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Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Pizza Pizza Royalty Corp.'s Earnings Call for the First Quarter of 2026. [Operator Instructions] As a reminder, this conference is being recorded on May 1, 2026. I will now turn the call over to Christine D'Sylva, CFO. Please go ahead. Christine D'Sylva: Thank you. Good afternoon, everyone, and welcome to Pizza Pizza Royalty Corp.'s Earnings Call for the First Quarter ended March 31, 2026. Joining me on the call today is Pizza Pizza Limited's President and Chief Executive Officer, Paul Goddard. Just a quick note, our discussion today will contain forward-looking statements that may involve risks relating to future events. Actual events may differ materially from the projections discussed today. All forward-looking statements should be considered in conjunction with our cautionary language in the earnings press release and the risk factors included in our annual information form. Please refer to our earnings press release and the MD&A in the Investor Relations section of our website for a full reconciliation of other disclosures related to non-IFRS measures mentioned on this call. As a reminder, analysts are welcome to ask questions after the prepared remarks. Portfolio managers, media and shareholders can contact us after the call. I'll now turn the call over to Paul for a business update. Paul Goddard: Thank you, Christine, and good afternoon, everyone. We appreciate you joining our call. This afternoon, we released our results for the First Quarter of 2026, which you can find posted on our website. The overall macroeconomic conditions remained challenging through the first quarter of 2026. We saw the impact on consumer confidence, spending and demand, all of which negatively impacted our retail sales, specifically traffic. In the first quarter, our overall same-store sales growth was actually negative 4.1%. Pizza Pizza restaurants were down 4.3%, while Pizza 73 restaurants were down 2.7%. Beyond the current macroeconomic impact on sales, the impact of last year's nonrecurring sales tax holiday was also felt at both brands. So while consumer confidence remains low, businesses continue to face rising costs and ongoing uncertainty. In this environment, we are focused on controlling what we can, strengthening our product offering, further expanding our footprint across Canada and driving operational discipline. Starting with product offerings. Our core pizza category remains resilient, supported offerings at all price points. And while value continues to be critical, staying top of mind through innovation is equally important. Our innovation pipeline allows us to attract new customers, encourage trade-up within our existing mix through premium offerings and deepen overall brand engagement. This quarter, following the success of the Volcano Dipper Pizza at Pizza 73, we rolled out the product at Pizza Pizza. This unique, ownable new product provided us with the opportunity to showcase Pizza Pizza and our food in a fun and playful narrative while enforcing -- reinforcing our gift leadership position. We also recently introduced a $5 Meal Deal slice and drink combo in late March to strengthen our walk-in channel and compete with other QSRs offering entry-level value meals. We saw immediate improvements in both sales and traffic within this channel, which is exciting. We remain focused on delivering strong value to our customers, knowing that we're competing for a share of increasingly constrained consumer spending. Turning to our restaurant network. In terms of restaurant development, I'm pleased to share that we started the year stronger than we have in the last 5 years. And as a reminder, with over 800 restaurants from coast to coast, we have more points of convenience than any other QSR pizza chain in the country. During the quarter, we opened 6 traditional and 3 nontraditional Pizza Pizza locations and closed 1 traditional and 1 nontraditional Pizza 73 restaurant. Our new traditional restaurants span the country with openings in BC, Manitoba, Ontario, Quebec and 2 in Newfoundland. And as mentioned on previous calls, our business is driven by 2 revenue streams. First, our traditional restaurant network, which generates 90% of our Royalty Pool sales; and secondly, our nontraditional and special event locations, which typically generate the remaining 10%. Our nontraditional segment is currently facing some headwinds, particularly locations within colleges and universities where lower attendance tied to international student policies stemming from reduced immigration, et cetera, has resulted in reduced operating hours and overall sales. But looking ahead, we continue to see growth opportunities across our network. At the same time, we are taking a more disciplined approach, carefully selecting locations and formats to ensure long-term profitability, particularly in the context of rising costs. As I close out my comments, we expect us to continue to face headwinds across our entire system in the near future. Consumer confidence is still low, and there continues to be much uncertainty. However, we will continue to be there to provide our customers with the best food and especially for them. Our platform is solid and battle tested. We will drive further value and innovation, and we have the experience and track record to do so. The strength of our brands and experience of our team and our owner operators as a critical part of that team have enabled us to navigate through these challenging conditions before, and we have great confidence in our ability to successfully manage well through this latest period of economic uncertainty and leveraging our proven competitive advantages and leading brand platform. So thank you again for listening in today. And I'll now ask Christine to provide a financial update. Christine D'Sylva: Thanks, Paul. As a reminder, Pizza Pizza Royalty Corp. is a top line restaurant Royalty Corp. that earns a monthly royalty through a license agreement with Pizza Pizza Limited. In exchange for the use of the Pizza Pizza and Pizza 73 trademarks in its operations, Pizza Pizza Limited pays the partnership a monthly royalty calculated as a percentage of the Royalty Pool sales. Growth in the Corp. is derived from increasing the same-store sales of the restaurants in the pool and by adding new restaurants to the pool each year. As we announced earlier this year, on January 1, 2026, the Royalty Pool increased by 20 net new restaurants as a result of adding 39 new locations less than 19 restaurants which permanently closed. So for fiscal 2026, there will be 814 restaurants in the Royalty Pool, comprised of 712 Pizza Pizzas and 102 Pizza 73. This is in comparison to 2025 when the pool was 794 restaurants. So now briefly covering the financial results for the quarter. As Paul mentioned, same-store sales, the key driver of yield for shareholders, decreased 4.1% in the quarter. Both brands saw a decline in traffic, which resulted in Pizza Pizza restaurants reporting same-store sales decrease of 4.3% and Pizza 73 restaurants reporting a decline of 2.7%. The positive impact of the 20 net new restaurants added to the Royalty Pool was offset by the same-store sales decline and resulted in an overall decrease to the Royalty Pool System sales and the corresponding royalty income. Royalty Pool System sales for the quarter decreased 3.5% to $145.8 million from $151.3 million in the same quarter last year. By brand, sales from the 712 Pizza Pizza restaurants decreased 4.1% to $124.5 million and sales from the 102 Pizza 73 restaurants decreased 0.9% to $21.3 million for the quarter. The partnership's royalty income earned as a percentage of Royalty Pool sales decreased 3.5% to $9.4 million in the quarter. As a reminder, the Pizza Pizza and Pizza 73 restaurants are subject to seasonal variations in their business. System sales for the first quarter of the year are generally the lowest, while system sales for the last quarter are generally the highest. So turning to partnership expenses. Administrative expenses, which include listing costs as well as director, legal and auditor fees decreased in comparison to the prior year. This quarter, they totaled $132,000 compared to $152,000 in the prior year. In addition to administrative expenses, the partnership is making interest-only payments on the $47 million credit facility. Interest paid in the quarter was $435,000. The all-in rate for the credit facility for the next 3 years will be 3.51% compared to the maturing rate that expired in April of 2025 of 2.685%. So after the partnership received royalty income and interest income and paid administrative and interest expense, the resulting net cash was available to distribute to its 2 partners based on their ownership. After the [ event ] on January 1, 2026, Pizza Pizza Limited's ownership increased to 27.2% and Pizza Pizza Royalty Corp. shared in the remaining 72.8% of the partnership distribution. The Royalty Corp. received distributions, paid taxes on its share of the earnings and any residual cash was available for dividends to the company's shareholders. The company declared shareholder dividends of $5.7 million in the quarter or $0.2325 per share, which was consistent with the prior year. The payout ratio for the quarter was 134% and resulted in the company's working capital decreasing by $1.4 million to end the quarter at $2.3 million. This $2.3 million working capital reserve is available to stabilize dividends and fund expenditures in the event of short- to medium-term variability in system sales and interim royalty income. The company has historically targeted a payout ratio near 100% on an annualized basis, and any dividend decisions will be made with this target in mind. That concludes our financial overview. I'd like to turn the call back to our operator to poll for questions. Operator: [Operator Instructions] Your first question comes from Cheryl Zhang of TD Cowen. Yaozhi Zhang: So obviously, certainly not an easy quarter for anyone in the QSR space. I'm curious what you're seeing that customers are cutting back on in particular? And is there any notable changes in consumer behavior compared to last quarter? Paul Goddard: Yes, it's a good point, Cheryl. I think we see the landscape we live in and some common issues people face. I think just generally, not unlike our last call, I mean traffic is overall weak. I mean, we still did see some growth positively in pickup but certainly, people are shying away from delivery. So we saw negative in delivery, and that's something we certainly have some plans to try and address. We've been trying for a while, but we have some other ideas we think we will be more successful. So I think there are some signs of light, but definitely, people are just really hurting. I mean you've got the global geopolitical situation. Gas prices are on everyone's mind. I think we're $2 gas in British Columbia, things like that. And so really since sort of mid-Feb really, we and I think the whole market has seen just all that much more conservative, careful behavior on the part of customers. So that translates into things like less frequency, less add-ons, people just getting what they really need and not sort of treating themselves as much and as often. So we just sense it's just been weakening as we saw really in the quarter, weaker than it was even in the last quarter. Yaozhi Zhang: I see. That makes sense. And curious if you could offer any early reads on the trends so far in Q2? Paul Goddard: Well, it's still a little early, right? I mean we're just kind of end of April here. So I think we really need to see. We've got a lot of menu innovation going on and other things we're planning on doing later this year. But I think things like our $5 slice and a coke deal, we think that's out in the market that that's going to have a big impact in walk-in in a positive way. That's something that's really unique to us really as a major chain. There's others that do slice, but nowhere near kind of the volume that we do. So that's just one example. Things like that, we're actually pretty optimistic about having a material impact. But the overall landscape is still very tough. People are looking for value and you're seeing some extreme discounting -- extreme,extreme discounting by other folks that we don't think is really sustainable. So we certainly discount ourselves, but we're also trying to play the long game here and play to our advantages. So I think some of our menu innovations have done well, and we're going to keep pushing things like organic delivery a little more, and we've had some signs of success there. But I'd say it's still a little early for the quarter to really make more comment on that. Yaozhi Zhang: Yes. Speaking of competition, how do you feel about your pricing and offering compared to competitors? And how do you think about keeping your value edge without escalating discount? You mentioned in your prepared remarks some subsequent improvement after you launched the $5 new deal, and I'm curious if you could add some color to it. Paul Goddard: Yes. I mean I think we generally have a good sense of price. I mean when we look at competitors, which we're doing all the time and seeing where we have traffic strength, traffic dropping off, what's happening with relative check. I mean we saw check was up, generally speaking, but traffic was down. It's always hard to find that balance. We think we're well priced. I mean we are not shy to change prices. We've changed prices on a la carte items. We've changed prices on specials from time to time. So I think generally, we feel like we're in the right zone for what we offer. I mean we know we offer very high quality relative to some others. And yet we think with our cost structure, we can be very competitive with our pricing. So I think we feel we're sort of in the right zone, but we do see downward pressure overall from people that are being extremely aggressive, I guess, you could say. So we're aware of that. We have to get good results. We have to get top line sales growth. That's our job. But we also got to make sure it's profitable for our franchisees as well. So I think just overall, we're really looking to play to our strengths. So things like the slice deal, we launched chicken tenders at Pizza 73, some unique items there. We've got more in the pipeline. I think BOGO has been successful out there for us as well. So I think we've had some success with things that we think will work well and some other things that maybe haven't resonated quite as well. I mean one example would be the Volcano Dipper, which we did very well in Pizza 73, we translated it over here, didn't quite get the pickup that we thought, to be honest. So not everything we try does work, but we have a pretty quick cycle time on our innovative marketing team. So we don't always hit it right, but we thought that was great value. But we also have more success with things like our Vladdy Junior Special, the XXL [ $19.99 ] 3-topping pizza, which became very quickly one of our top mixing specials and it's certainly fantastic value in a fun way and especially in our major markets, it's done really, really well. So it's just not doing well enough because customers are still, at the end of the day, hurting so much that even though it's a great deal and talking to a lot of customers, even that only has limited potential. So we're also looking at how do we get something even better, more interesting that can drive traffic further. But overall, I think we're well placed as a value player overall. We're really careful about our pricing. We're looking for opportunities to accentuate things like dips as well, which we're really famous for having the best dips as add-ons. But we know people are cautious. So we need to really get more and more creative about how we can really leverage our advantages, still be a value player and get that traffic up. It's just all about transaction count, getting that traffic up and doing whatever we need to do to do so. Christine D'Sylva: And then to add on to that, Cheryl. We do have the multiple channels, right? We make sure that we have value at every point where the customer is interacting with us. If we're coming in for a walk-in, we've got a walk-in special. If you want to come in to pick up to save on the delivery and the tip, which as consumers are getting more constrained in their available spend, we have pickup specials that are available to you. So you can save on the delivery and tip. And we always have our delivery specials like the XXL Vladdy deal. So we try to make sure that at every price point and at every convenience point, we have something to offer our customers. Paul Goddard: And across dayparts as well, I mean, we slice and dice the numbers every way you can imagine, of course, but we're always looking for growth in various dayparts and those sort of omnichannels, like Christine said. So that is some flexibility that others don't have. But at the end of the day, we're still not getting enough transactions. We know we've got to get traffic up. And we are pretty excited about some of the things coming down the line. And some of them will take longer as well to bear fruit, to be honest, but it's kind of a -- we have kind of a long view on the platform and what we can do to really win over more people from competitors and then get our loyal customers actually coming to us more often, more frequently and adding on more items. So it's a bit of a long game, but we do think there's some signs of hope, but the overall economic climate is still pretty concerning. Yaozhi Zhang: It's very helpful. Actually, I did mention that you still see some improvement in organic delivery. I'm curious if there are any drivers for that, that you could highlight? Is it because of better speed visibility? Or is it SMS tracking from all construct like free delivery or anything that you could highlight there? Paul Goddard: Yes. I mean we do think there's benefits to the customer and there's economic benefits. I mean we've actually been -- as of the last couple of months, I think it was sort of the end of Q2, correct me Christine if I'm wrong, but the -- with the sort of time, the guarantee time, and we try to highlight that a little more because that is something that we -- people don't get on a third-party platform. So we do use those as a channel like everyone else, but customers can rely on a uniform Pizza Pizza delivery driver with really good tracking times. We have much like the third-party providers, a customer tracking map, see where your order is on the map as it comes to the customer with an SMS reminder as it's supposed to get to your door. So it's better service, better speed, it's cheaper rather than paying commission to a third-party aggregator. So we -- and we think that's helpful because our delivery charges are really nominal really compared to those. And we think that's a real competitive advantage we have. We're famous for our guarantee. And although the third parties are a channel that some people only order from, they're also shying away from that. I think we see some weakness overall in the sector there for third party because delivery is just so expensive. So we see people trending more towards pickup. But we think leveraging things like loyalty and cross-channel marketing, getting people to behave in multiple channels, loyal customers or winning new ones in some of our multiple channels, that's a good pathway to success. Christine D'Sylva: We also have on game days, because we have such big partnerships with a lot of the sports teams across Canada, we have free game day delivery. So we try to get those customers who are watching the game with friends at home, ordering and saving on that delivery fee to keep them coming to us. And we always promote our on time or free, right? We are always less than 40 minutes with a guarantee that Pizza Pizza has always had, and we're proud of it and the fact that you can trust your order now is something that our marketing team has done a great job this quarter of promoting as well. Yaozhi Zhang: That's great. And just last one for me. What are you expecting for network expansion in 2026? And are you seeing any early impacts from the rising costs like fuel costs? Any impact on equipment construction costs or input costs that might impact franchisee profitability and interest in opening new stores? Paul Goddard: Yes, we are. I mean we still are, I would say, on offense growth-wise. So we think in terms of traditional stores, we're still looking at 2% to 3% range. I mean last -- this quarter has been encouraging in that respect. And so we do think really most parts of the country, we have lots of green space to grow on it while others perhaps are being a little more defensive. We're certainly defensive about our key markets, but on offense on the store development side. So I think we are getting suppliers increasingly looking for fuel surcharges and things like that. But that does indirectly impact us. We're holding the line on that as best we can. We haven't seen sort of equipment costs necessarily go up yet, but I wouldn't be surprised if we see more of that in the future. And we've been really challenging our construction team to also ensure that the unit economics look good for a franchisee. Can we reduce construction costs? Can we skip certain items or reduce the cost of certain items so that the investment for the franchisee is more palatable? So I think we're being pretty creative with some aspects like that, and that's pretty exciting. I think we have a good record, a good franchisee pipeline. But certainly, there's headwinds. I mean with the inflationary pressure depending on how long this big crisis goes on overseas and just even without that general economic malaise, I mean, that's what we expect. So we say, well, if it's a tough environment, we still need to be successful. So what do we got to do? And if it ends up not being as bad, well, then we'll look even better. But we are seeing some pressure, things like fuel. Most of our Canadian ingredients are Canadian, for instance, so we mirror that quite well, and we've held the line pretty well there. But certainly, we'll control what we can control and make sure that the food basket overall is okay. And same with lease costs and things like that for franchisees. So we're trying to make sure that our economic -- unit level economics are attractive even in a sort of really not helpful economic backdrop. Operator: [Operator Instructions] There are no further questions at this time. I would hand over the call to Christine D'Sylva for closing comments. Please go ahead. Christine D'Sylva: Thank you. Thank you, everyone, for joining us on the call today. If you have any further questions after the call, please feel free to contact us. Our information is on the earnings release. And thank you for your support of Pizza Pizza Royalty Corp. You may now disconnect your lines. