Good morning, and welcome to the Heritage Insurance Holdings, Inc. First Quarter 2026 Earnings Conference Call. Please note today’s event is being recorded. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. I would now like to turn the conference over to Kirk Howard Lusk, Chief Financial Officer for the company. Please go ahead, sir. Good morning, and thank you for joining us today.

We invite you to visit the Investors section of our website at investors.heritagepci.com where the earnings release and our earnings call will be archived. Materials are available for replay or review at your convenience. Today’s call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon management’s current expectations and are subject to uncertainty and changes in circumstances. In our earnings press release and our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, and we have no obligation to update any forward-looking statements we may make. For a description of the forward-looking statements and the risks that could cause our results to differ materially from those described in the forward-looking statements, please refer to our Annual Report on Form 10-K, earnings release, and other SEC filings. Our comments today will also include non-GAAP financial measures. Reconciliations of, and other information regarding, these measures can be found in our press release. With me on the call today is Ernesto Jose Garateix, our Chief Executive Officer. I will now turn the call over to Ernesto Jose Garateix.

Thank you, Kirk, and good morning, everyone. I want to start by putting this quarter in the proper context because it is the direct result of the strategy we have been executing for several years. When I became the CEO, our focus was very clear: we needed to achieve rate adequacy, tighten underwriting, reduce volatility, and protect the balance sheet. What you are seeing today is a result of that work, and the beginning of the next phase of our strategy, which is opening for new business to prudently grow and further diversify our business while maintaining acceptable margins. Our first quarter was strong and in line with our expectations. We earned $36.5 million, or $1.19 per share, making this the most profitable first quarter that the company has delivered since becoming public in 2014. We also reported the lowest first-quarter net loss ratio since 2015. These results reflect steady underwriting execution, the full impact of our prior rate action, and disciplined expense management. The improvement in the net loss ratio was driven by favorable attritional loss performance, lower weather-related losses, higher favorable loss development, and the continued positive impacts of the underwriting and pricing actions we have taken over the past several years. Retention is strong, and rate adequacy is firmly in place throughout our book of business. Our personal residential in-force premium grew 1.4% over the prior-year quarter, while our commercial residential in-force premium declined 7.8% as we continue to see competitive pricing pressure in the Florida commercial market. Heritage Insurance Holdings, Inc. has been in the commercial residential market for over ten years and has built a well-performing portfolio managed by a deep bench of experienced underwriters and claim adjusters for that product. However, we will not waver from our commitment to achieve adequate margins. To the extent competitors offer commercial residential products that are inadequately priced, we will not follow suit. Instead, we are leveraging the expertise of our commercial residential team to expand this product into other states, most recently Hawaii, where we can achieve appropriate risk-adjusted returns. We achieved rate adequacy across 90% of our geographies and continue our efforts to ramp up new business and prudently grow our book of business while maintaining underwriting discipline, maintaining profitability, and managing risk. Over the last five years, we deliberately took actions designed to improve the quality of our book of business and charge adequate rates, which ultimately reduced our policy count. This trade-off benefited our shareholders and stabilized our results. Given our current position, we are in the process of expanding our product offering and identifying new opportunities for Heritage Insurance Holdings, Inc. to meet the needs of our policyholders and agents. As we enter this next phase of responsible growth, we continue to evaluate our markets to meet our customers’ needs for coverage at competitive pricing. Loss costs have fallen, and we expect the cost of reinsurance to also decline, which will benefit our policyholders through premium reductions while we maintain margins. At the same time, we continue to cultivate agent relationships in our reopened territories. The early results are encouraging, with new business written up 62.7% from 2025 and over 30% from 