the Gilmartin Group for a few introductory comments. Marissa Bych: Great. Thank you. By now, you should have received a copy of the earnings press release. If you have not received a copy, please call (513) 644-4484 to have one e-mailed to you. Before we begin today, let me remind you that the company's remarks include forward-looking statements. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond AtriCure's control, including risks and uncertainties described from time to time in AtriCure's SEC filings. These statements include, but are not limited to, financial expectations and guidance, expectations regarding the potential market opportunity for AtriCure's franchises and growth initiatives, future product approvals and clearances, competition, reimbursement and clinical trial enrollment and outcomes. AtriCure's results may differ materially from those projected. AtriCure undertakes no obligation to publicly update any forward-looking statements. Additionally, we refer to non-GAAP financial measures, specifically constant currency revenue, adjusted EBITDA and adjusted loss per share. A reconciliation of these non-GAAP financial measures with the most directly comparable GAAP measures is included in our press release, which is available on our website. And with that, I would like to turn the call over to Mike Carrel, President and Chief Executive Officer. Michael H. Carrel: Great. Good afternoon, everyone, and welcome to our call. AtriCure is off to a strong start in 2026 with worldwide revenue of $140 million in the first quarter, reflecting 14% growth year-over-year. We are building on the momentum we established in 2025 from new product launches with this quarter marking an acceleration in our worldwide growth rate from the preceding quarter and comparable quarter last year. Fueling this acceleration is our U.S. business, which drove approximately 15% in the quarter from expanding adoption of AtriClip FLEX-Mini and PRO-Mini devices, cryoSPHERE MAX probe and continued strength from our EnCompass clamp. In addition, we generated $17 million in adjusted EBITDA, nearly double the first quarter of last year. Our results this quarter once again demonstrate our ability to deliver durable, double-digit revenue growth and expand profitability. Beyond our financial results, we have made exceptional progress in our BoxX-NoAF clinical trial. Since initiating trial enrollment in the fourth quarter of last year, we have enrolled approximately 300 total patients. To date in this 960-patient randomized controlled trial, we are tracking well ahead of our original time line and now expect to complete enrollment around the end of this year, nearly 1 year ahead of plan. The pace of enrollment in this trial reflects an extremely high level of engagement from surgeons who experienced firsthand the impact postoperative Afib has on their patients. As a reminder, up to half of cardiac surgery patients without pre-existing Afib will develop postoperative Afib, which is the most common complication of cardiac surgery. Because there is no established treatment today, postoperative Afib is a substantial burden on the health care spending, with estimates exceeding $2 billion annually in the U.S. alone. We are confident that our BoxX-NoAF clinical trial utilizing our EnCompass clamp and AtriClip device has the potential to meaningfully change treatment outcomes for this patient population and address the significant unmet clinical need. BoxX-NoAF is also highly complementary to our LeAAPS clinical trial, studying stroke reduction benefit of left atrial appendage management in cardiac surgery patients without atrial fibrillation. We expect both of our landmark clinical trials to generate robust clinical evidence in support of preventative treatment for cardiac surgery patients, unlocking a massive global market opportunity for AtriCure while establishing new standards of care in cardiac surgery. We at AtriCure are well positioned to realize these significant catalysts for our business in the coming years. Now on to updates covering franchise performance in the first quarter. Pain management once again led our portfolio growth, increasing 28% year-over-year. The cryoSPHERE MAX probe continues to be the primary driver of growth, contributing roughly 70% of our pain management sales this quarter. Surgeons across both new and existing accounts recognize the significant time savings and clinical effectiveness it provides, leading to more patients having their postoperative pain managed effectively. Building on our legacy of innovation, we are also pleased that our cryoXT probe for amputation procedures is beginning to gain traction. We continue to receive outstanding feedback from each new surgeon that uses this device and through our registries are capturing clinical outcomes for this therapy. We are still in the early innings for cryoXT for the cryoXT therapy development and adoption. However, we remain confident in cryoXT contributing more meaningfully as we move to the back half of 2026. Within our cardiac ablation franchises, worldwide open ablation revenue grew 15% in the first quarter, led by steady adoption of EnCompass clamp in the United States and Europe. EnCompass is delivering growth from both new and existing accounts even as we approach the 4-year anniversary of our U.S. full market launch. As mentioned in our fourth quarter earnings call, our efforts to drive treatment of Afib in cardiac surgery patients was validated with a recent announcement from the Society of Thoracic Surgeons' Annual Meeting, including concomitant Afib treatment as a quality metric. There is strong precedent for the impact of quality metrics in cardiac surgery, and we believe this change will support increased adoption for surgical Afib ablation and appendage management, serving as a durable tailwind for growth for years ahead. Our minimally invasive ablation franchise continued to face headwinds in the first quarter. We believe there is a role for hybrid therapy in the current and future treatment landscape and remain committed to providing a solution for the unmet need for patients with long-standing persistent Afib. Finally, turning to our appendage management franchise, which saw 16% growth worldwide, driven by both our open and minimally invasive appendage management products. Our open left atrial appendage management business benefited from strong adoption of AtriClip FLEX-Mini in the United States, where we exited the quarter with FLEX-Mini contributing approximately 40% of our open appendage management revenue. More importantly, we believe our FLEX-Mini device has been impactful in driving share gains in this market. Surgeons using our trialing competitive devices are impressed by the small form factor of AtriClip FLEX-Mini, along with robust clinical evidence and superior product performance of our AtriClip devices. In minimally invasive procedures, AtriClip PRO-Mini is building upon that adoption in the U.S., providing a pricing uplift that offsets pressure of our hybrid AF therapy procedure volumes. It remains clear that differentiated innovation plays an important role in maintaining our position as the leader in appendage management in cardiac surgery, and we continue to prioritize investments in this platform. In our international markets, we are growing adoption across our legacy left atrial appendage management devices. Following the first quarter, we received CE Mark under EU MDR in Europe for both AtriClip FLEX-Mini and PRO-Mini devices and expect to launch both products in Europe later this year. New product launches in Europe, the United States, China and Japan, coupled with the future of LeAAPS clinical trial outcomes, provide a long runway for growth in our appendage management franchise. In closing, the performance we delivered this quarter underscores the power of our innovation and focus on execution. While the rapid progress in our BoxX-NoAF clinical trial reinforces the significant opportunity ahead at AtriCure. We remain committed to advancing standards of care, scaling responsibly and delivering durable growth with improving profitability for our shareholders. And with that, I'll turn the call over to Angie Wirick, our Chief Financial Officer. Angie? Angela Wirick: Thanks, Mike. Worldwide revenue for the first quarter of 2026 was $141.2 million, up 14.3% on a reported basis and 12.8% on a constant currency basis versus the first quarter of 2025. Our performance reflects substantial growth driven by the continued adoption of key new products in the United States and many regions throughout the world. On a sequential basis, worldwide revenue increased approximately 1% compared to the fourth quarter 2025. First quarter 2026 U.S. revenue was $116.2 million, a 14.9% increase from the first quarter of 2025. Open ablation product sales grew 17.3% to $39.1 million, fueled by the strong and sustained adoption of our EnCompass clamp across new and existing accounts. U.S. sales of appendage management products were $48.4 million, up 14.9% over the first quarter of 2025, driven primarily by increasing adoption of our AtriClip FLEX-Mini and PRO-Mini devices. U.S. MIS ablation sales were $6.4 million, a decline of approximately 25% over the first quarter of 2025. And finally, U.S. pain management sales were $22.4 million, up 29.5% over the first quarter of 2025, led by the cryoSPHERE MAX probe, which contributed approximately 70% of pain Management sales in the quarter, driving increased adoption in both thoracic and sternotomy procedures. International revenue totaled $25 million for the first quarter of 2026, up 11.5% on a reported basis and up 3.3% on a constant currency basis as compared to the first quarter of 2025. European sales were $16.1 million, up 13.2% and Asia Pacific and other international market sales were $8.9 million, up 8.4%. International growth was tempered by continued uncertainty in the U.K. as well as lower distributor sales in Asia. Offsetting these headwinds, we saw significant growth across franchises in other major geographies, largely driven by our direct markets. Gross margin for the first quarter of 2026 was 77.4%, up 246 basis points from the first quarter of 2025. The increase was driven primarily by favorable product and geographic mix with strong U.S. performance propelled by our new product launches and adoption. Transitioning to operating expenses for the quarter, total operating expenses increased $10.2 million or 10.3% from $98.6 million in the first quarter of 2025 to $108.8 million in the first quarter of 2026. Rapid enrollment in our BoxX-NoAF clinical trial, which offsets a decrease in LeAAPS clinical trial costs, along with increased headcount focused on product development initiatives, resulted in a 7.6% increase in research and development expense from the first quarter of 2025. SG&A expense increased 11.2% from the first quarter of 2025 as we continue to support growth while driving leverage across the organization. Completing the P&L, first quarter 2026 adjusted EBITDA was $17.1 million compared to $8.8 million for the first quarter of 2025, representing a 95% increase. We recorded net income of approximately $100,000 compared to a net loss of $6.7 million in the first quarter of 2025. Earnings per share and adjusted earnings per share were both breakeven at $0.00 compared to a loss per share and adjusted loss per share of $0.14 in the first quarter of 2025. Our results reflect a balanced approach to allocating capital towards area we believe will sustain and accelerate growth, all while continuing to improve profitability. Now turning to our balance sheet. We ended the first quarter with approximately $146 million in cash and investments. Cash burn for the quarter was slightly improved from the first quarter of 2025 and reflects our normal pattern of cash usage, driven by share vesting, variable compensation and operational needs. As we move through the remainder of the year, we expect positive cash flow, resulting in full year cash generation that is moderately higher than 2025. Our balance sheet remains healthy and supports both current operations and our investment in strategic initiatives that we believe will drive long-term value creation. And now on to our outlook for 2026. We are reiterating our expectations for full year revenue of $600 million to $610 million, reflecting growth of approximately 12% to 14% over full year 2025 results. Consistent with our first quarter results, we expect performance over the remainder of the year to be driven by our pain management, appendage management and open ablation franchises and partially offset by continuation of headwinds from our MIS ablation franchise, along with certain international markets. For the second quarter, we anticipate typical seasonality translating to mid-single-digit sequential growth. On gross margin, while our first quarter 2026 results were exceptional as a result of extremely favorable mix. We continue to expect modest improvement in full year 2026 gross margin over full year 2025. Product and geographic mix are expected to be favorable in the near term. However, we will bring our expanded manufacturing facilities online in the second half of 2026, which will increase manufacturing cost burden, moderating the full year gross margin outlook. Turning to operating expenses. As Mike mentioned, the accelerated timing for full enrollment in our BoxX-NoAF clinical trial has placed us significantly ahead of schedule, and we now expect full enrollment of the trial around the end of this year. As a result, over the next 3 quarters, we expect additional R&D investment. While the cost of BoxX-NoAF acceleration is incremental to our plan, we continue to drive strong gross margins and operating leverage, reflecting discipline across our business. With that in mind, we are reiterating our expectations for full year 2026 adjusted EBITDA of $80 million to $82 million and full year net income, translating to earnings per share of approximately $0.00 to $0.04 and adjusted earnings per share of approximately $0.09 to $0.15. Consistent with our 2025 performance, our quarterly outlook for adjusted EBITDA is largely informed by normal top line cadence and the timing of R&D spend. As a reminder, 2025 R&D spending included LeAAPS enrollment costs for the first half of 2025 only. Therefore, we expect a slightly higher increase in R&D spending in the second half of 2026. In conclusion, our first quarter results highlight the durability of AtriCure innovation and continued improvement in our financial profile while funding investments in growth catalysts for the future. We remain energized by the opportunities in front of us and the exceptional AtriCure team who will make 2026 a success. With that, I will turn the call back to Mike. Michael H. Carrel: Thanks, Angie. 2026 is off to a good start, and our team is fully committed to our patients, our partners and our shareholders. As we look ahead, we are confident in our ability to execute with discipline, sustain operational excellence and build on the momentum that we've created, delivering meaningful progress throughout 2026 and well beyond. And with that, I'll turn it over to the operator for any questions. Operator? Operator: [Operator Instructions] And our first question comes from Bill Plovanic with Canaccord Genuity. Zachary Day: This is Zachary. Can you talk about the progress you're making on PFA integration? Any milestones that we should be on the lookout for this year? And then can you talk quickly about the RF enhancements you're making to come with the next-generation catheter? Michael H. Carrel: Sure. I'll take that on. I appreciate the question. On the PFA, we're making great progress on that. We've done our first in-human over in Australia so far. We're now starting first in human in Europe as well. It's not really first in-human anymore, but we're going to be doing an additional 30 to 40 patients in Europe. And so that will obviously lead for our submission for the trial that we expect to start running sometime next year. And so we're on pace, doing great. No additional commentary at this point in time, but we're really pleased with the results that we've seen so far and feel like there aren't any specific milestones other than really submission to the FDA later on this year, acceptance of the IDE and then beginning to enroll as we kind of look into 2027 at some point in time. So we'll give more details as we kind of get forward on that. We really want to focus today's effort on, obviously, the great progress we've made on the BoxX-NoAF clinical trial because we're so far ahead of plan that we wanted to make sure that we got that out there. 300 patients in a very short period of time put us well over a year ahead of plan, and we thought that was just a big, big milestone for us as we kind of close out this year being able to finish up enrollment around the end of the year. That's something we're super excited about. As for the RF advancements, they are embedded in there. We've got both the RF and also the dual energy combined in some of those first-in-human playbooks, and that will all be indicated and looking forward to kind of seeing that in trials sometime next year. Operator: Our next question comes from Matthew O'Brien with Piper Sandler. Matthew O'Brien: The first one, Mike, I know you can't grow this pain management business 30% every quarter but just talk about what you saw in the quarter from a growth perspective in terms of new accounts, existing accounts with cryoSPHERE MAX? And then also on the ortho side of things, just maybe the contributions that you got from those different buckets and how do we think about the growth trajectory for that business? And then I do have a follow-up. Michael H. Carrel: Yes. I'll start and just say that the cryo business, the pain business, is as we talked about our Analyst Day about a year ago, this is something that's got -- it's multiple billions of dollars of opportunity. Obviously, thoracic is an area that we've been established in for a long period of time. We're now starting to see some traction on the sternotomy side, and we're just starting on this, obviously, below-the-knee amputation area. We're just scratching the surface in my mind in all the areas that people undergo surgery and have a lot of pain afterwards, both from other parts of the body and other types of surgeries to looking into and researching the impact that you can have on actually phantom limb pain, which affects over 3 million people. I mean these are big, big numbers when you look at it. So we've got decades worth of growth in my mind here. Whether or not we can grow 30% for decades, obviously, the numbers get bigger and that becomes more difficult. But the good news is we've got multiple places to actually grow this market for many, many years to come. And with that, I'll turn it over to Angie to give you some of the specifics on the numbers. Angela Wirick: Yes. Matt, from an account perspective, we are about 70% of our pain management accounts have adopted cryoSPHERE MAX, and we continue to see every quarter since we've launched, we continue to see nice uptake. It was about 10% growth in the cryoSPHERE MAX accounts within the quarter. So this is clearly becoming the dominant device that's being used. I think surgeons are very compelled by the quick freeze times that they're seeing and just exceptional outcomes for their patients. Matthew O'Brien: Got it. That's great to hear. On BoxX-NoAF, in my experience, Mike or Angie, when these things enroll faster, it's because doctors are seeing good outcomes. That's why they're doing more of these cases. Can you just talk about any kind of anecdotal feedback you're getting from the clinicians as far as outcomes here? And then kind of what's expected from these outcomes? And then given the time line for finishing enrollment, could we see -- because I think the follow-up is pretty short. Could we see data at ACC or HRS next year? Michael H. Carrel: Yes. Great question. I think you're right that, that is kind of what you said. We don't have any specific information because it's obviously a blinded trial. I don't know exactly what's happening within the trial relative to the individual patients or the randomization on that front. That being said, we do know sites that have utilized this technology for their postoperative pain. We've seen it in all the preliminary work that went into going into the trial. And what we saw was significant reductions as a result of that. So much in fact that we have several sites and even more. We've got 5-plus sites or so that have decided to adopt this and will not come into the trial because they're seeing such good results relative to using the EnCompass clamp plus the AtriClip to see significant reductions in that. If you look at the STS database, what you see is it's about 35% to 40% of all patients that undergo cardiac surgery go into postop Afib, sometimes you'll see up to 50% in some studies where you'll see it as high as that. And we're seeing in the trials in different areas that it's less than 10%. We don't need that to win the trial, though, and to have a meaningful clinical impact on it. So we feel really confident and really good about where this is going and the results that we'll wind up seeing. In terms of timing of results, you're correct. We think it's going to be around the end of the year based on the pace of enrollment we're seeing right now. I said around because it could be sometime at the end of December or early January time frame that we might have full enrollment in place. Then you're right, we've got about 30 days of follow-up from that last patient. And then we'll have to obviously adjudicate all of that data. So if you start to do the math, as you just described, probably not HRS, more likely a surgical congress that we would do some sort of late breaker. The surgical congress that is out that late is AATS next year. If we got the data earlier, STS is in the January, February time frame. Obviously, that is highly unlikely to make it that quickly, but we're hopeful that we can conclude the trial, get those initial results and get some data out there as a late breaker sometime at the AATS, which is around the same time as HRS next year. Operator: Our next question comes from Marie Thibault with BTIG. Marie Thibault: I wanted to spend a minute here on your international business. I think you called out some uncertainty on the U.K. side, which I know isn't brand new and also some lower distributor sales from APAC. So can you tell us a little bit more about what's going on behind the scenes there? And any visibility on when things might start to improve? And then it sounds like the direct markets, OUS have been healthy. So just any more color on those markets as well. Angela Wirick: Yes. Marie, you called out the 2 kind of headwinds that we're facing within our international business. The U.K. within Europe, we had anticipated that being a drag and talked I think, at length within our guidance that we've baked in a run rate that looks very similar to how we exited 2025. That held true for the first quarter of 2026 as we started the year. And then just with our larger distributors in Asia, inherently, distributor orders can be lumpy. We expect that pressure to be transient as we think about the rest of 2026. You mentioned it, but I'll remind everybody. I'd say outside the headwinds, we saw really good growth in our franchises in our direct markets in Europe, Australia and Canada. We continue to be excited about bringing new products into each of those markets and seeing the progress that the teams are making there and continue to focus on the NHS and making sure that our pain management device. And then kind of any other budgetary pressures, what we can control that we are addressing quickly to get this market to a rebound. So guidance does not assume any kind of recovery in the U.K. and then strong business in other areas within Europe and the distributors in Asia that that's expected to be transient again. Marie Thibault: Okay. Great detail. And then maybe my follow-up on the Convergent procedure side, just wanted to understand kind of how your view of that market has been evolving. Obviously, the PFA landscape has evolved quickly. So would just love an update on what you're seeing there on the ground. Michael H. Carrel: Yes. On the ground, we kind of talked about it very briefly during my remarks. There's definitely a continued headwind in that area. What we're seeing is the data is still incredibly strong and these patients benefit from using the Convergent platform. That being said, they're getting multiple PFA catheters first. They're trying one than another. Some are going up to 3. That's obviously delaying that pipeline and those patients coming through. That's why it becomes tough to predict exact timing for us on that. That being said, if you talk to most people that are actually using it, they actually do believe in it. They're just seeing fewer patients or they're trying to catheter out one more time before they actually send that patient on. So that's the reality that we're dealing with right now. That's why we've set the expectations as we have. But we really feel like those that are utilizing technology are getting incredible benefit, and we're having lots of -- we continue to have lots of good conversations with the EPs. And we do think that it's a solution that matters, and we have to continue to support. Operator: Our next question comes from Lily Lozada with JPMorgan. Unknown Analyst: This is Henry on for Lily. I just wanted to pivot a little bit to talk about the guidance. You were able to beat on the top line but you reiterated the revenue guide. Can you talk a little bit more about why that's not flowing through into the full year guide? And are there any headwinds in particular you'd like to call out for the remainder of 2026? Angela Wirick: Yes. I think on the top line guide, we came in ahead of our expectations, both top and bottom line, a positive start to the year, but it is still early in the year and want to see continued outperformance before we revisit the guidance. I think that's very much in line with our philosophy and track and impact years. We are guiding to numbers that we feel very confident that we can achieve and look to beat and raise throughout the year. The headwinds we just touched on is primarily within our international business and then in our hybrid ablation business in the U.S. and in the areas of outperformance, very similar to what you saw in the first quarter results. Expecting continued really strong growth within our pain management franchise, our open ablation franchise and appendage management as well. Operator: Our next question comes from Mike Matson with Needham. Joseph Conway: This is Joseph on for Mike. Maybe just one on international first, China and Japan. I was wondering if you guys could just maybe give a broad overview on where you are now with the portfolio in terms of approvals or launches and maybe where that portfolio could sit in China and Japan by the end of this year? Angela Wirick: Yes. Pretty comparable between both our China and Japan markets. You have the basic RF ablation devices. Neither market has EnCompass at this point in time. We just recently put China -- put our AtriClip in China. So that's a newer product launch in that market. And then within Japan, we've had different versions of our AtriClip on market and got expanded clearances for the mini devices more recently there and are working on other product launches. I think with any market that you enter into, you're looking at the product set and what the market can absorb given economic considerations, so on and so forth. But it is a subset of the overall products that we've got launched and are selling within the U.S. market. Joseph Conway: Okay. Great. Makes sense. And then one on appendage management. So obviously, a very strong year in 2025 and with new products, it's looking good as well. But with the increased competition, it's just, I guess, trying to get a handle on basically where they are, where your competitors are with trialing and incentives. Has that kind of steadied off? Are you seeing increased incentives for them to trial the product from your customers? Just trying to understand how these new entrants are affecting your sales or not affecting. Michael H. Carrel: Yes. And just right now, there's only one entrant in the market that's Medtronic. They do have a product that we compete with today. And as I mentioned in my comments, what we saw was they kind of peaked in market share back in the kind of summer time frame, late summer, early fall time frame. And we've seen with FLEX-Mini gaining more and more adoption at more and more sites that we're actually gaining some of that share back. We still have the predominant market share in the United States. We feel like the innovation that we put out there with FLEX-Mini, with PRO-Mini with obviously clinical evidence that we'll generate that will be very specific to our product that we're going to be in a very good place both in terms of who we're competing with right now and also if Edwards does come into the market. Obviously, they've mentioned that they're going to be coming into the market later on this year, and we will be ready for that. Again, the way that we know how to compete is to build the best products that are what the market really wants to meet those needs. We continue to innovate. On top of that, we've invested heavily in clinical evidence that's very specific to our product, both in the LeAAPS and in the BoxX trial, which both include the appendage, looking for the benefits that we can get for stroke reduction on that, that will be very specific to our product and our product only. And putting that level of evidence is something that none of the competition has actually started a trial down that pathway, and these are long trials. So it gives us a great deal of confidence in terms of the future for that. So. Continue with the innovation, continue with the clinical evidence gives us confidence that when competition comes in, whether it's the ones that are out there, the ones that are talking about coming into the market and there may be more in the future that we are going to be incredibly well positioned. We also believe, as I've mentioned on this call before, that competition coming into the market means it's a big market. It means that it is a multibillion-dollar market that can take on competition like this. All great markets in medical devices typically have several players in there, and we believe that, that's actually a really good sign that this is a big and robust market on the international scale. Operator: Our next question comes from John McAulay with Stifel. John McAulay: Just want to put a finer point on the 2026 guidance commentary you gave. So reiterating the top line range and adjusted EBITDA range. I just want to understand the intention there as you beat on both. Would you expect that we let numbers for the rest of the year sort of stay where they are to reflect the strength in the quarter or the hybrid and international headwinds you called out, you expect that those sort of offset the $2 million of upside as we look ahead to the rest of '26? Angela Wirick: John, no different from our philosophy on guiding. We are putting out numbers that we believe we cannot only meet, but that we've got a pathway to beat. I think with one quarter in, you're still early in the year. And specific to the top line, felt like the right and prudent thing to do at this point in the year was just to hold the guide and expect that we've got the ability to outperform no different than when we started the first quarter. On the bottom line, I'd say more of a shift in we are -- with the pace of enrollment on BoxX-NoAF, those costs are incremental, pulling enrollment in by a year into 2026, that is incremental to our plan in 2026 for the full year. We had a very strong margin -- gross margin in the first quarter, expect for there to be improvement over 2025. But that being said, some of the favorability on the margin side is transient, again, with the mix of the international business primarily. You take that kind of whole calculus and the diligence that we're seeing across the business to see improvement in leverage that positioned us really well to be able to absorb the additional trial costs and hold the bottom line guide where it's at. And again, no different are putting numbers out there, we expect not only to meet but to be. John McAulay: That's helpful. And just to make sure I'm understanding the dynamics OUS. So in the quarter, you highlighted 3.3% constant currency growth. Is that what we should be expecting for the year ahead? Or what are the drivers of acceleration or reacceleration we should be looking at in that business? Angela Wirick: Yes. Good question. I'd say the -- we are expecting our international business to grow on a reported basis closer in line to the overall company guide. So that would be kind of double-digit growth for our international business. You saw more favorability from a currency in the first quarter, expect for that to lean a bit as we think about the rest of the year. Strength in our direct markets in Europe, we expect for that to be a continued driver there. You've got newer product launches in that market. EnCompass is a big driver in our European market and then a bit of a rebound in our Asia distributors. Again, I think ordering patterns can be kind of lumpy there. So expecting that to rebound as well. And that's the calculus to get to kind of that mid-double-digit growth expectation for the year. Operator: Our next question comes from Danny Stauder with Citizens. Daniel Stauder: Just first one on pain management. Great to see the strong quarter. You noted improved market penetration in thoracic and sternotomy. But just on the latter of the 2, it's nice to hear you're starting to see traction. But I was just curious what was driving this of late. We've talked about sternotomy and that opportunity for a bit now. So I just wanted to see if there was any newer developments that's leading to this? Michael H. Carrel: Yes. Great question. I think what you're seeing here, Danny, is that you're seeing it works in sternotomy. It just takes a little bit longer to get there. With the MAX product that has reduced the time in half that really has improved adoption and the willingness of somebody to even try it. And then once they try it, they see really good results pretty quickly, and then it becomes a lot more sticky at that point in time. So I'd say that's really what you're seeing. It's not something that you'll ever get a hockey stick curve off of, I don't believe, but I think that you're going to continue to see nice robust growth within this area as we add more and more accounts. So we've got many accounts that are actually doing this now. It's no longer just a handful across the country. People are talking to each other. They're talking about the results, whether it's at trade shows or other places like that or peer-to-peer conversations, and that's really what's driving it. Daniel Stauder: Okay. Great. And then just one follow-up on the FTS quality metric update. Could you give us a little more color on this? First when will it start? And should we be thinking of this more as a longer tail growth over the next few years versus more near-term uptick? Just any more information on how we should think about this in terms of incremental adoption or just frame the potential revenue opportunity here would be really helpful. Michael H. Carrel: Sure. I'll start by saying just a reminder to everybody that in the U.S., about 35% of all patients that have Afib that undergo cardiac surgery actually get an ablation. And so that is obviously a very low number. You still have 65% left to go. The quality metric is meant to address that. It's meant to say that -- and what they put out there was that there'd be 70% of the patients actually get treated. That number will likely grow. That was the commentary that was at STS back in January of this year. They anticipate that they'll put some teeth into it. They wanted to roll out that this is becoming a quality metric. And that quality metric will go into effect sometime in 2027, at which point in time there will be some teeth in it in terms of they'll be measured on it. It will be recorded in the STS database. How that's all -- the specifics behind that are still not disclosed yet by STS, but that is coming out. To give you some perspective, I mentioned in the call that previously, the last time they did any kind of therapeutic view like this, it was the Lima to the LAD. And when they made it a quality metric, it went from about 10% adoption up to 99.8% adoption or so today. So quality metrics matter. They make a difference. People look at them, hospitals look at them, they affect their ratings. And so we do anticipate that on the Afib side of things, we should see some uplift relative to the Afib side in 2027 as they're kind of rolling this out. And obviously, that will continue into '28 and beyond. So we think that's going to be a big boon and positive for us on the ablation side to improve that penetration from 35% in the U.S. to hopefully obviously getting it closer to 80%, 90% or so at some point over the next 3 to 5 years. So we've got a lot of room for growth. This is a little bit of -- I don't know, you can call it care or stick depending on how you want to look at it, but it's an incentive either way for people to do the treatment. On top of that, obviously, we're going to have data that comes out on the non-Afib patients. And we believe you combine that with the quality metrics and the fact that the EnCompass clamp is so easy to use that we will start to see some really nice adoption overall over the next 3 to 5 years in a big way. Operator: Our next question comes from Keith Hinton with Freedom Capital Markets. Keith Hinton: I just have a quick one on AtriClip. Can you just talk a little bit -- and I apologize if I missed this, I'm jumping around a little bit. But can you talk a little bit about the use of FLEX-Mini versus the prior generations in open appendage? And then more broadly, can you just talk about the current ASP for AtriClip in the U.S. and how we should think about those dynamics going forward as uptake continues for FLEX and PRO-Mini? Angela Wirick: Yes, I'll take this one. The AtriClip FLEX-Mini, what we are seeing is a pretty steady conversion from our last-generation AtriClip device, the AtriClip FLEX fee, less so from the original AtriClip device, which is still on the market. But between the 3 products, you've got different price points, and you've also got the ability for a surgeon to choose depending on the approach that they want to take for managing the appendage. Exiting the first quarter 2026, we were up to about 40% of the revenue in the U.S. in open appendage management in the FLEX-Mini clip. We exited last year a little over 35%. So we continue to see steady share gains by that new product launch. And from an ASP perspective, we're well positioned by offering a range here as low as $1,100 with the original AtriClip device for accounts where pricing is a sensitivity and the FLEX-Mini clip up to $2,250. Operator: Our next question comes from Suraj Kalia with Oppenheimer & Co. Suraj your lines is open, please unmute your button. I am showing no further questions at this time. I would now like to turn it back to Mike Carrel for closing remarks. Michael H. Carrel: Great. Well, I just wanted to thank everybody for joining for the call today after an exciting Q1 and what's starting to be a great 2026 overall. So thank you for joining. We appreciate it. We look forward to talking to you again in July. Talk to you soon. Operator: This concludes the question-and-answer session. This concludes today's conference call as well. Thank you for participating. You may now disconnect.

4天前Insight Analytics约5分钟阅读

FORR 2026 Q1 财报电话会议

Operator: Good afternoon, and thank you for standing by. Welcome to Forrester Research, Inc.'s first quarter 2026 conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to the Vice President of Corporate Development and Investor Relations, Edward Bryce Morris. Please go ahead. Edward Bryce Morris: Thank you, and hello, everyone. Thanks for joining today's call. Earlier this afternoon, we issued our press release for the first quarter 2026. If you need a copy, you can find one on the website in the Investors section. Here with us today to discuss our results are George F. Colony, Forrester Research, Inc.'s chief executive officer and chairman, and Chris Finn, chief financial officer. Carrie Johnson, our chief product officer, and Christophe Favre, chief sales officer, are also here with us for the Q&A section of the call. Before we begin, I would like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “intends,” “plans,” “estimates,” or similar expressions are intended to identify these forward-looking statements. These statements are based on the company's current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. Factors that could cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission, and the company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. Lastly, consistent with our previous calls, we will be discussing our performance on an adjusted basis, which excludes items affecting comparability. While reporting on an adjusted basis is not in accordance with GAAP, we believe that reporting these numbers on this adjusted basis provides a meaningful comparison and appropriate basis for our discussion. You will find a detailed list of items excluded from these adjusted results in our press release. And with that, I will hand it over to George. George F. Colony: Hello, and welcome to Forrester Research, Inc.'s Q1 2026 earnings call. With me is our chief financial officer, Chris Finn, who will deliver a financial report following my remarks. I will be covering four key themes today: one, our financial performance in 2026; two, trends in the AI world and their impact on Forrester Research, Inc.; three, an update on our journey to become the AI research company, including key research releases; and four, an update on our progress toward our four company initiatives. Starting off with a summary of our financials. In Q1, we saw continuing momentum on our key business indicators. Wallet retention improved by two points from last quarter to 89%, which is up three points from the previous year. Client retention improved by one point from the prior quarter to 78%, up five points from the prior year. Finally, the percentage of multiyear deals as a percentage of our total CV reached 72%, up from 71% last quarter. On the CV side, we saw a decline of 3%, an improvement on the 6% decline in 2025. Our revenue was down 5% from the prior year at 85.5 million. Research revenue was down 2% while consulting revenues declined by 13%. Consulting weakness is associated with our decision to exit the strategy consulting business in 2026. We had strong cash flow in the quarter, delivering 19 million of free cash flow. We are increasing the low end of our revenue guidance, driven by improving metrics and confidence in our business, and Chris will go into more detail shortly. AI technology continues to shift and evolve at fast rates, presenting our clients with two challenges. One, they will have to construct a private model that will serve their customers. And two, they will be replacing many of their internal systems like CRM or financials with new software based on what Forrester Research, Inc. calls AI computing. The market is composed of public models built by Anthropic, OpenAI, Google, and others, and private models deployed by Bank of America, Bloomberg, and many other large enterprises. Forrester Research, Inc. believes that approximately 70% of the revenue earned through AI in the future will come from private models, not public models. Why will private models proliferate? Data sensitivity, regulatory pressure, and intellectual property protection will increasingly push businesses to build and operate their own AI models for specific use cases across banking, insurance, and other sensitive industries. Retaining customer trust will be a primary incentive driving the construction of these models. The second challenge will be rebuilding internal systems using new software constructed with AI computing technologies, primarily agentic AI. The way that our clients operate their businesses will be vastly changed over the next five years. Why are these two changes relevant to Forrester Research, Inc.? Whenever there has been a revolution in how large companies connect to their customers, as with the advent of mobile and social, our business in B2B marketing and B2C marketing has grown. And when global enterprises move to a new generation of internal systems, as with cloud computing, our technology research business has historically expanded at faster rates. Change is the gasoline that drives our model faster, and the AI wave is forcing unpredictable and relentless change on our clients. This was very evident last week when we held our B2B Marketing Summit in Phoenix. The theme of that event was the go-to-market singularity: how AI is radically changing the rules of developing, marketing, and selling products in the B2B world. In the first quarter, we released over 420 research reports and datasets, and I wanted to highlight two of them here. A report entitled “Accelerate Your AI Voyage” found that most enterprises are struggling to turn growing AI adoption and investment into measurable business impact. One of the key factors holding businesses back is low artificial intelligence quotient, or AIQ—Forrester Research, Inc.'s measure of AI aptitude—with many employees lacking a clear understanding of how to use the technology. Other barriers include an overemphasis on productivity-focused use cases, difficulty measuring impact, and siloed adoption within individual functions. This report surveyed over 1,500 AI decision-makers at firms accelerating their AI efforts. It found that while there is an urgency to adopt AI, many businesses are paralyzed by a lack of understanding and disjointed, siloed adoption. “Forrester's AI Use Case Catalog,” another report, is designed to help senior decision-makers narrow their options on where AI should be applied. It includes more than 900 use cases organized by functions, industries, and desired outcomes. The tool allows clients to filter their specific needs to serve as a short list of use cases and pinpoint the AI opportunities that best align to their specific business goals. We are leading this new era by expanding our research coverage of AI, but that is not the only way that we are seizing the moment. As we have discussed on previous calls, we are using AI technology to improve the way that our clients use our research and services, and I want to take this opportunity to update you on our progress. We have upgraded our AI model from the first generation, what we call Izola, to a new generation, Forrester AI. This new version has improved capabilities. One, the model is now fully conversational, enabling clients to go deeper into our content. Forrester AI suggests prompts, leading users to comprehensive answers. Two, we made structural improvements to bring more transparency and depth to the responses. When a user types a prompt, Forrester AI is deploying reasoning to show how it arrived at the response, surfacing the key steps and research underlying the answer. And three, Forrester AI provides responses in 197 languages. In March, we announced that Forrester AI is certified for Microsoft Teams and is available as an app in Microsoft Marketplace. This means that a client can use Forrester AI from within Teams—we are going where our clients work and live. Last week at B2B Summit in Phoenix, we announced that clients will be able to work in Microsoft Copilot but receive analysis and answers from Forrester AI. These answers can be integrated with a range of Microsoft tools, including emails, presentations, and documents. We are doing this through the deployment of our model contact protocol server. In addition to Teams and Copilot, we are developing integration with other models and systems—again, going where our clients work. Client adoption of Forrester AI continues to grow. Usage hit an all-time high in Q1, with overall usage up 55% year over year and prompt volume up 65%, reflecting growing client demand for trusted, research-based AI guidance. Turning finally to our four key initiatives for the year. While these are internal initiatives, I thought that investors should be informed on our progress. They are: one, execution of the retention life cycle, our post-sales program for ensuring that clients are engaged and getting value from our research. From Q4 to Q1, the customer success organization accelerated clients’ time to onboard. This is one factor in helping us to improve client retention numbers. Two, expanding the product portfolio and embedding Forrester AI where clients work. With the Teams and Copilot integrations, we are on schedule here. We are leading AI. Three, building a culture of growth within sales. Q1 was the first quarter under the guidance of our new chief sales officer, Christophe Favre. We have made a good start to the year, with Q1 CV productivity per rep 6% higher than a year ago. We have intensively trained the sales force on how to position and sell our new Forrester AI portfolio. And four, offering actionable, all-seasons research. We are building more research that our clients can apply immediately and research that is relevant even when companies are not transforming—hence, all-seasons. This imperative is on track as we have created 70 initiative blueprints in Q1—step-by-step guidance on how our clients can advance their most important projects. The year has gotten off to a good start with Forrester AI growing, more practical research in the hands of our clients, engagement with the clients accelerating, and sales continuing to focus on expanding CV. We are turning the company back toward growth, and we have made a good start executing that pivot. Thank you, and I will now turn the call over to Chris. Chris Finn: Thanks, George, and good afternoon, everyone. In the first quarter, we saw improvements in our key metrics, continuing the momentum we experienced in 2025. Client retention and wallet retention continue to improve, and the decline in CV continues to slow. With the improvement in our metrics and progress on our strategy—embedding our products where our clients work—we are raising the low end of our revenue guidance for the year. In addition, we generated strong free cash flow of approximately 19 million for the quarter. Excluding our one-time headquarters CapEx of 5.4 million, free cash flow was approximately 25 million. Q1 saw a 3% CV decline in the quarter, and based on incremental improvements over the coming quarters, we continue to expect CV to be slightly up for the year, driven by the following areas: one, client demand for trusted advice to help them navigate their AI journey; two, our continued investment to enhance the capabilities of Forrester AI; and three, our product strategy with AI Access and embedding Forrester AI in clients' existing work environments, along with further product portfolio enhancements to come. All these initiatives will continue to support and drive improvement in CV performance. These ongoing efforts are laying the foundation for sustained CV growth in the coming years. For the total company, we generated 85.5 million in revenue, compared to 89.9 million in the prior-year period, which is an overall revenue decrease of 5%. As we outlined on our Q4 call, we expect revenue to decline this year due to bookings declines we experienced in 2025, the sunsetting of our strategy consulting business, and the reimagined events portfolio. In terms of our revenue breakdown for the quarter, research revenues decreased 2% compared to 2025, with revenue from research products down 4%, offset by growth in reprints. Client retention of 78% was up one point from the prior quarter and up five points from the prior year. Wallet retention was up two points to 89% from 87% in the prior quarter and up three points from the prior year. We believe the retention improvements reflect the ongoing alignment and improvements across the go-to-market ecosystem of customer success, sales, and research functions as they execute on the retention life cycle work. Our consulting business posted revenues of 18.6 million, which was down 13% compared to the prior year. The content marketing business was down 5% while the advisory business was up slightly. The majority of the decline can be ascribed to the strategy consulting business, which we stopped actively selling early in the quarter. We will continue to execute delivery on existing strategy consulting backlog over the coming quarters and exit this business by year-end. Regarding our events business, revenues were insignificant this quarter and in the prior year, as we did not hold any events during these periods. Continuing down our P&L on an adjusted basis, operating expenses for the first quarter decreased by 1%, primarily driven by lower real estate costs. Headcount was down 8%; however, these savings were offset by one-time costs largely associated with now-concluded litigation. Operating income decreased by 135% to negative 0.9 million, or negative 1% of revenue in the current quarter, compared to 2.5 million, or 2.8% of revenue, in 2025. Interest expense for the quarter was 0.8 million, up from 0.7 million in 2025. Finally, net income and earnings per share decreased 135% and 136%, respectively, compared to Q1 of last year, with net income at negative 7 million and earnings per share at negative 0.04 for the current quarter, compared with net income of 2 million and earnings per share of 0.11 in 2025. Looking at our capital structure, first quarter cash flow from operating activities was 25.6 million and capital expenditures were 6.2 million. Approximately 5.4 million of capital expenditures are associated with the one-time physical buildout of our Cambridge headquarters. Remaining cash spend for the buildout, net of reimbursements from the landlord, will be approximately 4 million to 5 million. Our balance sheet is strong, with cash at the end of the quarter of over 145 million and debt of only 35 million. In addition, in March, we executed an extension of our credit facility, moving the maturity date to March 2029. We did not pay down any debt nor did we repurchase any shares in the quarter. Moving on to guidance. For 2026, we are increasing the low-to-midpoint range of our revenue guidance, with the rest of our guidance remaining unchanged. Let me provide some additional commentary on our outlook for the year. For 2026, we now expect revenue to be 350 million to 360 million, or down 9% to 12% versus 2025. The increased confidence in the range is driven by the metric improvements previously discussed and stronger sponsorship bookings for the upcoming events. This guidance assumes the outlook for research to be a mid-single-digit decline, consulting to be a decline in the low 20s, and events to be a decline in the mid to high teens for the year. Despite the first quarter one-time expenses, we still expect our operating margins to be in the range of 6% to 6.5% for 2026, and interest expense is expected to be 2.3 million for the year. We are guiding to a full-year tax rate of 29%. Taking all of this into account, we still expect EPS to be in the range of 0.72 to 0.82 for the full year. We are continuing to see the positive momentum we experienced as we exited 2025. The first quarter of 2026 saw significant enhancements to our Forrester AI capabilities. This included embedded access via Microsoft Teams and the launch of the Forrester AI agent in Microsoft Copilot public models and custom applications as we embed Forrester AI into the places where our clients work. In addition, our unique research focus on key AI topics puts Forrester Research, Inc. in a strong position to take advantage of the upcoming AI demand. We are looking to capitalize on this demand, continue our focus on execution, and use it to drive continued metric and operational performance throughout 2026. Thank you all for taking the time today. I will hand the call back to George. George F. Colony: Thank you, Chris. To conclude, we are making steady progress on our four key initiatives for the year, including our execution of the retention life cycle, increased product options and AI opportunities, a renewed culture of growth within sales, and actionable, all-seasons research. As a result of these measures, we are seeing early but encouraging positive signs in our key metrics. We will now open the call for questions. I will now turn the call over to the operator for questions. Operator: Thank you, sir. As a reminder, to ask a question, you will need to press 1-1 on your telephone. To withdraw your question, please press 1-1 again. Our first question comes from the line of Anja Soderstrom from Sidoti. Please go ahead. Anja Soderstrom: Hi, thank you for taking my question. First, I am curious, given that you see contract value decline but expect that to increase in the coming quarters, what gives you confidence in that? Unknown Speaker: Sorry. Can you repeat the question? Anja Soderstrom: Yes. You mentioned you expect incremental increases in the contract value in the coming quarters. What gives you confidence in that? Chris Finn: From a contract value standpoint, we have seen really strong bookings this year compared to last year on the sponsorship side, and we are coming off a really great B2B event in Phoenix where engagement was incredibly strong with clients. We had a significant increase—actually, we were up 10% on attendees. All the metrics are pointing in the right direction on the events business—certainly much stronger starting this year off with event season than last year or prior years. We continue to expect that momentum to move in the right direction. The way the events business works, attendees and sponsorships are sold significantly in advance, so we are seeing really good engagement there this year, and we are really excited. I think a lot of the changes that we made in the format—more local and customized content—are really making a difference. Anja Soderstrom: Thank you. And then, in terms of the product portfolio expansion, what does your roadmap look like for the rest of the year? Carrie Johnson: Hi, Anja. Thank you for the question. We have two key initiatives on the product portfolio front. One is providing clients with more options in the way that they buy Forrester Research, Inc. AI Access was a big change that we announced last year, and we are seeing good success there, and you will continue to see more of those types of products—both for some access options for Forrester Research, Inc. and then also to work more closely with our most senior analysts. Stay tuned for that on the roadmap. The other side of the roadmap is, as you have heard, a lot of Forrester AI. We continue to have major releases of Forrester AI, as George mentioned, and also plan to continue to deliver on what we call our “where you work” strategy, which is embedding Forrester AI where clients work. George talked about Copilot—stay tuned for more options for our clients that work in other types of tools as we build out that roadmap throughout the year. George F. Colony: Yes, there are two major initiatives here, Anja. One is embedding AI where our clients work, as Carrie just said, and the other one is filling out the product line so she has more optionality—so embedded and optionality. Anja Soderstrom: Okay. And as you get embedded in these systems, do you see a strong uptick in interest, or how is that affecting your sales model? Carrie Johnson: We launched Microsoft Teams first in March, and that was very well received. The launch of Copilot has actually seen traction double even that, which I think is a good testament to some clients finding it on their own through things like the Microsoft Marketplace, because it is such a compelling offer to remove friction in accessing Forrester Research, Inc.’s insights and now getting true advice alongside their actual work. We are really pleased with what we are seeing so far there. Christophe Favre: And from a sales perspective, Anja, it is clear that large enterprises are willing to scale intelligence across their different functions, and Forrester Research, Inc. has the ability with Forrester AI to deliver trusted advice fast. Those organizations are looking to elevate leaders’ confidence to act and decide in this period of uncertainty, volatility, and opportunity with the AI revolution. I am training my sales organization to be able to sell those large enterprise-wide deals, and we see a very interesting pipeline moving forward. Anja Soderstrom: Thank you for that color. I also have a follow-up for you. You mentioned in prepared remarks that you are building a culture of growth within sales. Can you talk about what changes you made for the sales force to motivate them more? Christophe Favre: We already have some pockets of growth in the international market. My focus since I took my new role has been on the North American business. We have organized North America around six industries where Forrester Research, Inc. has strong expertise and growth opportunities. I have redefined the territories to ensure that our best account managers and our best new-business developers are in front of the highest-potential accounts. The second thing I have done is train our sales force to leverage AI to improve their productivity and feel more confident when discussing key AI changes taking place in the marketplace. So one, changes on the territories; two, training; and three, building their confidence. Everybody is excited by the new Forrester AI roadmap that we put in place. Anja Soderstrom: Thank you so much. That was all for me. Christophe Favre: Thanks, Anja. Operator: Thank you. Our next question comes from the line of Vincent Alexander Colicchio from Barrington Research. Please go ahead. Vincent Alexander Colicchio: Christophe, what portion of the changes that you plan to make have started to get implemented? And how long before you expect the changes you bring to bear to have a meaningful impact? Christophe Favre: Vince, I wanted to act fast because the opportunity is in front of us. All the organizational changes that I just discussed have been put in place in the North American business, and we have put sales technology and marketing technology in place to help that organization grow in efficiency. We can now really take advantage of the new Forrester AI portfolio, and we are starting to see pockets of growth in the North American business. I will name two industries where we see that growth: high tech and the industrial sectors. We see some good momentum here. George F. Colony: Vince, George here. Christophe is not one to wait. He is moving quite fast, and everything he is speaking about, he is implementing. Vincent Alexander Colicchio: Good to hear. Next question on the sales pipeline for CV. Has that improved since last quarter? Christophe Favre: Yes. We see consistency in the growth pipeline, and we have seen acceleration in two areas. One, thanks to Forrester AI, organizations are really looking for help in adopting AI and getting trusted advice faster, and with Forrester AI we have a unique competitive edge in the marketplace. The other is that we are starting to see very large organizations interested in our embedded portfolio, and the announcements we made regarding our partnership with Microsoft Teams as well as Microsoft Copilot have resonated in very specific industries. That is looking good. Vincent Alexander Colicchio: Which industries? Christophe Favre: We have seen financial services, agencies, and government being interested in that type of solution. Vincent Alexander Colicchio: And George, how is AI Access performing? Is it helping to bring back old clients? Carrie Johnson: We are a little bit ahead—AI Access has basically hit our expectations, especially on two fronts. One, new business, which is quite useful for our win-back programs of former clients who are looking for more flexible price points but appreciated Forrester Research, Inc.’s insights and advice. Christophe can expand on that. And the other is expansion within existing accounts, which is also the role of launching that product. We are pleased it is doing what we wanted it to do for our CV portfolio. George F. Colony: Forty percent of reps have now sold AI Access, so that is very encouraging. Chris Finn: And Vince, this is Chris. I would add that we are seeing good momentum as a percentage mix of the portfolio from a CV perspective. It is just under 5%, and in the near term, we expect it to approach 10% as we exit the year and get into 2027. We are really happy that, as we look at our CV per client, we are not seeing any degradation there. CV per client has been pretty consistent in that 160,000 to 180,000 range, so we are really happy with that. We are not seeing cannibalization at all either. Vincent Alexander Colicchio: Thanks, guys. I will go back in the queue. George F. Colony: Vince, thanks very much. Appreciate it. Operator: I am showing no further questions in the queue at this time. I would like to turn the conference back over to Chris Finn, chief financial officer, for closing remarks. Chris Finn: Thanks, everyone, for joining today. Please reach out to Edward Bryce Morris or me if you have any follow-up questions. Appreciate it. Unknown Speaker: Thank you. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

4天前Insight Analytics约5分钟阅读

CORZ 2026 Q1 财报电话会议

Operator: Greetings. Welcome to the Core Scientific, Inc. Fiscal First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Jon Charbonneau, SVP, Investor Relations. Please go ahead, sir. Jon Charbonneau: Great. Thank you. Good afternoon, and welcome to Core Scientific, Inc.'s first quarter 2026 earnings call. Before we begin, I need to remind you that statements made on this call other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are based on our current expectations. Words such as “anticipates,” “estimates,” “expects,” “intends,” and “believes” and similar words and expressions are intended to identify forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ substantially. For further information on these risks and uncertainties, we encourage you to review the risk factors discussed in the company's reports on Form 10-Q and 8-Ks filed today with the SEC and the press release and slide presentation contained therein. The forward-looking statements we make today speak as of today, 05/06/2026, and we do not undertake any obligation to update any such statement to reflect events or circumstances occurring after today. Today’s presentation is available on our website investors.corescientific.com. The content of this conference call contains information that is accurate as of today, 05/06/2026. Joining me today from Core Scientific, Inc. are our CEO, Adam Sullivan, Chief Operating Officer, Matt Brown, and Chief Financial Officer, Jim Nygaard. We will conduct a question and answer session after management’s remarks. We will now begin with remarks from Adam. Adam Sullivan: Good afternoon, everyone, and thank you for joining a platform designed to support the most demanding compute workloads in the market. Over the past year, we have translated that strategy into execution, delivering high-density capacity at scale across multiple states. Those sites were an important starting point; our first customer was never Core Scientific, Inc.’s full story. Delivering these initial sites enhances our operating credibility and provides a significant capital foundation we need to scale meaningfully from here. We have shown clearly our ability to deliver at scale. Across five sites, we are now developing one of the largest multisite AI infrastructure buildouts in the market. We are now earning revenue on approximately 245 megawatts, with another 200 megawatts expected to be earning revenue in the coming months. Our execution, combined with the favorable structure of our CoreWeave contracts, has enabled our next phase of growth. Today, we closed on a $3.3 billion capital raise supported by that contract, with the proceeds to be used for future growth and the development of projects for other customers. The fact that we have five facilities fully leased and financed by our tenant is a meaningful differentiator. We have the ability to push the next phase of development in a disciplined way by securing the land, labor, and equipment to protect timelines and accelerate delivery. As these new projects are leased, we expect opportunities for further financing to continue the cycle of our forward development go-to-market strategy. Our next phase of development has already begun. In late last year, we committed existing cash on hand to purchase equipment for our other existing sites. With the new secured financing, we are now accelerating development activity across multiple sites including Pecos, Muskogee, Hunt, Dalton Phase III, and Auburn. This positions us differently in the market. We are not waiting for deal negotiations to conclude before advancing sites. With capital in place, we can move early, bringing RFS timelines within the 12 to 14 month time frame that customers are actively trying to solve for. We are also scaling our campuses in a repeatable way. Today, we announced a path to approximately 1.5 gigawatts at Muskogee, closely following a similar plan. A key enabler of that scale is our power strategy. Customers are increasingly focused on solutions beyond existing grid capacity, including behind-the-meter options. We are proactively positioning our sites to support those needs, including efforts to secure natural gas infrastructure where appropriate to enable future expansion. Pecos is a clear example. We are actively converting the site from Bitcoin mining to high-density colocation with construction already underway and a pathway to RFS within 12 months. Muskogee is another. We see a path to 1.5 gigawatts of gross power supported by grid expansion, the Polaris acquisition, and behind-the-meter solutions, and we expect to deliver additional data center capacity outside of our current contract in late 2027. Stepping back, we are executing a repeatable model: secure strategic sites, invest ahead of contracts where appropriate, and create assets that are increasingly compelling as they approach readiness. That brings me to our commercial progress. We are engaging customers from a position of strength. Because development is already underway, our timelines are not dependent on contract timing—an important distinction in this market. As we previously discussed, we are engaged in an exclusivity process with a hyperscaler across Pecos and Muskogee. That exclusivity is now expired. However, three hyperscalers immediately engaged on those same sites. We are now in active discussions. This reinforced both the strategic value of these assets and the depth of demand for large-scale, high-density capacity. It also informed how we approach exclusivity going forward. While it likely remains a necessary part of some deal negotiations, it must also include clear milestones. In a market like this, we will not keep high-value assets off the market longer than necessary. More broadly, our conversations with potential customers have increased significantly since the beginning of the year. Hyperscalers remain our primary focus and we are also seeing growing engagement from chip makers, AI labs, and Neo Cloud providers. These emerging customer segments represent meaningful opportunity, though they often require additional credit support. We are actively working with customers and financing partners on structures that can support long-term financeable commitments. Stepping back, our position is clear. We are building a scaled, high-density digital infrastructure platform with a diversified site portfolio. We are deploying capital to secure timelines and accelerate delivery. We are also seeing strong customer demand. Based on our execution, capital position, and commercial momentum, we are confident in our ability to continue expanding and creating long-term value for our customers and our shareholders. With that, I will turn the call over to Matt Brown to provide more details on our operations and development progress. Matt? Matt Brown: Thanks, Adam. As we reflect on the first quarter, our operational priorities remain clear: execute on our existing build pipeline, bring capacity online efficiently, and position the business for the next phase of large-scale expansion. Demand for high performance compute infrastructure remains strong, and we have focused on aligning our delivery timelines, supply chain readiness, and power strategies to meet that demand. I will begin with an update on our CoreWeave dedicated facilities, where we continue to execute at pace and at scale. Today, I am pleased to announce that we have delivered 243 megawatts of billable capacity to CoreWeave. This includes a milestone with a full turnover of both our Marble, North Carolina and Dalton, Georgia Phase I data centers. At Marble, we completed construction and successfully transitioned the entire facility into operations, bringing 65 megawatts of billable capacity online. At Dalton Phase I, we likewise achieved full site handover and delivered 30 megawatts into service. These milestones reflect the team’s ability to execute efficiently at scale, transition assets seamlessly from construction to revenue generation, and consistently align to customer timelines—all of which remain critical as we continue to move forward. Across our remaining contracted sites, we will continue delivering billable megawatts over the coming months while scaling execution on the CoreWeave contract, positioning us to deliver more than 450 megawatts billable by the end of the summer, while remaining on track to deliver the full 590 megawatts by early 2027. Now turning to our non-CoreWeave developments, where we are advancing our development strategy. Our Pecos, Texas campus is one of our most significant development opportunities, with a plan to scale from 300 megawatts to 1.5 gigawatts through a multipronged expansion strategy. At the core is our power roadmap. We have secured an additional 300 megawatts and are advancing a mix of grid-connected and behind-the-meter solutions to support long-term growth. The behind-the-meter strategy leverages low-emission generation and includes the construction of a linear gas pipeline to the campus. Together, these efforts are designed to accelerate time to power, enhance resilience, and reduce supply chain risk while enabling us to meet hyperscale demand. In parallel, construction of our initial 431 thousand square foot, 185 megawatt facility is progressing from civil work into foundation phases, with precast walls arriving for vertical construction. All the long-lead items and equipment have been secured, helping reduce execution risk and support timelines. We are also advancing infrastructure for high-density colocation, including redundant fiber capacity and a new regional interconnect point in Midland, Texas, linking back to the Pecos campus. At our Muskogee, Oklahoma campus, today we announced plans for the expansion of the site to 1.5 gigawatts of gross power, or approximately 1 gigawatt of leasable capacity. Similar to Pecos, this expansion will leverage a combination of behind-the-meter infrastructure and utility-supplied power, including the roughly 440 megawatts acquired through the Polaris transaction. With our general contractor already secured on-site, we have begun development of the first 82.5 megawatt building with initial delivery expected in the second half of 2027. And finally, turning to other development sites: Hunt County, Texas; Dalton, Georgia Phase III; and Auburn, Alabama each continue to advance through preconstruction milestones and remain on track to meet their initial delivery timelines. In closing, as we look ahead, we remain confident in our ability to execute against our commitments and capture the opportunities in front of us. The combination of strong demand, a growing portfolio of scale developments, and continued progress on our power infrastructure strategies position us well for the quarters ahead. With that, I will turn it over to Jim. Jim Nygaard: Thanks, Myles. During the first quarter, we reached an important inflection point as our colocation revenue scaled to a level sufficient to cover operating costs and began expanding margins. This marks a meaningful milestone in our transition, with colocation now becoming an important driver of our overall financial profile. Today, we are billing for 243 megawatts, which equates to more than $350 million of annualized colocation GAAP revenue, with significant additional capacity expected to begin billing over the next several months. As a reminder, under GAAP, revenue from the CoreWeave contract is recognized on a straight-line basis over the 12-year lease term, effectively pulling escalators forward. From a Bitcoin mining perspective, we remain focused on optimization and are running that business to help offset contractual power costs as we continue the transition toward high-density colocation. Going forward, we expect mining activity to continue winding down over the course of the year, with a meaningful step down in miners online in the second half. Earlier this year, we monetized a significant portion of our Bitcoin holdings and currently retain only a modest amount of Bitcoin on the balance sheet. Moving on to costs, first quarter SG&A on a cash basis was just over $30 million. While we are not providing explicit SG&A guidance, we believe this level represents a reasonable baseline for corporate expenses going forward, with the potential for opportunistic investments to support growth over the next few years. Separately, you may have noticed that we increased our target cash gross profit range for the CoreWeave contract to 80% to 85%, up from our original target of 75% to 80%. We first introduced that target roughly two years ago, and today we have much greater visibility into the associated cost structure given we are now billing for a meaningful portion of the contracted megawatts. With that operating backdrop, let me turn to capital formation, where today marked another major milestone for Core Scientific, Inc. We closed our previously announced $3.3 billion CoreWeave project bond financing at a 7.75% interest rate, which we view as a highly attractive cost of capital for a financing of this scale. After closing costs and funding the required debt service reserve account, net proceeds were approximately $2.9 billion. For additional context, the bonds include a lockbox structure, which is a cash control mechanism where project revenues are paid directly into a designated account and then applied through the indenture-defined cash waterfall—first to operating expenses, then to debt service, and finally to other uses permitted by the indenture. Unlike a traditional project finance structure, where a lockbox is created to fund a specific project under development, our structure enables the distribution of the vast majority of offering proceeds up to the corporate level to facilitate investments in a variety of new projects outside the box. Going forward, the lockbox will service the debt secured by CoreWeave contracted site assets and cash flows. From this perspective, the transaction significantly strengthens our consolidated capital position, validates the quality and predictability of our contracted cash flows, and gives us the ability to execute the next phase of our growth plan with greater flexibility, speed, and certainty. We expect to deploy roughly $2 billion of total capital expenditures in 2026. This includes approximately $700 million for both the Hunt County, Texas site acquisition, which closed yesterday, and the Polaris acquisition at our Muskogee, Oklahoma site announced earlier today, as well as expenditures to begin pre-seeding approximately 1 gigawatt of new billable capacity. This includes long-lead-time equipment procurement and various site development and utility support activities across multiple project locations. We are strategically positioning the business to sign attractive new customer contracts with capacity outside of CoreWeave available for delivery starting in early 2027. The platform we are building, together with cost-effective capital we have secured for new project equity investments, is differentiated in the market, and we believe it positions Core Scientific, Inc. to create meaningful long-term shareholder value. Lastly, we recently welcomed Jorge Rey as our Chief Accounting Officer, further strengthening our finance and accounting team. Jorge brings valuable accounting and public company reporting experience, and his leadership will be important as we continue to scale the business and support our next phase of growth. I will now turn the call over to the operator for questions. Thank you. Operator: We will now open the call for questions. Our first question will come from Brett Knoblauch with Cantor Fitzgerald. Brett Knoblauch: Hi, thanks for taking my question and congrats on the site expansion at Pecos and Muskogee. I guess maybe just on the hyperscale exclusivity that expired—clearly, there is demand with additional tenants kind of backfilling that—but could you maybe shed light on why it expired, why it did not progress? Is there anything that maybe the sites were not of interest or that they were not interested in, or just give some more color around that dynamic? Adam Sullivan: Yes, absolutely. And thank you, Brett. Those sites, as you mentioned, are incredibly attractive—both Pecos and Muskogee, given their ability to scale, represent tremendous opportunity for a hyperscaler. As we noted in prepared remarks, three hyperscalers immediately engaged. They are incredibly attractive sites. With the one that we were under exclusivity with, it is hard to determine the exact reasons why, but for us, we got to the end of the exclusivity and we thought this is the best time for us to bring these back to market. Hyperscalers were knocking at the door and asking questions about the sites. We knew we could have an opportunity to bring another hyperscaler into the fray. So we feel great about our position today, given the competitive dynamic. Brett Knoblauch: Perfect. And maybe just one follow-up. It seems like the AI pendulum is swinging into full bull mode here, and you guys do have a lot of capacity available to the kind of RFS by early 2027. Do we think we are closer to maybe a second tenant today than we were when you guys reported 4Q in early March? Adam Sullivan: Yes. When you look across our site portfolio, we have five sites with first data halls RFSing in 2027. It is an incredibly unique position, given the different size and scale and geography spread that we have inside our portfolio. We are in conversations with all of the hyperscalers, chip makers, AI labs, Neo Clouds. We are in a unique position here just given the asset spread that we have, and so I would say definitely across the entire site portfolio, we are closer than we were before. Operator: Our next question will come from John Todaro with Needham and Company. John Todaro: Congrats on the expansion of power. Two from me. Going to the other three hyperscalers you are now in conversation with—if we frame it up, was there already some dialogue at some point? It is a limited universe. Should we be thinking it is kind of starting the process anew with them, or there has already been some dialogue along the way and you are pretty far along, and we could get something maybe a bit sooner than necessarily restarting the process? Adam Sullivan: Thanks, John. Our relationship with these groups is not new. We are engaged with them on other sites. This was just really bringing both Pecos and Muskogee back to the table, and that is really why we were able to immediately reengage with those customers. John Todaro: Got it. Understood. That is very helpful. And then you mentioned starting some of the process on building out some of these assets before a lease gets done at some of them. Is there any guardrail on how much CapEx you would start putting forward before getting a lease? Adam Sullivan: Yes. The way we are thinking about it right now is we want to take the first data hall to full RFS. As part of that, that means we are securing the labor, securing the trades, securing long-lead equipment, and putting ourselves in a position where, if a customer signs any time leading up to the RFS of the first data hall, we can just continue to extend all of that labor that we have secured on-site. That is our guardrail right now. We feel very confident in the strategy, and the ability to show the progress that we are making across each of these sites to customers is really what is forcing the engagement here, because everyone is incredibly interested in capacity that is getting delivered in 2027 right now. Operator: And we will go next to Analyst with Oppenheimer. Analyst: Do you have a rough idea when you might sign a contract? And can you maybe just talk about the pricing trends at a high level? Adam Sullivan: I would just say we are actively engaged right now across every major group, and we feel very confident based on where we sit today versus where we sat three months ago. The only thing that has changed is our assets have continued to build more value, we have continued to deploy more capital, and we have continued to get closer to the RFS state. So we have high confidence in the customer conversations that we are having today. If you could just remind me, what was your second question? Analyst: What are you seeing in the pricing trends? With the pricing of the new contracts, do you expect— Adam Sullivan: I think you are going to expect to see pricing continue to firm up. Really, that is the result of both labor and equipment continuing to inflate, and so you are seeing a similar move in pricing. Analyst: And then just lastly, behind-the-meter power—can you give us a sense of the lead time on that? And ultimately, how will your costs for build-your-own versus the grid compare? Adam Sullivan: Right now, what we are looking at is deploying behind-the-meter solutions anywhere from about 12 to 14 months. The great part for us is these are opportunities, given the locations that we have available to us, that really represent great opportunity for continuing to expand at those sites. The other site that we have not talked about—Hunt—has the opportunity to potentially bring behind-the-meter, but that is something that we are still in the evaluation phase today. We have not necessarily done as much of the due diligence that we have done across Pecos and Muskogee in the work that is currently being performed there. Analyst: And is the ultimate cost to a customer about the same as grid, or a little bit more? Adam Sullivan: It is about the same. The economics for us as developer look very similar, so the cost to the end tenant too, on a blended basis for power rate, is not materially different. Operator: And Michael Donovan with Compass Point has our next question. Michael Donovan: Hi, guys. Thanks for taking my question. So, another question on behind-the-meter. The Muskogee announcement this morning referenced Oklahoma’s behind-the-meter legislation. Can you explain what that legislation changes for Core Scientific, Inc.’s ability to develop and whether it gives Muskogee a timing or cost advantage versus opportunities in Texas? Adam Sullivan: Governor Stitt has been a big advocate of bringing behind-the-meter opportunities to the state of Oklahoma. You saw Governor Stitt’s quote in the press release today. Oklahoma is focused on figuring out how to bring more generation to the state. Our ability to execute in Oklahoma is not necessarily any easier or any more difficult than our site in Pecos, but we definitely have the support of the government there to continue to bring more generation to the state. Michael Donovan: Great. Thanks. And one follow-up, if I may. Have you contemplated owning the generation assets, or would you be solely partnering with a power developer? And then how are you thinking about redundancy? Adam Sullivan: I will take the first part of that question and then I will hand it over to Matt to take the question about redundancy. As we evaluate the behind-the-meter solutions, there are potentially some solutions that we would own ourselves, and there are others that we would work through a third party that would provide us a PPA, which would be included in the power price over time. There are a few different methods we could go down. It really just comes down to the economics question as well as who the behind-the-meter solution is from. Matt, do you want to talk about redundancy? Matt Brown: Yes. To include in that is the maintenance and operation of the behind-the-meter generation, which would come along with that PPA agreement as well. From a redundancy standpoint, when we are building behind-the-meter, redundancy becomes much more critical for high-availability services. We need to be able to support the full load of the portion of the campus that we are powering from behind-the-meter under maintenance conditions—meaning we need to be able to take some of that equipment offline for maintenance, maintain full load, and have redundant capacity still online and available in the event of a failure. You can almost think about that as at minimum an N+1 configuration—maybe an N+2 or an N+20% or N+30% type of redundancy scheme. Operator: Moving on to Joseph Vafi with Canaccord. Joseph Vafi: Hey, guys. Good afternoon. Congrats on the progress. Thanks for taking the question. Just wondering how you are managing the labor side of the builds here. I am not quite sure if you are employing a few large GCs on the build, or are you looking at construction labor as any constraint in the market right now? Thank you. Matt Brown: Great question. Labor is one of the primary constraints of the market, depending on which market we are talking about. Nationally, labor is a big issue. It is one of the reasons why we think we have an advantage by being able to proactively invest in development of these sites—being able to secure and tie up the labor through our projected RFS and scaling beyond that. In terms of how we are doing that, we have a couple large GCs executing our sites’ development today, and those GCs have a lot of leverage in the marketplace, being able to secure electrical contractors, mechanical contractors, civil, etc. All of those—except for probably one site—are already fully mobilized and executing our development as we speak. Operator: We will go to Paul Golding with Macquarie Capital. Paul Golding: Thanks so much and congrats on the progress. I wanted to ask on these behind-the-meter opportunities that you have been discussing. You mentioned you might partner with someone who would give you a PPA or you might look at an opportunity to do it yourself behind-the-meter in terms of generation. How is the air quality component of that structured, or how do you see that potentially being structured? Do you have to still go to market and apply for those emissions permits, or would a partner that you are speaking with already have that in hand? And then I have a follow-up. Thank you. Matt Brown: Yes, great question. As we mentioned in our prepared remarks, the technologies that we are going to get behind and support for all of our behind-the-meter sites will be technologies that are low emissions generally. That gives you a little bit of insight as to what we are not thinking about from that standpoint. On the permitting standpoint, yes, we will certainly have to go and apply for air quality permits for many of these deployments. In some cases, that will be in participation with the behind-the-meter operator or supplier, and in other cases, we will be doing that on our own. In both Pecos and Muskogee, we are already far down the path of our air quality studies for the implementation of those solutions. Paul Golding: Got it. Thanks so much. And I was just hoping you could also give a little more detail around some of the puts and takes that enabled you to raise the run-rate margin profile on the existing energized and billable capacity from that 75% to 80% to 80% to 85%. Thank you. Adam Sullivan: Two years ago, when we signed the original CoreWeave contract, we had a scope of service contemplated in that deal, and we had an element of conservatism knowing that we had not broken ground on the project at that point and that we were going to be deploying over a fairly lengthy period. Once you are two years after the fact and into it, we have more experience under our belt on the number of actual heads that are going to be devoted to the activities and the contractors that we are using and have actually deployed on-site. It is really just a true-up of that experience. We feel good that we are at a margin level that we can deliver today, and we felt more confident that we could be a bit more prescriptive on where we think we are going to end. Operator: And our next question comes from George Sutton with Craig-Hallum. George Sutton: Thank you. As you begin to market to the chip makers and the NeoClouds, I am just curious—do you have a bifurcated sales portfolio where some of the sites and maybe even parts of locations are being marketed to those folks versus the hyperscalers? How is that working through the system? Adam Sullivan: We are showing both chip makers, Neo Clouds, and labs the same sites that we are also showing to hyperscalers. As we work through these processes, oftentimes they are migrating to one or another site, but in reality, we are showing our entire portfolio to each of the customers that come through our door. George Sutton: And one other question relative to executing ahead of the contracts. How does the negotiation get altered with some of these potential customers when you have secured the supply chain and you are moving forward? Does that accelerate discussions? Does that keep them more engaged? Can you walk through that thought process? Adam Sullivan: It definitely keeps them more engaged. They rarely see sites that come across their desks with an RFS timeline within 18 months, and even less than that. For us, being able to show photos and videos of sites with active construction going on and the list of equipment that is on order changes the dynamic of the discussions, because this is not just a photo of a piece of land. This is an active construction site actively progressing towards building a data center. Operator: We will go next to John Hickman with Ladenburg Thalmann. John Hickman: Hi. Thanks for taking my question. This is a little bit esoteric, but now that you are well into your buildout for CoreWeave, could you comment on the experience—what was harder than you thought, what was easier, and where do you think you have a competitive advantage now that you have put that many megawatts into production? Matt Brown: It is a great question. Reflecting on that, the thing that was much more difficult than we gave it credit for was executing on brownfield conversions, which is why everything you see that we are doing forward is actually a greenfield site with a highly standardized basis design. That allows us to get leverage over our supply chain and be super predictable in terms of our delivery dates. Brownfield sites are highly unpredictable, require a lot of customization, and it is a lot of effort to try to retrofit an existing building. While sometimes that can be faster, it comes with a lot more complexity. That is probably one of our biggest lessons learned. John Hickman: Okay. And competitively, now that you have learned that, where do you think you are versus other people that are trying to build data centers? Matt Brown: The great part is that we have had five sites to practice on, and we have been executing these high-density builds across all the CoreWeave locations. We have been able to iterate on those designs—we have executed more than 150 design changes along the way across the portfolio—and that gives us a bit of a head start in terms of what does not work and what works well. All those learnings have culminated into a go-forward build strategy. We have the advantage of learning those lessons firsthand in real time, so we will not make those mistakes going forward. Operator: And our next question comes from Henry Hearle with B. Riley Securities, on for Nick Giles. Henry Hearle: Thank you, operator. I wanted to ask about the change in your approach to exclusivity. In what scenarios would you go into it? And then you also mentioned being in contact with several counterparties. Would you expect to announce exclusivity if you were to enter into one? Thanks. Adam Sullivan: Thanks, Henry. I would not say that we would expect to announce in the interim between quarters. What we have migrated to is moving to a milestone arrangement method, which allows us to ensure that the cadence is moving at the pace that we would expect in a deal that would move towards closing. That allows us to bring a site back on market if we do not feel like the pace and cadence is where we would like it to be. We have migrated to this strategy, we are on it now, and we feel like it gives us the best shot on goal given the demand that we are seeing in the market today. Henry Hearle: Understood. Thanks for that. And then on winding down your Bitcoin mining operations in the coming quarters, do you have a definitive target date to be fully out of that business, or will it act as a small hedge going forward? Thanks. Adam Sullivan: Over the course of the remainder of this year, the Bitcoin mining business is going to continue to migrate lower, and by the end of this year, we will only have one or potentially two sites operating Bitcoin mining. Operator: Moving on to Steven Glagola with KBW. Steven Glagola: Hey, thanks for the question. Adam, I just wanted to touch base again on the challenges on securing the leasing commitments at Pecos and Muskogee. From my standpoint, it would seem like you have strong leverage there—the sites have near-term power, you can point to your execution in the CoreWeave buildout to date. Are you seeing hyperscalers become more selective in their choice of development partners, and if so, how is that influencing demand or deal timing? Adam Sullivan: The exclusivity that expired—the customer is still at the table and still interested in those sites. Broadly across the market, you are seeing repeat deals across some of the developers, especially on the private side, so I would agree with that. They are also looking for experience in the development of this type of infrastructure. This is different than traditional data center infrastructure. Given the experience that we have and our ability to show them five sites that we built, plus 590 megawatts in progress of critical IT load, that is a differentiator and puts us in a different bucket. As you mentioned, we have great experience building, we have sites under construction, and it really puts us into a pretty unique category in this industry. Operator: Thank you. This now concludes our question and answer session. Ladies and gentlemen, thank you for your participation. This does conclude today’s call. You may disconnect your lines and have a wonderful day.