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Good day, and welcome to the Imperial Oil First Quarter 2026 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Peter Shaw, Vice President of Investor Relations. Please go ahead. Peter Shaw: Good morning, everyone. Welcome to our first quarter earnings conference call. I am joined this morning by Imperial Senior Management Team, including John Whelan, Chairman, President and CEO; and Dan Lyons, Senior Vice President, Finance and Administration; Cheryl Gomez-Smith, Senior Vice President of the Upstream; and Scott Maloney, Vice President of the Downstream. Today's comments include reference to non-GAAP financial measures. The definitions and reconciliations of these measures can be found in Attachment 6 of our most recent press release and are available on our website with the link to this conference call. Today's comments may contain forward-looking information. Any forward-looking information is not a guarantee of future performance and actual future performance and operating results can vary materially depending on a number of factors and assumptions. Forward-looking information and the risk factors and assumptions are described in further detail on our first quarter earnings release that we issued earlier this morning as well as our most recent Form 10-K. All these documents are available on SEDAR+, EDGAR and our website. So I'd ask you to refer to those. John is going to start this morning with some opening remarks and then hand it over to Dan, who is going to provide the financial update, and then John will provide his operations update. Once that is done, we will follow with the Q&A session. So with that, I will turn it over to John for his opening remarks. John Whelan: Thank you, Peter. Good morning, everybody, and welcome to our first quarter earnings call. I hope everyone is doing well. And as always, we appreciate you taking the time to join us this morning. Since our last earnings call, we've seen significant volatility in commodity markets, driven by geopolitical events in the Middle East. This has served to tighten the supply-demand balance for a range of commodities globally, resulting in a materially different outlook for this year and potentially beyond. It also reinforces the strategic importance of commodity and product supply from Canada to the rest of the world. Our long-standing business model uniquely provides significant leverage to upside conditions, while also protecting against downside scenarios. This is a substantial long-term structural benefit that allows us to return additional surplus cash to shareholders at higher prices, while adhering to our investment plans and strategic priorities over a range of price scenarios. There continues to be a dynamic global backdrop. However, our corporate strategy and investment plans remain consistent. We continue to maximize the value of our existing assets and progress material, high-quality organic growth opportunities, leveraging our competitive advantages of technology, scale, integration, execution excellence, and very importantly, our people. Speaking of technology and scale, we also continue to advance our business transformation restructuring plans. As a reminder, we expect to capture significant long-term efficiency and effectiveness benefits as we further leverage rapidly advancing technology and ExxonMobil's global capability centers. Now from a financial perspective, cash flows from operating activities were $756 million in the quarter. Excluding the impact of working capital, cash flows from operating activities were over $1.2 billion. Moving to operations. I want to highlight several achievements. At Kearl, production was in line with our second best first quarter ever despite the impact of a third-party natural gas supply outage. At Cold Lake, we achieved our highest first quarter production in over 8 years, supported by new technology-advantaged low-cost volume that is transforming the asset. In the Downstream, our renewable diesel facility at Strathcona captured significant value compared to more costly imports. In terms of capital allocation, our approach remains consistent with our long-standing priorities, which begins with investing in the business to sustain and grow value. Next, a reliable and growing dividend remains a key priority. Our annual dividend has grown for 31 years. And then as we generate surplus cash above and beyond our commitments, we look to return that to shareholders in a timely manner. And as you've seen in the release, we intend to renew our Normal Course Issuer Bid at the end of June. Overall, I'm excited about the opportunities in front of us, including our long-term in situ growth potential. We continue to construct the Enhanced Bitumen Recovery Technology pilot at our Aspen lease which can unlock significant new low-cost volume growth for Imperial and its shareholders. With that, I'll pass things over to Dan to walk through the financial results in more detail. D. Lyons: Thanks, John. Starting with financial results for the first quarter, we recorded net income of $940 million, down $348 million from the first quarter of 2025, primarily driven by higher incentive compensation charges as a result of our higher share price and unfavorable upstream realizations based on lower average prices across the quarter. Elaborating on the incentive compensation item, the total charge in the quarter was $143 million after tax. This mark-to-market charge was driven by a historic share price increase of almost $65, over 50% in the quarter. When comparing sequentially, first quarter net income is up $448 million from the fourth quarter of 2025 primarily driven by the absence of identified items and by higher prices, partially offset by lower volumes and the incentive compensation charge I just mentioned. Now shifting our attention to each business line and looking sequentially. Upstream earnings of $470 million are up $472 million from fourth quarter due to the absence of identified items when those items -- when excluding those items, net income is up $52 million, primarily due to higher prices. Downstream earnings of $611 million are up $92 million from fourth quarter. Excluding identified items in the fourth quarter, net income is up $47 million, mainly due to lower operating expenses. Our Chemical business generated earnings of $24 million, up $15 million from the fourth quarter. Excluding identified items in the fourth quarter, net income is up $4 million. Moving to cash flow. In the first quarter, we generated $756 million in cash flow from operating activities, excluding working capital effects. Cash flows from operating activities for the first quarter were $1,239 million, down $521 million from the first quarter of '25. Cash flows from operating activities were also impacted by unfavorable deferred tax effects of about $350 million, primarily driven by much higher commodity prices late in the first quarter as compared to the fourth quarter of 2025. As a U.S. GAAP LIFO reporter, we tend to see transitory negative inventory-driven deferred tax impacts when prices rise and transitory positive impacts when prices fall. This is driven by our reporting earnings on a LIFO inventory basis, while our deferred taxes are calculated on a weighted average cost inventory basis consistent with Canadian tax regulations. Now shifting to CapEx. Capital expenditures in the first quarter were $478 million, $80 million higher than the first quarter of 2025 and $173 million lower than the fourth quarter of 2025. In the Upstream, first quarter spending of $362 million focused on sustaining capital at Kearl, Cold Lake and Syncrude. In the Downstream, first quarter CapEx was primarily spent on sustaining capital projects across our refinery network. Shifting to shareholder distributions. In the first quarter, we paid $350 million of dividends. And earlier this morning, as John noted, we announced our intention to renew our NCIB in June, and we declared a second quarter dividend of $0.87 per share, in line with our long-standing philosophy of returning surplus cash to shareholders. Now I'll turn it back to John to discuss the company's operational performance. John Whelan: Thanks, Dan. I want to take the next few minutes to share key highlights from our operating results. Upstream production for the quarter averaged 419,000 gross oil equivalent barrels per day, up 1,000 oil equivalent barrels per day versus the first quarter of 2025. First quarter crude production was the second highest quarter -- first quarter result in company history, just 1,000 barrels per day below the all-time first quarter record set in 2024. I'll now cover highlights for each of the assets, starting with Kearl. Kearl's quarterly production was 259,000 barrels per day gross, up 3,000 barrels per day versus the first quarter of 2025. As a reminder, first quarter volumes at Kearl tend to be lower on a seasonal basis relative to the second half of the year. In addition, during March a third-party regional gas supply outage required us to temporarily reduce production levels to match lower natural gas availability. Now that we're in the second quarter, the team is focused on the planned turnaround at Kearl. Work this year will extend the turnaround interval at the K1 train from 2 to 4 years, similar to the work completed last year at K2 train. This is a great example of the work we're doing to maximize the value at Kearl, leading to higher volumes and lower unit cash costs. Consistent with the framework we outlined at our 2025 Investor Day, we are advancing growth at Kearl across multiple fronts, including higher recovery, productivity and reliability enhancements, and the turnaround optimization work I just mentioned. Later this year, we're adding a secondary recovery project at Kearl, designed to capture additional bitumen from the ore already being processed through the plant, supporting incremental capital-efficient volumes growth. Moving next to Cold Lake highlights. Cold Lake's quarterly production averaged 155,000 barrels per day, up 1,000 barrels per day versus the first quarter of 2025. We continue to see the benefits of our strategy of transforming Cold Lake production to advantaged technolog,y, with ongoing strong results from our Grand Rapids solvent-assisted SAGD project and continued ramp-up of the Leming SAGD project. We remain confident in our strategy at Cold Lake to deliver advantaged volumes at lower unit cash costs by leveraging technology. To round out the upstream, I'll cover Syncrude. Imperial's share of Syncrude production for the quarter averaged 72,000 barrels per day, which was down 1,000 barrels per day versus the first quarter of 2025. During the quarter, Syncrude experienced unplanned downtime associated with Coker 8-3, resulting in lower volumes and additional maintenance. The interconnect pipeline was utilized to enable the export of an additional 8,000 barrels per day of bitumen and other products over the quarter. With the additional maintenance required at Syncrude this quarter, the decision was made to postpone the planned second quarter turnaround work on Coker 8-2 until the summer. Now let's move to the Downstream. In the first quarter, we refined an average of 384,000 barrels per day, equating to utilization of 88%. Compared to the first quarter of 2025, refinery throughput was down 13,000 barrels a day. During the quarter, we experienced unplanned downtime, and Strathcona was impacted by the disruption of synthetic crude feedstock caused by the Syncrude Coker outage until alternative supply was put in place. As I mentioned in my opening remarks, our renewable diesel facility at Strathcona captured significant value compared to more costly imports during the first quarter, even as we continue to optimize around hydrogen availability. We are now executing the planned turnaround at Strathcona that began in early April and is scheduled to be completed in just over a week's time. The work is focused on the crude unit, which achieved the longest ever run length of 10 years before this planned turnaround. From a strategic perspective, we continue to invest in our structurally advantaged downstream business with a view to maximizing earnings and cash flow across the value chain. Investment in 2026 includes digital infrastructure enhancements and targeted projects to strengthen logistics and feedstock flexibility. Petroleum product sales were 441,000 barrels per day, down 14,000 barrels per day compared to the first quarter of 2025 due primarily to a reduction in opportunistic supply sales, partially offset by increased retail sales. Overall, across our Canadian network, we saw very similar demand for each of our primary petroleum products in the first quarter of 2026 relative to 2025. Turning now to Chemicals. Earnings in the first quarter were $24 million, down $7 million from the first quarter of 2025 due to lower product pricing, partially offset by reduced feedstock costs. In closing, I would like to reiterate that despite the dynamic geopolitical environment, our priorities remain clear and consistent. We are focused on continuing to profitably grow volumes, further lowering unit cash costs and increasing cash flow generation. We remain committed to maximizing the value of our existing asset base, progressing our volume and cost targets, driving greater efficiency and effectiveness, and delivering unmatched industry-leading shareholder returns. Operationally, our focus remains on execution excellence and being the most responsible operator. This includes safely and effectively completing the planned turnaround at Strathcona as well as the planned turnaround at Kearl in May. Both are important to sustaining reliability, capturing value from our assets and supporting long-term performance. Looking ahead, our restructuring is firmly in the implementation phase and progressing well. We are taking a robust and disciplined approach with a focus on maintaining safe, reliable operations. This work is being advanced in an orderly manner with clear line of sight to the expected benefits over time, including improved efficiency, improved effectiveness, competitiveness and long-term value creation. Finally, our capital allocation priorities remain unchanged. We expect to continue generating cash beyond the needs of our capital plan and our dividend, and our commitment remains to return that cash to shareholders in a timely manner. As noted in the press release this morning, we intend to renew our Normal Course Issuer Bid in late June. As always, I want to thank our employees for their commitment, professionalism and teamwork. Their dedication to safe operations, execution excellence, and customer and community service is what makes our achievements possible. And I'd like to thank all of you once again for your continued interest and support. Now we'll move to the Q&A session. I'll pass it back to Peter. Peter Shaw: Thank you, John. [Operator Instructions] So with that, operator, could you please open up the lines for questions? Operator: [Operator Instructions] And the first question is from Dennis Fong with CIBC World Markets. Dennis Fong: The first one for me is just really around the Upstream. Can you maybe discuss, we'll call it the progress around the pipeline of SA-SAGD projects at Cold Lake? I know that there's kind of a long duration strategy around kind of growing or layering in projects between now and 2050. As the world kind of obviously evolves in terms of diversifying supply chains globally, can you talk about opportunities to maybe accelerate some of that pipeline of projects as well as your appetite for that? John Whelan: Thanks, Dennis. I can -- I'll make a few comments on that. I think maybe I'll step back first and talk about our capital plans in light, as you say, of the current situation and commodity prices. Every year, we review our corporate plan, and we consider that over a range of inputs and a range of price scenarios. And we pace our investment strategy to maximize value at the end of the day. And looking at that both in terms of our existing assets and progressing advantaged growth. So we are -- remain very focused on Kearl getting it to 300,000, Cold Lake getting it to 165,000 barrels per day, and in the downstream flexibility and logistics projects. And of course, we're advancing our EBRT pilot. So I think at the high level, I wouldn't -- you shouldn't expect or anticipate major changes. We weren't waiting for a price signal to drive pace. We're looking at maximizing value for shareholders over a long-term view, and we believe we're progressing our growth opportunities at the appropriate pace to do just that. So that's kind of at the highest level. If you think at Cold Lake, I mean, we continue to work through this transformation of the asset. As I mentioned, Grand Rapids SA-SAGD is continuing to perform very well, above 20,000 barrels a day. We're ramping up the Leming SAGD, which is going back into the -- where the original pilot was, that's ramping up towards 9,000 barrels per day. And then in the future plans, we have Mahihkan, which we've started to invest in, and that's still on track to bring on 30,000 barrels a day of advantaged technology volumes starting up in 2029. So we continue to progress those at a pace we think that makes sense. And stepping back from that at Cold Lake, if you think about the percentage, we talk about this transforming the asset. In 2020, all of our production there was coming from CSS and steam flood and not from what we're today characterizing as advantaged technology. In 2025, that was 20% was coming from advantaged technology, largely the SA-SAGD at Grand Rapids. You go ahead 5 more years, that's going to be up to 45%. 