2025. We are encouraged by our results this quarter and remain optimistic that our initiatives will result in growth throughout the year. Importantly, our policy count trends continue to improve sequentially. While we are seeing a few states with double-digit policy count growth, others are beginning to ramp up, and we are overall seeing positive growth rates. The management-driven policy count reduction over the last several years continues to moderate and points to a growth inflection in the coming quarters. Retention also remained strong at approximately 88%, reinforcing our confidence that we are on a solid path toward sustainable growth in our policy count. As we discussed last quarter, we are exploring additional strategic growth opportunities, including our planned entry into Texas on an excess and surplus lines basis. Our significant market research indicates this addition to our product line, which we expect will be modest in the first year, nicely aligns with our strategic initiatives. Production will focus primarily on Tier 1 and select Tier 2 geographies, which are coastal regions within our risk tolerance. We will leverage both existing agent relationships and new distribution partners. Consistent with our approach of delivering regional expertise, we intend to have underwriting, claims, and marketing professionals located in Texas to remain closely aligned with local market dynamics. This provides us with the speed, flexibility, and market knowledge of a regional company with the economies of scale of a super-regional company. As always, we will maintain a strong focus on underwriting discipline, exposure management, and rate adequacy. Heritage Insurance Holdings, Inc. is now performing well with a diversified book of business, a strong balance sheet, significant cash from operations, and flexibility to take advantage of emerging opportunities. We have built a culture and infrastructure that generates a sustainable competitive advantage by focusing on data-driven decisions, execution, and disciplined processes. Our focus is on opportunities that strategically align with our core capabilities and provide solutions in challenging or dislocated insurance markets. Any potential business opportunity must meet our strict financial and risk-based criteria. We require a deep understanding of the target market, including loss history, regulatory environment, reinsurance implications, and key risk drivers, and we will only pursue opportunities that are expected to generate returns in excess of our cost of capital. Importantly, we are focused on prudent exposure management and ensuring that any transaction does not introduce undue enterprise or reputational risk. While competition has increased, our view is that not all operators in our space will be able to effectively manage the complexities of the market cycles. To the extent that consolidation opportunities emerge, we believe our scale, balance sheet strength, experienced workforce, and local expertise position us well to selectively evaluate opportunities that meet our disciplined criteria. Before I wrap up, I want to briefly touch on technology and artificial intelligence, which are important enablers of our strategy. We are actively deploying AI tools across the organization to improve efficiency and customer service as well as provide better tools for decision-making while maintaining appropriate controls and oversight. AI will continue to reduce manual effort, improve accuracy, assist with better quality control, and provide analytics that will assist us in aligning staffing needs to customer demands. We expect that we will continue to enhance these capabilities for improved quality and customer service. Additionally, we continue to see the benefits of tort reform as industry loss expectations for Hurricane Milton have been steadily falling, largely due to reduced litigation, which benefits not only us but our panel of reinsurers. Given the improved litigation environment in Florida, the lack of catastrophe losses in our markets during 2025, and the reinsurance capacity entering the traditional and insurance-linked securities markets, we remain optimistic that reinsurance pricing will continue to improve in 2026. We believe that favorable reinsurance terms will benefit the consumer with respect to the cost of insurance. To conclude, this quarter reflects the steady execution of the strategy we put in place several years ago. We delivered strong results, maintained underwriting discipline, and have firmly positioned the company to pursue controlled, profitable growth going forward. I would also like to reiterate our dedication to navigating the complexities of our market with a strategic focus that prioritizes long-term profitability, shareholder value, and customer service driven by our dedicated workforce, whom I would like to personally thank for their efforts. Kirk, over to you.