4天前Insight Analytics约5分钟阅读

SGHT 2026 Q1 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to the Sight Sciences, Inc. first quarter 2026 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Hannah Jeffrey, Investor Relations. Please go ahead. Hannah Jeffrey: Thank you for participating in today's call. Presenting today are Sight Sciences, Inc. cofounder and chief executive officer, Paul Badawi, and chief financial officer, Jim Rodberg. Also in attendance is Sight Sciences, Inc. chief operating officer, Alison Bauerlein. Earlier today, Sight Sciences, Inc. released financial results for the first quarter ended 03/31/2026 and raised its revenue guidance while maintaining its adjusted operating expense guidance for full year 2026. A copy of the press release is available on our website at investors.sightsciences.com. I would like to remind everyone that comments made by management today and answers to questions will include forward-looking statements, including statements about material business considerations, 2026 outlook, and financial guidance. These statements are based on plans and expectations as of today, which may change over time. In addition, actual results could differ materially from projected results due to a number of risks and uncertainties. For a discussion of factors that may affect the company's future financial results and business, please refer to the earnings release issued prior to this call and the company's most recent SEC filings. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. Also on this call, management refers to certain financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including adjusted operating expenses. We believe these non-GAAP financial measures are important indicators of the company's operating performance because they exclude items that are unrelated to, and may not be indicative of, its core operating results. Please refer to our earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure, as well as additional information about our reliance on non-GAAP financial measures. I will now turn the call over to Paul. Paul Badawi: Thanks, Hannah. Good afternoon, and thank you for joining us. We delivered a strong start to 2026, with first quarter results that demonstrated a return to double-digit revenue growth, continued strength in gross margin, and disciplined operating expense and cash management. We drove solid execution across both segments, Interventional Glaucoma and Interventional Dry Eye. This included the third quarter in a row of revenue growth in Interventional Glaucoma, and continued positive commercial traction in Interventional Dry Eye where revenue nearly doubled from the fourth quarter, representing early validation of our procedural, in-office, recurring-revenue business model. Based on our performance and outlook, we are raising our full year 2026 revenue guidance while maintaining our adjusted operating expense guidance. We are continuing to build an interventional eye care company focused on two significant anterior segment diseases—glaucoma and dry eye disease—where we believe procedural options can play a larger role in the treatment paradigm. Our two flagship technologies, OMNI and TearCare, are designed to address the root underlying causes of disease and can efficiently integrate into established practice workflows. They each support our focus on earlier, procedure-based care, while helping providers deliver consistent clinical outcomes for patients. We believe there is meaningful customer and patient overlap in our two business units, particularly in high-volume cataract and MIGS practices, where ocular surface disease is common and where physicians are increasingly incorporating procedural options in their treatment algorithm. Glaucoma and dry eye disease are often present in the same patient, and eye care providers often want to address both as part of the patient's treatment plan. We are already seeing this overlap, where we are driving new TearCare adopters from our existing glaucoma customer base. As we continue to drive earlier, procedure-based care across these two significant market opportunities, OMNI and TearCare can fit naturally along the same patient journey, supporting consistent clinical outcomes for patients as well as practice efficiency for providers. Over time, that broader portfolio participation can help deepen account penetration and support our efforts to scale both of these businesses and drive sustainable growth long term. Our strategy is to help advance interventional care earlier in the treatment paradigm of both glaucoma and dry eye disease, and to accelerate these efforts by leveraging the overlap of our two interventional business segments that we call the intersection of intervention. We began to drive momentum from this unique intersection in the first quarter. As we build on this progress, we remain focused on delivering sustainable growth and creating long-term value for our stakeholders. Now turning to our segments, I will begin with Interventional Dry Eye. In our first full quarter following initial market access, we drove expanded traction in our reimbursed dry eye business and increased customer adoption of our TearCare technology. We are increasing our Interventional Dry Eye revenue guidance by $1 million at the midpoint based on our strong results ahead of expectations and our confidence moving forward. We are very pleased by the commercial traction we generated with our dry eye customers in the first quarter, where we delivered revenue of $1.4 million, nearly doubling our fourth quarter revenue. The majority of this revenue was from our disposable SmartLids, and we sold approximately 1,500 in the first quarter, up from approximately 700 in 2025, more than doubling the volume. This includes sales to 96 accounts, made up of a balanced mix of new accounts and reordering accounts. Average SmartLids utilization increased from 9 per active account in the fourth quarter to approximately 16 per active account in the first quarter. Our strong dry eye performance is primarily in the First Coast and Novitas regions, where fee schedules were recently established. We are pleased with the early validation of our reimbursed business model and solid customer engagement with TearCare. In addition, we are driving encouraging cross-selling dynamics, with approximately half of all active accounts coming from our existing glaucoma customer base and with higher utilization in those accounts versus the Interventional Dry Eye-only customers. These early indicators demonstrate the depth and value of our established relationships, and the synergies that exist between our two business segments. Importantly, early utilization trends are improving, with a growing number of accounts reordering and increasing procedure volumes. For accounts that reordered in the first quarter, utilization more than doubled from fourth quarter volumes. In addition, new accounts onboarded in the first quarter are ramping at higher initial levels than those in the prior quarter. Together, these dynamics point to improved customer targeting and enhanced office workflow training, strengthening adoption and early momentum for scaling this business. We are also focused on supporting practices as they incorporate TearCare into their workflow. A growing number of accounts have successfully completed reimbursed procedures and reordered SmartLids, which we view as a positive early indicator of repeat utilization. This adoption reflects the effectiveness of our targeted commercial approach, prioritizing high-volume dry eye practices with significant Medicare patient volumes. These efforts are translating into meaningful traction, with increasing interest from both new and existing accounts, supporting the broader shift towards interventional dry eye care. To build on this foundation, we have continued to expand our commercial team in the first quarter, adding resources in both our sales rep and clinic support functions, to enhance execution and deepen provider engagement. Our focus remains on scaling efficiently within established reimbursed markets while positioning the organization to drive meaningful growth as we move through 2026. In parallel, we are also focused on expanding market access through engagement with additional MACs as well as commercial payers. We are actively engaged in discussions with multiple MACs, including detailed reviews of our clinical and economic data, and submitted TearCare claims reviews. Based on these activities and discussions, we expect additional payers to establish fee schedules this year. We are encouraged by our continued progress and view expanding TearCare market access as an important catalyst to support long-term growth. Building on a foundation of clinically differentiated technology, initial reimbursement in select markets, ongoing reimbursement discussions, and strong commercial traction, we are excited about our opportunity to drive the development of this large and underpenetrated reimbursed interventional dry eye market. Turning to Interventional Glaucoma. Our OMNI technology continues to demonstrate its clinical value within the evolving glaucoma treatment paradigm and its increasing importance as a differentiated technology and durable growth driver in the expanding field of interventional glaucoma. In the first quarter, we delivered strong performance and generated the third consecutive quarter of year-over-year growth. Revenue was $18.3 million, up 7% versus the prior year period. Ordering accounts increased 6% compared to the prior year period, driven primarily by reactivating dormant accounts and adding new accounts. The revenue growth was primarily driven by increased volume and price, partially offset by slightly lower utilization per account. We finished the first quarter with a strong March, with procedure volumes increasing from a slower than typical start in January and February. Additionally, we drove continued strong adoption of OMNI Edge, which helped in reactivating accounts and adding new accounts. OMNI Edge includes a higher-capacity viscoelastic delivery feature, while maintaining the trusted safety, efficacy, and usability of the OMNI technology platform. For 2026, our Interventional Glaucoma strategy is anchored in consistent execution, as we work to expand the combo cataract market and capture additional share as well as further unlock the stand-alone market opportunity. In the combo cataract market, we are focused on adding accounts through training new surgeons, capturing share in existing accounts, expanding adoption and penetration with MIGS-naive surgeons, and increasing combo cataract volumes through interventional glaucoma activations. In stand-alone, we have hired a dedicated market development team and are encouraged by the early progress they are making in activating stand-alone glaucoma interventions. Together with our differentiated technology and experienced commercial organization, we are in a strong position to deliver our growth targets in 2026 in Interventional Glaucoma. Looking closer at the stand-alone opportunity, as the shift toward earlier interventional treatment continues to shape the glaucoma treatment landscape, our effective market development team has been instrumental in partnering with surgeons and their staff to help them introduce a streamlined and actionable interventional glaucoma patient workflow that is modeled after the well-known and proven cataract patient workflow. This differentiated approach is helping practices identify patients and support increased procedural interventions in those practices adopting this workflow. We believe this new interventional glaucoma patient workflow partnership with our customers represents an important driver of market development and a growing contributor to long-term revenue growth. Before turning the call over to Jim, I want to briefly touch on the latest regarding our patent infringement case against Alcon. In April, the court issued its final judgment, which upheld the jury's finding of willful infringement by Alcon, and confirmed past damages and interest totaling approximately $55 million, as well as ongoing royalties of 10% of Hydrus revenue through patent expiration. This ruling is subject to appeal, and no cash has been received to date. To close, we delivered a strong start to 2026 in both our Interventional Glaucoma and Interventional Dry Eye business segments, and the progress we made in the first quarter reinforces our confidence in the year ahead, including our decision to raise revenue guidance while maintaining our adjusted operating expense guidance. In Interventional Glaucoma, we generated our third consecutive quarter of year-over-year growth and remain focused on expanding our leadership position in the combo cataract segment while continuing to activate stand-alone intervention. In Interventional Dry Eye, we are encouraged by increasing customer adoption and utilization, and we remain focused on scaling efficiently in markets where reimbursement is in place while working to expand market access over time. We are also excited about the increased recognition within the eye care community that there is strong patient overlap between Interventional Glaucoma and Interventional Dry Eye. We are uniquely positioned to leverage this synergy with two leading interventions for these two large and overlapping disease categories as we build something bigger—a leading interventional eye care company. Across the company, we are investing to support growth while maintaining the operating and financial discipline needed to improve cash usage and advance our path toward cash flow breakeven. With that, I will turn the call over to Jim to walk through the financials. Jim Rodberg: Thanks, Paul. Before discussing the first quarter results, I want to underscore that we are executing against our strategic goals from a position of strength, with the operating discipline and cost structure we need to support growth, and we believe this positions us to achieve cash flow breakeven without the need to raise additional equity capital. Unless otherwise noted, my comments reflect results for 2026 and comparisons to the same period in the prior year. In the first quarter, total revenue was $19.7 million, a 13% increase driven by growth in each of our two interventional segments. Interventional Glaucoma revenue was $18.3 million, an increase of 7%, driven by increases in ordering accounts and average selling prices, partially offset by lower utilization per account. Ordering accounts grew 6% from the prior year as well as 1% sequentially from the fourth quarter. Interventional Dry Eye revenue was $1.4 million, up from $400,000 and nearly doubling from 2025. Dry eye results were driven by increases in average selling prices, utilization, and ordering accounts, reflecting strong momentum in our reimbursed Interventional Dry Eye business model. Gross margin was 86%, flat compared to the prior year. Interventional Glaucoma gross margin remained strong at 87%, in line with the prior year period on higher average selling prices and product mix, slightly offset by tariff costs. Interventional Dry Eye gross margin was 72%, up from 71% in the same period in the prior year, primarily due to higher average selling prices and increased SmartLids sold, mostly offset by a one-time inventory overhead adjustment in the prior year. Over time, we expect our dry eye margins to continue to improve as we scale our reimbursed business model and offset absorption and overhead costs. Total operating expenses were $29.4 million, an increase of 2% compared to $29 million, primarily due to a $5.4 million one-time fee earned upon a successful final judgment in the Alcon litigation case described above. Excluding this fee, operating expenses were down 17%, driven primarily by lower personnel-related expenses and stock-based compensation. As a reminder, we conducted a reduction in force in 2025, and this past quarter was the second full quarter of our lower cost structure. Adjusted operating expenses were $21.2 million, down 14% compared to $24.7 million. Net loss was $13 million, or $0.24 per share, compared to a net loss of $14.2 million, or $0.28 per share. We ended the quarter with $85 million of cash and cash equivalents, compared to $92 million at year-end 2025. Cash used was $7 million in the quarter, which was down significantly from $11.6 million in 2025. We ended the quarter with $40 million of debt, excluding unamortized discount and debt issuance costs. Moving to our revenue outlook for full year 2026, we are raising revenue guidance to $83 million to $89 million, which reflects growth of 7% to 15% compared to 2025, versus the prior guidance of $82 million to $88 million. This includes revenue for our Interventional Glaucoma segment of $77 million to $81 million, representing growth of 2% to 7%, and our Interventional Dry Eye segment of $6 million to $8 million, compared to $1.6 million in the prior year. This guidance reflects our philosophy of setting achievable targets and our focus on disciplined execution and the growth we believe we can deliver. Looking closer at the second quarter, we expect total revenue to grow low double digits compared to 2025. We expect Interventional Glaucoma to grow mid-single digits compared to 2025. Interventional Dry Eye revenue is expected to be in the range of $1.5 million to $2 million in the second quarter, and we expect that revenue to continue to scale throughout the year. We are reaffirming our full year 2026 adjusted operating expense guidance of $93 million to $96 million, representing an increase of 6% to 9% compared to 2025. The increased spend compared to the prior year is driven by targeted commercial investments to capture growth opportunities in both Interventional Dry Eye and Interventional Glaucoma, while we continue to manage the business with operating discipline. We are pleased with our return to double-digit revenue growth in the first quarter. Looking ahead, we are excited to continue pioneering the Interventional Glaucoma and Interventional Dry Eye markets, and we are laying a strong foundation for sustainable growth and continued success. Operator, please open the line for questions. Operator: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please standby while we compile the Q&A roster. Our first question comes from the line of Frank Takkinen of Lake Street Capital Markets. Your line is now open. Analyst: Hey. This is Nelson on for Frank. Thanks for all the color, and congrats on the solid progress. Maybe just to start, I want to start on the SmartLids utilization stepping from 9 to 16 in the quarter per active account, which was a strong read there. For your most mature, fully reimbursed accounts, can you talk about that steady-state utilization and how we should think about that trajectory for the broader installed base moving forward? Alison Bauerlein: Yes, thanks, Nelson. It is a great question. The good news is I do not think we are anywhere close to a steady state yet. All of our accounts are still relatively early in their usage of TearCare across their traditional Medicare fee-for-service population, and I think even our largest accounts are not yet fully activating this across their patient population. Once we also get additional coverage, that will allow our customers to treat more and more patients across their patient pool. I will say, when we look at our customer mix, there are a handful of accounts—probably 10% of the accounts—that are driving a larger portion of the total volume here. Those are accounts that have really figured out the workflow, how to put this into their overall practice, and frankly we are really proud of the progress we had in the first quarter, almost 100 active accounts. These accounts are truly the early adopters of TearCare, the true believers in the future of procedural dry eye intervention, and we really see all of our customers as still very early in their utilization curves, which is a testament to how large this market is and how many patients could benefit from a procedural dry eye intervention. Analyst: Got it. That is very helpful. And then just quickly, you called out adding sales reps and clinical support resources during the quarter. Can you maybe size the Interventional Dry Eye team today and where we should see that going throughout the year? Alison Bauerlein: We are not going to provide a detailed sales force headcount every quarter, but we did incrementally add in the quarter. We reported at year-end 2025 that we had about 10 between our direct sales force as well as clinical specialists. So that team is still very small and growing. We are investing in the team, really focused on those First Coast and Novitas areas where we have Medicare fee schedules established, and we would expect to continue to grow that team throughout the year. Analyst: Understand. Thank you, and congrats. Operator: Thank you. Our next question comes from the line of Adam Maeder of Piper Sandler. Your line is now open. Adam Maeder: Congrats on a good start to the year. Two for me. First, I wanted to start on Interventional Glaucoma and really was hoping you could double-click and contextualize the good result there, the plus 7% year over year. Curious to get your view on underlying market trends, competitive dynamics—I think one competitor may have had a bit of a supply issue—pricing, and then you talked about some inclement weather. Did you recapture those patients in the quarter? Just bring that all together for us, and then I have a follow-up. Paul Badawi: Hi, Adam. We are excited to be back in growth mode in Interventional Glaucoma. The glaucoma community recognizes now that intervening earlier is better long term for patients, so there is a real tailwind in the ophthalmic community—you can feel it. We were just at ASCRS last month, and there is so much talk around earlier intervention, both IG—Interventional Glaucoma—as well as IDE—Interventional Dry Eye. On the glaucoma side, there are millions of glaucoma patients currently on medications who could benefit from an earlier intervention. That market is growing. We are excited to be a leader. We are the leading implant-free microinvasive glaucoma surgical option in the market, and over time, as this category grows, we expect to continue to innovate and lead the category we have created. We have new technology coming out; we are trying to stay ahead of the market with OMNI Ultra later this year. It is our third straight quarter of year-over-year growth, so we are excited about that tailwind and continuing to lead as the implant-free market leader in IG. Jim Rodberg: Adam, this is Jim. On the Q1 dynamics, we closed the quarter very strongly. March tends to be a significant part of the first quarter, and the team executed really well. We leave the first quarter feeling really good about where we are at. We had strength in March, and we expect that strength and momentum to continue into Q2 and the balance of the year. Overall, we are confident about our path forward. Adam Maeder: Fantastic. Very helpful color, and great to hear comments on the market. Switching over to dry eye—congratulations, Ali, on the progress there. I wanted to push a little in terms of market access and better understand expectations for new payer adds, whether on the commercial or MAC side. Can you be more specific on potential timing? And can you hit the updated $6 million to $8 million without any additional payer wins? Thank you. Alison Bauerlein: Thanks for the follow-up. We are very focused on increasing reimbursed access to TearCare with both Medicare and commercial payers. We are having continued good conversations across the payer mix, really focused on the SAHARA data, the health economic data, and also showing claims utilization and interest in the procedure. We are building a category here, and that does take time. We still expect to have additional payer wins in 2026; it is hard to predict exact timing. We fundamentally do not feel any different about our ability to get payer wins over time and to get access to this technology for our patients and our ECP provider partners. We do have some incremental positive movement with commercial payers—there are some paying regularly while they have not established coverage policies, and others are moving towards those activities. In terms of guidance, yes, we feel extremely confident. The guidance only takes into account First Coast and Novitas fee schedules in place for 2026. That market potential alone is very large for us. We are still a very small fraction of the patients with moderate to severe dry eye disease with MGD, even within that traditional Medicare fee-for-service population. We are in very early stages in a large market, and we set guidance appropriately for the areas where we currently have fee schedules established. Operator: Thank you. Our next question comes from the line of Steven Lichtman of William Blair. Your line is now open. Steven Lichtman: Congratulations on the progress. Wondering if you could talk about customer accounts for dry eye in the regions where you are approved with reimbursement. What is your latest view on the denominator—the number of viable centers that you think are target sets for you within the regions you are currently in? Alison Bauerlein: I will shift that question a bit and talk about ECPs—eye care providers—because that is an easier way of thinking about the opportunity. Across the U.S., when we target providers that do a lot of prescription eye drops, perform procedural interventions for dry eye, and have strong patient populations, we have historically talked about roughly 6,500 ECPs as that initial target population. Within First Coast and Novitas, there are about 2,000 ECPs that meet that same criteria. We are still very small. Obviously, active accounts is different from ECP counts, and even with there being a couple of ECPs per active account, we are very much in the early penetration days within First Coast and Novitas. Steven Lichtman: Great. And then just a follow-up on the patent suit. Obviously a decent amount of cash pending here for you. Can you talk about the next steps? I think Alcon has an opportunity to appeal within the next couple of weeks, or there could be a settlement. What are the next steps? And remind us of the interest accrual if it does go to appeal? Jim Rodberg: In April, final judgment was issued and that preserved the jury verdict from 2024 that awarded us updated damages, interest, and royalty of approximately $55 million, as well as ongoing royalties of 10% of future Hydrus sales through the patent expiration. We have not received any cash to date, and we will not book anything until such time as appeals are exhausted and cash changes hands, for example. The final judgment is subject to appeal. Beyond that, we will not comment further on pending litigation, but we feel we are in a very strong position in this case. Steven Lichtman: Okay. Great. Thanks. Operator: Our next question comes from the line of Thomas M. Stephan of Stifel. Your line is now open. Thomas M. Stephan: Thanks for taking the questions. First on dry eye—nice to see the guidance raise and already really strong sequential growth in utilization. Big picture, what have been the top one or two upside surprises or learnings amidst this relaunch? And part two, how do you feel about the playbook you are developing for when different markets and patient populations hopefully unlock, and your ability to deploy that quickly? Alison Bauerlein: We have had a lot of learnings since launch, most of them very positive—both about how large this opportunity is and how many patients are looking for a better treatment—and also the synergies with our Interventional Glaucoma business. That is probably the largest benefit we have seen. Those accounts are a large part of the accounts that have activated in these early stages. They have larger traditional Medicare fee-for-service populations, and they are looking for ways to help their patients who also experience significant dry eye. That is a large part of our initial launch, and we also see those accounts having higher utilization than non-IG-synergistic accounts—really positive momentum and good synergies across the team. In terms of the playbook as we move forward, there is still a lot of workflow activation that needs to occur when an account decides to implement procedural dry eye. We think this involves people being in accounts and helping clinics set up their workflow, identify the patients, and determine how best to put them into a dry eye treatment workflow. As we have additional market access wins, particularly in new geographies, that will involve additional commercial investments as we grow the team and work with accounts we already have in those areas. As we get additional density with more payers coming on in markets where we already have Medicare fee schedules, those are easier to activate because it is adding new payers into the same workflow. Over time, that may also shift the accounts we target. Right now, we are targeting many higher-volume ophthalmology practices with a lot of Medicare patients, which is where we are seeing synergies with IG. Over time, as commercial plans come on—about 70% of dry eye disease patients are covered by commercial and 30% by Medicare/Medicare Advantage—that can shift our account targeting and partnerships. We are happy with the progress in creating a workflow within accounts, and it is being replicated efficiently so they can work TearCare into their procedure flow—whether that is a dedicated TearCare day or multiple TearCare sessions across mornings or afternoons. They tend to stack them to be efficient. We are doing assessments up front to identify patients who may benefit from a procedural dry eye intervention and working that into the workflow. A lot is coming together, and we are in a good spot to continue executing across this new area. Paul Badawi: I want to add a few thoughts to Alison's comments around the intersection. Sight Sciences, Inc. started interventional—we started with OMNI and then developed TearCare. These are two very strong interventions for two of the leading diseases in eye care. While that has been our philosophy, I think what we have seen—and been pleasantly surprised by—is the rate at which our customers, specifically surgeons, have recognized the overlap of these two disease categories and the possibilities of offering these same patients multiple interventions. The alignment between the ophthalmic community and our philosophy of building an interventional eye care company has come faster than we expected. When we meet with our happy OMNI surgeons and work with our dedicated commercial team, it is amazing how many of our glaucoma surgeons talk about how many of their glaucoma patients have dry eye disease and are complaining about their dry eye disease—glaucoma is unfortunately a silent disease. Being able to show up as their interventional partner with an intervention for their glaucoma patient and an intervention for the same patient who also has dry eye disease is a very powerful partnership. We are happy with how fast the community is acknowledging that. Internally we call it IX—the intersection of intervention. It is a proprietary angle we have, and we look forward to driving the benefits and synergies of these interventional platforms to reach more patients with better interventions, offering better care more quickly. Operator: Our next question comes from the line of Joanne Karen Wuensch of Citi. Joanne Karen Wuensch: Good afternoon, and thanks for taking the question. You seem to be making a fair amount of progress on expense management, cash management, and everything else that goes along with it. Can you give us a view on your philosophy of how you balance penetrating the MACs, educating physicians, and ramping them with the other metrics we on the Street watch? Jim Rodberg: Hey, Joanne. Thanks for the question. We are in a really good spot with a healthy balance sheet and a strong path to cash flow breakeven, while at the same time having the ability to invest in these two significant opportunities. As we look at 2026, the most important investments this year are on the dry eye side—both in market access resources and commercial resources to scale up that business in markets where we already have reimbursement—and on the glaucoma side, continuing to invest in the stand-alone opportunity. The balance for us is to make disciplined, high-return investments. We are fortunate to have the flexibility to go faster on some of those investments where there is outsized opportunity for growth. Paul Badawi: The only thing I would add on R&D: we have a history of cost-effectively developing clinically differentiated interventions that can elevate the standard of care. We have done that well with OMNI and TearCare. We are making very selective R&D investments—all within this interventional category—as we build a focused interventional eye care company. We have a very interesting pipeline that we are developing cost effectively, and in due course we look forward to sharing more, hopefully later this year. Joanne Karen Wuensch: Wonderful. Thank you. Operator: Thank you. Our next question comes from the line of David Saxon of Needham & Company. Your line is now open. David Saxon: Good afternoon, Paul, Ali, and Jim. Thanks for taking my questions. A similar question to Adam's but from a slightly different angle. I think you are only in four of the 13 states in First Coast and Novitas. Does the guide assume you get into any more of those states, or is the $6 million to $8 million really just reflective of presence in a fraction of the immediate opportunity? Alison Bauerlein: We have sales across most of the states, and we do have some level of sales support across them, but you are right—we have density within four to five main states that have the majority of the sales resources. We expect to continue to expand resources. Whether we expand within those specific four to five states—there is still opportunity. For example, one rep in Florida would not be sufficient to cover the entire state. We are looking at where we invest those resources. The plan takes into account incremental investments in commercial resources in those areas. We are not going to get into specific territories, but all of that is accounted for in our operating expense guidance. David Saxon: Thanks for that. On the IG side, Paul or Ali, would love an update on the Ultra timing of clearance. Is that embedded in the IG revenue guidance, or would that be upside when that comes out? Paul Badawi: We are in discussions with the FDA on OMNI Ultra. While nothing is definitive with 510(k) clearance pathways, we feel confident that we should have a clearance within the coming months—certainly by the end of the year. We are very excited to launch Ultra, hopefully by the end of the year. It has a number of surgeon-informed features: single incision, single pass 360°, viscoelastic delivery on both advancement and retraction, catheter markings to indicate advancement, and improved handle ergonomics. We think these features will help elevate the category further. We have put out guidance that we are very confident we can deliver regardless of when Ultra arrives. Hopefully it arrives sooner rather than later, and we can do even better. Operator: Thank you. This concludes the question-and-answer session. I would now like to turn it back to Paul Badawi for closing remarks. Paul Badawi: Thank you all for attending today's call. We appreciate your interest in Sight Sciences, Inc., and we look forward to updating you on our progress in the future. Operator: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.

4天前Insight Analytics约5分钟阅读

BMBL 2026 Q1 财报电话会议

Operator: Hello, everyone. Thank you for joining us, and welcome to Bumble First Quarter 2026 Financial Results Conference Call. [Operator Instructions] I will now hand the conference over to Will Taveras, Head of Investor Relations. Please go ahead. William Taveras: Thank you for joining us to discuss Bumble's First Quarter 2026 Financial Results. With me today are Bumble's Founder and CEO, Whitney Wolfe Herd; and CFO, Kevin Cook. Before we begin, I'd like to remind everyone that certain statements made on this call today are forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of factors and risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in today's earnings press release and our periodic filings with the SEC. During the call, we also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Reconciliations to the most comparable GAAP measures are available in our earnings press release, which is available on the Investor Relations section of our website at ir.bumble.com. With that, I will turn the call over to Whitney. Whitney Herd: Hello, everyone, and thank you for joining us today. This is a period of real transformation at Bumble. Over the past few quarters, we have executed a deliberate reset of our member base. We made a clear choice to prioritize quality over quantity, focusing on well-intentioned engaged members. That decision reduced overall scale, but meaningfully improved the health of our ecosystem. Importantly, this quality reset was not isolated. It was the first step in a broader strategy to reestablish Bumble as the brand that sets the pace for innovation in our category. We focused first on strengthening the underlying supply of our platform because scale without quality degrades the experience and stifles the outcome people are seeking: high-quality, relevant connections. At the same time, we continued rebuilding our technology and product platform to better serve our members' demand for real dates and in-real-life connection. These moves required short-term trade-offs, but they were deliberate and necessary. Now with healthier supply and stabilization in our member base, we are entering the next phase, activation. This phase is anchored by 2 innovation initiatives. First, the introduction of our new technology platform. Second, the launch of a fully reimagined experience for Bumble members, including a new interaction model and profile system. The new Bumble platform and experience will roll out over the balance of the year, beginning with the first stage of the new tech platform in the coming weeks. Our direct member engagement and our research, including our work with author and professor, Dr. Arthur Brooks reinforces a key insight. The biggest friction in dating today is not discovery. It is the gap between online interaction and real-world connection. People get stuck in that in between. This is a central challenge faced by every scaled dating app. Everything we are building is designed to close that gap and drive real in-person dates between high-quality connections. Accelerating each member's progression towards finding that connection and getting out on a date is our priority. We've been doing foundational work on this problem ahead of introducing our new platform and reimagined experience. We have improved profiles, strengthened intent signaling, enhanced safety and built more dynamic onboarding. These changes have helped members show up better even within the limits of our legacy systems. We are also continuing to improve the current Bumble experience by addressing core member pain points, improving recommendations and enhancing usability. Early tests are showing promising results, including improvements in matching behavior and monetization trends, but results are expected to be relatively limited on the legacy tech stack. We have more to do here in the months ahead. What comes next will go much further. The innovation starts with our technology platform. As we shared last quarter, we have been actively rebuilding our new cloud-native AI-enabled tech stack. This modern platform will allow us to move faster, iterate more efficiently and begin to unlock entirely new product experiences. Today, making meaningful changes to our recommendation engine or introducing new features can take months. This has been a real constraint on the rate of innovation. Our new tech platform is expected to eliminate this constraint. As the platform rebuild nears completion, we are ramping development of the next-generation Bumble Date application, a merging of the new back end and the reimagined member experience, launching in select markets in Q4 of this year. Between now and then, elements of our new technology platform will begin powering a parallel roadmap of incremental improvements in the existing product. With our new app experience, the opportunity is not just to improve the current interaction model, but to evolve beyond it. We are designing a system that shortens the distance between intent and outcome, eliminating the friction caused by multiple steps between interest and connection. Clearer signals drive more mutual engagement and faster progression towards in-real-life connection. Early reactions to this new model have been very positive. Our AI layer, Bee, is expected to play a key role in the reimagined experience. Testing Bee and onboarding new members has been especially encouraging, not just in Bee's effectiveness, but in members' willingness to engage deeply and share richer context about who they are and what they are looking for. Bee's ability to capture more signal and process information quickly improves our understanding of each member and will strengthen our recommendation engine. Onboarding is just the first step in how Bee will be used in the new experience. We also expect Bee to help facilitate connection and to suggest and plan real dates among other roles. Bee is a great example of what we can accomplish on the new modern tech stack and how AI will be an important catalyst for our business. It is important to note that we built Bee separate from the legacy system. I have said a lot here. So let me summarize. First, demand for love and human connection is as vital as ever before. We have done the heavy lifting to reset our business with healthy supply that is ready to engage. We are giving them the tools to show up authentically as their best selves. Next is our new platform, which will accelerate product innovation. Right behind that will be an entirely transformed Bumble experience, which dramatically reduces friction and gets members to in-real-life connection faster. We believe this is our path to deliver what daters are seeking today. This is the path to restoring revenue growth, and we are already at work building the monetization model behind it. That is the core of the Bumble app transformation, but it's only part of the picture. Beyond dating, we are also investing in broader connection, which we see as both a critical need in the world and a competitive advantage for us. We have expanded groups on Bumble BFF and are seeing strong early traction with total group joins nearly doubling between December and March. This success is driven by Gen Z women who comprise the largest cohort on the platform, highlighting our opportunity with this core demographic. Overall, more than 80% of BFF members are women, reinforcing the durability of our overall brand. We will continue to expand on group connections and in-real-life meeting for platonic purposes through BFFs, but we are also bullish on the opportunity of romance beyond one-to-one in terms of how people come together and meet for love. We are testing new ways to bring people together for both platonic and romantic purposes, including a new product beta launching next month, which we are super excited about. Across all of these efforts, our approach remains consistent: test, learn, iterate and do it quickly. We are data-driven, member-obsessed and more passionate about the opportunity and problem we are solving than ever before. In terms of timing, members will first experience the rollout of our new platform, delivering a faster and more reliable experience starting in the coming weeks from a back-end standpoint. From there, we expect to introduce the initial features of our new interaction model and profile. This is our big thing. It will start to roll out to select markets in Q4, backed by a 360 marketing campaign. Then we'll continue to refine the experience into 2027, including adding features like group dating and expanded access to Bee. Ahead of our upcoming unveil, we are continuing to deliver innovations in the current Bumble experience that helps members show up better, more confident and ready to engage. Not all of these improvements will be immediately visible to members, but the critical signal enhancements they enable will drive more relevant connections on the back end. And the UI/UX will be on our modernized back end, which will enable the rollout of our transformed experience later this year. As we execute this transformation, we remain disciplined. We delivered a strong Q1 compared to our expectations, and we are managing our cost structure carefully while continuing to invest in product, technology and selective marketing. Of note, we have reduced our performance marketing spend to less than 50% of pre-quality reset levels. We are starting to see the benefit of organic marketing again, including positive word of mouth now that we have improved the member base quality. Despite tech limitations, we've been able to drive meaningful improvements, which we believe signals the opportunity ahead with a modern tech stack in place. To close, we have been hard at work rebuilding our foundation. Now we are focused on translating that into a meaningfully better product experience, which members will start seeing in the coming months. We cannot wait to reignite our brand, product and mission as we transform Bumble and our category. We look forward to sharing more in the months ahead. Thank you so much for your time. And now I will turn it over to Kevin. Kevin Cook: Thank you, Whitney, and hello, everyone. In the first quarter, we delivered results in line with our expectations as we move past our quality reset to focus on product and technology innovation. As Whitney noted, we're seeing signs of stabilization in our member base as we enter the next phase of activation. I'll review our quarterly results before turning to our outlook. Unless otherwise noted, my comments are on a non-GAAP basis, and comparisons are year-over-year. Total revenue for the first quarter was $212 million compared to $247 million in the year ago period. Foreign currency exchange rates contributed $9 million to revenue in the quarter. The loss of revenue from Fruitz and Official equate to approximately 1 percentage point of headwind in the quarter. Bumble App revenue was $173 million compared to $202 million a year ago. Foreign currency exchange rates contributed $6 million to Bumble App revenue. Adjusted EBITDA was $83 million, representing a margin of 39% compared to $64 million and 26% in the prior year period. Higher adjusted EBITDA despite year-over-year revenue decline is a function of how we have executed through our reset period, most notably with more intensive operating discipline and thoughtful marketing spend. Selling and marketing expense was approximately $26 million or 12% of revenue compared to approximately $60 million or 24% of revenue in the prior year period. In addition to the reduced overall spend, we've increased our focus on lower cost and higher return organic and targeted marketing channels. This strategy brings us back to our historical marketing strengths, which we believe also supports long-term brand health. Product development expense was approximately $25 million or 12% of revenue compared to approximately $24 million and 10% in the prior year period. Our product development spending is focused on core product innovation and platform modernization. General and administrative expense was approximately $24 million or 11% of revenue compared to approximately $26 million or 10% of revenue in the prior year period. I'll now turn to the balance sheet and cash flows. For the quarter, we generated $77 million in operating cash flow, $74 million of which converted into free cash flow. We ended the quarter with $246 million of cash and cash equivalents and continue to generate substantial cash flow while maintaining a strong liquidity position. In April, we completed the refinancing of our term loan that had been previously announced. Consistent with our plans to continue deleveraging, we paid down $114 million of debt in connection with the transaction. Pro forma for the refinancing, we had $150 million of cash and cash equivalents at the end of April. Turning to the outlook. As we move beyond the quality reset, our focus is now on activating our higher-quality member base through product innovation and improved member experience. This transition will unfold over the balance of the year as we introduce our new tech platform and accelerate the introduction of new member experiences. While this work will take time to be reflected in our financials, we believe it best positions us to drive more durable engagement and monetization. For the second quarter, we expect total revenue in the range of $205 million to $213 million, including Bumble App revenue of $168 million to $174 million and adjusted EBITDA of $65 million to $70 million, representing a margin of approximately 32% at the midpoint. As we move through 2026, we expect revenue headwinds to moderate as the most acute effects of the quality reset dissipate and we transition from stabilizing to rebuilding the member base. Adjusted EBITDA margins are expected to normalize over the remainder of 2026 as we increase investment in technology and talent to modernize our platform and drive product innovation. We also plan to increase marketing spend to support our innovation initiatives, organic member growth and brand strength. In closing, we've made meaningful progress on our transformation and are now focused on executing the next phase of the business, pairing a healthier, more engaged member base with a modernized platform that will enable faster product innovation and more effective revenue generation over time. Operator, let's take some questions, please. Operator: [Operator Instructions] Your first question comes from the line of Eric Sheridan from Goldman Sachs. Eric Sheridan: Whitney, I want to come back to some of the comments you made in the prepared remarks and go a little bit deeper. When you think about the tech stack and how it will iterate going forward, I wanted to ask a 2-parter. One, how should we be thinking about the velocity of innovation and your speed in terms of going to market that will result from that as we continue to monitor the business from the outside in? And what do you think about your opportunity around personalization and how much of it will be either AI-driven or non-AI-driven when you think about what the tech stack might enable you to do in the years ahead? Whitney Herd: Thank you, Eric. Great to hear from you. So I'll take this piece by piece. I think before we talk about the actual incredible opportunity we have ahead with this new tech stack, just to double down on a couple of the prepared remarks I had around what we've been dealing with. We have had extraordinary tech debt. What do I mean by this? We have frankly not been able to make the changes that both our members are wanting, commanding, needing, demanding, but that we have wanted to roll out. So all of the results you've seen to date are done on the back end of a very legacy system, which really does inhibit the second part of your question, which I'm going to get to in a moment, the personalization of the experience. So let's talk about velocity, my favorite word. Velocity is going to go up in such a way with this new tech stack. So as an example, if we wanted to make a change to the recommendation engine right now, which is the algorithm essentially, right, it could take us months. It's extremely clunky. It's extremely cumbersome. It's extremely difficult to navigate. On this new tech stack, we're talking we can put tests in immediately. We can be monitoring in real time. We can have A/B testing going at levels we've never been able to access before. And frankly, we can make changes in a matter of days or weeks versus months or even, frankly, years. So when you really start to wrap your head around the opportunity there, I think you can understand why I am personally so excited about this new system finally hitting members' back end here -- in the back end of the system here in the coming weeks. Let's talk about personalization. So this is the name of the game. What's the one reason why people come to a product like ours, particularly Bumble. They're not coming for entertainment. They're not coming to use it like a social media platform. They are coming to meet people. And if you want to meet someone, the baseline is you have to be showing people you want to see and that you want to meet. And so what we're able to do with this new system and this next-gen recommendation engine, which kind of goes side by side with the new -- with the new tech infrastructure, we will be able to personalize the system in ways that we just frankly never had access to. It's not lack of innovation. It's not lack of road map. It's not lack of talent. It has been lack of technical capability. So you will see extreme personalization. Turning to the last part of your question, AI or not AI. It's a hybrid. So I think it's important to maybe just spend a quick moment on how I look at AI for this business. AI should never replace human authenticity or human connection. And frankly, I've been saying this for a long time, but I certainly hope that the rest of the world is starting to see it the way I am in the sense that human connection is starting to matter more now than ever before and real authentic human connection. For those of you that have been following and watching people fall in love with AI bots, I mean, this is not the future we want for ourselves or the next generation. So this is why I'm at work. I'm giving it my all to make sure that we can bring people closer to real -- in-real-life, face-to-face, human, meaningful relationships and connections. So we will leverage AI to enable that, but we will not use AI to replace that. So I hope that answers the question. I could talk about this for 6 hours, but I want to give other folks an opportunity to jump in. But thank you again, Eric, for your question. Operator: Your next question comes from the line of Shweta Khajuria from Wolfe Research. Shweta Khajuria: As we think about the time line, could you please talk to what gives you confidence post the activation phase of the renewed tech platform in 2027 or in Q4 of 2026 into 2027? You will start seeing potentially market improvements in the refreshed tech platform. So could you point to what you saw in your test that gives you that confidence? And what should we be looking for starting in Q4 into next year? Whitney Herd: Shweta, it's great to hear from you. So let's talk about these different kind of work streams. I want to be very clear that the back-end tech rebuild is different than what the front forward-facing member-facing interaction model and profile redesign are. So these are 2 separate things that will converge into each other. However, one comes before the other. That is the back-end technology migration and enablement and rebuild. That is coming here in the coming weeks for select members, and we will start to roll out globally and more broadly, obviously, over the weeks following and the months following. So that is the enabler of everything. That is where we can go in and make algorithmic improvements. We can start to make matching and recommendation economics better for folks and really make sure that you are seeing who you want to see. Now very importantly, so that's the back end, and that will start to enable everything. But very importantly, I fundamentally believe, and I feel that I am a trusted source here because I've been on the front line of this industry from its kind of mobile explosion inception, if you will. I fundamentally believe the interaction model is outdated, not just for us, I'm talking about the industry at large. And I believe it's time to leapfrog anything that currently exists and help people break through these areas of friction where these cliffs exist. So right now, to get somebody from first sight to first date is extremely difficult. There are so many areas of drop-off opportunity where that mutuality of needing to like each other, needing to chat to each other, needing to keep the conversations going on this double-sided format, it's quite difficult to get you to a date. And frankly, Shweta, we're a dating app. We're not a matching app. We're not a swiping app. But have we really been behaving like that? And that is the impetus of the new interaction model. So we have listened to our members. We have been in the trenches with them. I personally have been on the front lines of research and deep in the data. So that forward-facing, member-touching interface interaction transition and profile redesign, that is what you will start to see in a major market in Q4 and then, of course, rolling out more broadly through the end of Q4 and early into '27. So let me actually try to answer your precise question. When do we start to see a rebound in the numbers you're all looking for? Well, the answer is very simple. When our technology and our next-gen recommendation engine can actually help better connect people more compatibly and show people who they want to see and then get them out on great dates, that's where the magic happens. And every single thing we are doing, I'm spending every waking hour of my life right now in effort of serving that one goal: get people out on great dates. So I hope this starts to answer your question, and thank you again for taking the time. Operator: Your next question comes from the line of Nathan Feather from Morgan Stanley. Nathaniel Feather: Digging in a little bit more on that kind of pipeline from discovery to actually getting out on dates. What do you feel are the current real pinch points that cause people to maybe have a match, but not actually convert that into an in-person connection? And to what extent can you actually solve that problem? Is there any issues from a perspective of a lot of people have different preferences? There's local markets? Are there ways that you can kind of solve those? And so that's the first part of the question. And then second, continue to see really strong performance on gross margin. Can you give an update on what you're seeing in terms of payment adoption? And do you think about the uplift that's driving EBITDA? Whitney Herd: Thanks, Nathan, for the question. I'll take the first half. I'll kick the second part to Kevin. So the reality is, you're right, everyone has different dating preferences. But the one thing everybody can kind of agree on at this point is everyone is exhausted from this passive model of just low-effort -- like low-effort interest that there's very little follow-through. And frankly, the industry, at large, and us included, we've made it just too easy to express low-intent interest. And so we are turning that on its head. I can't say much more. I really believe that this is going to be category defining, and we want to keep it close to the chest. But what we will tell you is the early testing has come back remarkably positive. There is very little concern that this is not the right direction. But to your point, every market is different, culturally different, preferences are different. We have no issue with being really agile and making sure that we test our way into the appropriate sequencing and the appropriate rollout strategy to make sure that those nuances are accounted for. But I really -- listen, I'm now 36. I've been doing this since I was 22. I cannot tell you how much this is needed right now for people to really feel reinvigorated with finding love. And there's a few frank realities. We are on our phones more than we've ever been on our phones before, much more so than when I started this company. The need for human connection and love is greater right now than ever. We are more disconnected. Everything is working in our favor. The only thing that has been going wrong is our ability to execute on product innovation, and that is simply due to legacy tech debt, and we are working extraordinarily hard. The teams are incredible, and they are so close on getting us to a place where we can finally innovate and deliver a modern product to our members so that they can continue to make meaningful connections in the real world. Kevin? Kevin Cook: It's Kevin. So the improvement in gross margin is primarily a function of increased adoption of alternative billing methods and therefore, a reduction in aggregator fees. So you're right to point out that we had very strong gross margin in the quarter, about 300 basis points than the prior year period, and we continue to see strong adoption of our Apple Pay program, for example, in the U.S., and that program is slightly ahead of expectation, but we expect to see alternative billing be a tailwind to margin throughout 2026. Operator: Your next question comes from the line of Andrew Marok from Raymond James. Raj Solanki: This is Raj dialing in for Andrew Marok. So as it relates to the post-reset disclosures made today, could you update us through March and April and explain how the curves for registrations, retention, MAUs and payer penetration trended from October until now? Given that this is the first month -- that was the first month of post-quality reset, which metric should best predict payer recovery going forward? Kevin Cook: Yes. Ron (sic) [ Raj ], thanks for the question. So obviously, the disclosures were provided specifically as a way for us to meet a contractual obligation to prospective lenders to cleanse data that we shared with them in connection with the refinancing. That information is all for the periods provided. You can see them outlined there in the specific disclosure on the website. They're all reflected in our current financials. They're out-of-date, stale, and have no sort of import in terms of the business today. The only thing I can share is that the business has stabilized with respect to KPI performance. And in particular, on registrations, I think you see highlighted there the steps that we took quite intentionally to bring the member base down to what we viewed as a healthier, higher-quality ecosystem from which now we can build. So that's all I have for you on that. Operator: Your next question comes from the line of Ken Gawrelski from Wells Fargo. Kenneth Gawrelski: As you look out a couple of years in success as you kind of transition the business, can you talk about how you see -- how you could see the financial profile of the business just relative to [indiscernible] built up in the past. You obviously don't want that to recur. Could you just talk about any changes we might see to the financial profile of the business as you kind of get back to growth in '27, '28? Kevin Cook: Ken, it's Kevin. So apologies, you broke up. Can you repeat the question or summarize the question quickly? Kenneth Gawrelski: Sure. Sorry. Is that better? Can you hear me better, please? Whitney Herd: It's still a little shaky. Try one more time. Kenneth Gawrelski: I'm sorry. Is this better? Sorry. Kevin Cook: So why don't you go ahead and we'll do our best. Kenneth Gawrelski: Yes. My quick question is this, are you -- when you think about the future kind of financial profile of the business, if you go out 24 months, 36 months relative to what we've seen in the business in '22, '23 time frame, how may it look different in your view? Different tech stack? You didn't -- don't want to -- and maybe a different kind of marketing go-to-market strategy. So can you just talk a little bit about what the changes in the financial profile might look like? Kevin Cook: Of course. Okay. So you're right to point out 2 key things. First, in the time frame you referenced, it was a marketing-led business, not a product- and technology-led business as it has been since Whitney returned as CEO. So what you'll continue to see is a much more efficient marketing spend. It will never return -- marketing should never return to the levels that you observed in '24 and '25. Marketing is used as -- in support of and as a tool to enhance product and contribute to new product introduction launch and of course, to some degree, brand. You will see a higher rate, overall, in technology and spend or product development. We're in a period of investment now. You see us beginning to gently increase product development expense to deliver all of the innovation that Whitney was describing and is expected for the second half of the year. So overall, with steady revenue or revenue growth, there would be substantial operating margin in the business. So you should expect to see continued adjusted EBITDA margin expansion, again, so long as revenue is stable or revenue is increasing. Let me know if that answers the question. Kenneth Gawrelski: Yes. Operator: At this time, there are no further questions. This concludes today's call. Thank you all for attending. You may now disconnect.

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RCUS 2026 Q1 财报电话会议

Operator: Hello, everyone. Thank you for joining us, and welcome to the Arcus Biosciences' First Quarter 2026 Business Update and Financial Results. [Operator Instructions] I will now hand the conference over to Holli Kolkey, VP of Corporate Affairs. Holli, please go ahead. Holli Kolkey: Good afternoon, and thank you for joining us on today's conference call to discuss Arcus's first quarter 2026 financial results and pipeline update. I'd like to remind you that on this call, management will make forward-looking statements, including statements about our development strategies and our expectations regarding the advantages and opportunities afforded by our investigational products, our clinical development milestones and time lines, our projected cash runway and our financial outlook. All statements other than historical facts reflect the current beliefs and expectations of management and involve risks and uncertainties that may cause our actual results to differ from those expressed. Those risks and uncertainties are described in our most recent quarterly report on Form 10-Q that has been filed with the SEC. For today's call, please refer to our latest corporate presentation posted in the Investors section of our website. This afternoon, you will hear from our CEO, Terry Rosen; Chief Medical Officer, Richard Markus; President, Juan Jaen; and CFO, Bob Goeltz. With that, I'd like to turn the call over to Terry. Terry Rosen: Thanks very much, Holli. And thanks, everyone, for joining us this afternoon. We're starting a new era for Arcus with full ownership of our lead program, casdatifan, our Phase III kidney cancer study, PEAK-1, enrolling rapidly, a clear path to win in the frontline and the next generation of molecules for inflammation and immunology that can be advanced rapidly into and through development, and with that, the strategic optionality imparted by a rich portfolio of wholly owned molecules and programs. We are at an inflection in value creation for patients and shareholders that will continue to accelerate over the next 12 to 18 months. Arcus has proven to be a highly productive company, creating and advancing a steady stream of potential best-in-class molecules for patients with cancer and inflammatory and autoimmune diseases. We believe that discovery is not a commodity, and we have built exceptional small molecule medicinal chemistry and drug discovery capabilities. Our scientists utilize proven biology to create unmatched medicines designed to raise the standard of care. Since its inception, Arcus has advanced molecules from program initiation to IND filing in a short of 18 months and accelerated platform and signal-seeking studies to move from proof-of-concept Phase I studies to randomized Phase II and registrational Phase III trials in just a few years. Today, the company is laser-focused on casdatifan, which represents a market opportunity of more than $5 billion in kidney cancer alone. I want to stress that casdatifan's efficacy advantages are underpinned by much better molecular properties and a superior pharmacodynamic profile. This profile reflects the key capabilities in Arcus that I described earlier. The simple fact is that casdatifan hits its target much harder and in a more sustained way than belzutifan. As illustrated on Slide 6, this is a point we've emphasized since the data first emerged. These data are clear and they're striking. We believe this fundamental differentiation between casdatifan and belzutifan and the limitations of belzutifan's pharmacodynamic profile and durability of effect are undoubtedly contributors to, if not the principal driver of, the outcome of LITESPARK-012. And the pharmacodynamic advantages of casdatifan will continue to result in improved clinical outcomes across the lines of therapy. I want to emphasize this point. This dramatic difference in profile has been evidenced since late last year. It is not esoteric. Its manifestations on clinical outcomes are dramatic and are at the core of our differentiation. No results to date are surprising. Our top priorities for 2026 are clear. One, complete enrollment for PEAK-1, our second-line Phase III study; and two, initiate a Phase III study in the frontline patient population. With the recent outcome of LITESPARK-012, casdatifan has a clear path to consolidate a fragmented frontline setting as the first HIF-2 alpha inhibitor in this setting. Let me spend a moment on why casdatifan is at the center of everything we do. We believe casdatifan can transform the treatment paradigm in clear cell renal cell carcinoma, and our development strategy is designed to generate evidence to secure cas as a backbone therapy so that every patient has the opportunity to benefit from cas across each line of therapy. PEAK-1 represents our fast-to-market strategy. This is designed to build on the clinician enthusiasm that we've seen for cas as an experimental agent and to generate the data to support the approval of a foundational treatment for clear cell RCC as rapidly as possible. Enrollment in PEAK-1 is accelerating, and we're on track to complete enrollment by year-end 2026. We're confident that PEAK-1 will establish cas plus cabo as the new standard of care in the IO experience setting. The peak sales opportunity for cas in this setting alone is more than $2 billion. At the same time, we are aggressively building a holistic strategy to embed cas across the treatment paradigm. We have been making tremendous progress in the frontline setting with multiple IO combinations now enrolling in ARC-20 and generating data in support of our first-line strategy. These approaches offer the greatest potential for long-term survival for patients. One of our key objectives today is to make very clear our integrated development strategy for casdatifan. It's actually quite straightforward, and here's how we believe things will play out. In the first line, our bedrock therapy will be cas, ipi, anti-PD-1. We believe that we can drive the 35% share of ipi/nivo to a regimen with greater than 50% of the important first-line market. While the IO regimen of ipi/nivo is the dominant therapy today, there's a segment of physicians that's always going to want to reach for TKI, particularly for patients with a fast-growing bulky tumor. Therefore, we will also be developing a cas combination inclusive of the TKI, a TKI with a well-established track record of both efficacy and safety that will allow the patient to have cas/cabo as a subsequent regimen. Our second-line treatment now enrolling its registrational trial PEAK-1 will be cas/cabo, building on the standard of care in this line, cabozantinib monotherapy. Finally, we will have a third-line plus regimen cas with another well-established TKI, and we will be investigating this regimen in both belzutifan naive and belzutifan experienced patients. We think this is a very important, kind of cool study. We also plan to explore novel cas combinations in HCC, liver cancer. I would like to emphasize that all of the clinical development plans discussed today are accounted for within our existing budget and have no impact on the guidance and runway that we have provided. We now control in all respects our early-stage pipeline, including our CCR6, CD89 and CD40 ligand programs, all of which are expected to support IND candidates in the next 6 to 18 months. So as we focus our resources, capital, human and otherwise on the late-stage development of casdatifan. The follow-on programs in our pipeline are early, but also with clear, early and capital-efficient clinical proof-of-concept opportunity and huge commercial potential. Therefore, we anticipate low spend and short time lines to get the proof-of-concept that will drive disproportionate value creation. Juan will discuss these programs in more detail later on in this call. If you want to walk away with just one thing from today, it's that Arcus has complete control of its destiny. The core asset of the company is casdatifan, and we have the strategy, data and resources to transform the treatment of clear cell RCC and create a $5 billion-plus drug. Bob will further elaborate on the enormous commercial opportunity here. We also continue to leverage our demonstrated competitive advantage in small molecule drug discovery, an increasingly scarce capability to generate wholly owned and unique development candidates, the advancement of which further enhances our strategic optionality. With that, I'd like to turn the call over to Richard to discuss our clinical programs. Richard Markus: Thanks, Terry. I'd like to start with casdatifan. As Terry described, our development plan is designed to establish casdatifan as a foundational standard of care in clear cell RCC so that all patients have the opportunity to benefit from treatment with a casdatifan-based regimen across multiple lines of therapy. At ASCO GU this year, we presented updated ORR and PFS from our 4 late-line monotherapy cohorts of ARC-20. As you can see here, the efficacy data continued to improve with longer follow-up at each data presentation. Moving to Slide 12, where we show the ORRs for the 100-milligram QD cohort, which is the dose and formulation being used in our Phase III studies, the confirmed ORR increased from 35% at the August data cut to 45%. A 45% ORR in this late-line patient population is rather remarkable. It's twice that observed with belzutifan in LITESPARK-005 or any study in this patient population. Similarly, the confirmed ORR for the pooled analysis improved from 31% to 35%, well above the range of ORRs that have been observed with belzutifan. On Slide 13, we show the Kaplan-Meier curve for the 100-milligram cohort. As you can see here that the 100-milligram cohort shows an impressive median PFS of 15.1 months after 17.9 months of median follow-up. On the next slide, we show the latest Kaplan-Meier curve for the pooled analysis. The median PFS remained at 12.2 months. So overall, we're seeing PFS that is 2 to 3 times longer with Cas monotherapy than the 5.6 months observed with belzutifan in the same setting. And as is often discussed, while the median is an important benchmark, it's not the only metric that's important. As you can see here and perhaps more impressive is the number of patients still on treatment beyond 18 months and even beyond 24 months. These data clearly support the proposition that casdatifan is the best-in-class HIF-2 alpha inhibitor. And our highest priority now is to maximize the potential of this molecule in ccRCC. Our first registrational trial, which is in the second-line setting, is well underway. Enrollment in the ongoing Phase III study, PEAK-1, is accelerating, and we are on track to complete enrollment by year-end. We are confident that PEAK-1 will establish cas plus cabo as a new standard of care in the IO experience setting. With a sole primary endpoint of PFS and a 2:1 randomization favoring the experimental arm and cabo as the control arm, we believe PEAK-1 is optimized for both probability of success and speed to data. I'd like to spend some time now on the frontline setting. With the outcome of Merck's LITESPARK-012 last month, Cas has the opportunity to be the first HIF-2 alpha inhibitor option in the frontline setting. Treatment in the frontline is generally bifurcated into IO-IO or a TKI, [ anti-PD-x ] combination. This currently leads to the conceptual trade-off between longer time to response or higher primary progression, but with the potential for durable responses and long-term survival with the IO-IO option or a faster time to response and lower primary progression but with much more treatment-associated toxicity for the TKI, [ anti-PD-x ] options. There's currently no treatment option that has the ability to both rapidly control disease and provide the best chance for long-term survival, while also having a favorable tolerability profile for long-term use. We believe a Cas plus IO-IO combination in the frontline setting has the potential to deliver on both of these fronts. We are enrolling several cohorts within the ARC-20 study, evaluating Cas combinations in the frontline setting. While the data are maturing, primary progressive disease rates have already been shown to be low, just 7% or 2 out of 30 patients for the Cas plus zimberelimab, our anti-PD-1 cohort. This rate compares favorably to published rates for anti-PD-1 monotherapy or ipi/nivo in the first-line setting. And in fact, it is close to the rate of a TKI-containing regimen but without the need for the TKI. We're also enrolling a cohort evaluating Cas plus zim plus ipi. Emerging data from these cohorts of ARC-20 will inform the first-line registrational strategy with the goal of finalizing the Phase III study protocol and beginning start-up activities by the end of this year. In parallel, we will shortly begin to evaluate additional Cas plus TKI-containing regimens in the early and late-line settings, including in patients with prior belzutifan experience. This effort contemplates the preference and in fact, the strategic necessity to utilize alternative TKIs as patients advance from one line of therapy to the next. Near term, we expect to have multiple data readouts for casdatifan in 2026. First, mature ORR data and initial PFS data for approximately 45 patients treated in the ARC-20 Cas plus cabo cohort in the IO experience setting will be presented at an investor event or at a medical conference, and all patients will have had at least 12 months of follow-up. Second, we will share initial data from the ARC-20 cohorts evaluating Cas in early line settings, including the cohort evaluating Cas plus zim in the first line. We also expect updated data from late-line monotherapy cohorts, including overall survival. Before I hand it over to Juan, I'd like to quickly touch on quemliclustat, our small molecule CD73 inhibitor. CD73 is highly expressed in pancreatic cancer and high CD73 expression is associated with significantly poor prognosis in several tumor types. In spite of this, as we recently published in Nature Medicine, in our Phase II study, ARC-8, those patients with higher baseline levels of CD73 or adenosine activity were the ones with longer PFS and OS in response to quemli treatment. Pancreatic cancer is one of the most aggressive cancers with an average 5-year survival rate of just 13%. In PRISM-1, our Phase III study evaluating quemli plus gemcitabine and nab-paclitaxel, versus gemcitabine and nab-paclitaxel in the frontline pancreatic study, completed enrollment in September of 2025. Results from this study are expected in the first half of 2027. And if positive, PRISM-1 could represent the first transformative therapy for an all-comer first-line patient population in 30 years. There's no biomarker requirement and no nonresistant mechanism and data to date have indicated that the regimen was well tolerated. Finally, we recently announced that the Phase III STAR-121 study, evaluating our anti-TIGIT domvanalimab plus zim and chemotherapy, versus pembrolizumab plus chemotherapy as a first-line treatment for metastatic non-small cell lung cancer will be discontinued due to futility. While these are certainly not the results we expected, the study had one important positive outcome. In addition to the assessment of Dom in this trial, STAR-121 also evaluated zim plus chemo as an exploratory endpoint. Zim plus chemo performed consistently with respect to overall survival as compared to pembro plus chemo. These data are consistent with what was observed in numerous studies with zim. And this randomized data set provides valuable support for the utility of zim as an anti-PD-1 combination partner for Arcus and its collaborators. I'd now like to turn the call over to Juan to discuss our immunology and inflammation programs. Juan Jaen: Thanks, Richard. Arcus has an exceptional small molecule discovery team that has demonstrated time and time again the ability to create highly effective drug candidates against difficult targets. We have been utilizing this expertise to create and develop drugs that have the potential to address very large markets in inflammation, allergy and autoimmune diseases. In-house expertise in immunology has been a core aspect of our discovery group since Arcus's founding, having been key to many of our oncology programs. Our team is addressing well-understood and validated mechanisms, and has implemented a two-pronged strategy in immunology. First, we leverage our medicinal chemistry capabilities to design and create small molecule drugs that regulate key cytokines therapeutically validated by existing biologics. Secondly, we target immune cell types that play key roles in human disease and have been historically under studied such as mast cells and neutrophils. Our first molecule in the immunology area to enter the clinic will be AB102, a highly selective, orally bioavailable MRGPRX2 antagonist. In the coming weeks, we will be sharing its preclinical profile in an oral presentation at the Society for Investigative Dermatology. The presentation will highlight the ability of AB102 to fully block MRGPRX2-dependent activation and degranulation of mast cells. AB102 inhibits all common human MRGPRX2 variants. We have optimized the potency of AB102 under physiological conditions, such as in human blood and serum. Due to its potency under these conditions, we believe that AB102 is a potential best-in-class once-daily oral treatment for chronic spontaneous urticaria and other atopic conditions such as atopic dermatitis and allergic asthma. It is expected to enter the clinic in the third quarter of 2026 with PK data available shortly thereafter and potential for proof-of-concept data in early 2027. In rapid succession, we have selected an oral, small-molecule TNF inhibitor drug candidate, which is a potential treatment for rheumatoid arthritis, psoriasis and inflammatory bowel disease and an orally active small-molecule CCR6 antagonist candidate as a potential treatment for psoriasis. Both of these molecules are expected to enter the clinic in 2027. We are very excited about the potential for our I&I programs to provide improved options for patients, and we are working to advance these into the clinic as rapidly as possible. I'd now like to turn the call over to Bob to discuss the market opportunity for casdatifan and our financial results. Robert Goeltz: Thanks, Juan. Before I get into the quarterly financials, I'd like to spend some time on the multibillion-dollar market opportunity in RCC for casdatifan. Sales for RCC drugs in just the major markets are anticipated to grow to $13 billion by 2030. Historically, the market has been dominated by 2 classes of therapy, IO and TKIs. There have been a number of offerings in both classes, which is why the market is fragmented. In contrast, there are only 2 HIF-2 alpha inhibitors on the horizon, and we believe our data have demonstrated clear advantages over our only competitor. We have a clear path to consolidate the market and entrench casdatifan as the primary backbone therapy. The development plan that Terry and Richard described is designed to accomplish this objective. If we look at the sales for the sole marketed HIF-2 alpha inhibitor, belzutifan, which is currently approved only in late-line clear cell RCC, is already generating annual run rate sales of nearly $1 billion, only scratching the surface. With casdatifan, we are also targeting earlier line settings, the IO experienced population with PEAK-1 and the IO naive first-line population with our next pivotal study. These earlier line settings have larger patient populations and longer durations of therapy, both of which contribute to a much larger market opportunity. Specifically, our PEAK-1 study targets approximately 20,000 patients in the major markets in the IO experience setting. We believe our commercial opportunity here exceeds $2 billion. In the first line, the opportunity is even greater. With the lack of HIF-2 alpha inhibitor competition in the front line, our goal is to grow the IO-IO share from roughly 1/3 of the market to more than 1/2 by adding Cas. In fact, our market research indicates that oncologists overwhelmingly prefer the promise of a Cas plus IO-IO over a TKI-containing regimen. As Richard mentioned, we also plan to investigate a regimen with IO and TKI in the frontline to address the remainder of the market. We believe the opportunity for casdatifan in the frontline exceeds $4 billion. One point I'd really like to emphasize as we think about the commercial opportunity is duration of treatment. We've seen impressive data in late-line monotherapy with many patients on therapy beyond 18 months. We plan to share updated data later this year. As we think about earlier lines of therapy, we believe there is the potential for meaningful upside resulting from the durability of effect. Conceptually, we think strong HIF-2 alpha inhibition holds the promise of a long-term tail effect. All in, we think Cas has a peak sales opportunity of $5 billion to $10 billion. As a reminder, we own all of the commercial rights to Cas other than in Japan and certain other Southeast Asian countries held by our partner, Taiho. Now let's turn to the financials. Arcus is well positioned to advance its full pipeline with $876 million in cash at the end of the quarter. We have cash runway until at least the second half of 2028. We expect to end 2026 with approximately $600 million in cash, indicative of the declining spend we expect over the year. As Terry outlined, Arcus is entering a new era with more control over our pipeline investments. While we are building a plan to take full advantage of the casdatifan opportunity, we are also sequencing these investments such that any significant growth in overall spend will be largely incurred after the PEAK-1 readout. As a result of the wind down of Dom and reduced spend on quemli, together with broader spend management, we expect to significantly reduce our overall R&D spend in 2026 and 2027 compared to 2025. For example, as our late-stage efforts have become focused on casdatifan, we have decreased our headcount by approximately 10%. Let me transition to the financials for the quarter. For our P&L, we recognized GAAP revenue for the first quarter of $17 million. Our revenue continues to be primarily driven by our collaboration agreements. We continue to expect to recognize GAAP revenue of $50 million to $65 million for the full year 2026. Our R&D expenses for the first quarter are stated net of reimbursements and were $122 million and included non-recurring workforce costs. Our actions to reduce headcount have lowered our ongoing cost structure, which we expect will result in reduced R&D expense in future periods. The discontinuation of STAR-121 and the broader reduction in our Dom-related investment will contribute to a meaningful decrease in R&D expenses as the year goes on. By 2027, we expect more than 80% of our portfolio spend will be directed towards cash development. G&A expenses were $29 million for the first quarter. Total noncash stock-based compensation was $19 million for the first quarter. For more details regarding our financial results, please refer to our earnings press release from earlier today and our 10-Q. I will now turn it back to Terry. Terry Rosen: Thanks, Bob. That was awesome. Let me close by summarizing the key themes for the remainder of 2026. Casdatifan is our #1 priority, and this year will be another transformative year for data and importantly, development as we advance towards commercialization. We expect multiple data sets, Cas plus Cabo data, initial first-line data and overall survival data from late-line monotherapy cohorts, all of which will further reinforce casdatifan's best-in-class profile and support our registrational strategy. PEAK-1 enrollment continues to accelerate, and we're targeting full enrollment by year-end. All of the clinical development plans for casdatifan that were discussed today are accounted for within our existing budgets and have no impact on our guidance or runway. Beyond casdatifan, our PRISM-1 Phase III trial for quemli pancreatic cancer is fully enrolled and on track for a readout in the first half of 2027. Juan shared the exciting progress on our I&I portfolio with AB102 expected to enter the clinic in the third quarter and our TNF inhibitor CCR6 antagonist following shortly thereafter. With $876 million in cash and investments and runway into the second half of 2028, we're well positioned to execute on all of these priorities and create significant value for patients and shareholders. We're moving into a new era for Arcus with full ownership of our lead program casdatifan and a clear strategy to win and transform the frontline setting while rapidly advancing the next generation of wholly owned molecules for inflammation and immunology. We have no doubt that we will be generating disproportionate value for patients and shareholders over the coming 12 to 18 months. Thank you all for joining us. We appreciate your interest and continued support of Arcus, and we will now open the call for questions. Operator: [Operator Instructions] Your first question comes from the line of Daina Graybosch with Leerink Partners. Daina Graybosch: Tell us about the Cas-TKI frontline combo. Specifically, we all know Merck failed with that triplet mechanistically with bel, lenva, pembro, and that's the LITESPARK-012. We have the press release. We don't know the detailed data. What could you see in that detailed data that would give you more confidence in Cas-TKI IO? And what could you see in the Merck data that would give you less confidence in the TKI combo strategy? Terry Rosen: I think we'll see what their data say, but I think the data that are out there tell us a lot already. So if you consider what we discussed at the beginning, that pharmacodynamic difference between casdatifan and belzutifan, not only the depth of response, but particularly the durability. And you think of that as a surrogate for its antitumor activity and a direct measure of its ability to inhibit HIF-2. I think what you can reconcile very easily is even in the absence of the data from the study itself, if you think about LITESPARK-011 versus LITESPARK-012, the duration of the treatment that you're talking about when you think about PFS roughly for the 2 different studies, is almost 2x. So if you recognize that belzutifan is whatever that surrogate for HIF-2 inhibition, directly relates to inhibition of the tumor, it's clearly losing that effect with time dramatically. So you see at least on erythropoietin production, on the average, you've lost that effect within 9 to 13 weeks. So when you think about it in the second-line population, the percentage of times what's bringing benefit is x. And then in the front line, it's much less. Then on top of that, if you think about the regimen, it's pretty toxic regimen. So even pembro-lenva had about a 37% rate of discontinuation. We know that the triplet was pretty unfavorable from a patient perspective. So if you think about basically, you're having diminishing effect of the HIF-2 inhibitor on top of a much longer duration of an arm that has more AEs than the control arm. So you're basically getting -- paying a price, but getting less benefit. So it's not surprising that you would end up with a hazard ratio that might not be too favorable. For us, we're going to select a TKI that we think has a very favorable -- relative to the TKIs out there, profile. But the most important feature will be that we have a HIF-2 inhibitor that has its robust effect and the durability of that effect is essentially the same on day 1 as it is on day 730. Operator: Your next question comes from the line of Jonathan Miller with Evercore. Jonathan Miller: Congrats on all the progress. I guess looking at a very broad Cas development plan here with a lot of combinations in -- across first-, second-, third-line settings. One thing that's notably absent is any approach in the adjuvant setting, which obviously we know Merck is going after. So I'd love to hear your updated thoughts on adjuvant and why that's missing from the current development plan? And then related to that, I guess, or the flip side of that is relatively recently, recently as well as relatively, you were talking about a more conservative approach to late-stage development for Cas, at least with respect to the number of Phase III trials you would want to start, you were considering going after partnerships to ameliorate the cost of late-stage development. Obviously, there's been a bit of a shift there. But Terry and Bob, I heard you say we don't expect to see any impact on runway or the ability to prosecute all these different programs. So I'd love to get a little bit more granularity on the sequencing that you're talking about and when you would start these TKI containing and potential novel combo development efforts to enable you to pursue all of these different approaches without running up against the bandwidth limitations? Terry Rosen: Thanks, Jon. And I'll let Bob handle that, and then I may have a few comments to add. Robert Goeltz: Yes, in terms of adjuvant setting, I think for us, it comes down to 2 simple things. One is the size of the opportunity and probably more importantly, is the need. So when you think about that particular setting, we think that it's around 12,000 patients or so that get therapy in the adjuvant setting, it's only the high-risk patients with resection and their treatment is capped in 1 year. And so when you actually do the math on that, we actually think that the opportunity, certainly from a revenue perspective, is probably certainly smaller than the second line and probably even smaller than what could be a third-line regimen with an alternate TKI as we described. I think the other important part is we've had a chance to talk to physicians after seeing the LITESPARK-012 data. The bar to add another therapy on top of pembro is considered quite high. In fact, most physicians told us that they actually wouldn't add belzutifan to the regimen even in light of the LITESPARK-012 data. So we actually think it will be a minority of patients that ultimately will receive belzutifan in that setting. So it's prioritization. And frankly, the other settings in first, second and third line are higher on the list for us. And so that's sort of why we've made the decision that we have from an adjuvant perspective. In terms of the sequencing of the spend, as we highlighted, we have PEAK-1 up and enrolling right now. Our goal is to have the study enrolled by the end of the year. The work towards launching these additional Phase III studies would have us in a position to sort of move those studies forward as early as late this year into next year with obviously probably our highest priority being that frontline combination with ipi and anti-PD-1. But the other studies will be shortly on the heels. But if you think about just sort of the general investment profile for the studies, we'll be through the bolus of study start-up for PEAK-1 and the cost profile for PEAK-1 will be starting to decrease as we get into the second half of next year. So we kind of feel like that it's going to be a nice portfolio effect that when we think about these other studies, kicking in really from a spend perspective in late '27 and into '28, we sort of see a generally steady spend profile through the PEAK-1 readout like we described. Terry Rosen: Jon, and I'll -- Bob kind of gave you the line of the spend along with the studies, and I'll give you a little bit more granularity on how we literally see the trials themselves playing out. So the first study, obviously, PEAK-1 that's enrolling, as Bob said, it will be fully enrolled by the end of this year, and then we'll be waiting for readout. We're going full speed ahead and expect that ipi, anti-PD-1 Cas, as we've been talking about for some time, to be getting up and going by the end of this year. We'll see where the TKI inclusive regimen comes in. There's -- Without getting into all the detail now, we'll be sorting through whether there's -- that's actually 2 studies -- 2 registrational studies or a 3-arm study is also a possibility. And then finally, in the later line study that we talk about, we'll start off in ARC-20. And as you know, those are relatively small cohorts that enroll very efficiently. But the other point that I think will be very important within those studies, and we'll get the answers quickly is that we'll be looking at that combination in the third-line plus in belzutifan-naive patients as well. And I think that will establish. It's a cool study, and I think, it's going to establish something [indiscernible] Juan Jaen: [indiscernible] Terry Rosen: Yes, I'm sorry, bel's experience in addition to bel's naive. Thank you, Juan. And I think that will nail something that we think we know the answer to, but we'll have those data even this year. Operator: Our next question comes from the line of Li Watsek with Cantor. Li Wang Watsek: Hey guys congrats on the progress. I guess just one question on the ARC-20 update, especially from the triplet cohort. It sounds like you guys are enrolling the combination with zim plus ipi. Can you clarify if we're going to see the initial data from this cohort this year? And what data points would you want to see to enable a Phase III frontline trial? Terry Rosen: Thanks, Li. So we do think what you'll get to see, and it will be probably in the fall, are the initial data from ipi anti-PD-1 Cas regimen. And essentially, we'll get a sense of the safety data and the rate of primary progression. While there may be some early ORR data, we don't consider that critical. We're most focused on the safety. We'll have an agreement with the FDA as to what safety data package they would want to see to enable us to get that Phase III up and going by the end of this year. And then obviously, because that's the first point, but it's also an important point for that regimen is we'll see the rate of primary progression. I think one thing to recognize about that regimen when we think about triplets, doublets, et cetera, is also just I'd like to make the point is, as you know, we've already talked about the rate of primary progression with casdatifan plus anti-PD-1 alone and those initial data are quite favorable where we only saw a 7% rate of primary progression. Now if you think about what that Cas, anti-PD-1 ipi regimen is going to look like, you basically get 4 cycles of ipi at the outset, of course, with Cas and anti-PD-1. But then the duration and the bulk of your therapy is going to be anti-PD-1 plus Cas. So both the efficacy that you're seeing with that as well as the safety of that will certainly impact the bulk of the therapy. So we're excited about that regimen. We think we're well on track to be able to start the Phase III by the end of this year and have a good safety data package. And we do plan to share that with the external world as well this year. Operator: Our next question comes from the line of Richard Law with Goldman Sachs. Jin Law: Yes, very helpful to see Cas's development laid out in its life for all the different lines of therapy. A couple of questions from me. So looking at the LITESPARK-012 failures in both triplets and dual Cas discontinuation by [ AZ ] and then all the frontline therapies of doublets or monotherapy so far, what is your confidence that a Cas triplet of any kind either with IO-IO or IO-TKI could be safe enough to succeed in 1L? And I mean, what do you think is the safety bar for 1L? Do you think that those triplets have to show like comparable safety profile to like that IO-IO, IL-TKI doublet for them to work? Terry Rosen: So I think we feel very confident based upon what we already know about our molecules with triplets, whether it's a triplet inclusive of a TKI or a triplet with the ipi anti-PD-1. So keep in mind, while we haven't analyzed in detail, and we will later this year, the zim, so that anti-PD-1 Cas, we know that doublet, and we certainly haven't seen anything untoward with that. We know we can combine with cabo well. So what we believe is that the ipi/nivo regimen has been extraordinarily well worked out in terms of dosing of that particular regimen. And as I was mentioning in my response to Li, you're basically going to treat with 4 cycles of ipi, that's quite worked out. So we believe that we have orthogonal AEs. We haven't seen anything in terms of a clear combination issues. When you think about casdatifan, you're basically bringing those on-target anemia and of course, rarely or certainly more rarely hypoxia. Again, we're going to pick a good TKI. We know that Cas anti-PD-1 is looking good. So we think a reasonable TKI will not bring anything untoward there. Keep in mind, we haven't actually seen the Merck data. And I think the thing that you should take away until otherwise is their hazard ratio must have been not good. So that doesn't get to an intrinsic inability to have a triplet. It just says when you're bringing that TKI, when you're bringing belzutifan on top of a pretty rough doublet, and you're treating for a long period of time and you are undoubtedly introducing some new AEs, but you're not having a robust long-term efficacy effect, you're probably not creating a hazard ratio, but we really don't know exactly how that played out. But all the data with our own molecule suggests that casdatifan is a very well-tolerated and robust HIF-2 inhibitor and with an orthogonal AE profile from anything that we plan to combine with. And we'll have all those data within the next 6 months or so. Jin Law: Got it. And then a follow-up on that. Have you seen the efficacy and the safety results from that dual Cas before Astra discontinued it? And will that data be shared to you guys even if Astra does not plan to share that? Terry Rosen: So we haven't seen anything other than what we said at the outset. Since they did disclose, you can now know that there were 9 patients. We -- What we described was that initial safety signal that was very CTLA-4 and more specifically volru-like when they dosed down volru. But casdatifan at the same 100 milligram dose we didn't see any more of it. And those patients still continue on. And in fact, the interesting thing out of that is, as we've commented before, we didn't see any progression. So that, if anything, we don't even know, quite honestly, that given that it was 9 patients, it's not obvious whether that was even purely volru or not. But what is obvious to us, at least as we were thinking about going forward, is that given that ipi/nivo well worked out regimen, well worked out dose, it's time tested. And of course, probably most importantly that you're only going to be carrying your anti-CTLA-4 dosing for 4 cycles made it a clear regimen for us to want to proceed with all the 4 things considered, not wanting to have both of those activities for the duration of the therapy. Operator: Our next question comes from the line of Salim Syed with Mizuho. Michael Linden: This is Mike Linden on for Salim. Just one from us on casdatifan in frontline again. Maybe just how you guys are thinking about patient selection for an ipi/nivo plus Cas combination for a Phase III? Like would these be all-comers versus poor intermediate favorable risk patients, things like that? And I guess, how is the thinking around patient selection changed post LITESPARK-012 failure? Terry Rosen: Yes. So our patient selection strategy hasn't changed. And in fact, we're thinking of all comers. And we would also be thinking of all comers in so far as a TKI inclusive regimen. So what we're really trying to address there is there's clearly -- we've had at Board meetings, there's clearly a strong preference for a TKI sparing regimen. So that's unequivocal, and that's the way we described it as the bedrock of the front line. With that said, it's a little bit one of those things where there's almost a tribalism is the way the investigators in the field would describe it, where there are certain investigators that are very prone, particularly if there is a bulky fast-growing tumor, but even otherwise do want to reach for TKI. So we feel from that overlap of particular patient with particular investigator, there should be a HIF-2 inhibitor containing regimen. And we think we can offer a very good one. So we look at both of those to be in all-comer patient populations. I think, again, the LITESPARK-012 data for us until we see something otherwise, we simply think it has to do -- and certainly, this has to be a contributing factor to that durability of effect, and let's just call it on HIF-2 inhibition with time that we know that's a dramatic difference between our 2 molecules. And of course, when we look at the choices of what to combine with, keep in mind, we have no commercial predisposition there. I -- Essentially, the world is our oyster. If you look at the front line, there's a number of TKIs used. There's not one that's particularly dominant. Overall, you have probably 60% of the patients are getting a TKI, but they're spread somewhat evenly. So we've gone and looked and been very strategic about it and looked at what's the smartest TKI from a safety standpoint, it's well used, it's well tested, approved, understood that we should combine within the front line. We know that we're going to have cabo in the second line. And then we've done the same in thinking about that late-line patient population with what then becomes another TKI that you would use in the late line. And like I said, the other important thing there is that we are going to look at that combination of Cas with that TKI in belzutifan experienced patients and establish that unequivocally. You get the activity that you want to see in that HIF-2 experienced patient. Operator: Our next question comes from the line of Jason Zemansky with Bank of America. Unknown Analyst: This is Jackie on for Jason Zemansky. Congrats on the progress. Just a quick one for you. So what do you think is necessary to drive broad uptake of a TKI-free regimen in the first-line RCC, given how popular TKIs are overall, especially given their ability to rapidly debulk tumors? Or is the goal to compete directly with dual IO therapies? Terry Rosen: So I think -- so what's interesting is we think there is a strong receptivity towards this. Now one of the most important things that we've seen to date is that casdatifan as a monotherapy, even in the late line, performs -- is good or better than TKI in any line of setting. So if you go -- we have in our deck somewhere, you can actually look that even in the late line casdatifan monotherapy, whether you're looking at ORR or PFS, looks quite good. And the thing that's standing out, and I think this is the issue that was identified with belzutifan at the outset was that rate of primary progression. So I think that's raised the question for HIF-2 inhibition, can you compete with TKI at bringing that tumor under control quick enough that you don't have that high rate of primary progression. So we believe that belzutifan was forced in the front line to combine with the TKI to address a potential high rate of primary progression, but we actually think that despite the fact that HIF-2 inhibition is well tolerated, it can get the tumor under control quite fast. And the place where we've already seen our evidence of that is in combining with anti-PD-1, where in 30 patients, we only saw 2 progressors, 2 primary progressors. So 7%, very much in line with the TKI. So we think there's a receptivity to the TKI-sparing regimen, and we think that the key thing to driving that uptake will be to show that our rate of primary progression and then everything that flows from, that looks like a TKI. The last point I would make is it's almost like there -- the mentality would be like because TKIs are a rougher treatment, it's sort of like when you think about chemotherapy that there's a linkage that sort of in people's minds, they associate rougher, but bringing the tumor more under control. Keep in mind that 85% to 90-plus percent of clear cell RCC has HIF-2 as a key driver. So you're hitting the tumor with something that really matters. And we think that's why with a robust HIF-2 inhibitor like casdatifan, you actually can compete with the efficacy effects of a TKI. Juan Jaen: Add one other point is like, I think Dr. McKay in our event in the fall indicated this that the reasons you really prefer using ipi/nivo for the most part is it gives the patients the best chance for long-term survival. And the problem is the Achilles heel as Terry described, of the primary progression. So if you could blunt that and still give patients the best chance of long-term survival and we just saw 10-year follow-up data with 40% of patients alive 10 years later, that's a very compelling regimen we think. Operator: Our next question comes from the line of Emily Bodnar with H.C. Wright. Emily Bodnar: Based on the LITESPARK-011 data, how are you kind of looking at your upcoming Cas plus cabo updated data? And what are you kind of hoping to see to feel confident that you might have a superior profile versus what we saw in the LITESPARK-011 trial? Terry Rosen: Yes. So we already feel that confidence, and we're obviously running the Phase III trial. I think you kind of have to think of things holistically. In the end, what you're going to have is a hazard ratio. And what's nice is that since we are both running versus cabo, those will be directly comparable. While our data when we share later this year, we will still be early, we're going to give Kaplan-Meier curve. We'll have landmark PFS, we'll have ORR. And people will be able to extrapolate to whatever extent how they want to look at those data, but we'll give a very holistic view. I think the other thing that we don't want lost on people because we think it's an interesting other aspect of the data that really will only be emerging. And we'll see how things play out by the time we have some mature data later this year. So while from a regulatory standpoint, the PFS is what matters, we're going to have data now our -- from our monotherapy cohorts that are getting mature enough that we'll start to get a sense of whether we do bring an OS advantage there, albeit in the late line. And the reason we feel that's important is it just -- depending on how that looks for casdatifan, it will potentially give a good sense that this mechanism can not only drive enhancements in PFS, but bring enhancements to OS. And while that may not be a requirement from a regulatory standpoint, we certainly could see it as an important differentiation that would drive more uptake by clinician, in fact, we start to show that there can be OS enhancement from HIF-2 inhibition, which we believe there's no reason there shouldn't be. Operator: Our last question comes from the line of Yigal Nochomovitz with Citigroup. Joohwan Kim: This is Joohwan Kim on for Yigal. Congrats on the progress. Maybe just to mix in a noncash question. Regarding AB102, while it's still early, is there any color you can provide on the intended proof-of-concept study design, whether you're planning on going into CSD versus AD first? Any color on primary endpoints or level of clinical signal you need to see to give confidence to advance into a future registrational program? Terry Rosen: So Juan, why don't you describe how we see ourselves going from A to B to C in the near term? Juan Jaen: Yes. So at a very high level, we have recognized that while we think we may have a better molecular profile, we have a little bit of ground that we need to make up relative to the couple of existing clinical players. So what we've devised is a fairly accelerated plan for establishing PK tolerability in healthy volunteers, followed by a fairly quick, rapid mechanistic confirmation of biological activity and very quickly progressing into a Phase II study in CSU. So we think we will in reasonable speed, catch up and hopefully begin to illustrate the better profile of our drug. In parallel with that, we're thinking about where it might make sense concurrently with that CSU type of Phase II study to demonstrate the value of an MRGPRX2 inhibitor. Right now, our lead candidate for that additional indication seems to be allergic asthma, but that's still at a very early stage of conceptual framing. Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect. Terry Rosen: Thanks, everybody. Operator: Goodbye.