5 years after that, it's going to be 60%. And by the time you get to 2040, which is less than 15 years from now, about 2/3 of our production will come from advantaged technology at Cold Lake. So we continue to progress at a pace we think that makes sense. Dennis Fong: Great. Really appreciate that color and context there, John. My second question shifts the focus back towards the downstream. And I was hoping you could provide us or at least remind us about the flexibility in terms of your refining assets, as well as kind of revealing any opportunities to capitalize on dislocations in the market, whether it be locally or globally, as well -- and kind of maybe specifically focusing around distillates and jet fuel, just given how desirable those products happen to be. John Whelan: Yes. I'll make a few comments. I'm going to ask Scott to chime in as well. We feel really good about the -- obviously, our downstream business, the margin capture that we're able to get. Canada remains advantaged globally in terms of margin that we get. And then Imperial remains advantaged within Canada. So we really like our position. We do -- so we're really looking to maximize sales locally. However, given the current environment, we do look at the export market as well and look to overall maximize the margin, our margin capture in that regard. So there are some constraints about what we can export when you look at logistics and so on. But we do continue to look across the whole portfolio and how to maximize overall capture, but we're really pleased with the advantage we have in Canada. And I think you saw us do that in the first quarter in terms of margin capture as we benefit from producing renewable diesel, the flexibility we've had to produce into the highest value products and into the highest value markets. So kind of high level, that's how I think about it, and I'll ask Scott to add some color to that. Scott Maloney: Sure. Thanks, John. I appreciate the question, Dennis. First, on the gas to diesel and jet splits within our refineries, we look at that from an optimization standpoint every single month. And so as we think about the feedstocks we're sending to our refineries, we're doing that based on the value we can achieve on the finished products that are manufactured. And so certainly, in this time period, we've been maximizing our production of diesel and jet molecules over gasoline. And that is a balance because a large portion of our production goes to supply customers within the Canadian marketplace, and we can efficiently supply those customers within the Canadian marketplace with our coast-to-coast logistics network, moving the barrels from our refineries in Eastern and Western Canada to those customers. And so that's where we see the highest uplift. And as John mentioned, we do opportunistically look at exporting additional production on top of that. And certainly, that is an opportunity in this sort of marketplace when you're seeing margins increase in other markets. Operator: And the next question will come from Greg Pardy with RBC Capital Markets. Greg Pardy: And as always, thanks for the detailed rundown. John, I wanted to come back to the -- just the progress in terms of the restructuring that's going on. Maybe to better understand perhaps at what stage you're at in terms of transferring workflows from IMO into some of the ExxonMobil excellence centers and so forth. And then also, just in terms of the technology we're talking about in terms of those advancements and how that's being incorporated, maybe what stage are we at? And what are the things that you're looking for in terms of key benchmarks of success? John Whelan: Thanks, Greg. Yes, as we -- if I step back in from this restructuring, it's all driven around, as you pointed to, leveraging rapidly advancing technology environment and the growth that we've seen in these global capability centers that ExxonMobil has. And that basis, that case for action remains really strong. And both of those things that drove the decision, and we feel very good about that. And it advances our long-standing strategy about maximizing value and leaning into technology and leaning into our relationship with ExxonMobil. I would say I feel very good about the progress we're making, and we are advancing that transition on track today. If I think about that, if you look at it, we're basically -- it's pretty ratable in terms of the -- we're doing 2 things. We're outsourcing work and we're capturing efficiencies. And as I've mentioned before, about 40% of the reduction in positions or the value is actually pure efficiency. And about 60% is outsourcing work to these global capability centers where we already have work being done for us today. So we have very rigorous plans on the transfer of that work to those global capability centers and the positions where we will capture efficiencies. And each department and group within Imperial has detailed road maps on how they're progressing that. It's going to be pretty ratable. We have had people leave the organization late last year. We've had people leave the organization in the first quarter of this year in the range of about 130 people in the first quarter of this year. And that's going to continue pretty ratably quarter-by-quarter and year-by-year this year and next year. So that's progressing well and on track, and you'll see it kind of pretty ratably over that period. The technology, I think a couple of things. There -- part of it is what we put in place that has enabled us to move at this pace. And then the second part of it is, as you move that into these global capability centers, we're going to be able to deploy technology more quickly at scale in the future. So a lot of it was putting the digital programs that we've spoken about in the past, putting in place digital -- our data lakes, getting our data organized and in a structure that could be used in an efficient way regardless where the work is being done, putting digital twins in place and then automating some of our work. So that enabled us to continue on this path. And then as we move these workflows into global capability centers, we see greater opportunity, AI, machine learning and so on to further automate those workflows. And we're going to be able to do that more quickly and at scale when that work is being at a global capability center and being done in a broader sense across ExxonMobil's network. Hope that answers the question for you. Greg Pardy: No, no, it does. I mean I think it's usually these announcements, they come out and then the focus is on cost of the future. But obviously, there's a transition to go through. So it's good to understand some of the context there. So let me just pose maybe a related question. Then in terms -- from your perspective as the CEO, the capability of Imperial to go execute Aspen in the future and recognizing there's a pilot there and there's a bunch of work to do and so forth. It certainly sounds from where you're sitting that the only change in terms of where corporate strategy might be headed is not necessarily in terms of what you're going to deliver, but just where it's going to be delivered from and at what cost. Is that the right way to think about it? John Whelan: Absolutely. That's exactly the way to think about it. Nothing is changing in our company in terms of the governance of our company, the skill sets we will have on the ground to support the assets we have today to support growth into the future. We will have -- we're still going to be an organization of 4,000 people after we go through this transition. And our growth plans, I really believe this sets us up to continue to deliver industry-leading performance and actually builds the foundation for us to grow. And of course, if you think about an Aspen project, we're not sitting here today with the project team waiting for that project to come, right? We build up capability when we see those projects coming in. Of course, a lot of it is done by contractors, but we will need additional capability. We're going to be in a better position to build up that capability because we're going to have support networks globally that are there that we can leverage and ramp up. So it doesn't change anything with our governance, doesn't change anything with our strategy. I'm as bullish or more bullish than I've ever been on our future in situ portfolio, the technology, and we have the ability to double our production with that future in situ portfolio. And when the time is right, when the technology is ready and the investment environment is there, we have the capability to do that. Operator: And moving on to Menno Hulshof with TD Cowen. Menno Hulshof: I'll start with a question on Kearl. In your opening remarks, you touched on some of the initiatives you're pursuing to drive production above 300,000 barrels a day on a sustained basis. And you talked about turnaround optimization. But can you elaborate on where things stand on the key pieces within enhanced bitumen recovery and the overall performance of the equipment? John Whelan: Yes. That's right, Menno. I mean I'm going to ask Cheryl to chime in here, but we've got these three focus areas that we've had, which is around productivity and reliability improvement, the turnarounds and then the one you mentioned around enhanced recovery. And we have specific projects focused on enhanced recovery. And so we're working all three of those components. Those are the things that will unlock and get us to 300,000 barrels a day, $18 a barrel. And I'm going to let Cheryl talk about a couple of the enhanced recovery projects that we have -- that we're progressing right now. Cheryl Gomez-Smith: Sure. Thanks, John, and thank you for the question, Menno. John references three items. I'd probably say there are more. This is a space where this is kind of our ultimate end equation. So when I think about Kearl and where we're headed with 300 kbd, I have very strong confidence in our future. And you've heard me say this before, which is we're anchored and we're building on a strong foundation. We're leveraging scale, such that our incremental production really leverages this fixed high-cost structure. We're doing recovery projects. We've got two in the hopper right now. One is called KFCC, and that's going to come online at the end of the year, and that captures additional bitumen from ore already processed. The second one is called CST or coarse sand tailings, that's in development. Think of this as where you get aeration in the system and it makes bubbles so the bitumen droplets, you're able to recover more bitumen. The other end in this space is the turnaround optimization that John mentioned and then technology solutions. And this really hits on that productivity and reliability space. You've heard me mention about we're continuing to upsize our hydro transport lines. We're looking at mine automation where we're looking for more remote, semi- and automated mining that really takes the physical operations out, continuing with our fleet optimizations on the autonomous side. And then the other thing I find is interesting with Kearl is just by design, your haul distances get longer as mine develops. So there's cost headwinds. Our intent is to more than offset those via scale optimization and technology solutions. And the final thing I'll leave you with, and this is one of the key milestones I'm very proud of. By late this summer, Kearl is on target to hit our 1 billion barrels of production. So this is a significant milestone and very much looking forward to it. Menno Hulshof: Yes. Thanks, Cheryl. That is a big number. Second question, maybe on the recent increase to the SCO premium. What is your marketing team seeing day-to-day in terms of rising SCO demand to meet diesel and jet supply shortfalls? And how long do you think premium pricing could persist? John Whelan: I'm going to ask Scott to take that one. Scott Maloney: Yes. So I mentioned before that certainly, we're optimizing our refineries to manage additional diesel and jet production. We feel like there's ample feedstocks in the marketplace to do that. And with the demand profile within Canada in particular, there's even some imported jet from other markets into portions of Western Canada. So we see some ongoing ability to continue pushing jet production and sales into the Canadian marketplace and believe we have enough feedstocks to do that. John Whelan: Yes. And I would just add, obviously, synthetics are trading higher because they're a good way to make diesel and jet. And that's probably -- we're not going to predict the future synthetic premium, but that may persist for a little bit as these margins stay quite high. Operator: And we'll take a question from Neil Mehta with Goldman Sachs. Neil Mehta: Yes. And this might be for you, Dan, just your perspective on return of capital, which has really been the hallmark of Imperial over the last couple of years. And as we've gotten into a firmer commodity environment, certainly, the NCIB will get turned on, but how do you think about buying back stock here and the potential for an SIB and if there's any price sensitivity around shrinking the share count because the stock has done really well. So any perspective around that would be great. D. Lyons: Sure, Neil. Bottom line is no change in the way we look at this, consistent with John's kind of remarks and earlier on. We're committed, obviously, to the reliable and growing dividend. We paid our April 1 dividend at the higher rate of $0.87, which is a 20% increase from the prior. And as you noted, we said we're going to renew our NCIB at the end of June when we can. And we'll certainly plan to proceed with that. And then the question is, okay, is there an SIB in there somewhere, too? And the answer is it's just going to depend on where cash goes, right? I mean, right now, at current prices, if those persist, we'll have a lot of cash, right? So that would certainly be a possibility. But we'll just have to see what happens. So I'd say no change in our philosophy. We remain committed to returning cash to shareholders. And as we generate the cash based on commodity prices, we'll continue to return that really as we have in the past. So no change to our philosophy. I would say we're not really set -- our prices has a great run. And as I said in my opening remarks, it had this -- the mark-to-market was so big. It showed up as a factor because of the rapid rise in the share price. But we believe that reflects value, and we see the share buybacks as an efficient way to return cash. So we'll continue to return cash. Neil Mehta: Yes. Thanks, Dan. It's been a great run. So just a follow-up on the questions about what you want to accomplish during the turnarounds that you referenced earlier for both Strathcona and Kearl. Can you talk -- can you give us pull back a little bit and talk about specifically what are the 2 or 3 things you want to accomplish at both of those turnarounds and that we should be focused on? D. Lyons: I mean I'll make a few high-level comments and then Cheryl and Scott can chime in. But being at Strathcona with the turnaround of the crude unit, again, it's had a 10-year run. So there are some -- we monitor obviously the integrity of the unit. And there are some elements, components that need to be changed out at that point. They've come to the -- towards the end of their life. So part of that is just the maintenance that comes with it. But 10 years is a long time to run a unit, and we look to continue to optimize that. There's that. But at certain point, you do need to go in and make some adjustments. Then at Kearl, I mean there is, again, the same thing. We've been -- there are some elements that components and things that we do need to change out. They come to end of life. In general, we try to have redundancy when we do that. We don't have that full redundancy to do it everywhere. But a big part is some of the upgrades that we're doing. Cheryl mentioned it already, I mentioned it, but it's some of the upgrades we're doing to allow us to get that turnaround to go from a 2-year interval to a 4-year. So that's metallurgy improvement, size of transport lines and things like that, that will allow us to go longer. So that's at the high level. Maybe, Scott, anything further on the Strathcona? Scott Maloney: Maybe just one other comment. Yes, just to confirm, it is an extended turnaround interval length. So that is something that we're pretty proud of actually getting the units to run this long. But it is a normal turnaround from a work scope perspective. We don't plan to add any new equipment or things like that. The one other comment I'd share is that with our new renewable diesel unit located at our Strathcona refinery, that continues to run during this turnaround. And so we continue to manufacture renewable diesel, and that's really been a bright spot for us in the first quarter. And so that has not been impacted by the turnaround activity in Strathcona in the first quarter to date. Cheryl Gomez-Smith: Sure. And I'll answer -- I'll give a little bit of context for Kearl. So the K1 scope that we've got this year is essentially the same scope that we had for K2 last year. So the work we completed on K2 gives us confidence that we head into the turnaround in May. And a couple of key items there, we have some modifications on the primary separation cell and then we've got some hardening on our surge bin. And those are really the key items to enable the 4-year turnaround. We do have a couple of incremental items to work for K1 around the flare. But in general, I would say the majority of the scope is exactly what we did last year for K2. Operator: And we'll take a question from Doug Leggate with Wolfe Research. Douglas George Blyth Leggate: I guess this might be for Dan. Dan, royalties in Canada are typically priced off WTI, which obviously has gone into overdrive here. And WCS has blowed out quite a bit. I wonder if you could walk us through how we should think about that. You're getting obviously, royalties priced on one number, but you're getting realizing prices at a different number, particularly on the heavy oil and the [ WCS ]. Obviously, your production is more heavy than light. So can you walk us through that? And I guess if I could ask a follow-up here. This is a really -- I know it's a stupid question before I ask it, but I'm going to ask it anyway. And it's about technology on things like SAGD, where does it sit? Does it sit at ExxonMobil? Or does it sit at Imperial? And the stupid bit of my question is, one can't help feeling that we're coming into a very different era for oil prices with UAE pulling out of OPEC and maybe there's a restocking cycle and underinvestment and all the rest of it. Imperial has never operated outside of the U.S. -- outside of Canada, my apologies. Is there ever a situation where the heavy oil opportunities in places like Venezuela might change that? Or does it all sit with ExxonMobil? D. Lyons: Okay. So maybe I'll take the first one on royalties. You're right. I mean it's pegged -- the royalties are pegged. The royalty rates, I should say, are pegged to WTI, but the actual royalty payment is tied to your realizations on bitumen. And that's been the case for a long time. And I would say, on balance, we feel the royalty regime in Canada is attractive. And in particular, for Kearl, which is pre-payout, even at the very highest royalty rate, which is over 120 Canadian WTI, we cap out at 9% gross, which -- so we have really great leverage to the upside on prices. So yes, we don't see it as a significant issue. I mean the spread has widened out a bit. It's like maybe $15. I haven't looked today, but 15-ish, so which is historically not very wide. So it's the rates that are set on the WTI, but the actual payments are based on your realizations of bitumen actual prices. So it's really to us, overall, given the way the rates work, a good regime, and we don't see it as a headwind. We see it as more of a tailwind in a high price environment, especially for an asset like Kearl. John Whelan: And let me take the technology question, Doug. I think -- here's how I think about it. We basically have access to all of ExxonMobil's technology and they have access to ours. So in terms of -- at the high level, is Imperial looking to expand its footprint beyond Canada? We're not. We're focused on Canada. But we basically have sharing agreements on the technology. And Imperial has largely the heavy oil-related technologies, SAGD, SA-SAGD, the technologies we use at Kearl, the paraffinic froth treatment and so on. That has been developed by Imperial. So Imperial has kind of been the center of excellence around heavy oil technology. So if ExxonMobil were to decide to look at Venezuela or whatever, they could utilize some of our heavy oil technology involved in that. Right now, we at Imperial are not looking to go outside of Canada. The flip side of that is we get to take advantage of ExxonMobil's technology. So we talked a lot about renewable diesel here today. We're using a low-temperature proprietary technology that allows us to use that our renewable diesel can be used year-round in cold weather environment. That's an ExxonMobil-developed technology that we have full access to and we're able to use to give us a competitive advantage with our renewable diesel project. Some of the metallurgy we use at Kearl on our hydro transport lines has come from metallurgical technology advancements that ExxonMobil has developed. We just used the ExxonMobil Proxima carbon fiber material in one of our bridges at Kearl. So we have full access, and we use much of their process optimization technology in our downstream and in our upstream as well. So we have full and free access to their technology. We use it in areas when it comes to heavy oil, that technology development has largely occurred through Imperial and will continue to occur. We just announced last year how we donated our technology center here to SAIT, which was a $37 million donation, the largest ever donation to an educational institution in Alberta. But we'll continue to have research at that research center going forward in specific to heavy oil optimization as well as tailings work and so on. So that's kind of how we see that. Douglas George Blyth Leggate: Maybe not such a dumb question, John. That's very informative. D. Lyons: We love your questions, Doug, just for the record. Operator: And that does conclude the question-and-answer session. I will now turn the conference back over to Peter Shaw, Vice President of Investor Relations for closing remarks. Peter Shaw: Thank you. So on behalf of the management team, I'd like to thank everyone for joining us this morning. If there are any other further questions, please don't hesitate to reach out to the Investor Relations team, and we'll be happy to answer your questions. With that, thank you very much, and have a great day.