Thank you, Ernesto, and good morning, everyone. Starting with our financial highlights, we reported net income of $36.5 million, or $1.19 per diluted share, for the first quarter of 2026 compared to $30.5 million, or $0.99 per diluted share, in the first quarter of last year. This is a great start to the year, considering that this is the highest first-quarter earnings in our history despite weather losses in the Northeast combined with the seasonality of our earnings. Since we gained profitability footing in 2023, the first quarter has made up 23% of our annual earnings. This bodes well for the rest of the year. The increase in our first-quarter earnings was primarily driven by lower net losses incurred and higher investment income, partially offset by higher operating expenses. The earnings generated an ROE of 28.5%, while average shareholders’ equity increased by 65.5% from the prior-year quarter. Premiums in force totaled $1.427 billion, down 0.4% from $1.432 billion in the prior-year quarter. The decline continues to be primarily driven by competitive market conditions in the Florida commercial residential market, where we remain disciplined and focused on rate adequacy and adequate margins, as Ernesto noted. While we continue to see opportunities, we will only write policies that meet our pricing and underwriting standards. Gross premiums earned were $153.6 million, essentially flat with $353.8 million in the prior-year quarter. Lower commercial residential activity was largely offset by growth in the personal residential lines. Net premiums earned totaled $199.7 million, also consistent with the prior year as ceded premiums were relatively flat. Gross premiums written were $346.7 million, down 2.6% quarter over quarter, primarily reflecting the reduction in Florida commercial residential business. Our net loss ratio improved to 45.9%, a 3.8-point improvement from 49.7% in the prior-year quarter. The improvement was driven by lower net losses and loss adjustment expenses, including lower weather losses and continued favorable attritional loss performance. Additionally, we experienced higher favorable prior-year loss development this quarter. These results reflect the positive impact of sustained underwriting and rate actions taken over the past several years. The net expense ratio increased modestly to 35.2% from 34.8% in the prior-year quarter, driven primarily by higher human capital-related costs, with net premiums earned remaining relatively flat. As a result, the net combined ratio improved to 81%, a 3.5-point improvement from 84.5% in the first quarter of last year, reflecting the improvement in loss ratio partially offset by the higher expense ratio. Net investment income increased to $9.9 million, up 15.1% from $8.6 million in the prior-year quarter, driven by higher invested assets with relatively stable returns. We continue to maintain a high-quality, conservative investment portfolio that is well matched to our liabilities. The effective tax rate for the quarter was 25.6%, compared to 23.8% in the prior-year quarter. As a reminder, we calculate income tax expense during interim periods based on estimates, which can fluctuate as assumptions are updated throughout the year.