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NAGE 2026 Q1 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Niagen Bioscience Inc First Quarter 2026 Earnings Conference Call. My name is Carina, and I will be the conference operator today. At this time, all participants are in a listen-only mode. As a reminder, this conference call is being recorded. Earlier today, Niagen Bioscience Inc issued a press release announcing its financial results for 2026. If you have not reviewed this information, it is available within the Investor Relations section of Niagen Bioscience Inc’s website at niagenbioscience.com. I would now like to turn the call over to Lauren Rittman-Borzansky, assistant controller. Please go ahead. Lauren Rittman-Borzansky: Good afternoon, and welcome to Niagen Bioscience Inc’s first quarter 2026 conference call. Joining me today are our chief executive officer, Rob Fried, chief financial officer, Ozan Pamir, and Senior Vice President of Scientific and Regulatory Affairs, Doctor Andrew Shao. Doctor Shao will be joining the call for Q&A. Before we begin, I would like to remind everyone that today’s call may include forward-looking statements. These statements relate to, among other things, our research and development activities, clinical trial plans and timing, regulatory filings, expansion into new markets, business development opportunities, and our expected financial and operating performance. These statements are based on our current expectations as of today and are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of these risks, please refer to our most recent Form 10-Q and other filings with the SEC. We undertake no obligation to update these statements except as required by law. In addition, we may reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in today’s earnings release and presentation, both available in the Investor Relations section of our website. With that, it is now my pleasure to turn the call over to our CEO, Rob Fried. Rob Fried: Thank you, Lauren. Good afternoon, everyone, and thank you for joining us on today’s investor call. In the first quarter, we delivered $31.5 million in revenue, a 5% year-over-year growth excluding revenue from the recently divested reference standard business. We generated net income of $6.3 million and ended the quarter with $66.5 million in cash and no debt. We had an increase in working capital of about $5.4 million from the prior quarter, leaving a total of $82.3 million. The core e-commerce business grew 14% year-over-year. The direct-to-consumer website grew twice as fast as Amazon. As anticipated, two of our customers did not order this quarter as much as they did a year ago, which impacted overall growth, but we do see promising indicators to start the year. The awareness around Niagen and the benefits of NAD supplementation continues to gain media attention. Over the last year, we have garnered many features with major media outlets, including a cover feature in Business by LA Times Studios, and additional digital features on LA Times, The Wall Street Journal, The Washington Post, Business Insider, People Magazine, GQ, Vogue, Vanity Fair, Bio Tuesdays, The New York Post, U.S. News & World Report, Everyday Health, Elle, Allure, and others. These features serve as a powerful validation that overall awareness of the importance of NAD is growing stronger and major media outlets are recognizing the strength of our science, the quality of our products, and our leadership in the industry. An example of why experts and industry journalists understand Niagen to be unique in this space is our recent launch of the Niagen Plus at-home injection kit and our telehealth capability. There are numerous federal and state requirements that had to be met in order to offer a product such as this, and the ingredient itself must be pharmaceutical grade. It must conform to very high purity and sterilization standards, and it has taken many years and countless hours from the exceptional Niagen Bioscience Inc team to get here. I am very proud of this achievement. It is the first product launch through our very own telehealth platform and places us firmly in the heart of a growing and important longevity trend. Of course, as we do with most things, we are approaching this new endeavor methodically, and I expect it to iterate and improve with time. Niagen Plus is not our only new development in our product pipeline. In March, we pilot-launched the Niagen NanoCloud, our first skincare topical product. Early demand has been extremely strong, and we are already nearly sold out. The wide launch will be in October. Surveys of the early adopters of NanoCloud have yielded results: visibly more youthful, smoother, and more moisturized skin and improved skin texture. These results are consistent with the recently completed independent study. In addition to our own TRU NIAGEN consumer products, we expect to supply NIAGEN as an ingredient to reputable and trustworthy skincare brands. Last month, we announced that NR chloride, patented as NIAGEN, has achieved a published USP dietary supplement ingredient monograph. A USP monograph is usually reserved for approved drugs and rarely dietary supplements. There is now a global benchmark for what high-quality NR chloride should look like in dietary supplements, and that benchmark is NIAGEN. NIAGEN is the only ingredient among the NAD and NMN companies to reach this standard. This is merely one of many examples of our dedication to investing in science and innovation and in high quality and makes our company truly unique in the NAD space. NAD science continues to evolve. As the leader in NAD science, we take pride in contributing to research that advances the understanding of NAD and its implications for human health. In March, we were the lead sponsor of the inaugural NAD for Health scientific meeting hosted by the University of Copenhagen. This brought together world-renowned researchers, clinicians, and industry partners. A prominent discussion at this conference was a new development in the understanding of how, when, and where different NAD precursors exhibit their effects. We learned that while whole blood NAD remains an important biomarker, tissue NAD may be the key determinant of functional outcomes. Emerging evidence suggests that NR through IV or injection can support more rapid, direct, and substantial NAD augmentation in peripheral tissues such as the liver, kidney, brain, skeletal muscle, and skin. Additionally, recent evidence suggests that combining NAD-boosting supplementation with exercise may produce additive or potentially synergistic effects on certain functional outcomes such as blood flow and aerobic capacity. These learnings will require further validation in human clinical trials, and we look forward to this next phase of research. We continue to make steady but deliberate progress towards pharmaceutical applications of our NAD precursor portfolio in orphan indications, particularly ataxia telangiectasia. We are working with CROs to design and key IND-enabling preclinical studies, a portion of which were initiated earlier this year, and I hope to have more updates or key developments on future calls. Niagen Bioscience Inc continues to set an example in the industry. We are dedicated to doing things the right way, to advancing the science, and to promoting the understanding of how NIAGEN plays a critical role in improving health. This is what sets us apart from all other NAD companies. I would now like to hand the call over to Ozan to run through the financials and then on to Q&A and closing remarks. Ozan? Ozan Pamir: Thanks, Rob. It is a pleasure to once again address our investors, partners, and team members today. We had a solid start to the year with strong e-commerce growth coupled with exceptional net income. In 2026, we delivered $31.5 million in revenue, or $31.1 million excluding the reference standard segment, an increase of 5% year-over-year. TRU NIAGEN revenue grew by 4% to $22.4 million, a $0.9 million year-over-year increase, driven primarily by e-commerce revenue of $19.2 million, which was up by 14%, or $2.4 million. Our NIAGEN ingredient revenue was $8.2 million, up 2%, or $0.185 million year-over-year. Within the ingredients business, we delivered $7.3 million in food-grade NIAGEN sales to key partners and $0.85 million in pharma-grade NIAGEN sales. TRU NIAGEN international and domestic distribution is an area of opportunity for the company. Sales to Watsons and other B2B partners were down by $1.5 million year-over-year due to timing of orders and changes to inventory management. You can continue to expect quarterly fluctuations in sales to Watsons, a valued partner and an important component of our international distribution strategy. We do expect sales to Watsons to increase during the year based on their forecasts. Gross margin improved to 63.5% in the first quarter, up 10 basis points compared to 63.4% a year ago. This improvement was driven primarily by changes in product mix and business mix. Selling and marketing expense as a percentage of net sales was 30.7%, compared to 26.6% in 2025. The increase in selling and marketing expenses reflects investments in marketing and advertising to drive e-commerce growth, brand awareness, and to support commercial launches of new products. Research and development expense was $1.5 million, $0.22 million higher year-over-year. The driver of the increase is continued investment into clinical studies for new product launches and providing materials and resources to support external research. General and administrative expenses totaled $7.2 million, a $2.1 million increase compared to the previous year. The increase in G&A expenses is driven by the absence of a $1.3 million recovery of credit losses related to our legal settlement with Elysium and higher share-based compensation. Finally, our net income for the quarter was $6.3 million, or $0.08 per share, an improvement compared to $0.07 per share for 2025. Turning to balance sheet and cash flow, our balance sheet remains strong. We ended the quarter with $66.5 million in cash and no debt. For the three months ended 03/31/2026, net cash used by operations was $1.2 million, compared to net cash provided by operations of $7.9 million in the same period last year. Cash used by operations was driven primarily by investments in inventory of $3.6 million, the timing of customer orders and collections, and a larger outstanding balance from a partner, which was subsequently collected in April. Trade receivables were also impacted by an updated Amazon policy where a seven-day hold on sales proceeds is implemented, which was a one-time impact on operating cash flows. We expect inventory levels to decrease throughout the remainder of the year. Cash from investing activities is primarily comprised of the sale of the reference standards business for proceeds of $5.8 million, while cash used in financing activities includes $2.4 million of common stock repurchases during the first quarter as part of our increased share repurchase program of $20 million. Regarding our full-year 2026 outlook, detailed information on key financial metrics can be found in our earnings press release and presentation. For our top-line growth, we are reaffirming our guidance of 10% to 15% growth year-over-year. Awareness around NAD+ has yet to reach its peak, and we remain confident in our opportunities for growth in this year and beyond. We anticipate that our e-commerce channel will be a consistent growth engine, and we expect that our innovative launches will provide upside. While sales to certain distribution or ingredient partners may fluctuate quarter to quarter, we remain confident in the year ahead. We are also revising our outlook for selling and marketing expenses to increase in absolute dollars and increase as a percentage of net sales, compared to our previous expectation of remaining stable as a percentage of net sales while increasing in absolute dollars. While we are not ready to commit to a broader brand initiative or investment, we are expecting to invest in marketing to generate refreshed creative assets to push brand awareness on all channels. Finally, we are revising our outlook for general and administrative expenses. We now expect expenses to be up $3 million to $4 million in absolute dollars year-over-year, compared to the previous expectation of $4 million to $5 million. This change in outlook is primarily driven by a shift of our investments from infrastructure to supporting brand awareness efforts. With the first quarter behind us, we are focused on building on the momentum we have established. We have the right operational foundation and focus to position the company for a strong year and for longer-term success. Operator, we are now ready to take questions. Operator: Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, please press 1 again. A kind reminder to please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Your line is open. Please go ahead. Jeffrey Cohen: Oh, hey, Rob. Good afternoon. Thanks for taking our questions. Big picture, could you talk about the FDA and the last motion and the ramifications of NMN as far as its sales as well as its sales through Amazon, and what is the impact there upon your business? What is the outlook there as well? Thank you. Rob Fried: Sure. We think NMN is a good ingredient, and it does effectively elevate NAD. It does not do it nearly as well as NIAGEN. In fact, there was a study published this quarter out of Norway that showed that NR increased blood NAD levels 2.3 times for the equivalent amount to NMN. Also, every NMN product that we have tested infringes on existing patents for NMN. We have also done studies, and others have done studies, that show that the percentage of NMN products in the market that meet what is on the label is very low. We think that the reversal of the drug preclusion ruling by the FDA in September was a bad decision and a questionable decision, and we think it has a very good chance of being reversed yet again. So for all those reasons, we are not bullish long term on NMN. But unquestionably, we are seeing an increase in NMN sellers and NMN sales on Amazon and elsewhere, and it is impacting our sales. In fact, there are more than 300 SKUs now on Amazon whereas in September there were zero. Jeffrey Cohen: So, Rob, what would you speculate the ramifications to NIAGEN have been over the first quarter? Rob Fried: I cannot give you a precise number, but we see an increase in bidding costs for keyword searches on Amazon and elsewhere, and we see more difficulty getting new-to-brand customers. Many of the NMN sellers are selling at a very, very cheap price, which probably coincides with the fact that some of these companies that come out of Belarus or China do not have any scientific research, they do not need label claims, and they charge a very small amount. So for those buyers that are basically price influenced, I think a lot of those are going to NMN. But as I say, I do not think it is a long-term thing. It has affected us, and I cannot give you a precise amount or number, but it is creating some headwinds for us that did not exist a few months ago. Jeffrey Cohen: Okay. That is super helpful. And as a follow-up, could you talk about the IV clinic locations? I know you were in approximately 1,200 locations last quarter. Could you talk about any trends there as far as placements, utilization, pricing, demographics, anything there you can give us some color on? Rob Fried: Yes. As you say, it is in 1,200 clinics now. We are seeing the order rate very strong, and the repeat rate is strong. It tends to be a more affluent consumer, and they are in the major cities, most of them. It is very well represented in the larger cities. We are also in cruise ships and it seems to do very well on these cruise ships. They still charge a great deal for it. The average price is still between $800 and $1,000 per IV, but people do experience a benefit and they are very enthusiastic about it. We have some partners like Restore that are doing an excellent job of educating the consumer when they come in on the benefits of NIAGEN IV over NAD IV, and they tell us that they are having great success and great repeat purchasers. Jeffrey Cohen: Super. Thanks for taking the questions. Nice quarter. Rob Fried: Thank you. Operator: Your next question comes from the line of Susan Anderson with Canaccord Genuity. Your line is open. Please go ahead. Susan Anderson: Hi. Good evening. Thanks for taking my question. I know it is early days, but any initial thoughts on the NIAGEN Plus IV injectable launch—any initial consumer response? And then also, do you have plans in place yet to roll it out to other telehealth platforms, and if so, what would the timing of that be? Rob Fried: Thank you. Very good questions. As you know, we launched over the weekend our Niagen at-home injection kit. It has taken us many years. We are very, very excited to be there. It is only four or five days, but it has been, I would say, outstanding those first four or five days in terms of traffic and conversions. Our expectations obviously are low. There is no marketing yet. The only marketing that we are doing is some email campaigns and some media press releases, and it has been picked up in some media. We have not done any paid ads at all as of yet. But the response right out of the gate is quite enthusiastic, so we are extremely encouraged. We are also not yet available in California, which represents a very disproportionately large percentage of the consumers of products such as these, and that is because our primary 503B pharmacy, Wells, is not licensed to supply in California. They believe that this problem will be resolved in the next few weeks, so we are hopeful for that. Susan Anderson: Okay, great. That sounds good. And then thinking about the consumer products—so NIAGEN supplements, etcetera—are you thinking about channels as we look forward? Do you eventually maybe go into retail with things like the core NIAGEN supplement? Are there other channels that you are considering? Rob Fried: Yes. We do expect to broaden the distribution footprint in other countries and also in retail in the United States. There are a few new companies in the dietary supplement space, brands to whom we will be supplying NIAGEN as an ingredient, so we will be expanding the distribution. Additionally, we will be rolling out additional products. As you know, we launched the NanoCloud product recently, and that has done extremely well. We expect to do a wide release of that in October. Similarly, we expect to supply NIAGEN as an ingredient to other skincare companies. As always, we will be very careful about the companies to whom we supply NIAGEN as an ingredient. They will be reputable, trustworthy companies with existing brands, so we see an expansion in that regard as well. Susan Anderson: What is the demand from other skincare or beauty companies for the ingredient, especially after you rolled out your own NanoCloud? Have you seen any of those companies come to you or show interest in adding the ingredient to their products? Rob Fried: Yes, and we have been in discussion with two major skincare brands. Susan Anderson: Great. That sounds good. Thanks a lot. Good luck the rest of the year. Rob Fried: Thank you, Susan. Operator: Your next question comes from the line of Sean McGowan with ROTH Capital Partners. Your line is open. Please go ahead. Sean McGowan: Thanks. Hi, guys. A few questions for Rob and then a couple of clarifications for Ozan. Rob, what do you expect is going to be the impact in the near and midterm of adding the new compounding pharmacy, and when do you think we will see that impact? Rob Fried: We are hopeful for two things. One is a wider distribution of sales to clinics. We are in 1,200 clinics at this point, but there are some thousands of addressable clinics, so we are hoping to expand the number of clinics to whom we are selling. We are also hoping that the ultimate price point to the end consumer comes down. If $800 is a lot to pay for many people, we think if we can get that price down through more clinics, more competition, and more pharmacies, we can expand the addressable market. Sean McGowan: Do you expect to increase beyond these two—so it is Wells and Olympia, right?—and would you expand beyond those? When do you think we will see that impact? Rob Fried: I think we will see the impact of Olympia in the summer, the end of the summer. It is possible we would talk to other pharmacies. There are 503B pharmacies and 503A pharmacies, but at this point, we do not know. It takes a while to ramp them up anyway. Sean McGowan: A couple of points of clarification for you, Ozan. One, the increase in the inventory number—what drove that? Is that any indication of acceleration in your expectation of sales, or is there something else going on there? And then in your commentary on G&A and sales and marketing and the outlook, would you expect the reduced outlook for spending in G&A to be offset by the increase in sales and marketing, so we wind up effectively with the same operating income level? Ozan Pamir: Hey, Sean. Regarding the inventory level, the main driver is that we made commitments to make these purchases from our primary supplier, W.R. Grace, about six months ago. This was all scheduled inventory that was coming in to support us for the year. We do expect that throughout the remainder of the year, the inventory levels will come down. And yes, on your second question, that is a fair assumption. Operator: Your next question comes from the line of Raghuram Selvaraju with H.C. Wainwright. Your line is open. Please go ahead. Analyst: Hi. John Vee sitting in for Ram. Thank you for taking my question. To start, have recent developments on the compounded GLP-1 front affected demand for NIAGEN Plus IV? Rob Fried: We only know in the sense that we get many calls and inquiries from these clinics and these compounding pharmacies, especially the compounding pharmacies, who often are saying, “What is the next big thing after GLP-1?” It seems like NAD is teed up for that. Analyst: Got it. How do you think the telehealth launch will impact operating efficiency, and what emerging promotional strategies do you expect to deploy under the scope of this approach? Rob Fried: We are going to market it similarly to the way we market TRU NIAGEN. It is mostly in the e-commerce business, so it is the use of social media, paid ads, earned media, PR, and the use of influencers, and we do studies. We publish these studies, and these studies tend to get picked up by people who pay attention. We have already put out two studies, and there are several more ongoing. As we learn, we put them out. There is a network of people that absorb this information because they are very curious about how they can improve the way their body ages. Analyst: Got it. Lastly, would you be able to go into the status of the complaint aimed at removing NMN products from the U.S. market? Rob Fried: We sued the FDA because we think that their ruling reversing the drug preclusion decision was incorrect. The FDA replied to that lawsuit recently, last week, and we are awaiting hearings on that reply and then the judge’s decision. We think his final decision will be within a year. Analyst: Got it. Thank you so much. Rob Fried: Thank you. Operator: Your next question comes from the line of Bill Dezellem with Titan Capital. Your line is open. Please go ahead. Bill Dezellem: Great. Thank you. Relative to the NanoCloud skincare product, would you walk us through how you are marketing that and how you ended up getting such great traction so early on? And secondarily, what you are learning from having that product in the market? Rob Fried: We are marketing very little at this point. It is mostly existing TRU NIAGEN consumers that are also purchasing NanoCloud as a bundle, so they are seeing it on the website when they order TRU NIAGEN. There is some social media discussion about NanoClouds, but the amount of our actual paid advertising is very small at this stage. We have done surveys of these consumers. It has now been on the market almost two months, so for the people that purchased once, we sent out a survey and we have gotten some extremely positive responses from these early consumers on the impact that it has had on their skin. Bill Dezellem: As you see the consumer behavior, has that led to any learnings in terms of how, when you do your commercial launch in October, you want to approach it? What are you seeing or learning from any of the social media that is taking place? Rob Fried: We are learning that it is predominantly a female product, at least thus far. It seems like there is a very high repurchase rate. We also realized that we could probably change the pricing a bit; we will probably increase the pricing a bit for the product. There has been some interest from retail on NanoCloud and skincare products, and we are considering that. In terms of the effectiveness of the advertising, of course we buy these ads, we track their performance, and we optimize it. Those learnings will inform the larger ad campaign that happens in October. Bill Dezellem: And just following up on the retail stores, Niagen has had a couple of—I will call them fits and starts—in, I think it was Walmart many years ago. How would this launch be different if you were to go that route, and how would you convert that to a greater level of success than you were able to have the first time? Rob Fried: We did try once in Walmart. We were never in Walgreens. That was just about timing. It actually sold quite well in Walmart—extremely well in Walmart. It is just that it took us a year to get our EV campaign going in conjunction with the launch at Walmart. It took too long. What we learned from that experience is that there needs to be marketing in connection with a retail launch, and you need to have that marketing campaign ready to coincide with the retail launch. We do not expect a wide retail launch. It will be slow. We are in certain retail locations now outside the U.S., in Watsons locations in Hong Kong and Singapore. We are in The Vitamin Shoppe presently, and we are in a few specialty shops as well. I expect that it will not be a broad, wide retail launch. It will be partner by partner and regional. Bill Dezellem: Great. Thank you. Rob Fried: Sure. Operator: And our last question comes from J.P. Mark with Farmhouse Equity Research. Your line is open. Please go ahead. J.P. Mark: Hi. Good afternoon, Rob and Ozan. Quick question for you about Niagen Plus and really about the three customer segments. Do you see meaningful overlap between the oral supplement user, the high-end IV user, and this newer at-home injectable user? Are they completely distinct populations, or do they overlap? Rob Fried: It is a bit early to know that, but we think that the NIAGEN injection product is more of an acute product. We understand the NR pathway that Doctor Charles Brenner discovered, which he called the NR kinase pathway, is located mostly in certain types of cells—that is, skeletal muscle cells, brain cells, spleen, kidney, and skin cells. So people that are interested in some sort of acute therapy are perhaps more likely to go with the injection, and the oral would be more of a maintenance product. We do think that some people will use both intermittently, but we do not yet know because the at-home kit is only recently on the market, and we will see how it plays out. J.P. Mark: In terms of the marketing to different segments, have you already identified what you think are the most promising social media paths or specific opportunities that you can tap into? You mentioned influencers—are there certain kinds of influencers or affiliates specifically who are more likely to reach your target market? Rob Fried: In the early stages, we know that the biohacker community, the strong anti-aging community, and the peptide community, if you will, are more inclined to try the Niagen at-home injection product—indeed, even the IV product, although to a lesser extent. So we think that is our early-stage primary addressable market. In the longer run, we think that elevating NAD with NIAGEN, whether by injection or TRU NIAGEN, has a beneficial impact on things like fatigue, muscle repair, or even inflammation in general across many cell types and organ types. Overall, we think it serves well as an anti-aging product. We think it is complementary to GLP-1s, so we are hopeful that in the long run the at-home kit becomes addressable as a complement to people who are presently self-injecting a GLP-1 agonist. J.P. Mark: And last question: Are you teed up on a bunch of podcasts? That would be the best marketing you can possibly do, I think. Rob Fried: We have done a few, and I think we have signed up a few more. There are many podcasters that have requested an IV or an injection that we are supplying to them. We will hear back from them and see if they want to follow it up with an interview. J.P. Mark: Okay, great. Thank you very much. Good quarter. I wish you the best for the rest of the year. Rob Fried: Thank you. Operator: And there are no further questions at this time. I will now hand the call back to Lauren Rittman-Borzansky for closing remarks. Lauren Rittman-Borzansky: Thank you, Carina. There will be a replay of this call beginning at 07:30 PM Eastern Time today. The replay number is 1-833-461-5787 and the replay ID is 828848803. Thank you for joining us today. We look forward to updating you again next quarter. Operator: This concludes today’s call. You may now disconnect.

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FSLY 2026 Q1 财报电话会议

Operator: Good afternoon. My name is Carmen, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Fastly First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would like to turn the conference over to Vern Essi, Investor Relations at Fastly. Please go ahead. Vernon Essi: Thank you, and welcome, everyone, to our first quarter 2026 earnings conference call. We have Fastly's CEO, Kip Compton, and CFO, Rich Wong, with us today. The webcast of this call can be accessed through our website, fastly.com, and will be archived for 1 quarter. A copy of today's earnings press release, related financial tables and supplements, all of which are furnished in our 8-K filing today can be found in the Investor Relations portion of Fastly's website, along with the investor presentation. During this call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, products and services, sales and growth, strategy, long-term growth and overall future prospects. These statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially from those projected or implied during the call. For further information regarding risk factors for our business, please refer to our filings with the SEC, including our most recent annual report filed on Form 10-K and quarterly reports filed on Form 10-Q filed with the SEC and our first quarter 2026 earnings release and supplement for a discussion of the factors that could cause our results to differ. Please refer, in particular, to the sections entitled Risk Factors. We encourage you to read these documents. Also, note that the forward-looking statements on this call are based on information available to us as of today's date. We undertake no obligation to update any forward-looking statements, except as required by law. Also during this call, we will discuss certain non-GAAP financial measures. Unless otherwise noted, all numbers we discuss today other than revenue will be on an adjusted non-GAAP basis. Reconciliations to the most directly comparable GAAP financial measures are provided in the earnings release and supplement on our Investor Relations website and filed with the SEC. These non-GAAP measures are not intended to be a substitute for our GAAP results. Before we begin our prepared comments, please note that during the second quarter, we will be attending the William Blair 46th Annual Growth Stock Conference in Chicago on June 2 and the D.A. Davidson 2026 Technology and Consumer Conference in Nashville on June 11, and also mark your calendars for our Investor Day, taking place on September 23 at the Nasdaq MarketSite in New York. Now I'll turn the call over to Kip. Kip Compton: Good afternoon, everyone, and thank you for joining us. We had a great start to the year at Fastly. In Q1, we delivered $173 million in revenue, up 20% year-over-year and near the high end of our guidance range. Fastly's value proposition is resonating with our customers, driving strong performance and growth in security and compute. Our focus on traffic engineering and platform efficiency continues to deliver results with another quarter of record gross margins. Security growth accelerated to 47% year-over-year and represented 22% of our total revenue. Our industry-leading WAF continues to perform well, and we are also seeing increasing momentum across our portfolio. In fact, among instances of security products sold to new customers in the quarter, almost half were of our newer products, DDoS Protection, Bot Management, and API Discovery and Inventory. We believe these are clear signals that our broader security suite is opening opportunities for wallet share expansion with existing customers while attracting new customers to the Fastly platform. Increased demand for our Compute offering drove the other category up 67% year-over-year, marking our largest quarter-on-quarter revenue step-up ever in this category. We expect continued momentum in compute as customers address increasingly demanding edge workloads and prove out high-value AI use cases. On a combined basis, security and other saw impressive growth of 50% year-over-year, and we anticipate these product lines will exceed the $200 million annual run rate milestone by late 2026. In Network Services, our platform's superior performance, reliability and value are driving continued share gains and delivered 11% year-over-year growth in the quarter, roughly double the market growth rate. We believe the Fastly platform's appeal is fueling momentum across the portfolio as customers increasingly prioritize secure, reliable and innovative solutions where performance matters. Our go-to-market execution continues to deliver strong results, including growth in new customers across key verticals in Q1. At the same time, our continued expansion within our existing base remains robust and drove LTM NRR to 113%, as Rich will discuss later in the call. We also saw broad-based strength year-over-year across all geographies. We are continuing our investment in APJ, highlighted by the recent opening of our new office in Singapore. Following key leadership hires in Q1, we remain committed to scaling our regional presence with additional strategic talent this year. To further accelerate the momentum of our go-to-market transformation, we hired Joan Jenkins as our new Chief Marketing Officer. Joan brings over 2 decades of experience leading global marketing organizations at world-class companies, including Informatica, Druva, Oracle and Cisco. Joan has a proven track record of building high-performing teams, driving category leadership and importantly, strengthening the AI narrative to drive growth. Joan will be instrumental in bringing the Fastly platform story to a global audience, and we are excited to have her on the leadership team. Turning to AI. We see the rise of autonomous agents as a long-term growth driver. The edge has become critical for scaling and securing AI across multi-cloud environments. Fastly's flexible programmable platform is built for this moment. For our customers, traffic generally passes through the Fastly platform regardless of where agents are hosted. We are co-innovating with them to secure and scale their AI use cases and helping them manage and optimize a massive new wave of automated traffic. AI Bot Management is an early example of this. Most importantly, this strategy is working. It is actively building our pipeline. As a result, we believe AI is a tailwind for our business. Now let me shift gears and provide details on some outstanding customer wins in Q1, including several 7-figure deals. We closed a multimillion-dollar ARR full platform win to support a large social media platform's API and Video-on-Demand operations. By meeting rigorous availability and security standards, we mitigated downtime and data breach risk and enabled 24/7 continuity for millions of users. To enhance user trust, a privacy-first browser customer leveraged our platform to power a native in-browser VPN. The Fastly platform enabled them to fulfill their core privacy promise critical to their brand at global scale and support long-term user retention. A global social media corporation chose Fastly in a critical cross-sell security win. After a high-profile industry outage, the customer turned to Fastly, an established and reliable partner to help secure its global API traffic. By adding Fastly, the customer reduced their infrastructure risk, improved reliability and supported uninterrupted platform availability. Lastly, a multinational tech company chose Fastly for our network, security and privacy offerings to accelerate and secure their critical workloads. We are also seeing momentum in AI Bot Management wins in conjunction with our leading NG WAF offering, including an enterprise cloud storage provider replaced a fragmented legacy setup by consolidating app security and delivery on the Fastly platform. Deploying our Next-Gen WAF and Advanced Bot Management provided robust, scalable security compliance without sacrificing performance. Facing daily malicious AI bot traffic, a long-standing media customer added ContentGuard, a new product in the Fastly security portfolio introduced this quarter to protect their intellectual property without compromising the reader experience. A leading digital payment conglomerate expanded its Fastly footprint by adding 10 new products and services on our platform. With this expansion, they maximized network availability, safeguarded revenue and enabled 24/7 availability against cyber incidents. We were especially pleased to see a partner-enabled deal with a Japanese financial services provider. Working through a regional partner, offering 24/7 local support, this customer chose the Fastly platform to enable and secure a critical international expansion. Through the adoption of Fastly's Security and Network Services offerings, the customer was able to build a highly reliable, compliant infrastructure for its regulated business-critical payment systems. This is an example of our international go-to-market expansion at work. As these wins illustrate, our flexible platform and continuous innovation uniquely position Fastly to capture growing AI demand, and our expanded security portfolio directly drives customer wins and growth. Highlights of our expanding security portfolio from Q1 include ContentGuard. Managing the exploding AI bot landscape requires more than just a simple switch. It requires continuous intelligence. We launched ContentGuard to give publishers precise control over access to their content. Leveraging Fastly's pre-cache inspection, customers can stop unauthorized AI agents without sacrificing the speed or performance of their authorized traffic. This unmatched visibility provides the critical data our customers need to secure and monetize their intellectual property. API Security. As AI accelerates code delivery, it creates security blind spots through shadow APIs. We have addressed this customer need by enriching our web application and API protection portfolio enabling enhanced API Discovery and inventory tools. Automated API cataloging gives enterprises continuous at-scale visibility to secure their ecosystems without slowing developer velocity. Fastly Agent Toolkit. We released a toolkit that equips AI coding agents with Fastly-specific skills. This toolkit accelerates the customer development life cycle, enabling customers to build, deploy and secure edge services faster and with expert-level precision, ultimately driving quicker time to value on the Fastly platform. We also enhanced our Compute and Security offerings by adding support for additional programming languages. This completes the core suite of languages requested by our enterprise customers, extending our premium security layer to a wider set of edge applications. Given these highlights, we are proud that Fastly was named one of only 2 leaders in The Forrester Wave for Edge Development Platforms. Fastly also earned a perfect score for innovation and was the only vendor to receive a top 5 out of 5 rating for workload and network isolation as well as observability. This recognition underscores our platform's differentiated strength, built-in resilience and the observable actionable insights we deliver to customers. Additionally, Fastly was the only company to receive a halo designation, highlighting superior customer feedback and our continued commitment to delivering business value for our customers. Next month marks my first year as CEO of Fastly, and I'm incredibly proud of what we have accomplished. We have a leadership team in place that is deeply committed to our core mission, making the Internet a better place where all experiences are fast, safe and engaging. We believe our platform is the gold standard for flexibility and resilience without compromising performance. We see our story resonating with the market, and we are delivering tangible value through our expanded portfolio and relentless customer-centric approach. As we scale, Fastly is positioned to drive better business outcomes for our customers and long-term value for our shareholders. Rich will now walk through our Q1 financial results and guidance in more detail. Rich, over to you. Richard Wong: Thank you, Kip, and thank you, everyone, for joining us today. I'd like to remind you that unless otherwise stated, all financial results in my discussion are non-GAAP based. Revenue for the first quarter increased 20% year-over-year to $173 million coming in at the high end of our guidance range of $168 million to $174 million. This result was a record high for Fastly and was driven by continued success in our go-to-market upsell and cross-sell motions with our expanded product platform, highlighted by strong security momentum. In the first quarter, Network Services revenue of $126.2 million grew 11% year-over-year. Our typically flat Q1 revenue seasonality was amplified this year by a record-breaking Q4. Despite the seasonality and strong Q4 results, we delivered quarter-over-quarter sequential revenue improvement in Q1. Security represented 22% of revenue or $38.8 million, both record levels. This represented growth of 47% year-over-year, our fourth consecutive quarter of accelerating security revenues and 9% sequentially. This was due to the expansion of our security product portfolio, which has resulted in larger 7-figure wins in the first quarter. Additionally, we are seeing new security wins expanding beyond our WAF product and into DDoS protection, Bot Management and API Discovery and inventory. This sets us up very well for the long-term growth opportunities with new and existing customers. Our other products revenue of $8 million grew 67% year-over-year, driven primarily by sales of our compute products. As Kip mentioned, other revenue grew a record $1.6 million quarter-over-quarter as we are seeing momentum in our compute revenue driven by new customer requirements in AI and related areas. In the first quarter, our top 10 customers represented 34% of revenue and grew 25% year-over-year. Revenue from customers outside our top 10 grew 17% year-over-year. Also, no single customer accounted for more than 10% of revenue in the first quarter. No affiliated customers that are business units of a single company generated more than 10% of the company's revenue for the quarter. As we mentioned in our previous earnings call, we have made changes to our customer metrics. Given that typically over 90% of our revenue has historically been generated by our large customers, formerly referred to as enterprise customers in prior reporting periods, we believe it is a more meaningful metric to track our customer acquisition compared to total customers. Thus, as previously mentioned, starting this quarter, we will no longer disclose our total customer count on a go-forward basis. Our large customer count, which represents customers with more than $100,000 in annualized revenue in the quarter was 634 customers. Our trailing 12-month net retention rate was 113%, up from 110% in the prior quarter and up from 100% in the year ago quarter. The quarter-over-quarter and year-over-year increases were due to revenue increases across a broad range of customers. Note that the LTM NRR is shifting from primarily being driven by our largest customers to now extending into our mid-market customers. We exited the first quarter with record RPO of $369 million, growing 63% year-over-year. This is our fourth consecutive quarter of accelerating RPO. The current portion of RPO was 75% of total RPO and grew 77% year-over-year. Our improved RPO continues to benefit from improved go-to-market discipline with our customer onboarding, which resulted in larger upfront commitments. I will now turn to the rest of our financial results for the first quarter. Our gross margin was 65.1% in the first quarter, a record high for Fastly. Gross margin was 110 basis points above our guidance midpoint of 64% and up 780 basis points from 57.3% in Q1 of 2025. This outperformance was primarily due to a 190 basis point onetime benefit from a change in accounting policy regarding server useful life to align with industry standards. Our incremental gross margin flow through on a trailing 12-month basis increased to 89% in the first quarter, up from 54% a year ago. Operating expenses were $93.5 million in the first quarter. OpEx was in line with our expectations for increased expense levels as we encounter a seasonal payroll impact in the first half of the calendar year. We continue to execute with OpEx spend discipline while balancing our growth investments in headcount. We had operating income of $19.1 million in the first quarter, coming in above our operating income guidance range of $14 million to $18 million. We intend to continue to drive leverage in our operating results as we scale our revenue. This is demonstrated by our operating margin expanding from negative 4% to positive 11% in the first quarter, an expansion of approximately 1,500 basis points year-over-year. This is underscored by our incremental operating margin flow through of 68% of revenue on a trailing 12-month basis, significantly above our long-term target of 25% to 40%. In the first quarter, we reported net profit of $22.9 million or $0.13 per diluted share compared to a net loss of $6.6 million or negative $0.05 per diluted share in Q1 of 2025. Our adjusted EBITDA was $29.5 million or 17% of revenues in the first quarter compared to $7.8 million or 5% of revenues in the first quarter of 2025. Turning to the balance sheet. We ended the quarter with approximately $330 million in cash, cash equivalents, marketable securities and investments, including those classified as a long term, a sequential decrease of $31 million over Q4 2025. This was primarily driven by the retirement of our current portion of the long-term debt totaling $39 million that became due in March 2026. Our cash flow from operations was positive $28.9 million in the first quarter compared to positive $17.3 million in Q1 2025. Our free cash flow for the first quarter was positive $4.1 million, representing a $4.1 million decrease from $8.2 million in the Q1 2025 quarter. This was primarily due to a year-over-year increase in infrastructure spend of $18.4 million offsetting an operating cash flow increase of $11.6 million. Moving to our CapEx plans and strategy. Last quarter, we shared that we will focus only on infrastructure capital expenditures and remove capitalized internal use software which is not a meaningful indicator of our capital spend. We believe this change more accurately represents the inherent capital costs to growing our business and more aligns reporting to our peers. Our infrastructure capital expenditures were approximately 12% of revenues in the first quarter. As we highlighted in our last earnings call, approximately $10 million in CapEx was pushed to 2026. This delay in CapEx resulted in our Q1 infrastructure CapEx spend coming in at the high end of our 10% to 12% full year expectation. Normalizing this timing impact, infrastructure CapEx would have been 6% of revenue in the first quarter. I will now discuss our outlook for the second quarter and full year 2026. I'd like to remind everyone again that the following statements are based on current expectations as of today and include forward-looking statements. Actual results may differ materially, and we undertake no obligation to update these forward-looking statements in the future, except as required by law. Our revenue model is primarily based on customer consumption, which can lead to variability in our quarterly results. Our revenue guidance reflects these dynamics in our business and is based on the visibility that we have today. As Kip discussed, we saw revenue strength from successful upsell and cross-sell motions highlighted by new customer velocity in our bookings across the platform. Additionally, our newer security features are proving to be strong vectors into existing and new customer wallet share, supported by Compute and Network Services growth. In the second quarter, we expect revenue in the range of $170 million to $176 million, representing 16% annual growth at the midpoint. We anticipate our gross margins for the second quarter will be 64%, plus or minus 50 basis points. As a reminder, our gross margin performance is dependent upon incremental revenue increases or declines as demonstrated by our improving gross margin through 2025 on accelerating revenue growth. It is also dependent on our infrastructure levels, which will serve as a modest headwind in 2026 as we invest in our platform capacity. For the second quarter, we expect a non-GAAP operating profit of $12 million to $16 million, reflecting an operating margin of 8% at the midpoint. We expect a non-GAAP net earnings per diluted share of $0.05 to $0.08. For calendar year 2026, we are raising our revenue guidance to a range of $710 million to $725 million, reflecting annual growth of 15% at the midpoint. We anticipate our 2026 gross margins will be 64%, plus or minus 50 basis points. We are increasing our non-GAAP operating profit expectations to a range of $58 million to $68 million, reflecting an operating margin of 9% at the midpoint, and highlighting our improved profitability compared to 2025's operating margin of 4%. We expect our non-GAAP net earnings per diluted share to be in the range of $0.27 to $0.33. We are closely monitoring supply chain dynamics, particularly regarding memory components and have taken strategic actions to mitigate potential impact. Our software-defined infrastructure is continuously improving, typically with lower capital requirements for expansion than legacy providers. We are also implementing server component upgrades in our fleet to efficiently expand our capacity. This structural efficiency underpins our expanding gross margins, positioning us to stay ahead of global traffic trends while maintaining strict capital discipline. For 2026, we continue to anticipate our infrastructure capital spend will be in the range of 10% to 12% of revenue compared to 5% in 2025 as we ramp our capacity to meet our growth objectives. As demonstrated in Q1, we believe the spend will be front loaded to ensure we have adequate equipment given recent supply chain constraints. We are actively monitoring our capacity plans relative to demand in this dynamic environment and may increase our capital infrastructure spend in the back half of 2026. As a result, we maintain our 2026 free cash flow guidance in the range of $40 million to $50 million. Before we open the line for questions, we would like to thank you for your interest and your support in Fastly. Operator? Operator: [Operator Instructions] Our first question comes from Jackson Ader with KeyBanc Capital Markets. Jackson Ader: First one is on Network Services. It came in kind of light of our, and I think consensus expectations. So just curious what was the driver there to the pretty big material slowdown in the year-over-year growth? And then also, like what role -- can we get an update on what role agentic use of the Internet is playing in your kind of core Network Services and maybe even the attach rates for security? And then I have a quick follow-up. Richard Wong: I'll take the first question, then Kip can answer the second part of it. [indiscernible] Remind that Q4 was particularly strong. We had particular strength in network services in Q4 for two primary reasons, we had a gaming download that was overperformance where we did see record traffic in Q4. And then we also have a seasonally strong e-commerce online holiday shopping. And so despite that strength of Q4, we did see a little bit of a dip, but it's not related to pricing. It's really just the seasonality that we would normally see in the business. Kip Compton: Yes. I would just add, we've not seen a material change in the pricing environment. And I think in Q4, we mentioned that we saw a stronger-than-expected seasonality. And of course, coming off of that, you might expect a little bit more of a drop out of that seasonality because, after all, the seasons do change. On agentic, we are seeing tailwinds across different parts of our business. Certainly, in network services, there's a volume component that we believe is being driven by agentic traffic. In terms of security attach, frankly, it may be more pronounced in the security part of our business as we have customers looking to protect AI workloads and provide privacy capabilities to agentic workloads and AI cloud compute use cases that require privacy. So we are seeing significant security there, security uplift that I think we could attribute to those trends, likewise on compute, so we see kind of an increase in volume over time on network services, but more specific attach in some of those other businesses. Jackson Ader: Okay. Okay. Cool. And then you guys mentioned pricing a couple of times. I know that some competitors in the network services market are explicitly raising prices because of the memory component prices that are impacting you and others. I'm just curious, what is your current strategy on maybe passing some of those component pricing on to your customers or whether you're taking this as an opportunity to be a little strategic on price? Richard Wong: Sure, Jackson. From a Q1 perspective, pricing environment was very similar to Q4. I think in the last earnings call, I mentioned the Q4 kind of price erosion in the mid-single digits. We did see a very similar mid-single digits in Q1. I think a good reminder is that price erosion is a year-over-year metric. And as customers spend more on our platform and as they increase the volumes, they're actually unlocking additional volume discounts and even the cross-selling. So we're actually going to naturally see some of the price erosion. There's also another reminder is that this only applies to our network services business. That phenomenon is not on our security or our compute business. And so we continue to focus on the value we create for our customers and the pricing discipline reflects this. With regard to what Akamai is doing and then what we're doing, we feel it was the right thing to do was to maintain the pricing that we negotiated with our customers, and we're honoring the contracts that we have with our customers. And as they continue to unlock those volume discounts, we are going to continue to honor that. We think it's the right thing to do from a customer relationship perspective. Kip Compton: Yes, I would just add maybe two things. First of all, of course, we see pricing changes when we experience renewals with our customers, not on a continuous basis. So there is some lag in seeing changes in market pricing just driven by when customers renew, and that is the time when prices are negotiated or potentially change, not generally mid-contract. So if you think about actions that others have said they're taking in the market starting in April, we're very closely monitoring that. We've not seen a change in the pricing environment yet. But it's conceivable that those changes are simply going to take a few more months to filter through the market as others have renewals and as our customers' renewals come up as well. The other thing I'll add, we said and I'll say again that we believe that we have a more efficient platform. It's a more modern platform. And I think if you look at the capital intensity of our business compared with some of the other similar platforms out there, you can see that it is more efficient. That does, in our view, give us a potential sort of structural advantage in an environment with rising component costs. They certainly affect us, but it appears likely that may affect us less than our competitors. And so we may not have as many cost increases that we need to pass through to customers. Operator: Our next question comes from the line of Frank Louthan with Raymond James. Frank Louthan: Great. Two quick ones. What is the percentage of your revenue that has revenue commitments with it now? The first question. And the second one, your network is deployed largely in Equinix and DLR data centers or something similar with power and connectivity. Is there a reason that you could not facilitate distributed compute nodes to GPUs, combined with your network delivery out of those? And is that something you're pursuing? And what would it take to have a product like that? Richard Wong: Yes, Frank, I'll take the first one, and I'll let Kip take the second one. In terms of the kind of revenue commitment, I think the best number to really point you to is the current portion of RPO. So we mentioned on the earnings call that we had RPO of $369 million, which grew 63% year-on-year. The current portion represents the next 12-month component of that. That was 75% of the total that was -- so taking 75% of that, it's $275 million as a next 12-month commit. And that actually, if you look at current RPO on a year-over-year basis, our current RPO is growing 77% year-on-year. Kip Compton: So to your question on GPUs and the opportunity that our global network presents there. We're in a very close contact with component vendors, including in the GPU space and looking strategically at that market. The observation I'd make is our network, most of our peers' networks is highly distributed around the world. And we don't concentrate as much capacity and compute power in a single location as, for example, a centralized cloud does. And when training was the primary driver of GPU demand, that meant that -- with training being extremely large scale, that meant that our network was not well positioned to drive training and therefore, GPU-based demand. As we are seeing, and I think many in the industry are seeing the workloads and the focus shift from training to optimal inference and how different chip architectures can help with a very high performance and highly efficient inferencing, that may very well open up a bigger opportunity for us given the way our network is built and given how software defined it is. So that is yes, absolutely something that we're tracking very closely. Operator: Our next question comes from the line of [ Charlie Zhou ] with Evercore. Unknown Analyst: This is Charlie on for Peter Levine from Evercore. It was great to see the step-up in compute revenue this quarter. Rich, could you maybe help us frame how we should best think about the trajectory of that business from here? Particularly what needs to happen for compute to become a more meaningful contributor to overall growth? And Kip, maybe could you walk us through some of the use cases where Fastly is seeing the strongest customer interest for edge compute today? And how do you expect AI edge inference to evolve over the, let's say, next 12 to 18 months? Richard Wong: Sure. Thank you for the question. I think from a compute perspective, we did report $8 million in our other bucket, which was a nice kind of 67% year-over-year growth in our other business. I think when we think about compute, that's a good business to -- and then we're co-innovating with our customer base right now on agentic and AI and what we're doing there. I do think that as the agentic kind of market really starts taking off and maturing, those co-innovations that we're doing become like much better and real products that we will go out to market with. So I think for now, from a co-innovation perspective, we are working with some of our best customers on the biggest and hardest opportunities and problems. And I think those are really unique opportunities for Fastly in that space. Kip Compton: Yes. I would add just to echo Rich's comment, I mean we've definitely seen an uptick in customers' interest in additional optimizations and features in our compute platform, specifically related to interoperability with LLM so that they can drive some of those workloads from the edge. And as Rich described, we're actively working with them to optimize and continue to enhance the platform. So I think the edge compute opportunity is a large opportunity overall and one that we're certainly well positioned to garner a good share of. Operator: Our next question comes from the line of James Fish with Piper Sandler. James Fish: Just curious what you guys are seeing at this point from some of the competitor exits, the Edgio side of things in terms of traffic and how that's kind of rolling through? And is it still that roughly 90% of the time you guys are replacing some of those legacy CDN providers, more incumbents like Akamai? Richard Wong: Yes, James, thanks for the question. I think that we have lapped Edgio probably for about 2 to 3 quarters now in terms of that opportunity. We are -- what we are doing on the network services, I think, as Kip mentioned on the earnings call, we are growing almost 2x the market. And the way we're doing that is increasing share with existing customers. So we continue to really support them and increase volumes with our existing customers. But we also do have takeout campaigns. And we've been pretty good about doing that where we go out there, sell the value, which is we win where performance matters, where customers care really about speed, reliability, security in their network. And so that's probably more the last 2, 3 quarters in terms of being able to kind of beat the growth rate of the market is doing those takeouts versus our competitors versus the ones that went out the business, which we lapped 2 to 3 quarters ago. James Fish: Yes. I mean at the end of the day, those guys are seeing renewals that kind of shift over and mix shift anyways. But my follow-up question was more around the emergence of Anthropic's Mythos? And how do you see the value of your portfolio in security changing with some of the advancements there? Kip Compton: No, it's a great question. We believe that the threat environment is only becoming more dynamic and more challenging for our customers. As these technologies come out, they could be quite disruptive on the security landscape. So we're seeing actually more interest in our security products, not -- to be clear, not less. I think there's an interesting market reaction when Mythos was first announced. We actively use AI technologies in our security work. So we believe that we have a modern approach there that's well equipped to respond to these evolving threats. And we see more and more customers seeing value in products like web application firewall because as the velocity of threats increases, they can't patch all of their systems in time. So having something like web application firewall that can be patched quickly and that can be managed by a company like Fastly, who sees the global threat landscape in real time is very attractive in terms of reducing their time to protect their workloads. So we think it's an evolution of the security space that makes perhaps platforms like ours even more important. Operator: Our next question comes from the line of Rudy Kessinger with D.A. Davidson. Rudy Kessinger: It's been a lot of noise and bigger questions around AI traffic. Could you help us just maybe break it down a bit further or provide more color. When you look at the year-over-year growth and the traffic on your network in Q1, what percent of that was driven by AI chatbots and agentic traffic? Kip Compton: I don't know that I have a robust number on exactly how to break that traffic out for you. I mean what we have seen is that, that traffic is growing faster than human browsing traffic. So we see it becoming a greater share of traffic over time. But I'm looking at -- I don't think Rich or I have like a percentage or a number that we could share on this call. Rudy Kessinger: Okay. Fair enough. And then on security, really another really strong step-up in the revenue on a quarter-over-quarter basis and the year-over-year growth acceleration. Were there any large deals in that in Q1 that contributed to that, that we should be mindful of, similar to Q3 last year, I believe it was? Or was that pretty broad based? Richard Wong: Yes. Security this quarter was more broad-based. I would say that we did not highlight it because it's multiple customers that we won security. I would say that compared to Q3, where we mentioned we had one kind of big customer deal. Here, I think we mentioned multiple 7-figure deals that we closed in the quarter that involve security. Beyond just those three, we also had a number of smaller ones that are also using security. I think as we see agentic traffic increase, our customers are getting more focused on the use of security and the use of compute on our platform. And so it's for us, we're seeing it much more broad-based than we did see in Q3. Kip Compton: I mean, I guess, the one thing I'll mention before we move on to the next question. Another characteristic, and I think we talked about this a little bit in the earnings script is we're seeing broader interest across our expanded security portfolio. So there are different ways to quantify it. But our newer products are starting to perform very well alongside the Next-Gen WAF, which obviously continues to perform well. So from a revenue concentration perspective, we saw a lot of different sized deals during the quarter. I would say, from a product diversification perspective, we saw broader interest and adoption across our portfolio, which is exactly our strategy. Operator: Our next question comes from the line of Jonathan Ho with William Blair. Jonathan Ho: I wanted to maybe start out with the hiring of Joan and the potential opportunity that you see in terms of the CMO role and maybe what the biggest opportunity could be for the business to accelerate just given the hiring there? Kip Compton: No, absolutely. We see a big opportunity there. We're proud of the efforts that we've made in marketing, but really look forward to Joan helping us take those to the next level, especially as we reach more markets around the world. I think there's a significant opportunity to better position the value of our platform and of our services with specific buyers and specific verticals. And I think there's also an opportunity to build awareness and particularly APJ, but other markets where we believe that we're underpenetrated from a market perspective. And I'm just obviously very impressed with Joan's background, and she has a very systematic and scalable and repeatable approach to marketing. And I think that's going to serve us well, especially as we work to expand our brand recognition to include, but be a lot more than our world-class network service and delivery products, but really as a first-class security and edge compute brand. Richard Wong: I think the one thing I would add to that is that I think we were founded by technologists. We've always been very technology-first company, and I think our brand really resonates really well with a lot of technologists who are so deep in the Edge platform. I think bringing Joan brings this level of, hey, how do we speak about the performance that we have and the technological capabilities we have beyond just a technologist organization. And I think that's pretty exciting to me because being able to appeal to a broader audience beyond just technologists is very important. Jonathan Ho: Got it. Got it. And just in terms of a follow-up, I mean, just given the strength in your security business this quarter, and what's -- can you help us understand what's maybe driven the strong uptake and what inning we're in, particularly given how early agentic rollout is around some of these use cases that you mentioned? Kip Compton: Yes. I mean, it's a great question what inning we're in. I'm not sure I know how to quantify that. But what I can say is we've had a few different things come together to drive that growth higher. As Rich mentioned, one was new deals and some significant new deals in the quarter. We've also had continued robust expansion of some of the deals we've won in the last several quarters. And so we continue to see growing volume and growing adoption. As I mentioned earlier, another thing that's happening is over the last 5 or 6 quarters, we've dramatically expanded our security portfolio, essentially from what was really one product, a phenomenal product in our Next-Gen WAF, but nonetheless, one product to include 5 or 6 very solid products that solve important business problems for our customers. So I think another thing that's sort of compounding into that growth is us being able to land more customers with that broader portfolio and having existing customers adopt more of the portfolio. I think it's hard to quantify, but AI, I think, is a driver here. We have seen increased interest in our privacy products that are part of our security portfolio and also in our API governance products, which includes our API Discovery and schema enforcement products and that appears in many cases, to be driven by AI use cases. And so we'll continue to monitor that. But as I said earlier, we see some significant relevance with aspects of our security product and important AI use cases. Richard Wong: Yes. The one quantification area I would -- may try to chime in with is that if you think about the midpoint of our guide for the full year 2026, that's a $93.5 million increase on the incremental revenue perspective. If you look at where that incremental revenue is coming from based on the growth rates of the various businesses, more than half of our incremental revenues will actually come from security and other, which I'm very positive and bullish on, right? I think that those are areas that we're investing in, those are areas that we think create the biggest opportunities for Fastly, and you can see that reflected in our growth rate, and you'll see that reflected in incremental revenue year-on-year for 2026. Operator: It comes from the line of Jeff Van Rhee with Craig-Hallum Capital Group. Jeff Van Rhee: A few for me. First, on the network side, I think you said last quarter bit growth was in the mid-20s. Just wanted to confirm it's sort of still in that range. And then what are the assumptions implicit in the annual outlook? Richard Wong: Yes. So network services, we've talked about traffic growth kind of being in the mid-20s. And then we talked about kind of the mid-single-digit kind of price compression. Nothing right now is really changing that. I think that from a prudence perspective, we are seeing kind of still mid-double-digit kind of traffic growth rates and then that's offset by price kind of erosion that we see in the mid-single digits. When we see the contracts coming up for renewal from a prudence perspective, we do still layer in expectations of both volume discounts that our customers start unlocking plus some price discounting that we do give. And so from a modeling perspective, we are still kind of doing the low double-digit kind of renewal assumption, which is again prudent thing to do, given the environment we're in. Jeff Van Rhee: Yes, agreed. And that's helpful. And on the CapEx side, just like-for-like on hardware, what is the assumption in terms of increased prices on the hardware built into your CapEx outlook? Richard Wong: Yes. So basically, from a hardware perspective, we guided 10% to 12% of revenues. That implies roughly a $70 million to $80 million infrastructure CapEx spend for the full year. We are front-loading that spend. So the majority of that infrastructure CapEx will come in Q1 and Q2. We have placed all the server orders already from an ordering perspective for the year. And as a matter of fact, the server orders, we've already received it in Q1. One of the things you may notice in our financial statements is that you'll see a big pickup in AP. The orders that we placed arrived in Q1, and we have not yet made payment. They arrived literally the last kind of 2, 3 weeks in the quarter. And so that's a normal thing. And those prices have been locked in, we've already received the equipment. And so we're good to go on the hardware side. We did see the price increase, I mean, in some of the areas we did see increases of 2 to 3x, especially when it comes to memory pricing. Jeff Van Rhee: Yes. Okay. And then just last, in terms of the high-level revenue guide, can you help us just in terms of what you're thinking network versus security, what's implicit in that annual guidance in terms of growth rates for those subsegments? And if you don't want to get too precise, even just some ranges would be helpful. Richard Wong: Yes. From a business-by-business outlook, we think network services is probably like 6% -- 5% to 6% market grower. For us, I think that from a growth rate perspective, we could be anywhere between 9% to 11% kind of year-on-year growth in network services. I think from a Security perspective, we should continue to see growth in this area. I think that it wouldn't be unheard of to be in the kind of 25% to 30% kind of year-on-year growth perspective, especially after delivering a 47% quarter in Q1. And then the other is just kind of the delta between what we've guided for the full year unless those two growth rates. Operator: Our next question comes from Param Singh with Oppenheimer. Paramveer Singh: I actually had a couple. First, I really appreciate the insight you've shared so far on the agentic AI side and some of the products that you're bringing on the security side. Now in that vein, when you talk to your customer base, what do they feel is missing so far either from a security or a compute perspective, that should help them deploy and manage the agentic AI platform. And how would you price some of these incremental products versus how you're pricing the current platform to the customer base? And then I have a follow-up. Kip Compton: That's a great question. A question I think a lot of people in the industry have. What we're seeing is with enterprises, it's relatively early days in terms of agentic adoption. Many of them are seriously looking at how their processes evolve to embrace agentic AI and get the full capabilities out of it. We've certainly seen interest, as I said before, in the security area. If they have agentic coding tools, writing code and executing it, how can they perhaps use API Discovery and Schema enforcement to make sure that they're comfortable with what that code is doing to other systems. I mentioned the privacy aspect. We've had a lot of interest in that. But I would characterize our work with customers is relatively early for the majority of enterprises. And that's why we talked about the design partner program where we're working very closely with those customers to make sure that we meet their needs. In terms of specific products and pricing, it's probably premature to comment on it, certainly not in this forum at this time as we continue to develop those products and work with our customers and assess the value creation potential. Paramveer Singh: Understood. That's really helpful. Maybe one for Rich. If I'm not mistaken, you still have some converts at 7.75%, that's a pretty high interest rate. How are you thinking about kind of rejiggering your financial structure at this point, taking advantage of the market and your stock price? Richard Wong: Yes. So the 7.75% convert we have outstanding. It's not due until June 1, 2028. And so we have a little bit of ways to do it. It is high interest rate relative to the interest rate environment we are in. These bonds are trading at a significant premium to where they are. So a refinance opportunity is quite expensive given the trading values they're at. Right now, we're focused on just what we have. And I think that from a liquidity perspective, I think that we sufficiently have the liquidity, and we feel good about the kind of maturity in 2028 and 2030, that they're a ways out to have to focus on that and focus on growing the business and really operating the business the way we've been doing. Paramveer Singh: And Rich, do you feel you're sufficiently capitalized to fund the CapEx to extend to all this growth opportunity you have in front of you? Richard Wong: Absolutely. I think we guided free cash flow for the year, even after the CapEx spend of $40 million to $50 million. And so we feel very good about how we're operating the liquidity we have with $330 million in cash and still generating cash flow. Operator: [Operator Instructions] Our next question is from Max Persico with RBC Capital Markets. Maximillian Persico: Great. I've got two for you. And I'll just give them both to you right away. On the security side, as we think about kind of the broadening portfolio and the traction you're seeing with the products outside of the core WAF solution, can you just help me understand like are you seeing customers and maybe net new customers actually land with the newer solutions? Or is it still predominantly a cross-sell upsell motion? And then separately, on the Network Services side, as we think about kind of -- I think what would be fair to describe as like a fluid macro environment with ongoing conflicts in the Middle East and higher energy prices, supply chain disruptions, et cetera, and the impact that, that could have on like consumer budgets, particularly at the low end. Could you just remind me like how much of that business is impacted by e-commerce traffic? And like how are those contracts structured? Like really, the question is like could that could slower traffic show its head or show its face in the numbers over the near term? Or are you somewhat insulated from those kind of macro trends that may or may not show up? Kip Compton: Sure. Thanks. I'll take the first question. I'll -- maybe a comment on the second question, but Rich may be able to offer a more quantitative lens on that. In terms of security and the newer products, we absolutely have customers starting on our platform with multiple of our security products at the same time, including, obviously, the newer products like Bot Management, DDoS and API Security. So absolutely, at this point, we see customers starting their journey with us with multiple security products, often also including WAF, to be clear. But starting with more than just the WAF and with those other products. So we're definitely seeing the attractiveness of those. I think that's something that we've talked about in the past is that we felt like as we completed the web application and API protection portfolio, as some of the analysts call it, which I think with the API releases we have, we expected to see some pickup on the security business as we were able to fully meet some, for example, RFP requirements of enterprises. And in those scenarios, they do adopt a bunch of products upfront at once. And so that is absolutely what we're seeing. We're very proud of our Next-Gen WAF, but there's sort of an opportunity for these other products as they come into their own in our portfolio. On the macro environment, I would not describe us as insulated from macro environment or geopolitical risk, for sure. But I think if you think about our business, it's to me, complex to predict exactly how it will have an impact. I have experience in past lives in industries where, for example, when the economy was not strong, people retained cable subscriptions and things like that because they were not going to be going out as much. So it's not as clear at the consumer level exactly how it affects the different lines of business that our customers are in that we support. So I don't know if I can draw a direct line but Rich may have some numbers or some further thoughts. I'm not sure. Richard Wong: No, I think, Kip, you answered it really well. I think that, that comment around like what people do in a recessionary environment is completely accurate. I think the other part of your question was around like how much exposure on e-commerce in terms of a recessionary downturn. I do think that we -- in our network services business, we win where performance matters and e-commerce is certainly one of those areas where performance is required and performance matters, but we are also very important to a lot of other verticals as well. And so, one, the exposure to e-commerce is not like magnified huge. But I think, two, we have seen in the past in a recessionary environment, there is a little bit slightly more resilient demand than what we see with in other areas. And so we are monitoring and we are watching because, of course, we care about this. But we are a little bit more resilient on the e-commerce front. Operator: And as I see no further questions in the queue, I will conclude the Q&A session and pass it back to Kip Compton for closing comments. Kip Compton: Thank you, everyone, for joining and for your interest in Fastly. We look forward to you -- seeing you at our Investor Day in September, which Vern mentioned earlier, and we'll be sharing more about as it approaches at the Nasdaq MarketSite in New York. Lastly, I want to thank our Fastly employees for all of their contributions, our customers for their trust and partnership and our investors for their continued support. Thank you. Operator: This concludes our conference. Thank you for participating, and you may now disconnect.

