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Operator: Hello, and welcome to AH Realty Trust First Quarter 2026 Earnings Call. Please note that this call is being recorded. [Operator Instructions] I would now like to turn the call over to Chelsea Forrest, EVP of Investor Relations. Please go ahead. Chelsea Forrest: Good morning, and thank you for joining AH. Realty Trust's First Quarter 2026 Earnings Conference Call and Webcast. On the call this morning, in addition to myself, is [ Shawn ] Tibbets, Chairman, President and CEO; Matthew Barnes-Smith, CFO; and Craig Romero, EVP of Asset Management. The press release announcing our first quarter earnings, along with our supplemental package were distributed yesterday afternoon. A replay of this call will be available shortly after the conclusion of the call through June 4, 2026. The numbers to access the replay are provided in the earnings press release. For those who listen to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, May 5, 2026, and will not be updated subsequent to this initial earnings call. During this call, we may make forward-looking statements, including statements related to the future performance of our portfolio, transactions involving our multifamily portfolio, our real estate financing program and our construction business and the use of proceeds from such transactions, our rebranding and the effects thereof, the consequences of our strategic transformation, our liquidity position as well as comments on our outlook. Listeners are cautioned that any forward-looking statements are based upon management's beliefs, assumptions and expectations, taking into account information that is currently available. These beliefs, assumptions and expectations may change as a result of possible events or factors, not all of which are known and many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations, and we advise listeners to review the forward-looking statement disclosure in our press release that we distributed yesterday afternoon and the risk factors disclosed in documents we have filed with or furnished to the SEC. We will also discuss certain non-GAAP financial measures, including, but not limited to, FFO, normalized FFO and FFO as adjusted. Definitions of these non-GAAP measures as well as reconciliations to the most comparable GAAP measures are included in the quarterly supplemental package, which is available on our website at ahrealtytrust.com. I will now turn the call over to Shawn. Shawn Tibbetts: Good morning, and thank you for joining us today. Today, I will briefly reflect on the quarter results, our progress on the company's transformation to date, discuss portfolio highlights and conclude with a review of our capital allocation activity. Since announcing our strategic restructuring on February 16, we have executed more transformation milestones in a single quarter than in any comparable period in the company's history. We entered into a binding agreement to sell 11 multifamily assets for $562 million completed the sale of the construction business, advanced the wind down of our real estate financing platform through multiple dispositions, repurchased 4.3 million shares of common stock, nominated 2 highly qualified independent directors to the Board, secured term sheets or reached final stages on all 3 2026 debt maturities, launched our new corporate identity as AH Realty Trust and raised full year FFO as adjusted guidance. The pace and magnitude of these actions reflect our unwavering commitment to unlocking shareholder value, and I will walk through each of these in more detail. In the first quarter of 2026, we delivered solid operating results, reflecting strong performance in our retail and mixed-use office portfolios and the benefits of our disciplined operating approach. AH Realty Trust is a pure-play, high-quality retail and mixed-use office REIT focused on identifying and realizing dominant market competitive advantages throughout the Sunbelt, Mid-Atlantic and Southeast. Our company is primarily comprised of and focused on open-air shopping centers and mixed-use ecosystems within our markets. We are encouraged by a combination of the retail market strength and the leasing activity we are experiencing in both retail and office. We are also mindful of macroeconomic conditions and geopolitical uncertainty, including higher interest rates, elevated financing costs and heightened global tensions as they continue to influence the broader real estate landscape. That said, our results exceed our internal expectations and reflect the actions we are taking to restructure AH Realty Trust into a simpler and more focused real estate platform positioned for long-term value creation. As a result of the performance of the retail and mixed-use office portfolio, our visibility into the coming quarters and the transformational actions we've taken to date, we are raising our full year 2026 FFO as adjusted guidance range to $0.51 to $0.55 per diluted share. We are here first and foremost for shareholders, and every single action we take is aimed at identifying and clearly demonstrating the underlying value in our portfolio. Another key initiative as part of this transformation is ensuring that we have the right Board skills and governance profile to help guide us. I trust you saw our press release last week announcing planned changes to the Board as part of our ongoing refreshment process to add directors with skills and experience that align with the company's evolved strategy. This includes the Board's nomination of Ted Bigman and Lori Wittman to stand for election at the 2026 Annual Meeting of Stockholders. Ted brings deep capital markets and real estate investment experience owned over decades at leading institutional platforms, capabilities that are directly aligned with our capital allocation priorities and balance sheet optimization objectives. Lori brings extensive public REIT, operating and financial leadership experience that will be invaluable as we execute the next phase of our strategy as a focused retail and mixed-use office REIT. Together, their skill sets are purpose-built for the company AH Realty Trust is becoming. I would also like to recognize George Allen and Dennis Gartman, who will not stand for reelection to the Board at the annual meeting. We are very grateful for their years of service and significant contributions during their tenure. The first quarter of 2026 was pivotal in AH Realty Trust's strategic transformation. We made meaningful progress implementing our new operating model and disciplined capital allocation framework. We are reshaping our business by exiting multifamily properties and focusing on high-quality retail and mixed-use office assets in markets where we have durable competitive advantages. As evidenced by our actions in the first quarter, we are taking decisive and deliberate steps to simplify the company, reduce leverage and reallocate capital to advance a new operating strategy. During the quarter, we entered into an agreement with an affiliate of Harbor Group International to sell 11 of our 14 multifamily assets for $562 million. This transaction represents a major milestone in our strategy to exit the multifamily property sector and will meaningfully strengthen AH Realty Trust's balance sheet and materially reduce complexity across the organization. Importantly, this sale reflects a significant premium to the value the public market was implicitly assigning to these assets within our REIT structure, which we believe further validates our thesis that substantial embedded value exists across our portfolio. We expect to close the sale in the coming weeks, subject to customary closing conditions. We are marketing the remaining 2 multifamily assets in Gainesville. Following these sales, we intend to retain only Smiths Landing in the residential category because its ground lease structure is unique relative to the remainder of the portfolio and the property continues to generate stable cash flow. As a result, we concluded that given the stable cash flow generation, combined with the ownership structure, retaining Smiths Landing is appropriate at this time and remains consistent with our value preservation objectives. Exiting the multifamily sector unlocks significant embedded value that has not been reflected in our share price, and there was a robust private market demand for our well-located and young assets. We also concluded that we prefer to compete in the commercial market and that future growth for our company in multifamily would be difficult given the low cap rates. Also, given the highly volatile nature of Southeast U.S. multifamily, where supply cycles are long and absorption predictions are often inaccurate, we are far more excited to return that value to shareholders through deleveraging our stable go-forward portfolio of well-leased, well-located retail and mixed-use office assets. Outside of multifamily, we made considerable progress exiting other noncore businesses. Last week, we completed the sale of the construction business, fully exiting. We also advanced the wind down of our real estate financing platform. We closed the previously announced sale of 2 multifamily financing investments. Additionally, I'm happy to announce that our partner closed on the sale of Allure last week. Collectively, we expect the asset sales already underway and those that have been completed will provide us with approximately $750 million in proceeds, which we intend to use to delever the balance sheet and achieve our target leverage ratio of 5.5x to 6.5x net debt to total adjusted EBITDA while also repurchasing shares in the market. We will do this while ensuring the dividend remains fully covered by core property operating cash flow. We will also have removed dependency on uneven construction fees and mezzanine investment revenue. I am proud of the significant progress we have made on our transformation in 2026. We have already achieved a number of key milestones in our journey, and we are well positioned to complete the transformation this year. A focused and agile AH Realty Trust will operate as a pure-play model, retail and mixed-use office real estate investment platform. Our retail portfolio consists primarily of open-air shopping centers and mixed-use retail environments located in strong, fundamentally supported markets. Importantly, 95% of our office investments are concentrated in vibrant mixed-use settings rather than stand-alone suburban office assets. These properties benefit from integrated retail, residential and experiential components, which continue to support consistently high demand from high credit tenants. At quarter end, our stabilized retail and mixed-use office portfolios were 94.8% and 96% leased, respectively. In contrast, while our office product delivers superior occupancy and performance metrics that exceed those of our peers' office product nationally, we would like to see a better appreciation of its value. This disconnect reflects broader sector sentiment rather than asset level fundamentals. 95% of our office portfolio is situated in mixed-use ecosystems and therefore, is highly differentiated and not suburban office product. As a result, our assets benefit from integrated retail, residential and experiential components. These characteristics support durable demand, consistently strong occupancy and a high-quality tenant base, resulting in operating performance that stands apart from prevailing conditions affecting the broader publicly traded office sector. The strength of our retail and mixed-use office portfolios was evident in their performance this quarter. For the first quarter, FFO as adjusted was $0.15 per diluted share, exceeding our internal expectations and demonstrating the earnings power of our go-forward retail and mixed-use office platform. Craig will discuss portfolio performance in detail in his remarks. Turning to capital allocation. We remain disciplined and shareholder focused. Since the beginning of the year, we have repurchased approximately 4.2 million shares for a total of $24.1 million at a weighted average price of approximately $5.70 per share, representing more than 4% of the common equity and reflecting our confidence in the underlying value of the business. Our commitment remains allocating available capital where we believe it is most beneficial to shareholders. Our NAV demonstrates the intrinsic value of our real estate and simultaneously informs our capital allocation decisions. When combined with our transformation, we believe the implied yield relative to other capital allocation alternatives is compelling. To put it simply, we believe that investing in our own assets above a 9% cap rate is very attractive and creates more shareholder value than other available capital allocation options. We expect that our transformation will create additional financial flexibility to allow us to invest in future growth opportunities while building on the performance of the portfolio and the momentum of this transition. As you know, as part of the transition planning, we initially modeled up to $50 million of retail acquisitions to offset potential gains associated with the multifamily sale. As we move closer to closing the residential transactions, we now have improved visibility into the timing and magnitude of the related tax considerations, and we expect, in this case, that the transactions do not result in a material tax consequences to the REIT. With that clarity, given our current cost of capital and leverage objectives, we have reallocated approximately half of that previously modeled acquisition capital towards share repurchases to date. And as stated, we believe this is the most compelling use of capital. We continue to evaluate our remaining allocation options while being mindful of leverage. Factors such as market conditions and potential dispositions will also figure prominently into our analysis. Finally, I want to acknowledge the key role our people play in our company's ongoing transformation. Over the past several quarters, we have made meaningful changes across the organization to ensure that we have the right people, focus and operating discipline to deliver on our full potential in this next chapter. We are investing intentionally in our people and building a culture centered on accountability, execution and disciplined decision-making. We believe these efforts are critical to sustaining performance and successfully executing the next phase of our strategy. In closing, our transformation continues to gain momentum. The multifamily sale is a defining step forward, and we remain committed to executing our strategy with discipline, transparency and strong governance. With a simpler platform, a strengthened balance sheet and continued governance enhancements, we are confident that we are positioning AH Realty Trust with the resiliency and flexibility to capitalize on opportunities while generating consistent cash flows, disciplined growth and superior risk-adjusted returns. We appreciate the continued support of our shareholders and look forward to the opportunities ahead. With that, I'll turn it over to Craig Romero to go through our portfolio highlights. Craig Ramiro: Thank you, Shawn, and good morning, everyone. Before discussing first quarter portfolio performance, leasing activity and expectations for the rest of this year, I'll draw your attention to