The risk of placing the directly impacted naphtha processing equipment and examining the entire facility at caution. The event, which cost us over $30 million of lost opportunity given the elevated margins at the end of the quarter, is now behind us. The plant is running about 50 thousand barrels per day and has done so most of April. I appreciate the team managing through this complex situation safely and urgently. Turning to slide seven and our Specialty Products and Solutions segment. Our underlying business remains strong. We generated $44.3 million of adjusted EBITDA during the period compared to $56 million generated in Q1 2025. We believe that the unique elements of our business model—integrated assets that provide optionality combined with commercial excellence to capture value—are well suited for periods of extreme volatility like we are in today. As a comparison, today’s business environment is similar to 2022 when we saw similarly elevated crack spreads and specialty margins. In that year, the company generated over $400 million of adjusted EBITDA. Our integrated business allows us to produce fuels and take advantage of the attractive high-margin fuel environment. Using current strips, the 2026 full-year 2-1-1 is over $42 per barrel, nearly double the average over 2025. In addition, in our specialties business, we have now posted six consecutive quarters of sales volume exceeding 20 thousand barrels per day. This was accomplished despite the outage at Shreveport, which primarily impacted our fuels business. Specialty margins during the period were temporarily compressed due to the extreme spike in crude oil price. The commercial team has been quickly pushing through numerous price increases to offset the impact of rising feedstock costs. We put in place more than 20 price increases to date and anticipate seeing the future benefit of this in the second quarter. These price increases plus the elevated fuel margin environment position us well for what we believe will be a strong second quarter, where we expect to generate additional cash flow during this attractive margin environment. To add to that, and to fortify our ability to achieve our deleveraging targets, we have entered into crack spread hedges for portions of 2026 and 2027 fuels production. We currently have hedges in place for approximately 10 thousand barrels per day, or around 25% of our fuels production, on the 2-1-1 crack spread. We entered into a portion of these 2026 hedges at around $22 per barrel of the 2-1-1 crack using a grade or CBOB for the gasoline leg of the hedge. Note that CBOB trades at a $3 to $4 discount to Gulf Coast 87. Those hedge positions were put in place at attractive historical levels even before the large run-up driven by the conflict in the Middle East and cost us around $6 million of realized hedge losses during the period. The next tranche, which was added recently, was 10 thousand barrels of production for 2027 at levels closer to $27 per barrel, also on a CBOB basis. How these hedges end up is a function of what happens here in the Middle East. For us, it is about making sure we deliver on our strategic objective, which is to generate strong cash flows to accelerate deleveraging and de-risking a portion of our fuels production at these extraordinarily high margins. This puts us in a place to support that goal, while also leaving plenty of room for upside on our remaining fuels production. Turning to slide eight in Performance Brands. We also continue to benefit from our commercial excellence strategy in this segment and a truly premium brand in TrueFuel. We reported $12.6 million of adjusted EBITDA. The results were partially impacted by margin compression and the normal price lag associated with a more retail-oriented customer base. While we have been implementing price action, this branded space takes about 60 to 90 days to fully reflect the increases compared to the less-than-one-month lag in our STS business. Taking a closer look at adjusted EBITDA on a like-for-like comparison basis, we have seen continued growth. As a reminder, the results of our Royal Purple Industrial business are reflected in the 2025 financials when we owned that portion of the business and are not included in the current period following the divestiture in March. Our commercial and operational teams, in less than a year, have successfully offset the lost EBITDA associated with the Royal Purple Industrial business through disciplined cost controls, growth of our trusted brands, and our strong customer relationships. We announced that our TrueFuel business in February had posted record monthly results, and that momentum continued throughout the entire quarter as we posted record sales volume. We posted another monthly volume record in April. Customers continue to place a premium on the value of our engineered fuels, our innovative packaging options, and overall product reliability and convenience. Turning to slide nine and on Montana’s Renewables segment. Adjusted EBITDA with tax attributes was $10.2 million for the quarter, compared to $3.3 million in Q1 2025. Renewables EBITDA with tax attributes on a Calumet-owned 87% basis was $8.8 million. As Todd mentioned, we have delivered the MaxSAF 150 expansion on time and on budget. With our new capacity, we are stepping into a market with significant tailwinds from a transformational product mix shift between renewable diesel and SAF that will deliver a four- to five-fold increase in SAF volumes on an annual run-rate basis. The business is incredibly well positioned as we ramp up production, with the new RVO and a diversified portfolio of customers with a contractual SAF premium of $1 to $2 per gallon over renewable diesel, all of which is underpinned by our industry-leading low cost structure. As these dynamics further take hold, our renewables business is at a positive inflection point, and we leverage the strategic investments we have made in the business over the last several years with an expectation of meaningful cash flow generation. As Todd mentioned, following the 2023 RVO and trough-like margins, the industry managed through, but look no further than the RINs pricing in 2026 to see that the recovery was already in process prior to the extremely constructive RVO announcement in March from the current administration. Finally, capital expenditures during the quarter within MRL were approximately $15 million and funded entirely by cash within MRL on the balance sheet. Before leaving this segment, our Montana asphalt results were in line with the prior year as first quarter 2026 reflected typical seasonality and price-lag impacts in our wholesale asphalt business. We are moving into a seasonally stronger period in Q2 as well as an extremely supportive crack environment for fuels also in this segment. As we have routinely said, we expect the site to produce $30 million to $50 million of annual EBITDA in a normal environment, and we look forward to the opportunity at hand in today’s stronger margin environment. I will now turn the call back to Todd for his concluding remarks.

Thanks, David. And before I turn the call back to our operator for questions, I wanted to remind those joining that we have filed our proxy materials and the voting window is open. For all shareholders listening, we appreciate your support. It is almost two years since our conversion from an MLP. We set out to create a stock with much higher liquidity and a broader investor base. Over the past few years, we appreciate the new investors that have joined us as our daily trading volume has increased over tenfold. Our strategy is focused on creating shareholder value, and Roy is available to our investors to further discuss our proxy materials and our business strategy. Thank you for joining us today, and I will turn the call back to Andrea for questions.

Andrea?

We will now open the call for questions. The next question comes from Karol Krzysztof Chmiel with Citizens. Please go ahead.

Yes. Thank you. Good morning. I have two questions. The first one is regarding the catastrophe weather losses. Can you just confirm that all of those are from the Northeast winter storms, or is there more to it?

No. Those are all the Northeast winter storms—Hernando, Gianna, Fern. Yes, those are all related to that.

Is there a particular state that was hit the hardest?

It is mostly mixed between New York and New Jersey, with a little bit in Rhode Island as well as Connecticut. It was, yes.