4天前Insight Analytics约5分钟阅读

ARAY 2026 Q3 财报电话会议

Operator: Good day, and welcome to the Accuray Third Quarter Fiscal Year 2026 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Stephen Monroe, Vice President of Financial Planning and Analysis. Please go ahead. Stephen Monroe: Thank you, and good afternoon, everyone. Welcome to Accuray Incorporated's conference call to review financial results for the third quarter of fiscal 2026, which ended 03/31/2026. During our call this afternoon, management will review recent corporate developments. Joining us on today's call are Stephen LaNeve, Accuray Incorporated's President and Chief Executive Officer, and Ali Pervaiz, Accuray Incorporated's Chief Financial Officer. Before we begin, I would like to remind you that our call today includes forward-looking statements. Actual results may differ materially from those contemplated or implied by these forward-looking statements. Factors that could cause these results to differ materially are outlined in the press release we issued just after the market closed this afternoon, as well as in our filings with the Securities and Exchange Commission. We base the forward-looking statements on this call on the information available to us as of today's date. We assume no obligation to update any forward-looking statements as a result of new information or future events except to the extent required by applicable securities laws. Accordingly, you should not put undue reliance on any forward-looking statements. A few housekeeping items for today's call. All references to a specific quarter in the prepared remarks are to our fiscal year quarters. For example, statements regarding our third quarter refer to our fiscal third quarter ended March 31. Additionally, there will be a supplemental slide deck to accompany this call which you can access by going directly to Accuray Incorporated's Investor Relations page at investors.accuray.com. As you review our prepared remarks and guidance today, please note that our outlook represents our current estimates and reflects the operating environment as we understand it today, including, among other things, current tariff impacts and geopolitical conditions. As always, the situation remains dynamic and we will continue to update investors as visibility improves. With that, let me turn the call over to Accuray Incorporated's Chief Executive Officer, Stephen LaNeve. Stephen LaNeve: Thank you, Stephen. Good afternoon and thank you for joining us. Since joining Accuray Incorporated last October, I have spent time with teams across the company and in our key markets. What stands out is the strength of our technology, the commitment of our people, the conviction health care providers and patients have in our solutions, and the scale of the opportunity ahead of us. Turning to the quarter, total revenue was approximately $105 million, up 3% sequentially but down 7% year-over-year. In the third quarter, we had product shipments planned to certain customers in the Middle East, North Africa, and Pakistan that have been delayed indefinitely due to increased geopolitical disruption in the Middle East, which is also impacting our service revenue in those regions. We do not know how long this regional dynamic might continue. Additionally, our business in China continues to face headwinds that we discussed during our last earnings call which pertain to geopolitical tensions and ongoing tariff uncertainty. These are markets that remain strategically important to Accuray Incorporated over the long term, but the current environment has added volatility and uncertainty that is largely outside of our control and difficult to predict. That said, restating our strategy, we are prioritizing investment in innovation, product reliability, service solutions, workflow efficiency, and partnerships that expand our reach and strengthen our platform. Additionally, we are relentlessly focused on executing on our transformation program initiatives that did not take effect until the middle or end of the third quarter, which, coupled with the geopolitical factors I have mentioned, have masked their impact to date. While we remain confident in our ability to execute against our transformation plan, the current geopolitical environment, including the conflict involving Iran and its ripple effects across the Middle East, as well as my earlier comments about our business in China, has created significant unpredictability for both the product and the service sides of our business. Given such uncertainty, we believe the responsible approach is to withdraw our financial guidance at this time. We will provide an update on the business when we report fiscal fourth quarter results. Now turning to our transformation plan and the progress we have made. We launched a comprehensive strategic, operational, organizational transformation plan. This plan was designed to sharpen accountability, tighten cost control, and accelerate execution, while positioning Accuray Incorporated for sustainable, profitable growth over the long term. The foundation of this plan was to establish clear product and service strategies supported by a set of critical enablers we believe are necessary to execute at a higher level. The first of those enablers was rightsizing our cost structure while improving efficiency through better processes and the use of our ERP system and business intelligence tools. This was paired with an organizational realignment that centralized key functions, outsourced non-core activities, and reinforced accountability, speed, and commercial focus across the business by reducing approximately 15% of our workforce. At the same time, we reallocated engineering resources toward higher ROI programs, particularly those that integrate third-party solutions and more directly reflect the voice of the customer. Taken together, these actions were designed to structurally improve operating profitability by approximately $25 million on an annualized basis, with roughly $12 million expected to benefit fiscal 2026. As of the end of the third quarter, we have already achieved approximately $10 million of those improvements, and we are well on track to exceed the $12 million we originally targeted for fiscal year 2026. We continue to believe that at least $25 billion of these improvements should be realized in fiscal year 2027. We remain encouraged by the pace, the quality of execution, and the sustainability of these actions to date, and we will provide an updated view on these annualized improvements on our fourth quarter earnings call. To put some color around what this looks like in practice, let me briefly highlight a few initiatives that are already underway. First, we are expanding and diversifying our service portfolio to better monetize our installed base and enhance customer value. During the quarter, we launched new training and educational solutions, which can be included in service agreements or sold standalone. Additionally, we will launch packages to add software solutions to our service agreements, which we believe strengthens recurring revenue opportunities and improves customer engagement over time. Our strategy is to better leverage our substantial and growing installed base and to drive significant value creation through our service business. Second, we are making meaningful progress toward a more disciplined distributor partnership model. In markets where distributors are essential to our reach, we are implementing clear performance standards, improved transparency, stronger alignment, and better support models to drive consistent, high-quality execution. During the quarter, we advanced this effort with several concrete actions, including the appointment of a Vice President of Distributor Partnerships, a new and strategically important role for Accuray Incorporated focused on elevating distributor performance and accountability globally. Third, we are implementing systems, processes, and controls to help ensure we are fully and appropriately compensated for the work our service teams deliver every day. During the quarter, we have made enhancements to our service systems, which are designed to improve cash conversion and margin quality. Fourth, we continue to optimize pricing across our product and service portfolio to better reflect the clinical and economic value our technology and our service solutions deliver. This work is designed to support competitive wins at appropriate margins and is expected to translate into stronger sales quality and margin expansion over time. Finally, an essential element of the transformation is strong commercial leadership. I am very excited that Paul Maielli has joined Accuray Incorporated as Chief Commercial Officer. Paul brings more than two decades of experience leading and scaling global capital medical device businesses across the Americas, EMEA, and APAC regions. His track record strongly aligns with Accuray Incorporated's priorities in terms of building effective commercial operating models, reactivating the installed base, expanding service and solutions monetization, and accelerating capital equipment sales, specifically in the areas of imaging, navigation, and robotics. In prior roles, his leadership helped drive the reversal of revenue decline trends and helped deliver double-digit annual growth. Paul and his team will play a critical role in strengthening our top line, improving profitability, and supporting sustainable, long-term value creation. With our internal transformation well underway, I would like to now turn to strategic partnerships, which is an area that is playing an increasingly important role in shaping Accuray Incorporated's future. A core principle of our transformation is focus. We are being very deliberate about where we invest our internal resources and where partnering allows us to move faster, scale more efficiently, and deliver greater value to our customers. Over the past several months, we have made meaningful progress aligning with partners that strengthen our execution today and fortify our long-term position as an innovative leader in radiation medicine. One of the most exciting areas of progress is how we are leveraging partnerships with the goal to convert one of Accuray Incorporated's most distinctive capabilities—real-time adaptation to patient and tumor motion during treatment—into a durable clinical evidence engine. Radiation medicine is entering an era where precision is increasingly defined not just by the treatment plan created in advance, but by what happens during treatment itself. Recent high-impact prostate SBRT data have reinforced that delivery-side factors, intrafractional motion management, can meaningfully impact outcomes. Accuray Incorporated's installed base gives us access to one of the largest repositories of real-world motion-tracked treatment data in the industry, spanning hundreds of thousands of treatment fractions across multiple disease sites. By pairing these insights with a multicenter registry sponsored by the Radiosurgery Society, we are working to define the clinical value of real-time correction, inform future product development, and help shape emerging standards of care. Importantly, this effort strengthens our differentiation, supports our product roadmap, and reinforces our focus on clinically meaningful innovation. Our new partnership strategy is built around creating an ecosystem of aligned partners that amplifies our strengths. We are building a constellation of strategic collaborations with many leading organizations, including the University of Wisconsin–Madison, Tata Consulting Services, as well as many others. Each brings distinct capabilities across imaging, software, workflow innovation, clinical research, treatment continuity, and operational execution. Together these partnerships allow us to deliver more comprehensive solutions to radiation medicine teams while improving speed to market and capital efficiency. This partnership-driven model is an important pillar of our transformation and a key component of how we intend to create enduring value for customers and shareholders alike. In addition to the momentum we are seeing across our transformation and partnerships, we are very excited about the upcoming European Society for Radiotherapy and Oncology conference in Stockholm later this month. ESTRO is an important global forum for radiation medicine and a key opportunity to engage directly with our customers. At ESTRO, we plan on highlighting a series of practical, customer-driven product enhancements and new partnerships that reinforce our commitment to clinical excellence, workflow efficiency, and continuous innovation. As I have said before, these are areas where we believe Accuray Incorporated can make the biggest difference for patients and where we can meaningfully differentiate ourselves in the market. In summary, while the external environment remains challenging, the transformative progress we are making across execution, innovation, and partnerships gives us confidence that we are building a stronger, more resilient Accuray Incorporated for the future. With that, I will hand it over to Ali to take you through our financial results and key financial metrics. Ali Pervaiz: Thanks, Stephen, and good afternoon, everyone. I would like to begin by thanking our global cross-functional teams for their continued dedication and hard work as we execute on our transformation plan. Turning to the third quarter results, net revenue for the quarter was $104.8 million, which was down 7% versus the prior year and down 10% on a constant currency basis. On a sequential basis, revenue increased 3%. Product revenue for the third quarter was $49.7 million, down 13% versus the prior year and down 15% on a constant currency basis, representing the majority of the year-over-year decline. Similar to earlier in fiscal 2026, most of this came as a result of ongoing macroeconomic headwinds in China and, more recently, geopolitical tensions in the Middle East. Service revenue for the third quarter was $55.1 million, down 1% from the prior year and down 5% on a constant currency basis. As a result of our global installed base and service network being negatively impacted by Middle East tensions, we had a $1.2 million negative impact to service revenue. The company's contract capture rate, defined as a percentage of active systems covered by a service agreement, continues to be at nearly 90% across our active installed base. As Stephen discussed, optimizing pricing to reflect our true clinical and economic value has been a key piece of our transformation plan. This includes a significant focus on pricing on service contract renewals. While the pricing secured in renewals spans over the next two to three years, we did experience $0.6 million of price favorability within service revenues in the third quarter. Product gross orders for the third quarter were approximately $49 million and represented a book-to-bill ratio of 1.0 in the quarter, with a trailing twelve-month ratio of 1.2. We ended the third quarter with a reported order backlog of approximately $356 million, defined to include only orders younger than thirty months. Our overall gross margin for the quarter was 24.1% compared to 27.9% in the prior year. This decline was primarily due to service margins, which were 26.1% compared to 33.3% in the prior year. Driving this decrease was higher net parts consumption of $3.2 million, which negatively impacted service gross margins by approximately 600 basis points. As we have mentioned in prior quarters, the timing of parts consumption can fluctuate quarterly depending on the volume and extent of service requirements. In the third quarter, our higher-than-anticipated service parts consumption also required higher-than-average logistics and duties costs. Additionally, tariffs adversely impacted service margins by $0.8 million, or 150 basis points. Product gross margins in the third quarter were 21.9% compared to 22.7% in the prior year. The year-over-year incremental cost from higher tariffs was $2.6 million, which adversely impacted product gross margins by approximately 530 basis points. Tariffs have been quite fluid recently, and although IEPA tariffs have been invalidated, we continue to monitor how the tariff landscape evolves over the near term and how that impacts our profitability and cash flow. Operating expenses in the third quarter were $34.4 million compared to $30.6 million in the third quarter of the prior fiscal year. The current-year third quarter includes $6.5 million of nonrecurring expenses, which includes severance costs and other costs directly related to our restructuring and transformation plans. Additionally, the prior-year third quarter benefited from a $3.2 million reversal of unrealized accrued compensation from fiscal 2025. Adjusting for these discrete items, third quarter fiscal 2026 operating expenses decreased $6 million, or 18%, versus prior year, which illustrates that the cost actions taken as part of our transformation have taken hold. As stated above, during the third quarter, we recognized $6.5 million of nonrecurring restructuring expenses. As our transformation plan progresses, we expect restructuring costs to sequentially decrease from these third quarter levels in future quarters, with a significant portion of the restructuring costs recognized by the end of the fiscal year. Operating loss for the quarter was $9.1 million compared to income of $1 million in the prior year. Adjusted EBITDA for the quarter was $3.8 million compared to $6 million in the prior year. We describe the reconciliation between GAAP net income and adjusted EBITDA in our earnings release issued today. Turning to the balance sheet, total cash, cash equivalents, and restricted cash as of quarter end amounted to $44.4 million compared to $47.9 million at the end of last quarter. The restricted cash related to required postings for cash flow hedging and tariffs amounted to $0.4 million in the current quarter as compared to $6.6 million at the end of last quarter. Net accounts receivable were $64.6 million, up $3.6 million from the prior quarter, largely due to higher sequential quarter revenue. Our net inventory balance was $156.6 million, up $5.7 million from the prior quarter. At the end of the third quarter, we had $5 million outstanding on our revolving credit facility. As Stephen noted earlier, we continue to execute our transformation strategy and remain ahead of plan to achieve the $12 million improvements we had originally forecasted. By the end of the third quarter, we had already realized approximately $10 million of these transformation-related improvements, which were largely achieved through workforce and discretionary spend reductions, as well as pricing realization. And with that, I would like to hand the call back to Stephen. Stephen LaNeve: Thank you, Ali. I remain excited about the opportunities ahead for Accuray Incorporated and continue to have strong conviction in the differentiation of our technology and the value it brings to customers and patients. We believe the impact of our strategic focus and the transformation plan we initiated will become increasingly evident over the coming quarters, with 2027 and 2028 financial performance expected to reflect the benefits of the actions we are taking today. As we look ahead, we believe our progress should be measured against a clear set of priorities. Number one, driving top-line growth with our product and service business lines through a focused commercial strategy. Number two, relentlessly executing on our transformation plan to improve gross margins and strengthen EBITDA through tighter cost management. And number three, prioritizing innovation grounded in voice of customer as part of our product and service development programs. We will now open the call for questions. I will turn the call back over to the operator for Q&A. Operator: We will now open the call for questions. The first question comes from Marie Thibault with BTIG. Please go ahead. Marie Thibault: Just wanted to ask about the decision to remove guidance. I know that the Iran war started after your last quarterly earnings call, but your prior commentary had pointed to a close understanding of timelines in these various regions. Why not just revise the guidance to remove some of those specific customers or those revenue installs in those regions? Why remove entirely? Stephen LaNeve: Thank you, Marie. This is Stephen. I appreciate the question, and obviously, we have spent a lot of time thinking through this very carefully. As we noted in our remarks earlier, the shipments to customers in the Middle East, North Africa, and Pakistan particularly have been delayed indefinitely due to these tensions, and that directly impacts both product revenue and all the associated service revenue. Just given the dynamic nature of these disruptions and the difficulty in predicting when these installations will resume, we collectively thought it was more appropriate to withdraw guidance. EMEA is the largest region for Accuray Incorporated, and within EMEA, the Middle East and North Africa are the fastest-growing subregions. Given the interdependencies that exist between other regions around the world, we felt this was the most prudent course of action. Marie Thibault: Okay. And then I know you are ahead of schedule on some of your cost-cutting efforts, but it looks like adjusted EBITDA came in well below what we were expecting and certainly does not really keep you on track for your prior outlook. I understand that has been removed. What is going on there? I think that excluded things like the restructuring charge. So what is going on there? And is there a way to see improving profitability despite some of this macro uncertainty? Ali Pervaiz: Hey, Marie, it is Ali. Thanks for the question. We are really excited about the fact that the transformation is moving along well, and we are ahead, just like you said. In terms of the savings, we have made a lot of progress to date. You heard about the workforce reductions and the reorganization that we have done. We have made a lot of progress in terms of overall cost and spend rationalization, and we will continue to execute on the transformation. The main pillars associated with the transformation relate to continuing to focus on our service business, making meaningful progress in our distributor partnership model, and focusing on optimizing pricing. All of those are going to take some time to come into play, and the timing of those is really hard to anticipate. We think we are still going to see a solid annualized benefit in fiscal year 2027. Marie Thibault: Thank you, Ali. You took my question out of my mouth. I was going to ask about the timing of some of those potential benefits. I will hop back in queue. Thank you. Stephen LaNeve: Thank you. Operator: This concludes our question and answer session. I would like to turn the conference back over to Accuray Incorporated's President and Chief Executive Officer, Stephen LaNeve, for any closing remarks. Stephen LaNeve: Thank you all for joining our call today, and we look forward to speaking with you again in the summer when we report our fiscal 2026 fourth quarter earnings results. This concludes our earnings call. Thank you again. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

4天前Insight Analytics约5分钟阅读

TSLX 2026 Q1 财报电话会议

Operator: Good morning, and welcome to Sixth Street Specialty Lending, Inc.'s First Quarter ended March 31, 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Wednesday, May 6, 2026. I will now turn over to Ms. Cami Senatore, Head of Investor Relations. Please go ahead. Cami Senatore: Thank you. Before we begin today's call, I would like to remind our listeners that remarks made during the call may contain forward-looking statements. Statements other than statements of historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Sixth Street Specialty Lending, Inc.'s filings with the Securities and Exchange Commission. The company assumes no obligation to update any such forward-looking statements. Yesterday, after the market closed, we issued our earnings press release for the first quarter ended March 31, 2026, and posted a presentation to the Investor Resources section of our website, www.sixthstreetspecialtylending.com. The presentation should be reviewed in conjunction with our Form 10-Q filed yesterday with the SEC. Sixth Street Specialty Lending, Inc.'s earnings release is also available on our website under the Investor Resources section. Unless noted otherwise, all performance figures mentioned in today's prepared remarks are as of and for the first quarter ended March 31, 2026. As a reminder, this call is being recorded for replay purposes. I will now turn the call over to Bo Stanley, Chief Executive Officer of Sixth Street Specialty Lending, Inc. Robert Stanley: Thank you, Cami. Good morning, everyone, and thank you for joining us. With me today is our Head of Investment Strategy, Ross Bruck, and our CFO, Ian Simmonds. Before I begin, I'm pleased to announce that effective May 21, Mike Fishman will become Chairman of our Board of Directors, following our previous announcement regarding Josh Easterly's retirement from the role. Mike is a respected industry veteran with decades of experience in credit investing and asset management. As an early member of Sixth Street, and a Director of SLX since 2011, including tenure as CEO, he has been instrumental in building our business. His combination of deep industry expertise and platform understand him -- make him uniquely qualified for this position, and we look forward to his contributions as Chairman. For our call, I'll review our first quarter highlights and pass it to Ross to discuss investment activity in the portfolio. Ian will review our financial performance in detail, and I will conclude with final remarks before opening the call to Q&A. Yesterday, we reported first quarter net investment income of $0.42 per share or an annualized return on equity of 9.9%. Inclusive of our movement in fair value of our investments, we reported a net loss per share of $0.27. Our net loss per share this quarter was largely driven by unrealized losses on our investments as we incorporated the impact of wider market spreads and lower market multiples in our fair value determinations, more on that in a moment. At quarter end, our net asset value per share declined by approximately 4.3% from $16.97, which includes the impact of the Q4 supplemental dividend to $16.24. Of this decline, $0.58 per share or nearly 80% was attributable to the movement in fair value from the market inputs, which are unrealized. That included $0.40 per share from unrealized losses in our debt portfolio tied to credit spread widening seen in the broader market and $0.18 per share from lower market valuations and in our limited equity portfolio. $0.08 per share of the decline is related to portfolio company-specific performance and the remainder from the payoffs and realized gains. Ian will walk through the NAV bridge in more detail. These results reflect a period of market-driven volatility rather than a change in the underlying strength of our business. Our portfolio remains healthy. Our balance sheet is strong, and we are well positioned to capitalize on opportunities as the market continues to evolve. Volatility in Q1 was driven by several factors, including market concerns around the impact of AI on software investments, increased redemption requests from shareholders of nontraded BDCs and heightened geopolitical uncertainty, the latter of which was not something we anticipated at the time of our last earnings call. These dynamics contributed to spread -- credit spreads widening in a subdued transaction environment. LCD first-lien spreads widened by 48 basis points and second-lien spreads widened by 256 basis points during the quarter. I want to reiterate our approach to valuation, which incorporates changes in market-wide credit spreads when determining the fair value of our investments. Our process is designed to reflect the price in an orderly transaction at the measurement date. That's not just our perspective. It's the regulatory requirement designed to maintain the integrity of the balance sheet. For additional detail regarding our valuation framework, we encourage you to read the -- our stakeholders' letter on the topic from August 2022 available on our website. We have consistently applied this valuation framework since inception, including periods of volatility, such as Q1 2020 related to COVID and Q2 2022 related to the interest rate hiking cycle. During those quarters, net asset value per share declined by approximately 7.4% and 3.6%, respectively, driven primarily by the impact of wider credit spreads. These unrealized losses reflected in earnings and NAV, are noncash in nature and do not reflect our view of permanent credit losses. As such, we expect these unrealized losses related to credit spread movement to reverse over time as market conditions change, and our investments approach realization or maturity. Our track record of long-term value creation is demonstrated by the 4.7% cumulative growth our net asset value per share since our 2014 IPO through March 31. This compares to an average NAV decline of 7.3% for our public BDC peer group from our IPO through the end of 2025, representing significant outperformance, irrespective of the volatility we experienced in any quarterly period. Market volatility also impacted net investment income through lower activity-based fee income. In Q1, we earned $0.05 per share of activity-based fees, which is below our 3-year historical average of $0.09 per share. As we've discussed in prior periods, activity-based fees, which are primarily driven by early repayments, are inherently episodic. During periods of heightened market volatility our experience is that many borrowers and asset owners defer capital markets activity. As a result, both funding and repayment volumes typically contract as valuation gaps widen and transaction activity slows. While we recognize that the current environment will take time to fully play out, as the market undergoes a period of price discovery, our experience has consistently shown that these periods of volatility create some of the most attractive investment opportunities. We believe we are well positioned to capitalize on that opportunity set. In our earnings release yesterday, we announced a change in our base dividend level from $0.46 to $0.42 per share. This decision was informed by what we believe is a responsible and sustainable dividend policy. As we assess the current environment, we have always believed it is appropriate to align our base dividend with the forward earnings power of the business. That forward view reflects the level of uncertainty we see around near-term activity, including the rate and spread backdrop and also the market volatility caused by geopolitical uncertainty that has occurred since our last call. Our perspective is also informed by historical periods of dislocation, which suggests that activity-based fee income can take several quarters to normalize following a market dislocation. While this segment may differ, history reinforces our decision to take a measured and prudent approach today. The pre-2022 environment provides a baseline for where our dividend level stood before rates began to increase. We had a base dividend of $0.41 per share. Our earnings power increased with higher base rates and wider spreads, we raised the base dividend to $0.42 in Q3 2022, $0.45 in Q4, and $0.46 in Q1 2023, representing a total increase of 12.2%. While we see potential for an increase in transaction activities as the year progresses, the timing and magnitude of that pickup and the resulting impact on our activity-based fee income remains difficult to forecast with conviction. That said, our view on base rates through the forward curve and new issue spreads is more visible. This adjustment establishes a distribution level that is sustainable across a range of potential activity outcomes. At quarter end, we had approximately $1.57 per share of potential activity-based fee income embedded in the portfolio, including unamortized OID and call protection. If activity accelerates, that embedded income provides meaningful upside. Our supplemental dividend framework captures and distributes that upside to shareholders as it's realized. Yesterday, our Board approved a base quarterly dividend of $0.42 per share to shareholders of record as of June 15, payable on June 30. This corresponds to an annualized dividend yield of 10.3% on our March 31 net asset value per share, which we believe is aligned with the core earnings power of the portfolio and with our target return on equity for the year. Ian will speak more on that in a moment. With that, I'll pass it to Ross to discuss this quarter's investment activity. Ross Bruck: Thanks, Bo. In Q1, we provided total commitments of $338 million and total fundings of $135 million across two new portfolio companies upsizes to four existing investments and an initial investment in our previously announced joint venture Structured Credit Partners, or SCP. A key advantage for SLX is our deep integration with the broader Sixth Street platform, which manages over $130 billion in assets. This connectivity allows us to leverage the collective expertise of hundreds of investment professionals to conduct the deep proprietary diligence required for today's complex investment landscape. By combining this expertise, the firm's platform-wide sourcing engine, and our disciplined underwriting, we remain well positioned to execute on investments that we believe create long-term value for our shareholders. Our recent investment in Mindbody is a good example of how the platform comes together in practice. Given our history with the business dating back to 2021, we had a differentiated understanding of the company, and we're well positioned to lead the new financing. This was a cross-platform and cross-border effort with our direct lending teams working closely with our consumer team to deliver a bespoke solution. The business benefits from significant network effects with a scaled 2-sided ecosystem across consumers and wellness partners that we believe supports growth and strong underlying business quality, ultimately driving attractive risk-adjusted returns for our shareholders. Our other new investment was Labrie, a leading North American manufacturer of premium refuse collection vehicles and related aftermarket parts. Labrie operates in a recession-resistant market with predictable demand and structural tailwinds. The company's sticky dealer and customer base, combined with a consistent high margin and capital life financial profile, make this a compelling investment aligned with our approach of lending to businesses with attractive unit economics. On repayments, payoffs moderated versus levels seen throughout 2025. We experienced $113 million in repayments from 4 full and 4 partial investment realizations resulting in $22 million of net fundings for the quarter. Of the 4 full payoffs in Q1, 2 were refinancings and 2 were sales of liquid investments. Of the 2 refinancings, both were completed at lower spreads with one executed in the private credit market and the other in the broadly syndicated loan market. Our largest payoff was Galileo Parent, which refinanced its senior secured credit facility originally structured to support Advent's 2023 take-private transaction. Sixth Street served as agent on the original deal and the company refinanced with a broadly syndicated loan priced at SOFR plus 450 basis points compared with SOFR plus 575 basis points on the existing facility. SLX was repaid with call protection generating an asset-level IRR and MOM of 15% and 1.4x, respectively. Our other refinancing was MadCap, a provider of authoring, publishing and content management solutions, which refinanced its existing credit facility in March. Sixth Street originally provided capital in December 2023 to support an acquisition with an underwriting thesis centered on MadCap's robust product offering, granular blue-chip customer base and strong unit economics. Having executed on its business plan, the company was able to transition to the bank market for a lower cost of capital. SLX was repaid in full, generating an asset level IRR and MOM of 16% and 1.3x, respectively. During the quarter, we had one addition and one removal from nonaccrual status, resulting in no change to the total number of investments on nonaccrual at 3 names representing approximately 1.4% of the portfolio at fair value and 1.9% at amortized cost. The addition was our investment in Bed, Bath & Beyond. While the path of this credit has not followed our original expectations, we have driven recoveries through secondary sources of repayment and have received approximately 85% of our cost basis through March 31. While we believe we are well positioned to realize meaningful additional recoveries over time, uncertainty around the timing and ultimate resolution of remaining claims led us to place the investment on nonaccrual effective January 1. The removal was our investment in Astra Acquisition Corp., which was reorganized in Q1 following the company's Chapter 11 process. This had no impact on the quarter's NAV as the position was already fully marked down. Moving on to portfolio yields. Our weighted average yield on debt and income producing securities at amortized costs decreased slightly quarter-over-quarter from 11.3% to 11.2%. The decline primarily reflects the decline of reference rates during the quarter. Across our core borrowers for whom these metrics are relevant, we continue to have conservative weighted average attachment and detachment leverage points of 0.4x and 5.2x, respectively, down from 5.3x in the prior quarter with weighted average interest coverage of 2.3x. As of Q1 '26, the weighted average revenue and EBITDA of our core portfolio companies was $425 million and $127 million, respectively. Median revenue and EBITDA were $174 million and $54 million. Before turning the call over to Ian, I'd like to provide an update on our existing portfolio companies highlighting key metrics. The performance rating of our portfolio continues to be strong with a weighted average rating of 1.19 on a scale of 1 to 5 with 1 being the strongest. We continue to see stable top line growth and earnings durability, which signal a healthy demand environment across our end markets. Across our core portfolio companies, LTM revenue and EBITDA growth were both 9%. The overall stability in these metrics continues to reflect proactive actions by management and sponsor teams. With that, I'd like to turn it over to Ian to cover our financial performance in more detail. Ian Simmonds: Thank you, Ross. For Q1, we generated net investment income per share of $0.42, and net loss per share of $0.27. Our reported and adjusted metrics converged this quarter as there was no impact related to capital gains incentive fees. Total investments were $3.3 billion, in line with prior quarter as a result of net funding activity offset by lower valuations. Total principal debt outstanding at quarter end was $1.8 billion, and net assets were $1.5 billion, or $16.24 per share. Our average debt-to-equity ratio decreased slightly quarter-over-quarter from 1.17x to 1.14x, and our debt-to-equity ratio at March 31 was 1.18x. The increase in this ratio was largely due to the impact of widening spreads on fair value versus net funding activity. We continue to have ample liquidity with $1.1 billion of unfunded revolver capacity at quarter end against $249 million of unfunded portfolio company commitments eligible to be drawn. Post quarter end, we further enhanced our debt maturity profile by closing an amendment to our revolving credit facility, maintaining the pricing and key terms of the facility while extending the final maturity through May 2031. All of the 19 banks in our syndicate were supported and participated in the amendment, an extension that closed on May 1. Adjusted for the revolver extension, our weighted average remaining life of debt funding is 3.9 years compared to a weighted average remaining life of investments funded by debt of only 2.5 years. At quarter end, our funding mix was represented by a 68% unsecured debt. Moving on to upcoming maturities. As we mentioned on our last earnings call, we have reserved for the $300 million of 2026 notes due in August under our revolving credit facility, after adjusting our unfunded revolver capacity as of quarter end for the repayment of those notes, and our revolver amendment, we have liquidity of $649 million, representing 2.6x our unfunded commitments eligible to be drawn at quarter end. Our balance sheet remains well positioned, allowing us to play offense in the current market environment. We believe the ability to invest capital opportunistically in what we're seeing as a wider spread environment today is a meaningful advantage for our shareholders. Pivoting to our presentation materials, Slide 8 contains this quarter's NAV bridge. As Bo mentioned, the impact of credit spread widening and movement in market multiples on the valuation of our portfolio was by far the most significant driver of NAV movement this quarter, including $0.58 per share from fair value marks. Again, absent permanent credit losses, we would expect to see a reversal of these unrealized losses related to credit spreads over time as our investments approach their respective maturities. The estimated impact of broad market credit spread tightening since quarter end represents approximately $0.12 per share, or 30% of the unwind of unrealized losses on our debt portfolio that we saw during Q1. Walking through the other drivers of NAV movement this quarter, we added $0.42 per share for net investment income against a base dividend of $0.46 per share. There was a $0.07 per share decline in NAV from the reversal of net unrealized gains from paydowns and sales. Other changes included $0.04 per share increase in NAV from net realized gains on investments and an $0.08 per share reduction to NAV primarily from unrealized losses from portfolio company-specific events. Moving on to our operating results detailed on Slide 9. We generated $93.4 million of total investment income for the quarter compared to $108.2 million in the prior quarter. Interest and dividend income was $87.8 million, down from prior quarter, primarily driven by the decline in interest rates. Other fees representing prepayment fees and accelerated amortization of upfront fees from unscheduled paydowns, were lower at $3.4 million compared to $10.9 million in Q4, driven by lower payoff activity in Q1 relative to the elevated level experienced in Q4. Other income was $2.2 million, up from $1.9 million in the prior quarter. Net expenses were $52.4 million, down from $56.4 million in the prior quarter, primarily driven by the decline in base rates. This contributed to our weighted average interest rate on average debt outstanding decreasing approximately 50 basis points from 6% to 5.5%. Lastly, on undistributed income, we estimate that to be approximately $1.15 per share at the end of Q1. Turning to our outlook for the year. Our original guidance was based on an assumption of 30% portfolio turnover in line with our long-term historical average. Given the moderated pace of repayments in Q1, we anticipate an ROE of 10% to 10.5% if turnover remains below 20% for the full year, and an ROE above 10.5% should we experience higher repayment activity. While we are taking a more measured view on forward portfolio activity, our fundamental return hurdle remains unchanged. We will continue to prioritize investing capital into opportunities that generate returns in excess of our cost of equity, maintaining the same discipline that has characterized our platform since inception. We may prove to be moving early on the base dividend adjustment, but our supplemental dividend framework provides the flexibility to capture upside should activity accelerate. With that, I'll turn it back to Bo for concluding remarks. Robert Stanley: Thank you, Ian. While the market environment remains dynamic, our conviction of the path forward is rooted in the platform we've built, over the last 15 years. Our historical outperformance through varying market conditions is underpinned by the depth and continuity of our people from this team sourcing and underwriting the risk to the professionals managing the portfolio and working through complex situations, this is a group with years of experience navigating every part of the credit cycle. We've been through these environments before and remain fully committed to the same disciplined approach that has guided the firm since day 1. Looking ahead, we're excited about the investment opportunity set to come as the markets reset our thematic sourcing engine and the breadth of the Sixth Street platform provide us with a significant advantage in identifying and executed on high-quality transactions. We believe the actions we are taking today position SLX to continue delivering strong risk-adjusted returns for our shareholders over the long term, and we are energized by the road ahead. In closing, I'd like to encourage our shareholders to participate and vote for our upcoming Annual and Special Meeting on May 21. Consistent with previous years, we are seeking shareholder approval to issue shares below net asset value effective for the upcoming 12 months. To be clear, to date, we have never issued shares below net asset value under prior shareholder authorization granted to us for each of the last 9 years, and we have no current plans to do so. We merely view this authorization as an important tool for value creation and financial flexibility in periods of market volatility. As evidenced by the last 12 years since our initial public offering, our bar for raising equity is high. We've only raised equity when trading above net asset value on a very disciplined basis, so we would only exercise this authorization to issue shares below net asset value if there was a sufficiently high risk-adjusted return opportunities that would ultimately be accretive to our shareholders through overearning of our cost of capital and any associated dilution. If anyone has questions on the topic, please don't hesitate to reach out to us. We have also provided a presentation which walks through this analysis in the Investor Resources section of our website. We hope you find the supplemental information helpful as a way of providing a clear rationale for providing the company with access to this important tool. With that, thank you for your time today. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Finian O'Shea from Wells Fargo. Finian O'Shea: To start with the dividend, I wanted to ask about why it's framed on activity-based fees where it feels like to us more good old-fashioned spread compression, credit loss which happens. You've kept a dividend for a very long time. But with that framing, is it a signal of some kind of shift in strategy, say, more toward flow lending, that's where the market is? Or is it more transient because, say, your software book won't refi for a long time and -- but you'll still focus on the same style and eventually recover in the sort of fee income line. Robert Stanley: Fin, thanks. It's Bo. I appreciate the question. There's a lot to unpack there. I'll attempt to get through it all. So first of all, first principles for us is we want to set our dividend level at a sustainable and responsible level. I think that has been from day 1, we've talked about that. We framed I want to take a step back, first of all, and talk about what we have signaled to the market, both for the space and for Sixth Street over the past 12 months and even before that. But I think we wrote a letter in April of last year, outlining what we believed were the path forward for ROEs in the sector, given the interest rate curve and spread compression that we've seen both in the market and at Sixth Street and SLX during that -- in that letter, we laid out what we believed was the path for ROEs for the sector and for Sixth Street. I think we had the forward curve at that day. So 12 months forward, ROEs of 10.3% for Sixth Street in SLX, which is coincidentally where we've set the base dividend level on a yield basis today. So just starting there. The framing of activity-based fees is exactly that for -- as we thought about forecasting ROEs last quarter, we forecasted normalized levels of activity-based fees, which have been generally around $0.08 to $0.09 per share since inception. Last year, on an LTM basis, that was closer to $0.12 per quarter. And this quarter, it was $0.04 because there was muted activity levels -- this is very consistent with what we've seen in the past when spread levels increase. And when you think about it intuitively, Fin, as spreads increase, you're going to have less repayments because people are not going to refinance you into higher-yielding loans. So your activity-based fees are really going to be focused on M&A activity, which was also muted in the quarter. Here's the good news, and what we feel good about is it's a better spread environment. We said last quarter that we believe ROEs for the sector were troughing and for Sixth Street, we still believe that. We think it's a better spread environment. That's going to slowly work through the book. We also are ramping SEP, which should continue to add support, but that's going to take time as well. And eventually, we will return to normalized activity-based fee levels. Historically, that has taken several quarters. Post rate-hiking cycle, it took 6 quarters to get back to normalized activities. I'm not sure it's going to take that long, we shall see. But just as we thought about setting a responsible dividend policy, we took all of those factors into consideration. Also, the great news is, and we commented this in the script, there continues to be high levels of activity-base fees embedded in the portfolio, should that activity return, and we believe it will eventually. So hopefully, that answered your question and it was a comprehensive answer. Finian O'Shea: Yes. No, it's definitely helpful. Like it will be a bit of a drought maybe sooner, maybe later, they hopefully come back in, I guess, sort of in the meanwhile, like that sort of call pro, correct me if I'm wrong, that's been pretty instrumental to NAV preservation, right? Like that's your sort of formula for gains, which is obviously a very critical input over time. Do you have any like backup plan or approach to solve for that issue in the meanwhile? Or do you think it's sort of also a NAV headwind? Robert Stanley: Yes. So, Fin, the great news is, I think our call protection as a percentage of book today is at 94%. Is that right? Finian O'Shea: 94.1%. Robert Stanley: It's 94.1%, that is -- that's versus a historical level of 94.7% since inception. So there continues to be a lot of embedded economics within the book. I would also note that, and I think you've heard from others that we're seeing a better investing environment and that includes higher spreads, but also it's better fees. We're seeing better both upfront fees and call protection. And I think that makes us happy about investing in the future. And then lastly, I would say we have seen a pickup of what I would call special situation type deals that have always been a hallmark of our platform and consistent historically, probably of 30% to 35% of what we've done. That had been muted activity. We're seeing a handful of opportunities in the current pipeline that excite me. All of that would support strong activity-based fees in the future when they begin to return. Again, the 2 biggest components that drive that are M&A activity, which we are seeing early signs of stabilization there. I think geopolitical concerns will really be the determinant if that returns, and then repayment activity, which we do believe will be muted for some time because, again, it's a better spread environment and it's just natural if you're -- if new loans are getting created at better spreads than historic, you're not going to have a lot of payoffs. Operator: Our next question comes from Brian McKenna from Citizens. Brian Mckenna: Okay. Great. So I'm curious, when did the Board make the final decision on the dividend? Was it in and around the end of the first quarter because if it was, I'm curious if the decision was made, call it, this week or today versus roughly a month ago, would that have changed the outcome on the dividend given the broad-based recovery in sentiment and risk assets over the past 5 weeks, similar related to the sharp recovery we saw post Liberation Day last April. Robert Stanley: Well, the formal decision was made yesterday at the Board meeting. We, as a team, have been working through this over the past months, given that we saw the muted levels of activity-based fees and have some forward visibility, albeit it's usually no more than 4 to 5 weeks on those activity-based fees. So I would -- so the answer is we've been working on it for some time. Again, we had talked about ROEs for the sector and for Sixth Street in a couple of letters, both in April and November. So this is something we've been thinking about for some time but didn't come to a final conclusion until the final weeks. You're right, there has been a stabilization generally in the credit markets. But again, the spread environment is a more attractive environment and that is going to mute activity levels, at least from refinancings in the meantime. And what we did is really did a thorough analysis of the data, we always when we have questions that are hard to answer turn to the data, and look at periods of historical spread widening in the past, and it always has taken several quarters to return to those activity-based fee normalization levels. Ian Simmonds: And maybe if I add to that, Brian, just to color up some of the data that Bo was referencing. That means that we went back and looked at every quarter back to 2014 to understand the characteristics of our earnings profile, what was generated from interest income and dividend income alone, what was generated from activity-based fees. We looked at that on a quarterly basis. We looked at that on an annual basis. We overlaid periods of credit spread widening and/or dislocation. So we looked at what was the behavior of our earnings profile during and post COVID, during and post the rate rise cycle in '22, and what are we seeing today? And all of those inputs into a determination about what is our level of conviction about the right level for our base dividend. And so as Bo said, it was data intensive as part of the framework for the discussion with the Board. Brian Mckenna: Okay. That's helpful. And then just looking at spreads on new deals in the quarter, I think these totaled around 600 basis points versus the recent pace of around 700 basis points. So is the 600-plus basis points going to be the new run rate for spreads on new deals? Was it just a one-off quarter? Like I'm just trying to think through where things settle in on the spread front. Robert Stanley: Yes, it's a good question. It was very idiosyncrat. There are only really 2 new originations. Both of those were -- we had been working on free the spread widening environment. Activity in general was muted. So it's -- we've had volatility from quarter-to-quarter given volumes come and go. And by the way, Q1 is always a low volume quarter. What I would tell you is, what we're seeing on the forward is a much better investing environment, wider spreads, more importantly, lower leverage, better documentation standards, better fees and call protection. So the whole package seems to be a better investing environment. I also mentioned with Fin, we're seeing more special situations than we had seen in the past. That's always been a driver of over earning relative to the space. So all of that would point to increasing spreads over time, which we're excited about. Operator: Our next question comes from Robert Dodd from Raymond James. Robert Dodd: Thanks for the color on the quarter. I wanted to like the $1.57 that you said was kind of embedded call protection in the portfolio right now. I mean, what's the half-life on that? Obviously, it ages out over time. I mean, if we look at low levels of activity, say, for 12 months, and I don't know, half of that $1.57 ages out over those 12 months, then even if activity rebounds a year from now, you still got structurally lower activity-based fees for a period after that as well, right? So I mean, the deals you're onboarding right now, are those sufficient to kind of maintain that total embedded core protection in the portfolio over kind of a prolonged period? Or is the aging phenomenon kind of going to drag it out even further if you have, say, 12 months, maybe it's not 12 months, but 12-month period of? Robert Stanley: I think that's a great question. Again, just turning that $1.57 into a metric that I think that we've talked about before, just to contextualize as a percentage of fair value on the call price is 94% today. That's versus a historical means of 97%. What we're seeing in new activity today, we'll have better call protection than what we've seen in the last couple of years, especially as it relates to some of the special situation deals, which generally have non-call features. What I would tell you is as far as half-life generally speaking, call protection is between 2 to 3 years when you see a number like 94%, which is above historical means, it means it's closer to the earlier vintages where we have that embedded that makes sense given portfolio turnover has been elevated over the last couple of years. So there's a long runway for that half-life. And what we're replacing, and what we're putting in a new deals will continue to actually add to that. When -- I actually don't have these in front of me, Cami, but when we returned after 2022, to the post kind of normalized fees, which took us 6 quarters, about 1.5 years, we started at a slightly less, if you look at 3 years, it was 94.5%. And what we're -- once we returned, I think those embedded numbers were well above historical means of $0.08 per share. We'll get you that data. So there is a shelf life kind of early into those vintages. What we're seeing from new deals, it's better call protection. I think all of that protects what we think should be normalized activity into the future. Robert Dodd: Got it. And a kind of tied follow-up. I mean, obviously, one of the issues here is spread widening, maybe that slows down refinancing to the point who wants to refinance that higher spread. Where spread widening has been greatest so far, anecdotally, at least, is in the software segment, which is obviously your biggest single sector, so to speak. How much of this expectation of low activity is tied to software given that spreads have widened more in that sector than elsewhere in the market right now? Robert Stanley: It really didn't go into the calculation. We think there's actually for names that are not deeply AI-impacted, and that's a very small percentage of the portfolio. As we've said before and also in our letter about a month ago, there continues to be what we think is a refinancing market for software names, albeit at wider spreads. Again, just looking back at the data historically, whenever there's been spread widening regardless if it was sector-based, it's just you've had muted levels of activity, and that's why we thought it was prudent to set the dividend level where it's at. I would also note that the portfolio continues to be very healthy earnings growth close to 10% in software and technology names are in line with that. In fact, I think the earnings power of those businesses continues to increase as EBITDA margins are expanding as growth slows a bit. Those also would point you to deleveraging over time and being able to refinance. We had, as we mentioned, MadCap was a software name that we had refinanced this quarter by a bank. It had executed well. It had delevered. You could argue whether it was going to be AI affected or not, but it was refinanced into a much cheaper paper. So that did not go into our calculus. Operator: Our next question comes from Arren Cyganovich from Truist Securities. Arren Cyganovich: The amend and extend of the credit facility with no increase in pricing was a positive sign given what we've seen in some press articles about banks looking to increase pricing on these types of -- or I guess more specifically, it was bilateral facilities, but were there any pressure from the banks in terms of that process to raise the pricing? And maybe you just talk a little bit about that process and how the banks have been supportive? Ian Simmonds: Yes, I'll take that, Arren. It's Ian. I would say there was no pressure, but that's really a factor of continued delivery on what we tell the banks that we're going to do. We view those banks as our capital partners, and so they're pretty in tune with our business. But I'd also point out that these syndicated BDC facilities are pretty well structured to protect the banks that actual LTVs are very low. And given the development of the unsecured market as another form of financing, it's actually a very supportive way to build the capital structure. So I would characterize this as really just ordinary course discussions collaborative in nature and the outcome was the supportive renewal that we achieved. Arren Cyganovich: That's good to hear. In terms of the investment activity slowing down, and I know that you don't have a crystal ball and you don't know when things might pick up. But in terms of whether or not it's discussions with sponsors or what have you, are there any kind of green shoots of activity in areas other than software that are showing some signs that you might see some stronger deal activity, maybe in the second half of the year? Robert Stanley: I'll start and then pass it over to Ross. Look, I think the pipeline has rebounded, and there's some -- definitely some green shoots I mentioned, more special situations than we had seen in the past, and that's across a lot of our core thematic areas, whether it's retail ABL, ABL, Energy ABL, some technology, special situations. So that is encouraging. As we speak with sponsors, there seems to be a renewed focus on platform activity and finding new deals. I think a lot of that M&A activity is really going to -- what's going to matter is the geopolitical concerns and where energy prices go over the next quarter. I think that's going to be the big determination. But the reality is, if you think about the robustness of our originations platform, especially the thematic platform across industries and specialties. I think that piece is really picking up here from what we can see. Ross, you should add anything to that. Ross Bruck: Yes. I think in addition to either platform acquisitions or full platform refinancings, our portfolio continues to be active on the M&A front. Our management teams, and our sponsors are looking to continue to drive growth and a large portion of our activity on the amendment side, this quarter was to support that growth or support acquisitions, which creates options for us to reprice existing facilities, provide new capital into credits that we know well or catalyze exits where the risk-return doesn't make sense any longer at what's being offered. So there continues to be a fair amount of activity within the portfolio itself. Arren Cyganovich: Very helpful. And just one quick one. The software exposure, I think last quarter, you said it was 40% in the portfolio. You had a refi. What's the exposure as of 3/31? Robert Stanley: Yes. Look, as you know, we don't think of software as an industry. We gave that number as a proxy to what we believe others in the space, including enterprise software. That has not meaningfully changed. In fact, we had one payoff. So if anything, it's down a bit, but it's not meaningfully changed quarter-over-quarter. Operator: Our next question comes from Rick Shane from JPMorgan. Richard Shane: Look, and you talked about this a bit in your response to Fin's question, but there's a lot of conversation about how terms and structures have changed since December. If you can help us understand sort of specifically what types of changes you're seeing, not only in terms of spreads, but in terms of structure, in terms of covenants that would be great. And more importantly, if you can put where we are today in the context of the historical continuum, because I don't think we're in sort of this dislocated market. I think, we're probably more in the middle, but I'd like to understand how you guys see things and also valuations on the underlying equity positions. Robert Stanley: Yes. I'll take a first swing at that, and then I'll pass it to Ross. So I think that's the right characterization, which is the pendulum is starting to swing back towards the middle from where it was to historic tights, both in pricing fees, and structures. The encouraging thing is all of those are actually improving. We're seeing anywhere from 50 to 75 basis points of spread widening across all industries. I think more encouragingly for us and 1 of the reasons that we were not participating in the market as robustly as others over the past 2 years is that underwriting standards are getting better. You're getting more access to management teams, you're getting better data. Your ability to underwrite and prove your core thesis is better. That is what was keeping us from being able as much as pricing from being able to participate in the market. Those dynamics are better. I would say leverage on average is probably down 0.5 turn to 1 turn in total from what we were seeing at the historic tights. Documentation standards are getting better. So all of those things are contributing to a much better environment, but to your point, I think that pendulum is swinging more to the middle than to look, what would be a deeply distressed environment where you've seen us grow by leaps and bounds in times of past. But that's how I characterize it. Ross, do you have anything you'd add? Ross Bruck: I don't have a lot to add. The other thing I'd say that we're seeing is better preservation of the headline economics. So things like carve-outs to call protection, we're seeing pared back where step-downs are set versus headline spread. Those are all things that have been important to us and that we've selectively decided not to participate in transactions where we're not getting the terms to preserve the bargain for economics, and I think we're seeing it come back our way a bit. Richard Shane: Got it. Okay. That's helpful. I mean, is it -- should we think of it that last year you would get sort of an RFT and the request would be, okay, here's the docs, or here's the valuation pack and you have 2 weeks to respond and this is all the information you're going to get now the due diligence time frames are extended to 4 weeks? Like I'd love to anecdotally sort of think about how this has changed from your perspective. Robert Stanley: Yes. I'll take that because I've been pretty vocal about this. And actually, in my letter to the team starting the year, this is one of the headlines, which is we will not be velvet roped in processes if we're not getting access to management and the data to underwrite our credit thesis, we don't participate in those deals, literally is almost verbatim what I said to the team. There was this velvet roping by issuers, both private equity and corporates because of the tight markets that, at least in our view, we're contributing to looser underwriting standards and very, very intense time lines, very little access to management, if at all, no real Q&A. And as a result, not only did we shrink the portfolio last year, but if you look at our originations that we did do, they were predominantly nonsponsor away from kind of the traditional channels. We lean very heavily on the thematic originations platform that we've built for -- to be robust through all environments. What we're seeing so far, and this could change is just better access all around. Access to management teams, actual management meetings. I actually think our team is -- this is -- our team is at a management -- all day management meeting today on a special situation deal. It's an 8-hour session. Those are the types of environments that contribute to the full understanding of the businesses, the ability to underwrite your credit thesis, and we do believe that is returning to the broader market and the credit environment as well. Hopefully, that's helpful. Richard Shane: It's very helpful. I appreciate it. And it will be interesting to see how things continue to evolve. Operator: Our next question comes from Kenneth Lee from RBC Capital Markets. Kenneth Lee: One more on the ROE outlook there. Wondering whether you've been embedding any assumptions or benefit from potentially wider spreads on new investments or at least less spread compression for any kind of prepayments and refis. Just wondering whether there's any impact on the assumptions there. Robert Stanley: Yes. From where we set our base dividend, it did not have an impact. But as we think about the future, we do believe that's going to slowly roll through and spreads will increase over time. We do think we are nearing trough levels just based on what we're seeing in the pipeline and in the markets in general. Ian, you're closer to kind of the projections, anything to add to that? Ian Simmonds: Yes, we did not update our new issue spreads for the purposes of this exercise. I think if you think about the volume of new deals relative to the size of the portfolio, you need to have quite a significant amount of origination activity for that to move the needle. Our business from an ROE perspective in the near term is much more oriented towards repayment activity. Robert Stanley: Yes. The one thing, because I think this is important as you think about the future, not only should you see spreads begin to increase over time through the book as you layer on new deals. There are opportunities, obviously, to -- with amendment fees, et cetera, as our portfolios come back to us as they're doing M&A, et cetera, to slowly reprice the book as well. That did not go into our numbers in the near term, but that should show up in -- after several quarters. So that's one of the things that leaves us pretty encouraged about the future earnings of the business. Kenneth Lee: Got you. Very helpful there. And it looks like you made some initial investments related to the SCP JV, just given the discussion around the geopolitical uncertainty and just the general backdrop there. What's sort of like the outlook in terms of how fast could you ramp up further in terms of that JV there? Ross Bruck: Yes. Thanks for the question. This is Ross. So in Q1, SLX invested $14.7 million into SCP, so 0.4% of SLX investments at fair value. This was the first quarter of activity when we put the program in place. Our base case expectation was that it would take about 2 years to 2.5 years to get to fully ramped. That continues to be our expectation. We've continued to invest into the program over the course of 2Q. So there were two CLOs that were priced before the end of Q1 that closed in 2Q. And overall, we are pleased with the results that we think we're achieving in the program. We were able to take advantage of some of the periods of dislocation in 1Q to build the portfolio at attractive prices. And despite the volatility, we're able to price the liability side of those two CLOs at levels that are consistent with the returns target for the program. Operator: Our next question comes from Paul Johnson from KBW. Paul Johnson: Yes. I was wondering if you could provide just kind of a very general update in terms of roughly what percent of the portfolio was sort of originated pre-2022. I think last quarter, you said roughly about 20% of it was kind of pre-2022 originated. I was just curious if that's changed at all since last quarter. Robert Stanley: No. It's very similar percentage. It has not changed. So pre-2022 is now 8% of the portfolio. No, no, I'm sorry, 18% of the portfolio. I missed the bar, but yes, about 18% of the portfolio. Paul Johnson: Okay. And then I was just curious, Mindbody that refinanced during the quarter. So there's some evidence obviously that the market is still there in terms of software companies. But I'm curious, in the last quarter, you also kind of talked about a little bit of slowing economics just within the software space in terms of the lending within that space. But I'm just curious, kind of based on some of the recent transactions, if there's anything that could be deduced from that in terms of what the common thread is of companies within the software space that are able to transact like that, refinance loans, and those that might have a much tougher time doing so. Ross Bruck: Yes. I think the trends that we're seeing within our software portfolio is consistent with the commentary that we gave in the prior quarter. So while top line continues to grow at a high single-digit rate on a broad basis, there has been a bit of deceleration in that number. But our portfolio companies are expanding margins and improving leverage profiles, which we think is ultimately supportive of refinancing activity. We talked about MadCap as an example of that transitioning from the private credit market into the bank market, given the deleveraging that the company had been able to achieve. And overall, as we look at our portfolio, we view management teams and sponsors generally as being forward-footed in finding ways to continue to drive organic growth as well as selective inorganic opportunities in order to sustain the deleveraging that we see within our credit book. Robert Stanley: Yes. And the only thing I would add to that because I think one of your questions was what we're seeing as far as spreads and leverage for new deals, there was muted activity of new deals in the technology space. In general, there were a couple of proof points. There's one in particular that was a U.K.-based software provider that priced maybe 50 bps wider than it would have been -- would have a year ago, but it was -- it's still a pretty robust package. I think it was 7.5x leverage so for 5 to 5.25. We did not participate in that. We were lower in leverage and wider on pricing, but there seems to still be a pretty robust market for anything other than what people perceive as having immediate AI disruptive risk. Operator: Our next question comes from Derek Hewett from BofA Securities. Derek Hewett: Since this is generally a better spread environment and really maybe even just more of a lender friendly environment, how should we think about capital issuance, assuming the shares continue to trade above book, which could potentially help pare back a little bit of the software exposure? And then to the extent that capital issuance makes sense, would you be leaning more towards just ATM issuance at this point? Or would you be willing to do overnight transactions? Ian Simmonds: Derek, it's Ian. Thanks for the question. I think there's no change to the framework that we've talked about in the past about the conditions that we want to see for considering new issuance. And so we want to have high conviction about the pipeline. We want to have high conviction about the ability to drive earnings as a result of accessing growth capital. So that's a really important piece for us. As to the tool we use, the way we communicated it 12 months ago when we put in place the ATM is it's an efficient tool. So I think our mindset is always how can we be efficient with our shareholders' capital and how can we generate the best outcome if there is an opportunity to raise capital? So without specifically answering which methodology, it's really going to come back to our view on the pipeline before we think about the tool that we apply. Derek Hewett: Okay. And then maybe a quick follow-up. Just in terms of circling back to the software portfolio. What is the -- like either the median or average EBITDA of the software portfolio? Or like how would you characterize it relative to the overall weighted average EBITDA? Robert Stanley: Do you want to go, Ross? Ross Bruck: Sure. Overall, we see margins in the software portfolio as broadly consistent with the overall portfolio, but also expanding at a quicker pace in the overall portfolio. So hopefully, that helps give a little bit of context. Robert Stanley: EBITDA margins are a bit higher, and they're expanding. I think quarter-over-quarter, they're up from 20% on average to 22% margins. That's been the historical trend, right? You've seen businesses continue to have slowing growth, which was maybe 2 years ago in the low to mid-teens on an average basis to high single-digit revenue growth, earnings growth continues to trend above that as companies move more to profitability. That has really been the trend post COVID when it was really a growth at all cost environment. And when we believed both public and private markets were kind of missed reading the signals from unit economics and the valuations were not in line with those declining unit economics, but it continues to be healthy, broadly in line on a growth basis, but probably more on the margin, just more profitable businesses in general. Derek Hewett: But what about on the absolute level? Is it -- are the software companies, are they similar in terms of the top line with the overall portfolio in terms of EBITDA? So the weighted average EBITDA for the overall portfolio was a little under $130 million for software. Robert Stanley: Yes, I would -- I don't know that we have that number in front of us. I would guess they're broadly in line, but we'll have to get back to you. Operator: Our next question comes from Ethan Kaye from Lucid Capital Markets. Ethan Kaye: Most of mine have been asked and answered, but maybe just a quick one. It looks like commitment activity was relatively kind of in line with historical average was really the funding activity that was maybe a bit lower. I'm curious whether perhaps that suggests, maybe there are some deals like towards the end of the quarter that were closed but not funded? Or if you can just help us kind of reconcile that delta between the commitments and fundings for the quarter? Ian Simmonds: Yes, Ethan, it's Ian. That's a good observation. Just to be clear, that commitment figure includes the full commitment to the structured credit partners JV. So Ross made the comment earlier that we funded about over $14 million in the quarter, but the commitment was $200 million that was previously disclosed. So that's in the commitment number. Ethan Kaye: The full -- okay, the full SCP, $200 million. Ian Simmonds: Yes. I point you don't read too much the gap. It's sort of very specific given we commenced operations of the JV in this -- in Q1. Operator: I'm showing no further questions at this time. I would now like to turn it back to Bo Stanley for closing remarks. Robert Stanley: Great. Well, thank you, everyone, for the thoughtful questions. Thanks to the team for the preparation here. And I just want to wish everybody Happy Mother's Day weekend. Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