additional information presented in this quarter's supplemental financial package, particularly economic occupancy. Economic occupancy as opposed to leased occupancy, which we've historically presented, considers free rent periods, rent abatements and periods prior to rent commencement, therefore, providing stronger correlation to cash NOI. We believe reporting both economic and leased occupancy going forward will provide investors with greater clarity on both past and expected future results. Retail lease occupancy at the end of the first quarter was 94.8% and economic occupancy was 92.5% -- we expect rent commencements primarily at Columbus Village and the Interlock to drive retail economic occupancy increases during the second half of 2026. Retail same-store NOI for the quarter was up 2.2%, driven by rent commencements on new leases across the portfolio as well as positive cash spreads on both new leases and renewals. We anticipate growth to slow through the rest of the year because of certain vacancies and store closures with annual same-store NOI growth ultimately settling well within our projected range of 1% to 2%. Higher economic occupancy at the Interlock Patterson Place, Overlook Village and Columbus Village was the primary driver of first quarter growth. We expect these properties to continue to boost same-store NOI for the rest of the year, driven by rent commencements from new tenants, including Trader Joe's, Golf Galaxy and F1 Arcade. First quarter visits to the new Trader Joe's at Columbus Village continued to outpace the only other location in the market by nearly 2x, while the new Golf Galaxy ranks in the top 3 nationwide. During the first quarter, F1 Arcade opened at the Interlock, driving a 30% year-over-year increase in visits and a 45% increase in parking volume, solidifying the property's destination status in the market. Partially offsetting first quarter gains were vacancies at Southgate Square, Broadmoor Plaza and Broadcreek Shopping Center as well as store closures at Hilltop and Town Center. We expect these properties to weigh on current year same-store NOI as we work to backfill spaces previously occupied by Conn's, Party City, JOANN, West Elm and Orbis. However, we anticipated these closings and tenant demand for these spaces is strong, creating future growth opportunities. We are already in the process of securing high-quality national tenants to fill these storefronts at positive spreads and enhance the merchandising mix at these properties to create longer-term durability. I look forward to providing further updates in the coming quarters. Our retail portfolio remains well positioned to capture sustained tenant demand for retail space at higher rents as demonstrated by positive first quarter spreads of 14.4% on new leases and 4.5% on renewals. Office leased occupancy at the end of the first quarter was 96% and economic occupancy was 87.7%. We expect rent commencements at the Interlock and Town Center to drive economic occupancy gains during the rest of the year. Office same-store NOI for the quarter was up 0.7%, driven by contractual rent increases on existing leases, new rent commencements and 7% positive cash spreads on new leases. These economic occupancy gains were partially offset by vacancy at One City Center from space reclaimed from WeWork in the second quarter of last year. Nevertheless, we expect to end the year comfortably within our projected range of 1.4% to 2.5% annual growth, supported by scheduled rent increases and anticipated rent commencements during the second half of 2026. At the Interlock, we've already begun realizing nearly $1 million of new ABR with the majority expected to commence in the third and fourth quarters. We anticipate that these economic occupancy gains, combined with additional increases at Team Street Wharf, 2 Columbus and 222 Central Park, formerly Armada Hoffler Tower, will outpace temporary challenges at One City Center, 4525 Main and Wills Wharf. While we are not forecasting any new rent commencements at either One City Center or Wills Wharf in 2026, we are seeing good activity and interest in the market and remain confident in our team's ability to re-lease the space. At 4525 Main, we remain on track to re-lease the 8,000 square feet we recaptured last quarter with lease execution expected by the middle of this year. At One Columbus, while we expect leased occupancy to decline by roughly 10 basis points in the second quarter because of anticipated lease expirations, we expect economic occupancy to slightly increase, driven by rent commencements for new tenants at positive spreads. Additionally, we're already at lease on over half of the expiring space at One Columbus and are confident in our team's ability to backfill the rest given the tremendous demand for Town Center office space. Just last week, we completed the consolidation, downsize and relocation of AH Realty Trust's offices to accommodate this demand. As a result of this intentional move, we unlocked and leased 38,000 square feet at 222 Central Park at top of market rents creating $1.3 million of new ABR, which we expect to begin fully realizing in the third quarter of next year, with partial recognition weighted towards the third and fourth quarters of 2026. Town Center is a case study example of the type of asset in which we invest, high quality, differentiated, mixed use and located in markets with high barriers to entry. Another good example is Southern Post, our newest mixed-use asset delivered at the end of 2024, where this quarter, we leased 22,000 square feet to industrious. Just last week, our team executed another 9,000 square foot lease, bringing office lease occupancy at Southern Post to over 93% -- we expect economic occupancy to increase to over 60% by the end of this year and over 80% by the first quarter of 2028 as free rent periods for existing office tenants burn off. Office portfolio fundamentals remain strong with nearly 8 years of WALT, high credit tenancy and less than 2% rollover for the rest of 2026 as well as our team's demonstrated ability to lease space and grow rents. We see continued organic growth opportunity across both our retail and office portfolios through proactive leasing, mark-to-market adjustments on new leases, positive renewal spreads, disciplined expense management and targeted redevelopment and capital investment where returns justify it. This operational focus is central to how we intend to drive consistent NOI growth and deliver long-term value going forward. With that, I'll turn it over to Matt for more details on our first quarter financial results and an update to our fiscal year 2026 guidance. Matthew Barnes: Good morning, and thank you, Craig. AH Realty Trust delivered solid first quarter performance, laying a strong foundation for the 2026 fiscal year. The results reflect the resilience of our assets and the benefits of the actions we are taking to reshape our portfolio and implement a simpler operating approach with less debt, focused assets and shareholder value that recognizes our asset quality. For the first quarter, FFO attributable to common shareholders was $20.6 million or $0.20 per diluted share, above our expectations for the period. FFO as adjusted attributable to common shareholders was $15.1 million or $0.15 per diluted share, also above our expectations for the period. FFO as adjusted excludes the segments classified as discontinued operations, multifamily, construction and real estate financing and therefore, represents the clearest measure of the earnings of our go-forward retail and mixed-use office platform. We believe this is the metric investors should focus on as it reflects a simplified higher-quality earnings profile that will define AH Realty Trust following the completion of our transformation. Net operating income for Q1 was $34.7 million, representing a 1.8% increase year-over-year and approximately $700,000 ahead of guidance. AFFO totaled $19.9 million or $0.19 per diluted share, which exceeds our current cash dividend as outlined in the supplemental with a payout ratio of 72%. Starting with the supplemental package, this quarter reflects a comprehensive refresh aimed at enhancing transparency and aligning disclosures with how we evaluate the business internally. We introduced several new metrics and disclosures, including economic occupancy, a refreshed NAV page and rental revenue disaggregation, all of which are designed to provide clarity on cash flow durability, asset performance and the embedded portfolio value. We believe these changes allow investors to more effectively track our continued progress by assessing both the quality and sustainability of our earnings streams, specifically as it relates to future cash flow growth. A key highlight is the NAV section illustrated on Page 13. This page is intended to provide a clear and transparent view of the underlying per share asset value, excluding the segments and assets categorized for discontinued operations. The analysis reflects the strength of our underlying real estate portfolio, including our high-quality office and mixed-use assets with the non-stabilized component currently representing Southern Post at development cost. The NAV framework plays a central role in how we evaluate financial performance and deploy capital. As our transformation progresses, we believe the quality of our assets is increasingly positioned to translate into durable earnings and shareholder returns. Our NAV analysis points to the intrinsic value of the real estate and serves as an important reference point in our capital allocation decisions, including share repurchases. As Shawn touched on, we remain committed to executing a disciplined capital allocation approach centered on shareholder interest. To that end, we have continued to take advantage of the dislocation between our share price and underlying asset value through our share repurchase program. Year-to-date, we repurchased $24.1 million of common stock at a weighted average price of $5.70 per share, representing an implied yield that we view as highly attractive relative to other investment opportunities. We see this as having a chance to invest our own assets at an effective implied cap rate for this quarter's share purchase above a 9% cap rate. Where else can we create more shareholder value than doubling down on our market-leading portfolio. As Shawn highlighted, dispositions of the multifamily portfolio, real estate financing platform and construction entity are all either complete or well underway. Based on the headway made, we are well positioned to continue advancing our balanced capital allocation strategy, paying down debt, making disciplined investments in select high-growth markets and continuing to execute our share repurchase program where appropriate. Turning to the balance sheet. We are proactively managing maturities and maintaining flexibility in what continues to be selective capital market environment. Looking ahead to the remainder of 2026, we have 2 office asset loans and 1 term loan scheduled for refinancing. We are actively engaged with lenders on all notes and expect to complete these refinancings consistent with our broader balance sheet strategy. Starting with the term loan. Maturing at the end of May, we have received a term sheet from our current lenders and are working to extend this loan at maturity for 12 months under the same terms and conditions, including extending the pricing that we have today. Pain Street Wharf matures at the end of September, and we are in the final stages with a relationship lender to close in the coming days on a 5-year nonrecourse asset level note priced in the 5.25% to 5.5% range. To round out the refinancings, we've also received a term sheet from a large institutional life insurance company for both 5-year and 7-year fixed rate debt on the Constellation office asset priced around 200 basis points plus the corresponding treasury with the expectation to close on this refinancing in the next 2 months. We are pleased with the pricing and terms of each of these loans. This reflects the quality of the underlying assets and the credit strength of the tenants and reinforces our track record of prudent liability management and our ability to navigate an especially challenging office debt market. Reducing leverage to strengthen the balance sheet remains a core priority. Upon completion of the transformation, we anticipate approximately $700 million in total debt paydown, a material reduction that is expected to fundamentally reshape our capital structure. Net debt to total adjusted EBITDA was 8.3x at quarter end, temporarily elevated relative to the prior quarter. We intend to use proceeds from the sale of 11 of our 14 multifamily assets to meaningfully reduce leverage to our target range of 5.5 to 6.5x net debt to total adjusted EBITDA, which we anticipate closing in the coming weeks. We ended the quarter with approximately $142 million of liquidity, providing adequate coverage of our capital needs. We are committed to maintaining a flexible balance sheet, disciplined capital allocation and sufficient liquidity to navigate a potentially prolonged higher rate environment. Now moving to our updated guidance. We are raising full year 2026 FFO as adjusted guidance to $0.51 to $0.55 per diluted share, reflecting the continued restructuring progress, retail and mixed-use office portfolio strength and the solid first quarter performance. We are confident that the actions underway, including simplifying our operating model, exiting noncore businesses, strengthening our balance sheet, executing opportunistic share repurchases positions us to drive long-term value for shareholders. We are committed to unlocking that value one way or another, and we have enhanced disclosures that will provide shareholders with additional transparency to continue to track our progress as we advance these initiatives. With that, I will turn the call back over to Shawn Shawn Tibbetts: Over the past several quarters, we have taken many of the hard but necessary actions to reposition the company for long-term success. We have completed the majority of our strategic transformation, simplifying the business, strengthening our foundation and sharpening our focus on a high-quality operating portfolio. Today, AH Realty Trust is a pure-play retail and mixed-use office REIT, owning and operating open-air shopping centers and thoughtfully integrated mixed-use assets in strong markets across the Sunbelt, Mid-Atlantic and Southeast. With these actions largely behind us, we are now squarely focused on execution and on delivering sustainable performance that drives long-term shareholder value. The path forward is clear, close the multifamily transaction, reduce leverage, continue to invest in our shares at a compelling discount to intrinsic value and demonstrate through consistent operating results that this portfolio deserves to trade at a valuation commensurate with its quality. We have never been more aligned with our shareholders. We remain deeply grateful for the continued support and confidence of our investors as we move into this next chapter. Operator, we are ready for the question-and-answer session. Operator: [Operator Instructions] Your first question comes from the line of Jana Galan of Bank of America. Jana Galan: Congratulations on the progress of the restructuring. The capital markets activity is especially impressive