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Hudbay Minerals Inc. First Quarter 2026 Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. I would like to remind everyone that this conference call is being recorded on 05/01/2026, 11:00 AM Eastern Time. I would now like to turn the conference over to Candace Brule, Senior Vice President, Capital Markets and Corporate Affairs. Please go ahead. Candace Brule: Thank you, operator. Good morning, and welcome to Hudbay Minerals Inc.'s First Quarter 2026 Results Conference Call. Hudbay's financial results were issued this morning and are available on our site at www.hudbay.com. A corresponding PowerPoint presentation is available in the Investor Events section of our website, and we encourage you to refer to it during this call. Our presenter today is Peter Gerald Kukielski, Hudbay's President and Chief Executive Officer. Accompanying Peter for the Q&A portion of the call will be Eugene Lei, our Chief Financial Officer, and Andre Lauzon, our Chief Operating Officer. Please note that comments made on today's call may contain forward-looking information and this information, by nature, is subject to risks and uncertainties, and as such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on SEDAR+ and EDGAR. These documents are also available on our website. As a reminder, all amounts discussed on today's call are in U.S. dollars unless otherwise noted. I will now pass the call over to Peter Gerald Kukielski. Peter Gerald Kukielski: Thank you, Candace. Good morning, everyone, and thank you for joining us on today's call. We have had a great start to the year, achieving several key operational, financial, and growth milestones. Hudbay Minerals Inc. delivered another quarter of record revenue, record adjusted EBITDA, and record adjusted earnings in the first quarter. This was driven by steady operating performance, our focus on cost control, and the continued benefit from margin expansion with our unique mix of copper and gold exposure. Our leading operating cost performance resulted in record low consolidated cash costs in the first quarter, which contributed to continued strong free cash flow generation. With the strong performance in the quarter, all our operations are on track to achieve 2026 production and cost guidance. Building on our commitment to prudent balance sheet management, we ended the quarter with over $1 billion in cash and cash equivalents, benefiting from $420 million received from Mitsubishi for their initial cash contribution on closing of the Copper World joint venture transaction in January. Our enhanced financial flexibility has positioned us well to continue advancing the development of Copper World, reinvest in high-return opportunities at each of our operations, and de-risk the Cactus project upon completion of the acquisition of Arizona Sonoran to deliver attractive growth and maximize long-term risk-adjusted returns at each of our operations for stakeholders. Slide three provides an overview of our first quarter operational and financial performance. The first quarter demonstrated strong operating performance with higher mill throughput across the three operations compared to the previous quarter, delivering consolidated copper production of 28 thousand tonnes and consolidated gold production of 62 thousand ounces. We achieved record quarterly revenues of $757 million and record adjusted EBITDA of $422 million in the first quarter. Cash generated from operating activities was $211 million, remaining relatively consistent with the fourth quarter as a result of favorable changes in non-cash working capital. First quarter adjusted net earnings were a record of $159 million, or $0.40 per share, reflecting higher realized metal prices and strong cost control across the operations resulting in higher gross profit margins. During the first quarter, we continued to demonstrate industry-leading cost performance, delivering record low consolidated cash costs of negative $1.80 per pound of copper and sustaining cash costs of $0. This incredible cost performance was partially driven by higher gold byproduct credits, reflecting the benefits of Hudbay Minerals Inc.'s unique commodity diversification. Turning to Slide four, Hudbay Minerals Inc. has delivered several quarters of significant free cash flow generation as a result of steady operating performance, expanding margins from strong copper and gold exposure, and our cost control efforts. With our enhanced balance sheet and diversified free cash flow generation, we are well positioned to fund our attractive growth pipeline. Our cost control efforts are focused on navigating emerging external cost pressures such as higher fuel prices and short-term labor challenges. We have not experienced any disruption to fuel availability and have been able to mitigate the cost pressures through initiatives to further improve throughput and enhance operating efficiencies. We are well insulated from external cost pressures due to our diversified platform with significant byproduct credits from gold production and the polymetallic nature of our ore deposits. While most of our revenues continue to be derived from copper, revenue from gold represents a meaningful portion of total revenues, with 39% of gross revenues from gold in the first quarter. After accounting for our sustaining capital investments but before growth investments, we generated $102 million in free cash flow during the quarter, bringing our trailing twelve-month free cash flow generation to $400 million. As mentioned earlier, we ended the first quarter with over $1 billion in cash and cash equivalents, and as of March 31, our total liquidity was $1.4 billion. Our net debt at the end of the quarter was nearly zero, bringing our net debt to EBITDA ratio to its lowest point in more than a decade. Consistent with our prudent balance sheet management and focus on cost of capital, following the quarter, we repaid our outstanding 2026 senior unsecured notes on maturity on April 1. We used a combination of cash on hand and a $272 million draw on our low-cost revolving credit facilities. After giving effect to this repayment, Hudbay Minerals Inc.'s total liquidity decreased by $473 million to $957 million. This continues to provide us with significant financial flexibility as we advance Copper World towards a sanctioning decision later this year. Turning to Slide five, the Peru operations continued to demonstrate steady operating performance with production and costs in line with expectations. The operations produced 21 thousand tonnes of copper, 9 thousand ounces of gold, 530 thousand ounces of silver, and 380 tonnes of molybdenum during the first quarter. Production of copper and gold was lower than the fourth quarter due to the depletion of the higher-grade Pampacancha ore in late 2025. Mill throughput levels averaged approximately 90.7 thousand tonnes per day in 2026, achieving a new quarterly record. The team's efforts to increase mill throughput align with the Peru Ministry of Energy and Mines regulatory change allowing mining companies to operate up to 10% above permitted levels. On March 6, Hudbay Minerals Inc. received a permit approval to increase annual mill throughput capacity to 31.1 million tons (29.9 million tonnes), setting a new base for the 10% permit allowance. We continue to advance the installation of pebble crushers later this year to further increase mill throughput rates in 2026, and we are on track to achieve 2026 production guidance for all metals in Peru. First quarter cash costs in Peru were $0.70 per pound of copper, a 23% increase compared to the fourth quarter due to lower byproduct credits, offset by lower profit sharing, lower power costs, and lower treatment and refining charges. Cash costs in the quarter outperformed the low end of the annual guidance range as a result of strong operating cost performance and temporarily higher gold byproduct sales from Pampacancha despite emerging external cost pressures. We are well positioned to achieve the full-year cost guidance range in Peru. During the quarter, Constancia was recognized as the safest open pit operation in Peru during the National Mining Safety Contest for our performance in 2025. This reflects our company's unwavering commitment to safety and validates Constancia's compliance with the highest operational safety and regulatory standards. Moving to our Manitoba operations, on Slide six. The first quarter demonstrated strong operational agility in mitigating lower equipment and labor availability at the Lalor mine while continuing to prioritize gold ore feed for the New Britannia mill. This strategy successfully maintained strong gold production in the first quarter, supported by higher mill recoveries compared to 2025. Our Manitoba operations produced 48 thousand ounces of gold, 2.5 thousand tonnes of copper, 5 thousand tonnes of zinc, and 213 thousand ounces of silver in the quarter. Production of gold was higher than in the fourth quarter due to higher gold recoveries and higher mill throughput, while all other metals were lower primarily due to lower grades. Production in 2026 is expected to be higher than in 2025 due to grade sequencing and higher ore output from Lalor. With solid operating results in the first quarter, we are on track to achieve 2026 production guidance for all metals in Manitoba. The Lalor mine hoisted an average of 3.9 thousand tonnes of ore per day in the first quarter, strategically prioritizing gold zones to secure optimal feed for the New Britannia mill. Total ore mined was lower than the prior quarter because of lower effective utilization of equipment due to reduced workforce availability. This was offset by successfully onboarding nearly 80 new employees as recruitment and upskilling of employees are underway to increase proficiency of frontline employees. The New Britannia mill averaged approximately 2 thousand tonnes per day in the first quarter and benefited from continuous improvement initiatives to unlock future throughput capacity. Gold recoveries of 90% at the New Britannia mill reflect ongoing optimization efforts. Similarly, the Stall mill achieved improved gold recoveries of 73% in the first quarter, reflecting process optimization and enhanced gold recovery initiatives. The 1901 deposit delivered 11 thousand tonnes of development ore in the first quarter. The team continues to advance haulage and exploration drift to further delineate the ore body and support ongoing infrastructure projects. Looking ahead, we plan to prioritize exploration definition drilling, ore body access, and establish critical infrastructure at 1901 in preparation for full production in 2027. Manitoba gold cash costs in the first quarter were $4.08 per ounce, outperforming the low end of the guidance range. We are well positioned to achieve our 2026 cash cost guidance range. In British Columbia, we continue to focus on advancing our multiyear optimization plans, achieving significant milestones in both mining productivity and project permitting in the first quarter, and remain on track to deliver the benefits of the stripping program and unlock higher-grade ore later this year. As shown on Slide seven, Copper Mountain produced 4.1 thousand tonnes of copper, 5.2 thousand ounces of gold, and 43 thousand ounces of silver in the first quarter, in line with our guidance and planned mine sequencing. Production was supported by a higher mill throughput, offset by lower grades compared to the fourth quarter. We remain on track to achieve our 2026 production guidance expectations for all metals in British Columbia, with higher production expected in the second half of the year as mill improvements take effect. Mining activities reached a record total material movement of over 25 million tonnes in the first quarter driven by an optimized mining sequence in the Main Pit and increased contributions from the North Pit. This ramp up was supported by the successful commissioning of a new production loader in January. To further bolster the equipment fleet and add to this momentum, a new shovel has been recently commissioned. Drilling throughput benefited from the completion of the second SAG mill and the mill optimization initiatives implemented in late 2025, resulting in increased mill throughput in 2026. The second SAG mill achieved increased throughput in the quarter and averaged 10 thousand tonnes per day in March. The primary SAG mill continues to operate under a reduced load and is being rigorously monitored prior to the head replacement scheduled for late June and into July. The mill remains on track to achieve its permitted capacity of 50 thousand tonnes per day in 2026. British Columbia cash costs were lower than the prior quarter, delivering cash costs of $2.41 per pound of copper as a result of higher gold byproduct credits and resolving the unplanned maintenance downtime issues experienced in the prior quarter. First quarter cash costs were within the guidance range and despite emerging external cost pressures, we remain on track to achieve 2026 cash cost guidance in British Columbia. During the quarter, the New Ingerbelle project reached a major milestone in February with the receipt of the Mines Act and the Environmental Management Act amended permits from provincial regulators. The New Ingerbelle project supports continued copper production, increased gold production, and further mine life extensions. The project is designed to access higher-grade mineralization while improving operational efficiency with a stripping ratio approximately three times lower than current mining areas. With these permit approvals, we are advancing critical infrastructure required for the expansion. This includes the construction of an access road, a bridge across the Similkameen River, and the development of an east haul road link to New Ingerbelle with existing operations. A large drill program was initiated during the first quarter at New Ingerbelle to improve resource definition and expansion. We are pleased to receive the news this week that the B.C. government has added the New Ingerbelle project to the province's list of priority resource projects. This list highlights the acceleration of major projects that strengthen economic growth, support resource development, and create jobs and long-term value. Turning to Slide eight, we announced our annual mineral reserve and resource update along with an improved three-year production outlook during the quarter. We extended Snow Lake's mine life by four years to 2041, maintained Constancia's mine life to 2040, and extended Copper Mountain's mine life by two years to 2045. Consolidated copper production is expected to average 147 thousand tonnes per year over the next three years, representing a 24% increase from 2025. This growth is driven by higher expected copper production in British Columbia from the mill throughput ramp up in 2026, higher grades in British Columbia in 2027 from the completion of the accelerated stripping program, and higher expected mill throughput in Peru starting in 2026. Consolidated gold production is expected to average 243 thousand ounces per year over the next three years, reflecting continued strong production in Manitoba and the expected contribution from New Ingerbelle in British Columbia starting in 2028. We have already made significant progress in advancing many of our corporate and strategic objectives so far this year, and we anticipate many more key catalysts to come from our portfolio of long-life assets in Tier 1 jurisdictions, as shown on Slide nine. Our prudent balance sheet management, strong financial flexibility, significant free cash flow generation from strong exposure to higher copper and gold prices, and continued margin expansion has positioned us to be able to advance generational growth investments across the portfolio. In Peru, we will deliver higher mill throughput in the second half of the year as we complete the installation of two pebble crushers, which will grow copper production in 2027 and 2028. We also continue to progress exploration plans in Peru, including at the Maria Reyna and Caballito properties, to provide long-term growth potential at Constancia. In Manitoba, we continue to advance optimization initiatives and exploration efforts to demonstrate an enhanced production profile and expanded mine life. Exploration activities are underway at the 1901 deposit as we advance towards production in 2027, and an expanded exploration program at Talbot is focused on upgrading mineral resources to reserves and expanding the deposit footprint at depth. In British Columbia, we expect to continue to see operational improvements in the second half of the year as we complete our optimization initiatives and advance this operation towards its free cash flow inflection point later this year. Following the receipt of the New Ingerbelle permits earlier this year, we have commenced construction of critical infrastructure for the development of the deposit to access the higher-grade mineralization and drive further cash flow growth starting in 2028. We have also launched the largest exploration program at New Ingerbelle to further increase mine life extension potential. On Slide 10, during the first quarter, we made significant steps towards enhancing our United States copper growth pipeline. At Copper World, as I mentioned earlier, we announced the closing of the Mitsubishi joint venture transaction establishing a long-term strategic relationship with a premier partner. The initial $420 million in cash proceeds will be used to directly fund the remaining pre-sanctioning costs and the initial project development costs following a sanctioning decision later this year. Feasibility activities at Copper World are well underway, with the DFS progressing above 85% completion at March and remaining on track for completion in mid-2026. In March, we announced the acquisition of Arizona Sonoran, establishing a major copper hub in Southern Arizona with the addition of the Cactus project to our existing Arizona business. This transaction further strengthens our position as a premier Americas-focused copper company, enhances our U.S. growth pipeline, and creates significant operational efficiencies and regional synergies with the staged development of Copper World and Cactus. The transaction has received strong shareholder support and is expected to close in 2026. We have also commenced pre-feasibility study activities at our Mason copper project in Nevada. We expect the study to be completed in 2027. While Mason is not expected to come into production until after Copper World and Cactus, its larger production base will position it as the third-largest copper mine in the U.S. As we continue to advance all of these attractive growth initiatives across the portfolio, we remain committed to prudently allocating capital to the highest risk-adjusted return opportunities to deliver significant value for stakeholders. Concluding on Slide 11, our focus on demonstrating continued operational excellence while prudently advancing our many organic growth opportunities will deliver significant copper production growth. Over the next three years, we expect to increase production by 24% through attractive brownfield investments while continuing to advance our attractive U.S. pipeline to meaningfully expand annual copper production levels. By the end of the decade, we expect to increase our annual copper production by more than 70% to approximately 250 thousand tonnes with Copper World. And with the staged development of Cactus and Mason to follow, we have a pathway to 500 thousand tonnes of copper by the middle of the next decade. The most compelling part of this industry-leading copper growth profile is that our growth assets are low risk, low capital intensity projects located in some of the best mining jurisdictions in the world, and we have the team, the balance sheet, and strong financial plan to deliver this pipeline. This is largely driven by a diversified operating platform with significant exposure to complementary gold and our expanding margins. I have no doubt that our continued focus on delivery and execution will continue to drive significant value for all our stakeholders. And with that, we are pleased to take your questions. Thank you. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Our first question is from Ralph Profiti with Stifel Financial. Please go ahead. Ralph Profiti: Thanks, operator, and good morning. Thanks for taking my question. Peter and Eugene, there has been a lot of work being done at Copper World on long-lead items ahead of the definitive feasibility study. Do you have a goal for how much of the revised budget, by the time sanctioning does come, will be locked in, contracted, and committed? I am trying to get a sense of how much work can be done ahead of time to manage inflationary pressures. Peter Gerald Kukielski: Thanks, Ralph. Great question. We certainly will lock in a significant amount of the equipment. For example, we already have pricing on fleet. We have the opportunity to lock in fleet pricing right now. We have pricing from vendors for primary equipment that we are going to procure, and we are ensuring that we have space in the production facilities right now. I would say between the issue of the DFS and FID, we will lock in pricing on all of that equipment. Andre, any comments you might have in addition? Andre Lauzon: Yes, I agree on long-lead and there are also some critical path items that we have been moving along. We started construction of our waterline, taken some initial blasts, and we are pioneering our haul roads as we speak. Those are already in our budget for the year. Like Peter said, the big ones are already in place. Ball mills, SAG mills, all those costing items are coming forth. Eugene Lei: Ralph, if I could just add one more point. You will recall that when we announced the joint venture transaction last August, we increased the 2025 budget for long-lead items. We did not just react to this today. We have been thinking about this for well over a year. We have been placing orders and getting ourselves ready for the FID decision well over a year in advance. Ralph Profiti: Great. That is very helpful. And maybe as a follow-up, a point of clarification, Peter, on the LSIB judicial review. This is a process that is actually tied to the regulatory government process itself and sits outside of Hudbay Minerals Inc.? Are you needing to have a legal strategy around this to preserve the 2028 timeline for New Ingerbelle? Peter Gerald Kukielski: Yes, great question, Ralph. In March, the LSIB submitted an application for review of the regulatory decision to grant the permit amendment. We remain very confident in the integrity and the robustness of that regulatory process that led to the issuance of the permit amendment, and we believe that the court will uphold the decision. At the same time, we remain committed to working with the LSIB in a respectful and constructive manner to try to resolve their concerns through the mechanisms that were agreed to by the parties in the participation agreement. Their issue is not with us, it is with the government, and we have a constructive relationship with them and will continue to ensure that we continue to drive that relationship. Ralph Profiti: Great. Thank you for that clarity and for your answers. Operator: The next question is from George Eadie with UBS. Please go ahead. George Eadie: Yes, hi, thanks for the call today. Following up on that question from Ralph, on the Copper World CapEx, Peter and Eugene, how much can you lock up in the next twelve months or so in terms of dollars? Are we talking 20% to 30% of the CapEx spend