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AZTA 2026 Q2 财报电话会议

Operator: Greetings, and welcome to Azenta's Q2 2026 Fiscal Financial Results. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, May 6, 2026. I will now turn the conference over to Yvonne Perron, Vice President, FP&A and Investor Relations. Please go ahead. Yvonne Perron: Thank you, operator, and good morning to everyone on the line today. We would like to welcome you to our earnings conference call for the second quarter of fiscal year 2026. Our second quarter earnings press release was issued yesterday after market and is available on our Investor Relations website located at investors.azenta.com in addition to the supplementary information and PowerPoint slides that will be used during the prepared remarks today. Please note that, effective the first fiscal quarter of 2025, the results of B Medical Systems are treated as discontinued operations. I would like to remind everyone that during the course of the call, we will be making a number of forward-looking statements within the meaning of the Private Litigation Securities Act of 1995. There are many factors that may cause actual financial results or other events to differ from those identified in such forward-looking statements. I would refer you to the section of our earnings release titled Safe Harbor Statement, the safe harbor slide on the aforementioned PowerPoint presentation on our website and our various filings with the SEC, including our annual reports on Form 10-K and our quarterly reports on Form 10-Q. We make no obligation to update these statements, should future financial data or events occur that differ from the forward-looking statements presented today. We may refer to a number of non-GAAP financial measures, which are used in addition to, and in conjunction with, results presented in accordance with GAAP. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance, that when considered with GAAP financial results and the reconciliation of GAAP measures, they provide an even more complete understanding of the Azenta business. Non-GAAP measures should not be relied upon to the exclusion of the GAAP measures themselves. On the call with me today is our President and Chief Executive Officer, John Marotta; and our Executive Vice President and Chief Financial Officer, Lawrence Lin. We will open the call with remarks from John, then Lawrence will provide a detailed look into our financial results and our outlook for fiscal year 2026. We will then take your questions at the end of the prepared remarks. With that, I would like to turn the call over to our CEO, John Marotta. John P. Marotta: Good morning, everyone, and thank you for joining us today for our second quarter earnings call. Candidly, we are not satisfied with our second quarter results. Overall, second quarter organic revenue was down 3% and adjusted EBITDA margin of 5.4% did not meet our expectations. While our teams remain disciplined and are delivering progress in key areas, there have been execution-related shortfalls within our control, and we are addressing them with urgency. At the same time, we are operating in a more cautious prolonged demand environment, particularly in North America, where customer spending and research funding remain constrained. Within that context, we saw continued growth in Multiomics in Europe and in Asia. In addition, sample repository solutions, product services and consumables and instruments delivered sustained growth, reflecting the strength of our recurring revenue offerings. This performance reinforces the durability of these parts of our portfolio and their role in supporting more consistent results over time. Turning to specific drivers of the second quarter performance. In Multiomics, while both Europe and Asia Pacific volumes remained strong, performance was driven by softer demand across key end markets in North America and competitive pressure, resulting in lower volumes and reduced fixed cost absorption. In Sample Management Solutions, we remain pleased with sample repository solutions performance that remains strong, delivering solid growth and reinforcing the value of our recurring revenue service-based model as did product services and consumables and instruments. This was offset at the segment level by continued softness in automated and cryogenic store systems that reflected a more pronounced step-down in capital-related demand. With respect to the automated stores quality issues, there are 3 remaining stores where remediation is progressing, but is taking longer than anticipated. The scope of the quality issues has not changed, and now we expect the remaining work to be completed by the end of the third quarter. As a result of these pressures, we have revised our full year fiscal 2026 outlook and have taken a cautious approach to assessing our pipeline as order conversion remains less predictable. The life sciences funding environment remains measured with ongoing variability in academic and government-related funding flows, including NIH-related activity as well as more selective capital deployment across biotech and pharma customers. We now expect organic revenue to range from down 2% to up 1% year-over-year, reflecting a prolonged period of constrained capital deployment for larger automated stores and cryo investments, as well as continued demand softness in Multiomics in North America. Adjusted EBITDA is expected to range from down approximately 125 basis points to flat year-over-year, reflecting the impact of lower volumes. Importantly, we continue to invest in targeted growth and productivity initiatives as part of our broader transformation agenda. In a lower volume demand environment like this, operational inefficiencies and execution gaps become more visible and have a greater impact on results. We are addressing these gaps to ensure that the business is structurally efficient, scalable and positioned to deliver higher and more consistent performance over time with greater precision, stronger discipline and clear accountability. While these challenges impact our near-term results, they reinforce the need for the work already underway to transform Azenta. Since I joined the company, we've undertaken decisive steps to structurally reposition the business for improved performance. These actions include leadership changes, organizational redesign, deployment of the Azenta Business System to strengthen operational rigor and a more disciplined long-term assessment of portfolio performance and growth investments. Operational excellence remains central to how we run the business, and we're seeing tangible results from the Azenta Business System. In our consumables and instruments business, on-time delivery has improved significantly from approximately 15% to 70%, reflecting stronger execution and greater reliability for our customers. In Multiomics, we're also driving meaningful improvements in turnaround times. With our Lightning RNA-Seq offering, we've reduced turnaround time from roughly 20 days to 5 days, which is the fastest turnaround time currently available in the market and a meaningful differentiator for our customers that just launched. These gains are being driven through Kaizen in structured problem solving as well as daily management systems. ABS positions us to deliver more consistent, high-quality performance. In 2025, our focus was on reshaping Sample Management Solutions. Today, SMS has a more stable operating base and a stronger foundation for execution. In 2026, we've shifted our focus to Multiomics, where we are actively executing a comprehensive transformation of the business in addition to addressing the demand softness through targeted commercial actions. As this work has progressed, we have gained more clarity as to what is required to strengthen execution and drive sustainable performance. We are excited that Trey Martin has joined Azenta as the President of the Multiomics business to lead this transformation, advancing our gene synthesis regionalization and technology strategy, strengthening commercial discipline and driving structural improvements. Trey brings over 30 years of experience leading and scaling life sciences businesses, most recently as CEO and Board member of Maravai LifeSciences, with prior senior leadership roles at Danaher, including President of Integrated DNA Technologies, where he drove global expansion, strong commercial execution and sustained double-digit growth. Trey is exceptionally well positioned to lead the next phase of our Multiomics strategy. I'm confident in his ability to lead us forward. Trey and his team are working to accelerate progress across key initiatives. This includes reviewing our site and laboratory footprint to optimize the hub-and-spoke model and rightsize the cost structure, strengthening commercial excellence with a greater focus on high-value workflows, improving pipeline conversion and disciplined execution of commercial opportunities, driving operational productivity by accelerating ABS deployment and implementing the technology and infrastructure to strengthen our competitive positioning. This is not an incremental change, but rather a structural overhaul of the Multiomics platform. While we navigate this environment, we continue to deliver strong free cash flow and maintain a solid balance sheet with significant financial flexibility to support our strategy. Our capital allocation framework remains disciplined and unchanged. Our priorities are investing in productivity and gross margin improvement, driving organic growth through R&D and go-to-market capabilities, pursuing disciplined and strategic M&A and returning capital to shareholders when appropriate. In March, we announced the acquisition of the UK Biocentre Limited, and the integration is progressing as planned. The acquisition strengthens our ability to deliver end-to-end life cycle solutions in the U.K., a leading life sciences research epicenter, while expanding our presence in Europe by establishing the UK Biocentre as a European-wide operational hub to support pharmaceutical, biotechnology, academic and public health customers across the region. The acquisition is aligned with our biorepository expansion strategy and further strengthens our leadership in sample-based and biorepository solutions. Integration priorities include hiring key commercial resources, accreditation and operational readiness. This acquisition demonstrates our commitment to investing behind our highest conviction long-range plan initiatives. We also recently provided an update on the previously announced B Medical transaction. As of March 27, 2026, we were informed by the counterparty that it had not yet secured the required financing to complete the transaction by the expected closing date of March 31. The agreement remains in place and continues to be subject to customary closing conditions, including financing. We are actively evaluating potential paths forward while the counterparty continues its financing process. We will provide updates as appropriate. As previously announced, we continue to evaluate the timing of execution under our $250 million share repurchase authorization, reflecting our commitment to disciplined capital deployment and shareholder value creation. To close, given the guidance reset this year, we have decided to push out the long-range plan we outlined at our Investor Day in December of 2025 by 1 year from 2028 to 2029. The same financial targets remain, and we believe that the market opportunities, strategic priorities and value creation framework are strong. I want to emphasize our confidence in the long-range plan anchored in the strength of our portfolio and our ability to expand our recurring revenue base that supports more consistent and durable performance. Across the organization, we are operating with greater focus, stronger discipline and higher accountability and clear execution priorities. With that, I'll turn the call over to Lawrence to walk through the financials. Lawrence Lin: Thank you, John, and good morning. I'll begin with our Q2 2026 fiscal results and the key financial drivers, then cover segment performance, our balance sheet and updated fiscal 2026 guidance. Today's results exclude B Medical Systems, which continue to be classified as discontinued operations unless otherwise noted. During the quarter, we recorded an additional $6 million noncash loss related to assets held for sale. As communicated during the quarter, the transaction has not yet closed and remain subject to financing and customary closing conditions. In the quarter, we recorded a goodwill impairment charge. As part of our annual goodwill impairment assessment, we recorded noncash impairment charges of $112.4 million for Multiomics and $36.6 million for Sample Management Solutions, both reflected in GAAP operating expenses. This was driven by a combination of factors, including the sustained decline in our stock price, the decrease in our near-term outlook and a more uncertain macroeconomic and geopolitical environment, which together reduced the estimated fair value of the units below its carrying value. To supplement my remarks today, I will refer to the slide deck available on our website. Turning to Slide 3. Total reported revenue was $145 million, up 1%, including $1 million from UKBC. Excluding UKBC and the impact of foreign exchange, revenue was down 3% organically. Second quarter performance came in below our expectations and reflect continued divergence across our segments with softness in Multiomics driven by lower volumes in North America and a decline in Sample Management Solutions, driven primarily by lower volumes in capital-intensive automated and cryogenic store systems. This was partially offset by strong growth in sample repository solutions, reinforcing the strength of our recurring revenue offerings. Non-GAAP EPS for the second quarter was a loss of $0.04. Adjusted EBITDA margin was 5.4%, down 320 basis points year-over-year, primarily reflecting lower volumes across the portfolio and reduced fixed cost absorption leading to gross margin pressures as well as store quality rework costs and an increase in inventory reserves. Free cash flow, including B Medical, was $5 million in the quarter, driven by improvements in working capital and higher deferred revenue. We ended the quarter with $565 million in cash, cash equivalents and marketable securities. This provides continued financial flexibility to invest in the business, pursue strategic opportunities and return capital to shareholders over time. Now let's turn to Slide 4 to take a deeper look at our results in the quarter. Total revenue was $145 million, up 1% reported, and down 3% organically, with a 3% impact from foreign exchange and 1% from the UKBC acquisition. Multiomics performance reflected lower volumes driven by softer demand and increased competitive intensity in North America. Within Sample Management Solutions, results were supported by continued strength in biorepositories but was negatively impacted by ongoing softness in capital equipment demand, reflecting more cautious customer capital spending behavior. Turning to gross margin. We delivered 44.3% for the quarter, down 110 basis points versus the prior year. The decline was primarily driven by lower North America volumes, which reduced fixed cost leverage as well as a noncash inventory charge and approximately $2 million of quality costs associated with automated storage rework, which was in line with our expectations. While the quality issues are largely behind us, we expect to have some additional costs in the third quarter. We have put changes in place to improve quality and reliability. We've restructured the engineering team into 3 teams: new product development, current projects and sustaining in order to drive clear accountability in the R&D organization. As we discussed at Investor Day, we are transitioning from highly customized systems to a more modular product strategy that enables configurable and quality control solutions. In parallel, we have strengthened execution leadership by hiring an experienced project manager with a background in large-scale complex programs, bringing additional discipline, structure and visibility to execution. Adjusted EBITDA was $7.8 million or 5.4% of revenue, down 320 basis points year-over-year. The decline was primarily driven by 120 basis points of pressure in Multiomics from lower volumes and gross margin compression as well as down 360 basis points from investments in sales, product marketing and R&D to support future growth. These impacts were partially offset by 80 basis points benefit in Sample Management Solutions, reflecting additional pressure from storage quality rework and inventory reserve and lower volumes, offset by the favorable impact of an accounting adjustment. Lastly, there was a benefit of 80 basis points from other income. Importantly, while we continue to take actions to optimize and rightsize our cost structure, we are committed to our growth investments to support long-term growth and strengthen our competitive positioning. Again, non-GAAP EPS was a loss of $0.04 per share. With that, let's turn to Slide 5 for a review of our segment quarterly results, starting with Sample Management Solutions or SMS. Sample Management Solutions delivered revenue of $81 million for the quarter, up 2% on a reported basis and down 3% organically. Biorepository solutions, which is roughly 40% of the SMS segment, delivered high single-digit growth, reflecting focused commercial execution and the benefits of the strategic emphasis placed on this business over the past year. Consumables and instruments delivered modest year-over-year growth supported by steady demand across the installed base. The segment was impacted by external factors with lower capital spending, which impacted orders in automated and cryogenic store systems, resulting in a low double-digit decline in core products. Gross margin for Sample Management Solutions was 47.4%, up 40 basis points versus the prior year. The result reflected headwinds from lower volumes, store quality rework and an inventory reserve, which were more than offset by the benefit of an accounting adjustment as well as improved biorepository margin. Turning next to the Multiomics segment. Multiomics revenue for the quarter was $64 million, flat on a reported basis and down 2% organically, reflecting a decline in global Sanger and lower volumes in North America, driven by softer demand and increased competitive intensity. Next-generation sequencing grew mid-single digits and gene synthesis delivered mid-single-digit growth, supported by continued oligo demand in China. Europe and Asia Pacific continue to perform well, supported by strong execution and commercial initiatives. In North America, we are focused on improving commercial execution and driving more target engagement across key markets as we move through the remainder of the year. Multiomics non-GAAP gross margin was 40.2%, down 300 basis points year-over-year. The decline was primarily driven by lower fixed cost absorption and unfavorable regional mix, reflecting reduced volumes in North America and the resulting loss of operating leverage. This was partially offset by more stable performance in Europe and Asia, though not sufficient to fully offset the pressure from lower North America volumes. We are taking targeted cost actions to better align our cost structure. Next, let's turn to Slide 6 for a review of the balance sheet. As I mentioned, we ended the quarter with $565 million in cash, cash equivalents and marketable securities. We have no debt outstanding. Capital expenditure for the quarter was approximately $7 million, reflecting continued investment in automation, capacity expansion and technology to support scalable growth. Turning to guidance on Slide 8. We are updating our fiscal 2026 guidance to reflect first half performance trends and what we are seeing in the market. We expect the total reported revenue to be in the range of approximately $603 million to $621 million, including the contribution of UKBC. On an organic basis, we expect revenue to range from a decline of approximately 2% to a growth of up to 1% compared to the prior guidance of 3% to 5% growth. We expect adjusted EBITDA margin to range from down approximately 125 basis points to flat year-over-year compared to prior expectations of approximately 300 basis points expansion, excluding UKBC. This is driven by continued pressure due to lower volumes and the loss of fixed cost leverage. Free cash flow is expected to improve between approximately 10% to 15% year-over-year compared to prior expectations of approximately 30% improvement. The low end of the range reflects continued softness in Multiomics in North America and in the capital-intensive products within Sample Management Solutions, while the high end reflects a modest increase in demand in North America, additional order closures for stores and cryo and incremental revenue pull-through. At the segment level, we now expect Sample Management Solutions to grow approximately low single digits organically versus prior expectation of mid-single-digit growth and Multiomics to decline in mid-single digits versus prior expectations of low single-digit growth. Looking ahead to the second half of the year, I'll offer some directional color to help frame the cadence of performance. In the fiscal third quarter, we expect organic revenue to grow low single digits. For the fiscal fourth quarter, we expect organic revenue to decline low single digits. If you recall, fiscal fourth quarter of 2025 was a record revenue quarter and presents a tough comparison. From a profitability standpoint, we expect adjusted EBITDA margins to improve sequentially with margins moving into the low double-digit range in Q3 and then stepping up more meaningfully in Q4, reflecting the combined impact of volume recovery, cost actions and second half seasonality. In closing, while we are updating our full year fiscal outlook to reflect the current demand environment, we remain focused on disciplined execution and operational control across the business. We are taking the necessary actions to align our cost structure and to improve the performance across both segments. Importantly, we remain confident in the long-term fundamentals of our markets and in our ability to achieve improved performance over time, supported by the progress we continue to make across the organization. As John mentioned, given the guidance reset this year, we have decided to push out the long-range plan we outlined at our Investor Day in December 2025 by 1 year from 2028 to 2029. The same financial targets remain, and we believe that the market opportunity, strategic priorities and value creation frameworks are strong. This concludes my prepared remarks. I'll pass the call to John for a few closing remarks. John P. Marotta: To close, we are encouraged by the continued strength and resilience of the reoccurring revenue base of our portfolio. We are taking decisive actions to strengthen commercial and operational execution and drive more consistent and improved performance. We are also pleased with the progress of the UK Biocentre acquisition and look forward to the opportunities ahead of this strategic action. Finally, we remain disciplined in our capital allocation, continuing to invest to drive organic growth through R&D and go-to-market capabilities, pursuing disciplined and strategic M&A and returning capital to shareholders when appropriate. With that, operator, we're ready to open the line for questions. Operator: [Operator Instructions] The first question comes from David Saxon with Needham. David Saxon: Maybe I'll just ask one on fiscal second quarter. So I would love to understand kind of the cadence you saw throughout the quarter? Like how did things start off? How they progressed? Were there any meaningful orders or customers that got slipped or pushed out? Just trying to understand the exit velocity as we go into the fiscal second half. Lawrence Lin: Yes. David, good to hear from you. Maybe why don't we kind of start with what we saw in Q1 really quickly and then walk to Q2, right? So in Multiomics, what we saw in Q1 was bookings were slow in North America. As a reminder, Multiomics in North America is roughly 50% of the revenue for the segment. This was attributable to the October shutdown and the NIH funding delay. We had key sales leaders and sales reps that are no longer in the company that created a bit of a commercial gap. Now Europe and APAC performed well, and we thought these were transitory events. So now let's step into Q2 for Multiomics. We expected several dynamics to improve as the quarter progressed. In North America, the first 2 months, we saw improved bookings demand. Our month 3 spike seasonality just did not materialize. Usually, you see a pretty big hockey stick in terms of demand. On a commercial execution perspective, we saw rep productivity, but we still saw gaps. As you know, we brought in several new reps, but there were still commercial execution challenges. When you look at the competitive dynamic, particularly in North America, it really did intensify in the quarter, particularly in gene synthesis. Now on the bright side, as I mentioned earlier, Europe and APAC continue to perform, and this is really isolated to a North America issue in Multiomics, okay? Now let me pivot to SMS. So what did we see in Q1? We saw slow bookings in stores and cryo. A lot of these capital-intensive products, we were seeing pushouts. Positive note, biorepository were high single-digit growth. C&I was low single-digit growth in the quarter. When we move into the second quarter, while we had really good visibility in our capital equipment pipeline by opportunity, we did not see these order conversions in the quarter. Let me give you a couple of examples. One, we had a multimillion dollar cryo deal with a biotech firm that got pushed out. Secondly, we had a multimillion dollar automated governance store that got pushed out. We haven't lost these orders, but they're just now delayed. Timing issues such as these -- funding delays or site readiness has really caused us to get these items pushed out through the balance of the year. But again, positively in the quarter, biorepositories were high single-digit growth. C&I was low single-digit growth. We just really had some challenges around our capital-intensive products. And as I mentioned earlier, these lower volumes I just described really create this loss leverage with our existing cost infrastructure. So hopefully, that provides enough -- the color you're looking for, David. David Saxon: Yes. That was helpful. And then I guess just in terms of some of the initiatives you've already put in place, like pricing in SRS, I think you have some pricing coming through in C&I after that backlog is kind of worked through. You have -- moving to more modular systems on the storage side. Like, I guess the question is when do we start to see the benefit of that? And as you think about the cadence over the fiscal '29 LRP now, zooming out, like how should we think about the trajectory over that period? John P. Marotta: Yes, David, thank you for the question. Let me start with the '29 LRP and kind of get us back anchored into our IR Day. If you look at the total SAM, you're talking about a $6 billion SAM. Let's go kind of strategic vector by strategic vector and get us kind of anchored back into that. So in our biorepository business, it's nearly about $1 billion business at mid- to high single digit. We're well positioned there because there's a number of growth drivers there. So ultracold, you've got good research volumes coming out in terms of the sheer volume of samples. There's a lot of emphasis around productivity, more therapeutics coming out and those sorts of things. That's a key market driver, and we're well positioned there. We're going to continue to invest behind that. So that gives us some confidence around our LRP certainly. Second is around gene synthesis. So that's north of $1 billion. That market is growing double digit in certain areas. And this is an area that we are investing behind, clearly with bringing Trey in. We certainly have to do a little more work on the cost side to get this business better positioned. Now what's driving that double-digit growth? Cell and gene therapy. A lot more research and therapeutics are driving the gene synthesis market, and we're investing behind that. And thirdly is our automated solutions. So that's north of $1 billion, growing at mid- to high single digits. We are investing clearly around small stores and modules. Well, what's the growth driver in that end market as well? Everything is moving to ultracold and cold. We're well positioned there. The number of assets that are in the field right now going from thousands to millions, people want to automate that. And so the stores, automated stores and automated cryo units are kind of the epicenter of all of that. There is a clear push for productivity and a clear push around cell and gene therapy and the investments behind that. That gives us the confidence around our LRP because we're holding our growth investments in there specifically. We could dramatically improve our margins today if we came off of some of those growth investments. And I realize also we've got some room to improve forecasting, both internally and externally here. But I've got some confidence around this, specifically around our LRP, hopefully, you're going to see some more detail coming out around our external -- around how we're looking at things externally in terms of the earnings supplement that was put out, that's going to continue here. And then internally, we've got our GMs in place. And certainly, we've got our finance leads in place in each of the businesses as well. So there's people waking up every day to drive performance in these businesses in these strategic areas, and they've got the finance leads that are in place as well. David Saxon: Yes, that earnings supplement is super helpful. So looking forward to that going forward. John P. Marotta: Thank you for the feedback. Operator: The next question comes from Matt Stanton with Jefferies. Matthew Stanton: Maybe a 2-parter on the reset. So Multiomics going from low singles to down mid-singles. Maybe just talk a little bit more about what you saw. I think you talked about competitive pressure. I think you guys have been hiring 20, 25 people on the commercial side. Are you saying those are no longer a tailwind for the back half of the year? I guess, what changed, to help us bridge the guide down on Multiomics here? And then maybe, John, just stepping back on the LRP reset. I mean, if you're going to touch that less than 6 months later from the Investor Day, why not maybe revisit the numbers to derisk those if you're going to push it out here? Was there any consideration to move any of the numbers either on the margin or the growth side to help derisk that bridge from, call it, flat growth this year to high singles now in '29? John P. Marotta: You bet, Matt. Thanks for the question. So both Lawrence and I will give you some color here. So let's talk about Multiomics. I mean we had clearly kind of a human capital reboot in North America right now in North America sales. We had some folks that left and then BD. We've added headcount in all of the regions right now. And where you can see there are bright spots right now from a growth perspective and double-digit growth is clearly in Europe and China right now. So those teams are performing well. Where we've got -- where we're kind of going back at things in North America is, in fact, we think there's still a tailwind there in NGS. We've got to do a little more work around gene synthesis in North America. There's some competitive dynamics that are going out on there that Trey is going to be coming in and we're going to be solving for. And then lastly, in the North America business, we've talked about this is from a structural point of view. We've got 14 labs. We're going to be rethinking that business, I can tell you, specifically around Sanger and how we drive performance going forward. Regarding the -- I'll touch on the LRP, then I'm going to hand it over to Lawrence here. Regarding the LRP, we did think about -- clearly think about what the revenue profile looks like over time. And we really went into the plan detail by detail, looking at the waterfall of the plan, the phasing by years. We've kept nearly $20 million of growth investments in the business right now. And that's where we're coming down. It was one of the reasons I wanted to share kind of how we view the market in biorepository, gene synthesis and automated solutions. Those are mid- to double-digit growers across all 3 of those right now. We're holding our growth investments, and we've got conviction around that plan over the 3 years that we outlined. And more importantly, seeing those growth investments through gives us the confidence around this phase shift in the program right now. The opportunity is clearly still in front of us. And we've got to go get that. I mean I think it's one of the things that I continue when I say were guiding us annually. That's what I mean by that, is this opportunity is still in front of us, and we're investing behind that with the numbers that I just shared with you. Lawrence, do you want to talk about some of the numbers around Multiomics? Lawrence Lin: Yes. In terms of guidance, Matt, when you look at the overall guide, right, as I mentioned earlier, the low end of the range of down 2% on revenue really just going to reflect the greater softness in Multiomics in North America. And then really, when you look at the plus 1% is we reflect a slight pickup in overall Multiomics North America bookings. Again, Europe and APAC continues to be strong for us in the Multiomics business. Certainly, there's -- to John's point, there's a bit of a reset around the commercial engine in North America, and we've accounted for that in our low-end guide to derisk it. Matthew Stanton: And then maybe just a little bit of cleanup. So B Medical, I appreciate the update. I mean, how do we think about the scenarios from here? So the time line was the end of March, that you guys are continuing to work through it. I mean, do we expect a resolution sooner rather than later? And then, Lawrence, can you just help us -- how long can you keep this in discontinued ops in the scenario where it needs to come back into continuing ops? Any chance you can kind of remind us of what the margin profile of that asset is today? John P. Marotta: Sure. I'll take the first part of the question, and Lawrence can take the second. So right now, where we sit, we feel pretty good about where we are. We're getting weekly updates from the team right now. Yes, there was a financing delay, it's certainly outside of our control. A lot of things going on in that part of the world right now, specifically in some of the end markets that they serve. And so I think the team is back on track. We've had direct conversations with the banks, and we've got more conviction on that close right now. Lawrence Lin: Yes, Matt, in terms of if there is a need to reconsolidate, that would happen at the next quarter point, June 30. Matthew Stanton: And anything you'd say on just margins if that does happen in that scenario? Lawrence Lin: Yes, we'll evaluate that, and we'll provide an update if that happens. But like John says, we feel confident that this will close. Operator: The next question comes from Mac Etoch with Stephens. Steven Etoch: Maybe just to start, following up on some of the Multiomics conversation that you've already had. Margins have been under pressure, growth expectations are coming down for this fiscal year. But can you just unpack how much of the margin pressure is really driven by those temporary factors like utilization versus the more structural dynamics and how that informs your confidence in the recovery and in the LRP as well? Lawrence Lin: Yes, Mac, thanks for the question. So as we look at the overall guide for the year around Multiomics, around leverage, for the year, it's about $14 million in terms of loss leverage. 80% of that is related to Multiomics. Now what I will say is we've taken actions in the second quarter, and we've done partial restructuring that will yield $7 million of annualized savings and $3 million in year. As John mentioned earlier, we're also evaluating currently the rooftops in labs. So let me give you a little bit more color. When we look at the overall fixed cost in the business, there's just too much cost. There is 14 labs that were built to support a much larger Sanger footprint than the demand environment supports today. So with the sustained lower volumes, this has really created pressure on profitability. Steven Etoch: Appreciate that. I guess just a follow-up on that. How is the -- how are these efforts kind of factored into your updated LRP? I know you're just pushing it out by a year, and there's not really any update between the different segments. But in terms of -- anything in terms of like a gating factor between the year or FY '26, '27, '28 might be helpful for our context. Lawrence Lin: Yes. I think it's a great question. Certainly, when we look at the overall confidence in LRP, right, that's why we're kind of holding to those targets. John P. Marotta: Mac, it's all contemplated in the phase shift to the LRP. Operator: The next question comes from Vijay Kumar with Evercore. Vijay Kumar: I guess my first one is, big picture, when you look at rest of life science tools space, we've generally seen stable [ A&G ] end markets, stable capital environment. So when you talk about end markets, when you talk about capital constraints, bookings in North America for gene synthesis, right, there seems to be a disconnect between what we're hearing from peers versus trends Azenta is seeing. How much of this is Azenta company-specific versus market issues in your mind? And when you think about back half, what is the guide assuming? Are you assuming current market environment that Azenta is facing sustains in the back half? Or are you assuming further deterioration in your end markets? John P. Marotta: Sure. It's a fair question, Vijay, and thank you for that. So let's unpack it first from an end market perspective. If you look at our North America GENEWIZ business, really, the headwinds we've seen is we had a commercial reboot. That's on us in terms of the human capital side. And so that's first thing there. Second thing is we did make some commercial investments, and we've got some execution shortfalls in that. Again, that's on us. Around the end market and what we're seeing in our pharma, biotech and academic customers, a lot of the performance issues we're seeing is really based on what's called this [ PC&S ] business. Think about that as a specialty CRO. And so it's large project-related revenue. It's very similar to our POC business in stores and our capital equipment business in cryo. So we've got -- there is a funnel -- a weaker funnel than we had because of some of the human capital turnover that I've talked about. The biggest driver in North America is, of course, related to Azenta-specific, and that is our Sanger business. I mean that is declining 17%. It's been a big issue for us internally. We are going to be solving for that. And so on balance, I would say, of the number of items I've talked about, I would say, on balance, about 60% to 70% are Azenta-specific, Vijay, and we're going to be solving for those. We've got plans in place. One of the things we've got with Trey coming in, we're very excited about his grip on the business just 4 weeks into the business here today. So that's the way I would think about GENEWIZ specifically in North America. If we unpack stores and cryo business, these are big-ticket items. I mean there's this -- right now, we're seeing pharma and biotech kind of investing in small pockets here and there. But remember, these are big-ticket CapEx. And so that is -- right now, I mean, when we review the funnel, we're looking at that, and we've got a good grip on that funnel. We've got a good grip in terms of the competitive dynamics. We're not seeing any share loss here. This is just a pushout. It's -- our interpretation of that is there is -- is pharma going to continue to invest? Where are they going in bioprocessing? They're clearly doing that. With this reshoring thing, are they going to move more dollars over there? Or are they going to put that into R&D and some of these large stores? It's a bit of a mixed bag right now. And I think that is really around end markets. I don't view our performance in stores as an Azenta-specific issue at this point in time, if we're just calling it down the middle as we see it, Vijay. Cryo, we had some new salespeople. We had some commercial reboot in North America. I think we were clear when Joe came in, he's got to rebuild our North America sales organization. He's done that. So on balance, Vijay, I would call it, on cryo, a bit of a 60-40, 60 being an end market, meaning a lot of the funnel, and we go project by project on these large CapEx deals. A lot of that's been pushed out. 40%, I would say, is this commercial reboot when Joe was coming in and rebuilding our North America business. So on balance, that's how I would look at unpacking the big issues in the business, and specifically, what is Azenta-related and what is end market-related. Do you want to talk about forecast, Lawrence? Lawrence Lin: Look, Vijay, when we contemplated the overall guide, the low end of the revenue range, we believe the plan is largely derisked, right? Importantly, we've really taken a conservative posture to the outlook and paired it with cost actions and operational discipline that John talked about. And that's why we believe that the revised guidance is appropriately balanced with realism and execution focus. Vijay Kumar: Understood. And maybe, John, on some of those comments you made on human capital, sales force issues. What is the plan for fixing these issues, right? Do you have the personnel in place? Or do you need to hire people? And how do you track productivity? Is that like 6 months from now where we should see a turn in some of these businesses? John P. Marotta: Yes. So on the human capital side, we have a North America leader in GENEWIZ, with Trey coming on board, he's going to be bringing in a leader for North America and Multiomics. And we're excited to bring about new talent into the business and with Trey being here and his -- very clearly his grip on the gene synthesis business. He spent many, many years there. And so we're excited about bringing in the right talent to go drive performance there. That was a gap for us for, basically, Q1 and Q2. That's on us. We've got really good sales reps in place right now. We've got really good regional managers in place right now. And so we're driving performance there. We track productivity clearly. Ramp time is 6 to 9 months in that business right now. I think there's some room for improvement around -- specifically around NGS. I think we're more confident in that area. We're building more capabilities in our gene synthesis business, and we've got to go solve for cost issues in Sanger. And we've got the right people now with Trey in place to go do that. I hope that helps, Vijay. Operator: The next question comes from Paul Knight with KeyBanc. Paul Knight: John, you were talking about the reorg of the automated stores group into 3 groups. And did I read it correctly that the automated stores technology is kind of a new footprint, a more reliable footprint? It seems to have always had some issues before you even. So is that -- what I understood there is, is this a new kind of way of producing and selling and servicing the stores product? John P. Marotta: Yes. So let me pull us back and discuss how we're thinking about stores in general. Let me just touch on the quality side of it first and how that's informing us in terms of what you're talking about in terms of restructuring, how we restructured that business in general. So when we came into the business, we had 18 stores quality issues, 18 of those stores did not work in the field. We're down to 3 right now -- 2 customers, 3 stores. And nothing's changed in terms of the quality issues that we've got to remediate and more importantly, the time frame to go do that. We're going to be lapping that this next quarter here in terms of trend and how we're more attacking the general dynamics around quality and the bespoke nature of our current portfolio there. So we -- when we came into the business, there was over 100-and-some quality tickets. I would -- I'm very pleased with the fact that the team -- and these are minor issues, but the team is down to around a handful, meaning 20-some. And so part of the bespoke nature of this is you've got some service gaps that were occurring in the business. I'm very pleased with the team in terms of how we've addressed these. More importantly, our customers are thrilled about that. It's been a good investment for the company. Okay. So what are we going to do about it going forward here? Customers clearly want these products. We don't see share loss with any of these quality issues at all, bluntly. And secondly, it's what do we want to go do going forward? When you're in a mid- to high single-digit business, there was a gap -- there's a gap in our portfolio. What's the gap? Small modulated stores, one; two, these larger stores that are highly configurable, meaning you've got standard modules that are off the shelf right now. That goes to the point around restructuring our R&D group, which was to your question, Paul, and that is that R&D group now is waking up every day -- one part of that group wakes up on new product innovation. The second part of that group wakes up every day and they work on the POC part of that business. And then the third one is sustaining engineering, and they're working around existing quality issues in the field, what we call PPV, price performance variance, which is around procurement and then value-add value engineering. That's what they're waking up every day and doing. Now let's talk about the timing of this, okay? The timing of implementing all of this was Q1. We put our general managers in the business in Q1 in automated stores and cryo. That's Jeff. We put Michael in C&I in that business to drive performance there. And then Alex in the biorepository business. All of those general managers came in, in that November-December time frame. So they're getting more clarity around the business clearly. And then our financial leads are coming in there, too. So we think we're going to have more of a grip on the business just from an execution of the road map, but more importantly, how we're driving forecasting in the business. I know we've got a little work to do internally forecasting and more importantly, externally forecasting here. So all of that to say, structurally, Paul, I think we're in a much better place in how we're driving that going forward in automated stores. Thanks for the question. Paul Knight: Sure. And then last, on Multiomics. Is Sanger -- obviously, you want to change the roof -- the rubber roofs. But is Sanger moving into other next-gen techniques that are longer read length? Is that -- does it imply less Sanger in the future, more next-gen in the future? John P. Marotta: Sure. What is going on in the Sanger business is you've got technology disintermediation, okay? Is Sanger ever going to go away? No. But there's a shift, a clear shift to the ONT Oxford Nanopore Technology, which we also offer, okay? We've got thousands of dropboxes globally. We've got a big commercial footprint here. Bluntly, we were on our heels in terms of bringing the new technology into GENEWIZ. We're now on our front feet in doing that. I think with Trey coming on board, we're going to get more aggressive in this technology conversion. That lends us to the fact that we've got to then rightsize the Sanger business, but also meeting our customer needs with the right balance of Sanger. If you look at a Multiomics business competitively differentiated, having gene synthesis on the writing side of genes and then next-gen sequencing, including Sanger and Oxford Nanopore is strategic. And so we need the right balance of having NGS, Sanger and ONT in the business to drive a synthesis strategy here. Trey is the one that is really well positioned to do that. And all of that right now, Paul, we're on our front feet to go do. Operator: The next question comes from Brendan Smith with TD Cowen. Brendan Smith: I appreciate all the color here on North America versus other regions. And maybe just following up kind of on that last question. I guess even really from a priority basis, you mentioned some of the GENEWIZ dynamics in North America, but I know we've even seen, for example, some AI-driven demand for some of these tools from biotech and pharma starting to crop up here. So I guess I'm really just wondering how you kind of see Azenta's competitive opportunity in sequencing versus synthesis and maybe if one ultimately makes more sense to kind of really lean into first, just kind of order of operations from here over the next few months. John P. Marotta: Sure. I mean if you look at what we talked about in IR Day in terms of you've got gene synthesis north of $1 billion end market growing double digit, very high margins, we have that in our hands today, and we're executing well, specifically in that in Europe and in China. Where we think that there is room to improve in our strategy is up-indexing us from a technology perspective, specifically in North America and kind of what we outlined in our strategy is this decentralized up-indexing from a technology perspective. We think there's a lot of room there. The evidence of that, Brendan, is clearly in bringing Trey in. In order to execute our strategy, you got to have the right person to do it. He's a clear expert here. And so, for our strategy, we need to have both in terms of reading and writing of genes. Going to your question around AI, this is an area that I think you're going to hear more from us in as the strategy starts to evolve around gene synthesis up-indexing us from a technology and a double-digit growth perspective and getting us more on our front foot there. We're pretty excited about that. We do have bioinformatics internally. We do -- we are investing in that specifically. I mean, that's in our hands today. I think you're going to see some more partnerships and some more things around our inorganic activities around that specifically. But I hope that helps, Brendan. Operator: We have reached the end of the question-and-answer session. And I will now turn the call over to John Marotta for closing remarks. Please go ahead. John P. Marotta: Very good. Thank you, operator. To close, I want to recap on a few things. First, I want to emphasize our confidence in the strategic priorities as outlined in our Investor Day: scaling our biorepositories, advancing our gene synthesis technology and our new product innovation and automated solutions. We're really focused on getting the portfolio centered around those 3 areas and increasing our recurring revenue focus. As I've stated, we're not satisfied with our results, and we have some work to do to transform Multiomics and stabilize our performance. I'm confident on our team's ability to do so and the new leadership we brought in to help us do that. I want to thank our employees and our shareholders for their support and their commitment to Azenta. Thank you very much. Operator: Thank you. This concludes today's conference call. You may now disconnect your lines. Thank you for your participation.

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FLUT 2026 Q1 财报电话会议

Operator: Hello, everyone. Thank you for joining us, and welcome to Flutter Entertainment plc Q1 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. I will now hand the conference over to Paul Tymms, group director of investor relations. Paul, please go ahead. Paul Tymms: Hi, everyone, and welcome to Flutter Entertainment plc's Q1 update call. With me today are Flutter Entertainment plc's CEO, Peter Jackson, and CFO, Rob Coldrake. After this short intro, Peter will open with a summary of our operational progress and then Rob will go through our Q1 financials and our updated guidance for 2026. We will then open the lines for Q&A. All of the information we are providing today, including our 2026 guidance, constitutes forward-looking statements that involve risks, uncertainties, and other factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors are detailed in our earnings press release and our SEC filings. In addition, all forward-looking statements are based on current expectations, and we undertake no obligation to update any forward-looking statement except as required by law. Also, in our remarks or responses to questions we will discuss non-GAAP financial measures. Reconciliations are included in the results materials we have released today, available in the Investors section of our website. I will now hand you over to Peter. Peter Jackson: Thank you, Paul. I am pleased to share our Q1 results and update you on the progress made against the key strategic objectives we outlined in February. But first, I wanted to address the management changes we have announced today. Amy Howe will be leaving the business. I would like to thank Amy for her contributions to Flutter and FanDuel, and recognize the impact she has had on the business since joining in 2021. We wish her every success for the future. Looking forward, the U.S. market and FanDuel’s number one position within it represents one of the most significant growth opportunities in our industry, and it is essential that we have the right structure and leadership in place to fully capitalize on it. Dan Taylor’s track record of driving growth and executing on complex strategies makes him ideally suited for his expanded role. Christian Genetski has proved to be an exceptional leader, instrumental in scaling the FanDuel business and market leadership. These changes will sharpen our focus on the U.S. sportsbook, strengthen the connection between our U.S. and international divisions, and fully leverage the group’s expertise, capital, and strategic ambition. I am confident this gives us the right structure for long-term success and strengthens our ability to deliver sustained long-term growth. Now turning to the results in the quarter. In the U.S., we saw encouraging signs in underlying growth in Q1. Overall AMPs were 1% behind last year, and revenue grew 6%, with headline KPIs improving as the quarter progressed. As outlined in February, overall sportsbook performance was adversely impacted by NFL trends observed in Q4, with persistently high gross revenue margins negatively affecting customer activity, leaving us with a smaller player base as we entered 2026. We outlined our sportsbook and generosity improvement plan to maintain our leadership position in these areas, and we are now executing against them. From a generosity perspective, we are focused on delivering a truly customer-first proposition. Examples include the launch of early win promotions through March Madness—an opportunistic pair to capture the social side of betting, which aided engagement. Mets fans will know what I mean. In April, we began rolling out our sportsbook loyalty program, which has had a very positive response from the initial cohort of customers. To gain access to the program, we also launched BetProtect Plus, an industry-first generosity mechanic allowing customers to insure their bets for the full game for a small fee. Initial response has been excellent, with adoption rates double our expectations and continuing to grow. From a sportsbook perspective, product enhancements in the quarter included expansion of our popular Path to Leg feature to Super Bowl, more personalized and simplified NBA same game parlay building with bettors, and full-screen streaming for key sports. These changes are gaining traction with our customers. Underlying trends across our headline KPIs have been positive, with AMPs, handle, and structural revenue margin all improving through the quarter. Looking ahead, we have a strong pipeline of improvements planned. This includes significant expansion of our new loyalty program through Q2 and Q3, ahead of the full rollout for the NFL 2026–2027 season, and new soccer product features ahead of the World Cup. In iGaming, FanDuel delivered another strong quarter of growth, with AMPs up 10%. Expansion of our direct casino player base, coupled with improved frequency amongst higher-value categories, drove revenue growth of 19% year over year. This was driven by enhanced rewards delivered through our loyalty program, including daily reward boxes and a continued rollout of new exclusive content. In April, we migrated PokerStars customers to the FanDuel platform, unlocking improved products and cross-sell liquidity for poker customers. Turning now to prediction markets. First, we continue to see limited cannibalization impact from prediction market operators on our sportsbook growth. We believe this is a function of the fundamental differences in product propositions between sportsbook and prediction market platforms, customer age profiles, and the concentration of prediction market activity amongst entertainment-first and low-value users. However, we continue to monitor the impacts of prediction market operators in the broader sports betting ecosystem. Second, in terms of the opportunity, we continue to view prediction markets as an attractive incremental customer acquisition opportunity ahead of sports betting regulation in new states. A fast-moving and complex regulatory environment has at times made product delivery timescales challenging. However, we are prioritizing new product rollouts focused on building the operational flexibility required to deliver our ambitions. In March and April, we widened our range of sports markets, and early testing of our generosity capabilities saw encouraging returns with strong app downloads through March Madness. We launched the FanDuel One app in April, dynamically serving customers sportsbook in regulated states or prediction markets in non-sportsbook states. Critically, this now allows us to leverage FanDuel’s strong nationwide brand awareness by giving customers one app that delivers access to an increasingly compelling sports experience. While Q1 revenues were modest, reflecting the early stage of the journey, we are focused on delivering the improvements needed during 2026 to serve customers an exciting sports-led experience by Q4. The 2026–2027 NFL season launch will be a major milestone, with further improvements planned for the FIFA World Cup. We believe our world-class proprietary pricing capabilities can also unlock a significant market-making opportunity. We began market-making services on a major third-party prediction platform in April. Early indicators have been encouraging, and we expect to launch the initial phase of our market-making platform in the coming months. Turning to our International segment. Our performance in Italy has been extremely strong. We are the clear number one operator online, outgrowing the market and our main competitors. This performance is even more remarkable given the drag from our SNAI business, which, while in growth during the quarter, had yet to benefit from the migration onto the SNAI platform, which successfully completed in April, transitioning around 2 million accounts. SNAI’s market-first MyCombo product saw excellent engagement, with multi-leg bets contributing half of pre-match soccer handle and over 30% of bets carrying five or more legs. This drove a significant step-up in parlay penetration and structural margin. In iGaming, SNAI benefited from the continued rollout of exclusive content. I am very excited about the outlook for the rest of the year in Italy, SNAI’s ongoing exceptional performance, and the unlocking of Sisal’s market-leading product following the platform migration. In the UKI, strong double-digit iGaming revenue growth was delivered across Paddy Power, Tombola, and Betfair, driven by new slots content and robust retention. Although Sky Bet’s performance has been behind our expectations as customers adapted to the new user interface post migration, momentum has improved with the highest customer acquisition volumes in five years in January, and underlying sportsbook revenue returning to growth in March. Market competitiveness remained stable ahead of the UK iGaming tax increase of 40% on April 1. We now expect less profitable operators to begin adjusting marketing and general strategies. As the leading UK operator, Flutter Entertainment plc is well placed to deliver material first-order mitigation as previously outlined, and to benefit from second-order market share gains over time. In Brazil, performance remained encouraging, with Betano Latino AMPs over 40% higher year over year. We will soon integrate our proprietary pricing capabilities, unlocking a best-in-class parlay product and promotional improvements ahead of the FIFA World Cup in June. In APAC, we saw modest year-over-year growth in sportsbook AMPs and handle, and racing, excluding greyhounds, was still declining year over year but was ahead of our expectations. We also welcomed advertising restrictions announced in April and believe Sportsbet is well placed to build on its market-leading position. Overall, I am pleased with how we have executed on our priorities across the group, and particularly in the U.S. we have made significant progress embedding improvements discussed in Q4. FanDuel Predicts is building momentum, and I am excited about our market-making opportunity. Internationally, our SNAI and LSX integration is progressing well. We are investing with conviction in Brazil. We now have the right organizational structure in place to deliver against our strategic priorities, giving me confidence in the outlook for the year and our ability to deliver sustainable, long-term shareholder value. Finally, I wanted to note our plans to review our London Stock Exchange listing as we consider streamlining the dual listing. We expect this review to conclude during Q2 with an update on our findings at that time. I will now turn the call over to Rob for the financial results. Rob Coldrake: Thank you, Peter, and good afternoon, everyone. The group delivered 17% revenue growth in Q1 2026 with adjusted EBITDA up 2%. This reflected contributions from our SNAI and Betna Finale acquisitions and a positive year-over-year swing in sports results. Performance included 10% sportsbook revenue growth, with excellent underlying momentum in SNAI, and the U.S. showing encouraging signs of improvement, as Peter outlined. We also delivered continued strong iGaming performance across the U.S., SNAI, and UKI, with total iGaming revenue growth of 28%. Net income of [inaudible] declined $126 million year over year, driven by a $71 million increase in interest expense and a $122 million increase in depreciation and amortization. These were partially offset by an $88 million non-cash year-over-year benefit from the Fox option fair value adjustment. Earnings per share and adjusted earnings per share declined to $1.23 and $1.22, respectively, reflecting the factors mentioned above and a $61 million year-over-year noncontrolling interest benefit as we lapped the prior period. This included an expense reflecting Boyd’s 5% ownership of [inaudible]. Net cash provided by operating activities increased by $142 million, or 76% year over year, primarily driven by a positive year-over-year swing in player funds of $153 million—from an outflow in the prior year related to a Sisal lottery payout to an inflow in the current quarter. This more than offset higher tax and interest payments and a super PAC contribution in the period to support our U.S. advocacy initiatives. Capital expenditure was higher year over year due to lower prior-year phasing in the quarter. As a result, free cash flow, including financing CapEx and excluding player funds, declined by 46%. There is no change to our full-year 2026 capital expenditure guidance. Our disciplined capital allocation policy provides flexibility to respond effectively to evolving market conditions and emerging opportunities. We continue to prioritize organic investment in our core business and strategic investment, including emerging opportunities such as prediction markets, which we continue to view as an optionality-driven investment within a defined cost envelope. Deleveraging is now a priority. Buybacks also remain an important part of our capital allocation policy. At our Q4 earnings in February we communicated our plans to return $250 million to shareholders commencing in H1. This program began in Q1 and remains ongoing. As of May 1, $190 million has been returned to shareholders. Consistent with our flexible approach, we will continue to evaluate the buyback program as we progress through the year. From a leverage perspective, we ended Q1 with leverage of 3.7x. We expect leverage to decrease by the end of 2026, initially increasing through Q2 and Q3 reflecting the profitability profile of the business, before reducing in Q4 and moving us towards our target ratio of 2.0x to 2.5x over the medium term. We also continue to drive efficiencies across the business and have already embedded significant cost savings through our ongoing cost transformation programs. Internationally, we are on track to deliver the full $300 million run rate from our cost efficiency program by the year end, with most major milestones already achieved. We are now actively defining the next phase of cost transformation into 2027 and beyond with a clear emphasis on sustained cost discipline and operating leverage. In the U.S., we are equally focused on cost efficiency, with 2026 savings realized across initiatives including payment provider efficiencies, improved supplier rates, and overall process optimization. This includes the closure of our FanDuel TV racing network and FanDuel Picks product in 2026 in order to optimize costs and ensure investment is directed towards the highest-return areas. Moving to our 2026 outlook. We are pleased with the trading momentum in April. Our full-year guidance is unchanged on an underlying basis, adjusting only for unfavorable Q1 sports results in the U.S. and International, and launch costs in Arkansas not previously included. Guidance also reflects the internal transfer of management of our PokerStars North America business from our International business to the U.S. Revenue is now expected to be $18.3 billion at the midpoint, with adjusted EBITDA of $2.865 billion for the year. Additional detail on guidance is available in today's release. To reiterate Peter's comments, I am encouraged by the positive operational signals we are seeing, which give me conviction in our full-year outlook. Peter and I are now happy to take your questions. I will hand back to the operator to manage the call. Operator: We will now open the call for questions. Please limit yourself to two questions. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jordan Bender with Citizens. Jordan, your line is open. Please go ahead. Jordan Bender: Hi, everyone. Good afternoon, and thanks for the question. I want to start with the management changes over the last couple of months, including today. From our perspective and from some of the questions we are getting, how should we be viewing these changes in real time? Is this an effort to get back to where we were at the start of the NFL season with Christian and Dan, or is this a change in strategy on what you are trying to do, including maybe willingness to spend on generosity? And then the second question, Rob or Peter: your 2Q EBITDA is about $104 million by my math. Can you help us with some of the inputs? You have a lot of moving pieces in the quarter—just how we get to that number? Thank you. Peter Jackson: Hi, Jordan. Good afternoon. I will take the first question; Rob will pick up the Q2 EBITDA one. In terms of the management changes, now is the right time for us to put in place new leadership in the business. I am excited to see what Christian and Dan can do. We are getting onto the front foot as a business. The sportsbook improvement plan is working. We started to see some of those sequential benefits in the quarter. I am excited to see what we can do with the loyalty program as it rolls out through the course of the year. I think we have been trading the business harder. I mentioned the activity we have been doing with the Mets and other things to get on the front foot, which is working. And I am pleased with the progress we are making with BetProtect. There is no change in our strategy or posture of the business. Rob Coldrake: Picking up on your Q2 question, Jordan: there is no change in our expectations for Q2 from where we were previously. If you look at our trading at the moment, we are in line with our expectations and have seen some slightly favorable sports results in recent weeks. I think if you look at consensus, there is potentially some adjustment needed to the phasing—slightly too high in Q2 and too low later in the year. The main things to consider in the year-on-year bridge for Q2 would be that the prior year included about $70 million from sports results. We have some prediction market spend in the forecast for this year in Q2, which we expect to ramp up slightly from Q1. We also have some marketing around the World Cup that will kick off in Q2, in addition to the new states investment that will continue around Missouri and Arkansas. From an underlying perspective, as we saw in Q1, we started the year with a slightly lower player base, and that flows through. But ultimately, no change in Q2 from our previous expectations. Jordan Bender: Thank you very much. Operator: Your next question comes from the line of Barry Jonas with Truist. Barry, your line is open. Please go ahead. Barry Jonas: Great. Thank you. The prediction legal environment remains pretty active. Curious to hear your expectations for how you think this plays out in the courts. And does that weigh into how you think about your investment spend going into next year and beyond? Thank you. Peter Jackson: You are certainly right that there is a lot of noise around the legal position setting for these markets. I think it is important that we remember a few things. First, the team has made good progress recently—launching the market-making capabilities and the One app, which allows consumers wherever they are across America to access sports on FanDuel. That is important progress. We demonstrated the strength of our brand with the activity we did around March Madness. I am excited about the incremental opportunity this presents for us. Until we understand what the Supreme Court says, we will live with some uncertainty. In the meantime, we will continue to invest in the market prudently. We are pleased with the early indications we are seeing. It is a good opportunity to monetize. For the core fixed product, we ultimately want to acquire as many sports customers as we can onto our regulated OSB products. Our intention is to build a great sports experience for customers wherever they are in America. That is what we are going to do with the One app. Barry Jonas: Got it. And then just for a follow-up: a lot has happened since your 2024 Analyst Day, and Street numbers have adjusted. At a high level, how do you think about the path and timing to ultimately hitting those original targets? Rob Coldrake: Ultimately, we still see a very compelling pathway to growth in the short to medium term. From the targets that we set out at the Capital Markets Day in 2024, it is right to assume some things have moved out to the right slightly given underlying changes in the business since that time. But if you think about the key structural foundations we set out, we retain confidence in our ability to increase structural margin. We continue to see higher penetration. We continue to see a move into new states in terms of regulated OSB; we said that would be about 2% a year, and we have broadly seen that since. We said iGaming would take in the next three years; we are seeing some encouraging conversations and hopefully momentum moving in the right direction there. We are still very confident about the longer-term plans. We need to trade through the next couple of quarters and see where we are exiting 2026, and we will give more color then. Operator: Your next question comes from Jed Kelly with Oppenheimer. Jed, your line is open. Please go ahead. Jed Kelly: Thanks for taking my question. Going back to the market making—as you are able to integrate that into your product, does that give you the ability to merchandise that product better, either through customer credits or other things you can do to drive engagement? Can you talk about the importance of putting market making behind that? Peter Jackson: Jed, you are right. Market making is an exciting opportunity, and it is a great way to showcase the quality of our pricing capabilities across the business. When we think about the opportunities, it is principally around combos, and we aim to be market making on as many platforms as we can. It is a good opportunity for us to monetize our pricing expertise. Your point about doing it on our own platform and changing the dynamics of a customer objective—there are interesting possibilities there that we are considering. Jed Kelly: As a follow-up, philosophically in the U.S., how do you toggle maximizing for net win margin versus trying to drive more players? Do you ever think about toggling down the net win margins to get more players, and maybe net win margins in the U.S. might not be as high as other countries? Peter Jackson: The biggest driver of our net win margin is the bet mix and the extent to which customers build same game parlay products. This is something people want to do, and we are meeting that customer need. You then have to look at the relationship between structural gross margins and generosity and get the balance right. If you do not, customers can quickly become dissatisfied. We have lots of experience around the world, and we are well placed in the U.S. to deliver great experiences for our customers. Operator: Your next question comes from Trey Bowers with Wells Fargo. Trey, your line is open. Please go ahead. Trey Bowers: Thanks for the question. I wanted to revert back to the cadence in the U.S. As I run the math on the second-half loading, it looks like Q2 expectation is slightly down revenue and EBITDA down 75% year over year, but then the back half is 25% revenue growth and 100% EBITDA growth year over year. Can you dig in another layer on expectations—around promotional activity or signposts that should give confidence that the back-half loading is doable? Rob Coldrake: We set this up with our initial guidance with Q4 a couple of months ago. We anticipated sequential improvement as we move through the year on the top line, and we are starting to see that already. The best way to look at this is to view the year in two halves. In H1, it is broadly a continuation of the trends we saw as we exited 2025 with a slightly smaller customer base. We are seeing handle slightly down versus Q1. We have had some amendments year on year, albeit with some improvement in Q2, to structural margin impacted by the sports mix. With new launches in Arkansas that we talked about previously, and also with Alberta in July and the World Cup, we will see slightly higher generosity in the first half. For the year overall, we anticipate a broadly similar generosity envelope. In the second half, we lap a weaker prior-year NFL performance and expect handle and structural revenue margin to move to modest growth year on year. We also expect significant efficiency in generosity as we lap the launch of Missouri last year and get the benefits from the loyalty program we have launched, where we are already seeing positive signs. Putting it all together, we feel very comfortable. We always said we would have sequential improvement as we move through the year, and we are starting to see that at the start of Q2. Trey Bowers: As a follow-up on prediction markets, you are upping the investment a little for the year. As we exit this year, what would you view as success in terms of user levels in the non-licensed states to prove out that the investment is playing out as you would like? Peter Jackson: We are not upping the level of investment. There is opportunity to monetize this category through our market-making capabilities—particularly in combos—and you will see us do that. We are focused on delivery of the One app; it is in the market now and lets us leverage the FanDuel brand nationally. Wherever you are, you can open the FanDuel Sports app and access either regulated OSB if you are in a state like New York, or our fixed products in non-OSB states like California. We want to acquire as many customers as we can through that platform and leverage the national marketing we already have. The brand resonates very well. We are improving the quality of our Predicts experience, expanding the catalog, and delivering a much better experience. That is our focus this year. Rob Coldrake: As Peter said, we will remain very disciplined in our investment around prediction markets. We will invest more if we see opportunities to do so. It would be a great position to be in at the end of the year if we get real traction and want to lean in. Equally, we will follow the same rigorous framework that has driven our success in the sportsbook business, and we will continue to monitor returns and CAC to LTV as we move through. With the improved product in place for the World Cup and the start of the NFL season, we see exciting opportunities. Operator: Your next question comes from Jeffrey Stantial of Stifel. Jeffrey, your line is open. Please go ahead. Jeffrey Stantial: Good afternoon, everyone. Two from us. First, Peter, you mentioned some challenges shipping product for prediction markets at the velocity you would have expected given some regulatory constraints. Can you clarify where this bottleneck is most pronounced? Is this a function of the JV partnership? Is this more the lack of guardrails you are seeing from the CFTC? What explains the restriction in product development pacing? Second, a clarifying question: the release notes revenues were about $90 million ahead of your guidance in Q1 if you exclude the $45 million of hold impact. Can you clarify where this $90 million came from—is this core sports, core casino, Arkansas, or prediction markets—and the decision not to flush this through to the guide? Peter Jackson: I will pick up the Predicts product question first. We have made good progress in the first quarter. The fact that we are now aligned with our unified One app is important and a great step, and we have launched the market-making capabilities. We are working hard to improve the breadth of sports coverage we have, particularly around combos. There have been some challenges, principally around our ability to access the range of content we need, rather than a product front-end issue. I am confident our team has the capability to deliver great user experiences and products. If you look at the Betfair Predicts product in the UK, it is a fantastic example of what the teams can deliver. There is a lot of work underway to expand the range of product, particularly from a combo perspective, onto our own platforms, and we will adapt as needed to win in sports. Rob Coldrake: On the underlying beat, there were a couple of factors. We saw strong NBA handle in the quarter, which helped offset the impact of slightly unfavorable sports results and the Arkansas launch. When we set out our guidance a couple of months ago, we said we were taking a sensible and measured view. It is early in the year. Encouragingly, we are seeing early signs that our plans are gaining traction, but given it is early, we are not updating guidance at this stage aside from the technical factors mentioned in the release. Operator: Our next question comes from the line of Bernie McTernan with Needham and Company. Bernie, your line is open. Please go ahead. Bernie McTernan: Thanks for taking the questions. First, a follow-up on the second-half ramp. Any building blocks you can give in terms of how you get back to year-over-year handle growth in the second half of the year? And since NBA is trending positively, can you share quarter-to-date trends on handle to compare versus Q1? And then I have a follow-up. Rob Coldrake: As I mentioned, we are pleased with the momentum we are seeing. We are seeing positive year-on-year handle trends in NBA. As we have talked about many times, we are not obsessed with handle as the one metric—it is one factor and a building block for the full year. We do not need a huge incremental improvement from where we are in the year-on-year handle variance to hit the targets in our guidance. We are also anticipating a small amount of structural margin expansion as we move into the second half, helped by the mix of sports. For the overall generosity envelope, we expect it to be broadly in line for the full year. In the short term, we are seeing encouraging trends, in line with our expectations and phasing. Peter Jackson: When I look at the sportsbook improvement plan—the changes we are delivering and the benefits we are seeing in early cohorts—perception data clearly demonstrates the benefits from the very early cohorts on the program. I am excited to see what happens as we roll it out for the full year. The BetProtect product is getting real traction, so there are a lot of good things coming that we are already seeing benefits from. As we get to the back half of the year, we will see those in full rollout and get the full benefits. Bernie McTernan: Thank you. Then one financial question. Gross margin in the U.S. was almost 200 basis points lower year over year despite revenue growth. What was the major driver—any one-timers? Was this just launch impacting promotional spending? Rob Coldrake: A couple of factors. One would be tax increases year on year from a state perspective—New Jersey, Illinois, and Louisiana—which total approximately 220 basis points. That is the main moving part. Of course, when you look year on year, the sports results impact needs to be taken into account. We are making great progress on payments and fraud costs, and we have more efficiencies to come. But the main movement year on year in margin is down to the tax changes. Peter Jackson: Got it. Thank you very much. Operator: Your next question comes from the line of Ben Shelley with UBS. Ben, your line is open. Please go ahead. Ben Shelley: Hi. Thanks for taking my questions. Two from me. One on U.S. promotions: excluding state launches, how did online sports betting promotions fare on a same-state basis in the quarter? And with regards to prediction markets and CAC inflation, are you seeing any inflationary impact on customer acquisition costs from prediction market-related marketing spend? Peter Jackson: I will pick up the prediction market inflation question. We are not seeing any change in terms of market competitiveness. We have long-term deals in place for many of our marketing partnerships, so we are not subject to short-term fluctuations from others trying to spend more. It remains very competitive, but it has been for some time. The nature of our national partners and deals puts us in a good place. Rob Coldrake: On generosity year on year, we have about 50 basis points from the new states. Our focus is on getting the biggest bang for our buck from our generosity across the customer base. As Peter outlined, we have seen really encouraging responses from the changes we have made. Customer feedback has been incredibly positive on BetProtect Plus and in the early days of the new sportsbook loyalty scheme we have launched. We have previously said our generosity envelope for the full year will be broadly in line with 2025, and we have not changed our view. Ben Shelley: Thank you. Operator: Your next question comes from the line of Brandt Montour with Barclays. Brandt, your line is open. Please go ahead. Brandt Montour: Thanks for taking my questions. First on prediction markets: how do you think about the cadence of spend in 2Q, 3Q, 4Q, given the One app is not yet where you want it to be, and considering the sports calendar? Do you need to be there in a big way for the World Cup, or wait and save dry powder for NFL? How do you balance that? Rob Coldrake: In Q1, it was really about testing and learning—generosity and marketing around our Predicts products, demonstrating our ability to acquire customers and establish presence in the category. We spent circa $40 million in Q1. It is early days, but we have always said we anticipate the majority of our spend in the second half. We will invest behind the World Cup and expect to ramp our spend slightly from Q1 into Q2, but we retain flexibility and will closely monitor returns on a CAC and LTV basis. We really want to get behind the start of the NFL season in the second half, provided we have the right product in place. We will look at the prediction investment envelope alongside our core sportsbook. Our overall envelope does not change at this point, but it is evolving, and it would be great to be here at year end saying we are spending more because it is really taking off behind NFL. Brandt Montour: Separate question on iGaming. The U.S. market slowed a little sequentially and a key competitor hinted at a tougher competitive environment, yet you outgrew the market and gained share. How sustainable is that performance? Has the market gotten less growthy or more competitive sequentially? Peter Jackson: We were really pleased with iGaming in Q1—AMPs up 10%, revenue up 19%. Revenue growth from direct casino customers was even higher. Our performance was impacted somewhat by coming into the year with a smaller sports business. Our focus on our rewards club—now in its second year—more exclusive content, and our relationships with key influencers have been important. The team is executing well. As for market growth, it cannot keep growing at the same percentage rates as the base gets larger, so some slowdown is natural. But market penetration still has a long way to go. We have the leading position in iGaming and are performing well. Operator: We now ask that each analyst limit themselves to one question. Our next question comes from the line of Joe Stauff from Susquehanna. Joe, your line is open. Please go ahead. Joe Stauff: Thanks. On your generosity reinvestment in FanDuel OSB, is it fair to say that largely started in March? I am wondering if AMPs grew in April. And for the World Cup, Peter, you mentioned another exchange that you could plug into. Will you be plugged into that more than the CME going into the World Cup? Peter Jackson: I will take the World Cup question first. We want to make sure we have as compelling sports offerings for our customers as we can. We have a very exciting set of products that we will bring to our regulated OSB, leveraging the Flutter Edge and our global expertise in soccer. We are excited about the opportunity to bring customers onto the platform. From a Predicts product perspective, we do have the right connectivity with other venues. It is something we are focused on, and the timing is tight, but we will see where we can get to for the World Cup. Rob Coldrake: On your first question, from an AMPs and generosity perspective, we are laying down a number of new initiatives, and we are very pleased with the traction we are seeing. We are seeing sequential improvement across a number of KPIs from Q1 into Q2. We are not getting hung up on any one metric, but across the board we are seeing a lot of green on the dashboard. There is some noise around March Madness—last year was very customer-friendly—so you always get some noise around handle as you move through that period. But we would take the March Madness we had this year over last year every day of the week. We are pleased with the momentum we are seeing into Q2. Operator: Our next question comes from the line of Ed Young with Morgan Stanley. Ed, your line is open. Please go ahead. Ed Young: Good evening. In your shareholder letter, Peter, you said you have a clear plan of improvement for the sportsbook and laid out a lot of product iterations. Can you help us step back and diagnose what has gone wrong? You have made some changes, which is good to see, but on a bigger-picture level, where has the business not done what it should have been doing? And beyond organizational changes, any macro change in how FanDuel needs to approach the market in terms of competitive or promotional intensity? It does not sound like that is what you are saying, but you are also saying Dan Taylor is coming in to review and oversee the business. Please share your diagnosis. Peter Jackson: Good evening, Ed. We have been clear about the issues for us from a sports perspective in the U.S. As I described, the team’s intention is to get back to a customer-first approach. We have seen that with how we have been trading the business in the last quarter. I mentioned the activity around the Mets—some good justice refunds the team has been doing. It is engaging and gets you on the front foot socially, which is important and something we do around the world. The BetProtect product was important to deal with injuries, which have been a real challenge. We have a great solution in place, and we have seen double the level of engagement we expected already, with plenty of ways to evolve it over time. One way is integration with the loyalty or reward program—for example, tiers where we can give customers access to BetProtect. Integrating all aspects of the product is important to offer great value. There is no need for a big step change in strategy. We are also executing many small enhancements: iOS launch time is now less than two seconds; we have full-screen streaming for key sports; upgraded live betting with simplified same game parlay building; and you can track bets on the lock screen. There are lots of small enhancements that we will continue to roll out. The cadence of delivery is improving with our investment and focus in AI, and throughput from a product perspective is stepping up materially. It is exciting to see that translate into what customers experience. There is no change in strategy. We have clarity, we are putting customers first, and we are getting back on the front foot, with sequential benefits emerging. If we look at revenue, it was up 9% on a normalized basis in March, compared with flat for Q1 as a whole—good sequential improvements in sports. From a gaming perspective, we are also making progress. We had the highest customer acquisition volumes in five years onto the brands. Sky Gaming now has more than a million customers for the first time as of March, and the app was highly ranked by third parties for interface and accessibility. There has been a strong step up in customer perception. Operator: Thank you. This concludes our Q&A session. You may disconnect.