given the macro and interest rate volatility. I was hoping if you could talk to kind of the breadth and depth of buyers for multifamily and for the construction platform and maybe the decision to go with the portfolio versus single assets? Shawn Tibbetts: Yes, thank you for the question. And we appreciate the congratulatory remarks. We are excited to be able to beat our forecast and raise, and we're excited about the path forward. In terms of the capital markets, we've continued to see, especially in the multifamily and retail, obviously, the depth of the market. It's good to see that those markets remain strong even given the kind of macro headwinds. That being said, we had an opportunity to sell to Harbor Group here, great deal for our shareholders, obviously, at a mid-5 cap on in-place and likely, hopefully, a good deal for their investors. We saw interest. We talked to quite a few folks, but we were able to make the best deal for shareholders all things considered with Harbor Group. So we feel good about that. And we're excited, by the way. We're a couple of weeks out, and will be -- that will be a material move, as you're aware, for our firm at $562 million, paying down debt. And as you heard, buying back some of our own shares at what we believe is a nice discount. In terms of construction, that business was and has been in wind-down mode. So our view was let's sell it. And the best buyer for that was actually the employees of the company. So we essentially traded that for a price that's north of what was due to the shareholders anyway in terms of gross profit, but we sold that at a slight uptick from what gross profit would have otherwise been received by the shareholders. It's a tough business right now, as you could imagine, with interest rates, and we think this is the best move for the company, for the shareholders to create a more simplistic company reduce not only confusion, but reduce risk, quite frankly, over the short, mid and long run. So we're excited about that. Jana Galan: Super helpful. And then I appreciate the enhanced disclosure. And you mentioned several lease commencements in the second half '26 for both retail and office, but also some offsets and known move-outs. Can you give any type of year-end '26 economic occupancy projections or ranges for either portfolio? Shawn Tibbetts: Sure. I'll just start by saying that -- we are encouraged by the tailwinds, by the strength of the market and the leasing kind of momentum and velocity activity out there broadly, especially in terms of our retail and mixed-use office portfolio. But I think, Craig, why don't you drill down a little bit, if you don't mind, just quickly and talk a little bit about what's on the horizon here? Craig Ramiro: Yes, sure. Happy to, Shawn. And thank you for the question. When it comes to lease and economic occupancy, I think the widest gap is obviously today in the office portfolio, as you can see. The biggest pieces of that are the Interlock, which we expect to see that gap narrow during the second half of the year as new tenants that we've secured and leased in prior quarters begin to pay rent. And one interesting anomaly, the same Street Wharf, you'll see a decent sized gap there between leased and economic occupancy. The main tenant there is Morgan Stanley. They have a month of free rent every other quarter. That happens to be this quarter. So you will see that gap narrow in the second -- actually close in the second quarter, again, widen in the third and then close again in the fourth. So a little bit of volatility there. But overall, macro speaking, you'll see the difference between leased and economic occupancy from our expectations to narrow as we progress through the second half of this year due to rent commencements. Operator: [Operator Instructions] Your next question comes from the line of Victor Fediv of Scotiabank. Viktor Fediv: I have a question on your decision to kind of shift from acquisitions to share buybacks. It kind of makes sense given where your stock is trading. Just trying to understand the financial implications because if I'm not mistaken, you were planning to use some 1031 exchange money to kind of do these acquisitions. I'm just trying to understand financial implications for you connected with this decision. Shawn Tibbetts: Sure. Thank you, Victor. I think it's pretty straightforward. As we get closer to closure in a couple of weeks on the kind of biggest material part of our transaction or transformation, have a better line of sight on the tax consequence to the REIT, and it looks like that will not be material. So we chose to -- given the value the stock was trading at and kind of capital allocation opportunity cost, if you will, versus buying a retail center at a 7 cap, we said, look, north of a 9 cap, it's better to invest in our assets that we have perfect information on. And obviously, to the benefit of the shareholder, kind of reduce that share count. So we think that was the best move. Obviously, we'd like to get into a mode where we're acquiring additional properties, but not at all costs, right? It needs to be accretive to the shareholder. So our view was let's take the opportunity while there is a discount and let's take also the opportunity to close that distance between current share price and what we believe NAV is -- we will move through that chapter as well as kind of look at some repositioning, kind of some redevelopment opportunities on the smaller scale within the portfolio as we close that gap and then continue to focus on our FFO growth to grow the value of the firm. So we thought it made a lot of sense, especially given that gap to buy the shares back kind of opportunistically, especially given that the REIT is not facing a material tax consequence as a result of the sales of the assets or otherwise real estate positions. Viktor Fediv: Makes sense. And then on these 2 multifamily assets, which are left in Gainesville. So I see that now you're kind of expecting to close it in Q4 '26, first quarter of -- so just trying to understand your logic here. So are you trying to kind of reach full stabilization for those assets and then sell them at the highest price? Like just trying to understand whether you will be willing to sell it earlier or later? How do we think about that? Shawn Tibbetts: Yes. I think, look, the reality is they are stabilized now. And there's some market timing to this as well in addition to the fact that the buyer was not willing to pay us what we wanted for those assets, and we believe the market will bear a better price. So we're going to take those and sell them at the market to get the best number that we can and obviously benefit the company and therefore, the shareholders the best that we can in the form of paying down debt and bringing capital back on the balance sheet. Viktor Fediv: Got it. And then just last for me on -- in terms of -- you mentioned kind of some opportunities to invest capital in redevelopment. Or do you have like any outparcel that you can invest in or kind of upcoming redevelopments that are not on the lease that you're kind of considering? Can you provide some additional details on that? Shawn Tibbetts: Sure. There is a page in the supplemental, forgive the page flipping because I didn't memorize your page. But yes, Page 29 of the supplemental, Victor, includes opportunities that we see kind of on the horizon given the portfolio that we currently own. And there are a number of outparcels there as well as some assets that I would characterize as maybe underutilizing the real estate. Outparcels are probably the quickest move, right, in terms of getting some accretive opportunity into the earnings stream, but also there are some opportunities there with assets that may not be using the real estate in terms of the size of the plot they sit on or the box, quite frankly, may not be the best -- may not have the best tenant. So kind of repositioning in terms of something like we did with the Bed Bath & Beyond the Trader Dose, outparcels, and we have a couple of other opportunities with assets with large parking lots and sitting on a large amount of acreage that we could think about more in the midterm. So yes, we're thinking about that a lot. Candidly, we're doing a lot of work on that. But yes, we'll continue to look for those opportunities and strike at the right time when it makes sense to best deploy that capital. Operator: Your next question comes from the line of Jon Peterson of Jefferies...... Jonathan Petersen: Great. On the share buybacks, I mean, you talked about the implied cap rate of your company being well north of 9%. I mean, how do we think about where your share price needs to go where you hit some sort of breakeven where share buybacks make less sense and maybe investing in future acquisitions or buying back more debt is -- it makes more sense. Shawn Tibbetts: Yes. I think, John, thank you for the question, first of all. Second of all, I think -- when we get within a line of sight of NAV, I think, would be the way to think about that for us, right? Theoretically, if we're at NAV, we can begin to think about deploying capital. I think that implies that our -- we're trading at a cap rate that's compressed relative to where we are today. We don't think we're there. Candidly, we think we've got some work to do to close that gap. So in the short run, as you know, we bought back these shares, and we may do some more. But yes, I think we've got a little ways to go before we can think about actually deploying capital into an acquisition or otherwise, obviously, yield dependent, market dependent. Jonathan Petersen: Okay. And then if we look at your lease expiration schedule over the next 2 or 3 years, are there any material mark-to-market opportunities, particularly in the retail portfolio that we should be thinking about? Shawn Tibbetts: That's squarely down the middle of your plate. Why don't you take that one? Craig Ramiro: Yes, happy to take that, Jon. Thank you for the question. As far as expirations for this year, about half of those we've actually already renewed at positive spreads. So we feel pretty good about near-term expirations. Looking out further, a lot of this is big box anchor spaces, which we'll expect to be able to push rents nominally on those. That's kind of the balance of the retail side. In office, I think there's still tremendous opportunity to mark-to-market, particularly in Charlotte at our Province Plaza asset, where I know we are significantly below market. That is a little bit older, but we have plans to reinvest in that particular location so that we can drive further rent growth. So still lots of organic growth opportunity in both sides of the coin, retail and office and bullish about our prospects going forward here. Jonathan Petersen: Maybe kind of -- Shawn, just bringing together all your comments and just all the moves that you guys have made with the Board refresh and the selling multifamily, what would you say is the most meaningful movement that the company has made this year? Shawn Tibbetts: Well, that's a tough one. As you can tell, Jon, and I appreciate the question, we're excited about where we are and more importantly, where we're headed. It's hard to single one out. But I think from an economic standpoint, the scale and the momentum created here as of late on the sale of the multifamily and the real estate financing as well as the construction business. I mean, we came to the market 3 months ago and said we are going to do these things, and we have materially done those things. I think when you add to that, this kind of evolution of our company, the ability to bring highly skilled directors on board is, in my mind, metaphorically accretive to the Board, right? And it gives us an opportunity to have some additional guidance. We appreciate more than they know the kind of contributions from George and Dennis. But as we evolve this company, we're bringing 2 folks with deep capital markets REIT, public REIT experience on to this Board. And we think that is helpful to us to kind of challenge some assumptions work through the challenges that face us ahead and continue to grow this company, grow, again, close that NAV gap and grow the FFO and in turn, grow the shareholder value over time. So we're just excited about this, excited about the opportunity, thankful for the directors that were with us and very thankful for the ones that will be joining us. And I think, look, I'd be remiss not to say I'm thankful for the team for digging in and plowing through this challenging yet rewarding kind of phase in our company here. But we're fired up. We're excited. We are bullish, and we are executing, and we're excited about the future. Operator: This concludes our question-and-answer session. I would now like to turn the call back to Shwan Pivot for closing remarks. Shawn Tibbetts: Thank you very much. First and foremost, we appreciate your interest in our firm. For the shareholders, your investment in us, for the employees, your continued resolve to see our company continue to succeed. I just want to thank you for joining us today. We look forward to more exciting quarters in the future and look forward to some press releases from us. We're excited about where we're headed and couldn't be more excited for the support that we're receiving along the way. So thank you for joining this morning, and have a nice day. Operator: Thank you. That does conclude today's call. You may now disconnect. Goodbye.