you can fix in that period? Is that a reasonable estimate? And we have seen a zinc project nearby this week materially lift CapEx, and while part of that is scope change, how can we get meaningful conviction that in twelve months you can avoid that risk? Eugene Lei: Lots of careful planning. We have had a lot of time to think about this project over the years, and the feasibility study for a similar project was completed a decade ago. We also have a certain amount of equipment already in storage and obviously not subject to cost inflation. In terms of the actual percentage in dollars, we are still working on the final estimate in the DFS. We do not know that number yet. We have been very clear that we expect there to be some cost inflation and escalation related to the final CapEx number from the pre-feasibility number that was released three years ago. As you know, there has been inflation, but that three-years-ago number was post the biggest wave of inflation post-COVID. So we are not expecting a blowout in terms of capital. We are approximately 85% done with the feasibility study. We will release that likely in the third quarter, midyear as expected, with an FID to follow. We do not have any further clarity or any guidance on the actual CapEx number at this moment. Peter Gerald Kukielski: I would add, George, that we are following an integrated project delivery system, which incorporates a number of the contractors and engineers in the overall project management structure. So the development of the estimates that we have will, in no small measure, include their estimates of their own contributions. The constructors and engineers we are using have actually participated in several of the projects that have been developed in the U.S. recently, and they will have deep insight into the evolution of costs over the last couple of years in any case. That will be reflected in the definitive feasibility study. Andre Lauzon: To the original question around percentages, it is tough, like Eugene said, but we do have insights in terms of the fleet. If you recall from the pre-feasibility study, the fleet is 10% to 15% of the overall cost, and the numbers that we are receiving are in line with our estimates. That is a good sign to start. You will recall this project is one of the lowest capital intensity projects in the copper space. It is not subject to some of the larger cost flows we have seen in the sector. It is not at altitude and is about 26 miles from Tucson, so some of the inherent infrastructure challenges that have plagued other builds do not apply to this project as much. We are confident there will be a very robust economic case for this project, as evidenced by Mitsubishi joining at the PFS level a few months ago. George Eadie: Okay, yes, that is helpful, thanks. Pivoting slightly, at Cactus, when will we get an updated PFS with Hudbay Minerals Inc.'s overlay post-transaction closing? Could that be by year-end, or is it still going to be some time next year? And what is the latest on the permit amendments too, please? Andre Lauzon: Sure. I will take that. The vote is still to come in a couple of weeks. We are quite excited about the project and the teams. We are very pleased with the quality of the teams currently working for Cactus and excited for them to be part of ours. The next step, once the vote goes through, is to sit with the teams and regroup. There are lots of synergies with Copper World and our view of the acquisition. Getting their understanding as well will go into next year. It is not a year-end thing. Realistically, it is into 2027 for sure. In terms of permitting, the teams are progressing permitting at site and having discussions locally with the county. The permitting and the revisiting of that is on track and moving forward, and we are supportive. The synergies include looking at fleet; we just completed negotiating a large fleet for Copper World. Once we go through closing, there will be opportunities for Cactus when we look at it altogether. But end of the year would be rushed; it is definitely into next year. George Eadie: Okay. Thanks, guys. All the best. Operator: The next question is from Fahad Tariq with Jefferies. Please go ahead. Fahad Tariq: Maybe just any color on input cost pressures or supply constraints that you are seeing? I do not think I saw anything in the presentation or in the press release. If you could comment on that, that would be helpful. Thanks. Eugene Lei: I can take that. I assume, Fahad, you are referring to current fuel and oil prices and the like. From Hudbay Minerals Inc.'s standpoint, we are fairly well insulated from these emerging cost pressures. As you saw, we held costs very well in the first quarter and, while prices for oil were not yet elevated, our operations are minimally affected. In Peru, about a $10 increase in the price of oil per barrel is about a $0.04 cash cost increase per pound of copper. In B.C., given the heavy stripping that we are doing, that is a little higher, about $0.10 per pound produced. If you think about oil today and, for example, current prices were to hold, oil is about 50% higher than our original budgeted amount for the year, and that would result in about a $45 million hit to cash flow if oil prices were to persist at this level for the whole year. We have a natural hedge of gold in our portfolio that more than insulates that cost. Gold is about 20% higher than what we budgeted for the year, and if these gold prices were to hold for the rest of the year, the impact of that would be close to $200 million. So, in terms of the net effect, what we have with the gold that we produce in the portfolio is a natural hedge against larger cost inputs like oil. We feel very well positioned. Peter Gerald Kukielski: And, Fahad, I would also add that one of our primary cash flowing assets, which is Manitoba, is largely insulated from the effects of oil prices since we use very little oil in Manitoba at all. Most of our underground equipment is electrically driven or battery driven in any case. Fahad Tariq: Okay, great. That is really clear. And then switching gears to the growth profile, can you remind us in terms of the sequencing between Cactus and potentially Copper World Phase 2, how you are thinking about that assuming those permits happen at some point and you are in a beneficial situation of being able to select between the two? Peter Gerald Kukielski: For sure. It makes absolute sense to progress Cactus in sequence with Copper World because there are a lot of synergies between the two projects. As Andre mentioned, we would continue with updating the pre-feasibility study of Cactus, move from that into definitive feasibility, and get all the permits in place so that once Copper World Phase 1 is in production, we would be able to phase the construction of Cactus and bring that online subsequent to Copper World. For Phase 2, we would not want to apply for permits until Phase 1 is in operation because we do not want to get things mixed up. It will take several years to get the permits for Phase 2, so it makes absolute sense to progress Cactus, and then Phase 2 would come in after Cactus. Andre Lauzon: And Cactus is a little different than Copper World. At Copper World, a lot of CapEx is around building a facility and infrastructure. At Cactus, it is more of a stripping exercise leading into building an SX-EW plant. It is very low risk in terms of execution of moving material. It is about purchasing the fleet and executing the plant. So, as Peter said, there is a timing element and it almost naturally fits. Operator: The next question is from Dalton Baretto with Canaccord Genuity. Please go ahead. Dalton Baretto: Thanks. Good morning, guys. Staying on the sequencing theme between Copper World Phase 1 and Cactus, given what has been going on with sulfur and sulfuric acid pricing, demand for U.S.-made cathode, and the timing of the sequencing, has anything changed in your thinking as it relates to the feasibility study around the Albion facility? Peter Gerald Kukielski: Great question. Nothing has really changed. The DFS is a continuation of the PFS, pretty well the same. Andre Lauzon: What we could do is, during the update of the PFS for Cactus, take a look at the sequencing or the timing for the development of the Albion facility. That will be something that we look at as part of the Cactus PFS rather than the work that we are doing on Copper World right now. To build on that, the other project in Manitoba where we are looking at getting the gold out of the Flin Flon tails is progressing quite well with the studies. There is still more to go, but one of the byproducts there is also sulfur—molten sulfur and sulfur products. There is lots of optionality in our portfolio to produce sulfur that would benefit the Cactus project, where ultimately what you are trying to get is acid for the heap leach. Whether it is advancing Albion, as you suggest, or producing a lot more gold in Manitoba and doing the other, we will evaluate all those at the right time. Dalton Baretto: Understood. And then once the feasibility study drops midyear, outside of the financing package, what are some of the other gating items to get you to FID? Peter Gerald Kukielski: Obviously, getting our partner on board. The partner is already on board in many respects, but they have their own internal approval process that we need to respect. There will be some time between the completion of the definitive feasibility study and the final investment decision in respect of what our partner needs. Andre Lauzon: They are actively working with us. We are meeting with them. They absolutely do not want to be a barrier. We are all aligned on rock in the box and hitting that first production. They have been really great to work with, and we do not see any barrier to spending the money. Eugene Lei: The $420 million that they deposited in January at close is being used to advance the feasibility study and will be the first capital spent when we FID this project. Andre Lauzon: We do not see the FID being a barrier to rock in the box and first production. All the allowances we have made and the critical path items we are focusing on are keeping us on track. Dalton Baretto: Great. Thanks. And finally, Peter, can you comment on some of the political developments in Peru right now and whether that is translating into any form of social unrest? Peter Gerald Kukielski: The social landscape has been complicated since the unrest we saw last year. With the federal elections underway right now, there may continue to be periods of heightened social unrest. The general election was held on April 12, and from the initial voting, there is not yet a clear result of who the second candidate is. The first candidate, as everybody knows, is Keiko Fujimori. By mid-month, it probably becomes clear who the second candidate is. Frankly, federal elections do not really impact Hudbay Minerals Inc., as we have seen many different presidents since we started operations ten years ago. What has been constant in those years has been the stable fiscal regime, which we do not expect to change. We have seen left-wing presidents, right-wing presidents, and everyone in between. Peru is a leading copper production nation globally, and the new president will recognize the importance of mining to the country. It will be business as usual for us. We have no concerns with respect to the upcoming election. I do not think it will result in heightened unrest. There may be bouts of it, but we are well positioned to deal with it. Operator: The next question is from Stefan Ioannou with Cormark Securities. Please go ahead. Stefan Ioannou: Hi, can you hear me okay? Maybe following on the Peru theme. In the slide, you mention preparing for Maria Reyna and Caballito exploration. I assume that involves more local social considerations. Is there any update on when we might be able to put a drill rig in the ground there? Peter Gerald Kukielski: There are no changes to the remaining steps in the permitting process, which includes the government’s Previa process with the local community. With the election underway, that process is delayed. There are community elections later in the year. We think once those elections have been held, we will move forward towards getting the permits. Permits are delayed, but we think we are coming to the end of that period of delay as we move past the general election and the community elections, and then we probably see some movement towards the end of the year. Stefan Ioannou: Okay, great. Thanks very much. Operator: The next question is from Matthew Murphy with BMO. Please go ahead. Matthew Murphy: Hi. I wanted to ask about the labor balance at Lalor. You mentioned it a few times. Some challenges in Q1—maybe you can elaborate on what you are seeing and how you are addressing it? Andre Lauzon: Sure. There have been some challenges. They are not new; we have gone through this before. We saw a bit of a peak toward the end of Q1, and we are working through it now. We are bringing more people into the organization, and that takes a little time to train—more of a medium-term fix. In the very short term, the team is looking at the 1901 ore body, which we have been developing ourselves, and we have a lot of skilled employees there. The team is working on contracts with a mining contractor for that isolated area as a nice fit, and then we will redeploy our resources into the shortfalls within the mine. There are several initiatives underway, but those are the main ones. We have this in hand. It is something we have done before. It is just a blip, and we are working through it. Peter Gerald Kukielski: And, Matt, we were straightforward in the results release that we remain on track to achieve the annual production guidance ranges in Manitoba regardless of any labor issues and ups and downs that we might see. The team has it well in hand. Andre Lauzon: We will still be within production and cost guidance, even with those extra costs. Matthew Murphy: Got it. Okay. Thank you. Operator: The next question is from Lawson Winder with Bank of America Securities. Please go ahead. Lawson Winder: Thank you, operator, and good morning, Eugene and Andre. Thank you for today’s update. Could I ask about capital return? In light of the recently revamped capital return framework and the stronger balance sheet, and considering the growth capital needs and the buyback renewal approval, can we consider the probability that Hudbay Minerals Inc. might be more active in the buyback in 2026 as a higher probability than in 2025 when the buyback was not acted upon at all? Eugene Lei: Hi, Lawson. I can take that question. We look at this holistically, and the capital allocation framework was meant to provide us, beyond that 3P plan, the way to advance the company. With the framework, we are able to do three things: fund the development of Copper World, reduce debt with a goal of less than 1x net debt to EBITDA through the life cycle of the build, and fund generational investments in brownfield projects at each of our operating sites. Given the progress we have made on the balance sheet, we are able to consider shareholder returns well ahead of our goal to be a meaningful dividend payer with the development of Copper World. We started thinking about that earlier this year with the capital allocation framework, and the first step was increasing our dividend. It was a nominal increase, but it was the first dividend increase we have had in our history. We would like to ramp into that if we have the opportunity and if these prices were to hold, while making generational investments and providing shareholder returns. The NCIB was put in place as good housekeeping, as a tool to smooth market volatility. It is something we want to be able to access at the right time. We are not committing to any set dollar amount of share buybacks at this time. We do not think that is the right way to set our capital allocation priorities, particularly during the year of sanctioning at Copper World. If we have the opportunity to have excess capital at the end of the year, we can relook at the dividend and see if we can enhance that as part of the whole capital allocation framework. Peter Gerald Kukielski: I would also add that we want to have all options available to us, but right now the most important thing for us is delivery. I am confident that the culture of consistent operational and financial delivery that we are building will ensure we are the gold standard in the copper space, as we referred to in our release. Lawson Winder: Thank you. One other follow-up on capital return: I am not entirely clear on the potential spending at Mason. You are advancing plans to initiate a pre-feasibility study. Can you remind us what you think you are going to spend in 2026 on Mason? Could that change? Is there a range, or is it fixed? Eugene Lei: We are starting that process, and approximately $20 million is allocated to advancing Mason this year. That will be expensed, as it is not yet in reserve. That is essentially a fixed budget number. There is not much we can increase that by in terms of moving ahead. We are starting the pre-feas and that will take the better part of a year or two. Andre Lauzon: It is mostly studies—studies, some drilling, some geotech, hydrology. Lawson Winder: Okay. Fantastic. Thank you all very much. Operator: The next question is from Analyst with Haywood. Please go ahead. Analyst: Thanks. Peter or Andre, following on the discussion with respect to sequencing in Arizona, do you feel comfortable giving a date in terms of production start for Copper World, for Cactus, and for Phase 2, just to give us a broad sense of what this is going to look like over the long term? Peter Gerald Kukielski: Sure. Copper World targeted dates will be released with the DFS, but it is pretty well mid-2029 for rock in the box. Cactus would be sometime after that. As Andre said, Cactus is more an earthmoving effort than anything else. We have to move rock, do some stripping, develop the heap leach piles, and then build an SX-EW plant. There could be concurrent activity on mining between one and the other, but it remains to be seen during the PFS update what that will look like and the actual sequencing. Andre Lauzon: We are not slowing down Cactus studies. We will move those forward as fast as we can. Depending on where we are with Copper World, metal prices, and all that, we could start stripping—things that are very straightforward—while we are doing detailed engineering. We want to keep that optionality open. Analyst: Understood. On overlap, if you start in mid-2029 at Copper World, would you consider a start-up at Cactus within 18 to 24 months of that start-up, or do you need longer lead time? Andre Lauzon: That is possible and reasonable. Pre-feasibility is roughly a year and feasibility is another year. Layer on concurrent permitting updates. One thing we do know is you have to strip rock, and at the right time that costs money. How Copper World is going, where metal prices are, and permits in hand will drive timing. We are not slowing anything with Cactus. We want everything ready as fast as possible. It is optionality for us. In the next five years, we could potentially triple copper production and Cactus is a key part of it. Peter Gerald Kukielski: In terms of Phase 2, we will apply for permits pretty quickly once Phase 1 is up and running. The question is the duration of permitting. It will certainly take longer to permit Phase 2 than to bring Cactus into production. Phase 2 is not a massive effort, and there are nice surprises in Phase 1 that will come out. Analyst: And finally on New Ingerbelle, what are the implications of bringing New Ingerbelle on in 2028 from a production perspective? Peter Gerald Kukielski: For gold, it is basically more gold and mine life. It is roughly double the gold grade of what we are currently producing. Andre Lauzon: There is some stripping that goes along with it, but it is a great cash flow generator for us, particularly at these metal prices, and with about a third of the stripping ratio of current areas. Eugene Lei: The average gold production with New Ingerbelle essentially doubles from about 20 thousand ounces of gold per annum to about 40 thousand ounces per annum. It would be a very nice complement to the consistent copper production, and the mine life of New Ingerbelle on a reserve basis today is ten years. We started drilling at New Ingerbelle and expect to convert a lot of the inferred, so we are likely to see something much closer to double that mine life as we continue to drill and convert that resource. Analyst: Alright. Okay. Thanks. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Candace Brule for any closing remarks. Candace Brule: Thank you, operator, and thank you, everyone, for participating today. If you have any further questions, please feel free to reach out to our Investor Relations team. Thank you and have a great day. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Daniel Fairclough: Good afternoon, everyone. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you for joining this call to discuss ArcelorMittal's performance and progress in the first quarter of 2026. Leading today's call will be our Group CFO, Mr. Genuino Christino. Before we begin, I would like to mention a few housekeeping items. As usual, we will not be going through the presentation that was published on our website this morning. However, I do want to draw your attention to the disclaimers on Slide 20 of that presentation. Following opening remarks from Genuino, we will move directly to the Q&A session. [Operator Instructions] And with that, I will hand the call over to Genuino. Genuino Christino: Thanks, Daniel. Welcome, everyone, and thanks for joining today's call. As usual, I will keep my remarks brief and much of what I say will echo the messages from recent quarters. That reflects the consistency of our performance, the clarity of our focus and the discipline with which we continue to execute our strategy. What we are delivering at the bottom of the cycle positions us very well for the near future, particularly as more favorable policy conditions translate into a stronger operating environment with improving margins and returns. Alongside the impact of our growth strategy, this supports the free cash flow outlook and the delivery of consistent capital returns to shareholders. But first, I want to address safety. Our multiyear safety transformation program is now delivering more consistent and improved outcomes across our organization. Leadership expectations are clearly defined, risk management practices are being applied more uniformly and our focus on process safety has expanded across installations. Advanced analytics, including AI are strengthening these efforts, for example, enabling early identification of workers entering hazardous areas and triggering fast alerts and interventions that human monitoring alone. Most importantly, the sustained focus on safety is translating to tangible improvements in performance across the group. We provide a more detailed account of this progress in the sustainability report published last week, which I encourage you to review for a fuller picture of how we are advancing our safety objectives. Now I want to focus this quarter on 3 key points. First and foremost, our results consistently demonstrate clear structural improvements. In the first quarter, we delivered EBITDA of $131 per tonne, up $15 per tonne year-on-year and around 50% higher than our historical average margins. This clearly demonstrates the strengthening of our underlying earnings power over recent years. Importantly, this performance does not yet reflect the significantly stronger price environment seen in recent months, which we expect to be more fully evident in our second quarter results. Underlying free cash flow performance was robust. Excluding the seasonal working capital investment and the strategic growth CapEx, underlying free cash flow was running at an annualized rate of over $2 billion. Again, considering where we are in the cycle, this represents a strong outcome. Consistent and disciplined execution of our strategy is driving improved performance and providing the capacity to continually invest with discipline and focus and materially enhance the future earnings potential of ArcelorMittal. This brings me to my second point, our compelling growth opportunities, which clearly set us apart from our peers. We are allocating capital to the highest return opportunities. This includes projects that are actively enabling the energy transition, expanding our iron ore mining capacity and adding new value-added capabilities. We recently approved an EAF investment in Dunkirk. The decision was enabled by the more supportive policy backdrop, the cost visibility from a competitive long-term energy contract and the support of the French government. Our EAF projects are expected to deliver incrementally high EBITDA to provide an acceptable return on the capital deployed. So we have reflected Dunkirk together with the previously announced EAF projects in Sestao and Gijon into the expected EBITDA impact from strategic projects. This now stands at an incremental $1.8 billion from 2026 onwards. My final point is on the positive outlook, which is underpinned by trade policy. Given the change to trade policy, the steel sector today offers much more defensive characteristics, particularly in Europe than it did in the past. More effective trade protections are leading to increasingly regionalized market structures, enabling domestic producers to recapture market share from unfairly subsidized imports. The biggest shift occurring in Europe. We are very pleased with the agreement achieved in the new Tariff Rate Quota tool in Europe. As a result, we can expect this to be in effect from 1st of July 2026. Together with CBAM, this underpins our positive outlook for our European business. We are seeing stronger customer engagement, higher order inquiries and customers shifting more towards domestic supply. This is apparent in the material improvement in steel prices and spreads since the start of the year. As a result, despite the volatility of energy markets caused by the conflict in Iran, we continue to expect our production and shipments to improve across all regions in 2026. And we should see a clear improvement in our EBITDA in all Steel segments next quarter. As I conclude, the message is simple. We are consistently delivering structurally improved results while executing our strategy with discipline. Our high-return growth opportunity to differentiate us from our peers as does our track record of capital returns through the consistent application of our policy. That framework has already delivered a 38% reduction in our share count and a doubling of the dividend over the past 5 years. At the same time, we have advanced the business strategically, enhancing resilience and structurally improving returns on capital, all achieved while maintaining a strong investment-grade balance sheet. With that, Daniel, I believe we can begin the Q&A. Daniel Fairclough: Great. Thank you, Genuino. So we have quite a long question -- list of questions already. So we will move to the first, which we'll take from Alan. Unknown Analyst: A couple of questions from my side. The usual question is probably a good place to start. If you can walk us through the usual profit bridges Q1 versus Q2? And where do you see the greatest delta in prices and volumes? And how are your divisional costs evolving sequentially, including the CO2 cost implications in Europe? That's the first question. Genuino Christino: So I will ask Daniel to start with the bridge. Daniel, do you want to kick it off? Daniel Fairclough: Yes, sure. Thanks, Genuino. And it's a very simple bridge, which you've already alluded to, I think, in your opening remarks, you referenced that we expect all of the Steel segments to improve in the second quarter relative to the first quarter. And the drivers behind that improvement are common across the segments. So it's a theme of improved volumes and improved prices. So that's applicable to Europe. It's applicable to North America, and it's applicable to Brazil. Genuino Christino: Yes. Perhaps then I will add, Daniel. I mean the point on carbon cost, I mean, as you know, I mean, we have the new benchmarks, right, from beginning of the year, and that's ETS 4.2. So I'm sure you know what it means in terms of reduction of free allowances, right? But I think what is important here, and we have in our results is that now with CBAM, which so far, based on what we can see, is proving to be very effective, right? I mean we see that prices since the introduction of CBAM has moved up by this year, just look at the index almost EUR 100, right? And you don't see that yet in our results. You see, of course, the costs in Europe already, right, as we accrue the higher CO2 costs, but you don't see yet the benefits of CBAM, that's I would say. So that should come, of course, from quarter 2 onwards. Unknown Analyst: And my second question is, if you're able to give us some qualitative color on the European customer behavior, how receptive are they to the new pricing frameworks both CBAM and the upcoming safeguard? And are you worried about inventory levels in Europe? Or are you seeing any client retrenchment because of the Middle Eastern conflict? So any color you can give us on your customer profile in Europe today would be much appreciated. Genuino Christino: Yes. Well, I made some comments in my prepared opening remarks, right? We are seeing more activity. The order book is good. So when I compare where we were last year, I would say the order book is stronger. We see customers trying to develop the relationships -- so that is all supportive, Alan. That's good. So -- and that's why, I mean, we feel, of course, confident to confirm the guidance that we discussed at the time of Q4 results, higher shipments in Europe year-on-year, right? And I would expect our second half actually to be stronger than the first half, which is, as you know, unusual. Typically, our second half is weaker. But because of everything that we are discussing here, I would expect shipments in the second half to be actually stronger. Yes. So I think it's all moving in the right direction. Daniel Fairclough: Great. So we'll move now to take a question from Bastian at Deutsche Bank. Bastian Synagowitz: My first one is also a follow-up actually on maybe your guidance, particularly on the steel production side in Europe specifically, which was, I guess, very low in terms of production in Q1. And you talked about the maintenance, but shipments were down quite a lot as well, which I guess one could say is a little bit surprising given the impact from CBAM we've seen already as well as maybe some withdrawal from imports. So I'm wondering how far we will see a real catch-up in the second quarter driving very strong year-on-year growth and whether you would be able to even give a bit more detail on that, that would be great. That's my first question. Genuino Christino: Yes. Sure, Bastian. Yes, you're right. So we are, of course -- and as we discussed in Q4, we had maintenance in some of our facilities, right? And we have just 1 or 2 days ago, restarted one of our furnaces in Poland. And we continue to work on our furnace in France and Spain. So we're going to be in a position to bring back the capacity as and when we see the demand, right? And as a result, the furnace in Poland is already -- we are ramping up that as we speak. I mean inventories, and I have not really touched on it, so I should do it now. I mean we know that imports were quite elevated in Q4, right? We saw imports coming down in quarter 1, right? But evidence suggests that imports, at least at the beginning of quarter 2 elevated. So you still have players to try, of course, to get materials here before the new TRQ starts from 1st of July. Having said that, we don't believe that inventories are too high. I mean, of course, they are higher than, I would say, normal levels, but not so high. So our expectation is that the new TRQ comes into place, this inventory should normalize relatively quickly. Bastian Synagowitz: Okay. And in terms of what this means for, I guess, the overall cycle, I guess there are some players in the market, which do expect that imports in the second quarter will basically go up before they fade in the second half. Is this the view you do share as well? And I guess, what is your view maybe particularly also on the pricing side, prices have been very strong already. But is your view that rely comes third quarter, we will see further price dynamic most likely kicking in, in Europe? Or will it take longer to maybe digest and work through, I guess, inventory overhang, whatever disruptions we could see? Genuino Christino: Well, Bastian, I mean, what we are seeing, I mean, we saw prices actually moving up during the quarter, right, actually accelerating from beginning of the Iran war, also in response, right, to cost pressures. So I think it's fair to say that imports in quarter 2 should still be high, right, as we discussed because just it's normal, right? So players are trying to get the materials here before the new TRQ. But again, it's not ideal, of course. We're going to need to work through that. But we don't expect that to really be to take the market long to absorb that. And of course, on prices, as you know, we cannot comment, right? We can -- I can only refer you to what we are seeing. If you look at the index, it's right? I mean we have a nice -- not only prices increasing during the year, but it's spreads, right? So when you look at the spreads also evolving positively, also as a result of introduction of CBAM at the beginning of the year. I think we need to look at the European market. As we have always been saying, right, it is the combination of the 2 CBAM and TRQ that is very, very powerful here, right? And we have one piece, and we're going to have the second piece now from 1st of July. Bastian Synagowitz: Okay. Great. Maybe a very quick one on India, which you didn't mention in your early second quarter indication. I guess we have seen decent performance actually in Q1. Prices also picked up, but then there is obviously the energy situation. So I guess, what is the trajectory for India into the second quarter? Genuino Christino: Yes. It's also good. You're right. So because of the DRI, we are more exposed to gas in India. But as you know, I mean, we have -- we are fully hedged, Bastian. So we don't expect cost pressure coming from gas in India. So we are fully hedged. And the price environment has also improved, which already benefited Q1, right? And we would expect also a good second quarter for our Indian operations. Daniel Fairclough: So we'll move to take the next question from Reinhardt at Bank of America. Reinhardt van der Walt: First one, maybe just we've spoken a lot about inventories, and it seems like it's creating a bit of an uncertain picture around when this domestic demand will kind of kick in. What are you seeing across the European steel industry in terms of capacity mobilization -- outside of the actions that you've taken, do you think that the European industry is ready for the challenge of producing that additional volume? Genuino Christino: Well, Reinhardt, I'm not going to talk much about what the competition is doing, right? I think what we have been saying very consistently is that ArcelorMittal is in a good position, right, to take our market share of the reduced imports and we can do more, right? So to the extent that others cannot, so then we're going to be in a good position as we talked about, we have a lot of flexibility here. So we have the finances that we can bring back. We have the possibility to bring back blast furnaces. We have more downstream capacity. So we're going to be in a good position here to make sure that the market is supplied that we don't have any shortages in the -- as a result of this. Reinhardt van der Walt: Understood. That's very clear. Just maybe a second question on the Dunkirk EAF investment. You're looking to do any kind of downstream additions there or to get any changes in your product mix maybe out of that capacity as you go through the capital allocation? Genuino Christino: So can you repeat the question? I'm not sure that I got it. Reinhardt van der Walt: Yes, sure sir. So as you're converting over to EAF, are you looking to add any downstream investment as well, any kind of finishing capacity as part of that project? Genuino Christino: No, not really. We're going to be able to, of course and that's why the CapEx can be reduced to some extent because we're going to be able to still use some of the equipment there, right? And downstream will, of course, be intact. We're going to be able to -- so basically, what you're changing is the upstream, right? So instead of the blast furnace and the converters, you're going to have the EAF, the ladle furnaces and then we're going to just follow the normal process of that plant. So we should be in a position to achieve the same mix, which [indiscernible] as you know, it's quite high. We have a very quality high order book there, which we, of course, it's very important for us to protect. And that's exactly the idea here that we should be in a position to produce the same grades as we can today with the blast furnace. Daniel Fairclough: So we'll move now to take a question from Boris at Kepler Cheuvreux. Boris Bourdet: The first question is about the new capacity restarts at both in France and Dabrowa in Poland and plus EAF capacity in Spain. How much capacity are you bringing back with those new furnaces? And the second question would be on North America. Are you still facing the same headwind about the tariffs, Section 232? And can you share with us the expectations you might have for the coming renegotiation of USMCA agreement? Genuino Christino: Yes. So we have a couple of questions there. So the first one on the capacity in Europe. So all these furnaces, they are 2-plus million tonnes. So they are relatively large-sized furnaces. As I mentioned before, so we started [indiscernible], and we are getting ready in force and also in Spain, right? And we'll, of course, announce when we are ready to bring these furnaces back up, right? But we're just doing all the work so that we are in a position to restart them when we need them, right? In North America, look, I mean, the USMCA, I mean, it's early days. I think we have to wait to see really how it starts, right? It's probably wouldn't be right for me to speculate. The only thing I can say is that we hope that the outcome will be one that we feel that we can operate as a single block, right? I think for us, for our business, what would be ideal is that we have Mexico, we have Canada, putting the same barriers against the imports that we have similar protection as we have in the United States, right? And then the material then can flow. So that's what I would say. I think we have to wait there, Boris. Boris Bourdet: Okay. And just the current headwind that we still something like $150 million per quarter due to that. Genuino Christino: Yes, there is no change there. The headwinds remain basically the same, Boris. Daniel Fairclough: Great. Thanks, Boris. So we'll move now to take a question from Tristan at BNP Paribas. Tristan Gresser: I have two questions. The first one is a question on North America and Section 232. We've seen recently that there could be some relief for Mexican, Canadian producer to build new capacity in the U.S. to supply the auto market. Do you believe this could be retroactively applied to your first Calvert EAF? And if not, is that a consideration for the potential second one? Genuino Christino: Yes, Tristan. So I think it's important to be clear, right? So that today, we are not receiving any tariff relief, right? And all imports into the U.S., including from Canada and Mexico continue to pay Section 232, 50% tariffs. I think you know our position on tariffs, which is very consistent. For over 20 years, we have been arguing that the global steel industry has been suffering from overcapacity and continuously pushing for fair trade, whether it is in the U.S., Brazil, Europe, Canada or other parts of the world. So we do fully support the Section 232. But we also support being able to operate, as I was saying before, as one regional market across North America and that there are no tariffs on steel that is melted and put in Canada and Mexico. And as you know, we have been seriously considering the second EAF in Calvert as the U.S. is an attractive market to make steel. And in terms of potential tariff release, as you know, tax has been now published, designed to stimulate additional investments in the U.S., and we are analyzing it. So it's a lot of details has now been published, and we're just going through that. And the answer is not really a clear yes. We still need to study it. And I just want to also just take the opportunity as a lot has been written on this topic. I would actually like to also take the opportunity to confirm that we are contributing steel to the White House Ballroom. So approximately 600 tonnes have been delivered to date. As you know, we have a track record of both supplying strong high-quality steels to U.S. customers and donating steel to iconic buildings and projects around the world that showcase its strength and flexibility. Just to give an example, when the Freedom Tower was one of the strongest steel in the world, they came to our facilities. So we are pleased to add the White House to the list of iconic American buildings where our steel will stand strong for years in this country. So we just need to wait a bit more. We're going to go through the details, and then we're going to be in a position to update everyone. Tristan Gresser: Okay. Okay. No, that's clear, but that's a potential thing to consider. My second question is on the green steel economics in Europe. I was a bit surprised to see that you were only targeting $200 million of EBITDA for your 3 EAF projects. Because if I understood correctly, Sestao in Spain is potentially adding another 1 million tonne of new volumes. Gijon is replacing 1 million tonne and Dunkirk is replacing 2 million tonnes. So that's close to 4 million tonnes of EAF steel. And it does not look like there are much of productivity gains or green steel premiums baked into that. So maybe if you could discuss a little bit the high-level assumptions you're making and perhaps the delta is on the cost base and if you expect a big increase there from moving from BF to EF. Genuino Christino: Well, Tristan, there are a couple of points there, right? I think it is important to appreciate that we are talking about -- we are just giving you the incremental EBITDA, right? So it's incremental to what we are adding today. So -- and as you know, the idea here is that we're going to be except for Sestao, where we are really increasing capacity. In Dunkirk, we're going to be replacing one furnace. So we are not really looking to increase capacity. So what you have is really what is incremental. And then I think it's also important to take into account the amount of the investments, right? And that's why we were so focused as a company to make sure that we have the right conditions, right, so that we can justify this investment. That's why the focus on making sure that we have visibility in terms of CBAM, visibility in terms of imports [indiscernible]. We have visibility in terms of our energy contract, which we now have for this project, as