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SVV 2026 Q1 财报电话会议

Operator: Good afternoon, and welcome to Savers Value Village, Inc.'s conference call to discuss financial results for the first quarter ending 04/04/2026. At this time, participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. Please note that this call is being recorded, and a replay of this call and related materials will be available on the company's investor relations website. The comments made during this call and the Q&A that follows are copyrighted by the company and cannot be reproduced without written authorization from the company. Certain comments made during this call may constitute forward-looking statements which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from expectations or historical performance. Please review the disclosure on forward-looking statements included in the company's earnings release and filings with the SEC for a discussion of these risks and uncertainties. Please be advised that statements are current only as of the date of this call, and while the company may choose to update these statements, it is under no obligation to do so unless required by law or regulation. The company may also discuss certain non-GAAP financial measures. A reconciliation of each of the historical non-GAAP measures to the most directly comparable GAAP financial measure can be found in today's earnings release and SEC filings. Joining from management on today's call are Mark Walsh, chief executive officer; Jubran Tanious, president and chief operating officer; Michael Maher, chief financial officer; and Ed Ruma, vice president of investor relations and treasury. Mark Walsh, you may go ahead, sir. Mark Walsh: Thank you, and good afternoon, everyone. We appreciate you joining us today. We are pleased with our first quarter results as we once again delivered strong sales performance and continued our earnings inflection for the second consecutive quarter of year-over-year adjusted EBITDA growth. We increased segment profit in both of our major markets through a combination of continued strength in our U.S. comp store fleet, the ongoing maturation of our new stores, profit improvement initiatives, and tremendous operational discipline. We also made continued progress on our innovation agenda, which is already delivering benefits to our business. Let me start with a few highlights from the quarter. Sales in our U.S. business grew 11.2% with comps up 6.4% driven by both average basket and transactions. The secular trend towards thrift remains a powerful tailwind, and our maturing new store fleet is in the early stages of contributing to comp sales growth. In Canada, our sales trends were largely as expected with a 0.6% comp decrease during the quarter, reflecting a roughly 70 basis point headwind due to an early Easter. I am especially proud of our Canadian team's execution this quarter. Despite flat comps, we grew Canadian segment profit almost 24% as we tightly managed production levels and benefited from some significant and sustainable profit improvement initiatives. We opened three new stores during the quarter, all of which were in the U.S., and we continue to expect around 25 total new store openings this year. Our new store portfolio continues to perform in line with expectations, giving us confidence in our ability to drive profitable sales growth as these stores mature. Financially, we generated $44 million of adjusted EBITDA in the quarter, or 11% of sales. Finally, we are reaffirming our outlook for 2026, which Michael will address in more detail. Turning to our results by geography, in the U.S. we believe that we are still in the early innings of consumer thrift adoption. Our 6.4% comp, despite some unusually disruptive weather, was broad-based with strong growth across regions, categories, and income cohorts. We continue to see the strongest growth in our younger and more affluent consumer cohorts, which speaks to the power of our model and its ability to resonate with shoppers across demographics. We feel very good about our competitive positioning and value gaps as new clothing and footwear prices continue to face upward pressure. Additionally, on-site donation growth continues to be robust, which helps power our flywheel, enabling our compelling assortment. In short, the U.S. business is firing on all cylinders, and we are excited about our continued expansion in this market. In Canada, our 0.6% comp decrease was largely in line with our flattish comp expectation, with the Easter shift negatively impacting our comp by roughly 70 basis points. Macro conditions remain stable but sluggish, particularly in our key Southern Ontario market, including the Greater Toronto Area and Windsor, where we have roughly 35% of our Canadian store fleet. We do not expect a material change in the economic conditions in Canada in the near term, and we continue to plan our business around a roughly flat comp. Having said this, our first quarter results demonstrated our ability to drive meaningful profit improvement in Canada despite limited top-line growth. Canadian segment profit increased $6 million over last year, and profit margin expanded 310 basis points, which we attribute to our continued focus on productivity and tight management matching demand and production. We also have a number of tests and initiatives underway to drive meaningful improvements in sales yields and cost per unit in our off-site facilities. We are quickly sharing learnings and best practices across our central processing centers and expect incremental benefits in the coming quarters. Moving on to new stores, we opened three new store locations in the U.S. during the quarter and continue to be pleased with the results as they are performing in line with our expectations. As I indicated earlier, we are excited to continue growing our store fleet in the U.S. and believe we can expand at current rates for years to come. For 2026, we are planning to open around 25 new stores, over 20 of which will be in the United States across 11 states, with a nice mix of infill and new markets. An upcoming highlight this quarter is our first North Carolina store, as our Burlington location opens later this month. Repeating our theme, our new store growth remains the highest return and most important use of our capital, and we are excited to bring our value offering to more consumers. Shifting now to innovation, where our key priority areas are strengthening our price-value equation, driving efficiency and cost reduction, and expanding our data science and business insights. Last quarter, we announced the launch of ABP Lite, an asset-light extension of our automated book processing, or ABP, system. I am pleased to report that we have completed our rollout plans ahead of schedule, with the vast majority of the fleet now leveraging our ABP capability. We expect these stores will now reap the proven benefits of ABP. I think this is a great example of how we can deploy technology in a cost-effective and high-return way across our store portfolio. We also continue to significantly strengthen the foundation of our data science and business insights. The team has been working hard to transition to a more robust data state, structuring operating data that allows us to translate and communicate insights to drive field action, thus improving our ability to, one, react to changes in sales trends, two, improve productivity, three, support margin discipline, and finally, help us continually refine our value proposition for consumers. I would like to highlight the progress we are making through a strategic partnership with Microsoft. For several months Microsoft has had a team of forward-deployed engineers working closely with Savers Value Village, Inc. to embed AI agents directly into our operating model. Our first agentic AI capability monitors our loyalty program, empowering our field organization with insights to boost consumer engagement and drive productivity. Our loyalty program is a strategically important part of our business as it represents roughly 73% of our sales and is a key focus as we continue to grow our store fleet. This deployment also provides us an agentic template for an agile future rollout of AI capabilities and insights across our enterprise. We have already identified several other use cases for AI agents across our business and are either deploying or finalizing for implementation as part of our broader innovation road map. We look forward to sharing more updates on future calls. I would like to thank our nearly 24,000 team members for their efforts in driving a strong start to 2026 and helping us deliver our commitments to our customers, nonprofit partners, and shareholders. Our mission is to make secondhand second nature, and that continues to gain momentum. We are well positioned to build on this momentum and deliver continued success. I will now hand the call over to Michael to discuss our first quarter financial performance and the outlook for the remainder of 2026. Michael Maher: Thank you, Mark, and good afternoon, everyone. As Mark indicated, we had a solid first quarter. Total net sales increased 8.9% to $403 million. On a constant currency basis, net sales increased 6.9% and comparable store sales increased 3.5%. We are especially pleased with our sales results in the U.S., where net sales increased 11.2% to $234 million. Comparable store sales increased 6.4%, fueled by both average basket and transactions, with broad-based gains across categories, regions, and income cohorts. Given the breadth of our sales performance, and the fact that we have yet to see a material lift from our new store openings, we remain very confident in our ability to grow the U.S. business. We also saw continued stability in Canada, where net sales increased 6.7%. On a constant currency basis, Canadian net sales increased 2% to $131 million, and comparable store sales decreased 0.6%, reflecting an earlier Easter that negatively impacted comp by 70 basis points due to store closures on Good Friday. In the near term, we do not assume any material improvement in the Canadian economy and, as such, we will be planning our Canadian business conservatively. However, as Mark mentioned, we did successfully expand segment margins and grow profit contribution even without comp sales growth through strong execution, efficiency gains, and the continued maturation of our new stores. All things considered, we believe this quarter is a good model for how we will continue to grow segment profit contribution even with limited sales growth going forward. Cost of merchandise sold as a percentage of net sales decreased 10 basis points to 45.4% due to comp leverage, efficiency initiatives, as well as growth in on-site donations, partially offset by the impact of new store openings. Salaries, wages, and benefits expense was $86 million. Excluding IPO-related stock-based compensation, salaries, wages, and benefits as a percentage of net sales was roughly flat at 20.5%. Selling, general, and administrative expenses increased 13% to $98 million and, as a percentage of net sales, increased 80 basis points to 24.4%, primarily due to growth in our store base, increased routine maintenance costs—namely higher snow removal expenses—and increased occupancy costs. Depreciation and amortization increased 18% to $23 million, reflecting investments in new stores. Net interest expense decreased 15% to $13 million, primarily due to the impact of our debt refinancing last fall. GAAP net loss for the quarter was $5 million, or $0.03 per diluted share. Adjusted net income was $2 million, or $0.02 per diluted share. First quarter adjusted EBITDA was $44 million and adjusted EBITDA margin was 11%. U.S. segment profit was $43 million, an increase of $4 million, primarily due to increased profit from our comparable stores. Canada segment profit was $31 million, up $6 million due to disciplined management of production and expenses and the CPC productivity and efficiency initiatives Mark mentioned earlier. Our new stores continue to perform in line with our expectations and mature on schedule as their contribution ramps. However, as we mentioned last quarter, a more balanced store opening schedule this year means more front-loaded preopening expenses. While we expect preopening expenses for the year to be roughly flat with last year at approximately $14 million to $16 million, first quarter preopening expenses were approximately $1 million higher than last year. Our balance sheet remains strong with $62 million in cash and cash equivalents and a net leverage ratio of 2.5 times at the end of the quarter. We also repurchased 1.2 million shares at a weighted average price of $8.51. Our capital allocation strategy remains unchanged, as we continue to prioritize organically funding new store growth, repaying debt as we target a net leverage ratio under 2 times by the end of next year, and opportunistically repurchasing shares. I would like to now turn to our guidance and discuss our outlook for fiscal 2026, which remains unchanged from the previous full-year guidance we gave back in February. We continue to expect net sales of $1.76 billion to $1.79 billion, comparable store sales growth of 2.5% to 4%, net income of $66 million to $78 million, or $0.41 to $0.48 per diluted share, adjusted net income of $73 million to $85 million, or $0.45 to $0.53 per diluted share, adjusted EBITDA of $260 million to $275 million, capital expenditures of $125 million to $145 million, and approximately 25 new store openings. Our outlook for net income assumes net interest expense of approximately $50 million and an effective tax rate of approximately 28%. For adjusted net income, we are assuming an effective tax rate of approximately 27%. We are projecting weighted average diluted shares outstanding to be approximately 163 million for the full year. This does not contemplate any potential future share repurchases. Finally, I would like to briefly touch on our expectations for the second quarter. We expect total revenue growth to be 100 to 200 basis points lower than the first quarter due to the impact of foreign exchange rates. We expect constant currency total revenue and comp sales growth similar to the first quarter. We also expect Q2 adjusted EBITDA growth to be similar to Q1, with the cadence of earnings through the balance of the year to resemble 2025. We plan to open six new stores during the quarter in line with our goal of more ratably opening stores throughout the year. This concludes our prepared remarks. We will now open the call for questions. Operator? Operator: Thank you. We will now begin the question-and-answer session. If you would like to withdraw your question, simply press 1 again. We will go to our first question from Matthew Boss at JPMorgan. Matthew Boss: Great. Thanks, and congrats on a nice quarter. So Mark, can you elaborate on the step-up in comp trends that you are seeing in the U.S. business in particular? Two straight quarters of double-digit same-store sales on a two-year stack. Maybe if you can touch on new customer acquisition, secular thrift tailwinds, and just any puts and takes to consider with the second quarter comp trend maybe relative to the mid-single-digit full-year guide? Mark Walsh: Yes. Thanks, Matt. Look, I think it starts with what we have seen is widespread growth across geographies and merchandise categories, and that obviously plays into a great experience—value and selection winning. On top of that, we are seeing accretive adoption trends amongst our younger and higher income households. We have seen that continue. So we are seeing trade down and trade in. I would also say that demand is really healthy across a broad base of all income demographics, and I think that is a key difference versus Canada. The secular trend certainly remains a tailwind, and what is really great is basket and transactions have driven comp. As we mentioned around the agentic initiative, the loyalty program is an important element in how we consider and drive growth, and we have continued to see really nice growth in our loyalty program in the U.S. And then, Matt, to your question about how we think about Q2, so far what we have seen in April in the U.S. is actually a little bit of acceleration in U.S. comps, but we do expect those comps to get a little tougher to lap as we progress through the year. So still thinking about a mid-single digit. In Canada, we really have not seen much change. It remains roughly flattish. Michael Maher: Sure. So new stores continue to perform in line with our expectations and consistent with the waterfall, as you described it, that we have laid out here over the last year or so. Just as a reminder for everyone, typically in year one we see about $3 million in top-line sales. We do lose money both from the preopening expenses that we incur as well as in the first year of operations as we are still ramping volume and developing and building that on-site donation foundation. Profitability typically passes breakeven in the second year and then continues to ramp as the sales improve. Ultimately, we target a year five top line of about $5 million and something close to a 20% margin. So far, our new store classes continue to perform in line with that waterfall. Thus far, Matt, we are still too early in that pipeline for those stores to be meaningfully contributing to our comp. So the comps that we are posting in the U.S. really are mature store comps. Recall that we only started opening new stores at this pace in the last couple of years, and really only the 2024 classes at this point have entered the comp base. So it is less than 50 basis points in total benefit to the comp, but we expect that is going to continue to build as more of those stores enter the comp base going forward. Mark Walsh: Let me supplement Michael's answer, Matt. It remains the highest and best use of our capital to open up these stores. Matthew Boss: Helpful color. Best of luck. Mark Walsh: Thank you. Operator: We will move next to Brooke Roach at Goldman Sachs. Brooke Roach: Good afternoon, and thank you for taking our question. I was hoping you could unpack the improvement in profitability that you are seeing in the Canadian business. How should we expect that to continue for the rest of the year? And then more broadly, can you help us understand what the quantitative impact that you see from your AI capability monitors and your agents is on profitability as you look on a multiyear basis? Jubran Tanious: Hi, Brooke. I can take the Canadian profitability question. The first thing I would say is it is driven by a few factors. It is not one thing. The first is some of our initiatives in CPC. Mark talked about those in his opening comments. Those continue to get better, more efficient, more effective through a variety of process improvements, and we have been very pleased with that and proud of the team. We are in the midst of expanding that to all of our off-site locations. The second thing, and we talked about this on past calls, is striking the right balance in total pounds processed—the amount of production level—and maintaining a good equilibrium so that we are feeding customers fresh product but also doing it in a very healthy gross margin way. We think the team did an excellent job at striking that equilibrium this past quarter. The third thing I would cite is ongoing refinement and improvement of our data and analytical tools. That is important because if you think about converting pounds into items, those improvements have helped us better align items that we supply to the customer at the category level, so it improves our ability to put the right thing at the right time in front of the customer, and that obviously benefits our sales yield. Lastly, I would cite the ongoing on-site donation growth, which we are seeing improve in a broad-based way. This past quarter, over three quarters of our supply came from on-site donation and GreenDrop mix—nice year-on-year improvement, and one that we expect to continue. So you put all that together, and yes, we absolutely expect those trends to continue through the balance of the year, and that is all contemplated in our guidance for Canada. On your question around AI and the agentic deployment, let me say that it is just one element of a much broader innovation approach that includes ABP Lite. It includes a number of process and efficiency improvements that we are driving in our off-site production centers and then applying data science and business insights to what is a data-rich business. From an AI-specific perspective, these efforts are primarily efficiency- and productivity-driven, and we will develop a better sense for how big of an impact it will be over time. Michael Maher: Brooke, just one closing thought on that. First, as Jubran stated, we are really pleased with what we are seeing in Canada. While we do not guide segment profit specifically, we do expect directionally that to continue, and we have contemplated that in the guidance for this year. Longer term, to your question about innovation, it gives us added confidence in that longer-term algorithm of getting back to that high-teens EBITDA margin as we continue to see the new stores mature, but also see the innovation initiatives really take root. Operator: Great. Thanks so much. I will pass it on. Next, we will move to Randy Konik at Jefferies. Randy Konik: Thanks a lot. Michael, I just want to jump off of the last thing you said there in terms of segment profit, or geographic profit margins as we move higher. Can you give us some perspective on where we sit with those Canadian margins versus history in the U.S.? Are there things you are doing in Canada that you intend to apply to the U.S. business to kind of further those margins higher? Just give us some thoughts on some of these profit initiatives you are working on and where they are in that life cycle. How much higher can we go from here? And then, it looks like you managed payroll well in the quarter. You have had some deleverage in that item in the last four to six quarters. Is that something where now we are kind of turning the corner on that payroll side of things? Will we start to get some leverage going forward out into the balance of the year and into 2027 and beyond? How do you think about it? Michael Maher: Sure, Randy. Why do I not start, and then I will let Jubran jump in and provide a little color too. First of all, we have long seen that we have structurally higher contribution margins in Canada than the U.S. I actually think that gap probably widens in the short term in 2026 because we continue to invest in growth in the U.S., which, as we have said now for a while, does create a short-term headwind. Long term it is absolutely value accretive, but we know that there is some short-term margin pressure as a result of opening new stores. We are generating nice comp growth and seeing healthy gains from on-site donations and yield improvements in the U.S. as well, but you do have that headwind. Whereas in Canada, the focus really is on profit improvement and process optimization. We are not investing meaningfully in new store growth in Canada at this point. We are a mature business there—much more highly penetrated, obviously, than we are in the U.S.—and so that gives us a chance to really focus on the productivity and efficiency initiatives that Jubran described earlier and really see those flow through into the bottom line as you saw here in the first quarter and the improvement in our Canadian segment profitability. I do expect directionally that trend to continue this year. On the OpEx line—salaries, wages, and benefits—I think you are referring to that. We are continuing to step down the IPO-related stock comp in that line. We have one quarter left of that here in the second quarter. That is roughly $4 million in each of Q1 and Q2. That falls away completely in Q3 and beyond, so you will see that. Excluding those nonrecurring items, I think you will see normalization as we go forward. We do still have some pressure from new stores and those maturing and getting to scale, so that normalizes as we get past the one-time items. I would expect actually more of the improvement this year to come from gross margin rather than the operating expense lines, as we continue to see the new stores mature and the benefit of that and their related on-site donation ramp flowing through to the margin line. Jubran Tanious: It absolutely cuts across borders. When we think about production, productivity, and efficiency improvements, the team does a very good job of working collaboratively on discovery, leveraging best practices, and scaling that across all of our operations. Two examples we talked about earlier: off-sites—the improvements that we have made in off-sites are going to benefit all locations, not just in Canada. Data and analytics—the refinement I mentioned, where we have tools that are better than they have been in terms of putting the right thing at the right time in front of the customer—cuts across all segments. So the short answer is yes, we expect broad-based benefits from that. Randy Konik: Super helpful. Thanks, guys. Operator: We will go to our next question from Michael Lasser at UBS. Michael Lasser: How long can you continue to grow the profitability in Canada on a flat comp? At some point, do you start to experience deleverage if the same-store sales do not grow, and do you need to take action to reinvigorate the same-store sales growth in that market? My follow-up question is on the delta between your sales yield and what you are paying for donations. What are you seeing with respect to the sales yield? How much of the improvement in sales yield is being driven by like-for-like pricing? And on the payment for donation, are you experiencing any inflation as a result of the overall environment and some of the scrutiny that charities are under around the country? Jubran Tanious: Hey, Michael. I will grab the profitability question. I understand your question. Long term, I think there is merit to what you are saying, but we think there is still a tremendous amount of opportunity—certainly for the remainder of this year—on all the initiatives that we have to improve efficiency and effectiveness. The trends that we saw in Q1 we expect to continue for the remainder of this year. On your supply cost question, a reminder that our supply cost is governed by a set of contracts that we have with all of our great nonprofit partners across our three countries that are typically anywhere between one and three years. They are deliberately relatively short to medium term because we are always evaluating the market so that we can stay very competitive in terms of what we pay for delivered product or on-site donation, which we have reliably continued to grow across all segments. So the short answer is no, we are not experiencing any unexpected upward pressure on supply costs. That is all very predictable. It is contract-based, we can see it clearly, and we plan for it many months in advance. In terms of availability of supply, both for our comp stores and to feed new store growth, we have no concerns at all. The team continues to execute well. We see no ceiling on how high on-site donations can go—that is what we are seeing in the business. Michael Maher: And then, Michael, on the sales yield, we were really pleased with the roughly 6.5% increase in sales yield that we delivered in the first quarter. There is an element of higher ASP in that. We strive to keep that at or below inflation over time, and that is a normal recurring thing. What really drove that outsized growth this quarter were the things Jubran talked about earlier—being very careful about how we are managing production and lining that up to demand, especially in Canada, and the productivity initiatives in our off-site processing facilities, which are helping us to get the right item to the right location at the right time and, therefore, drive greater sales yields on those items as well. Michael Lasser: Thank you very much, and good luck. Operator: We will take our next question from Robert Drbul at BTIG. Robert Drbul: Good afternoon. A couple of questions for you. On the first one, when you look at energy cost impact, can you talk about how you are being impacted throughout the business from that perspective? And then the second question I have is, can you expand a bit more on new store productivity? Are you seeing any variations? And as you take a more measured approach to this year—five in the first quarter, six in the second—the benefits to a more measured rollout from an execution perspective, what are you seeing there? Thanks. Michael Maher: Yeah, Bob. Let me take the energy cost question, and then I will let Jubran take the new store one. The run-up in fuel costs came fairly late in the quarter for us, so not really a material impact to our first quarter. At these levels, we think there is some modest pressure for the balance of the year—nothing that we think we cannot mitigate—but it is obviously a fast-evolving situation that we will continue to monitor. Jubran Tanious: New stores have been very pleasing, as Mark talked about in his opening comments. They are in line with our expectations. I think our ability to pick winners and refine our modeling of new stores has just gotten better and better over the years, and we are seeing that in performance. To your question of whether we are seeing any outliers, it has been pretty consistent. We feel very good about our ability to predict and execute all the things that have to go into making a new store open on time and be successful. In terms of our ability to prospect and find attractive new locations and fill up that pipeline, that has only gotten stronger. As we think about the remainder of this year and what we have committed to in 2027, we are right on track with where we hoped we would be. Robert Drbul: Great. Thank you very much. Operator: We will move next to Mark Altschwager at Baird. Mark Altschwager: Thank you. Good afternoon. I wanted to follow up on the price-value framework you have been building on here in the last few calls. With the U.S. comp now nicely in the mid-single digits and your competitive set continuing to take price, has anything in your testing changed your view on the AUR opportunity? Are you taking any incremental price tactically by category or by geography? And how are you thinking about further opportunity if that value gap widens? Is it more about loyalty growth with new customer acquisition on that trade down, or is there maybe some incremental AUR contribution to comp as we move forward? Thank you. Mark Walsh: Great question. We are very focused on maintaining a super deliberate and very attractive price-value for our customer base in both the U.S. and Canada. We have a great dataset that informs our approach on where we are putting category pricing in a given geography—critical element. As we think about watching the item ratio or flow-through, that really informs us as to where there are certain opportunities in certain geographies and certain categories. So again, a very analytically, data-science-driven approach to how we are deploying pricing across our fleet in both countries. The differences are obviously the geographies and the sensitivities to price relative to how quickly those garments or those goods sell. We are monitoring our approach carefully, and in this environment we seem to be winning. We are really pleased with the throughput that we have gotten in both countries when it comes to our price-value relationship. Mark Altschwager: Thank you. And just a follow-up on the loyalty program, the loyalty file. Can you size up where that is today and how much it grew in Q1? Trying to get a better understanding of how much the U.S. strength is growth in that file versus deeper engagement with your existing base. Mark Walsh: The file is growing quite nicely. We are a little north of 6 million total loyalty members across North America. We continue to see nice growth. I think the thing we are most pleased about is that the top loyalty cohort behavior really continues to outperform in both countries, and it represents roughly 73% to 74% of our sales. It is a great ability for us to connect with our consumers very cost efficiently at any given time. Operator: Our next question comes from Peter Keith at Piper Sandler. Peter Keith: Nice quarter, guys. I know you sound like Q2 has continued the trend, but with the backdrop of higher gas prices, in the past you have spoken to a lower income element as a portion of your customer base. With the loyalty program, are you seeing anything of note as it relates to trade in versus trade down in this evolving economic backdrop? And to follow up on the prepared remarks about using AI and applying it to your loyalty program, can you unpack exactly what you are doing? It sounds like something that would enhance sales, but I would like to get a better understanding of what is happening. Mark Walsh: I will take that. In both countries, we continue to see a really nice adoption trend amongst younger and higher income consumers. When you think about higher income consumers, trade in and trade down are certainly part of our growth mix in our loyalty platform. There are some differences between the countries. In the U.S., consistently, demand has remained healthy and broad-based across all income demographics. In Canada, where there is a little more economic sluggishness, we see our lower household income cohort disproportionately impacted. That is really the only difference we are seeing between the two countries and how they are engaging with us and through the loyalty program. On AI, our goal is to pick very important and critical strategic elements of our business model and what the stores do. The loyalty program is an important element of our consumer engagement platform. Having our store managers and store leadership continually focus on this very critical element was a great starting point for us to kick off our agentic strategy. What this agent is doing is communicating to our store managers where they are relative to their peer set from a loyalty perspective. It provides things to consider and actions to take relative to how you are engaging with the consumer at that moment when they could either sign up or be given the opportunity to get signed up. We see this as the unlock for several more agents to come right behind that, to allow us to keep our team and our store managers focused on critical issues throughout the week, period, and month, and then provide the information upward so that district managers, regional managers, Jubran, and the country leads can roll down appropriately to ensure that those key disciplines are being met and focused on throughout the year. Operator: We will move to our next question from Jeremy Hamblin at Craig Hallum. Analyst: This is Will on for Jeremy. Thanks for taking my questions. First, I was just wondering if you are able to size the weather impact you saw in Q1, and then you noted the 70 basis point headwind from Easter. Should we be considering a similar magnitude of benefit to your Q2 from the late Easter last year? And then on the ABP Lite rollout, it sounds like it is ahead of pace. It may be too early, but is there any quantifiable benefit you have been able to realize thus far from the rollout? Michael Maher: It is Michael. I do not know if I would quantify a weather impact other than to say it really was more about how the quarter played out—very lumpy in terms of the comps, given the weather patterns this year versus last. February was our softest comp because we had some really extreme storms in both the U.S. and Canada this year. Some degree of extreme weather is just par for the course in Canada in particular. It was probably more extreme than normal in the U.S. and therefore arguably a little bit more disruptive to our U.S. comp, which nevertheless continued to be strong. We are focused on what we can control, and as we exit the quarter and see that normalize, we are pleased with the reacceleration in the U.S. comp. As far as the Easter impact, yes, that headwind of roughly 70 basis points to Q1 will flip and benefit us in Q2 by a similar amount. Jubran Tanious: On ABP Lite, it is a little early to cite the results, but we are very pleased with the rollout. Between our traditional automated book processing, ABP, and now its derivative ABP Lite, we have rolled it to roughly 85% of the fleet. Rollout has gone well. Reminder, books are only about 5% of our business, but ABP Lite is a great example of our innovative process—data intensive, stress tested—and a smart rollout plan that we feel good about. We will continue to monitor it in the coming months. Operator: We will go next to Owen Rickert at Northland Capital Markets. Analyst: Hi. This is Keaton Chokey on for Owen. You have called out the strength in the younger and more affluent cohorts. I was curious to hear how their basket size, purchase frequency, and category mix have been trending versus legacy customers, and how you expect that to trend going forward. Any early read on Tennessee and North Carolina stores? Are those markets ramping faster or slower than prior cohorts, and what are you expecting out of those? Mark Walsh: Thanks for the question. Pretty consistent—nothing out of the ordinary in terms of the trend lines we are seeing from that particular customer cohort. On Tennessee and North Carolina, we are excited about those markets. We have not yet opened those stores. Our first store in North Carolina will open later this month, and our first store in Tennessee will be several months beyond that—maybe end of this year or early next year. Nothing to report yet, but suffice to say, we are very energized by the white space opportunity and the quality of the sites that we have secured. Operator: And we will go next to Dylan Carden at William Blair. Dylan Carden: Thanks a lot. I am curious, is there any incremental or change in the competitive dynamic in Canada? I know that market tends to lag from an online migration standpoint, if that is a piece of it. To the extent that there is not, what is the line of sight you have on some of the improvement in that market? Or if it is more that if you are managing the business to a flat comp, that becomes more of a manifest destiny that you feel more comfortable with. And then on the AI/technology side of things, any incremental thinking on how you might use that from an inventory management standpoint—pricing, decisions on what to keep versus donate? Jubran Tanious: In terms of a longer-term expectation of growing the top line, we are not satisfied with a flat comp. We think there are a number of things that we can test and trial. What we know is that we can control what we can control now, which is efficient and effective use of our material and labor to put the right thing at the right time and in the right amount in front of the customer. Doing that well in a more sophisticated way allowed us to have the gross margin improvement that we saw in Q1. In terms of competitive landscape directly for us in Canada, nothing specific that we could point to that has materially changed. Not-for-profit is really our number one competitive set in the Canadian market. Being within 12 miles of 90% of the population, we are fairly saturated. We are highly competitive in every market in Canada, and we are not satisfied with our comp trend. We are doing a lot to try to improve those trends. Michael Maher: To put a bow on that, we continue to work to drive the business in all facets, including top line. In the near term, we are mindful of the macro environment, and we believe it is prudent to plan for a flattish comp for the balance of this year. We continue to believe that even with that backdrop, we can drive profit improvement on the order of what we saw in the first quarter. Mark Walsh: On AI, we have a robust innovation pipeline for sure, and we have a lot of promising initiatives in test. We are pretty conservative about bringing them public. Once we get to a place where we are ready to deploy, we will be sharing those opportunities. Operator: That concludes our Q&A session. I will now turn the conference back over to Mark Walsh for closing remarks. Mark Walsh: I just want to thank everyone again for their interest in Savers Value Village, Inc. We look forward to talking to you in roughly three months. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

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CHYM 2026 Q1 财报电话会议

Operator: Good afternoon, and welcome to Chime's First Quarter Fiscal 2026 Earnings Call. Following the speakers' remarks, we will open the line for your questions. As a reminder, this conference is being recorded, and a replay of this call will be available on our Investor Relations website for a reasonable period of time after the call. I'd like to turn the call over to Peter Stabler, Vice President of Investor Relations. Thank you. You may begin. Peter Stabler: Good afternoon, everyone, and thank you for joining us for Chime's First Quarter 2026 Earnings Conference Call. Joining me today are Chris Britt, our Co-Founder and CEO; and Matt Newcomb, our CFO. Mark Troughton, our President, will participate in Q&A. As a reminder, we will disclose non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings release and our earnings presentation posted on our IR website at investors.chime.com. We will also make forward-looking statements on this call, including statements about our business, future outlook and goals. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our Form 10-K filed on March 6, 2026. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward-looking statements, except as required by law. With that, I'll hand it over to Chris. Christopher Britt: Thanks, Peter, and thank you all for joining us today. 2026 is off to a strong start. In Q1, we delivered strong active member growth, continued taking share from the largest banks, achieved GAAP profitability and accelerated product velocity. Last month, we launched Chime Prime, our new premium membership tier. Prime offers higher cash back rewards, high-yield savings, greater access to liquidity and premium perks for members who make Chime their primary financial partner. Early signs are encouraging, and I'll share more in a moment. The strength of our brand and offerings have never been clearer. We added nearly 700,000 active members in Q1, bringing total active members to a record 10.2 million. Consumers are drawn to Chime's expanding product suite and low-fee model. As a result, Chime again ranked #1 in U.S. checking account openings per J.D. Power's Q1 survey and 50% ahead of the next competitor, while members earning $75,000-plus remained our fastest-growing segment. Unaided brand awareness also continues to rise among consumers earning up to $100,000. Turning to the quarter. Revenue grew 25% year-over-year, exceeding the high end of our guidance range. Coupled with strong cost discipline, we delivered over 13 points of adjusted EBITDA margin expansion year-over-year, demonstrating the powerful fixed cost leverage in our business model. Q1 also marked our first quarter of positive GAAP EPS, a major milestone for our shareholders. And we expect to deliver positive GAAP EPS for our full year results. Our Q1 results highlight our core competitive advantages, primary relationships, our trusted brand, a low cost to serve and rapid innovation powered by ChimeCore now accelerated with AI. Understandably, the health of the American consumer is a major focus for investors today, fueled by geopolitical uncertainty, high energy costs and overall affordability concerns. We look closely at our members' behavior, and as we've reported for the past several quarters, we continue to see broad consumer resilience. Even with fuel spending up, overall purchase volumes and saving rates remain strong and consistent, and average account balances among our recurring direct depositors continue to grow, aided in part by year-over-year growth in the average tax refund. And we've yet to see any meaningful changes in the number of our members receiving unemployment benefits. In terms of lending, our credit loss rates continue to improve, reflecting the strength of our short duration loan portfolio underwritten by recurring direct deposits and our ability to rapidly fine-tune our lending risk models. These factors dramatically lower our loan portfolio risk and are what separate us from other lending businesses. Turning to our 2026 priorities. As we mentioned last quarter, our first priority is to extend our lead as the best financial partner for everyday Americans. This starts by leveraging our proprietary tech stack and cost-to-serve advantage to provide products and services that enable our members to unlock financial progress while maintaining our position as the market's low-cost leader. Our membership tiers embody our central brand promise of offering the most rewarding fee-free banking experiences in the market for everyday Americans. At the same time, they reinforce a simple idea: the more members engage with Chime as their primary financial partner, the more value they unlock. Our membership tiers drive deeper direct deposit relationships, increased product usage and expanded ARPAM as evidenced again this quarter. Building on the success of Chime Plus, our basic membership tier that rewards members who set up direct deposit, we're really excited about the launch of Chime Prime, which offers an even richer set of rewards to members making at least $3,000 of qualifying direct deposits per month. And as with Chime Plus, there are no fees. Chime Prime members unlock a market-leading 5% cash back on the category of their choice when they spend with their Chime Card. Categories include groceries, restaurants, gas, utilities, or travel. So for example, a family spending $1,500 on groceries per month would receive $75 in cash back on Chime Prime. Prime also includes 3.75% APY on savings, a rate 9x the national average, up to 70 points of credit score improvement, higher levels of liquidity through MyPay and instant loans and premium travel and lifestyle perks like access to exclusive airport lounges and special access to concerts. Early results show that our new Prime tier is increasing direct deposit intent and improving retention among existing direct depositors. Prime members are also more likely to adopt Chime Card for everyday spend, helping to drive a continued shift we're seeing from debit to credit spending, which delivers a higher take rate for us. The benefits from this more premium tier deepens our relationship with higher-earning members who are becoming a larger portion of our member base. Turning to our short-term liquidity products. Q1 was another strong quarter for MyPay, which is already a $400 million-plus run-rate business. We rolled out our variable MyPay pricing plan and expanded access to earned wages earlier in the pay cycle, addressing our most frequent member requests while at the same time, retaining our leadership as the low-cost provider in the market. With higher origination volumes, improved yields, and low, steady loss rates, MyPay transaction profit was up over ten-fold year-over-year. We're also making great progress with instant loans, which we believe positions the product to become a meaningful contributor to transaction profit growth over the coming quarters. Members qualifying for Chime Prime are prequalified for instant loans, and continued optimization of our underwriting models is enabling us to broaden member access while we reduce loss rates. Our first priority at North Star is to help our members unlock financial progress. In service of this goal, our product road map for this year will expand to meet even more of their everyday financial needs with investing, joint accounts, and custodial accounts all coming soon. With a broader portfolio of products, we believe we'll continue to deepen our member relationships. The evidence at the cohort level is clear and compelling. The longer a Chime member stays with us, the greater the average product attach rate, purchase volume and transaction profit. This compounding dynamic is the core of our long-term growth model. Our second priority is scaling Chime Enterprise, our expanded earned wage access and suite of financial wellness tools completely free to employees through their employers. As we've mentioned, the sales cycle for enterprise accounts tend to be long, but our pipeline and customer count is growing steadily. We're excited to announce that we've signed 4 new employer partners in Q1, including First Student, the largest provider of student transportation in the nation with over 65,000 employees. As we prepare to roll out with First Student, our Workday partnership will support seamless integration and implementation. Our third priority is to deeply embed AI across Chime and into the member experience. For a full-stack fintech like Chime, with proprietary data, integrated infrastructure, deep bank partnerships and a trusted brand, AI compounds our structural advantage and further differentiates us from incumbent banks. As the primary account for millions of members, we have a real-time view of their financial lives, paychecks, spending, bills, balances, all flowing through our platform. And because ChimeCore powers everything from the ledger to the app experience, we can take action, not just provide insights. With the member's permission, we can move money to where it earns more, extend credit in the moment it's needed, and stop unwanted charges before they post, capabilities no third-party app could replicate. With Jade, our AI copilot rolling out now, we're bringing this to life. Jade will help us move from reactive tools to proactive financial management, helping members spend smarter, save more, pay bills on time, borrow responsibly and build long-term wealth. Early results from scaled beta testing have been encouraging and we'll continue to expand access over the coming months. While AI will accelerate innovation across the industry, it won't replicate the foundations of our model, bank partnerships, payment networks and compliance infrastructure. As choice expands, consumers will choose the platform that delivers the best products at the lowest cost from a brand that they trust. AI is already transforming the way we work. In product and engineering, AI-powered development is quickly becoming the norm. 84% of the code we shipped in March was developed with AI, up from 29% just 4 months ago. That's driving a meaningful increase in velocity. We're now taking the next step with Archimedes, our AI-native "software factory" where we can move from idea to a shipped product with AI agents doing the majority of the development. More broadly, Archimedes represents a fundamental shift in how we build at Chime, from AI assisting humans to AI at the center of how we design and develop products, while maintaining the quality, control, and compliance our platform requires. AI is driving operating leverage at scale, increasing levels of output while keeping headcount flat. We're at a unique moment where AI is unlocking entirely new possibilities in financial services. Because we're not burdened by legacy systems, we can move faster, build better, and lead this transformation. With our platform, model and momentum, we're uniquely positioned to shape what comes next. AI isn't just a tailwind for our business. It's an accelerant of our core advantages, further expanding what we can deliver for our members and for our business. I'll turn it over to Matt to cover our financial results and provide an updated outlook for Q2 and the full year. Matthew Newcomb: Thanks, Chris. In Q1, our fourth quarter as a public company, we again demonstrated both strong execution and the resiliency of our model. We're continuing to execute on multiple dimensions of growth with 19% growth in active members, 5% growth in average revenue per active member or ARPAM, and a 9 percentage point improvement in transaction margin in Q1. These are compounding growth levers, and together drove 41% growth in transaction profit in the quarter. We're the clear #1 share gainer in a massive market with a radical cost-to-serve advantage and a technology and product innovation advantage that continues to extend our lead over the competition. And powered by our deeply engaged primary account relationships, we have a durable, low credit risk, 70% plus transaction margin business that we're scaling over a largely fixed OpEx base. These are the ingredients of a business model with strong long-term earnings power, and in Q1, we again demonstrated our rapid progress along that path. Our Q1 adjusted EBITDA margin of 18% improved over 1,300 basis points year-over-year. Our incremental adjusted EBITDA margin was 73% in the quarter, and we were GAAP profitable. Given the strength in the business, we are raising full year guidance. And, having exhausted our prior repurchase program, we are also announcing an additional $200 million share repurchase authorization. While markets are volatile, our long-term earnings power is not, and this authorization allows us to continue to opportunistically take advantage of market dislocations in our share price. Let me dive into more detail on our Q1 operating results, starting with Active Members. We have a consistent track record as the leading share gainer in a market of nearly 200 million Americans making up to $100,000. In Q1, we added nearly 700,000 net new active members quarter-over-quarter. Some of this growth was driven by particularly strong seasonal tailwinds. As a reminder, each year in Q1, tax refund related activity drives seasonally higher levels of reengaged Active Members. This year, we saw the number of members using our embedded tax filing service grow over 50% year-over-year. Also, this year's later start to tax season concentrated more of this reengagement later in the quarter. That said, our overall growth algorithm continues to perform well, with several other drivers contributing to this quarter's strong performance. First, our top of funnel remains strong. Our brand awareness continues to grow, and new value propositions like Chime Card's cash back rewards on everyday spend are clearly resonating with members. Looking ahead, we're excited about the opportunity to use rewards more broadly to drive both new member growth and retention and expect to continue to experiment this year. Second, our early engagement initiatives, which make it easier to get started with Chime continue to be successful. These initiatives have enabled us to engage members we wouldn't have otherwise engaged, driving all-time high activation rates, lowering our CACs, and improving our payback periods to 5 to 6 quarters. We're also finding that they are increasingly an on-ramp to more deeply engaged direct deposit relationships, not just lightly engaged members. Given this progress, we believe we are on track to exceed our original goal of 1.4 million net new actives for 2026. Second is ARPAM. We have a high-quality member base. We serve the majority of our members in the primary account capacity, which gives us deep levels of engagement, strong retention, and high levels of ARPAM. As our members' primary account relationship, we've also earned both the trust and mind share to drive strong product cross-sell. 15% of our active members use 6 or more products each month and their ARPAM is north of $500, double our average. In Q1 specifically, overall ARPAM increased 5% year-over-year to $263, driven by strength in both payments and platform revenue. Combined payments and OIT revenue increased 19% year-over-year. Resilient member spend trends, along with larger tax refund deposits drove PV and OIT volume growth of 15%. We're also continuing to drive strong adoption of Chime Card across both new and existing members. As of March, nearly half of our members are using a secured credit card, either our legacy credit builder card or increasingly our new Chime Card on a monthly basis. That's up from just over 1/3 of members in September prior to our Chime Card launch. This progress has increased the portion of total purchase volume that is on credit to nearly 25% in March, up from 16% in September. Chime Card is a win-win. Members benefit from cash back rewards on their everyday spend, and we benefit from the higher net interchange rates we earn on credit. And as Chris noted, we're excited for Chime Prime's potential to drive Chime Card adoption even higher. Platform-related revenue increased 50% year-over-year, driven by continued strong performance across our liquidity products. Our success earning direct deposit relationships enables us to offer liquidity products profitably, at low cost, and with low risk. In Q1, we completed the rollout of our new variable pricing model for MyPay, while also maintaining loss rates at our steady-state target of 1%. Together, this grew our MyPay transaction margin to 62%, and overall MyPay transaction profit dollars to $64 million, up 10x year-over-year. We're also seeing strong performance for instant loans, our 3- to 12-month installment loan products. We're scaling access. In Q1, we originated $180 million of instant loans. We're also offering longer duration loans to repeat borrowers, which come with better economics. In Q1, we doubled origination volume quarter-over-quarter for 9- and 12-month loans, and we're driving lower loss rates. We continue to see loss rates improve as much as 50% for repeat borrowers compared to first-time borrowers. Taken together, we're very excited about the progress with this product and its path to becoming a meaningful driver of transaction profit growth over the coming quarters. Third is transaction profit. Our low-cost operating model has enabled us to offer what we believe is the most compelling directive services for mainstream consumers, delivered at over 70% transaction margin. We don't believe any incumbent offers consumers anywhere near the level of utility and value that Chime offers, including for higher earners. In Q1, as a result of our recent transition to ChimeCore as well as continued strong loss rate performance, we improved our transaction margin to 76%, up 9 percentage points year-over-year. Together with our growth in actives and ARPAM, overall transaction profit grew 41% year-over-year to $491 million. So we're compounding growth across multiple dimensions and we're driving this growth with strong unit economics. We continue to acquire members efficiently with 5- to 6-quarter transaction profit payback period. But just as important is the durability of our cohorts driven by our deeply engaged, long-lasting primary account relationships. Our cohorts are underpinned by everyday reoccurring nondiscretionary spend. Our cohorts double in ARPAM as they season as members attached to more products over time, and our cohorts see over 100% dollar-based transaction profit retention, net of churn. Taken together, this drives LTV to CAC of over 8x. It's these unit economics that allow us to drive strong operating leverage while continuing to make meaningful investments in growth. In Q1, non-GAAP OpEx as a percent of revenue fell 5 percentage points year-over-year with leverage across all OpEx categories. And in Q1, we grew our adjusted EBITDA margin to 18%, up 13 percentage points year-over-year at an incremental margin of over 70%. In total, we delivered $119 million of adjusted EBITDA and $53 million of GAAP net income. Turning to our guidance. In the second quarter, we expect revenue between $633 million and $643 million, resulting in year-over-year revenue growth between 20% and 22%. We expect adjusted EBITDA between $72 million and $77 million, and an adjusted EBITDA margin between 11% and 12%. For the full year, we expect revenue between $2.66 billion and $2.69 billion, resulting in year-over-year revenue growth between 22% and 23%. And we expect full year adjusted EBITDA of between $416 million and $431 million, and an adjusted EBITDA margin of 16%. We now expect an incremental adjusted EBITDA margin of approximately 60% for 2026. There are a few things to keep in mind about our second quarter and full-year guide. As a reminder, we have a seasonal business. Many of our metrics, including Active Members, transaction volumes and ARPAM benefits from tax refund-related activity in Q1. In particular, because tax refund-related activity drives more members to reengage with us in the first quarter, we benefit from seasonally high quarter-over-quarter net adds each Q1, but lower net adds each Q2. We expect to see this typical seasonality again this Q2. We also see seasonally elevated transaction margin in Q1 due to higher purchase volume, as well as those lower utilization and higher repayment rates on our liquidity products. As such, we expect transaction margin to normalize from 76% in Q1 to between 70% and 72% for the rest of the year. Finally, while we'll continue driving operating leverage at attractive incremental margins, as we've noted previously, we are investing in the sales and marketing and member support costs to support the recent launch of our Chime Prime premium membership tier this year, particularly in Q2. With that, I'll open it up to Q&A. Operator: [Operator Instructions] We'll take our first question from Tien-Tsin Huang with JPMorgan. Tien-Tsin Huang: Great. Really great results here, guys. Nice to talk to you all. Just Matt, you went through a lot with the ads. So I won't ask you to go through it again, but just thinking about drafting off of the strong tax rebate season and some of the initiatives you guys have put in as you're thinking around, additions and how it's going to track for the rest of the year? Has that changed at all? And it does feel like you've gotten a little bit more momentum on instant loans and it's showing up already. So how impactful might that be here as we recast our forecast for the rest of the year? Matthew Newcomb: Thanks, Tien-Tsin. Yes, we're really pleased with the continued momentum that we're seeing on our actives growth. As I mentioned, our overall growth algorithm remains really strong. Top of funnel remains very healthy. Our brand awareness continues to grow. You're seeing this result corroborated by third-party data, J.D. Power, came out with their latest survey in Q1 where Chime again ranked #1 by a large margin in terms of checking account openings. I think our product velocity is really helping us as well. New products like Chime Card and more recently, Chime Prime are clearly resonating with members. And all of this also supports our early engagement initiatives. We're continuing to see great progress that led to shorter payback periods and LTV to CAC north of 8x. That being said, we also saw that some of the -- we also saw some outsized seasonal tailwinds on actives growth in the quarter as well. And as a reminder there, every Q1 we see seasonally high reengagement related to tax refunds. In this quarter, there are really sort of 2 factors that magnified this. We saw a later start to tax season than in years prior, and that concentrated more of the reengagement later in the quarter. As a reminder, we measure monthly actives as of the last month of the quarter. And then we also saw a really strong engagement with our embedded tax filing service this year. So in sum, we're continuing to see broad momentum, but it is true some of the performance in terms of net adds in Q1 was related to seasonal factors. But in aggregate, we're feeling very good about exceeding the $1.4 million annual target that we set out at the beginning of the year and broadly speaking, to follow the similar seasonal trends that we've seen in years prior. Maybe I'll pass it to Mark to touch on instant loans. Mark Troughton: Tien-Tsin, it's Mark. I think on instant loans, we've been very pleased with the progress there. And just to give you an indication there, we originated $180 million in the quarter of instant loans. We expect that to accelerate going forward. Just to remind everybody, Chime Prime members automatically qualify for instant loans. So we do expect some significant growth to come from the instant loan product. In addition to Chime Prime, we're continuing to offer a longer duration loans to our repeat borrowers. Those borrowers operate at 50% better loss rates. And so the model that we've developed here over the last 12 to 18 months seems to be working well. In terms of what it can do overall, we're not giving sort of specific guidance. And I do think this will still be small compared to MyPay. But I think it's fair to say that we expect instant loans can become a material contributor to transaction profit over the coming quarters. Operator: We'll take our next question from James Faucette with Morgan Stanley. James Faucette: Apologies for the background noise. A couple of quick questions here. You mentioned that the above $75,000 income over was kind of your fastest-growing segment. Can you just help us understand how you think about segmentation? And as part of that, I thought the comments around products attached, were also very compelling. How is -- how do those numbers as they come in at that higher income bracket, what is their attach rate or pacing compared to maybe a rest of the customer base as a whole? Christopher Britt: Thanks, James. It's Chris here. Yes. We're really excited about the progress that we're making across really a wide range of segments that we serve. We reported again, I think this is the third quarter in a row where we've announced that specifically the $75,000-plus segment of income is the fastest growing for us. We really have a mainstream service here that appeals to consumers across income segments. And I think we not only see it in our own data, but we also see it in the J.D. Power data, the external data that said that we open up the most checking accounts. When you double-click into reports, they actually break out by income levels, and you see Chime also near the top of the list for higher-earning demos as well. So when we look at the sort of higher income demo specifically, we see retention rates that are similar to -- or right at the same level as the rest of the portfolio. So just as a reminder, a 90-plus percent retention rates after the first year, and we see very high levels of product attached that are similar to all of our cohorts as they continue to age and just a reminder on that, we have some information in the supplemental that shows how our cohorts continue to drive outsized ARPAM as they age. The more tenured cohorts are doing over $400 of ARPAM and we see that of our member base that attach 6 or more products actually generate $500 or more of ARPAM. So obviously, a higher earning customer has the ability to spend more, which is the key driver of our economic model, but it also gives us an ability to offer a wider range of products, including lending and credit products. And now with our Chime Prime product, which gives you 5% in a category of your choice and 3.75% APY, this is extremely powerful and something that is broadly compelling. And so I think we now have even more reasons for our members to stick with us for life. And I think that's particularly relevant to these higher earnings segments as well. James Faucette: That's great to hear. And then I wanted to follow up on one of the other comments you made in terms of accelerating product development and the benefits that you're getting from some of the AI development tools, et cetera. How should we think about kind of what that accelerated product road map can look like? I mean -- and really I'm trying to think about it from a business and financial standpoint, does this help accelerate? Is it more so that it improves your ability to attract members, et cetera? Or should we think about it more as accelerating incremental products for your members and that instead of really accelerating member growth per se, that it's really about finding incremental ways to serve existing members et cetera? Christopher Britt: Well, I think we really see it as a force multiplier for us. It starts with the way that we actually get work done around here. We talked in our intro remarks about Archimedes, which is our software factory that allows our developers to basically run what is essentially a multi-agent development pipeline so we can build products much faster from idea into production with AI handling the vast majority of that work. So we're going to be able to get more products into the hands of our members even faster. We've got a really exciting road map for the rest of the year that we've outlined with investing in joint accounts and custodial accounts and the thing that I think we're most excited about is the progress that we're making on our actual AI copilot called Jade, which is going to allow our members to not just get financial advice, but -- and tips, but also to -- given our unique position of having -- enjoying this primary account relationship, we can give advice and then allow with their permission to take action on the behalf of our members to help them make financial progress. So you should expect to see exciting developments on that front. And I think it's going to give us one more reason for consumers to come to Chime, use us as a primary bank account and I think over time, you're going to see that this technology advantage that we have relative to incumbents is going to only expand in the coming quarters as we deploy these AI tools, both in development and in the consumer product itself. Operator: Our next question from Adam Frisch with Evercore. Adam Frisch: Great results here. Two questions for you. One, the fiscal year guide was increased more than the 1Q beat, which is great to see. So the business momentum is pretty obvious. Matt, was the second quarter guide more conservatism given the seasonality there and not a read on decelerated momentum in the business or anything like that into the second half? And my second question was for Chime Prime, what are the early adoption, eligibility or activation rates? Anything you can tell us about, if you're seeing kind of a lift, in direction deposit conversion and all that kind of good stuff that would go along with that program? Matthew Newcomb: Thanks, Adam, Matt here. I'll talk first about the guide, and then I'll hand it over to Chris to talk a little bit about our early results on Chime Prime. As you mentioned, we're really pleased with really the broad-based business strength we're seeing and the momentum heading into the rest of the year. And just as you said, we're raising our expectations on both revenue and adjusted EBITDA for the full year. As it relates to Q2 specifically, a couple of points to keep in mind. First, on the top line, we do face a more difficult year-over-year growth comparable in Q2. In the year ago period, we saw a 500 basis point revenue growth acceleration from Q1, which is primarily due to how we were scaling MyPay at the time. So if you were to actually look at Q1 and Q2 on a 2-year stack basis, what you see is that revenue growth in Q2 is very comparable to Q1. On top of that, with the launch of Chime Prime, that will also lead to some higher rewards costs beginning in Q2. So those are 2 factors as it relates to top line. On bottom line, 2 things to point out. On a sequential basis, we do expect to see our normal step down from Q1 seasonally high transaction margin. We mentioned in our prepared remarks that we expect transaction margin to land in the 70% to 72% zone for the remaining quarters of the year. And also, as we telegraphed last quarter, we expect to invest behind our Chime Prime launch in Q2, both in sales and marketing and member support. On an incremental basis, we expect adjusted EBITDA margins in the low 50s in Q2. So from a phasing perspective, this is all in line with our plans. And again, to reiterate, we're raising our expectations for the full year on both revenue and adjusted EBITDA. And on the full year, just as you said, not only are we flowing through our outperformance from Q1, we're raising our expectations for the remainder of the year as well. Christopher Britt: Maybe I'll talk about Chime Prime results. Thanks for the question on that. It's really early days, but we're feeling really good. Just as a reminder, we launched Chime Prime to the public on April 2. So a bit early to get a read, but we are seeing already that it is demonstrated to be effective in driving higher levels of direct deposits. So that's a plus, obviously, because as a reminder, you have to do $3,000 of direct deposit to get access to those benefits, including that hefty cash back on Prime of 5%. The other thing that we're excited about is just looking at the retention rates among people who qualify for Prime, we're already seeing that in the first month or so here that it does appear to drive higher levels of direct deposit retention. And at the same time, we're seeing overall continued increase in the adoption of Chime Card. In other words, Prime -- members who qualify for Prime are more likely to be adopting Chime Card. They're taking it up at a higher rate which is a great tailwind for our mix of payments volume, which is increasingly shifting towards credit. So these are all really, really great tailwinds for us. We've got lots of exciting marketing campaigns and product initiatives this -- over the next few months. In fact, you'll see tomorrow, during the NBA game, you'll see our first spot with our newest brand ambassador, John Cena, America's champ, he's going to talk about all the great benefits of Chime Prime and is very relevant to the consumers we serve. So yes, feeling like great progress on that front and continued great tailwinds on this mix of spend towards credit. Operator: We'll take our next question from Will Nance with Goldman Sachs. William Nance: Maybe I could just follow up a little bit on some of the commentary around Chime Prime. And specifically on unit economics, you're clearly embedding some incremental customer acquisition costs in the second quarter. How are you thinking about the impact of that push as it relates to net adds specifically and particularly in 2Q? I mean, is there any expectation of an offset to some of the seasonal weakness that you alluded to earlier in the second quarter? And just more broadly, what are you looking at to gauge success? And then maybe if I could just sneak in a numerical question for Chime Prime. I think you previously talked about like a 175 net interchange for the new card taking into account the higher rewards rate, is something in like the 130 to 140 range on the new card. Is that the right way to think about it? Just correct me if I'm wrong there. Matthew Newcomb: Thanks for the questions, Will. This is Matt. I'll chime in on both of those. So yes, as we discussed, we're really excited about this launch. We are ramping up a bit of investment behind the launch. That's going to be really across a wide range of marketing efforts. And so that's certainly part of our plans and OpEx phasing for the year. As it relates specifically to the cadence of net adds over the quarter, I think the best baseline expectation is to take a look at the cadence of seasonal net new adds that we've seen over the last few years. Again, Q1 being the outsized one, Q2 being the seasonally lower net adds quarter whereas Q3 and Q4 in the middle. So I think that is the right cadence to expect for us. As it relates to take rates, we've discussed in the past how, yes, Chime Card earns around 175 basis points. We've now launched both Chime Prime as well as a new 2% category of your choice cash back offer on Chime Plus. That's an improvement from the previous Plus offering. The way to think about take rates is on our plus offering for take rates to be in that 175 basis point zone whereas Chime Prime will be slightly below that, not as low as what you alluded to, but slightly below those ranges. Those are the ranges we see today. I'll have to caveat that things will shift a bit and fluctuate a bit over time as members choose the categories that they choose to spend in, but that's sort of the appropriate range to think about for us today. William Nance: No, that's awesome. Glad I asked on the Chime Prime side. And then just maybe sticking with the take rate commentary. I was wondering if you could help pick apart some of the sequential moves in take rates from 4Q to 1Q. I know there's been -- I mean, you just alluded to some of the movements in the rewards offerings. But I also know there's some seasonal factors that impacted in the first quarter. So if you could just unpack that and specifically in the context of credit mix going up several points sequentially from 4Q to 1Q. What are some of the offsets that drove the take rate this quarter? Matthew Newcomb: Yes, great question. There's really sort of 3 factors to keep it mind as it relates to take rates, specifically in Q1. We talked about one already, which is, of course, credit mix and how the continued adoption of Chime Card is continuing to drive higher credit mix. In Q1, that landed right around 25% of total spend, up from about 16% before we launched Chime Card in September. And on that front, what I'll say is, we're certainly continuing to see momentum both on new members but also existing members. New members coming into Chime, nearly 60% of them are spending with Chime Card. And among those, they're spending about 70% of their Chime spend on the card. And for existing members, we're seeing that those who have adopted Chime Card are using it for an increasing portion of their Chime spent. So good momentum on that front. And again, that's helping to drive take rates up in the quarter. The second thing to point out as you did, Will, is seasonality. So interchange rates are another metric in our business that are affected by tax refund related seasonality in Q1. More specifically, because outsized deposit volumes from tax refunds result in purchase volume with higher ticket prices, what you see is interchange rates because there's both a variable and a fixed component, are actually a bit lower each Q1. Again, that's a very typical seasonal pattern. We saw that again this year. So as I would encourage you to do with the rest of our business, you really got to look at things on a year-over-year basis. And then lastly, as we shared in our prepared remarks, we are doing more to experiment with member rewards to drive both new member growth and retention. That includes not just the cash back rewards on Chime Card, which is clearly doing well and resonating with members, but it's also included in initiatives like limited time cash back and referral offers, introductory bonuses and other initiatives. These types of member rewards are accounted for as contra revenue, which makes the calculated net take rate of payments revenue and purchase volume look a touch lower. That, of course, is all included in our transaction profit payback period. In the scheme of things, it's a fairly small amount, but we are excited about the potential. So that's one additional factor to keep in mind as it relates to take rates. Operator: We'll take our next question from Andrew Jeffrey with William Blair. Andrew Jeffrey: I wanted to ask a little bit about learnings from variable pricing in MyPay. And if that's sort of a lever you can pull to drive monetization, obviously, the performance there has been terrific with the tenfold increase in transaction profit contribution. But I wonder if you could just elaborate a little bit on what you've seen and what the outlook is for those initiatives? Mark Troughton: Yes, sure, I'll take that one up. Okay. At a high level, we've been very pleased with MyPay performance. $400 million business, now 62% transaction profit margins and still operating at a 1% loss ratio inside -- in a product that really has been on for less than 2 years. So from a pricing perspective, if you remember, as Chris outlined in the early remarks, the real reason we did this was so that you weren't limited by a fixed-fee model, the variable fee model enables us to actually give members access to greater MyPay limits earlier in the pay cycle. And that effectively, to your point, enables us to actually accelerate advancing more MyPay to members. Now having said that, we obviously want to make sure we're advancing this to people who can actually repay us in this situation. What we're not wanting to do here is to create a debt burden that our members cannot handle. So that's been an important part of developing our underwriting model. And I think as you look at the yields, you guys will probably have noticed that if you look year-over-year, our yield on MyPay increased about 35% and if you looked at Q1 relative to Q3 last year, it increased about 20%, and that was really driven by the price change that came in starting in Q4 and then finishing in Q1. And those are key contributors to that. So that takes year-over-year growth in the MyPay-to-MyPay profit. I think it's also important to continue to bear in mind that even at our 2.6% or 2.7% MyPay yield, we are half the cost of our newest competitors in the space. And that continues to be one of the reasons why we bring more people into upper funnel and continue to attract and retain members year after year after year. So I think we feel really good that we now have the pricing structure and the underwriting model in place to start to expand MyPay access to those who can handle it. Andrew Jeffrey: I appreciate that, Mark. And then as a follow-up, one of the things that I hear sort of keenly from investors is about the purchase volume per MAU KPI, which seems to me to kind of miss the point. Nonetheless, investors seem to care about it. And I know there were some seasonal factors influencing 1Q. Can you talk a little bit about your expectations for that KPI and whether it's something that should maybe get as much attention or not get as much attention as it seems to? Matthew Newcomb: I'll pick up that one. Thanks, Andrew. So at the highest level, what I would say first is, as we've shared the last few quarters, we're seeing very consistent overall trends in purchase volumes. And I would say that really is one of the key advantages of our business model and our focus on earning primary account relationships. Our spend is highly concentrated in nondiscretionary everyday categories. And that's been -- that's the type of spend that's very resilient across business cycles. If you take a look at our cohorts, our tenured cohorts, we're seeing very consistent growth in spending. That's true across both discretionary and nondiscretionary categories. It's true across income groups. At the same time, we're seeing account balances increase year-over-year. Again, this is a healthy consumer willing and able to spend and that's translated into a pretty consistent pace of payments in OIT revenue growth. That grew 19% year-over-year in Q1. As it relates to the per active metric specifically, as we shared previously, the reason that purchase volume plus the OIT volume per active is down on a year-over-year basis is largely the result of these early engagement initiatives that have been very successful for us. They've helped us engage new members, we wouldn't have otherwise engaged. This has strengthened our unit economics. That being said, it has had the effect of diluting the headline purchase volume per active metric since these initiatives have driven faster growth of the newly engaged actives who aren't yet spending as much on Chime. It's creating a larger denominator. We do expect these trends to start to normalize in the back half of this year, in particular, as we start to lap last year's launch of these early engagement initiatives. So this is just to kind of hit your question head on, this is really just a phenomenon of the successful early engagement initiatives. It's not a reflection of any sort of concerning underlying spend trends. On that front, we see a lot of resilience and consistent trends. Operator: We'll take our next question from Timothy Chiodo with UBS. Timothy Chiodo: Great. So on Chime Prime, I know the overall paybacks are very attractive 5 to 6 quarters, the LTV CAC is 8x or higher, those sort of great numbers. For Chime Prime, I heard you say obviously a much higher ARPAM. And I also heard that some of the early data suggest that the retention is even higher. So absent a meaningfully higher CAC, I would suggest really, really attractive LTV/CAC payback. So I was -- I was wondering if you could talk a little bit about that CAC and just how much higher it might be for these clearly more attractive customers and Chime think clearly that higher CAC is well worth it in the context of the ARPAM and the retention? Matthew Newcomb: Tim, it's Matt here again. We're really excited about Chime Prime. As Chris mentioned, early signs of a lot of potential benefits across the business. That's true across retention, that's true across Chime Card attach, that's true across direct deposit conversion and attach. And so yes, we're very excited about the potential there. That being said, it's very early days here. We've just started to roll this out. It is too early to give you a sense, specifically on sort of what the unit economic equation specific to Chime Prime looks like. But again, we think this is a great add to our overall product mix and value props and we're excited to keep you posted in the coming quarters. Operator: We'll take our next question from Patrick Moley with Piper Sandler. William Copps: This is Will Copps on for Patrick Moley. As it relates to Chime Enterprise, have -- are you thinking about any sort of future percentage of total member adds coming from the segment? And what's the CAC relative to other traditional channels for member acquisition? Mark Troughton: Will, it's Mark here. I'll pick that up. I think Enterprise is progressing really well, as Chris indicated in the prepared remarks. The value prop is really strong. It's a broader financial wellness product. The EWA is totally fee free. And anytime we approach a large enterprise, we find that 5% to 10% of their employee base is really on direct deposit with Chime, which gives us an edge. So it's resonating really well in the market. It's still early days for us. These enterprise sales cycles are quite long and it takes a little while to get the boat out of the water. I think the good news is we think the boat is out of the water, and that's actually translating into a good pipeline here with a steady drumbeat of conversions, including some large ones like we're announcing today with First Student, which is the largest student transportation company in the U.S. So yes, the momentum is strong, as we've indicated, it's one of our priorities. We're not giving specific guidance with respect to enterprises contribution to net ads. We think the fact that it's a priority, we'll probably tell you that we believe it has the potential for it to be a meaningful contributor. But we're not giving specific guidance related to that. As it relates to CAC, the CAC on Enterprise is materially lower. But really, it's -- the CAC there really is the fixed cost of the Enterprise division and the sales cycle rather than a sort of variable CAC. So that CAC will start off higher, although considerably lower than our consumer channel, and then it will reduce as we get more ads through that same sales cost base. That's how we think of the Enterprise channel. Operator: We'll take our next question from Alex Markgraff with KeyBanc Capital Markets. Alexander Markgraff: More questions, maybe 2, if I can squeeze the second one in. First on Prime for Chris. I'm curious, when we think about the ramp of this offering and some of the forthcoming products or features that you mentioned outside of the really strong initial offering. How do you think about the catalyst that those forthcoming products represent, whether it's account types or at some point, more unsecured credit. Just be curious to understand how those connect as catalysts for the ramp as we think forward? Christopher Britt: Yes, we think that the progress we've made year-to-date has been great. This new offering is incredibly compelling. I mean, if you think about the cost of fuel today, if you're a Chime member that selects the gas category and you're spending, say, $800 a month on gas, you're getting $40 cash back. It's a really, really powerful offering that I think is broadly appealing and that's very consistent with how we're thinking about our product road map. We want to create an even broader set of products for our members to engage with us and not just to avoid fees and not just to get access to short-term liquidity and credit building, but to also play a role in helping shape the long-term financial health and progress for our members. And that's why we'll be launching investment accounts and a combination of allowing people to buy equities directly, we'll have a robo offering for people who are maybe feeling a little less sophisticated or less comfortable investing in the market to try to get them moving in that direction. And we're really excited about using AI to guide people towards all of these exciting new products. We think that as we evolve them and we offer an even more comprehensive set of services that we can truly be even more broadly appealing to consumers even in the 100,000-plus category. We have the core products and services to meet their needs. So I think the combination of these services together will allow us to -- will be a catalyst to drive even more awareness of Chime's product offerings and open up new segments of the population. We've heard of Chime to really take another look at it and I think you're already seeing the progress in the net asset that we're adding each quarter. So expect more and more product offerings coming down the pike, including more products in the area of credit and lending. We're going to keep pushing on those fronts as well. I think Mark mentioned that the Chime Prime tier comes with an instant approved instant loan product. And so we're going to continue to have credit and lending products to serve that segment as well and certainly down the line we anticipate having some form of an unsecured credit card product as well, but that's not something we have on the sort of short-term road map. Alexander Markgraff: Understood. I appreciate that. And then maybe if I could squeeze one in, just on underwriting. Just having heard from some peers in the ecosystem, talked about step changes in underwriting model quality as a result of AI-related improvements. I'm just curious to maybe sort of a pulse check. Obviously, you guys have made a ton of progress in hitting target loss rates around MyPay. But just sort of curious to pull check the maturity of models and if there are opportunities that you all see that didn't exist 12 months ago with respect to model quality? Mark Troughton: Yes, I'll take that one up. I think, look, 2 things. One, it's important to just bear in mind the key advantages we have on the underwriting side. The first one is we -- as the primary account, we have a lot of unique data. Secondly, we're actually underwriting against a recurring direct deposits. So we sit top of the repayment stack. Those are two very, very significant advantages that we leverage. In addition to that, we obviously continue to use those data signals through increasingly sophisticated models. We've been using advanced machine learning on these things for some time. We do think there will be increased advantages with AI, and we will -- we want to continue to sort of lead that. But I think if you have a look at our underwriting performance and you look at something like MyPay, a year ago, we were sitting at 1.7% loss rate, and now we're sitting around 1%. So I think that while there are still meaningful improvements ahead with AI, I think a lot of the advantage is coming from the unique data and the position we have in the recurring direct deposit stack. Operator: At this time, we've reached our allotted time for questions. I'll now turn the call back over to Chris Britt for any additional or closing remarks. Christopher Britt: Great. Thanks again. I want to congratulate the team on a great quarter and looking forward to seeing you all on the road. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

4天前Insight Analytics约5分钟阅读

UTZ 2026 Q1 财报电话会议

Operator: Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Utz Brands, Inc. First Quarter 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Trevor Martin, Senior Vice President, Head of Corporate Finance. Please go ahead. Trevor Martin: Thank you, operator, and good morning, everyone. Thank you for joining us today for our live Q&A session of our first quarter 2026 earnings results. With me today on today's call are Howard Friedman, CEO; and BK Kelley, CFO. I hope everyone has had a chance to read our prepared remarks and our presentation, all of which are available on our Investor Relations website. Before we begin our Q&A session, I just have a few administrative items to review. Please note that some of our comments today will contain forward-looking statements based on our current view of the business and that actual future results may differ materially. Please see our recent SEC filings, which identify the principal risks and uncertainties that could affect future performance. Today, we will discuss certain adjusted or non-GAAP financial measures, which are described in more detail in this morning's earnings materials. Reconciliations of non-GAAP financial measures and other associated disclosures are contained in our earnings materials posted on our website. Now operator, we are ready to open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Peter Galbo with Bank of America. Peter Galbo: Howard, maybe to start, just -- you had some commentary on the second quarter in your prepared remarks kind of addressing some of the softness to start 2Q, particularly in April. So I was hoping maybe you could expand a little bit just on that point as well as whether or not you think April represents kind of the bottom within the quarter, and then we should see improvement in May and June. So maybe I'll start there and let you kind of elaborate on your commentary? Howard Friedman: Yes. Thanks for the question, Pete. So a couple of things. Look, I think, first of all, we always expected that April was going to be sort of -- it would be a more difficult lap for a couple of reasons. Beyond sort of the Easter shift, we have year-over-year programming that we had done in the prior year. Specifically, you see it on Boulder Canyon, and you can see it on the cheese business. We also had some laps in some larger customers where there's some merchandising timing that actually shifted. So as you look at the year-over-year, we expected the quarter to start out a little bit softer than the run rate had been. I think if you look at the food channel overall, 50% of our business, I think it's a pretty good indicator of our underlying strength, which continues to be positive. And as we progress through the second quarter, you'll actually see some incremental activations coming. Boulder Canyon has some activity behind Tallow. You'll see new product innovations start to hit. And obviously, California will continue to grow. So I think we're off to where we expected to be in the second quarter and largely through the -- through Q1 as well. Peter Galbo: Great. And BK, just maybe as a follow-up, you left the guidance unchanged for the year, actually reiterated all elements of it. I think there was a bit of concern out there in the market that just given maybe less of a scaled DSD platform, things like freight, resins might hit you a bit sooner. So maybe you could just talk a little bit about the hedging program and kind of how you're locked on freight and go forward for the rest of the year. William Kelley: Yes. Thanks, Pete. Thanks for the question. So first of all, I would say we're covered for most of the year on fuel, ags and freight. Our productivity program that we've touted a bit here at approximately 4% is going well, and we'll continue to build on those plans in H2. And that will help us offset any incremental inflation, which we think comes from primarily a small impact from fuel for us, but mostly packaging driven by the resin impact. We'll continue to maximize the other levers that we have, the RGM tools around price pack architecture, and we'll be using AI to improve our promo effectiveness, and we'll continue to improve our sales mix. The net impact for us is that we have many levers to address potential inflation, but we are mostly covered on the fuel, ags and freight pieces to your point. Operator: Your next question comes from the line of Michael Lavery with Piper Sandler. Luke Maloney: This is Luke on for Michael. I just wanted to ask on marketing spend. You increased marketing spend by 35% in the first quarter, and I believe your long-term target is for 3% to 4% of sales. How close do you get to that target this year and in 2027? And then also, where do you see the biggest opportunities for return on marketing spend? Howard Friedman: Thanks for the question. Look, I think what we've said, we're largely in line with what we would have expected on the marketing investment for the year. We will expect to add [indiscernible] about 40% year-over-year, and we continue to have conviction that, that's the right place to be. We're still many -- probably a couple of years out from being able to get to that 3% to 4% longer-term target because as you can imagine, when we start to think about the available resources we have and the opportunities we have to grow, whether it's with westward expansion, continue to drive capabilities as well as marketing and innovation, there is a reasonable competition for those dollars. I would tell you that we feel great about the innovation this year, and I think it's probably the strongest lineup we've certainly had in the -- in my time here. I think in terms of where we see ongoing investment, I think there are a couple of places. One is obviously supporting our Power Four Brands, Utz, Boulder Canyon, Zapp's and On The Border. Boulder Canyon has new advertising that will be out this year to support the momentum on that brand, which continues to grow very quickly. Second is in our expansion markets where we're introducing the brand. In California, we'll obviously get investment as we continue to scale that area. And then the last is in supporting our core where it's a little bit more traditional competitive dynamics for us within the category. So I think over time, you'll continue to see us grow our advertising and consumer spend, and we'll remain focused and disciplined on how we deploy those resources. Luke Maloney: Okay. That's great. And your household penetration increased just over 1 point. What's working there? And what opportunities are ahead? Howard Friedman: Yes. So look, I think part of our household -- we feel very good about the household penetration trend we've been on. I think equally important to us is that the loyalty rates continue to grow because, obviously, as you grow penetration, you're introducing yourself to newer users, and they may not repeat quite as much. And what we're seeing is very strong loyalty rates as well, which I think is a testament to the quality of our products and the variety of items that we offer. I think that the major drivers, again, are going to be -- partially it's going to be about expansion geographies which obviously, for the Utz brand is as we're moving westward and for the remaining Power of Three, it's also bringing it into Utz's core geography. So we're introducing new households in both places. Second, our innovation is introducing products into households that they may not have had before. We feel very good about the early start on Tallow. And then lastly is just driving incremental advertising, which is also doing a good job of being both effective and efficient, but also driving our brand story. So I think we're kind of hitting on most of the cylinders right now and lots left to do. Operator: Your next question comes from the line of Scott Marks with Jefferies. Scott Marks: First thing I wanted to ask about in the prepared remarks, you made a comment about not seeing any need to change commercial plans because of competitor activity. Wondering if you can expand on that a little bit and just help us understand what you're seeing out there from a competitive perspective and how some of the recent changes within the category may or may not have impacted your own business. Howard Friedman: Yes. Thanks for the question, Scott. Look, I think overall, we feel like we're where we expected to be at this point in the year and that our commercial plans are holding. And a lot of the innovation expansion and investment in marketing consumer, I think, is going to deliver on the goals that we've had for the year. I think with respect to what we're seeing competitively, I'd tell you what we've observed is, obviously, the Bell-Mark prices or the on-pack price has come down, and we have seen some sharper promotional price points with some customers in some of the subcats. And this isn't wildly different than what we had seen in Q4 as we were going through the -- observing the early testing. And we do believe that at this point, it will continue to be a targeted and focused activity from the competition. From our perspective, we feel pretty good. I think if you look at the first 2 major merchandising windows of the year, Super Bowl and Easter, we were able to take dollar share. We grew our distribution 7% on TDPs, and we increased marketing to, as we said, to 35%, while also being mindful of where our price gaps need to be to remain competitive. So I think we feel confident in our drivers for the year. I think we feel confident that California will continue to build and that we've invested in our revenue management capabilities to make sure that we are able to compete. And the nice thing about our company is we can be fairly agile and with productivity giving us more resources potentially to deploy it if we had to, we feel like we can compete in a variety of contexts. Scott Marks: Appreciate the thoughts there. And then just a follow-up for me. A lot of comments in today's remarks about the bonus bags. Hate to bring up the term again, but obviously, it's in there. You obviously helped us -- give us a little bit of context in terms of what the numbers look like, excluding the Bonus Packs. Wondering if you can break that down between core markets versus expansion markets. What would the impact have been if we exclude the bonus bags just in terms of price versus volume and kind of where that growth has come from? Howard Friedman: Yes. So a couple of things. I think -- I know we haven't broken it out between core and expansion geographies. It's kind of more difficult for us to do just given the nature of the fact that bonus bags were actually the same UPC. So we have to do quite some additional work to be able to offer that. I think what you can take [indiscernible] is that bonus bags broadly were mostly in the core geography because that's where the majority of our distribution is with respect to things like Utz and On The Border, which is where it was. But we tried to give you a perspective of on a 2-year basis, we're holding up quite well competitively and that both volume mix and price are being similar contributors to our overall growth rate, which is I think really kind of the point we wanted to make sure we got across. Operator: Your next question comes from the line of Rob Dickerson with BTIG. Robert Dickerson: Yes, just a quick question on the category. I realize you're using retail dollars in the quarter, category is not flat, right? It was up, I think, over 2% based off of what you spoke to, the guidance that you've been talking for a while of kind of expecting kind of flat for the year. Is it just kind of -- obviously, the market is very dynamic right now, kind of we're still in the early or at least first half of the year. So there's no need to say, oh, we actually think the category could be more than flat this year and maybe we'll be in line with the category. I'm just trying to gauge a sense of kind of where your head is right now sitting in early May with respect to the category and maybe its potential for the year and then kind of how you could maybe operate vis-a-vis that category growth? Howard Friedman: Yes. I think -- first, I think when you think about the beginning of the year, we have continued to project a more flattish category, just given how early it has been in the year, and there is a very -- it's certainly been noisy in the first 3, 4 months of the year. So I think at this point, we're just continuing to take a conservative view on the category. I think what we would expect is that as the year continues and as the category sort of starts to demonstrate more consistency, then we would -- we'll relook at that, look at our assumptions. But from our perspective, obviously, we've never been solely dependent on the category for our growth. The expansion geographies remain a significant area of white space for us and our increases in innovation in A&C, we believe, puts us in a position to make sure that we are delivering against the guidance that we've provided as we go forward. And obviously, if the category continues to improve, then we'll take a different decision as we continue to navigate the year. Robert Dickerson: All right. Super. And then I guess just on the innovation front, I think you mentioned you were saying like Beef Tallow going for $20 on auction. And then I know you have flavored tortillas coming and Utz Protein, some Utz Protein SKUs. There are a few other competitors that might have some healthier options coming in as well. But just as we think about kind of consumer reengagement, right, in the category like Boulder is clearly doing very well, engaging well with the consumer. Again, kind of coming back, I guess, to Utz, but then also to the category, it just feels like there's clearly action in motion that would support kind of category improvement potentially as we get through the year, but especially just within consumer reengagement. I don't know if that makes sense. Just to hear your comments. Howard Friedman: Yes, it does. Look, we think that there are kind of 3 areas where consumer engagement really kind of matters to us. I think the first, to your point, is around better-for-you, and we're certainly seeing many people entering into the better-for-you category, larger scale competitors and smaller guys. We feel really good about Boulder Canyon's ability to compete. Tallow has gotten off to a great start. It was a new one for me to go on to an auction site and see the product there, but really around better-for-you attributes and non-seed oil and that business continues to grow in both the Natural and conventional channels. I think we've also seen that it's actually able to stretch with, to your point, both unflavored and now flavored tortilla chips, which we feel very good about the authorizations and early consumption trends on that business is strong. I think Protein in Utz is introducing that brand into what we call an elevated performance, not necessarily all the way to the Boulder Canyon side, but the presence of positives, we think, is a big territory for consumers who are looking to incorporate more protein in, and we'll continue to try and work on the better-for-you attributes across. We have Snacking Made Simple on our Utz brand is our sort of our organizing idea, which highlights the simple ingredients that are in our core products. The next 2 areas really are around flavor and value. And those 2 areas also are places where I think consumers have always engaged in this category and we will continue to do so as we go forward. So I do think you're going to see more effort by everybody to continue to introduce presence of positives. I think it's a consumer trend, but I also think flavor and value you'll also see. Robert Dickerson: All right. And then just maybe a quick one for me, too, for BK. Just on the free cash flow front, is there kind of anything to call out as we get -- as we're now in early May, for the year. And I'm really just kind of speaking to that expected kind of sequential improvement in free cash flow this year and then kind of that ability to hit that larger target longer term. That's all. William Kelley: Yes. I think the -- thanks for the question. Our confirmation of our guidance included the $60 million to $80 million of free cash flow that we were chasing this year. The Q1 for us is always going to be a quarter where we burn cash as we build for the seasons. I think the improvement in our leverage year-on-year is something that is indicative of the improvement we're making in our processes and capabilities in this area. We continue to think that, that will build over the year, and we'll be on track for the free cash flow that we expect to generate as well as the leverage targets that we set. Operator: [Operator Instructions] Your next question comes from the line of Jim Salera with Stephens. James Salera: I wanted to circle back on the pricing actions you mentioned by large competitors and kind of the limited impact on the commercial plan. From some of the work that we've done, it seems like those pricing actions are most pronounced in mass, particularly the largest mass retailer. I wonder if you could share how you're thinking about your pricing maybe on a kind of channel basis relative to peers and if we should see maybe a more strategic opportunity for you to differentiate yourself in channels outside of mass? Howard Friedman: Yes. Thanks for the question. Certainly, we've seen similar performance in the mass channel, which is not that much of a surprise to us. I think you've seen that -- we've seen that historically, which kind of goes back to the original point of the nothing that we're doing -- we've seen so far has been all of that surprising to us. And if you think about how our commercial strategy kind of unfolds, we have got a wide range of competitive dynamics across the price ladder. So we continue to grow very nicely in the Natural channel. We've been making good progress in Club behind some of our premium brands, notably Boulder. Our expansion geographies and frankly, the food channel overall continues to perform for us with the larger national grocers as well as the regional players. And so we will compete there. Obviously, our [ rev man ] capability really comes through in the food channel because that's where promotional effectiveness and timing can really kick in. And then I think more broadly, as you think about sort of the rest -- the remainder of the mass channel, we are feeling very good about the performance of our business there. We've seen distribution gains. So overall, we are -- it is a subcat by subcat, channel-by-channel game for us. And that's -- again, I think we have a lot of different ways to get to our goals and our objectives. And I think that's kind of what you're seeing in the first quarter. James Salera: Great. And then if I could shift gears and ask a quick one on California. You mentioned in your prepared remarks, California was up high single digits. It might be too early, but I want to ask if -- do you have any sense for the repeat rates in California given your brand is going to be new to a lot of folks out there. Curious to see kind of the initial loyalty response. Howard Friedman: Yes. It's early for us to see. We have to get through a couple of purchase cycles before we really be able to give you a better sense of loyalty. What I can tell you is if you look at our overall marketing metrics nationally, which, of course, our expansion geographies are a significant portion of our growth, you continue to see loyalty and repeat rates actually fairly consistent across. So I think that, that gives us quite a bit of confidence that even with a lower relative brand awareness on a brand like Utz that the product once in consumers' hands and pantries will have -- will earn its right to stay there. I think beyond that, remember that Boulder Canyon and Hawaiian are also brands that exist in that marketplace today. And so that -- it's also the opportunity for us to expand distribution of those items, which are more familiar to the California market. So it will be a full suite of our Power Four Brands and some of our targeted brands as we kind of mature that geography over time. But like I said, high single digits, a couple of weeks in, call it, 5, 6 weeks into it, we feel pretty good about where we are in California, lots to do, but we're excited about it. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