Great. Thank you. And then my second question is regarding the new repurchase authorization. So you had the $25 million prior, you used about $12 million of it year to date, and now you have a new $50 million. So the net increase in your authorization is about $38 million. Is that correct?

No. The $25 million authorization is terminated. We have a new authorization for $50 million. So the authorization between now and the end of the year is $50 million.

Okay. But the $25 million was fully used?

No. We used $12 million of the $25 million.

So the $12 million would be in addition to the new $50 million. Got it. And then can you just comment on how much was repurchased so far in Q2?

It would have been about—we did $10 million in the beginning of the year, and then an additional $2 million. So of the new authorization, we have not purchased any.

Got it. Understood.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Ernesto Jose Garateix for any final remarks.

Thank you for joining the call, and we hope everyone has a great weekend.

The call has now concluded. You may now disconnect.

But other than that, we feel like we are positioned pretty well and are really looking forward to the opportunity the market is offering.

Thank you, Todd. The next one for me is on the SAF side of the story. In your SAF contracts where you are getting the $1 to $2 premiums, how long are these in place for? And then, when these renew, do you think you will be able to get similar or better terms?

Hey, Evan. It is Chris. Thank you for the question. The term contracts are evergreens. The notice periods—we have a distribution of those at this point because we have been selling SAF for three years now, and as we step into these, we will have different notice period dates. What I can tell you is the ones that rolled have renewed within that guidance range. The new ones are a portfolio of various next notice dates going forward, and then they stay with us as evergreen relationships. On average, these are typically two- to three-year type evergreens. So far, they have all continued to roll forward. As far as the margin environment and ability to renew, we feel quite comfortable with where those have been as we have rolled forward contracts historically. We have certainly not had a problem re-upping them and adding additional supply as we have been doing here recently over the last six months or so. We have not seen any step back in margins. We think that the underlying fundamental support is there given all of the demand for the renewable energy credits, the underlying scope credits, etc. So we are pretty bullish on the outlook there and our ability to continue growing our marketing.

Good to hear. That is all I have. I will step back in the queue. Thank you so much.

The next question comes from Connor Fitzpatrick of Bank of America. Please go ahead.

Good morning, everybody. Thanks for taking my question. I wanted to dig a bit into an update or refresh on the second phase of SAF capacity expansion. It is still a ways away, and it could maybe take a more modular form. But I was wondering if there was any update on CapEx build parameters, engineering, and obviously the contracts coming in for this first phase are pretty bullish, pretty supportive of continued demand. Sounds like there is still the opportunity there to expand at a similar profitability to the first phase.

Connor, thanks for the question. It is Todd. We have been focused on the current phase. Obviously, we are just now commencing operations, so it is very exciting where we are at. We want to stay focused there. We have our team heads down, focused on operations. At the same time, we do have an independent project team that is certainly looking at the next phase of a modular opportunity. Probably a little bit too early to get ahead of ourselves on announcing that. We hope to be able to talk more specifically to that soon. In the past, we have said let us get a chance to get up, get through this commissioning, ramp up over the next couple of months, and we will certainly be out, and we are looking forward to doing so in the not too distant future to talk about what is next and how the steps can play. To your point, we certainly are bullish about the opportunity to continue to expand. The opportunity is there, it is readily available, and we are not seeing any demand gaps that would hinder that. We are going to take it one step at a time here, but hope to be able to talk about our acceleration plan and next steps pretty soon.

Great. Thank you. And as a follow-up, it looks like there are maybe still some impediments to biodiesel capacity ramping to full or peak rates again, with various reasons like feed cost, basis in the Midwest, diesel pricing and biodiesel pricing in different regions of the U.S., and the ability to have the actual cash inflow from 45Z credits soon enough to incentivize production. How far are we from marginal biodiesel producers that will be needed to supply the market returning to profitability so that they can ramp up fully?