Operator: Hello, everyone. Thank you for joining us, and welcome to the Duke Energy First Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Mike Switzer, Vice President, Corporate Development and Investor Relations. Mike, please go ahead. Mike Switzer: Thank you, Jen, and good morning, everyone. Welcome to Duke Energy's First Quarter 2026 Earnings Review and Business Update. Leading our call today is Harry Sideris, President and CEO; along with Brian Savoy, Executive Vice President and CFO. Today's discussion will include the use of non-GAAP financial measures and forward-looking information. Actual results may differ from forward-looking statements due to factors disclosed in today's materials and in Duke Energy's SEC filings. The appendix of today's presentation includes supplemental information, along with a reconciliation of non-GAAP financial measures. With that, let me turn the call over to Harry. Harry Sideris: Thank you, Mike, and good morning, everyone. We're pleased to be with you to share our results on the continued progress we're making on our strategic priorities. Today, we announced first quarter 2026 adjusted earnings per share of $1.93, which builds on our momentum from last year and marks a strong start to the year. These results are primarily driven by critical infrastructure investments to meet growing customer demand in our service territories. We are on track to achieve our 2026 guidance range of $6.55 to $6.80 and are reaffirming our 5% to 7% long-term EPS growth rate through 2030. And we are more confident than ever that we will deliver in the top half of the range beginning in 2028 when we expect to see accelerated growth from the economic development projects we have secured under ESAs. Our growth is strong. Economically attractive jurisdictions is underpinned by the industry's largest regulated capital plan, efficient recovery mechanisms and a long track record of constructive regulatory outcomes, and we continue to see strong fundamentals across our business. In the first quarter, we achieved key strategic milestones in support of the growing states we serve. With every investment, we're ensuring the dollars deliver long-term value for our customers and communities. We will continue to execute this strategy with discipline and look forward to updating you throughout the year. As we invest in our system, I want to underscore that our priority has been and always will be providing customers reliable power at the lowest possible cost. As a result of this unwavering focus, our rates are below the national average and have risen below the pace of inflation. We continue to find new ways to deliver affordable energy for our customers, including leveraging our scope and scale to achieve top-tier cost management. As shown on Slide 5, I'm pleased to announce 2 major accomplishments that will provide more than $5 billion of customer benefits, further demonstrating our sustained commitment to providing customer value. First, last week, we reached a multiyear agreement to monetize up to $3.1 billion of clean energy tax credits expected to be generated through 2028. The proceeds will flow back to customers to support keeping rates as low as possible. We also received all regulatory approvals, including from FERC, North Carolina and South Carolina regulators for the proposed combination of our 2 Carolina utilities. Combining these utilities will enable us to meet the Carolina's growing energy needs more efficiently with estimated customer savings of $2.3 billion through 2040. With these approvals, we're working towards an effective date of January 1, 2027. Our customers remain our top priority, and we will continue to utilize every tool available to keep rates as low as possible. We had several other significant accomplishments in the first few months of 2026, which are outlined on Slide 6. Starting with the 2 strategic transactions announced last year. We closed on the first tranche of Brookfield's minority investment in Duke Energy Florida in early March, receiving $2.8 billion in cash proceeds for a 9.2% interest in our Florida utility. Several weeks later, we completed the sale of our Piedmont Natural Gas Tennessee business to Spire for $2.5 billion. The more than $5 billion in proceeds strengthen our credit profile and help cost effectively fund our $103 billion capital plan as we invest for the benefit of our customers. Moving to economic development. We continue to seize the growth in our attractive regions driven by innovation in AI technologies and advanced manufacturing. Since the fourth quarter call, we've signed an additional 2.7 gigawatts of ESAs with data center customers, bringing our total executed agreements to approximately 7.6 gigawatts, nearly 2/3 of which are already under construction. We recognize that we're in a once in a generation build cycle and have been collaborating with state and local officials, policymakers and regulators to attract these investments to our communities while protecting our existing customers. We've taken a leading role in developing contract structures that establish greater certainty for planning and ensure that new large customers pay their fair share of the overall system costs. Contracts include minimum demand provisions, credit support, refundable capital advances and termination charges. Importantly, these incremental volumes will benefit all customers over the life of the contract as system costs are spread over a larger base. For decades, our teammates have had the privilege of living and working alongside the customers we serve, and that experience has made community engagement and core competency in our planning and delivery. When projects are built with communities and not around them, we are able to support growth in a way that both protects and benefits customers. And finally, I want to touch on several regulatory updates, beginning with North Carolina. The rate cases for both Duke Energy Carolinas and Duke Energy Progress are proceeding on schedule. The next step will be intervenor testimony, which is due for DEC at the end of May. We look forward to continuing constructive engagement with stakeholders as we advocate for the critical investments needed to reliably serve our growing communities and provide value for our customers. And in mid-March, we filed our initial electric rate stabilization adjustment in South Carolina under legislation that was signed into law last May. This efficient process allows for annual true-ups that reduce rate volatility for customers. The investments we're making in our systems support critical upgrades to improve reliability, harden the grid and support growth. Whether it's a blue sky day or responding to winter storms like we experienced earlier this year, we continue to provide value by keeping the lights on and restoring power safely and quickly. Moving to Slide 7. We continue to advance our all-of-the-above strategy, adding 14 gigawatts of generation over the next 5 years. We're also maximizing existing generation by extending the lives of our nuclear fleet. In April, the NRC approved the subsequent license renewal for Robinson Nuclear Plant, marking our second nuclear plant to reach this important milestone. As the operator of the largest regulated fleet in the nation, nuclear is foundational to our strategy, and we intend to seek similar extensions for all our remaining reactors. Our gas generation program, which is a critical component of our strategy is well underway with 5 gigawatts under construction and an additional 2.5 gigawatts in development. In March, the South Carolina Commission approved our application for a 1.4 gigawatt combined cycle plant in Anderson County. The plant is the first to be approved after the enactment of the Energy Security Act last May, and is our first new baseload generation asset in the Palmetto State in a decade. Construction is expected to begin in 2027. And last month, we implemented a CWIP rider in Indiana for our Cayuga combined cycle plant. This recovery mechanism supports the state's focus on affordability by reducing overall costs to customers while maintaining balance sheet strength. We have agreements in place to secure the long lead time equipment and workforce needed for this dispatchable generation, which reduce risk and leverage our size and scale to complete these projects efficiently, maximizing the value for our customers. The first turbine secured under our framework agreement with GE Vernova are being built, with the turbines for the first Person County combined cycle project expected to be delivered in the second half of this year. Our gas generation build will create thousands of construction jobs and we have a solid plan to ensure we have the skilled labor needed to meet our construction milestones on time and on budget. In the Carolinas, we have signed EPC contracts for the first 3 new gas generation facilities, a programmatic approach that gives our EPC provider Zachry line of sight to an order book of projects. We have deliberately laid out the construction timelines for Person County and Marshall plants to create a road map for Zachry to stage the regional workforce. This will support developing and retaining a local craft pool for years into the future. We're building on the success we've had supporting talent pipelines to address needed skills in our service territories, like we've done with lineworker training programs, and we're sharing these best practices with our EPC partners. To bring all this together, our project management and construction team has a robust construction monitoring process in place. We are working closely with our equipment suppliers and EPC providers, including conducting quality assurance checks of equipment and manufacturing and leveraging AI technologies to track milestones. This includes monitoring construction at a granular level down to the cubic yard of dirt excavated and concrete being poured. Overall, our scope and scale as well as our extensive experience and infrastructure development uniquely position us to lead this record generation build. And we've been actively preparing for this next build cycle for more than 3 years given us full confidence in our ability to execute the work ahead. With that, let me turn the call over to Brian. Brian Savoy: Thanks, Harry, and good morning, everyone. As shown on Slide 8, we delivered strong first quarter results with reported and adjusted earnings per share of $1.97 and $1.93, respectively. This compares to reported and adjusted earnings per share of $1.76 last year. Electric Utilities and Infrastructure was up $0.16, driven by infrastructure investments to reliably serve customers in our growing jurisdictions as well as favorable weather. Partially offsetting this was higher O&M and depreciation expense on a growing asset base. The colder temperatures we experienced in the quarter drove higher usage, but this was offset by higher O&M expenses incurred responding to winter storms. We budget for storms and have solid recovery mechanisms in place. So the impact in the first quarter is largely timing, and we continue to target flat O&M for the full year. Gas Utilities and Infrastructure was up $0.01 compared to last year, with contributions from riders and customer growth, partially offset by higher depreciation expense. The Other segment was essentially flat to the prior year. Our results for the quarter continued to build on the momentum from the past year, reflecting the strength of our utilities and consistent execution of our strategy, positioning us well to achieve our full year EPS targets. Turning to Slide 9. Our economic development success continues as we progress additional large load projects through the pipeline and signed contracts. We have now secured approximately 7.6 gigawatts of electric service agreements with data center customers, including an incremental 2.7 gigawatts since the fourth quarter call. As Harry touched on, these contracts include provisions that protect existing customers and deliver value to those customers over time by spreading fixed costs over a larger base. As we continue to convert economic development prospects into firm projects, we are locking in contracted ramp schedules that provide us with increasing confidence in our long-term load growth projections. On Slide 10, I want to highlight the work underway to sign additional contracts and bring new large loads onto the system. We continue to see robust interest from large load customers with our late-stage high confidence pipeline now at 15.4 gigawatts, inclusive of the ESAs we've signed. Our teams are working diligently to advance projects through the pipeline, and we expect to convert additional prospects to ESAs over the next 12 months. Construction is underway on the first 5 gigawatts of new data centers, and we are putting the necessary infrastructure in place to support speed to power, preparing the grid to deliver energy as soon as they are ready and executing our generation build to grow together over time. Consistent with our load forecast, we expect these customers to begin taking energy as early as the second half of 2027 and into 2028 and ramp into their full contracted load through the early 2030s. We expect the 2.7 gigawatts signed in the first quarter as well as any incremental projects signed to begin taking energy late in the 5-year planning window and ramp into the early to mid-2030s, strengthening the durability of our long-term growth potential well into the next decade. Turning to the balance sheet on Slide 11. We remain well positioned to meet our financial commitments for the year. In March, we received over $5 billion of proceeds from the sale of Piedmont's Tennessee and the first tranche of our -- of the Duke Energy Florida minority investment. Closing these transactions provides financial flexibility to execute our strategy and demonstrates our commitment to pursuing the lowest cost of capital to support our investment plans. Also in March, we issued $1.5 billion of convertible senior notes at a 3% coupon, providing interest savings as we pay down higher cost debt. We took advantage of the strong market conditions and priced $300 million of equity under our ATM program, which will settle in December 2027, consistent with the timing of our future equity needs. This balanced funding approach, along with improving cash flows from efficient recovery mechanisms keeps us on track to deliver 14.5% FFO to debt in 2026 and 15% over the long term, providing meaningful cushion to our downgrade thresholds. I also want to take a moment to acknowledge a major achievement we celebrated as a company this year, our 100th consecutive year of paying a quarterly cash dividend. This milestone marks a long-dated commitment to the dividend that's directly tied to the company's financial strength, regulatory execution and disciplined long-term investments. We have a diverse investor base, including many who live and work in the jurisdictions we serve, and we are proud to deliver this consistent cash flow they can count on. Let me close with Slide 12. We are off to a strong start in 2026, and I'm proud of our team's unwavering commitment to deliver value for our customers each and every day. We are on track to achieve our 2026 EPS guidance range of $6.55 to $6.80 and 5% to 7% EPS growth through 2030 with confidence to earn in the top half of the range beginning in 2028. Economic development success across our states generates an extensive runway of customer-focused capital investments that position us to deliver on our growth targets, which combined with our attractive dividend yield, provide a compelling risk-adjusted return for shareholders. With that, we'll open the line for your questions. Operator: [Operator Instructions] Your first question comes from the line of Julien Dumoulin-Smith. Julien Dumoulin-Smith: So just as it pertains to the Carolinas cases here, right? I mean, obviously, they're proceeding, as you say, on schedule. How do you think about any potential to settle them up here partially or otherwise here? Again, obviously, we're ticking through the milestones here. But just how would you set expectations against the wider backdrop here? A lot of noise in the system here, would love to hear how you set expectations. Harry Sideris: Yes, Julien. So we always pride ourselves in working closely with our regulators and stakeholders to make sure everybody understands the benefits of the case, the value that we're providing to our customers. Like I mentioned, the next big milestone is the intervenor testimony later this month. I think once we get that out, we will have more extensive discussions on settlement opportunities. We always are open to that, but we also feel like we have a strong case if we have to litigate it. We understand that affordability is front and center for everyone, it's front and center for us, and we're taking every action that we can. The announcement that we made yesterday with over $5 billion of savings over time for our customers is just one of the tools. And we have other tools in our tool bag to help as we have those stakeholder discussions. So we feel very confident that we will be able to continue our regulatory outcomes -- strength in regulatory outcomes that we've had for the last several years. Julien Dumoulin-Smith: Awesome. Excellent. And then just coming back to the load growth, I