you know. So I would encourage you also to look at what is the net amount of this CapEx, right? And then in the case of Dunkirk, not only you're going to have the 50% support through the white certificates, but we're going to also be in a position to avoid the reline of the furnace that we're going to be replacing. So that's why in the end, we feel that we're going to be in a position to earn a return on our investment. And when it comes to the assumptions, we don't want to be too specific about it, Tristan. As you can imagine, this is also commercially sensitive. We have our teams going out and marketing already for the future of this contracts, the green steel. I mean, as you know, for some time, at least we believe that this will be limited, right? And I think this is -- it's -- our teams are out there. So we don't want to be talking too much about the assumptions. Daniel Fairclough: So we'll move to take the next question, which I think will be from, yes, Ephrem at Citi. Ephrem Ravi: I'm just trying to understand the Page 12 AMNS future growth optionality figures. There's 15 million tonnes from Hazira, 8 million tonnes from Andhra, which gives you 23. My understanding was that Hazira was after 15, there is an optionality of Phase 2a to 18 and then Phase 2b to 24. And then obviously, the Greenfield in Andhra is sort of separate. So is the Phase 2 being delayed? Is that how we should sort of interpret that in favor of pushing ahead with the Greenfield in Andhra in order to balance the balance sheet and skill sets? Genuino Christino: I think you're right. I mean, of course, we have to phase it, right? And absolutely right. So we have in front of us the 2 options. And it continues to be an option for us, right, to take Hazira further, and that will most likely happen over time as well. But right now, yes, that's the sequencing that we see, right, and which is to start Andhra. And yes, and Hazira will remain an option for us as well as after we complete this first phase in Andhra, we can go also for another phase, right? So the 40 million tonnes vision for the Indian operations remain intact. Ephrem Ravi: And then you've said that obviously, your current energy situation is manageable, hedging and support of policies framework for insulates margins. Can you give us a sense of time line for that in terms of how long -- because, I mean, energy prices could remain high for 6 months, 12 months, 2 years. So if they remain for how long would your hedging policies cover it? And at what point do you think you and the industry will have to start thinking about energy surcharges in your steel? Genuino Christino: Yes. Well, specifically in India, we are -- our program goes -- it's a multiyear program, Ephrem. So I think we are in a good place there. So it's a multiyear. And even in Europe for gas, we will also have a multiyear plan program. So I think we are -- as I said, I think we are in a good place. Daniel Fairclough: Great. Thanks, Ephrem. So we'll move to the next question, which we'll take from Cole at Jefferies. Cole Hathorn: I'd just like a little bit of color on the metals on iron ore, just the ramp-up on volumes and how you see that into the second quarter? Just any color you can provide? And then I'd also just like to follow up on imports into Europe ahead of the trade barriers. I mean we've seen a lot of logistics disruptions globally. Do you think that there's a possibility that everyone is expecting a lot of imports into Europe, but considering the supply chains, we just don't see them delivered in time or customers potentially pull back on some of those orders just considering they might not meet the delivery dates. Just any thoughts on that? Genuino Christino: Yes. So maybe I'll take this one, Daniel, and then maybe you can comment on iron ore. So you're right. So I think what we are seeing, of course, is at this point in time, what we are seeing is more a cost issue, right? We are seeing freight rates going up. And of course, some of the journey is also taking longer because of the conflict. But it's not something that we believe should be delaying the arrival of the materials. So I think that's why as we discussed, we feel that the second quarter should still end up with elevated levels of imports, right? And as a final quarter and then from Q3 onwards, the new TRQ comes into play. And I would say that this window is now closed, right, as we are here almost the beginning of May, the window to imports, they are basically under the existing safeguards regime are getting close to an end. And the fact that we don't have yet the quotas for the new TRQ split by country, I mean, it makes it even a little bit harder for imports, right? So that's what we are seeing. Dan, you want to talk about the iron ore? Daniel Fairclough: Yes. Sorry, Cole, would you mind just repeating that question? Cole Hathorn: Just a little bit of color on the iron ore production that you're expecting into 2Q and any of the phasing through the year, just so we can think about that in the model? Daniel Fairclough: Yes, sure. So thank you. So we did have obviously a good start to the year in Liberia, another record production shipment quarter. So I think as we -- and that will just continue over the next 3 quarters. So we've signaled in our initial guidance at the beginning of the year that we expect to be at full capacity in the second half and to achieve at least 80 million tonnes of shipments. So yes, I would just be -- that's how we would be factoring it into the model. Some further improvement in the second quarter. I expect that we will navigate the rainy season through Q3. We continue to improve on our ability to navigate that. And then I would expect we should finish with a strong fourth quarter performance. Cole Hathorn: And then maybe just following up on iron ore. You've been very clear that the energy situation is manageable across the rest of the business. But are there any things we should be thinking about in iron ore costs just for diesel, et cetera, on the mining side? Genuino Christino: I think the only thing I would call out, Cole, is freight, right? I think the profitability of mining in Q2 will depend, of course, much more, of course, where prices finally land and freight, right? So oil will have an impact as well. But based on what I see today, I would be more focused on prices and freight. Daniel Fairclough: So we'll move to the next question, which we'll take from Andy at UBS. Andrew Jones: I've got a few follow-ups to previous questions. Just on that potential tariff carve-out in North America. My understanding is it's based upon volumes sold just into the auto sector. So if you ship slabs from Mexico into Calvert, would you -- is it your understanding you potentially get some relief on those if they then be sold into auto? That's the first one. I've got a couple of ones to follow. Genuino Christino: Andy, as I said, I mean, we just got all these details, right? And the teams are busy going through that. So I don't want to anticipate the analysis. If you don't mind, I think we will address that with you next quarter. I'm sure we'll have more color and information to provide on that. Andrew Jones: Yes. Okay. No worries. And just a couple of modeling ones. On the Ukraine contribution, I mean, that was obviously a drag in the first quarter. Can you quantify that on EBITDA? And do you see anything changing into 2Q? Genuino Christino: Yes. Yes, it was -- Q1 was a challenging quarter for Ukraine, right? So energy prices, in particular, really very, very high. So as we discussed before, so Ukraine, they have been managing relatively well, right? So in the whole of 2025, as we discussed, at EBITDA level, they managed to be basically neutral, still free cash negative, of course, because of CapEx. Q1 EBITDA was negative as a result of the high energy costs. Energy has come down, so which is good news. So we do expect to do better in the second quarter, right? But as we know, the situation remains very challenging. But at least on that front, we expect to do better, and that has been really one of the key drivers of the result. Andrew Jones: Okay. That's clear. And just finally on Mexico, the operating issues that you had last year, there was a little bit of overspill into 1Q. Like how material was that? I think you -- I think maybe in the fourth quarter, you called out 65 million hit. I mean what was the equivalent number in 1Q? Was it material? Genuino Christino: Yes. So the evolution in Mexico is very good, right? We started the blast furnace, which is producing long products. So we were not yet at full capacity in Q1 in long. So we're going to be at full capacity in quarter 2. So I would expect our production and shipments in North America to continue to improve as we move forward, right? But it's no longer, of course, the same magnitude that we had in prior quarters. So I think it's a very good evolution. As we discussed at the time of Q4, you see profitability in North America almost doubling, and we should continue to see progress going forward in the second quarter. But production is now up and running, and it's only now the full capacity of this furnace that you should see in quarter 2. Daniel Fairclough: So we'll move now to take a question from Timna at Wells Fargo. Timna Tanners: I wanted to actually double-click as the kids say these days on North America just a bit more, if I could. I think we obviously, as you pointed out in the last response, seen a nice benefit. It was the biggest contributor to Q1 over Q4 from rising prices. You have some locked up in annual contracts. Can you talk to us about how auto annual contracts fleshed out a bit or give us high-level color on that? And then also, do you think that you could see the same order of magnitude in the U.S. into Q2 given the pace of price increases? And then also I wanted some more color on how Calvert was ramping up? Genuino Christino: Yes. So automotive, I mean, as you know, in U.S., our contracts, they are really the negotiations happen throughout the year. It's a little bit more spread out compared to Europe. In Europe, we have a concentration really at the beginning of the year. In U.S., it's more, I would say, more like 30% Q1, 30% from quarter 2 and then the rest is 25% is Q3. And so I think we are doing well. And as you know, we don't really comment so much on the outcome of these negotiations. But I have to say that they are going in line with our expectations. It's good. The ramp-up at Calvert, the EAF is progressing. So in quarter 1, we were a little bit running above already 20%, 25%, and we are progressing. We believe that by the end of quarter 2, we should be at much higher levels. And we remain optimistic that we're going to be getting close to ending this ramp-up phase by the end of this year, Timna. And then if I have... Go ahead, Timna. Timna Tanners: No, I just wanted to ask about if you would be able to quantify the extent of the price increase in Q1 over Q4, if that could be sustained given recent price strength continuing into Q2? Genuino Christino: Yes. Look, we're not going to be quantifying that, but I mean, I think you know very well how prices have moved up in the U.S. I mean they continue to rise, and you should see that reflect in our results. We talked about automotive, the annual contracts and how much is resetting, right? So yes. Timna Tanners: Okay. And one further one, if I could, please. We're hearing a bit about switching away from aluminum to steel. In the U.S., of course, it's been a more extreme change in prices between the 2. But even in Europe, to the extent that the BYDs are getting built and have more steel amount in them versus aluminum. So it would be great to get any observations that you're seeing on switching away from aluminum to steel and automotive. Genuino Christino: Yes. So when we look at -- I think you're right. I think this is -- to be honest, it has been at least now less of an issue. We continue to be very focused on that, showing the benefits of steel to our customers. I think we have been very successful there, Timna, as you know. So I think we continue to make improvements there. So it's not something that I would highlight to you as a big concern that we have at this point, right? But of course, we remain very focused on R&D, making sure that we have the right grades, we achieve what customers want. So we have successes. And so when we look at the level of intensity, steel intensity on average, we see relatively stability. Daniel Fairclough: So we'll move now to a question from Tom at Barclays. Tom Zhang: Just one quick follow-up for me, just on Ukraine, you talked about obviously high energy costs having an impact in Q1. Are you seeing anything from CBAM impacting Ukraine? I guess one of your Ukrainian peers has called out CBAM as being quite a big disruptor for Ukrainian steel going into Europe. I think it's not exempt at the moment. There's been a few articles saying maybe some order cancellations. Yes, are you seeing any kind of impact there? Genuino Christino: Yes. I think there was the expectation that Ukraine will be exempted, right? And they are not. And we believe that is right. There shouldn't be exemptions, right? At the same time, prices are increasing in Europe. So if you have the right cost base, of course, then you should be competitive. In our business, of course, we are focused in Ukraine on the domestic market, right, and also selling pig to different parts of the group. There's good demand for pig, which we continue to sell. Tom Zhang: Sorry, I didn't quite catch that. Did you say it shouldn't be or it should be exempt from CBAM? Genuino Christino: It shouldn't be an exemption. Tom Zhang: Shouldn't. Okay. So you're focusing more on the domestic market. And you would say there was some kind of earnings impact that I guess, persists into Q2 if an exemption doesn't come through. Then just second question, just on sort of buyback thoughts really. I mean I know your capital allocation policy hasn't changed. We haven't seen any buybacks for nearly a year now. If I look at your free cash over the last 12 months, it is positive. And I guess you're talking about earnings ramping up through the rest of the year. Is that sort of back on the cards potentially to restart that buyback program? Genuino Christino: Well, I think you're right. So you know our policy, right? And we had, by the way, in Q1, our first quarterly dividend which was paid. We remain very optimistic that we're going to be free cash flow positive this year. And then the policy will kick in. And based on the visibility that I have today, I see no reason why we would not go above the minimum 50% as we have been doing in the last couple of years. And if I can remind everyone, the policies has been really great. I mean we bought more than 38% of our stock. And I think we are close to restart that. Tom Zhang: Okay. Great. And sorry, you just said I'm so optimistic free cash flow positive this year, then the policy will kick in. Does that mean the policy only kicks in once you sort of see the full year numbers in? Or is it more dynamic than that if you have visibility, you could start sooner? Genuino Christino: Yes. I mean it is more dynamic. Daniel Fairclough: Great. So we have time for maybe 2, 3 more questions. So the first, we will take from Max at ODDO. Maxime Kogge: So first question is you published last week a sustainability report where you cut your carbon emissions objective to minus 10% from minus 30% previously by 2030. I think the new objective is very dependent actually on being delivered on time in 2030. So my question is what would be, in your view, a more realistic time line for the 30% reduction? Is it the mid-30s, late 30s, even beyond? And how should we think about the sequencing of the next EAF projects in Europe? Are you waiting for Gijón to be delivered and ramped up before potentially launching investments? Or will it come perhaps even later? Genuino Christino: You want to start with this one, Daniel? Daniel Fairclough: Yes. Thanks, Genuino. So I think you're right to observe the change to our 2030 target. We well flagged that, I think, in recent reports and communications. What's, I think, important to take away is that, that 2030 target is based on the announced projects. So it's a number that we are confident we can achieve and that's why we updated it. In terms of the timing of the next EAF projects, I think if you look at our communications on our messaging, we've also been quite clear that our EAF projects are going to be sequential. So we don't expect significant overlap on any of our blast furnace to EAF project. So the focus right now is completing Gijón. We've just announced Dunkirk, and that will occupy us for the medium term. And then the intention and time is to obviously communicate on what the project that will then follow will be. So let's really focus on getting a smooth start to Dunkirk at this stage, and then we will update on the next project in due course. Maxime Kogge: Okay. And just the second and last one is about the German stimulus plan. So expectations in recent weeks have come down actually amid the red tape, other priorities perhaps an infra for the new German government. So what's your latest view on the topic? You were quite vocal previously on it saying that it could increase demand in Europe by around 2% per year over the next 10 years. Is that still your scenario? And when do you expect that to really kick in already next 2 2026 or it's more of a story of 2027 or even 2028 based on your latest understanding? Genuino Christino: Well, I mean, to be honest, I mean, we don't see any significant change there. I mean when we look at the impact of the program. We start actually to see some activity, right? So I don't believe that the overall numbers that we talked about, they will change. I mean we -- at least that's not the intelligence that we have. We will, of course, have to -- we'll keep monitoring that. But I think we are progressing as the progress is happening there. Daniel Fairclough: Great. So we do have time for 2 more questions. So we'll take the first from Dominic at JPMorgan. Dominic O'Kane: Just 2 quick questions. You've spoken and given us a lot of granularity on Europe. And again, just maybe coming back to the U.S. given how tight we see that market at the moment, do you think there's any possibility that you actually run harder through Q2 than normal? So obviously, we often see a summer slowdown. Do you think there is potential that given the state of lead times that you may run harder than normal? And second question, just on -- so any kind of obvious cash flow items we need to be aware of for Q2 modeling for the net debt bridge. Genuino Christino: Dominic, so in U.S., I mean, as you know, I mean, we are running our facilities full. I mean Calvert, we have been running at high levels, and that will continue, right? So where you're going to see improvements in terms of production shipments is going to be more really in Mexico and a little bit also in Canada, right? And the focus in U.S. for us right now is to ramp up EAF as we talked about, that will bring more results, so it should contribute to results. And the second part of the question, can you repeat that for me, please? Dominic O'Kane: But just in terms of modeling for net debt in Q2, are there any... Genuino Christino: I would not -- Daniel, I would not focus so much in quarter 2, right? I mean I guess my message is more really when I think about the year as a whole, as you know, we have -- typically, we will have a larger release of working capital in the second half. That should continue to be the case despite all the improvements that we are discussing, we are seeing, right? And we explained that because we built some strategic inventories at end of last year that we're going to be releasing. So despite all the good developments that we are seeing in terms of prices, volumes in the second half, our expectation is that for full year, working capital should not really be consuming a significant amount of cash, which should then support even more the free cash flow generation. Daniel Fairclough: Is that helpful, Dominic? So I think the focus there just to reiterate is normally, the working capital movement in Q2, Q3 is not a major delta in the cash flow bridge, where it is a major delta is normally Q1 and Q4. So normally, we invest in working capital in the first quarter, and this year has been no different. And then normally, we see a nice release of working capital in Q4 and Q2, Q3 normally that's broadly a wash. Great. So I think we will now move to the last question, which we're going to take from Matt at Goldman Sachs. Matthew Greene: I have one question on your Indian operations, perhaps in 2 parts. Genuino, you mentioned costs are largely hedged, that's fine. But given India's reliance on gas imports primarily from the Middle East and some of your peers flagging shortages, could you outline where you're sourcing your gas from today and whether you've received any force majeure on future deliveries? And then just a follow-up, given your use of gas-based DRI and captive power, what measures can you realistically take to manage gas availability or reduce gas intensity across the Indian operations? Genuino Christino: So I think we are in a good place there as well. I mean we have different sources of gas. So we are not really dependent only on Middle East. So we are in a good place. So we have not had any force majeure. So we have received all our gas. We have no indication as we speak in end of April, beginning of May, no indication of force majeure. So I think we are -- as we discussed, I think we are in a good place there. So we are not expecting any disruptions because of availability for sure on the price and also on availability, it's not something that we are overly concerned at this point. Daniel Fairclough: Great. So I'll hand back to Aditya Mittal for any closing remarks. Genuino Christino: Yes. So thank you, everyone. Before we close, let me briefly reflect on the key messages from today's discussion. First, our first quarter performance again demonstrates the structural improvement in the earnings power of ArcelorMittal. Margins are well above historical levels with the further benefits of more favorable policy still to accrue. Underlying free cash is annualizing at over $2 billion. Second, we have a clear and differentiated growth pipeline. Our strategic investments are supporting our results and materially enhancing our future EBITDA potential. Finally, the positive outlook for our business is underpinned by more supportive trade policy, especially for Europe. More effective trade protections are fostering a more regionalized market structure, providing a robust platform for higher capacity utilization and profitability and higher and more consistent returns on capital employed. Alongside the impact of our growth strategy, this supports the free cash flow outlook for ArcelorMittal and the delivery of consistent capital returns to shareholders. With that, I will close today's call. And if you have any follow-up questions, please reach out to Daniel and his team. Thank you again for joining us, and I look forward to speaking with you soon. Stay safe and keep those around you safe as well. Thank you.