4天前Insight Analytics约5分钟阅读

CLOEF 2026 Q1 财报电话会议

Laura Lindholm: A very warm welcome, and thank you for joining Cloetta's Q1 Interim Report Presentation. I'm Laura Lindholm, the Director of Communications and Investor Relations. Our CEO, Katarina; and CFO, Frans will first go through our results, after which we will move to the Q&A, where you either have the possibility to dial-in and ask questions live or alternatively post your question through the chat. It's already possible to add questions in the chat. Over to you, Katarina. Katarina Tell: Thank you, Laura. Today, I'm very proud to present our first quarter 2026 results. After a transformational 2025, this is our first quarter with execution and clear result from our strategy. As you will see during the presentation, we are making great progress and are moving closer to delivering on all 4 long-term financial targets. But first, over to the agenda. Today, it looks as following. I will start with Cloetta in a brief, then I shortly recap our strategic framework and our updated financial targets for the ones that have not listened to us before. After that, I move to our quarterly highlights. Our CFO, Frans, will then walk you through our quarterly and full year financials. And as always, we wrap up with a Q&A. For the new listeners on the call, let me start by introducing Cloetta. We were founded in 1862. And today, we are the leading confectionery company in Northern Europe. We strongly believe in the power of true joy and our everyday purpose is to spread joy through our iconic brands. We have grown a lot since the early days and now have an SEK 8.5 billion in sales last year, combined with an operating margin of 12.1% to be compared to 10.6% in 2024 and 9.2% in 2023. We have established a strong profitability uplift, which we also will talk more about today. Over half of our sales come from our 10 biggest and most profitable brands, and we call them our super brands. Despite the increased geopolitical uncertainty, we remain largely unaffected. This resilience is due to several key factors. First, we operate in a noncyclical market with stable consumer demand, which provides a solid foundation even in uncertain times. Second, our broad product portfolio allows us to offer a range of alternatives, helping us adapt quickly to shift in consumer behavior. And finally, we have, despite the current geopolitical uncertainties, still many attractive growth opportunities like expansion of our super brands, step-up in innovation and growing beyond our core markets. These strengths gives us the confidence to continue delivering solid performance, profitable growth and building further long-term value for our investors, our customers, consumers and for the people at Cloetta. I will now briefly walk you through how we bring our vision to life through our strategic framework and then in relation to this, also our updated financial targets. To learn more, please see the recording of our Investor Day 2025, which is available on our website. So let me start by talking about our vision at Cloetta because it's really capture what we are all about. Our vision is to be the winning confectionery company inspiring a more joyful world. And it's not just something we say. For us, this is a real promise to do great work, to keep innovating and most of all, to bring joy to people every day. This vision is what guides us, is what keeps us learning, improving and leading the way in our industry. I will today also show you 2 concrete product examples of the vision. We have created a clear strategic framework to guide us forward. And right at the center is our vision. Our strategy is about focus, clear choices that will help us scale, grow and make the biggest impact where it truly matters. We have 5 core markets. It's Sweden, Denmark, Norway, Finland and the Netherlands. And today, around 80% of our total sales come from these markets. Our first strategic priority is to focus on our 10 super brands within those core markets. These are the brands with the strongest potential. By leaning into an expansion strategy, we can open new opportunities, grow faster and build real scale. We are not stopping there. We're also looking beyond our core markets. We have identified 3 high potential markets that sit outside the core, and that is U.K., Germany and North America. Our third priority is to elevate our marketing and accelerate innovation. The market keeps changing, and we need to stay ahead, not just following trends, but also help to shape them. In our strategic framework, we are now also opening up to explore M&A, but only if it fits our strategy and when, of course, it makes good business sense. That said, any M&A would serve as an accelerator. It's not something we rely on to reach our financial targets. And to make all of this work, we need, of course, the right enablers in place. This means having a focused, efficient operating model and a structure that actually support our strategy and goals. During 2025, we aligned our structure with our strategy so we can move faster and strengthen our path to profitable growth. People and culture are, of course, the heart of everything. Without them, the rest is just a black box. Our culture is the foundation of how we work, and we have now built an organization that is strong, capable and filled with joy. So Lakerol is one of our super brands in the pastilles category. And this slide capture our launch of Lakerol more and how it delivers on our vision and fits into our strategy win with super brands. What we are introducing here under the Lakerol brand is a new texture and flavoring experience, softer, chewer and more indulgent, while we are staying fully within the sugar-free space. This is a successful multi-market launch in line with our vision and strategic focus. This launch is helping us recruit younger shoppers into the Lakerol brand as Lakerol more feels modern, sensorial and relevant without alienating our existing core users from the brand. We've seen a strong start across the Nordic markets where we have launched the 2 flavors with early results showing increased market shares in the pastilles category and what's particularly is encouraging is the repeat purchase rate, which is already above the category average, really confirming that consumers don't just try Lakerol MORE, they actually also come back to buy more. Moving on to our second example. And here, we are showing how we are scaling a winning pick & mix concept into branded packaged products. Zoo Foamy Monkey started as a pick & mix success within CandyKing, where it quickly stood out, thanks to its taste, foamy texture and playful shape. Consumer demand was strong, and this gave us the results we wanted to also scale Foamy Monkey into branded packaged format. Under the super brand Malaco, we are building on the iconic Swedish Zoo monkey shape and flavor that Swedish consumers already know and love and now translated into a soft foamy candy in a Malaco branded bag. Malaco Foamy Monkey is rolled out across major Swedish retailers as we speak and is available in 2 variants, sweet and sour. This is a great example of a smart brand leverage, proven products, strong emotional equity and high engagement, both in-store and on social media. These projects deliver faster growth, lower risk and stronger relevance, a perfect example of how we continue to win with our super brands and deliver on our vision. In March 2025, we updated our long-term financial targets to match our strategic priorities and our vision. With a clearer plan in place, we raised our long-term organic growth target from 1% to 2% to 3% to 4%. As reported, inflation has now stabilized. It's obviously difficult to justify price increases driven by inflation. This means that future growth primarily needs to come from higher volumes, exactly what our strategy is designed to deliver. Our long-term adjusted EBIT target is 14% with a goal to reach at least 12% by 2027. As many of you saw in the report, we're already above 12%. As Frans will explain later, both Q4 and Q1 got an extra boost, and we will wait to celebrate 12% EBIT when it's fully repeatable. Our EBITDA net debt ratio target is below 1.5% -- 1.5, sorry. Of course, if a strong M&A opportunity appears, we may go above that temporarily, but only if it clearly supports our strategy and with a clear deleverage plan in place. And finally, our dividend policy. We are now targeting a payout about 50% of profit after tax. And now a short quarterly update. As highlighted in the report, we delivered a very strong first quarter with profitable growth driven primarily by higher volumes. Easter sales fell into the first quarter this year, but even when we adjust for that effect, we still achieved our long-term organic growth target of 3% to 4%. I'm also proud to see solid growth across both of our business segments with particularly strong performance in the Nordic and North America. Inflation continued to ease during the quarter. At the same time, geopolitical uncertainty increased, and we, therefore, expect societal and political pressure related to food pricing to remain high. Our EBIT margin reached 12.9%. And even excluding the compensation related to the quality incident, we are in the quarter, exceeding our profitability target of at least 12% by 2027. After a transformational 2025, we are now fully executing and delivering on our new strategy. And with that, we are now also another step closer to reaching all of our long-term financial targets. And with that, it's time for the financials. I'll hand over to Frans, who is more than ready to dive into the first quarter's numbers. Frans Rydén: Yes. Thank you, Katarina. So just before looking at the details here, I'd like to tell you what I'm about to tell you, and then I'll tell you. So firstly, and it's worth repeating, strong organic volume-driven net sales growth in line with our higher long-term growth target set 1 year ago and then a favorable Easter phasing on top of that. So not because of, but on top of, and I'll come back to that. And then I'll talk about the continued significant margin expansion, delivering another quarter with an operating profit adjusted margin meeting the midterm target set to be reached only in 2027. And then I'll tell you about the continued improved leverage for yet another best ever at 0.6x net debt over EBITDA, further improving on our ability to secure resilience in a volatile world and importantly, financial strength to act on business opportunities in line with our strategy. And lastly, not Q1 specific, but Tuesday, I guess, 2 weeks ago, given our strong financial position, the AGM approved the Board's proposal, which was in line with our new long-term target to distribute for 2025, our highest ever ordinary dividend, so SEK 1.40 per share, a 27% increase versus last year. So let me then start with our net sales. So again, very strong volume-driven organic net sales growth of 6.9%. Now as you recall, in Q4, our slight volume decline from Q3 had turned to stable growing volumes. So now from the stable growing volumes, we are now in the territory of solid volume growth. In Q4, I also shared that we expected that quarter 1 2026 would benefit from the shift of Easter sales coming into Q1 from Q2 last year. And I can confirm that shift to SEK 40 million to SEK 45 million this year, which is in line with the earlier estimate I gave. This means then that even when adjusting for the earlier Easter phasing, Q1 2026 organic growth is at the upper end of the range for our long-term target growth of 3% to 4%. And we are, of course, very pleased with this and to be able to confirm that after a transformational 2025, implementing the new strategy and updating our organizational structure to support that, it all starts to come together in product innovation, marketing and sales and supported by a reignited supply chain organization. Naturally, given that the phasing was from quarter 2 into quarter 1, in the coming quarter 2, that quarter's growth will reflect also that shift. So the main point will be then to look at the first half of 2026. And given the strong Q1, so you can imagine, even if we would not grow at all in quarter 2, the first half of 2026 will still be growth in line with our long-term target. And I'm not trying to sandbag quarter 2 here. The main point is just to illustrate how strong of a quarter 1 really is. Now on the 6.9% organic growth, that's partially offset by currency effects of about 3.3% for a reported growth of 3.6%. And before looking at the segments, I want to repeat something mentioned also last quarter about the currency effect. So companies incurring costs in Swedish krona in Sweden to make products which are then exported and sold in euro, of course, will have a challenge when the Swedish krona strengthens. But at Cloetta, we largely sell our products where we make them. So products made in Sweden are mostly sold in Sweden and products made in euro-denominated countries are mostly sold in euro-denominated countries. So the real effect is really limited for us, and it's primarily a translation effect. Then moving to the regular page showing then the segment here side by side or over and under, I should say. In Q4, we could report that both segments were growing to stable again, while for Q1, both segments are now clearly growing and they are growing on volume. And for pick & mix on the bottom half, we are growing solid double digits. And also if one assumes the full Easter effect in pick & mix, then pick & mix is still growing at a very healthy 2x the long-term target for Cloetta. For packed, we're also growing a healthy 3.6%, which is also in line with the long-term target. That's against a softer quarter 1 2025, but then we also rationalized the portfolio at that time and volumes were also affected by pricing and especially on chocolate back then. That said, we are very pleased with this growth being of high quality. It's volume driven and it's profitable. So let's look at the profit. So in the quarter, we are reporting an operating profit adjusted of 12.9%, and we're very pleased with that. As we also reported about 12% in quarter 4 and for the full year 2025, let me unpeel that a bit. So you may recall, for the full year of 2025, the margin was 12.1%. But then that was aided by the receipt in Q4 of compensation for suppliers' quality deficiency back in 2024. Now in Q1, we have received the second and final part of that compensation. The total compensation over the 2 quarters is SEK 44 million, of which SEK 32 million was received in Q4 and SEK 12 million now in Q1. So doing the math on that, it means that in Q4 2025 and for the full year 2025, the margin, excluding the compensation were 12.4% and 11.7%, respectively. So 12.4% in Q4 and 11.7% for the full year 2025, which is why back then, we said we would hold the celebration of having reached 2027's profitability target of 12% in 2025. Now it does mean that our Q1 margin, excluding the compensation is 12.4%. And that, my friends, is above the 2027 target. So in line with what we flagged earlier, 12% is within sight for the full year 2026. Taking one layer down into this, and it's quite obvious from the slide that the profit is driven by volume as well as mix. On the volume, the mentioned Easter phasing drives further volume. And although we supported that with merchandising and sales activities, which will be visible in the SG&A, we're obviously making a healthy profit on those sales. And then for the mix, you do have an effect of the faster-growing pick & mix, but largely offset by favorable mix with respect to market mix and also product mix within the branded package side. And I mentioned the rationalized portfolio last year, but we also have a strong lineup of new products this year. Now these net sales are supported by marketing at similar levels as in Q1 last year. So the overall SG&A is flattish to up, and we look at that separately. But cutting back on investments is not how we are driving the stronger margin. And actually, before a view of profit by segment, a quick comment for those who wants to look at the gross margin. Remember, you need to look at the adjusted gross margin, and we have that commented in the report. Given that in Q1 2025, we released provisions related to the [indiscernible] the greenfield project. So that led to favorable items affecting comparability, boosting the gross profit that year. So on an adjusted basis, so like-for-like, the gross margin is up about 50 bps. Looking then at the segments over and under, you see that both segments margin improved in the quarter over last year with the Pick & mix segment on the lower half, reaching a quarterly margin of 12%. Now that is, of course, above the target to be between 7% to 9% obviously aided by the strong sales and the favorable fixed cost absorption as a result. And we believe that the targeted long-term range is the appropriate range to continue to drive profitable growth in the category as well as geographic expansion in line with our strategy. Then for the Branded package segment, the quarterly margin is 13.4%, aided, of course, by the second part of the compensation. But irrespective of that, it's a great recovery versus last year and again, bringing us closer to the sort of plus 15% pre-pandemic level margin we used to generate in this segment. And we will continue to seek to further strengthen the packed margin and over time, return to the levels we were before the pandemic. Then moving to SG&A. Here, stripping out the benefit of translating the cost incurred in euro to Swedish krona, which I'm showing separately here, it is an almost flattish SG&A. Actually, it's the lowest quarterly increase we've had in many years. And that is, of course, on account of the savings from the change to the operating structure in 2025. So I can confirm the upside of SEK 60 million to SEK 70 million on an annual basis. And that saving in Q1 is fully offsetting the investments we have for growth, including the investment in the geographical expansion beyond our core markets, mostly well-known is the CandyKing store in New York, but it's also on the organizational side. We're, of course, already profitable on that store, but it does generate SG&A. And then also in overall organization in North America and the U.K. as well as investments in product innovation. And then increased merchandising and sales activities on account of the Easter phasing. Again, obviously, a profitable sales, but it does incur additional SG&A cost. As mentioned, our advertisement and promotions are in line with last year, where we already made a big step-up for new launches and a further step-up will be phased more into Q2 given the already strong Easter performance. The net increase in SG&A shown then on the slide is mostly driven by the carryover effect of annual salary adjustments from April 2025 with the next round, of course, now in April 2026. So key takeaway is that the change to the operating structure in 2025 has not only aligned the organization better to execute on the new strategy as evident from the quarter's results, but also permanently lowered the SG&A baseline and helped offset the stepped-up investments beyond the core markets. So overall, costs are held in check. Then on cash. In Q1, we delivered a solid SEK 144 million in free cash flow, and the difference to Q1 last year is really driven by the working capital effect of this Easter phasing as we ended Q1 with higher receivables, only partially offset by lower inventories. This is in line with expectations. And for comparison in Q1 2024, when Easter was similarly phased to how it is this year, our free cash flow was below SEK 100 million. So we continue to see the favorable development on account of the focus on both profit and working capital. And then CapEx in the quarter, that's SEK 38 million that remains on the low side, in line with earlier communicated is expected to rise to between 4% and 5% of net sales over the next 5 years, and we will revert on that later this year. That brings me to my last slide on financial position. And here, you can see that our leverage as we closed the quarter is 0.6x as net debt over EBITDA, well below our target for the leverage to be under 1.5x. And it's also the lowest ever we've had. Now the result is a combination of the strong cash flow, resulting in a lower debt, lowest ever actually at SEK 820 million and then, of course, the improved earnings. Now with the low debt, we have plenty of access to additional unutilized credit facilities and commercial papers, which together with the cash on hand is just shy of SEK 3 billion. So coming back to where I started. One, we have secured resilience in a changing world and the financial strength to act on business opportunities. And two, in April now, of course, not shown on this slide, we distributed SEK 402 million in dividend, and we're, of course, pleased to have created the conditions for that dividend payment of SEK 1.40 per share, up 27% versus last year. And on that note, I conclude that our financial position developing in line with our set targets remains very strong and hand back to you, Laura. Laura Lindholm: Thank you very much, Katarina. Thank you, Frans. It is now possible to either dial-in and ask questions live or alternatively post your question to the chat. And I think, Vicki, we already have some questions on the line. Operator: [Operator Instructions] We have the first question from Stefan Stjernholm, Handelsbanken. Stefan Stjernholm: Can you hear me? Operator: Yes. Stefan Stjernholm: Stefan here. Congrats to a good start to the year. If you start with the gross margin, if adjusting for the SEK 12 million in compensation for the quality issue, I get the margin to 34.6%, i.e., flattish year-over-year. Am I missing something? Or is that right? Frans Rydén: Sorry, can you repeat that, the flattish? Stefan Stjernholm: If you adjust gross margin for the SEK 12 million in compensation, I am getting to 34.6%. Frans Rydén: Yes. Stefan Stjernholm: Yes. I mean, how should we think about the gross margin going forward? Is there room for improvement? I mean, you had a positive leverage on the strong growth in the quarter, and you're also highlighting positive sales mix. And in spite of that, the margin is -- the adjusted margin is flattish. Frans Rydén: Okay. Okay. Yes. So it's always a little bit -- the reason that we're focusing on the operating profit margin adjusted is because of the 2 segments and that it's difference between the branded side and the pick & mix side. So when we have really strong pick & mix sales, you would have an unfavorable mix effect on the margin as a result. But the reason that we get a higher profit at the end is because we have really good fixed cost absorption when it comes to merchandising and depreciation of the racks, et cetera. So our focus is a little bit further down into the P&L because of the segments are -- it plays out a little bit differently between them, if I put it that way. Stefan Stjernholm: Yes. I got it. Good. And regarding the Easter impact, good that you give the figure of SEK 40 million to SEK 45 million on sales. Is it possible also to quantify the EBIT impact if you get -- if you take the margin for the group, it's like 5% positive. I guess that's slightly more than that given the leverage on better sales. Frans Rydén: Yes, yes. So I would say that it is possible to do it, but we haven't done it. It's not a level that we want to disclose. But we're obviously very happy with the profit in the quarter. Stefan Stjernholm: Yes. But somewhere between 5% and 10% is a fair assumption, I guess, for the EBIT impact. Frans Rydén: Yes, yes. So definitely favorable, yes. Stefan Stjernholm: Yes. And then a final one for me, the pick & mix, the pilot with Edeka in Germany, how long is the evaluation phase? Katarina Tell: Stefan, this is Katarina. Yes. So as we wrote, we are now setting up in the report. We are testing in one store, and then we will also -- we have another try at another customers next quarter. So I would -- it's usually goes for a couple of months and then we evaluate. Of course, you can't drag it out too long. So it's a couple of months, then we do an evaluation. Stefan Stjernholm: Interesting. It would be nice to hear more about that later. Okay. These were my questions. Katarina Tell: Yes. We'll update for sure. Operator: The next question from Nicklas Skogman, Nordea. Nicklas Skogman: I have 3 questions, please. First, could you give some more flavor on the organic growth? You mainly highlighted the growth in chocolate, the Kexchoklad and the Tupla, but how did these new innovations that you mentioned like the Lakerol and the Zoo Foamy, how did they contribute to growth in the quarter? And also how did the rest of the sugar candy business do? Katarina Tell: Okay. I will start with that one. So as mentioned, the Lakerol more was a successful launch. We launched that quite early in the -- or I think it was week 7 or 8 or something in the quarter. And it's already taking market share. So that is, of course, a very positive signal. We also see that consumer already coming back to buy more in a double sense. So that is a very -- we have very positive signal. So that launch have, of course, contributed to the growth. The Foamy Monkey was launched a bit later right now. So it's too early to know the consequence of that one. But we have proof, of course, that the consumer already likes it because it's a client in CandyKing. So that is, of course, we really believe big in this launch as well. Nicklas Skogman: And the rest of the sugar candy business, how is that excluding Easter and the launches -- the innovation launches? Katarina Tell: It's performing well. So we have -- we are on a good growth. And as I said, we had a very strong quarter and on top, the Easter sale. So we really now get the strategy into action. And what we also see is the Nordic performing very well together with North America. Nicklas Skogman: Okay. Second question is on the inflation. You mentioned that it is slowing. Do you think we could see price being a net negative contributor for the full year, given the massive decline in the cocoa prices? Frans Rydén: So first of all, we don't want to comment on our prices in terms of price signaling. What we've said is that we have an established way of working with our customers, which is around fair pricing and where we adjust our pricing based on world market commodities. And now cocoa, which, of course, is only part of our portfolio has stabilized. And here, we have to think about when players who are as us sell chocolate products, if that would be at a lower price, how many consumers would then come back into the category, and that would drive volume to maybe more than offset that. And as Katarina mentioned in the CEO comments in the report as well that although from a market point of view, and I'm talking Nielsen here, the chocolate candy or confectionery chocolate category has -- looks like a little bit more promising now than it did before. We have really strong volumes. So you could have a rollback without dropping NSV. Nicklas Skogman: Yes. So volume could offset the potential price impact in short. Okay. Good. Last question is on the announcement yesterday from a competitor. They acquired a company called Aroma. Do you have any business with Aroma today via a pick & mix part of your company? And also from a broader market view, do you expect any changes to the market dynamics as a result of this acquisition? Katarina Tell: Yes, I can confirm. In the CandyKing concept, we have Aroma products. As mentioned in the interview this morning, it's not in line with strategy for Cloetta to acquire Aroma because we have a clear M&A strategy from that perspective. [ Fazer ] and Aroma are 2 well-known players today in the market. And of course, they will now have one -- there will be one set of competitors that we have to -- yes, play with, so to say, and see. I don't think it's too early to say what the key changes will be. But of course, this is a signal that Fazer will be more focused in the confectionery category. And that, of course, we need to take a position and manage. Nicklas Skogman: Could you share how much of the pick & mix business that is like how much is Aroma at the retail level? Frans Rydén: No, no, that's not something we would do. But if you think about Aroma is about 1% of the confectionery market in Sweden. So Aroma plus Fazer is less than half the size of Cloetta in Sweden. So it's not going to change -- impact our strategy this. But as Katarina says, we'll have to continue to see how this acquisition develops. And -- but it doesn't impact our strategy, and it would not have -- Aroma would not have been relevant for us with our focus on our super brands in the Nordic. Nicklas Skogman: All right. Good. Maybe I'll sneak a last one in. What's the latest on the North American business? Katarina Tell: Sorry, what is the latest update on the North American business? Nicklas Skogman: Yes. What's the last, yes. Katarina Tell: Yes. So as mentioned, North America grew well in the quarter. So it contributed to the growth. We launched the CandyKing store in Manhattan in the end of December. It's a profitable business. It's there to drive CandyKing and also to learn about -- learn the consumers and customers about our concept. We are also, as mentioned, we have recruited a business manager that's located in the U.S., all the packaging for what we can -- how we can drive the Swedish candy in the packed format are now approved from a legal perspective, both the design and the information on pack and recipes and so on. So we are progressing well, but we will share a more updated information about North America, yes, going forward. But we are progressing well and it's contributing to the growth in this quarter for sure. Laura Lindholm: Thank you, both. Vicki, it seems we do not have any further questions from the line. Is that correct? Operator: That's correct. No questions for the moment. Laura Lindholm: Thank you. We move over to the chat. We do have one question that was posted quite early on, but that's quite commercial and business driven in terms of promoting products. So we will come back to that separately. We will move to the second question, which is focusing on the agreement with IKEA. Assuming the IKEA contract has made your products available in more countries than you are already existing in and beyond the 3 identified markets, will you explore the opportunity to accelerate the expansion to new countries? Katarina Tell: Yes. So last year, we signed a global contract with IKEA. Today, we are -- we're having sale in 14 markets, and we continue to roll it out in more countries. We have planned for that in 2026 and 2027. The details of the agreement with IKEA are confidential. So -- but as long as we have the opportunity possibility, we will share information about the contract -- about the business within the details of the contract. Yes. Yes, it's 14 markets. Laura Lindholm: Good. We have no further questions in the chat. So should you like to post a question, please do so now. And I think also no further questions from the lines, right, Vicki? Operator: No questions from the phone. Laura Lindholm: All right. Let's double check the chat. It appears we have no further questions. It's time to start to conclude our event for today, but we take this opportunity to update and remind you of our upcoming IR events. Our next report Q2 is published on the 15th of July. But in addition to that, quite a lot is happening. Before the report, you can meet us in Stockholm and at our plant in Ljungsbro, Sweden as well as also New York and Dublin. You can see the details here on the slide. After Q2, we have so far have confirmed IR seminars and other events in Stockholm and in New York. And also there, you can find all the details on the slide and then also keep an eye out for the IR calendar on our website. We've updated it almost weekly. For those of you who are based in the U.S. or plan to travel there, our CandyKing store has been mentioned many times, and we extend a special welcome to that store. It's located in the West Village at 306 Bleecker Street. And do trust me, it is the perfect spot to familiarize yourself with our leading brand and concepts and to know what Swedish Candy is all about. It's now time to conclude the event. Before we meet again, we, of course, hope that you get the chance to enjoy our wide portfolio of confectionery products during many joyful occasions. Thank you for joining us today.

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BLMN 2026 Q1 财报电话会议

Operator: Greetings, and welcome to the Bloomin' Brands Fiscal First Quarter 2026 Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Ms. Tara Kurian, Senior Vice President, IR, FP&A and International. Thank you, Ms. Kurian. You may begin. Tara Kurian: Thank you, and good morning, everyone. With me on today's call are Mike Spanos, our Chief Executive Officer; and Eric Christel, Executive Vice President and Chief Financial Officer. By now, you should have access to our fiscal first quarter 2026 earnings release and our investor presentation slides, both of which can be found on our website at www.bloominbrands.com in the Investors section. Throughout this conference call, we will be presenting results on an adjusted basis. An explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our earnings release and investor presentation on our website as previously described. Before we begin formal remarks, I'd like to remind everyone that part of our discussion today will include forward-looking statements, including a discussion of recent trends. These statements are subject to numerous risks and uncertainties that could cause actual results to differ in a material way from our forward-looking statements. Some of these risks are mentioned in our earnings release. Others are discussed in our SEC filings, which are available at www.sec.gov. During today's call, we'll provide a brief recap of our financial performance for the fiscal first quarter 2026, current thoughts on fiscal 2026 guidance and an update on our turnaround strategy. Once we've completed these remarks, we'll open the call up for questions. With that, I would now like to turn the call over to Mike Spanos. Michael Spanos: Thanks, Tara, and good morning, everyone. On today's call, I will discuss our first quarter results and provide an update on our turnaround strategy. Eric will then review the financials and our guidance. I want to start by thanking our teams in the restaurants and the restaurant support center for their hard work and dedication to our business and our guests. They supported their local communities by operating safely during some challenging weather conditions this quarter. The team focused on controlling what they could control, delivering a great experience to our guests while also driving productivity. Turning to our first quarter results. We launched our turnaround strategy in Q4 of last year with a focus on consistent execution across food, service, experience and value to deliver a great guest experience at Outback Steakhouse. This focus is driving improvement in underlying guest metrics, reinforcing our belief that we are on the right track to deliver sustainable traffic and profit growth. Outback's guest metric scores increased year-over-year for the third consecutive quarter. In Q1 of this year compared to Q1 of last year, Outback's brand trust increased by 4 points, guest scores increased across service by 6 points, value by 5 points, atmosphere by 5 points, food by 4 points and intent to return by 4 points. Given that our average guest visits approximately twice per year, we expect the cumulative impact of these initiatives to become increasingly visible in traffic momentum as more guests experience the improvements we have made. I will share more detail of our progress shortly. Our Q1 U.S. comparable restaurant sales were positive 90 basis points with traffic down 180 basis points. We experienced approximately 240 basis points of weather impact this year, driven by the winter storms experienced in the earlier part of the quarter. This was lapping approximately 130 basis points of negative impact from Q1 last year. Although we trail the industry as defined by Black Box by 30 basis points on comp sales and 70 basis points on traffic, we continue to narrow the gap versus the industry each quarter. We remain focused on improving the what you get for what you pay for value equation, which is driven by consistent execution in the restaurant, combined with offering affordable entry price points to meet the guests where they are economically across all of our casual dining brands. Outback's Q1 comp sales were down 30 basis points with traffic down 240 basis points. As we mentioned in our previous earnings call, in comparison to Q4 2025, we adjusted our offers in 2026 to be more balanced across check average and traffic. Outback continues to drive traffic and loyalty from the Aussie Three Course offering with about 60% of our guests trading up from the entry price point of $14.99 and into the higher tiers of $17.99 and $20.99 and approximately 20% trading up on the dessert option. Carrabba's comp sales were up 130 basis points with traffic of negative 270 basis points. This is the fifth consecutive quarter that Carrabba's drove positive same-store sales growth, driven by their continued focus on the in-restaurant experience. From experiential wine dinners to revamped Happy Hour and our recently launched day of week offers, we are seeing positive results and guest satisfaction. Bonefish's comp sales were up 610 basis points with traffic of positive 300 basis points. Bonefish has steadily improved traffic growth, driven by the team's focus on compelling day of the week offers like Martini Mondays and Bang Wednesdays and prefixed lunch affordability offers. Fleming's comp sales were up 80 basis points with traffic down 290 basis points and reflects the seventh consecutive quarter with positive comp sales growth. Team has capitalized on special occasions and created experiential events with approachability to drive demand while remaining focused on elevating service to create memorable experiences for our guests. I would now like to update you on our turnaround strategy focused on Outback Steakhouse. Our strategy is based on 4 strategic platforms, which are to: first, deliver a remarkable dine-in experience; second, drive brand relevancy; third, reignite a culture of ownership and fun; fourth, invest in our restaurants. These platforms will be supported by non-guest-facing productivity savings, balanced capital allocation and a strong management team. Starting with an update on the first platform to deliver a remarkable dine-in experience. In November last year, we launched our new steak lineup as part of our commitment to steak excellence. This is a critical component to delivering a remarkable dine-in experience at Outback, and our Outbackers are proud to serve our best steak lineup. We are excited that all of our craveable steak cuts and burgers are scoring high in the top box of menu satisfaction, and we continue to have strong and improving guest satisfaction and reorder intent scores driven by our tender sirloin, standout barrel cut filet, our new signature Delmonaco Boneless ribeye, new 20-ounce bone-in ribeye and new 0.5 pound burger that you can also get with great tasting Bloom petals. We are very pleased with what we are seeing from the new steak lineup. The commitment to steak quality is complemented by a relentless focus on consistency of execution. In the Outback principles and beliefs, we commit that close is never good enough for Outbackers. Our Outbackers are leveraging the tabletop Ziosk data, both from guest feedback as well as specific KPIs to drive accountability and close any gaps in performance across restaurants. Specific to steak quality, the team is conducting monthly steak reviews and training to build consistency and accuracy by each multiunit leader. We are recognizing our top performers and coaching the bottom-performing restaurants to drive consistency of execution and bring them up to brand average. As we hone in on our consistency of execution on steak accuracy scores, we are measuring intent to return, food quality and overall service scores. The Ziosk data, combined with guest feedback enables our multi-unit leaders and managing partners to quickly coach and provide feedback by location and by shift. We believe our focus on consistency of execution has translated into improved brand scores. As I mentioned earlier, we had the third consecutive quarter of year-over-year improvements in Outback guest metric scores. Moving to the next element of a remarkable dining experience, Craveable Service. Last year, we identified that our 1 server to 6 table station ratio during peak hours didn't provide the right level of guest interaction and Outbacker satisfaction. We tested and validated that a reduced ratio of 4 tables per server during peak times enables our Outbackers to provide a more consistent and enhanced experience for our guests. We are pleased to have kicked off this new service model in April. As part of the national rollout, we are gathering feedback from our guests and Outbackers as well as using the Ziosk tabletop data to measure specific KPIs, including intent to return, server attentiveness, overall service scores and labor scheduling. We will provide a more meaningful update on the progress of this turnaround initiative on our next earnings call. Our second strategic platform is to drive brand relevancy at Outback and differentiate the brand. The core of our Aussie brand roots is inviting customers to come as our guests, leave as our mate with a sharpened brand positioning centered on steak leadership, craveability and a casual fun environment. We continue to plan for an increase in marketing spend year-over-year concentrated in the second half of this year, which comes after our investments in steak quality and the service model enhancements. Marketing will bring them in, but consistent execution brings the guest back. More to come on this platform later this year. Reignite a culture of ownership and fun is our third strategic platform. Our people are the key to our turnaround, and we remain focused on our managing partners. Their names as value leaders are above the door of each restaurant. We know that to retain and recruit the best partners, they need to be compensated competitively and incentivized to drive operational performance. The goals of our updated MP compensation model are simple. First, ensure total compensation is competitive with the local market; and second, aligning total compensation to the growth of sales and profit of the restaurant. Through these changes, we are able to create a competitive compensation program that continues to drive accountability and ownership. [indiscernible] rollout of changes across our managing partner group in April will continue the changes through the balance of this year. We know that when we take care of our Outbackers, they serve our guests with pride and ownership. Lastly, let me update you on our fourth strategic platform, invest in our restaurants. Our goal is to touch nearly all the Outback restaurants by the end of 2028 with targeted initiatives to refresh the interior and exterior, expecting to spend on average between $350,000 and $400,000 per location. With this asset refresh approach, we are focusing on guest-facing areas, the areas that make a positive impact on restaurant ambiance. Additionally, we have started to expand the char grill capacity in our Outback locations to support the steak lineup and expect to be done by the middle of this year. Let me now turn it over to Eric to review our financial performance for Q1 and guidance for Q2. Eric Christel: Thank you, Mike, and good morning, everyone. I would like to start by providing a recap of our continuing operations financial performance for the fiscal first quarter of 2026. Q1 total revenues were $1.06 billion compared to $1.05 billion last year, reflecting a 1% increase. Restaurant sales were up, driven by positive comparable restaurant sales. This was partially offset by a decline in franchise revenue as Q1 last year included 1 additional month of intercompany Brazil royalties. As Mike mentioned, U.S. comparable restaurant sales were up 90 basis points and traffic was down 180 basis points. We remain very focused on narrowing the gap to the industry in the near-term and positioning ourselves to lead the industry long-term. Average check increased by 270 basis points compared to 2025, with pricing offset by negative mix as we continue to invest in affordable offers for our guests. Off-premises sales were 23% of total U.S. sales in the quarter, consistent with Q1 last year. Outback's off-premises mix were 25% in the quarter and Carrabba's were 33%. Our GAAP diluted earnings per share was $0.64 compared to earnings of $0.50 per share last year. Our Q1 adjusted diluted earnings was $0.67 per share versus earnings of $0.59 per share last year. The difference between GAAP and adjusted GAAP operating results is approximately $3 million of adjustments in Q1 2026, primarily as a result of transformational and restructuring activities. Q1 adjusted operating margins were 5.9% versus 6.1% last year. This is down 20 basis points despite an increase in restaurant margin and more favorable depreciation and G&A due to higher impairment and restaurant closure costs year-over-year. Within restaurant margin, COGS and labor were both slightly elevated compared to last year, driven by commodities inflation of 4.6%, labor inflation of 3.1% and an increase in health insurance expense. This was offset by lower other restaurant operating expenses driven by lower advertising spend and an improvement in productivity initiatives. As it relates to our 33% retained ownership from Brazil, which is classified as an equity method investment, we recognized a loss of approximately $200,000 in Q1. We still expect the full year loss to be approximately $3 million to $4 million. Turning to our capital structure in Q1. Total debt net of cash is $681 million. As of the end of Q1 2026, our leverage metrics were 3.8x on a lease adjusted net leverage basis and 2.2x on a net-debt-to-adjusted EBITDA basis. Capital expenditures in the quarter was $25 million. We would expect expenditures to be higher in the remaining quarters of 2026 as the timing of refreshes and remodels ramps as we move through the year. We still expect the full year capital expenditures to be in the range of $185 million to $195 million. As we mentioned in the last call, our capital allocation priorities are to: one, invest in the base business; and two, pay down debt. Turning to our guidance this year. As it relates to the full year fiscal 2026, we reiterate the guidance for the full year communicated on our last earnings call in February. As it relates to the second quarter of 2026, we expect Q2 U.S. comparable restaurant sales to be between 1% and 2%. We expect Q2 adjusted diluted earnings per share to be between $0.27 and $0.32. We expect the tax benefit to be between $4 million and $5 million in the quarter. We expect our 33% Brazil EMI to be between approximately negative $1.2 million and negative $1.7 million. Let me now turn it back over to Mike. Michael Spanos: Thanks, Eric. While it's still early innings in our turnaround, we are highly confident that our strategy will put Outback Steakhouse in the right course for sustainable long-term profitable growth. The brand is strong. Our confidence is based on the foundation of a strong management team with extensive years of restaurant operating experience, positive guest feedback as demonstrated by our improvements in leading guest indicators over 3 quarters and the excitement and pride to serve our best stakes from our Outbackers. Overall, we have a clear strategy in place, which is to: one, deliver a remarkable dining experience, improved steak quality, enhanced service and consistency of execution; two, drive brand relevancy to differentiate Outback; three, reignite a culture of ownership and fun with a commitment to our people; four, invest in our restaurants to refresh approximately 100% of Outbacks by 2028. Strategy is supported by non-guest-facing productivity savings with a balanced capital allocation. Our leadership team is aligned and committed to the turnaround. We will continue to be transparent in our progress and our actions. Lastly and most importantly, I want to thank our people in the restaurants and restaurant support center for making this strategy a reality, both in terms of their exceptional input and hard work to make it happen at the moment of truth with our guests. With that, let me open up the call for questions. Operator: [Operator Instructions] And our first question for today will come from Alex Slagle with Jefferies. Alexander Slagle: Congrats on the momentum here. I guess I wanted to start on Outback and I mean it looked like the check growth was pretty solidly positive. And I know there was some more pricing, but it seems like the mix component of check also seems to stabilize after being more negative in recent quarters. Just wonder if you could break that down a bit and your outlook for 2Q and beyond, if that sort of check and that mix component can be a little bit less negative than it's been for a while. And I know Carrabba's also had pretty solid check growth, but you could touch on that. Michael Spanos: Good morning Alex. Yes, I'm really pleased and excited about the progress we had at Outback. I think it's great what we've said we would do and what we've accomplished executionally. And on your point about pricing, the way I look at it is our check average at Outback is going to grow by about 2.5% to 3%. It's very balanced. And we talked about this in Q4. If you remember, as we were doing some test and learn, the mix got a little heavier than we liked. We got much more disciplined in terms of the mix. And we've been balanced, and we'll continue to be balanced across the levers of traffic, how we think about inflationary pricing, how we think about mix and reinvesting that pricing, a portion of it back into affordable entry price points. And that's why all of our casual dining brands have provided those affordability price points. The latter part of your question, if you look at the full year, the way we're looking at the balance is you should assume -- we know we're expecting about 4.5 to 5.5 points of commodity inflation. We're balancing that with -- that's really predicated on we got high single-digit inflation on beef. By the way, that's in our guidance, and we're locked for the year on our beef. We exited 2025 with about 3.5 points of pricing. Full year is probably about 4 to 5 points of pricing. But remember, 2 points of that is carryover from 2025. And the other half of that pricing is actions we've taken into 2026. So again, it gets back to what I said, the net on a per check average gets to that 2.5% to 3%, which we think is the right balance in terms of how we're dealing with the guests in the commodity environment. Alexander Slagle: Okay. Makes sense. And a question on labor as a percentage of sales seem to flatten out year-over-year for the first time in like 12 quarters or so. And maybe you could talk more about the drivers behind that and views on maybe the server ratio changes that start in April. Does that start to impact us a little bit? Maybe the underlying improvements are sustainable, but there's a little impact from those server ratio changes. Eric Christel: Sure. Thanks, Alex. It's Eric. On Q1, we're very pleased with our labor performance, especially given the weather. So we had really, really good middle of the P&L management across all cost levers, including labor. We have a huge focus on using HotSchedules, which is a bit of an AI tool to help us dynamically make sure that we have the right service for our guests at the peak times. The service model you mentioned actually just launched in April. So we're very pleased about that and very bullish on that impact on the guest experience. Operator: Your next question will come from Jeffrey Bernstein with Barclays. Jeffrey Bernstein: Great. My question is just on the core Outback comp trends. Encouraging to see the brand scores continue to improve. Just looking at the absolute comp for the first quarter, it looks like it fell short of The Street. I'm wondering where that was maybe versus your internal expectation. And if you can share maybe some color on the sequential trends through the quarter and I guess, for the month of April. I know you mentioned a 240 basis point headwind from weather in the first quarter. Wondering whether you saw any volatility increasing from gas price spikes. So any color you could provide on the trends through the first quarter and into April relative to expectation? And then I had one follow-up. Michael Spanos: Yes. Jeff, on Outback, I'm very pleased with where we're at on Outback, and our results were very much within where we expected to be within the guide. When you look at it, I feel really good because we know our success is not going to be linear. We're totally focused on long-term profit, long-term sustainable traffic and comp sales growth. So to me, we start with Q4, we launch the steak lineup and the team is doing a great job on that. You mentioned the economic scores, the guest is giving us credit and especially when you look at brand trust and especially when you look at intent to return, those are great leading indicators 3 quarters in a row. As Eric mentioned, in April, we launched the service model, great initial feedback on that. We did through our tests. Later in the summer, we'll launch 6-star hospitality piece. We've also launched and communicated our MP compensation update, and we're executing our char grill expansion, which we'll have those done by the summer. So I feel really, really good about that and where they landed was consistent with where I expect them to be. Second part of your question, if -- around the results. We start off 2026 nicely, really strong. And then we saw that tough weather hit at the end of January, early February. Our Valentine's Day, and I mentioned this on the last call, our Valentine's weekend and Valentine's week was very strong. All 4 brands grew traffic, all 4 brands grew comp sales. And then you look at Easter, we had a good Easter week like week year-over-year, growing comp sales in all the brands. And for the weekend of the day, all 4 brands grew traffic and comp sales. So that tells me our guests like us from an occasion. Then if I go to what did March-April look like, which is your other part of your question, we saw sequential improvement in March versus January and February. And then we saw April step up as well from there. And our early read on Mother's Day, I mean it's quite early, is also very positive. So all this is embedded in our guide. It's how we're thinking about the comp sales. So I actually like where the guest and the consumer is right now. They're engaging in our brands. They're seeing casual dine and eating out as a very affordable luxury. And we're going to keep dialing in on what you get for what you pay for and keep the guests engaged. Jeffrey Bernstein: That's very encouraging to hear that there was sequential improvement in March and then further in April. And you actually got me a little nervous, but I missed Mother's Day, but it's still coming up. You're just talking about what you're seeing ahead of time. So that's. Michael Spanos: Yes. No, you're good, you're good. I guess you're helping your mom. We're just -- you got till this Sunday, Jeff. But there's a couple of the brands we know ahead of time based on reservations and open tables where they're trending and where they're pacing. And we like what we're seeing. Jeffrey Bernstein: Got it. And my follow-up is just on the restaurant margin. I don't think it was mentioned in this call, but if you're reiterating everything, I think last quarter, you said you expected a mid-11% range for the full year with the first half higher than the second half. If that's true, I'm just wondering, maybe if you look by quartile, like as an indication, like where are the best units running? Just wondering how that comes into your thought process as you think about where the margin should be longer term relative to, again, the 11% for the system or just maybe that top quartile is doing something much better? Just trying to get a sense for the long-term opportunity on restaurant margin. Michael Spanos: Yes, Jeff, we haven't gotten into breaking down the margins across different quartiles, et cetera. What we're focused on is controlling what we can control being disciplined in the strategic plan, that's going to bring sustainable traffic. That's going to bring sustainable comp sales. That's going to unlock good restaurant margin expansion with that sustainable growth in sales. And we -- as Eric said, we've got real -- we've got great operators here. We know how to manage the side of the P&L and how to manage costs appropriately without taking it away from the guests or taking away from our people. Jeffrey Bernstein: Got it. But no published longer-term restaurant margin guidance specifically? Michael Spanos: No. Operator: Your next question will come from Brian Harbour with Morgan Stanley. Brian Harbour: Could you guys remind us how you -- like roughly the timing of marketing this year and how you plan to handle that and how we should sort of just kind of factor that into our margin expectations? Michael Spanos: Yes. Brian, in terms of marketing, I'll start and Eric can add on. I'd start with -- the first thing is our marketing, we've gotten very disciplined in terms of connecting it to our strategic framework, which is all about driving brand relevancy. And for us, that starts with, with Outback being true to the core of the brand, which is about that hospitality, the Australian reverence, no rules just right. Our brand communication, as I've said before, is going to be very steak-centric. It's going to be about casual. It's going to be about fun. It's going to bring together what we're doing, which is the steak lineup, the service model and that 6-star hospitality model. As far as how we plan the year, we said we're going to go from a legacy of 70% linear TV, 30% digital, we're flipping that. We're now at a 60% digital, 40% linear TVs, we're going to be much more digitally focused, and we'll continue to evaluate that. We also -- I really am excited about the marketing mix models. Our marketing performance returns have increased significantly. We are just getting a better bang for the buck in terms of the right message and then which channels we're putting in and when we're running our marketing. And then as we said, broadly, we're going to be in that kind of low 2s to mid-2s as a percent of revenue on marketing for the full year. The increased investment, which we've talked about approximately an extra $10 million of marketing is in the back half of the year. But that will follow when we feel really good about our consistency of execution that we're running the elements of delivering a remarkable dine-in experience the right way, and we'll step that up. And we can measure the returns. If we like it, we'll step it up more. If we don't, we'll dial it down. Brian Harbour: Okay. Got it. And with the new service model in April, I mean, I would guess there's some impact on sort of how servers are paid, right, if you're changing their table count. I appreciate that it's sort of the right thing for the customer, but how do you sort of like manage through that and make sure that it's not kind of disruptive for the servers? Michael Spanos: Yes. I think it's a really good question. I start with ownership and connecting it to our principles and beliefs. What I heard from our servers and we know from the past is our servers want to own the guest relationship. And that's how the model was set up. Two, remember, we did test this. And when we tested it, we saw overall comp and tips were about the same and tips might -- were actually slightly up on a per check basis because remember, the tip share changes in this model versus the previous server, server assistant model. So we see our servers making the same, especially on a shift basis, which is really important. And part of that as well, we really like what we're seeing in terms of intent to return, attentiveness of the server, likelihood to recommend the server. And it's less stress. If you're a server and you used to have during peak, 6 tables as a server during the peak dinner hour and somebody else calls out, that stress level is really high. And that's not a good guest experience. It's not a good team member experience. And we like where we've landed and the initial feedback is very good. We'll have that fully rolled out by the end of Q2. We started in April. Operator: And the next question will come from Jeff Farmer with Gordon Haskett. Jeffrey Farmer: As it relates to that, I think you said roughly 4.5% menu pricing for the year. What was the number in Q1? And how should we be thinking about the cadence of pricing across the balance of the year? Eric Christel: Yes. Pricing was about 5% in Q1. It's going to be a little bit higher in Q2. That's due primarily to the lap of off-premises promotions we did prior year. So full year, we're still basically in the 4.5% to 5% range on pricing. Jeffrey Farmer: Okay. And then G&A, I think on the last call, you mentioned $215 million in G&A. Is that number still in play? And then it sounds like it is, but same question. How should we be thinking about the cadence across quarters? Eric Christel: Yes, that's still our number. We had a little bit of favorability in Q1, probably more timing than anything. So we basically see mid-5s getting down to basically low 5s, 5.3% approximately for G&A full year as a percent of sales, but right on that $215 million number. Michael Spanos: Yes. Jeff, it's Mike. I'll just add one point Eric touched on, which I think is important. As we communicated in Q4, how we're going to just be more balanced on mix and being disciplined. Eric hit on it. Part of that, especially this is important for Q2, we're not going to chase dilutive traffic. We're going to be really focused on what's sustainable long-term. And what that means is we decided not -- as we go into Q2, we're not going to lap what we thought was some dilutive type traffic in the third-party channel. We're just going to be very balanced. So you'll see that -- that moderates, by the way, as we finish up the first half of the year. But I think it's important -- we're focused primarily on delivering that remarkable dine-in experience. Operator: The next question will come from Sara Senatore with Bank of America. Sara Senatore: I have, I guess, quick questions about some of the capacity investments you're making. But maybe first, if you could talk about the Steakhouse category, it's been very strong for the last few quarters. And I was just curious, as you look at Outbacks improving momentum, is that kind of tracking with the Steak category or is it -- are you sort of exceeding that? Just trying to understand kind of how much might be category strength versus -- clearly, you have company initiatives that are working, but just disaggregating it. Michael Spanos: Yes, morning Sara. I think it's both. One, we're getting momentum and I'm really pleased with the momentum we're getting. And I already covered it in the previous questions. What we're seeing on the leading indicators, really impressive. We're getting good momentum, a consistency of execution. So that is us controlling what we can control. The category, I believe, is very resilient. We've talked about this. The category is resilient. The pure proteins, in our case, we have great steak proteins. We have great non-steak proteins. But the bottom line is we're seeing Americans continuing to engage in beef. We're seeing that with our new steak lineup. They were thrilled with the cuts we offer. And I've said this before as well, we deliver a great relative value. You come in and you get a meal with us, that steak is going to be right. We're going to make sure it's right. And you're going to get your sides and you're going to get your Coke or your Bloomin' Blonde and you're going to get your dessert. If you buy that steak and you cook it at home and screw it up, it's on the guest. We make it right. And we also give you a great experience. And I think that's why the category remains robust, and I see it looking that way in the future as well based on everything we're hearing and seeing from our guests. Sara Senatore: Okay. Right. Understood. I just wasn't sure if sequentially, there was any kind of change in category dynamics, but it sounds like 4Q to 1Q, no real change in the category. So obviously, more Outback specific. Is that fair? Michael Spanos: Yes, Sara, as I said, we saw a step-up across all brands, including Outback March versus that Jan, Feb and then again in April and our early read going into Mother's Day. If you look -- if you're asking about it on a short-term and over the long haul, we're seeing a steady resilience in the category and strength in the category. Sara Senatore: Perfect. And then just on the investments like the reimagery remodel, if you can just remind me, I mean, are you looking for a specific same-store sales lift or is this more kind of table stakes you need to have the assets look as good or comparable to the service model and the quality of the food. So trying to think through the kind of returns on the capital. Michael Spanos: Yes. So one, as we said, you start with -- we've got about half of the Outbacks have already been touched in the last few years, whether they're new or they were remodeled. So you've got about approximately 300 left that we're going to execute this asset refresh, which is light touch -- an average of about $350,000 to $400,000. We'll get those done through 2028. And what we're focused on is that which drives a good restaurant ambience and adds the cumulative effect to the guests. So inside, that's going to be tables, it's chairs, it's [ booths ], some ceilings, maybe some light bar touches on the outside, you're hitting the landscape and you got some paint and lighting. And what we've seen in tests and other brands before is we typically see about 100 basis point to 200 basis point tailwind in traffic right after those refreshes as we do them. So we'll continue to [ bring ] them out in a smart way. We want to do it when the restaurants aren't jammed. So you'll see that more in some of the lighter quarters, but it's table stakes in terms of how we think about capital. Operator: Your next question will come from Christine Cho with Goldman Sachs. Hyun Jin Cho: Congrats on the great momentum. A follow-up to Jeff's question earlier. Could you please help further unpack the margin drivers for the quarter? So I think you noted the higher restaurant level margin driven by check and cost savings and lower ad costs as key factors. Could you quantify these impacts and discuss whether you expect these trends to persist for the second quarter and the remainder of the year? Eric Christel: Yes. Christine, it's Eric. So the main driver of our margins and profit performance in Q1 really was we delivered top line at the top of our range, so about 1%. We also had better mix. And those 2 combined with sort of very good cost controls in the middle of the P&L, again, despite the weather, that all added up to essentially our ability to kind of hold slightly expand restaurant margins. So we see that -- so everything that's baked into our guidance is the flow-through resulting from the top line guidance. We remain committed to, as we mentioned, labor management as well. Hyun Jin Cho: Great. And then the last quarter, I think you mentioned there were some check management in some of the older consumer cohorts. Have you seen any changes there? Have you seen any shift in trends in other demographics that you would call out? Michael Spanos: Yes. Chris, it's Mike. Yes, that's the right recall. We're -- as I've been saying, we're cautiously optimistic on the consumer. There's been some choppiness, but we see an engaged guest. We have, to your point, when we look at number of guests, the guests in Outback that tend to run above age 55, 60 with household incomes under that $75,000 range, they are managing their checks. But what's quite interesting, they're adding frequency of visitation. So they're actually remaining very engaged. And this is why we've kept the affordability offers. And that group, especially has resonated within Aussie Three Course within Outback. So when you look at a loyalty hook or increase in frequency, Aussie Three Course has played very well for that cohort that is balancing that. As I also said, what we see is the opposite, too, Christine, which we like. If I stay on Aussie Three Course, we see younger cohorts with bigger household incomes, they're coming in and they're -- whether they're new or frequent, they're trading up into the higher tiers. They're going into that $17.99. They're going into the $20.99. They're enjoying that experience and they're moving up the incentive curve. Operator: The next question will come from Christabel Rocha with JPMorgan. Unknown Analyst: This is [ Christopher on for John ]. The first question is on expanding char grill capacity that you mentioned by the summer. Can you remind us, is this moving away from your clamshells? Michael Spanos: No, no. It's about creating the optimal cooking platform. We know and we've tested what is the best cooking platform, whether it's a steak or non-steak protein. So the whole point of char grill and bringing back broilers as well was we want to have enough capacity on the flame for our new steak lineup. We also -- we love our clamshells for a number of steak and non-steak proteins. And the other thing I pointed out on the previous earnings call, this was also feedback from our Outbackers. As you look at what we're doing with the char grill capacity, which again, we'll have done by the end of the summer, it actually created better visibility on the line, the way it's set up. So the flow and the teamwork, it's much easier to see on the peripheral vision. It gives us more refrigeration, capacity storage space in the base of the line. So this actually helps us from pace and execution simplicity in the back of the house. Unknown Analyst: And then on the remodels, you mentioned an average spend of like $350,000 to $400,000. It kind of feel slow, especially like you might be overdue for a remodel? Is this just Phase 1 of a multiphase effort? And is there any like downtime that you're seeing that you need? And how are you communicating these changes to the customer without significant exterior work? Eric Christel: Yes, I think your third question first. So no downtime. We're able to do these off hours. The scope of the refreshes typically do not require permits. So it's very easy for us to do it sort of non-guest-facing, non-guest impacting. Your first question was -- I think to answer, we basically see this as getting caught up to where we will now have a normal refresh cycle for -- across all of our concepts, including Outback. So by getting to what Mike mentioned, getting 100% of our Outbacks touched by 2028, that allows us to then continue to invest on a normal cycle past that. Michael Spanos: Yes. Remember, Chris, we -- one of the decisions, if you go back, as we've brought down the future capital on new restaurants, we're reallocating to the refresh because before we were putting that same level or more level of capital into those new ones. And our point is we need to invest -- as Eric said, we want to invest in the base of the business first and then pay down debt in terms of capital allocation. Operator: The next question will come from Brian Vaccaro with Raymond James. Brian Vaccaro: Just 2 quick clarifications for me. Just back to the Outback comps, obviously underperformed a little bit, as you noted, the Black Box casual dining category in Q1. But you noted the improvement in March-April. So I was curious if Outback is outperforming segment trends in more recent months? And then second, on the commodity inflation, it sounds like that might have come down a little bit, maybe 50 bps on each range. Just curious what might be moving a little bit more favorable in the basket. Michael Spanos: On Outback, when you look at the last year, Brian, I would -- we've improved our performance versus Black Box. So if you look at it, we've narrowed that gap both in terms of comp sales and traffic and the same for Total Bloomin' Brands. We obviously want to be at a point where we're leading Black Box, as I said in my prepared remarks, but we made progress and momentum versus that standard or that comparison. And we also, in the short-term, like I said, Outback and Total Bloomin', we saw an improvement in comp sales when you look at March versus Jan, Feb and April versus March and out of the gates here early as we go into Mother's Day. In terms of commodities, and Eric can add on, we were pretty clear with our commodities. We assumed them to be roughly 4.5% to 5.5% with that high single-digit inflation on beef. We're about 85% locked in terms of -- if you look at our commodity basket, we're locked in on 85%. Our beef is locked in. And Eric can give you more on the details of the pace and how that looks. Eric Christel: Yes. Q1 came in a little bit favorable due to dairy and poultry primarily. We had also a pretty good inventory management in terms of commodities. But for the full year, we're still in the 4.5% to 5.5% range on total commodities inflation. So no change to the full year. Brian Vaccaro: Okay. I might have been mistaken. I thought it was 5% to 6% previously, but it's a small change either way. Just curious if something moved there, but that's helpful. Okay. Perfect. And I guess the last one for me. As it relates to your second quarter EPS guidance, and this just ran some quick back of the envelope math, but it seems to embed maybe some year-on-year store margin contraction. I just wanted to ask if that's right? And if it's right, can you help square what might be driving a little bit of year-on-year contraction in the second quarter after Q1 was flat on a lower comp, assuming you hit the 1% to 2% for Q2. Just anything on the Q2 margin dynamics? Michael Spanos: Yes. No, I would assume more flat margins flat margins -- flat at the midpoint of the guidance. And it really just embeds some cautious optimism that we see with consumers and guests. We feel great about the momentum. Operator: And that will conclude our question-and-answer session. I would like to pass the call back over to Mr. Mike Spanos for any closing remarks. Michael Spanos: Thank you once again for your investment and support of Bloomin' Brands. I want to close by thanking our people for their hard work, their passion and commitment to each other and our guests. Thank you. Operator: That will conclude our conference call for today. Thank you for attending today's presentation. You may now disconnect.