Hey, Connor, it is Bruce. That was a good frame of what some of the issues and drivers are. There are two fundamental questions you asked: what about their volume and what about the economics that follow from that? Our supply stack says we are solidly back into a market environment where the prices are going to have to accept the small biodiesel guys, the independent ones. Remember, some of them are run—everybody has their own specific unique situation. That is why those stacked cost bars have a range to them. The question on volume is how fast and how many. Have these been permanently abandoned? History shows us that it is kind of ghost capacity, but it can come back faster than you think unless somebody just gave up and removed it. We are going to find that out. A lot of the analysts are calling for getting back into the 90% utilization range of biodiesel capacity by toward the end of this year.

Okay. Thanks for the color. That is all I have.

The next question comes from Josiah Knight of Goldman Sachs. Please go ahead.

Hey, team. Good morning. Thanks for taking our question. Maybe on the feedstock side of the equation for MRL, how much pressure are you seeing, and can you remind us of MRL’s relative advantage and feedstock flexibility in navigating these costs? Thanks.

Hey, Josiah, it is Bruce. Thank you for the question. We have essentially unlimited feedstock flexibility. We set it up that way on purpose, and the pretreater capability is what allows us to follow the market dynamics and pricing volatility. We are pretty aggressive at our monthly re-optimization. We exist in the middle of a feedstock-long area, so there has never been a question of any kind of physical shortage. We seem to do better on optimization and re-optimization when we look at our capture percentages versus an industry index.

Got it. That is helpful. And then a follow-up, maybe on the base business, how are you thinking about the earnings outlook in the near and medium term, especially given some of the recent volatility for commodity prices?

We are pretty confident in the outlook. The fuel margin is incredibly positive right now. There is meaningful supply disruption. We do not think this is something that just returns in a very short period of time. It obviously is not something that lasts forever, but it feels a lot like 2022 when you see the shock in the market and you look at inventories that are depleted not only here, but throughout the globe. On the specialty side, we talked about our ability to push price increases through rapidly—our commercial team did over 20 of them across the product line. At current costs, we are quite bullish on the outlook for both fuels and specialties. We could see increased volatility from here, and if we do, we have demonstrated that we can react accordingly. Big picture, the market is pretty constructive on a margin outlook basis no matter where you look. Our specialties business has a domestic supply chain and access to feedstock, and you just cannot say that on a global basis right now. We will continue to serve the market.

The next question comes from Greg Brody of Bank of America. Please go ahead.

Good morning. You referenced 2022 as a way to think about specialty material margins and the environment you are in. Those margins got up to the $90 range during that period. You have mentioned you have been able to pass price through. Is that the type of environment we are in right now, or do we need more steps to get there in terms of price increases?

Hi, Greg. I do not think right now we would look and say we are at $90 specialty margins going forward. When we talk about 2022, we are looking at analogies to the whole demand pair. Increasing crude costs create a little bit of lag in specialty business. Back in 2022, we were able to overcome that in a hurry. We have done the same here. We will see what happens with volatility in the back half of the year. As we sit right now, I would say specialty margins are a tad lower than 2022, and fuel margins are a tad higher than 2022. If you blend those together, then it is probably a good period. We are not trying to draw too tight of an analogy; we are just saying the market feels pretty similar where supply shocks are going to drive margins that are sustained for a period of time and provide the ability to generate some excess cash flow and accelerate our deleveraging plan.

That is helpful. Are you seeing any response from the consumer as a result of the price spikes?

We really have not right now as far as demand. Everybody is getting their arms around these rapid cost increases. There is such supply disruption throughout the space that consumers need our products. A lot of our products go into consumer necessities and staples and not things that have massive price elasticity. We do not expect dramatic demand declines. We even saw record growth in some of the downstream performance brands—we talked about a TrueFuel record, etc. We have seen consumer demand continue to stay strong throughout the space. How long that continues is a function of general consumer sentiment and market volatility, but as it sits right now, we are pretty positive on the outlook.

Shifting to the organic chlorides issue, which is in the past—do you have any remedies to make to the facility to fix any damage that was done, or are you just going forward with the risk of something happening again?