mean, kudos again on that here in the quarter. Can you give us a little bit of an update in South Carolina, where do we stand on the generic large load tariff docket? How do you think about that being a catalyst in its own right? And any differences in the framework that you're expecting between the 2 different Carolinas here? Harry Sideris: Yes. We're looking at several dockets and several tariff opportunities in all our states, but they're all grounded on the contracts that we have mentioned before, making sure that the data centers pay their fair share through minimum take provisions, deposits, refundable deposits, clawback provisions if they terminate. And also the benefits that they provide over time is a tremendous value to our customers. So making sure that people understand that. This is billions of dollars over the life of these contracts that are going to go to help offset the fixed system costs that we have with the larger loads. So we're in discussions in South Carolina, North Carolina, Florida and other states to make sure that these are memorialized and that we have the right provisions and tariffs in place to be able to do that. We feel our contracts do that now and then tariffs will just add to that. Operator: Your next question comes from the line of Carly Davenport with Goldman Sachs. Carly Davenport: Maybe just on the tax credit monetization that you announced this morning or mentioned in your prepared, any details you can provide in terms of counterparty or terms there? And just are there any other opportunities like that, that you could utilize to continue to provide customer benefits as the focus on affordability remains top of mind? Brian Savoy: Carly, this is Brian. I'll take that one. As we monetize tax credits over the past couple of years, we've tested the market and we found a couple of partners that we wanted to go longer with. And that's what was the catalyst to negotiate a multiyear contract with this counterparty. We can't disclose the counterparty, but they have a healthy tax appetite, obviously, because they're acquiring these credits and going to be applying them on their tax return. And we feel like that, that's the best approach to partnering with companies as this IRA monetization market has continued to mature because going through an auction each year does take a lot of churn and effort in the system and you don't necessarily get the best prices. Like we tested the prices. We got great value for our customers with this contract. And after we've proven out that the discounts on the tax credits are as good or better than any market we've seen. So I think you could expect us to continue doing this. And just to be clear, this is a forward contract. So we're going to earn the tax credits and sell them in those given years, but we predetermined the set value for our customers, which is a great, great opportunity. Carly Davenport: Great. Super helpful. And then maybe just on nuclear. I guess across the industry, there's been some discussion on perhaps a consortium of utilities, hyperscalers, government entities kind of coming together to try to address some of the cost overrun issues and move forward on new build AP1000s in particular. I guess, is that sort of a structure something that you might consider participating in? And maybe just refresh us on kind of what specifically you're looking for to feel confident to move forward on new nuclear development. Harry Sideris: Yes, Carly, obviously, nuclear is very important to us. We have 11 reactors that provide safe, reliable, dispatchable clean energy to our customers. And like Brian just mentioned, also helps us with customer value by providing almost $600 million of tax credits a year to our customers. So obviously, nuclear is important to Duke Energy. I think nuclear is important for the future of the country and the utility industry in general. We're going to need nuclear in the future to be able to deliver reliable power and clean power to handle the growth that our country is experiencing. But like we've said before, our main focus right now is to make sure that we get the most out of our current reactors. So we have about 300 megawatts of upgrades that we're executing and also getting the life extended. So we just announced Robinson's life extension, we'll be extending the lives of our other reactors as well. And we're working with the government, with hyperscalers and others to make sure that the things that we need to solve to be able to go forward with the new nuclear build are being managed. So those risks like we've talked about before, first-of-a-kind risks on the technology, what are we going to do with supply chain and workforce and making sure that that's available out there. And last but definitely not least is how we manage the financial risks that protects our customers from overruns as well as protects our investors from that. So we continue to have those discussions. We continue to maintain optionality in our IRPs and our planning to be able to do that if those answers come. But we will not make any moves till we get those 3 questions answered. Operator: [Operator Instructions] Your next question comes from the line of Jeremy Tonet with JPMorgan. Jeremy Tonet: Just wanted to maybe go into the backlog a little bit more for the ESAs. Just wondering if you could, I guess, share a bit more of the view of the larger pipeline, as you said, the 15 and change, and how you think the cadence of this could come together in the future as far as the potential to expand the plan and what that could mean over time? Harry Sideris: Yes, Jeremy, like we talked before, we're taking a very disciplined approach to this, really focused on those counterparties that are -- that can deliver those projects, and we're very conservative in what we're putting into that. So our pipeline is much bigger than that. But what we focus on is that late-developed stage, and we feel confident that the discussions that we're having are going to land a lot of these that are in our late development pipeline in the next 12 months. So we'll continue to update you on that. But we continue to have prospects further deeper in the pipeline that we're moving up into this more advanced stage as well. Brian Savoy: Jeremy, if I could just add, I can't help myself. I'm so proud of our focus on speed to power. We've really retooled how we approach these large load customers, pulling together our transmission and grid teams as well as our economic development teams, ensuring that we're looking at every solution to get these customers signed. And I think it's evident. We signed 2.7 gigawatts this quarter, which was more than half we signed last year is really a testament to that speed to power focus, and you should expect more of that in the future. Jeremy Tonet: Got it. That's helpful there. And just wanted to turn towards the current rate case. Are there any direct offsets here from the savings that you announced with the merger of the Carolinas and as well as the tax credits? Just wondering if you think about the potential to -- levers, I guess, to reframe the ask as a result of what was accomplished here just looking at forward prospects. Harry Sideris: Yes, Jeremy, we have a lot of levers, tax credits being one of them. The one utility, that's going to go into effect at the beginning of next year. So that will be more over time, but it does definitely provide a lot of value to the customers over that time, $2.3 billion. So our focus with the levers that we have now is how we can offer some of those up to mitigate some of the increase. So think about tax credits, then we have some other options as well. Again, we'll be talking to our stakeholders and our regulators after the intervenor testimony is filed at the end of this month. Jeremy Tonet: Got it. One quick one, if I could, just as it relates to the legislative session, if there's anything that you're watching there? I think there might be some bills talking on tax incentive for data centers, fuel cost sharing mechanisms. And just wondering if -- any thoughts on the legislative session you could share? Harry Sideris: Yes. We share the goals that our legislators and our regulators and our stakeholders have in the states. They want to make sure that customers are protected from the large load that's coming to our territory to make sure they pay their fair share. They want to make sure that the reliability is maintained. And they also want to make sure that we continue to have economic development in the states grow. Those are all things that we're in tune with, and we're working with them. I think a lot of the things that are being discussed are already in our contracts. It's just codifying some of that. So we'll continue to work with them, but we all have the same goal in mind to make sure that our customers are protected and our states can continue to grow and we can continue to have reliability. Operator: Your next question comes from the line of David Arcaro with Morgan Stanley. David Arcaro: I was just wondering -- just one question from me. Have you seen any -- just in terms of the data center activity in the broader pipeline, have you seen any acceleration in that activity in terms of top of the funnel interest in your service territory? Wondering if there are any areas, any regions that are showing indications that they could be bigger hubs and develop that way over time? Harry Sideris: Yes, Dave, we're seeing an acceleration in interest in our territories. Being a vertically integrated utility has a lot of advantages to these hyperscalers. We plan our transmission, our generation. It's a one-stop shop. We also have a very vast experience and skill around community engagement that can help these folks as they navigate zoning and other issues that crop up. So we're getting a lot more interest in our service territories. We're seeing in North Carolina around the Charlotte area kind of becoming another hub. We have a lot of interest in Florida as well as the southern part of Indiana. I know a lot of activity has happened in Northern Indiana originally, but we're getting a lot of incomings for the Southern Indiana region now as well. So we'll continue to work on those. Like Brian mentioned, we have a team in place that their goal 7 days a week, 24 hours a day is how do we get these things signed quicker, how do we service them quicker, maintaining the reliability and the value for all our customers. Operator: Your next question comes from the line of Richard Sunderland with Truist Securities. Richard Sunderland: Circling back to the customer savings outlined on Slide 5. The tax credit agreement, can you speak a little bit to the timing of flowback to rate payers there? I think you've discussed this a little bit in the past. Just trying to get a sense of if the latest monetization agreement is consistent with that or any changes in thinking there? Brian Savoy: Thanks, Richard, and congrats on the new role. I know you started covering Truist recently. So it's good to hear your voice. The tax credit agreement, I would think about it as we're locking in the value per customer. So we're not going to be negotiating discounts year in and year out. The flowback is different for North Carolina versus South Carolina for DEP and DEC currently. But you think of -- we've been signaling to a 4-year amortization generally, and that's what is in North Carolina. And as Harry said, as we work through the rate cases, this might be a tool to accelerate to keep the rates even lower during this time. But it's not additional tax credits, it's ones we expected to earn through our nuclear, solar and battery investments. It's monetizing them at these predetermined discounts and locking in that value for customers. Richard Sunderland: No, I appreciate that commentary as well. I guess on the ESA update too, just if I caught that in the script, I think it was 2/3 are under construction. Curious what you see as the timing for those remaining projects to begin construction. And I guess anything you're focused on locally around moratoriums, what have you in terms of the confidence of those projects advancing until they start turning dirt? Harry Sideris: Yes. So we're very confident in all our projects that are in the ESA bucket. Our ESAs require having zoning nailed down, having permits in place. So we feel confident, and that's why a lot of them have been able to start construction as soon after we sign those ESAs. We anticipate the same thing with all the new ones that are coming into us. They'll start construction very rapidly. And in fact, we're looking at ways of how we can accelerate some of the bridge power to them -- to get them online and have them start taking their service a little bit earlier as well. Operator: Your next question comes from the line of Steve D'Ambrisi from RBC Capital Markets. Stephen D’Ambrisi: I just had a quick one to follow up on kind of the load commentary in the 2.7 gigawatts. I was just looking at the North Carolina IRP that you guys had filed in October. And I think in that IRP, you had included the moderate development forecast, which included something like 6 gigawatts of advanced stage, but it was risked at like a 25% or 30% rate. And so I mean, it seems like signing this 2.7 gigawatts, even if it's in the tail end, looks like it would be upside to what was kind of laid out in the moderate development plan. So can you just talk about what that means and like what the avenue is to update load forecasts in North Carolina or elsewhere just as you continue to sign these large loads? Harry Sideris: Yes. It's a very dynamic environment that we're dealing with. That's why we put a high case in that IRP. So this 2.7 gigawatts that we just recently signed, that moves that load up to that level. So it's been contemplated in our plans there. It will be discussed in our rebuttal as well. So that just solidifies that other line in there. This is very dynamic. We're also talking to our stakeholders on how we can update that a little bit more frequently than what we have in the past because it's such a dynamic environment. But we're doing everything that we can to make sure that we're planning the generation, staying ahead of it so that we can sign these ESAs as fast as possible and not have any delays. Operator: We have reached the end of the Q&A session. I will now turn the call back to Harry Sideris for closing remarks. Harry Sideris: Thank you again, everybody, for joining us. And before I close, I just wanted to reemphasize how proud I am of the results that this team has delivered in the first quarter, and we're going to continue to build on that momentum as we move through the rest of the year. But I want you to know that we're executing our strategy effectively. We're reaching our new milestones in our generation build, and we're converting those economic development opportunities into real projects, and we're going to continue doing that in the future. So I'm very confident in our ability to earn in the top half of the range -- EPS growth range in 2028 as these loads materialize. And our plan is very durable well into the future. So again, thank you for joining us today, and thank you again for your investment in Duke Energy. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Greetings, and welcome to the Enpro First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to James Gentile, Vice President, Investor Relations. Thank you. You may begin. James Gentile: Thanks, Jessie, and good morning, everyone. Thank you for joining us today as we review Enpro's first quarter 2026 earnings results and discuss our improved outlook for 2026. I'll remind you that this call is being webcast at enpro.com, where you can find the presentation that accompanies the call. With me today is Eric Vaillancourt, our President and Chief Executive Officer; and Joe Bruderek, Executive Vice President and Chief Financial Officer. During this morning's call, we will reference a number of non-GAAP financial measures. Tables reconciling the historical non-GAAP measures to the comparable GAAP measures are included in the appendix to the presentation materials. Also, a friendly reminder that we will be making statements on this call, including our current perspectives for full year 2026 guidance that are not historical facts and that are considered forward-looking in nature. These statements involve a number of risks and uncertainties, including those described in our filings with the SEC. We do not undertake any obligation to update these forward-looking statements. It is now my pleasure to turn the call over to Eric Vaillancourt, our President and Chief Executive Officer. Eric? Eric Vaillancourt: Thanks, James, and good morning, everyone. Thank you for your interest in Enpro, as we discuss our first quarter results, provide an update on strategic initiatives and share our current views for the balance of 2026. Before we discuss our results for the first quarter, I would like to recognize our 4,000 colleagues across the company who are accelerating their personal and professional growth, while contributing to Enpro's strategic and financial successes. Momentum and excitement is showing up throughout the organization. And we are off to a strong start in the second year of Enpro 3.0. We are energized to continue providing critical products and solutions to our customers, while driving significant enterprise value creation, by unlocking compounding strength of our portfolio. Our leading market positions, committed colleagues and strong balance sheet support the continued execution of our multiyear value creation strategy. After my update, I will turn the call over to Joe for a more detailed discussion of our results and drivers of our increased guidance for 2026. Now on to the highlights for the first quarter. We started 2026 off on the front foot with reported sales up nearly 11% year-over-year. Improving demand in semiconductor markets drove sales in the Advanced Surface Technologies segment up over 11%. Additionally, the contributions from the 2 businesses that we acquired in the fourth quarter, AlpHa Measurement Solutions and drove Sealing Technologies sales up 10.8%. Total company adjusted EBITDA increased nearly 13% to over $76 million at a margin over 25% for the first quarter. We are pleased with these results, especially as we continue to invest in growth opportunities across the company at high-margin return thresholds, while accelerating investments in the development and growth of our colleagues. Throughout our organization, teams are excited to drive our 3.0 strategy forward. Our early progress shows the benefits we expect to unlock as we move into this phase of our strategy. We are confident that our proven excellent execution will allow us to continue to succeed in a variety of macroeconomic backdrops. In AST, positive trends across the segment's portfolio of products and solutions are translating into strong performance. The slope of the demand curve has steepened with order patterns accelerating during the first quarter ahead of our expectations at the start of the year. For us, execution is top of mind. And we began building inventory during the first quarter to ensure that we can effectively deliver for our customers and proactively manage potential capacity, supply chain and labor constraints as demand increases. We are already seeing the investments we made in AST during the downturn begin to bear fruit in the early stages of the recovery cycle. We expect these investments will position us well to capture opportunities from the acceleration of semiconductor capital equipment spending for the balance of the year and beyond. We also believe that, our vertical integration model is a key differentiator for Enpro in the next phase of the semiconductor industry growth, as many of our new business wins are using more of our solutions to drive value for our customers, enhancing our specified position in critical in-chamber tools, including gas dispersion and wafer handling applications. In addition, hard work to qualify and earn processor record designations solidifies our position in leading-edge precision cleaning solutions, a business that is currently strong and accelerating. Our capacity expansion in Taiwan, California and Arizona, both executed and ongoing, position us to participate in the rapid expansion of leading-edge chip production, capacity supporting advanced computing and artificial intelligence. In Sealing Technologies, segment revenue of 10.8% was primarily driven by the first full quarter contribution from the acquisitions of AlpHa and Overlook completed in the fourth quarter of 2025, recovering nuclear solutions sales and currency tailwinds. Commercial vehicle sales were down year-over-year, below our expectations as demand remains slow, although we're cautiously optimistic that we are nearing the bottom in commercial vehicle markets. Aerospace sales in Sealing were flat year-over-year, reflecting a difficult year-over-year comparison in commercial aerospace, which was partially offset by continued acceleration in demand for products supporting space applications. Total Sealing segment orders were up double digits during the first quarter. Sealing Technologies segment profitability remained strong at 32.5% with disciplined execution helping to offset continued growth investments, softness in commercial vehicle sales and tepid general industrial demand internationally. Aftermarket sales represented 60% of Sealing segment revenue in the quarter. Integration is going well at AlpHa and Overlook. And we are making the appropriate investments to fully integrate these businesses into Enpro and unlock additional growth opportunities. Our new colleagues are already finding ways to leverage Enpro network, including our sourcing, supply chain capabilities and operational expertise while delivering strong top line growth during the first quarter. Additionally, AMI, which we acquired in January 2024, continues to perform above plan. We expect the Sealing Technologies segment to continue to deliver continued best-in-class performance. Our growth priorities underpinning the Enpro 3.0 strategy remain unchanged and will guide our performance through 2030. Over the long term, we are positioned to generate mid to high single-digit organic top-line growth with strong profitability and returns complemented by capability expanding acquisitions that meet our rigorous strategic and financial criteria. We are targeting mid-single-digit organic growth in Sealing Technologies. While at AST, we are targeting at least high single-digit organic growth, with both segments capable of generating 30% adjusted segment EBITDA margins plus or minus 250 basis points through 2030. Our cash flows allow us to maintain our strong balance sheet with a net leverage ratio currently at 1.9x after taking into account the fourth quarter acquisitions of AlpHa and Overlook. Our first capital allocation priority is to reinvest in the business and our people, while pursuing select strategic acquisitions that expand our leading-edge capabilities and meet our stringent criteria, without the use of excess leverage to drive growth in line or above Enpro 3.0 goals. We are excited to deliver on our promises and continue to execute our strategic plan. Life is good at Enpro and the future is bright. Joe? Joe Bruderek: Thank you, Eric, and good morning, everyone. Enpro started 2026 with strong results and consistent execution despite a dynamic macroeconomic environment. For the first quarter, sales of $303 million increased nearly 11%, supported by strong year-on-year revenue growth at AST of over 11%. The contributions from the recent acquisitions and steady overall performance in the Sealing Technologies segment. First quarter adjusted EBITDA of $76.4 million increased nearly 13% compared to the prior year period. Total company adjusted EBITDA margin of 25.2% expanded by 40 basis points year-over-year, driven by consistent performance in the Sealing Technologies segment and a nearly 20% increase in AST segment EBITDA, which includes expenses tied to growth investments, both executed and ongoing. Corporate expenses of $13.7 million in the first quarter of 2026 increased from $11.3 million a year ago, primarily driven by higher incentive compensation accruals and $1.2 million in restructuring costs. Adjusted diluted earnings per share of $2.14 increased 13%, largely driven by the factors behind adjusted EBITDA growth year-over-year. Moving to a discussion of segment performance. Sealing Technologies sales increased 10.8% to $199 million. Growth was driven by the contributions from the AlpHa and Overlook acquisitions, a recovery in Nuclear solutions sales from the choppiness experienced last year, strength in compositional analysis applications, as well as strategic pricing actions. These gains more than offset soft commercial vehicle demand and slower general industrial sales internationally. Foreign currency translation was also a tailwind. North American general industrial, aerospace and food and biopharma sales were firm throughout the quarter. For the first quarter, adjusted segment EBITDA increased over 10%, driven by favorable mix, strategic pricing initiatives, contributions from AlpHa and Overlook and foreign exchange tailwinds, partially offset by lower commercial vehicle volumes and investment in growth initiatives. Adjusted segment EBITDA margin was 32.5% and remained above 30% for the ninth consecutive quarter. Turning now to Advanced Surface Technologies. Sales for the first quarter were up over 11% and orders during the quarter hit a clear inflection point. Demand for precision cleaning solutions tied to advanced node chip production is accelerating. In addition, our outlook for semiconductor capital equipment spending has improved. And we built inventory of key products during the first quarter to prepare for the expected increase in demand. For the first quarter, adjusted segment EBITDA increased 18.5% versus the prior year period. Adjusted segment EBITDA margin expanded 140 basis points to 23.3%. Operating leverage on higher sales growth and higher production volumes, as well as favorable mix were offset in part by $2 million of increased expenses tied to growth initiatives. Our #1 priority is to serve our customers and remain agile as we enter this period of unprecedented demand for our semiconductor products and solutions. Moving to the balance sheet and cash flow. Our balance sheet remains strong. And we have ample financial flexibility to execute on our long-term organic growth initiatives and consider select acquisitions that align with our strategic priorities and deliver attractive returns. We generated strong free cash flow in the first quarter, more than doubling from last year to $26.5 million, while capital expenditures increased nearly 40% to $13.1 million, largely supporting growth and efficiency projects. During the first quarter, we repaid $50 million in revolving debt, bringing our leverage ratio to 1.9x trailing 12-month adjusted EBITDA. We expect to continue generating strong free cash flow in 2026 with an unchanged capital expenditure budget of around $50 million this year as we continue to invest in the company at solid margin and return thresholds. Finally, our strong balance sheet and cash generation provide us with ample liquidity to make these investments, while continuing to return capital to shareholders. In the first quarter, we paid a $0.32 per share quarterly dividend totaling $6.9 million. We also have an outstanding $50 million share repurchase authorization. Moving now to our increased guidance. We are raising our total year 2026 guidance issued in mid-February and now expect total Enpro sales to increase in the 10% to 14% range, up from 8% to 12%. Adjusted EBITDA in the range of $315 million to $330 million, up from $305 million to $320 million previously and adjusted diluted earnings per share to range from $8.85 to $9.50, up from $8.50 to $9.20. The normalized tax rate used to calculate adjusted diluted earnings per share remains at 25% and fully diluted shares outstanding are 21.3 million. In Sealing Technologies, shorter cycle order patterns remain solid as we enter our seasonally strong second quarter. As Eric mentioned, we are seeing double-digit order growth year-on-year despite a slightly softer commercial vehicle outlook than previously expected. And we expect mid-single-digit revenue growth, excluding the contributions from AlpHa and Overlook in the Sealing Technologies segment for the year. We are encouraged by positive order momentum in domestic general industrial, aerospace, food and biopharma and compositional analysis, as well as smaller but improving pockets of earned growth in areas such as communications and data center infrastructure. We expect these elements to support improved sequential sales performance in Sealing Technologies into the second quarter while not factoring in any recovery in commercial vehicle markets in our improved guidance ranges. Finally, we expect Sealing segment profitability to remain towards the high end of our long-term target range of 30%, plus or minus 250 basis points for the year. In the Advanced Surface Technologies segment, we are seeing significant order momentum with strong acceleration in Precision cleaning solutions and critical in-chamber tools. New platforms and capacity expansions that we have invested in will begin to generate revenue in the second half of 2026, with ramp schedules dependent on underlying volume into 2027 and beyond. At this time, we expect AST revenue growth in the mid-teens range year-over-year, with segment profitability improving to a run rate close to 25% by the end of 2026 as capacity and supply chains aligned to meet elevated demand levels. Thank you for your time today. I will now turn the call back to Eric for closing comments. Eric Vaillancourt: Thank you, Joe. We are excited to demonstrate our strength and agility as we continue to accelerate our personal and profitable growth in the second year of Enpro 3.0. Thank you all for your interest in Enpro. We'll now welcome your questions. Operator: [Operator Instructions] Our first question is coming from the line of Jeff Hammond with KeyBanc Capital Markets. Mitchell Moore: This is Mitch Moore on for Jeff. Obviously, just really nice margin progression sequentially for AST. Could you help us just unpack a little bit how that inventory investment helped margins in AST? And then separately, just could you help us understand the margin trajectory kind of through the balance of the year? Is it kind of a linear progression to that 25% you talked about? Joe Bruderek: Yes. Thanks, Mitch. As you noted, we did see progression from the low 20%s to 23% and change for the first quarter. The inventory build, which is really important as we head into significant