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CSTL 2026 Q1 财报电话会议

Operator: Good afternoon, and welcome to Castle Biosciences, Inc. first quarter 2026 conference call. As a reminder, today's call is being recorded. We will begin today's call with opening remarks and introductions, followed by a question-and-answer session. I would like to turn the call over to Camilla Zuckero, vice president, investor relations and corporate affairs. Please go ahead. Camilla Zuckero: Thank you, operator. Good afternoon, everyone. Welcome to Castle Biosciences, Inc. first quarter 2026 results conference call. Joining me today are Castle Biosciences, Inc.'s founder, president, and chief executive officer, Derek J. Maetzold, and chief financial officer, Frank Stokes. Information recorded on this call speaks only as of today, 05/06/2026. Therefore, if you are listening to the replay, or reading the transcript of this call, any time-sensitive information may no longer be accurate. A recording of today's call will be available on the Investor Relations page of the company's website for approximately three weeks following the conclusion of the call. Before we begin, I would like to remind you that some of the statements made today will contain forward-looking statements including statements about expected addressable markets, statements containing projections regarding future events, or our future financial or operational results and performance, including our anticipated 2026 total revenue and the impact of our investments and growth initiatives including our ability to achieve long-term growth and drive stockholder value. Forward-looking statements are based upon current expectations and involve inherent risks and uncertainties. There can be no assurances the results contemplated in these statements will be realized. A number of factors and risks could cause actual results to differ materially from those contained in these forward-looking statements. Please refer to the risk factors in our most recent SEC filings for more information. These forward-looking statements speak only as of today, and we assume no obligation to update or revise these forward-looking statements as circumstances change. In addition, some of the information discussed today includes non-GAAP financial measures such as adjusted revenue, gross margin, and adjusted EBITDA that have not been calculated in accordance with U.S. GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted on the Investor Relations page of the company's website. I will now turn the call over to Derek. Derek J. Maetzold: Thank you, Camilla, and good afternoon, everyone. We delivered strong first quarter results, building on our momentum from 2025. Thanks to the strong execution by the entire Castle Biosciences, Inc. team, we delivered revenue of $83.7 million. Test report volumes for our core revenue drivers grew 36% compared to 2025. Excluding DecisionDx-SCC and ID Genetics revenue, our revenue growth for 2026 is approximately 42% compared to 2025, highlighted by double-digit year-over-year test report volume growth for both DecisionDx-Melanoma and 2026. Our teams remain focused on executing our growth priorities, and our strong performance gives us confidence to raise our 2026 revenue outlook to between $345 million and $355 million, compared to our previously provided guidance of $340 million to $350 million. Now I will walk you through business highlights from the first quarter, and then Frank will provide additional financial highlights before we turn to your questions. Let us start with our core revenue drivers, and what we see as the bulk of our 2026 top line growth story: DecisionDx-Melanoma and TissueCypher. For DecisionDx-Melanoma, we delivered 10,021 test reports in the first quarter, representing 16% year-over-year growth. Further, March 2026 saw an all-time high record month for test reports delivered. We believe DecisionDx-Melanoma remains a durable growth driver and continue to expect mid to high single-digit volume growth for full-year 2026. Driving test adoption and sustaining our competitive advantage through robust clinical evidence remains a key priority. We recently presented new data at the 2026 American Academy of Dermatology Annual Meeting demonstrating that our DecisionDx-Melanoma test can significantly improve risk prediction within the American Joint Committee on Cancer, or AJCC, stages for patients with cutaneous melanoma. These data from 1,868 SEER-linked patients showed that DecisionDx-Melanoma significantly stratifies five-year melanoma-specific survival within AJCC stages and T categories, identifying patients whose mortality risk is substantially higher or lower than staging alone would predict. What this means is that in this study, DecisionDx-Melanoma provided clinically meaningful differences in risk within the same stage, enabling more personalized, risk-aligned management decisions by helping clinicians identify patients who may warrant closer monitoring or early intervention while also recognizing those who may safely be managed less intensively. These results are in addition to our recently published data from the PRO multicenter study evaluating DecisionDx-Melanoma's i31-SLNB test result. Data from this prospective U.S.-based study confirmed again that our test identifies patients with a less than 5% predicted risk consistent with the National Comprehensive Cancer Network guideline thresholds while maintaining favorable outcomes and outperforming traditional staging criteria. Now let us turn to our gastroenterology franchise. During 2026, we delivered 11,745 TissueCypher test reports compared to 7,432 in 2025, which is 58% growth. Consistent with our DecisionDx-Melanoma test, March also represented an all-time record month for TissueCypher. Two studies were recently presented at Digestive Disease Week by researchers at the Mayo Clinic. The findings demonstrated how molecular risk stratification with the TissueCypher test refined risk assessment and directly informed real-world management decisions for patients with Barrett's esophagus, with one study showing changes in surveillance intervals in more than half of patients compared with recommendations guided by traditional histopathology alone, supporting more personalized, risk-aligned patient management. Look to our news release from earlier this month for more information on these studies. For the full year, we expect to add a similar number of tests in 2026 as we did in 2025, indicating year-over-year growth approaching 50%. Let us move on to what we believe are our midterm—2027 and 2028—revenue drivers, which includes our Advanced ADTx test in addition to our core revenue drivers. As a reminder, Advanced ADTx is our first-in-class test designed to guide systemic treatment selection for patients 12 years of age and older with moderate to severe atopic dermatitis, or AD. You may recall that we released this test under a limited program in 2025. Continuing on our limited access during the first quarter, we received approximately 650 orders. Initial responses indicate that clinicians appreciate that Advanced ADTx integrates into their existing AD care pathway, helping them make more informed systemic therapy choices early in the patient treatment journey. Supporting this claim, during the quarter we published data from a prospective multicenter clinical validation study in the Journal of the American Academy of Dermatology, demonstrating that Advanced ADTx can identify patients with moderate to severe atopic dermatitis who are significantly more likely to achieve greater and faster responses when treated with a JAK inhibitor compared to a TH2 biological therapy. The data showed that Advanced ADTx can stratify patients by molecular profile, identifying those more likely to achieve near-clear skin or EASI-90, faster time to response, and meaningful patient-reported benefits when taking a JAK inhibitor, supporting improved outcomes and more biologically informed systemic treatment decisions early in the treatment journey with JAK inhibitor therapy as compared to TH2-targeted biologic therapy. Based on revenue cycle timelines, we expect to be in a position to provide more detail on reimbursement by the end of the third quarter 2026. And with that, I will now turn the call over to Frank. Frank Stokes: Thank you, Derek, and good afternoon, everyone. As Derek noted, our first quarter financial performance marks a strong start to 2026. Revenue was $83.7 million for 1Q26, driven by continued strength in our core revenue drivers. For total revenue for 2026, we are raising our revenue guidance to $345 million to $355 million, up from the previously provided range of $340 million to $350 million. This is growth of high-teens to low-20s in 2026 over 2025, excluding revenue from DecisionDx-SCC and ID Genetics from the 2025 and 2026 totals. Our gross margin during 1Q26 was 72.8% compared to 49.2% in 1Q25. As a reminder, 1Q25 gross margin reflects the one-time adjustment of accelerated amortization expense of approximately $20.1 million. Our adjusted gross margin, which excludes the effects of intangible asset amortization related to our acquisitions and excludes the effects of revenue adjustments in the current period associated with test reports delivered in prior periods, was 75.6% for the quarter compared to 81.2% for the same quarter in 2025. Turning to expenses. Our total operating expenses, including cost of sales, for 1Q26 were $102.1 million compared to $115.9 million for 1Q25. Sales and marketing expenses for the quarter were $41.0 million compared to $36.8 million for the same period in 2025, primarily driven by higher personnel costs and higher sales-related travel expenses. Increases in personnel costs reflect a higher headcount driven by salesforce expansion as well as merit and annual inflationary wage adjustments for existing employees. Higher sales-related travel expenses reflect increased field activity to support growing test report volumes. General and administrative expenses were $23.9 million for the quarter, compared to $21.8 million for the same period in 2025, primarily attributable to higher personnel costs, higher information technology-related costs, and higher travel costs, partially offset by a decrease in professional fees. Increases in personnel costs reflect headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustments for existing employees. Cost of sales expenses were $20.5 million in 1Q26, compared to $16.4 million in 1Q25, primarily due to higher expenses for lab supplies, higher lab services costs, higher personnel costs, and higher depreciation expense. The increase in expenses for lab supplies and lab services expense was driven by higher test report volumes. Increases in personnel costs reflect a higher headcount due to additions made to support business growth in response to growing test report volumes as well as merit and annual inflationary wage adjustments for existing employees. The higher depreciation expense reflects continued investment in and expansion of our laboratory facilities. R&D expenses were $14.4 million for the quarter, compared to $12.6 million for the same period in 2025, primarily due to higher personnel costs and higher clinical studies costs. The increases in personnel costs reflect a higher headcount to support continued business growth, and increases in clinical studies costs reflect investment in our pipeline products. Total noncash stock-based compensation expense, which is allocated among cost of sales, R&D, and SG&A expense, was $9.0 million for 1Q26, compared to $11.2 million in 1Q25. Interest income was $2.5 million for 1Q26, compared to $3.1 million in 1Q25. Our net loss for the quarter was $14.5 million compared to a net loss of $25.8 million for 1Q25. Diluted loss per share for the first quarter was $0.49 compared to a diluted loss per share of $0.90 for the same period in 2025. Adjusted EBITDA for the first quarter was negative $5.1 million compared to negative $13.0 million for the comparable period in 2025. The year-over-year change primarily reflects a one-time noncash amortization expense recognized in 2025 related to the accelerated amortization of our ID Genetics test. Net cash used in operating activities was $22.1 million for 1Q26, due in part to annual cash bonus payments and certain healthcare benefit payments that do not recur through the remaining three quarters of the year. Net cash used in investing activities was $25.8 million for the first quarter, consisting primarily of purchases of marketable investment securities of $55.1 million and purchases of property and equipment, partially offset by the maturities of marketable investment securities and the sale of equity securities. As of 03/31/2026, we had cash, cash equivalents, and marketable securities of $261.7 million. As we have discussed, we expect M&A to play a role in our growth story, and we intend to continue to evaluate candidates that fit within our strategic opportunities criteria. In closing, I am pleased with our strong first quarter results and increased guidance which reflect the consistent execution and momentum we are building across the entire business. I will now turn the call back over to Derek. Derek J. Maetzold: Thank you, Frank. In summary, I am pleased with our strong start to 2026. We remain confident in our ability to execute our growth strategy and drive long-term value to our stockholders. Finally, I want to thank the entire Castle Biosciences, Inc. team for their dedication to advancing patient care and improving patients' lives. We are proud of our accomplishments and excited about the path ahead, and we look forward to sharing our continued progress in the coming quarters. Thank you for your continued interest in Castle Biosciences, Inc. Now we will be happy to take your questions. Operator? Operator: We will now open the call for questions. In order to allow everyone in the queue an opportunity to address the Castle Biosciences, Inc. management team, please limit your time on the call to one question and only one follow-up. If you have additional questions, please return to the queue. If you would like to ask a question, please type star one on your telephone keypad to raise your hand. Your first question comes from the line of Mason Owen Carrico with Stephens. Your line is open. Please go ahead. Mason Owen Carrico: Hey, guys. Thanks for taking the questions here. I want to start out with TissueCypher volume: 58% growth year over year, obviously that is great growth, but volumes did decline very modestly quarter over quarter. That just has not happened since early 2024, I think. So any unique dynamics to call out in the quarter that may have contributed to that, whether seasonality, anything capacity-related? Just any color there would be great. Derek J. Maetzold: Yes, sure, Mason. Thanks. As you know, we continue to see really strong growth there with 58% year-over-year growth. On the sequential or quarter-to-quarter trend there, I think we finally have hit the penetration level where we are seeing seasonality and sensing that. Based on looking at IQVIA third-party data, historically, the first quarter of the year has fewer GI procedures than the other quarters. But having said that, importantly, March was a record month for TissueCypher, and that trend continued in April. So we would expect to add a similar number of test reports in 2026 as we did in 2025, and that gets us something close to 50% year-over-year growth for the year. So a good performance on the test, and we continue to be pleased with what we are seeing. Mason Owen Carrico: Got it. Thanks, Frank. And could you give us an update on the reimbursement initiatives for your ADTx test or the progress you have made on that front? And then as a follow-up, on the potential for revenue to become material there in 2027 or 2028, where do you expect that revenue to come from? Is it all from appeals, or could there be some other revenue model contributing next year by 2028? Derek J. Maetzold: Hi, Mason. We think based upon the long revenue cycles from an RCM perspective, we could be in a position probably by the end of the third quarter to provide some good evidence-based clarity in terms of what we are seeing, but we can assume for 2027 and 2028 under a traditional reimbursement approach. There are, of course, other avenues as well in terms of interested parties who may be interested in controlling the cost of having patients keep cycling around medications. And, of course, there is always an opportunity to partner with some of the commercial companies who might have an interest in having their share shifted. But for right now, I would say we are relying primarily on traditional governmental or private payer category reimbursement, and we expect probably in the third quarter to give some strong clarity based on evidence. Operator: Your next question comes from the line of Thomas Flaten with Lake Street. Your line is open. Please go ahead. Thomas Flaten: Yeah, good afternoon. I appreciate you taking the questions. I think you guys were relocating to a new Phoenix lab at some point this year. Any update on what impact that might have on gross margins going forward? I do not think we will— Derek J. Maetzold: I do not think we will see much impact on gross margins, Thomas. We have not made that change yet. We are moving into an expanded facility in the Phoenix area, and that is really with an eye toward, as you recall from working with us for a while, staying a couple of years ahead of demand in terms of capacity. As we look at the expanding derm franchise and the growth in those test volumes in particular, we are trying to stay ahead of it. I do not have guidance for you on when we will make that move, but I do not think you will see much impact on gross margin at all as we shift from one facility to the other. Thomas Flaten: Got it. And then on Advanced ADTx, any thoughts on broadening this initial rollout? I think you had 150 accounts targeted as the first group. Will that stay at those 150 for the foreseeable future, at least until you have more visibility into reimbursement? Derek J. Maetzold: We opened up access a bit more late in the first quarter. We will look at our volume, look at our early RCM assumptions, make sure we are on track, and then continue to release it over time. That being said, having 650 orders come in the door in the first quarter is very nice reinforcement of the opportunity that we have here when the field force is 100% focused on melanoma and we have such limited access to our customer base. We are quite pleased with the continued early response of the dermatologic clinicians out there in the field. Operator: Your next question comes from the line of Analyst with Baird. Your line is open. Please go ahead. Analyst: Hi, guys. Thanks for the questions. Maybe first, for the mid to high single-digit melanoma volume growth for the year, off to a really strong start there with mid-teens growth in 1Q. Should that double-digit growth continue in the second quarter with some conservatism baked into the back half? Or how should we think about the phasing there? Derek J. Maetzold: We did reiterate our 2026 mid to high single-digit growth expectations. Q1 was a bit of an easier comp than we expect for the rest of the year. We are pleased with that, and I think that is where we see the business trending. Analyst: Okay. Analyst: And then, have you been getting any feedback from clinicians regarding some of the moving pieces on NCCN guidelines and any feedback you have received on the Future Oncology publication or any other data that you have put out recently? Derek J. Maetzold: We continue to get good feedback on, “I do not quite understand what NCCN sees here.” This is a failed study—failed to meet the 5% cut point—so what is trying to be said? Which is good for us, I think. Unfortunately, from an NCCN standpoint, there is a belief that this is really more political than we even thought. We are hearing that from most of our customers. The recent SIDE study which came out in Future Oncology earlier this year was another strong reinforcement that if you use our test to look at accuracy, once again, we have one more study showing that we comfortably get way below 5% predicted risk in people who actually undergo SLNB. As important in that same publication is that people who used our test to move away from SLNB—meaning you did not know if you were going to be positive or negative—had extremely strong outcomes; it was 97% or 98% recurrence-free survival over the time period of the publication. That is a really safe melanoma patient, if you can use those two words together. That continues to be strong reinforcement that we have data that clinicians can rely upon that is consistent over time, which is excellent. I think that also led to having our greatest month ever in March. Operator: Your next question comes from the line of Analyst with Guggenheim. Your line is open. Please go ahead. Analyst: Hi, guys. This is Thomas on for Suvi. Thanks for taking our questions. Frank, you mentioned M&A. Is that something you are looking at near term? Can you just walk us through the factors you are considering when evaluating targets and your criteria there? Derek J. Maetzold: I think we always keep an open eye to what may be a possibility. We own things as we become aware of them. We do not feel compelled to chase anything. We have a great opportunity with what we own and control today. But we do look at things as they come around or come across us. The “Goldilocks” approach is pretty tough. Things have to look pretty good, but we do think that could be part of the future. Analyst: Great. And then separately, maybe on sales—can you just give an update today on derm and GI? And then how is headcount expansion expected to look for this year, and how does that translate to selling and marketing spend? Derek J. Maetzold: We have said we think we can cover, for the time being in the near term, both of those verticals with fewer than 100 reps, and that is where we are today. Operator: Your next question comes from the line of Matthew Parisi with KeyBanc Capital Markets. Your line is open. Please go ahead. Matthew Parisi: Hi. Sorry, I was on mute. This is Matthew on for Paul Knight at KeyBanc Capital Markets. Congrats on the quarter and thanks for taking my question. You previously mentioned in 2025 that melanoma received FDA Breakthrough designation, and I was wondering if Castle Biosciences, Inc. was still preparing for an FDA submission in 2026 that you had mentioned. Derek J. Maetzold: We are moving forward with a submission along that same timeline, sometime in 2026, yes. Matthew Parisi: Alright, thank you. And then just one other follow-up. Wondering if there has been an update on SCC—I know you had received acceptance of the reconsideration request for both Novitas and MolDx—and if there is any update or an idea on timing. Derek J. Maetzold: No official update from either one of the Medicare contractors, Palmetto or Novitas, since our year-end earnings call a few weeks ago. We still continue to believe that a year-plus review cycle should be plenty of time for reconsideration requests that were accepted in, I guess, July and September accordingly between Novitas and MolDx. We are not at this point in time thinking that there is a later posting of a draft LCD than the second half of this year. That would be surprising. Operator: Your next question comes from the line of Kyle Alexander Mikson with Canaccord. Your line is open. Please go ahead. Kyle Alexander Mikson: Hey, guys. Thanks for the questions. On the 650 orders for the atopic dermatitis test, could you talk about recent trends and how you expect that to accelerate going forward? And when you think about that number getting into the thousands in the near term, how does that affect the cost structure of the company? As we see gross margin decline sequentially and things like that, how should we be thinking about P&L impact? Derek J. Maetzold: So you know about COGS and [inaudible]. Frank Stokes: Yeah, so, Kyle, I think what we see right now is that the primary hurdle for our AD test is just our willingness—candidly—on how available we want to make it. In terms of impacting the overall COGS profile, that is a pretty efficient test. It is a PCR-based test, and so we would not expect a material impact on the blended adjusted COGS even with some growth in volumes from where we were in Q1. Certainly not in the next several quarters anyway. Kyle Alexander Mikson: Okay. On that note, how do you anticipate the cadence of expenses throughout this year? It was a little bit surprising to see the net loss and the lower-than-expected EBITDA in the quarter. As we think about cash flow positivity—that has been a goal for 2026–2027 for a while—how should we look at that metric? Frank Stokes: Yeah, so as you know, we continue to focus growth on three windows—near, medium, and long term. As we support that, we do expect some growth in operating expenses. I think as we get through Q1 here and we lap the more meaningful change in SCC revenue, we will get to a more meaningful comparability period going forward. But I think that we continue to grow into the P&L and leverage the cost structure, and our intent is to generate meaningful returns on those operating expenses, driving value going forward. Operator: Your next question comes from the line of Puneet Souda with Leerink Partners. Your line is open. Please go ahead. Puneet Souda: Yes. Hi, guys. Thanks for the question here. First one, on the guide itself—you beat by $4 million and raised by $5 million, largely banking the beat. I wanted to understand how much of the beat was from SCC. Derek J. Maetzold: Most of that beat was driven by TissueCypher. Puneet Souda: Okay, got it. And then, can you provide a little more color on the TissueCypher ramp throughout the year? I think you called out you had two best months—March and April—but maybe it was sequentially down. I did not exactly catch that. How should we think about the ramp from 1Q to 2Q? It seems it could be larger than what you saw last year. Derek J. Maetzold: As we said, we continue to think we will add a similar number of test reports for 2026 as in 2025. I think we are big enough, or penetrated enough now, that seasonality is finally to the point where we feel it. As I referenced, the number of procedures tends to be lower in Q1. So I think we will see that growth come ratably through the year. I am not aware of things quarter to quarter that should shift that from more of a ratable ramp. Operator: There are no further questions at this time. I will now turn the call back to Derek for closing remarks. Derek J. Maetzold: This concludes our first quarter 2026 earnings call. Thank you again for joining us today and for your continued interest in Castle Biosciences, Inc. Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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MLYS 2026 Q1 财报电话会议

Operator: Welcome to the Mineralys Therapeutics, Inc. First Quarter 2026 conference call. It is now my pleasure to introduce your host, Dan Ferry of Life Science Advisors. Please go ahead, sir. Dan Ferry: Thank you. I would like to welcome everyone joining us today for our first quarter 2026 conference call. This afternoon, after the close of market trading, Mineralys Therapeutics, Inc. issued a press release providing our first quarter 2026 financial results and business updates. A replay of today's call will be available on the Investors section of our website approximately one hour after its completion. After our prepared remarks, we will open up the call for Q&A. Before we begin, I would like to remind everyone that this conference call and webcast will contain forward looking statements about the company. Actual results could differ materially from those stated or implied by these forward looking statements due to risks and uncertainties associated with the company's business. These forward looking statements are qualified by the cautionary statements contained in today's press release and our SEC filings, including our annual report on Form 10-Ks and subsequent filings. Please note that these forward looking statements reflect our opinions only as of today, May 6, 2026. Except as required by law, we specifically disclaim any obligation to update or revise these forward looking statements in light of new information or future events. I would now like to turn the call over to Jon Congleton, Chief Executive Officer of Mineralys Therapeutics, Inc. Jon Congleton: Thank you, Dan. Good afternoon, everyone, and welcome to our first quarter 2026 financial results and corporate update conference call. I am joined today by Adam Levy, our Chief Financial Officer, David Rodman, our Chief Medical Officer, and Eric Warren, our Chief Commercial Officer. I will begin with an overview of the business, clinical programs, and recent milestones, followed by Adam to review our first quarter financial results before we open up the call for your questions. Our NDA acceptance in the first quarter has been the culmination of a massive effort by our team and our mission to provide more healthy days to patients with cardiovascular disease. From an operational perspective, we are focused on preparing lorundrostat for a successful launch in the United States while we continue to evaluate partnering opportunities and consider the next steps in the clinical development of lorundrostat. During the first quarter, the FDA accepted the NDA for lorundrostat for the treatment of adult patients with hypertension in combination with other antihypertensive drugs and assigned a PDUFA target date of December 22, 2026. This represents a significant regulatory milestone for lorundrostat that moves us meaningfully closer to our goal of delivering a potentially best-in-class therapy to patients with uncontrolled or resistant hypertension. The NDA is supported by a comprehensive clinical data package, including positive results from the Launch HTN and Advance HTN pivotal trials, TRANSFORM HTN, our open-label extension trial, and the proof-of-concept trials, TARGET HTN and EXPLORE CKD. Collectively, these five trials demonstrated that lorundrostat delivers clinically meaningful reductions in blood pressure, is well tolerated, and maintains a durable response across diverse patient populations. We believe this data package supports the potential for lorundrostat to be included in prescribing guidelines, the economic value of lorundrostat to the health care system, and lorundrostat as a differentiated novel therapy. Uncontrolled and resistant hypertension continue to represent areas of unmet medical need, affecting over 20 million people in the United States and contributing significantly to cardiorenal complications. Aldosterone dysregulation often plays an important role in resistant hypertension where patients on three or more antihypertensive medications fail to achieve their blood pressure goal. The launch of lorundrostat, if approved, will be initially focused on this population with the highest need. Our ongoing market research highlights the following three key factors. One, prescribers prioritize magnitude and consistency of blood pressure reduction and have stated a consistent willingness to prescribe lorundrostat in the fourth line. Two, payers recognize the high-risk nature of patients whose hypertension is uncontrolled on three or more medications and have expressed a willingness to provide coverage for lorundrostat. Three, patients are seeking meaningful and sustained blood pressure reductions that are tolerable and simple to integrate into their daily lives. They are very receptive to novel agents like lorundrostat that may help them achieve their goal. As we move towards our PDUFA target date, our operational focus will continue to be on preparing lorundrostat for commercial success. Our teams are working on early market access planning and payer engagement to ensure the value proposition of lorundrostat is clearly understood. In parallel, we continue to invest in physician advocacy with our medical communications capabilities, including broader education of the unmet need in uncontrolled or resistant hypertension through peer-reviewed publications, increased participation in scientific meetings, and the continued build out of our field-based medical science liaison team. We are also expanding our sales and marketing capabilities to ready lorundrostat for success. Together, these activities are intended to support awareness of the clinical profile and position lorundrostat for a potential commercial launch. We continue to evaluate partnering opportunities and engage in strategic discussions. The right partner could provide enhanced value and enable us to reach more patients who could benefit from lorundrostat. Our focus on preparing for a strong commercial launch is invaluable to potential business development partners. I will now turn the call over to Adam to review our financial results for the first quarter 2026. Adam Levy: Thank you, Jon. Good afternoon, everyone. Today, I will discuss select portions of our first quarter 2026 financial results. Additional details can be found in our Form 10-Q which will be filed with the SEC today. We ended the quarter with cash, cash equivalents, and investments of $646.1 million as of March 31, 2026, compared to $656.6 million as of December 31, 2025. We believe that our current cash, cash equivalents, and investments will be sufficient to fund our planned clinical trials and regulatory activities as well as support corporate operations into 2028. R&D expenses for the quarter ended March 31, 2026 were $24.4 million compared to $37.9 million for the quarter ended March 31, 2025. The decrease in R&D expenses was primarily driven by a $15.5 million reduction in preclinical and clinical costs following the conclusion of our lorundrostat pivotal program in 2025. This decrease was partially offset by $1.1 million of increased clinical supply manufacturing and regulatory costs and $800 thousand of increased personnel-related expenses resulting from headcount growth and increased compensation. G&A expenses were $21.0 million for the quarter ended March 31, 2026, compared to $6.6 million for the quarter ended March 31, 2025. The increase in G&A expenses was primarily driven by $7.9 million of higher professional fees, $6.1 million of increased personnel-related expenses resulting from headcount growth and increased compensation, and $400 thousand from other general and administrative expenses. Total other income, net, was $6.0 million for the quarter ended March 31, 2026, compared to $2.2 million for the quarter ended March 31, 2025. The increase reflects higher interest earned on investments in our money market funds and U.S. Treasuries due to higher average cash balances invested during the quarter. Net loss was $39.3 million for the quarter ended March 31, 2026, compared to $42.2 million for the quarter ended March 31, 2025. The decrease was primarily attributable to the factors impacting our expenses that I just described. With that, I will ask the operator to open the call for questions. Operator? Operator: Thank you. At this time, we will be conducting a question-and-answer session. It may be necessary to pick up your handset before pressing the star key. One moment please while we poll for questions. Our first question comes from Michael DiFiore with Evercore. Your line is now live. Michael DiFiore: Hey, guys. Thanks so much for taking my question. Two for me. Number one, in the scenario where Mineralys Therapeutics, Inc. launches lorundrostat itself without a partner, will you conduct any more significant R&D activity or business development, or will you preserve funds just to support the launch and focus on the launch? And separately, as you near the day 120 safety update, it may have already passed, I am not sure. Can you comment on whether safety remains consistent with the past and whether there are updated plans to publish data from the OLE? Thank you. Jon Congleton: Yes, Mike. Thanks for the questions. To the first one, in the event that we launched alone, we, from the beginning, have been focused on how we build value with lorundrostat and how we do that by extension for Mineralys Therapeutics, Inc. We have built this organization from the beginning thinking about our clinical development program with an eye towards how we generate the greatest value from a commercial standpoint launching, whether it is on our own, with a partner, or through someone else. And so I think it is fair to say we are going to continue to look at ways that we increase value for lorundrostat and Mineralys Therapeutics, Inc. If you think about the development program to date, we have done that. Launch HTN, obviously, spoke to the real-world audience. Advance HTN stands out on its own because it is a very distinct, complicated population that no one else has studied with an ASI. EXPLORE CKD provides information for prescribers looking at the complexity of resistant hypertension and nephropathy or CKD. So we have always had an eye towards meeting the physicians where they are, what they need with lorundrostat, and building the appropriate data around that. So we will continue to look at opportunities to build value from a clinical development perspective, and we will continue to look at opportunities to expand the value of lorundrostat through business development. To your second question around the 120-day safety mark, we continue to be very confident in the safety profile of lorundrostat. The TRANSFORM HTN trial, our open-label extension, continues to collect that data. We think lorundrostat is well characterized from a durable effect and safety and tolerability profile perspective. And as we have noted in the past, we will be looking to get that long-term data published in due course. Michael DiFiore: Great. Thanks so much. Operator: Thanks, Mike. Our next question comes from Richard Law with Goldman Sachs. Your line is now live. Richard Law: Hey, guys. Good afternoon. A couple of questions from me. Do you get a sense that you need to compete with AZ on preferred or exclusive access with payers based on some of the discussions that you are having? And, also, what is your confidence level on getting access to that 3L setting compared to fourth and fifth line settings? Is your 3L strategy based on broader use, or is it more on the smaller niche population? And then I have a follow-up. Jon Congleton: Yeah, Rich, thanks for the questions. As we have talked about in the past, our clinical development program looked at that third-line-or-later opportunity. Both Advance and Launch looked at that population failing to get to goal on two or more because that is where significant need exists. I think that is where an ASI can add significant value. From a market standpoint, in a launch, we think the focus will be fourth line. It is our feeling that in that fourth-line resistant hypertension setting, payers appreciate the risk that these patients are under and the lack of satisfactory alternatives that are currently available relative to what lorundrostat has shown in our clinical program. Eric, do you want to add some more? Eric Warren: Yeah, hey, Richard. It is all about sequencing. The fourth line is the entry point. But, obviously, there is that need for those comorbid patients that are third-line patients. The opportunity will be to gain that experience, gain that confidence, and then make that transition to the third line using that comorbid condition as a bridge. This has been well vetted with payers in research and advisory boards, and as our team is now out there engaging payers with our account executives. You also asked about whether we are going to try to position ourselves in a different way than baxdrostat. Obviously, there is an opportunity for both ASIs, and having parity access is something that is a focus for us. Richard Law: I see. Got it. And then a follow-up. We heard that AZ has been saying that baxdrostat can potentially achieve something like $10 billion peak if they can succeed in other indications beyond hypertension and CKD that they are developing. And I also remember, Jon, I think you mentioned that when you think about a partner, an ideal partner would be the one who would recognize lorundrostat’s potential. So when I hear that, I think you meant the potential beyond hypertension. In your discussion with potential partners, how many of them recognize the value of lorundrostat outside hypertension? And what are these indications that you believe partners are bullish on or not bullish on based on the unmet need and the drug's mechanism? Thanks. Jon Congleton: Thanks, Rich. As we noted before and in the prepared remarks, there are 20 million patients that are struggling to get to goal on two or more meds right now. We know the clear linkage of uncontrolled or resistant hypertension to poor outcomes, whether they are cardiovascular or renal. I think at this stage we can clearly say that what lorundrostat has demonstrated in reducing blood pressure is a clear surrogate for what we could expect as far as a reduction in cardiovascular risk. So I am not surprised by AstraZeneca's bullish position on baxdrostat. I would say we have shared that view given the fact that, just in the United States alone, there are 20 million patients at risk. We have talked in the past about having a partner that is more global in nature and has a holistic view of this asset. I do not think that view has changed. I cannot really opine on how some of those discussions have looked at different indications. But, clearly, we know that aldosterone is going to be a key target for the next several years into the 2030s as it relates to not only hypertension, but the related comorbidities. Operator: Thanks, Rich. Our next question comes from Seamus Fernandez with Guggenheim Partners. Your line is now live. Seamus Fernandez: So I guess I will address, or ask you to address, the elephant in the room, which is you guys have been talking about potential partnering for quite some time. You have had the data and now you have had the NDA firmly established in terms of the PDUFA date for some time. What is it that you are looking for at this point in a potential partner that perhaps you are seeking but has not quite matched up? Or should we anticipate that you are in active discussions along those lines? I think we are all just trying to metric what is the timing for either selection of a partner or a potential go-it-alone strategy in the U.S. Thanks so much. Jon Congleton: Yeah, Seamus, appreciate the question. And, as we have said in the past, we are interested in finding the right partner. In response to Rich’s question, I talked about the global nature of that. We are routinely evaluating those partnering opportunities. As you can imagine, and I think appreciate, we are not in a position to provide color or specifics around the level of dialogues, the timing, or the structure. But it is something that we are mindful of. We have, as noted, continued to focus on how we build value going forward, and that is why, operationally, we are focused on commercial readiness for this asset. I think it is an important part of those partnering dialogues. But, clearly, looking for a partner to build on that value continues to be something we are focused on. Seamus Fernandez: Great. Maybe if I can just ask one follow-up question. As you look at the opportunities to partner your asset with other mechanisms, specifically, what would you say are the core mechanisms that you are particularly excited about? We have a whole host of new cardiometabolic mechanisms that are advancing and potentially looking to emerge outside of hypertension. Which would you say would be particularly exciting from your perspective to partner with lorundrostat? Thanks. Jon Congleton: Yes, Seamus, it is a great question. I think what is key as an opportunity for Mineralys Therapeutics, Inc. is we have the core foundational molecule, that being lorundrostat as an ASI. Given the nature of aldosterone to be a driver of not only hypertension, which is the beginning point of many other cardiorenal metabolic disorders, but also the role that aldosterone plays in CKD and heart failure and other disorders, it begins with the fact that we have the core foundational molecule. There are other mechanisms. Certainly, the SGLT2s are what our competitors are looking at. I think the fact that dapagliflozin is generic at this point, given the data that we have generated to date within our pivotal studies and specifically EXPLORE CKD, gives us an entrée to put lorundrostat forward in a hypertensive nephropathy or CKD population. But there are other mechanisms that we are looking at from a cardiorenal standpoint. We are not in a position right now to opine on those. But I would come back to the fact that we have the core product that really addresses the key driver of pathology, and that is lorundrostat. Operator: Thanks, guys. Appreciate it. Our next question comes from Jason Gerberry with Bank of America. Your line is now live. Jason Gerberry: Hey, guys. Thanks for taking my question. As you are doing a lot of your prelaunch activities, how are you thinking about the physician segments that you think are going to be the most likely to drive early adoption, especially in that fourth-line setting where it sounds like maybe you will not be focusing on doctors that focus on comorbidities like CKD, but maybe more cardiology-driven hypertension? Can you discuss some of the learnings from the prelaunch activities and how you are thinking about the early adopter? Jon Congleton: Yes, Jason, thanks for the question. I would say that we have been thinking about this going back three to four years when we framed the pivotal program for lorundrostat. Clearly, there is a primary care portion of the audience that is key prescribers in fourth line. They would be part of a launch target. But cardiologists as well. That is why Advance HTN is such a critical, differentiating piece of our data story. These are the patients that a cardiologist is truly seeing. They are maximized with treatment. They have tried various alternatives and still cannot get to goal. That was the test that Advance HTN put lorundrostat through, and lorundrostat came through with flying colors. That is a key and distinct dataset that AstraZeneca, frankly, does not have. The cardiologist will certainly be a part of that target base. Nephrology as well. We know that nephrologists deal with uncontrolled and resistant hypertension with comorbid CKD. As we speak to those nephrologists, the number one goal for them to try to arrest the progression of kidney disease is to get their patients’ blood pressure to goal. We have been thinking about the target population, the prescribers and the use cases they have, and that is why we built out a very distinct and diverse dataset that provides information about how to use and where to use lorundrostat, and the expected benefits they can see in blood pressure control and beyond, such as proteinuria. Jason Gerberry: And as a follow-up, is there any one or two things you will be looking at in the first three to six months of your competitor’s launch that may alter your go-to-market strategy? Jon Congleton: I do not know if I would say it will alter it. Certainly, it will be informative. We have a view of the data package we have. Eric and his team have done a really nice job of identifying where the unmet need is, who the key prescribers are, where that beachhead indication is for fourth line, and what is important to them in prescribing. We will obviously be looking at AstraZeneca's launch, and we anticipate it is going to be significant given the unmet need here and the lack of innovation in the last 20-plus years. But given the data that we have generated, and specifically speaking to the different prescribers that your first question alluded to, we are very confident in our ability to tap into that, assuming approval and launch very quickly after that. Operator: Our next question comes from Annabel Samimy with Stifel. Your line is now live. Annabel Samimy: Hi. Thanks for taking my question. I would love for you to talk about who you think might be driving the process of guideline changes that would position the new ASI class as the next drug to try after third-line agents have failed. You have a tremendous amount of data across the spectrum of patients as well as safety, CKD, and OSA. How important is it to have that wealth of data to drive those conversations, or do you think that it is the first to market that drives the conversations? Just want to understand the mechanics behind that. Jon Congleton: Yeah, Annabel, thanks for the question. I think it is safe to say that we have been interacting with those physicians that are part of the guideline committees, appropriately sharing the information that we have. It is something we contemplated three years ago, and it is why we worked with the Cleveland Clinic and Steve Nissen and Luke Laffin with Advance HTN, because we knew there had been a lack of innovation in this space. This is a heavily genericized space, and the guidelines would be a critical component. Advance HTN becomes the study that addresses all of the questions guideline committees are going to have about whether it is apparent or truly confirmed resistant hypertension. That dataset is going to be an instrumental component of the argument for inclusion in the guidelines. Launch HTN is an important part as well. It speaks to the primary care physicians. EXPLORE CKD and EXPLORE OSA, as you alluded to, provide additional data that is informative and speaks to the unique complexities of the resistant hypertension population. We are in front of the right physicians who are part of those guideline committees, and we have the right data and dataset with lorundrostat to make a compelling argument. Annabel Samimy: If I could just follow on the physician segmentation that you are thinking about. Given the Launch trial and the fact that primary care is a big prescriber of hypertensive agents, do you expect the focus to be cardiologists and nephrologists and hope for trickle-down into primary care, or do you expect to include high-prescribing primary care physicians within that first set of physician targeting? Jon Congleton: I do not know that our view has changed. We are continuing to narrow in on those prescribers that control approximately 50% of that third- and fourth-line, predominantly fourth-line, segment, and within that there are primary care as well as specialists. Eric, you can add some more to that. Eric Warren: Well said, Jon. Cardiologists, nephrologists, but there are primary care physicians that function very well within this fourth-line state. They are actively prescribing. We have looked at the segmentation. We have looked at the deciling, and there will be primary care included in that initial go-to-market strategy. Operator: Great. Thank you. Our next question comes from Mohit Bansal with Wells Fargo. Your line is now live. Mohit Bansal: Great. Thank you very much for taking my question. One question I have is regarding differentiation. Do you expect to see any kind of differentiation when it comes to labeling between lorundrostat and the competitor here, based on your market research? What feedback are you getting from physicians that they see any differentiation between these molecules? Thank you. Jon Congleton: Yeah, Mohit, thanks for the question. On the label, I think there will be a level of uniformity, certainly within the indication. But I will step back to a point that I have been making. There is a distinct difference between the datasets that we generated with lorundrostat and that of baxdrostat. Launch HTN speaks to the real-world audience, but, again, Advance HTN is a very distinct and differentiated dataset that provides information to cardiologists specifically who are dealing with very difficult, confirmed resistant hypertension patients. Then EXPLORE CKD. We know that proteinuria and having a benefit on proteinuria is a key attribute in physicians' minds when they think about an antihypertensive and how they view its utilization. Certainly for nephrologists, having a benefit on proteinuria is a key signal, or surrogate if you will, for slowing renal progression. Launch HTN, Advance HTN, and EXPLORE CKD, as well as our long-term open-label extension TRANSFORM HTN, were all part of our submission in the NDA. Now, what language and what portions of those studies get into the actual label will be part of negotiations with the FDA. But having that data, whether within label for promotion or through medical information, is going to be very instructive and informative for those distinct prescriber populations. Mohit Bansal: And the physician feedback, the second part? Jon Congleton: The physician feedback has been very robust. Eric? Eric Warren: Two things I will highlight, Mohit. Number one, the absolute systolic blood pressure reduction. That is really what shines from a physician perspective. That 19 mmHg that we demonstrated in Launch, but also the diversity and the well-represented trial populations. I will call out the Black/African American population at between 28% and over 50% of our patients depending upon the trial. Physicians really appreciate the inclusivity of our populations. Mohit Bansal: Got it. Very helpful. Thank you. Operator: Our next question comes from Matthew Coleman Caufield with H.C. Wainwright. Your line is now live. Matthew Coleman Caufield: Hi, guys. Thanks for the updates today. You covered a couple of my questions, but I think overall the sense is that baxdrostat's possible approval mid-year helps overall ASI receptivity and awareness. At a high level, do you anticipate there being any headwinds with that approval, or do you see it only as a positive as we get closer to the December PDUFA? Jon Congleton: I think there is significant opportunity within this space. As I noted previously, Matt, the lack of innovation speaks to the high interest from physicians to have a novel agent or novel class of agents. I do think there is an opportunity to see this market grow as AstraZeneca launches six to seven months in advance of potential approval for lorundrostat. I think it is important to highlight that we will have a voice in the market during that six to seven month period. We have had national account executives in front of payers going back to Q1. We have our MSL team in place, going out and building advocacy within those top-tier and regional-tier KOLs. So I think it is really both companies out there progressively talking about the role of aldosterone, the importance of addressing it within the ASI class. That grows this market opportunity. Whether you look at it from a revenue projection that AZ guided to, or the 20 million patients that we target, this is a massive market opportunity. There is significant interest in the novelty of the class of drugs. So I think it is a net positive. Matthew Coleman Caufield: Great. Thank you, guys. Appreciate it. Operator: Our next question comes from Rami Azeez Katkhuda with LifeSci Capital. Your line is now live. Rami Azeez Katkhuda: Hey, guys. Thanks for taking my questions as well. Given that AZ will likely set the initial pricing benchmark for the ASI class with baxdrostat, are there any other market access levers that you can pull to differentiate lorundrostat? And then, secondly, I know there are not many recent cardiovascular launches, but what do you view as the most relevant commercial analog for lorundrostat at this point? Jon Congleton: Yes, Rami, thanks for the questions. Relative to AZ, presuming approval, they will be setting the initial price point. I have been asked whether that is an anchor point. I think it is a guiding point. I have no idea where they are going to price it at this stage. Clearly, they are bullish on the revenue opportunity, but it will be informative for us. Going back to differentiation and the payer discussions, we are seeing that right now. As we have dialogues with payers, the distinction of the dataset—whether it is Advance HTN, which I have commented on previously in a very distinct population that AstraZeneca cannot speak to, or the Black/African American population that Eric alluded to—we know that is a critical high-risk population. We believe we have the dataset that is very informative for payers from an access standpoint. The feedback we have gotten from payers to date is they are open and willing to create access in this fourth-line setting and potentially, in due course, third line. They are also interested in having two assets to evaluate. So it is not as if, from our perspective, baxdrostat will launch and secure all access from a payer standpoint. On commercial analogs, it is a fair question and hard to answer because there has not been a lot of innovation within cardiovascular for quite some time. An interesting analog for me, although it is a GenMed category and not cardiovascular, is migraine with the gepants, the orals. When you come out with something truly novel from a clinical profile standpoint and match that to a market with significant unmet need, you can see significant commercial uptake. That is an informative analog we think about as we prepare the commercialization of lorundrostat. Operator: Thanks. Our next question is from Analyst with TD Cowen. Your line is now live. Analyst: Hi, thanks and good afternoon. A follow-up from Mohit’s question. It was helpful to hear about label differentiation. Can you tell us more about how you will react to baxdrostat pricing, especially when it comes to your pricing strategy? We know how important access is to physicians, but we are curious about the strategy you are thinking there. Could you launch with a lower WAC price? Should we assume rebates would be the primary mechanism to drive access, or something else? More thoughts there would be helpful. Thank you. Jon Congleton: Yeah, thanks. I appreciate the question. I hope you appreciate that it is really early to opine too much on that. We will see where AstraZeneca comes in with pricing. We have guided in the past that thinking about Farxiga and Jardiance WAC, or list price, is probably a good barometer to work from. We will see where they go from a pricing standpoint and evaluate what makes sense for lorundrostat. The key for us at the end of the day is to ensure that patients that physicians believe could benefit from lorundrostat get access to it. There are a lot of different levers we could pull, from contracting to what we do with our patient assistance program, but it is too early to give you the level of color your question would require. Analyst: Okay, great. That makes sense. Maybe then I can ask a different question. As we are looking at this launch as a proxy to lorundrostat, can you talk about how you would think about the cadence of that launch? It is hard without recent hypertension proxies, but do you expect that there would be an initial bolus of patients within the hypertension population, or anything that could help us understand what a good first few quarters might look like? Jon Congleton: Looking at 2024 IQVIA data that shows, in third line or later, there are about 8.8 million patients that are turning over and trying new medications, and that is in the absence of any innovation—that is with existing treatments that have been available for 20-plus years. As an old marketer, to me, that tells me there is a market with a great deal of dissatisfaction. Physicians have not given up. They continue to trial existing medications to help patients get to goal. There is significant pent-up demand and appreciation of the risk these patients are under if they do not get to goal. Fundamentally, that is a proxy. How that translates to baxdrostat’s launch quarter over quarter, I cannot opine on that. I just know, looking at fairly recent data from 2024, there is a lot of movement within this marketplace, and that creates opportunities for novel agents like lorundrostat. Operator: We have reached the end of the question-and-answer session. I would now like to turn the call over to Jon Congleton for closing comments. Jon Congleton: Thank you. In closing, we remain encouraged by the FDA acceptance of our NDA based on a strong clinical data package that I have just spoken about through the question and answers. From an operational perspective, we are focused on executing on our pre-commercial readiness strategy, while in parallel evaluating partnering opportunities and considering the next steps in the clinical development of lorundrostat. We believe Mineralys Therapeutics, Inc. is entering an important next phase in its evolution. This reflects the dedication of our entire team, the physicians and researchers who have supported the lorundrostat program, and, most critically, the patients whose needs continue to guide our daily work. Thank you to everyone for joining us today. We appreciate the continued interest and support, and we look forward to providing further updates in the quarters ahead. With that, we will close the call. Have a nice day, everyone. Operator: This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.

4天前Insight Analytics约5分钟阅读

HGTY 2026 Q1 财报电话会议

Operator: Ladies and gentlemen, greetings, and welcome to the Hagerty First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jay Koval, Head of Investor Relations. Please go ahead. Jason Koval: Thank you, operator, and good morning, everyone, and thank you for joining us to discuss Hagerty's results for the first quarter of 2026. I'm joined this morning by McKeel Hagerty, Chief Executive Officer and Chairman; and Patrick McClymont, Chief Financial Officer. During this morning's conference call, we will refer to an accompanying presentation that is available on Hagerty's Investor Relations section of the Company's corporate website at investor.hagerty.com. Our earnings release, slides and letter to stockholders covering this period are also posted on the IR website as well as our 8-K filing. Today's discussion contains forward-looking statements and non-GAAP financial metrics as described further on Slide 2 of the earnings presentation. Forward-looking statements include statements about our expected future business and financial performance and are not promises or guarantees of future performance. They are subject to a variety of risks and uncertainties that could cause the actual results to differ materially from our expectations. For a discussion of material risks and important factors that could affect our actual results, please refer to those contained in our filings with the SEC, which are also available on our Investor Relations website and at sec.gov. The appendix of the presentation also contains reconciliations of our non-GAAP metrics to the most directly comparable GAAP measures that are further supplemented by this morning's 8-K filing. And with that, I'll turn the call over to McKeel. McKeel Hagerty: Thank you, Jay, and good morning, everyone. Spring has finally arrived in Northern Michigan, and with it comes the unmistakable sound of engines turning over after a long winter's rest. Our members have been pulling their cars out of storage, checking all the fluids and tire pressures and getting back out on to the open road. I for one drove a 1963 Corvette split window into the Hagerty headquarters this morning, and I am smiling year-to-year. And One Team Hagerty has been right there with them and with me ready to welcome a record number of new members in 2026 as the driving season gets underway. Let me jump to the headline. We are off to an excellent start to 2026. Written premiums increased 18% in the first quarter, ahead of our full year expectations. This marks 13 consecutive quarters of executing on our strategy to deliver compounding top line growth while making investments in our team, technology and members that should sustain high rates of growth in the years to come. As we discussed last quarter, 2026 marks the first year in our history that we control 100% of the economics on our own U.S. book of business. This structural milestone shows up clearly in our results, 42% growth in earned premium and a 77% jump in adjusted EBITDA. The GAAP presentation of revenue down 5% and our net loss of $13 million are temporarily different due to the new Markel Fronting Arrangement, but the underlying business performance has never been stronger. GAAP profits in 2026 are negatively impacted by the amortization of deferred ceding commissions paid to Markel in 2025 for policies written before January 1st. Think of it as settling the tab on the old structure. These deferred acquisition costs were $89 million in Q1 and wind down to 0 by the year-end 2026. With that, let me walk through our first quarter results shown on Slide 3. We added a record 112,000 policies during what has historically been a seasonally light quarter for us. Top cars added are not surprising as they are the bread and butter for Hagerty, Mustangs and Miatas, C10 Pickup Trucks and Cameros. We are also seeing a rapidly growing contribution from more modern enthusiast vehicles, including German and Japanese imports, sought after by the rising generations of drivers. Our written premium growth has been and will continue to be powered by new business count, unlike the broader industry that fluxes with the cycle. PIF growth jumped 15% as our retention rate remained steady at an industry-leading 89%. Retention at that level is not an accident. It is the product of decades of delivering on our brand promise to members who genuinely love their cars and trust Hagerty to protect them. We are delivering this growth with a careful focus on maintaining high-quality underwriting. Hagerty Re's combined ratio was 87%, and we took down our reserves by $6 million in the first quarter. Our underwriting team is one of the best in the industry, and we have been strengthening the capabilities of our in-house claims team. Our sustained market share gains are impressive and indicative of the enormous B2B opportunity for us. We are diligently working on additional partnerships as well as deepening existing relationships by earning the right to ask for more business. Hagerty is uniquely positioned to help protect the carrier's classic car book of business with automotive expertise and excellent service, and we are making the necessary investments to lengthen our lead. State Farm Classic+ is a great example of a tightly integrated partnership where both parties win. We now have an accelerating growth engine with expectations for their 19,000 agents to be selling new business in 40 states by year-end. The conversion of State Farm's existing 525,000 collector car policies to the Hagerty platform is also progressing well, and we remain on pace to convert most of these members to the new Classic+ program by the end of 2027. In addition to the white space with national carriers, our independent agency channel with 50,000 agents is ripe with potential. We are investing to make it easier for these agents to do business with us, including straight-through processing and the automated tools that help them identify enthusiast vehicles already sitting in their existing books of business, likely insured as daily drivers. Our addressable market of 36 million vehicles expands every year, and we want to empower these agents to think of Hagerty as the best solution for their customers. Let me move on to something that genuinely stopped all of us in our tracks during the first quarter. In March, Broad Arrow Auctions hosted a 2-day sale at Amelia Car Week in Jacksonville, Florida, and the results were historic, $111 million in total sales, 50% higher than any prior Amelia auction and with a 92% sell-through rate. The top lot was a 2003 Ferrari Enzo that sold for over $15 million, and we set 12 pricing records. The market for modern enthusiast vehicles has never been stronger, and every car that trades hands at a Broad Arrow Auctions is a potential Hagerty insurance policy. That is the flywheel in action. Our marketplace is not only a rapidly scaling profit center, but it is also a customer acquisition machine that gets cheaper with every car sold. I want to put that into context. In just 4 years and through the hard work of an exceptional global team, we have become one of the world's leading collector car auction houses. When you combine Broad Arrow's deep expertise with the Hagerty brand, our global community of members and our unmatched proprietary valuation data, you get results that surprise even us. And those results tell us something important about the health of our market. International demand for the finest cars is strong. Values on great cars continue to appreciate. Buyers from 23 countries do not show up to an auction in Northern Florida unless they trust Hagerty and Broad Arrow. That is all good news for Broad Arrow's transaction revenue. It is also good news for Hagerty Re as insured values rise, so to written premiums. Approximately 20% of our per policy premium growth over the last 15 years has come from our members voluntarily choosing to ensure their appreciating vehicles for higher guaranteed values. Our customers want their coverage to grow because their cars are worth more. That alignment between asset appreciation and insurance economics is absent from the standard auto market where vehicles tend to devalue or depreciate, and it is a structural advantage that compounds every year for Hagerty, augmenting our PIF-driven written premium gains. Over the same 15-year period since 2010, our regulatory rate increases for Hagerty Re has averaged only 1.5% per year, bolstering our consumer-friendly value proposition. We saw robust auction demand continue at the Porsche Air/Water auction in April with sales up 30% year-over-year and a sell-through rate of 84%. And in May, Broad Arrow will once again serve as the official auction partner of the Concorso d'Eleganza Villa d'Este with the BMW Group on Lake Como, Italy. This will be our second year at Villa d'Este, widely considered to be one of the most prestigious Concours events in the world, and we expect to build on last year's inaugural event as Broad Arrow is increasingly recognized as the trusted brand in auctions across major European markets. So in summary, our first quarter results were not only ahead of expectations, but they were far and away the best first quarter we have ever delivered. While it is only May, we are highly encouraged by how we are tracking towards our full year outlook. With that, let me turn it over to Patrick to walk through the financial details. Patrick McClymont: Thank you, McKeel, and good morning, everyone. Before I begin, let me reiterate the headline. The underlying business is performing very well. Written premiums increased 18% ahead of full year expectations with record new member additions. Adjusted EBITDA jumped 77% to $85 million, including a $6 million reserve reduction due to favorable prior year development. And Hagerty Re's combined ratio was 87%. This is what a healthy compounding specialty insurer looks like when firing on all cylinders. As McKeel mentioned, the GAAP presentation this year requires a brief reminder of what we shared on our fourth quarter call. Starting January 1 of this year, Hagerty Re assumed 100% of the underwriting risk on our U.S. book, a great economic outcome for us given the bump in underwriting profits and investment income. Under the new structure, the MGA commission revenue and the associated ceding commission expense that previously appeared gross on our P&L now eliminate against each other in consolidation, i.e., they net to 0. This is why reported revenue declined 5%, even though written premiums grew 18%. Additionally, there are $89 million of costs in the first quarter from the amortization of deferred ceding commissions for pre-2026 policies that result in a GAAP net loss of $13 million. This charge burns off entirely by year-end. With that, let me walk through the financials shown on Slide 6 and 7. Written premium in the first quarter was $289 million, up 18% versus the prior year period. This is ahead of our full year guidance of 15% to 16%, an acceleration from last year's 14% growth driven by our omnichannel approach, combined with 89% retention. Earned premium jumped 42% to $240 million, reflecting the 100% quota share retention in our U.S. book of business plus written premium growth. This is the structural improvement in our reinsurance economics that we have been working towards for a decade as we evolve our partnership with Markel. Commission and fee revenue in the quarter was $16 million. As I noted, this line is no longer comparable to prior periods given the elimination of Markel-related commissions. As State Farm conversions continue during the next 2 years, commission revenue inflects upwards. And unlike the prior Markel commission structure, the State Farm MGA fees carry no offsetting ceding commission expense falling through more cleanly. Marketplace revenue was $26 million, down 12%. We delivered record auction results at Amelia this year, but had lower inventory sales as we compared against last year's one-time sale at the Academy of Art University. Amelia cemented our position as a leader in the high-end auction market. We are investing significantly to position Hagerty as the undisputed global leader in both live and online sales. Membership and other revenue was $22 million, reflecting steady growth in Hagerty Drivers Club, paid memberships and ancillary revenue streams. Net investment income came in at $10 million, benefiting from our now larger investment portfolio at Hagerty Re that enjoys steady returns with low volatility, thanks to our focus on high-quality fixed income investments. Moving on to expenses. Let's start with losses. In 2025 and into 2026, we are seeing declines in frequency and favorable development from prior years that allowed us to reduce reserves by $6 million in the first quarter. Hagerty Re's loss ratio was 38%, resulting in a combined ratio of approximately 87%. We deliver high rates of written premium growth with excellent underwriting discipline, thanks to more than 40 years of proprietary data on 40,000 distinct makes and models, increased efficiency of acquiring and serving members and selecting members who take exceptional care of their toys. With the new Markel Fronting Arrangement, we have also adjusted our presentation of our expenses to allow investors to track and model our core insurance operations the way other insurance companies disclose their results. We will report the balance of the year consistently with our first quarter disclosures. After adjusting for the amortization of the ceding commission for policies issued in 2025, the underlying business showed significantly improved profitability, which can be seen in our adjusted EBITDA of $85 million. We believe that adjusted EBITDA is the best metric to focus on as it reflects the true operating momentum of our differentiated business strategy. We are growing quickly and efficiently converting premium growth into cash flow. I would point out that operating cash flow of $16 million was lower than the prior year's $44 million. With the new Markel Fronting Arrangement, we are paying claims directly, while under the prior structure, Markel paid the claims and we reimbursed Markel with a lag. So in Q1 of 2026, we made both the direct payments and the reimbursement for Q4 2025 claims of approximately $65 million. This normalizes during the balance of 2026. Adjusted for this doubling up of payments, operating cash flow increased roughly in line with adjusted EBITDA growth in the quarter. First quarter loss before taxes was $21 million and includes $89 million of deferred acquisition costs. First quarter net loss was $13 million and net loss attributable to Class A common shareholders was $7 million. GAAP basic and diluted loss per share was $0.06 for the quarter based on 101 million weighted average shares of Class A common stock outstanding. Adjusted diluted loss per share, defined as adjusted net loss divided by 361 million fully diluted shares was $0.04 for the quarter. We ended the quarter with $212 million in unrestricted cash, total investments of more than $1.1 billion and total debt of $229 million, which includes $110 million of back leverage for Broad Arrow's portfolio of loans. Given the strength in our first quarter results and momentum as we head into the summer driving season, we are reaffirming our full year 2026 guidance and are trending toward the high end of these ranges. This includes anticipated written premium growth of 15% to 16%, adjusted EBITDA of $236 million to $247 million and a GAAP net loss of $41 million to $51 million. As has been our practice in prior years, we will revisit our full year outlook on the second quarter call, but we are increasingly confident in our ability to deliver great 2026 results for shareholders. Looking forward a year, 2027 should be a more normalized year for Hagerty's P&L post 2026 complexity, where revenue growth more closely tracks written premium growth. We anticipate another year of mid-teens growth in written premium. While we continue to make multi-year investments in member growth and other initiatives. These include increased capabilities around the Markel Fronting Arrangement, technology investments in our B2B distribution, build-out of our product and Broad Arrow teams, enhancements to our digital marketplace as well as expansion of our special investigation and material damage units. Early indications point to these being high-return investments that will fuel member LTV in the years to come. That wraps up our prepared remarks. Operator, we can open the line for questions. Operator: [Operator Instructions] We take the first question from the line of Pablo Singzon from JPMorgan. Pablo Singzon: Is there any seasonality considered for EBITDA through the balance of the year? It seems to me or as you pointed out, Patrick, right, it seems to me that at least through 1Q, you're running above the full year guide, and I'd expect revenues to increase through the balance of the year. So I'm just not sure if there's any offsets maybe I don't know if you're considering GAAP in the third quarter or some pick up in expenses that might sort of derail the simplistic math of just annualizing the 1Q number. Patrick McClymont: Yes. I think business is seasonal, and so the seasonal pattern has not changed. So you should always consider that in your modeling. And then we are investing in the business, and we talked about that on the last earnings call. And some of that ramps up over the course of the year. And we have the normal dynamic of inevitably in the first quarter, you don't end up filling all the headcount slots that are open. It just takes a little longer than expected. So we would expect to see some ramp-up of expenses embedded in the full year guidance. So I wouldn't just annualize the first quarter. Hopefully, that's helpful that gives you a direction. Pablo Singzon: Yes. And then the second question I had, just a broader topic, right? So competition in personal auto is increasing. I'm wondering how that's affecting dynamics in your core classic car insurance business. And then maybe just to tack on something to that, like how is the current environment affecting your thinking about the rollout of Enthusiast Plus? McKeel Hagerty: Thanks, Pablo. It's McKeel. As you may recall, we've discussed this in some of our previous calls that when rates have gone up, for example, in standard auto, it tends to create shopping behavior that we actually benefit from. As you know, we're in a different kind of cycle now with standard auto where states are -- standard auto carriers are holding pretty steady right now, if not down. But we're seeing very strong year-over-year PIF growth in the core business, not just because of the additional new partnership accounts that are coming in from State Farm and others. So in this case, just I think the flywheel effect of the business is holding our momentum strongly into this year, and we're not in any way negatively affected by the fact that the standard auto carriers are kind of in a lateral moving year from a rate standpoint. Operator: We take the next question from the line of Michael Phillips from Oppenheimer. Michael Phillips: You've talked a bit about in recent calls about your European expansion for the auction business. I guess, given the flywheel that exists in your overall business, can you talk about your appetite -- just remind us your appetite for expansion internationally for insurance business? McKeel Hagerty: Yes. Thanks, Michael. It's a topic we've discussed for years. We've had an international business for over 20 years with our first entry outside of the country was actually in the U.K. We still have that business. It's growing. It's doing well. I think this order of things that we've really discovered by unlocking these very successful sales in Europe with Broad Arrow is helping us to understand the market differently than just sort of starting with insurance and then deciding whether membership is added and then thinking about marketplace later is that the order of things for us first is understand the market with these European auctions, getting that kind of sales team in force, in place, understanding the event environment and then deciding whether insurance is something that needs to be added on the back. Something we have discussed in the past is that when we started our U.K. business back in the day, the U.K. was sort of a golden place to be able to operate throughout Europe selling insurance. So our MGA structure over there, we were able to consider writing directly into the European continent without having to create an additional entity after Brexit, that became much more difficult. So right now, we are still just operating in the U.K. We write a little bit of some larger collection business in Europe, but we're looking at opportunities, but right now, focusing on just rounding out that auction schedule on the continent. Michael Phillips: Okay. I guess I was hoping you could expand a little bit more on the -- you mentioned the strengthening of your in-house claims team and kind of what's happening there and why -- how much of that's related to the change in the structure of this quarter? How much of that is related to -- I know you wanted to expand more enthusiast market, so kind of a different book of business that's coming. But just can you talk about that in-house claims team and what's happening there and why and how it's related to the changes that's happening in your overall business? McKeel Hagerty: I'll take the high end of it and if Patrick wants to follow-up, I'll let him. So yes, we've always done claims in-house. It was a real differentiating thing for us even when we were just operating as an MGA. Of course, now having 100% of your risk, you want to be paying attention to every dollar you spend when it comes to claims while maintaining a very high level of NPS and customer satisfaction and sort of overall claim service rates. But even though this is a low-frequency claim business, the bigger you get, we will have more claims. And we decided we really needed to make the investments to upgrade that team. We have some incredible leadership on the claims side who bring sort of the best of big auto industry claims expertise, but that understand the unique nature that repairing the types of vehicles we insure in our core book is very different than repairing a sort of standard auto where you can just bolt on a brand-new part because in many cases, repairing a vintage car, it takes time. You got to find the right kind of shop. You have to sometimes fabricate parts or parts have to be sourced from a variety of different places. So we have teams of people who help find those parts very different than a standard repair shop. So I think what we're doing just sort of structurally bringing best practices from standard auto claims and kind of turnaround times and all the things that you can do to contain the leakage that can happen around claims practices while maintaining the high quality of work that our customers expect because you want to pay fast, but you don't want to rush so that they're concerned about the quality of the repair. So that's the sort of maybe structural piece. And I don't know how much it's affecting the math specifically, Patrick, or we just... Patrick McClymont: Yes, it's meaningful. The claims organization that they've changed the mix, right? The meaningfully increased the number of claims that are dealt with in-house versus using independent adjusters. And every time they've increased that baseline, they've proven that the return on that is pretty compelling. And so we sit down and decide to increase the baseline again. That's what happened over the last couple of years. And that return comes from when you're processing things in-house, velocity increases, the customer service is better and the ultimate economic outcomes are better as well. And so the overall frequency and severity trends have been -- for the industry have been positive. We think we've got more tailwinds behind that because of this strategic decision to really invest in that capability. So we view it as a differentiator because these cars are different. They need a different level of expertise, and it's driving real value. Operator: We take the next question from the line of Elyse Greenspan from Wells Fargo. Elyse Greenspan: My first question is just on PIF. How should we just think about seasonality during the year? And I think in some years, right, Q1 tends to be like the lowest growth quarter of the year. Would you expect to see similar trends this year as we think about PIF growing during the year? Patrick McClymont: Yes. So this year -- last year, this year, next year, we do have the impact of the State Farm conversions. And so that's driving a meaningful increase in PIF. And that is not seasonal, right? That's based upon the rollout schedule with our partners at State Farm. And so that's meaningful and attractive. You have to kind of put that aside from a seasonality perspective. And then we're seeing the same trends that we typically would see. The first quarter typically is a lower quarter for us in terms of PIF growth. We ramp-up starting kind of in April and now into May and through the summer months, and you see it ramp down again in the fourth quarter. So we're seeing those same -- that same underlying dynamic. But right now, we're also seeing a very attractive healthy growth in that traditional core business. Elyse Greenspan: And then my second question, you guys, I think, are typically weighted to Q2 to update full year guidance, but you did say -- and I think you made some comments that said you're trending towards the high end of the ranges. It does seem like based on the Q1, right, that you're trending favorable to most items. So anything that we should think about like reversing? I mean, I guess I'm more interested just in thinking about adjusted EBITDA, right, and written premium growth, but really any components of guidance? Or is it just being somewhat conservative and just waiting to provide an update with Q2? Patrick McClymont: It's just waiting to provide the update. That's our approach on this. We've been consistent. We've concluded that not enough chapters of the books have been written at the end of 3 months. And so we'll do our first update after the second quarter. Elyse Greenspan: Okay. And then I think you said with State Farm that you would be active, I think, in 40 states by the end of the year? And then would you expect to add the additional states in '27 to be at full capacity? Is that how to think about that? Patrick McClymont: Pretty much. There could be states that stretch a little bit beyond that just because they're more challenging from a regulatory standpoint. But by the end of 2027, we should be selling in almost all the states, and then we'll still have a little bit of a tail in terms of the conversions, right? There's always that lag where we sell new business first, you make sure that everything is working and then start the conversion process. Operator: We take the next question from the line of Gregory Peters from Raymond James. Charles Peters: McKeel, in your opening comments, it's quite envious of your description of driving the Corvette into the office this morning. And I guess I'm going to go down a path that's probably unexpected, but I recently leased out a model Y, the Tesla Model Y. And I know this isn't your classic car addressable market, but I find the experience with it shockingly positive. I'm just curious because you're a car enthusiast, what you think of these new electric cars with the self-driving feature? McKeel Hagerty: First of all, thank you. Yes, it was -- it's a super fun drive to drive the Corvette. And I'm reminded why they made some significant changes in 1964 after 1963 when you drive it. So it's a fun car, but you can't see out of the rearview mirror. I'm a huge fan of electric cars. And some car people who view it as some sort of dogmatic war going on. I don't view it that way. I think we're going to have more and more electric cars. I own an electric car. I have one of the Porsche Taycans, and I'm a big fan. I drive that year around. Like you said, shockingly impressed. They're just great. They're great. They're simple, they're fast, they're quiet. They do a lot of great things. And I think you'll see more of them, and I think we'll be ensuring more of them in years to come. Like for us, it's -- there's always this shifting process, right, even with like the daily -- the cars that we insure today were daily drivers, some number of decades ago or some number of years ago. And there's a shifting process where people decide, I like this one, I don't like that one and the ones that survive are the ones that we end up insuring. And so there is no doubt, as we do now, ensuring Tesla Roadsters that we will be ensuring certain Teslas out there in the future. And -- but finally, just on the self-driving thing, I also -- I took my first Waymo ride for what it's worth a couple of weeks ago, and I thought it was really cool and I played my own music in it and all that stuff. And I think we're going to have more self-driving cars as well. But I think there will be a world where there are human-driven cars. I think there'll be self-driving cars. And I think as that technology becomes safer and safer outside of cities right now, I think it's better off in cities personally. That it will be part of our world. So we're going to be the ones out there advocating. We're the company that was built by drivers like me for drivers, and we'll be advocating for those people. But we recognize that we will be surrounded by self-driving cars. Charles Peters: Great. I know it was a little bit off topic, but not really. I mean it's a great... McKeel Hagerty: Not really, non-topic. Yes. Charles Peters: It's a great product. It's not in your classic car sweet spot yet, but I'm sure it will be at some point. Listen, I know you spent some time in your prepared remarks and maybe in the follow-up Q&A talking about the PYD, the prior year development. Can you just revisit that and just walk us through what's the source? Is it lower severity? And maybe take the results that you reported, is there anything -- any read-through as we look forward on how the reserves are seasoning? Patrick McClymont: Sure. So the prior year is about $6.5 million reduction that we had in the first quarter. And you'll recall in the fourth quarter, we had about a $20.5 million reduction in reserves. So this is a continuation. The $6.5 million, it was predominantly the 2025 accident year. And we're starting to see that development in the fourth quarter, and that influenced what we did in the fourth quarter. But it just matured and continues to mature in a very attractive way for us. And so what we're seeing is a combination of from a severity standpoint, we're in a good spot, continue to be in a good spot. We talked about frequency before. We've talked about what we're doing in terms of claims outcomes. And so it's really just looking at the historical book of losses and as those are maturing and layering into that what we've done to make sure that we're delivering from a claim's standpoint, it's all adding up to that we end up in a better position. That's our market-to-market as of right now for prior years. We'll see how the balance of this year unfolds, but we think we're in a solid position right now. Operator: We take the next question from the line of Mark Hughes from Truist Securities. Mark Hughes: Patrick, you had mentioned that you probably see another year of mid-teens growth in written premium next year. Any early thoughts on EBITDA growth when we think about expenses that may be either ramping up or being leveraged? How should we think about EBITDA in 2027? Patrick McClymont: No, no early thoughts on that. We're going to stick to sort of the focus on the prompt year in terms of guidance. Hopefully, what came through in those comments, this is a business that continues to grow at that sort of very credible mid-teens type rate, so we feel good about that. And it's also a business that we have demonstrated that we've been able to expand margins over time. And then it's also a business that we're choosing to invest in to make sure that we deliver that growth, not just for the next year, the next 2 years, but for the long haul. And so that's the balance that we're constantly striking. Mark Hughes: And then, McKeel, you talked about the higher guaranteed value that, that is a benefit over time. Is there a specific number that you would throw at that? Is that kind of a low single-digit tailwind? Or how should we think about how much that helps year-to-year? McKeel Hagerty: Yes. Well, thank you. What's interesting when we go back -- what's interesting to compare it against is that when I think of the few times in my career where the market has taken some sort of dip. So for example, all the way back to, believe it or not, the dot-com crisis, the great financial crisis, we know COVID was -- had the exact opposite effect is that I was sort of looking at, okay, which cars kind of held steady and which cars kind of went up. And we certainly have seen for the last 15 or so years where sports cars, sports racing cars, Ferraris, Porsches, that sort of thing, of earlier generations were the ones that showed the greatest amount of increases year-over-year, while the rest of the book kind of held steady, which is still differentiated from a standard brand-new daily driver book of business that would be depreciating over time. But definitely, what we're seeing right now is this sort of more modern supercar, hypercar segment that we're seeing in the Broad Arrow business. Those are the cars that are most sought after. And they're lifting everything around them. So when we were seeing cars from -- so when I think modern supercars, I think cars from the '90s, even the 2000s. And these are Ferraris and similar types of cars that were that are just -- they're being purchased at a higher price point by new entrants into the market, but also by older well-heeled collectors. And so it's that double effect where you get maybe new money deciding to come in there and pay 10%, 15%, 30% more than the car was worth or in a few cases, just multiples of that. But it's also that well-heeled collector that had an earlier generation of cars who they step up and say, well, I don't want to be left without the new hot thing. So I'm actually willing to lighten up on my other parts of my collection, so I can go buy the latest and greatest or they're just continuing to add to their collection. So in general, it's sort of single-digit steady growth on those types of cars, but you get these just wild examples of like the 2003 Enzo that we sold for $15 million. I mean that was a $3 million to $5 million car a couple of years ago, and it's just astonishing. Patrick McClymont: Yes, Mark, we've looked at all that over the last 15 years, as McKeel described, on average, it ends up being low single digits. In those 15 years, there's only 2 years where it ticked down a little bit, and that can happen. And then some years, it's mid-single digits or even high single digits. But in the long run, it ends up being that low single-digit type number. Mark Hughes: Very good. Well, I'll tell my own story I parked in church next to Camaro Z28 and it looked sort of like a beer, but it was still in pretty good shape. And when he pulled out it had the license plate and peak auto is intriguing and also since I had that car when it was new, I felt a little antique as you drove away. So anyway. Patrick McClymont: We don't call that a beer. We say it has patina. McKeel Hagerty: It has patina. Yes. It's -- those are wisdom marks. As the 63 Corvette was, I must admit a little slow cranking when I was turning it over. And then I realized like, well, you're a couple of years older than I am, and I'm feeling a little slow cranking myself. So that's all right. Operator: We take the next question from the line of Mike Zaremski from BMO Capital Markets. Michael Zaremski: Maybe just back to the excellent PIF growth and revenue growth question. It sounds like if you agree that underlying seasonality did take place. So the kind of the overlay was the State Farm conversions. I'm just trying to kind of help dimension the impact State Farm's having. Is that a fair way to think about it? Patrick McClymont: Yes, that's accurate. McKeel Hagerty: Yes. Michael Zaremski: Okay. Great. And I can see there was a $50 million in proceeds from a loss portfolio transfer in the quarter. Any color on what happened there, any implications for capital return, et cetera? Patrick McClymont: So that's part of the overall transition evolution of our relationship with Markel. And so for the prior periods, we did a loss portfolio transfer. So they transferred to us $50 million. We've assumed all those liabilities. And keep in mind, this is the 20% or so because some of the prior years where we were taking a little bit less of the risk. But it really just represents that. So it's risk that we already had. We're just topping it up for those prior period. And so we received that cash. We put the liability on our balance sheet. As you go through the queue, you'll see that we're assuming that there's a gain associated with that. And then that gain amortizes into the income statement over the expected settlement of those claims, which in the aggregate will take, I don't know, call it, 4 years or so, but it's pretty front-end loaded. And so that will flow through. This is not a risk transfer transaction, so it's a financing. And so it hits down on the other income and expense line item. Operator: We take the last question from the line of Tommy McJoynt from KBW. Thomas Mcjoynt-Griffith: When we look at the mid-teens premium growth in the guide this year, is there a roughly even split between the core legacy Hagerty business, State Farm and Enthusiast Plus? Or is there one of those contributing more than the others? Patrick McClymont: Yes. We're not going to kind of break it down by the different lines that you just described. What I will say is this year, 2026 and then 2027 are going to be big years for State Farm conversion. I think between new and converted, we're already in excess of 100,000 policies. But in total, it's 500-plus thousand policies. And so we're kind of in the thick of it right now. So that is a meaningful driver this quarter and it will be this year and next year. And then the core business continues to grow at the kind of rates that it has been for the last handful of years. So very consistent there. And then E-Plus is still very, very small. So that's not much of a driver at all right now. Thomas Mcjoynt-Griffith: Got it. And then switching gears. As we track the large national carriers start to file for rate decreases in some instances, we understand that probably doesn't impact the core Hagerty business, but does that at all impact your outlook for Enthusiast Plus, just where there's a bit more overlap with the daily drivers? Patrick McClymont: You're right for the core business, when we look at what our rate increases have been over the long haul, it's again, low single digits, right? So we're not -- and that's continued over the last couple of years. We've done some things on the liability front and address that. But our rate increases are pretty modest. As we think about the E-Plus business, it's hard to say because that's the current environment right now. E-Plus, we're in one state in Colorado, right? And so we're rolling this out over time. And we're learning in Colorado, and we'll learn in the other states in terms of what the right approach is on pricing and what that means in terms of the liability of the product and the profitability, I should say. So it's hard to say that the current market is heavily influencing our plans there just because of where we are in the rollout plan. Operator: Ladies and gentlemen, with that, we conclude the question-and-answer session. I now hand the conference over to McKeel Hagerty for closing comments. McKeel Hagerty: Thank you, operator, and thanks to everyone on the call for your continued support. I want to close today by coming back to where we started this morning. Hagerty has never been better positioned to serve the community of auto enthusiasts who trust us to protect what they love. We have a fast-growing recurring revenue model built around specialty insurance that delivers combined ratios of 90% year after year. Our high-quality underwriting and rapidly scaling business allows us to price at a meaningful discount to traditional carriers. What we are building at Hagerty is incredibly unique in the insurance world, making us the partner of choice because there is no one else who can do what we do for their customers, helping the retention and protecting their bundled business. We also have a fast-growing auction and marketplace business that did not exist 4 years ago and is setting world records all over the world. And we have a membership community approaching 1 million paid members that love our member-centric products and services. Thank you, One Team Hagerty. The results we deliver are the product of your passion, excellence and hard work, and I cannot wait to see what this amazing team can accomplish over the coming years as we to double PIF count to 3 million by 2030. We look forward to seeing some of you at Villa d'Este in May, and we hope many of you will join us at our annual investor event in Greenwich, Connecticut on May 29, where we will share an update on our progress towards delivering compounding profit growth for our shareholders. Invites will follow, but please reach out to us for more details or to our SVP. Until then, never stop driving. Operator: Thank you. Ladies and gentlemen, the conference of Hagerty has now concluded. Thank you for your participation. You may now disconnect your lines.

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