It is a good question. There is no further work needed at the facility. We took the event extremely seriously. We inspected the facility thoroughly. We made quite a few repairs at the time, and in a very conservative fashion. We were not taking any risks with the situation. We took a big chunk of our naphtha train out of service and replaced it. We have installed redundancy in sampling and quality monitoring throughout the system to ensure that this cannot happen again. Typically, in these scenarios, chlorides in small amounts can do a lot of harm—sneak in with crude supply and bypass the upfront QC checks. We think that is what happened here. We are still fully investigating the details. We would be very aggressive with any culprit that created that. As far as the current go-forward position, the facility is operating really well. There is no sustained damage. We aggressively addressed any repairs that needed to be made, and we have been up and running strong for over a month now.

With respect to the deleveraging plan, you highlighted that you will use cash to deleverage. You are clearly set up for a windfall from both restricted group assets and MRL. Does that change the way you are thinking about potentially monetizing MRL to pay down debt at the restricted group, or is that still the plan?

The plan still remains as it has been. Ultimately, we think that Montana Renewables is going to present an opportunity to monetize at some point. We are well on track to accomplish that. The recent RVO was a major step in the right direction. No game plan changes there. We think the next step is showcasing the earnings power of this business with both the MaxSAF project up and running and a really positive RVO market. That is what we are focused on for the next quarter or two, and we will go from there.

The next question comes from Jason Gabelman of TD Cowen. Please go ahead.

Thanks for taking my questions. You mentioned you are in a validation process of the MaxSAF expansion right now. Can you talk about the steps to get it to a steady state, or if it is already at steady state? And in this type of margin environment, since the asset has been running, what type of margin are you seeing coming out of it?

Hey, Jason, it is Bruce. On margins, the renewable diesel index margin hit over $3 per gallon at the end of the quarter. We are not calling for it to stay there. If you look at our supply stack, we think the renewable diesel industry’s equilibrated structure should be a bit north of $2, with feedstock and SAF premium overlays above that. In terms of operational performance, we re-streamed the unit after the extended turnaround plus capital projects—those are the modifications we call MaxSAF 150. We had a sidestep on an unrelated electrical power interruption to the site, so we had to re-stream a second time. With that behind us, we are finishing the ramp-up. We have a performance test design that is maybe four weeks out. The catalyst comes with performance guarantees; we modified the hardware, and we want to test that we have delivered the engineering expectations. We will have more intelligence in a few weeks. Nothing we see gives us any reason to think we have underachieved. We are excited about the go-forward.

Can you also remind me, from an OpEx standpoint, if there is any change on unit OpEx relative to where the initial MRL was at?

Our track record of improving controllable costs got us down to something like $0.38 per gallon—that is the chart we publish occasionally. It is pretty compelling. We do not think we have any reversal on that just because we are fractionating more kerosene out of the total reactor product.

Maybe turning to liquidity—there has been a lot of volatility in the market, and we have seen in some of your refining and biofuel peers working capital and derivative hedging headwinds related to that commodity volatility. Have you seen that to a large extent? Can you talk through impacts on cash flow as a result of volatility and if you would expect that to reverse over time?

We feel good about our liquidity position and the cash we are generating in the current environment after some of the operational things we saw in Shreveport during the quarter. We have seen a big run-up in crude price. That impacts us in a couple of ways: inventory cost that we need to buy—there is a little bit of a lag as we buy into the market—and also accounts receivable. We were up over $100 million as the prices getting passed through at a premium to crude roll into our AR. There was a big draw on working capital during the period from that run-up that was exacerbated by the downtime at Shreveport. We are already seeing almost a total unwind of that in April; there will be a little bit more into May. On the liquidity path, we did a tack-on for $150 million earlier in the year. We thought about that as a way, at a pretty cost-neutral even at a premium, to pay off some of our 2028s when the call protection steps down in July. In this current volatile environment—we do not know how long it will last—we were in an attractive position to take from the market, pre-reduce that debt, and use that extra cash to balance the spike in crude. As we move forward, we will still use that cash to pay down debt. We will reevaluate what the market looks like closer to July when the call protection steps down and what is happening in the world.

This concludes our question-and-answer session. I would like to turn the conference back over to John Kompa for any closing remarks.

Thank you, Andrea. On behalf of Todd and the entire management team, I would like to thank everyone for their time today and interest in Calumet. Have a great rest of the day. Thank you.

The conference has now concluded. Thank you for attending today’s presentation, and you may now disconnect.