demand in the second quarter and more specifically for the back half of the year, contributed about 150 basis points to the margin increase in the first quarter. We also saw Precision cleaning continue to be very strong, tied to advanced node precision cleaning work, both in Taiwan and the U.S., which helped margins. And we're also seeing a little bit of leverage on the revenue growth. We expect to continue to build inventory a little bit in the second quarter. It might be a little bit less than we had in the first quarter. And then revenue increasing to offset any lower inventory build potentially in the second quarter. So margins relatively similar in the second quarter and then seeing incrementally throughout the second half, pointing towards that roughly 25% run rate that we expect to exit the year at. Mitchell Moore: Great. That's helpful. And then maybe just the Sealing. I think orders were up double digits in the quarter. Could you just expand on the order activity you saw there, where you're seeing it, if it's concentrated or more broad-based? And then if you could just talk a little bit about your confidence in Sealing kind of picking up through the remainder of the year with a little bit slower start here. Eric Vaillancourt: Very confident in Sealing picking up throughout the year. Our order rate is very strong, exiting the first quarter and building throughout the quarter. So very positive on the year. I don't have any concerns there. Very strong in North America, space, aerospace in general. General industrial in the U.S. is still pretty strong. Only area of weakness really is general industrial and a little bit in Europe, a little bit in Asia. But it still doesn't have any meaningful impact to our overall results. Operator: Our next question is coming from the line of Steve Ferazani with Sidoti & Company. Steve Ferazani: Appreciate the detail on the presentation. Eric, I understand commercial vehicles still being weak. Obviously, we've seen 3 or 4 quarters -- 3 or 4 months of much stronger Class 8 truck orders, obviously, coming off of a significant trough. When would you start seeing that? And do you -- is that built in at all that CV comes back at all in the second half? Eric Vaillancourt: It's not built into our projections at all, as we said in the script. Although, I am cautiously optimistic that it does start to pick up in the second half of the year. Keep in mind, the reason for the acceleration in truck orders is really to avoid the extra cost dilution enhancements in the trucks. And so right now, people are prioritizing trucks versus trailers. But that demand will normalize over time to roughly -- if you look over a 20-year cycle, it's about 250,000 units a year, we're somewhere 170,000 to 180,000 now. So I expect next -- at the end of this year, beginning of next year, somewhere in that time frame, you'll start to see some momentum build. I mean, the ratio between trucks and trailers really doesn't change much. We expect to have about 1.1 trailers per truck. So you would expect that to come back. And our aftermarket business remains very strong. Steve Ferazani: Got it. How are you feeling about the 2 acquisitions now with the quarter under your belt? I know that with Overlook, they had made some pretty significant capacity additions prior to the acquisition. In terms of those 2 businesses, do they require significant investments to grow moving forward? How do you feel about them? Eric Vaillancourt: Very, very strong. Very excited about them going forward. They don't require significant investments. Overlook, they made a pretty significant investment and moved into a new building or did move into a new building in the first quarter. But that was already ongoing before we closed on the business. So it really, it was just a move at this point. And so most of the upfitting that already done and their backlog and their performance is really impressive. AlpHa continues to go well. And so we're still excited about those businesses going forward. Joe Bruderek: And I'll just add, Eric, the integrations are going well. I think the teams are joining our functional support, we're helping where we can there. We're already seeing some supply chain opportunities. In addition, we're making some smaller investments. But investments in their commercial organizations to help expand growth opportunities and enter a few new markets and new customers. So we expect that's an area that we can add value and help them grow over time. Steve Ferazani: And I think you mentioned in the script that AMI since the acquisition was 2024, I believe, continues to outperform in general. How are you thinking about that compositional analysis market? Eric Vaillancourt: Love the space. We just would like to do more. And we continue to have a very active pipeline and we continue to look for the right opportunities to meet all of our criteria that are exciting. And there's several opportunities in our pipeline exciting and the more and more opportunities seem like to come to the market. So there's more momentum in that space. Joe Bruderek: Overall, if you take into consideration the compositional analysis growth perspective. We're looking for a kind of minimum high single-digit organic top-line growth moving forward with incremental investments to expand end market positions and commercial expertise. Steve Ferazani: Got it. That's helpful. Just if I get one more in, in terms of where you are with the various qualifying processes to meet advanced node production. Is there a lot more to go there? Eric Vaillancourt: I don't think it ever stops. So I start by saying that. So no, Arizona is getting fully qualified now. I don't know how much longer -- it shouldn't be long at all. But at the same time, there's new investments in Taiwan that are just starting. There's new customers that are starting as well. So I don't think it ever ends, 2-nanometer is going to start to ramp at some point in the next little bit and then you're already trying to qualify 1.4. So it's -- I don't it stops. I think of that as continued investment. Operator: [Operator Instructions] Our next question is coming from the line of Ian Zaffino with Oppenheimer & Company. Isaac Sellhausen: This is Isaac Sellhausen on for Ian. Just on the updated guidance, if you could unpack a little bit more on what has changed with regards to the outlook for the AST business. Maybe if you could parse out the demand drivers between cleaning and coating and the semi cap side. It sounds like visibility is a bit better in capital equipment. Joe Bruderek: Yes, we're clearly seeing increased order momentum and longer lead times. And demand is inflecting significantly sooner and higher than we expected coming into the year from an AST's perspective. And it's coming from both. It's coming from precision cleaning and semiconductor capital equipment in really all geographies. So our increased guidance is pretty much all driven by AST. Our teams are rallying around meeting the higher demand, working with our customers and the entire supply chain and all of our partners to kind of meet the overall industry demand. The outlook is really bright for the rest of the year. The second half is firming up where when we had the call in February, we talked about we saw orders for the second half and really starting in the end of the second quarter. Well, the second quarter is filling in nicely. We're seeing some of that demand come a little sooner into the second quarter. And the second half is clearly going to be significantly increased over the first half in the magnitude of double-digit increase second half versus the first half. And the industry is all talking about rallying to meet this higher demand and out through the end of '26 and really into '27. So there's tremendous optimism. And we expect to participate and even outperform what the market expects. Isaac Sellhausen: Okay. Great. And then just as a follow-up on the margin outlook for both businesses, obviously, it sounds like you guys are managing any kind of inflationary pressures just fine. But is there anything to call out maybe on the cost side with regards to whether it's fuel or equipment. But yes, that would be helpful. Joe Bruderek: No, there really isn't anything that's going to be meaningful from the supply side or cost side. Like I said, we do a very good job in general. Operator: We have no further questions at this time. So I would like to turn the floor back over to James Gentile for closing comments. James Gentile: Thank you, everyone. We're seeing strong momentum across Enpro and look forward to updating all of you when we report second quarter results in early August. Have a great rest of your day. Operator: Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. And you may disconnect your lines at this time.
Operator: Good day, and welcome to the ONE Gas First Quarter Earnings Conference Call and Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Erin Dailey. Please go ahead, Ms. Dailey. Erin Dailey: Thank you, Regina. Good morning, everyone, and thank you for joining us on our First Quarter 2026 Earnings Conference Call. This call is being webcast live, and a replay will be made available later today. After our prepared remarks, we are happy to take your questions. A reminder that statements made during this call that might include ONE Gas expectations or predictions should be considered forward-looking statements and are covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Securities Act of 1933 and the Securities and Exchange Act of 1934, each as amended. Actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings. This call will include financial results and guidance with respect to adjusted net income and adjusted net income per share, which are non-GAAP financial measures as defined by the SEC. A reconciliation of the company's GAAP net income and GAAP earnings per share to adjusted net income and adjusted net income per share, along with additional disclosures required by Regulation G are available in the earnings release we issued yesterday. Joining us this morning are Sid McAnnally, Chief Executive Officer; Chris Sighinolfi, Senior Vice President and Chief Financial Officer; and Curtis Dinan, President and Chief Operating Officer. And now I'll turn the call over to Sid. Robert McAnnally: Thanks, Erin, and good morning, everyone. We're glad to be with you to discuss our first quarter results and to affirm our guidance. We delivered strong results in the first quarter with adjusted EPS growing 6% year-over-year despite one of the warmest winters in the history of our service territory, 25% warmer than the first quarter last year. Our performance reflects disciplined execution of our long-term plan, advancing our regulatory strategy, driving operational efficiencies and supporting growing customer needs. We continue to meet our growth targets while maintaining a strong focus on customer affordability, which was particularly important during a volatile winter. While conditions were historically warm across Kansas, Oklahoma and Texas, we did experience Winter Storm Fern in January, a brief isolated cold event that temporarily drove higher gas prices across our service territory. Our 20% increase in storage capacity since Winter Storm Uri allowed us to shield customers from price volatility and save $98 million relative to purchasing gas at spot prices. Ultimately, this performance reflects the same focus that guides our business every day: safe, reliable and affordable service to our customers and long-term value creation for our investors. Safety remains a priority for our company. Our strong performance in 2025, especially in the areas of workplace safety and safe driving continues to place ONE Gas among the safest natural gas utilities in the nation. The Safety Achievement Award is given each year by the American Gas Association to companies who experienced the fewest number of serious injuries when compared to peers. Last month, AGA named ONE Gas as the winner of this award for 2025, the ninth consecutive year ONE Gas has received the Safety Achievement Award. We are grateful for the commitment and dedication of our entire workforce to operating safely as we serve our customers and support our coworkers. Now I'll ask Chris to discuss the details of our financial performance and regulatory activities. Chris? Christopher Sighinolfi: Thanks, Sid, and good morning, everyone. As Sid noted, we delivered strong first quarter financial performance, demonstrating the resilience of our business model during a historically warm winter. This was largely due to new rates taking effect and the impact of Texas House Bill 4384. We are affirming our financial guidance which includes adjusted net income of $306 million to $314 million and adjusted earnings per diluted share of $4.83 to $4.95. Adjusted net income for the first quarter was $133.4 million or $2.11 per diluted share compared with $120.1 million or $1.99 in the same period last year. First quarter revenues reflect an increase of approximately $27 million from new rates. Depreciation and amortization expense was down 6% year-over-year and interest expense was down 9%. Texas and Oklahoma experienced their warmest winters since 1895 when regional temperature tracking began. Kansas had its second warmest winter in that period and its warmest of the past 34 years. While we have effective weather normalization mechanisms that tempered the earnings impact, we were not completely insulated. Along with earnings impact, cash flows were affected as we monetized less gas in storage than we would have under normal conditions. Higher spring storage balances mean we will inject less this refill season. We expect the storage-related cash flow impact to normalize as we move through the remainder of the year. First quarter O&M expenses increased approximately 8.6% year-over-year compared with 1.9% year-over-year growth in the prior year period. The increase was primarily driven by employee-related costs. We also experienced elevated line locating activity. In particular, more fiber installations, led to an increase in line-locating tickets. Quarterly O&M naturally fluctuates due to the timing and the nature of our operations, and we continue to expect compound annual O&M expense growth of 3% to 4% over our 5-year plan. Other income net decreased by $2.6 million compared with the same period last year, in part due to decreases in the market value of investments associated with our nonqualified deferred compensation plan. Excluding amounts related to KGSS-I, interest expense was $3 million lower year-over-year in the first quarter, due in part to the impact of Texas House Bill 4384 and 2025 Federal Reserve rate cuts, a reminder that our 2026 guidance did not assume any rate reductions. Turning to liquidity. During the first quarter, we executed forward sale agreements under our at-the-market equity program for approximately 237,000 shares of common stock. We also have roughly 269,000 shares remaining to be issued under a forward sale agreement executed in May of last year. Had all shares under forward sale agreement been fully settled as of March 31, net proceeds would have totaled approximately $41.5 million. We will continue to be opportunistic about issuing equity as we meet our remaining needs. Our balance sheet remains strong. Our adjusted CFO-to-debt ratio was 19.1% for 2025 and supporting our A- credit rating and stable outlook from S&P and our A3 rating and stable outlook from Moody's. Our financial plan supports similar performance going forward. Yesterday, the ONE Gas' Board of Directors declared a dividend of $0.68 per share, unchanged from the previous quarter. I'll now turn to our regulatory activities. Oklahoma Natural Gas filed its annual performance-based rate change application in February, seeking a $28.7 million adjustment with rates expected to go into effect in late June. In March, Texas Gas Service made its gas reliability infrastructure program filing for all Texas customers seeking a $36.9 million revenue increase that is expected to take effect in July. Kansas Gas Service has not yet made a 2026 Gas System Reliability Surcharge filing. The GSRS was amended by statute effective July 1, 2026. The amendment expands the qualifying infrastructure investments eligible for recovery to include all state-specific utility plant investments. It also increases the maximum monthly residential surcharge to $1.35 from $0.80. Filings can be done once per calendar year, and we expect to make ours in the third quarter. As a reminder, we do not have any full rate cases planned until we file the Oklahoma rate case in 2027 as required by tariff. And now Curtis, I'll turn things over to you. Curtis Dinan: Thank you, Chris, and good morning, everyone. I'll start with an update on growth and capital deployment. We completed $170 million worth of capital projects this quarter, relatively in line with the same period last year. We are on schedule with final system design and acquiring right of way for the Western Farmers project that was announced late last year. This project, which includes the construction of a 43-mile 24-inch pipeline in Southern Oklahoma is on track to be in service in 2028. Our teams have also completed construction of the 1.6-mile 12-inch pipeline serving the advanced manufacturing facility near El Paso. Commissioning of the pipeline and final installation of the meter set are on schedule to be in service early in the third quarter, meeting our customers' needs. This project required multiple complex crossings including 5 irrigation canals and was executed in close coordination with local authorities and other stakeholders to ensure safe, timely and successful completion. We continue to see steady residential customer growth, even with slower new housing starts due to macroeconomic conditions. Through April, we've installed over 6,300 new meters with Oklahoma City and El Paso showing the strongest growth year-to-date. Across the board, our major metropolitan areas are adding customers at a healthy rate. We are advancing opportunities to serve additional large-load customers across our footprint. Our active discussions include a range of prospects such as large manufacturing facilities, data centers and grid connected utility generation. We have 6 projects in late-stage discussion that in aggregate could support approximately 3 gigawatts of generation and up to 1 Bcf per day of demand across Kansas, Oklahoma and Texas. We recently signed a transportation agreement for one of these projects to supply 20 million cubic feet of natural gas per day to an Oklahoma data center. This is another example of how we're leveraging our existing system to support economic growth that benefits all of our customers. We will update our growth forecast as final agreements are executed. Turning to O&M. Our coworkers continue to drive improvements in workforce efficiency and safety. First quarter line locating activity increased approximately 8.5% year-over-year while damages declined 2%. This highlights the operational benefits of bringing certain work in-house. Building on that progress, we plan to begin in-sourcing the Watch and Protect function in Oklahoma this year. We will be deploying our personnel at excavation sites near transmission and critical high-pressure distribution pipelines to support safe digging practices. This initiative further enhances public safety and system integrity while supporting more proactive management of O&M expenses. We are also using AI technology to drive efficiency. One process improvement initiative has already generated more than 12,000 hours of annualized labor savings. By automating certain tasks, AI allows employees to focus on higher value work while improving consistency, accuracy and reliability. These efficiencies are not onetime gains. They are embedded in our daily operations and supported by a stable and growing technology platform. Our investment in automation reflects a deliberate data-driven approach to cost management and operational excellence while maintaining the safety, affordability and service quality our customers expect. Operator, we're now ready for questions. Operator: [Operator Instructions] Our first question will come from the line of Richard Sunderland with Truist Securities. Richard Sunderland: I realize there are a lot of moving pieces with 2026, but I wanted to start there. You called out the weather, line locates and the Kansas GSRS filing timing. I guess, a shift around that last one in consideration of the new legislation. How do just kind of aggregate in terms of line of sight to 2026? Is -- I guess is the weather putting you in a hole that you have to overcome? I'm just curious about the moving pieces here and how you see them stacking up? Christopher Sighinolfi: Rich, it's Chris. Yes, you're right. I noted in my prepared remarks that weather normalization mechanisms while effective, didn't fully mitigate the impact of the warmth that we experienced in the first quarter. There are both structural things that will be recognized later in the year that derive from that weather, and there are discretionary decisions that we'll make around managing that. So if you look at the structural, for example, in Kansas, we have capacity release of some of the pipeline capacity that we maintain in part due to how warm it was. We didn't need it in the moment, and we don't need it in terms of storage refill. We can sell that capacity. We share that capacity release with customers. You'd have to look back a decade or more to find a weather dynamic that rivals this and where you'd see that similar type of structural delayed benefit, but that's part of what is present in the back half of the year. And then also, if you recall, Rich, last year, we accelerated some O&M projects into 2025 that had originally been planned in 2026. That affords us some flexibility and optionality as we think about managing 2026. We had contemplated a sleeve of projects that we could pull forward from '27 into '26. We formerly assumed we would do them. They're not time sensitive. There's not a safety-related or integrity component to them. So we can defer those projects and create some added capacity in that way. Robert McAnnally: Rich, this is Sid. You also mentioned Curtis' reference to the Watch and Protect program. You'll recall that we've had great success in-sourcing line locating and seen an improvement not only in performance, but significant savings. We are running that same play with Watch and Protect. And so it may feel counterintuitive to speak to the plan that we have to address the impact of weather. But I think it's important to continue those programs that we know are accretive, both in the short term and the long term. They're investments that have a meaningful return. And so we'll continue to make those, but we wanted to be very clear and open with the support for our guidance because we have confidence in the plan and our ability to execute that over the course of the year. Richard Sunderland: That's all very clear. And then turning to the large-load commentary, it sounds like a lot of exciting activity there. The 6 projects referenced in late-stage discussion, are those all incremental to your current capital plan? And then any kind of order of magnitude on the capital opportunity across those 6 projects? Curtis Dinan: Yes, Rich, this is Curtis. When we talk about late stage, that means we're literally talking about final contract terms and final needs of our customers, final design, final understandings of where they will be sourcing the gas supply from because these are transport customers. They're not gas sales customers. So in terms of the scale of those projects, I gave a sense of the magnitude overall. The one that we have announced that gives you a little bit of context, that's the largest one that we've ever announced. That's the Western Farmers project that we talked about at the end of last year. So other projects are more like the one that I mentioned in my prepared remarks that we've just signed that contract. It's not a large capital investment, but it's a meaningful contribution to our operations where we make that investment, it is very immediate-accretive because it's not a large project to put into service. So that one would be, maybe on the smaller scale of some of them that we're talking about. There was another part of Rich's question? Christopher Sighinolfi: Capital plan. Curtis Dinan: The capital plan. So the way we think about that, Rich, or the way we give the guidance is in our 5-year plan in the earlier parts -- the earlier years of the 5-year plan, those projects and those growth dollars are pretty specifically identified in what they're going to. Projects in the latter part of the year are -- there's several different options of those that will ultimately get commercialized. And so we think of those as filling in the bucket ultimately. Is there the opportunity that those buckets may overrun with additional projects? Yes, that's a possibility. We'll just have to continue to see when customers decide to move forward with the projects and what the timing of that might be versus what we've assumed. And as that happens, we'll continue to update what that growth profile looks like. Operator: [Operator Instructions] And our next question will come from the line of Paul Zimbardo with Jefferies. Paul Zimbardo: And just a follow-up on the prior question. Could you quantify what that weather plus kind of the storage excess capacity, just in terms of like an EPS impact from all those kind of abnormal weather items in the quarter? And also, if you had the number, the benefit from that House Bill 4384 in the quarter as well? Christopher Sighinolfi: Paul, I don't. I'd have to follow up with you. I mean we broke out specifically for the Texas House Bill, the non-GAAP, the equity return component. But in terms of how much it impacted interest expense and depreciation, I don't have that offhand. But if you're looking for sort of a total, "Hey, how much did this impact you?" I think that's something we could probably work to provide. In terms of the weather impacts, we have weather norm that doesn't fully reflect in the quarter. What happens? There's somewhat of a delay there. In terms of the capacity release benefits that are coming, it's in the couple of million dollar territory. Paul Zimbardo: Okay. Okay. Great. That's helpful. And then also just to follow up on the large-load side. So like that 20 Mcf project, it sounds like there could be some of those. And I think you said it's decently accretive. I don't want to put words in your mouth, but just is there a way to kind of frame what that benefit could be either to shareholders and/or customers from executing on some of those capital-light opportunities? Curtis Dinan: Paul, this is Curtis. And we have not quantified that project. Probably the easiest way is if you look at what our tariff is, and I've given you what the volumes are, but we've not made a specific comment about what the total of that would be. And typically, we wouldn't on any individual projects like that. So -- but we will include it as part of our overall guidance as we update it. Paul Zimbardo: Okay. Okay. Understood. And then just the last really quick. Is there anything on the weather normalization, like lessons learned, things that you'd recommend proposing? I know this is a really extreme mild period. I don't know if there's any kind of refinements that you're looking to advocate for? Robert McAnnally: Paul, this is Sid. If you look at the way that our weather norm mechanisms have worked across the service territory, on balance, they've been very effective in achieving the goal, which is protecting all of the participants to make sure that everyone is incented to continue to focus on reliable and affordable gas service. And so there are some extraordinary situations like think about this winter, and we covered it a bit in the prepared remarks, where you have essentially no meaningful winter and then one spike that is really significant in the amount of gas that was used and the requirements on the system and then back down to no winter. So it really was an extraordinary first quarter from that standpoint. We don't have any concerns about the weather mechanism going forward. Chris just spoke to the capacity release. That's a pretty elegant solution that the Kansas Commission put in place to incent the company to be prepared. So we know that if we're oversupplied, then there's a capacity release option that's available. It supports good service to our customers, and it is all wrapped around affordability, which takes me back to your previous question. The way that we are treating data centers and large-load opportunities not only is pursuing those opportunities, but as we've said in the past, has 2 other components. The first component is what's the impact to our customers and how do we derisk our participation in those projects to ensure that our customers aren't exposed in a way that we don't think is appropriate. And we successfully have done that, and we continue to do that. The other is how does it fit with the long-term strategy that we have for our own system. So we're thoughtful about these opportunities when they come up. Does it forward the plan that we have already to build a system that's designed to serve our customers and provide economic development opportunities across our service territory? Or is it essentially an alley with a dead end that doesn't have that kind of knock-on growth potential? We're very focused on what's the long-term potential and how does it support our long-term growth profile. So kind of a long answer, but I think you have to understand that we are constantly looking at not weather norm in isolation, not large-load in isolation, not pulling projects forward or pushing them back. We're trying to maintain flexibility so we can operate the company in a way that allows us to respond to whatever the event may be, in this case, weather, but do it in a way that doesn't interrupt our long-term vision for how we support growth for the company and long-term returns for our investors. Operator: And that concludes the question-and-answer session. I would now like to hand it back to the ONE Gas team for closing comments. Erin Dailey: Thank you all again for your interest in ONE Gas. We look forward to seeing many of you at the AGA Financial Forum in a few weeks. Our quiet period for the second quarter starts when we close our books in early July and extends until we release earnings on August 4. We'll provide details about the conference call at a later date. Have a great day. Operator: This concludes the ONE Gas First Quarter Earnings Conference Call and Webcast. You may now disconnect.
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