Operator: Good afternoon, and welcome to Poolbeg Pharma PLC Full Year Results Investor Presentation. [Operator Instructions] I'd now like to hand you over to Jeremy Skillington, CEO. Good afternoon, sir. Jeremy Skillington: Good afternoon, and thank you for the introduction. I appreciate everybody joining us this late afternoon. Finally, a bit of a sunny Dublin. It's -- bleak winter is over. And we're delighted here to be able to present on the back of our full year results announced this morning, company update, company presentation and let you know where we are with particularly POLB 001 clinical trials. So again, appreciate you joining us this evening. And I'll be sharing presentation duties tonight with Liam Tremble, our Principal Scientist, who will talk more of the POLB 001 clinical trial attributes. So just to give a setting, just a grounding, a reminder, Poolbeg, we're a clinical-stage company developing POLB 001 that we believe has the potential to transform the lives of cancer patients by delivering these cancer immunotherapies in particular safely and locally. There's a big unmet need. There's a lot of issues around Cytokine Release Syndrome associated with cancer immunotherapies, and we believe we have a solution for that. We'll talk a little bit more about the scientific and medical rationale for that later on. We're also developing an oral medication for obesity treatment, we'll touch upon later on as an oral GLP-1. Again, very exciting space to be in. We are an AIM listed company, listed in London. And we believe we've got a strong investment case. We've got a terrific team here behind us, both on the, as I said, the clinical business development, which will be critical, and I'll talk a lot about that and, of course, on the corporate and finance side as well. The clinical -- stage programs we're developing, getting into the clinic, these are clear large unmet medical needs and large, growing markets. We've done an in-depth analysis, particularly on POLB 001, again, we'll touch upon later on. So very excited about to get these moving forward. We have financial runway into 2027. So we've got several key clinical inflection points coming up. So we're funded through these clinical inflection points and into 2027. And that gives us scope then for partnering, for collaboration and licensing discussions. So again, we have had many discussions with potential partners over the last several months. Again, I'll touch upon those later on. So there's a strong interest in what we're doing. So a strong potential to secure partnerships. Of course, what comes with that is financial revenue, and we'll touch upon that later on. So right now, we're certainly in clinical development execution mode, particularly with POLB 001. But over the last 6, 9, 12 months, we've been gearing up on the partnering aspects, talking to a lot of big pharma companies, midsized pharma companies, and again, pitching and promoting Poolbeg. We've got high-value programs with strong IP. Those of us -- those of you who have kind of followed Poolbeg have seen the RNS that's talking about IP grants, very important in this industry. The proof-of-concept clinical trials we touched upon are ready to be done, touch upon the timing on that later on. And what we've built thus far with regard to the programs, we've got very high-quality and compelling human data in the POLB 001 setting. Again, touch upon that, Liam will cover. So again, our discussion with partners have gone exceptionally well. They're very keen, obviously. They see the value inflection point, and the derisking episode will be the clinical data that will read out in the summer of this year. A summary of what we announced this morning in our annual results. So we believe 2025 was a transformative year for Poolbeg. We really got ourselves kind of focused and driven and aligned with not just the market, but the clinical community as well, the Cytokine Release Syndrome community in the cancer immunotherapy space. We finished the year with GBP 7.7 million in cash, again, a healthy cash position. That allows us, as mentioned, to execute on our clinical development programs. The first bullet here, we have the TOPICAL trial, is fully prepared. And with that, that's the POLB 001 CRS prevention trial. We've appointed ACT as the clinical trial executor, the CRO that will run the trial. We've had fantastic discussions with Johnson & Johnson, and they have agreed to supply us with their approved bispecific antibody teclistamab. And they've given that to us at no cost because, obviously, they're keen to see the reduction in Cytokine Release Syndrome or CRS with teclistamab. And we've enrolled now -- we've lined up 6 U.K. cancer centers to be part of this clinical trial, and we've finished the protocol and we've gotten MHRA approval, which is very important to allow us to start dosing patients. Importantly, during 2025, we've got Orphan Drug designation from the U.S. FDA. So again, they recognize the scientific validity of what we are doing, what we are trying and reducing CRS. It is linked to patients who will receive these T cell engagers. And these are wonder drugs that are now demonstrating cures in these blood cancer patients such as multiple myeloma. So again, they're very good to get that. There's a lot of additional bonuses that comes with that, we'll touch upon later on. But certainly, from a partnering standpoint, that actually adds a lot of value to the program when it comes to talking with a big pharma company. So intellectual property is very important for this industry. It protects the programs as we get to the market. It doesn't allow any competitors to invade our space. We did get multiple patents granted last year. Many of you know, in the hypercytokinemia or the severe influenza space, we've been progressing down those roads for many years. But importantly, we got our first patent grants earlier this year in Australia when it comes to the cancer immunotherapy and CRS aspect. So very happy with that. And again, that helps bolster the discussions with pharma companies when they know that the program is protected. We also generated last year positive in vivo data, again, demonstrating that we can impact Cytokine Release Syndrome in an in vivo model. Liam will talk later on about a very exciting program we have in collaboration with Johnson & Johnson with the University of Manchester, that's looking into broader research into the immunology around Cytokine Release Syndrome. And then lastly, making progress on our oral GLP-1 program, which is now expected to start in the second half of this year due to the revised manufacturing lead time. I will highlight that last year, we were, again, very delighted to fund-raise GBP 4.865 million from the market. Tough conditions in the market, but I think the investors saw the potential of what Poolbeg is doing and what we can bring to the market. And speaking of this market, we've done some independent analysis where we see that preventing CRS in these cancer immunotherapies is a market opportunity of over $10 billion. And we'll talk about the details around that later on. When it comes to 2026, this year, again, we are at full pace right now. It's a full-steam-ahead situation. As I said, the first 4 months or so of this year has been, again, very productive from a Poolbeg standpoint. I mentioned the patent grant, and again, that's in the cancer immunotherapy space, which again adds validity to the program that we're doing. And again, we're hopeful that there will be many other opportunities to announce patent grants in other territories as we're going forward. We are, as I said -- have a wide patent application in various territories and they're moving through the processes there. It can be kind of a long process, but I think we're encouraged by the responses we're receiving from the various PTO organizations and the EPO organizations going through. Again, exciting this year, we've -- our LPS challenge study. This is our Phase Ib study that again was a very successful study run in the Netherlands. We were able to get peer-reviewed data published in that. And again, this peer-reviewed is important because as people look at the data, they look at the paper itself and they saw worthy of publication. We've gotten some very good feedback from that. And that springboards us then onto -- into the CRS prevention study we're talking about. When we see prevention of that inflammatory response in the LPS challenge, we're hopeful that we'll see a similar prevention of the inflammatory response when it comes to Cytokine Release Syndrome that's caused by these cancer immunotherapies. We're very excited. We had several discussions last year with Dr. Adrian Kilcoyne. He's an expert in the Cytokine Release Syndrome space. He's had many, many interactions with the U.S. FDA around developing clinical trial programs around CRS. He came onboard to join our Scientific Advisory Board and is now a very active member of our development team when it comes to planning what the future holds for CRS clinical trials. I mentioned we got MHRA approval this year as well. Very exciting. Again, it's a rigorous process where they take and review all of our data, clinical and preclinical. As I say, it's a very high bar for any drug to get into human clinical trials. So the MHRA gave us that approval in the past few weeks and we've announced at the RNS. And that gives us the green light to progress and move into the clinical studies that Liam will talk about. Again, we want to make sure, when we're talking to partners, we want to make sure -- or we make sure that they're aware that this is a significant market opportunity. So to achieve that end, we've had independent analysis done where we look at the market, the Cytokine Release Syndrome, the incidence that occurs in the various bispecific antibodies and CAR T cell therapies, these T cell engagers. And the impact it has on the health care system, the impact it has on patients, what it costs for the health care systems. So again, we were able to do an in-depth analysis looking at -- it's a multibillion-dollar peak U.S. sales potential stand-alone. So we spoke to 3 different payers talking about CRS and our program, and they're very enthused that this is a drug that they would happily reimburse if and when it gets onto the market because they see CRS is a cost drain for them as an insurance company. So they'd like to get rid of that. And as you know, we're talking about prevention of CRS. So I think it's a very important goal, a very important goal that we want to achieve here. And it's very well received by these insurance payers both in Medicare as well and Medicaid. Again, momentum in partnering has accelerated. As we get closer to the clinic, it's becoming more kind of apparent. What we have here is a very exciting program, as I mentioned, some of the large pharma companies and more midsized companies that maybe are in the more cancer supportive care area specifically. So they're all very excited to wait and see what this data hold, this clinical data hold as it reads out. And as I said, we've got multiple upcoming milestones in the near future. So again, I talk about momentum, I talk about running at full speed. So as I say, the POLB 001, the trial site initiation visits have been scheduled. So these are the 6 sites that we've -- are going to run this trial in the U.K. It's going to be led by Dr. Emma Searle at The Christie in Manchester, and she's brought some of her hematology colleagues onboard to be part of this clinical trial. So very excited to get that moving. As I say, the next step then is trial -- patient recruitment and dosing, so basically getting the patients onboard, these multiple -- these relapsed/refractory multiple myeloma patients, get them onboard and get them dosed, to get the clinical trial to -- the clinical trial up and running. But we always comment that like 80%, 90% of the work is done in advance of dosing patients. So we've come down the road quite a long way. So we're very excited to be at this stage right now. So again, we're looking to have this interim data, the POLB 001 CRS prevention data, in the summer. So again, it's linked to the patient enrollment. These are very short clinical trials Liam will speak to, so we should have data relatively rapidly out here. And then the second half of the year, we're looking for to commence our oral GLP-1 clinical trial. I'll talk a little bit about that later on. So fantastic, exciting time for the company. Again, very productive 2025, very productive first 4 months of 2026. So we're excited to be progressing this forward, and again, generating that key data, which will be the value inflection point, really derisking the program. And then transactions and collaborations, license agreements will follow from there. So we're very excited to be in the space. And again, thank you for attending this evening. Liam will present on the POLB 001 program. I'll return in the end and talk about the market opportunity and the oral GLP-1 program. And then we will open up the floor for questions. So again, thanks for your time right now. Liam, over to you. Liam Tremble: Brilliant. Cheers, Jeremy. So just I'm going to do a brief introduction to POLB 001. But before we jump into the asset itself, I want to give a little bit of context of where the field has come. So obviously, over the last number of decades, a massive amount of progress has been made for cancers. It's not been symmetrical. Some cancers have had significantly more progress than others. But if we look at something like multiple myeloma, it's really been a poster child for where significant progress has been seen. So for somebody diagnosed 23 years ago, 2003, 5-year survival, 10-year survival really wasn't that great. 30%, 5 years; 10 years, about 20%. And it's because the treatment options really weren't that effective. And a lot of these you might be a little bit familiar with: pomalidomide, chemotherapy, corticosteroids. They didn't do a massive amount for all patients. Fast forward 20 years and the progress has been exponential. If you're diagnosed now, 5-year survival rate is well over 80%, or estimated; 10 years, well over 60%. And I say estimated because the progress is so quick that the pace of clinical trials is faster than the survival data we have from those clinical trials. So at the moment, in multiple myeloma, we've obviously -- we've had immunotherapies be approved in the last number of years, so CAR T cell therapies, bispecific antibodies, but also a number of other therapies like antibody drug conjugates, proteasome inhibitors. It's quite common now for multiple myeloma patients to actually get quadruplet therapies as first line or even quintuplet now because the therapies are so effective. And a lot of the projections, so this is a disease with a median, so 50% of people get it age 69 or older. And some of these frontline therapies have median progression-free survival projected to be up around 15 years. So really in myeloma, you're at a position where people are discussing functional cures where really patients will pass away from old age rather than their disease. And that's what we're ultimately trying to achieve for all cancers. What's important about this is that when we get to this stage where multiple effective options exist, patient preference has a significant impact on market uptake of the drug. Patients don't always go for the drug with the best overall survival. They also consider things like time at home, treatment time, having to travel to hospitals. Some of the tolerability issues can be quite significant for these drugs. The immunotherapies, for instance, have a lot of severe infections that can happen for years afterwards. So they all have a very meaningful impact on what drugs patients actually decide to take. So for these CAR T cell therapies and bispecific antibodies, they really are revolutionary. For the CAR T cell therapies, are potentially curative in some patients. And it's really making sure that they are accessible to all patients. So if I zoom in on the bispecific antibodies, these are breakthrough immunotherapy as well. And they're extending into early lines of therapy. As I'll show you on some of the later slides, at the moment, they have to give micro-step of doses. And it's quite common for patients to be hospitalized for 5 to 10 days just for these initial doses because of the risk of CRS. So they have a significant amount of time in hospital just to get on to these therapies. And then obviously, they have downstream infection risks as well. So a lot of these therapies as well are restricted to specialist cancer centers who have the expertise and the tools to manage these patients. It depends on what country you're coming from, but in some countries, this is a very significant obstacle to accessing these therapies. Particularly in the U.S., people talk to things called treatment deserts. It's where patients can live hundreds of kilometers and miles from their nearest hospital who can administer these therapies, and really is a significant issue for a lot of late-stage patients. So CRS, as I mentioned, is a major barrier for some of these immunotherapies to become more widely available, with over 70% of some patients being affected on the immunotherapies, and hospital stays due to the risk of CRS may negatively affect the uptake of these therapies themselves. So the next slide. So just zooming in on that for 2 seconds. So on the left-hand side of this slide as well, we've shown a simple diagram to have these therapies and how 001, POLB 001, could change the treatment paradigm. So the current standard of care, on the left here, is typically a patient will come into hospital, they will get their immunotherapy. And the immunotherapy will actually activate their immune system. And what this induces is Cytokine Release Syndrome. And the risk of Cytokine Release Syndrome or indeed CRS after the onset can result in significant hospitalization for these patients. So it can persist for days to weeks. And in severe cases, it can mean that the patients have to discontinue the immunotherapy, so they have to opt for something else. And obviously, they lose time between these different choices. So it's really important that when patients do opt to go on to a therapy, that they can continue with it. If we bring in 001, potentially, we have something where they can take orally before they have the immunotherapy. They come into the hospital, they are administered it. And rather than the immunotherapy causing activation of the immune system, we still allow activation of the immune system, but it doesn't cause Cytokine Release Syndrome. And if we're able to avoid Cytokine Release Syndrome, then we can potentially prevent this hospitalization and make this step onto the treatment a lot more manageable and feasible for the patients themselves and for the health care systems that have to deliver it. So just zooming in on POLB 001 a little bit deeper. So it's a p38 MAP kinase inhibitor. What this means is that it selectively prevents excessive inflammation without immunosuppression. So compared to some other drugs, they completely block a pathway. Actually, p38 is kind of like a master inflammation switch where if you activate p38, you can get global expression of a lot of pro-inflammatory cytokines, which are things that cause CRS. If you don't p38, actually the production of these falls 80% to 90%. So the drug itself is an oral agent, again, particularly important where we positioned this as a prophylaxis. It really needs to be easy for the patients and the hospitals to administrate. And we have a strong patent portfolio with potential coverage out to at least 2044. So we do have a strong preclinical and clinical data package to date. So favorable safety and tolerability profile, which again we think is really important as we move into this indication. And we have potential inhibition of IL-6, TNF and other key inflammatory markers. IL-6 and TNF we mentioned because we know these are the main drivers or significant drivers of the Cytokine Release Syndrome itself. So as well, Jeremy will go into later in the presentation that there is a very significant market opportunity behind this drug. So over USD 10 billion market opportunity. There isn't anything approved in the preventative setting and there's a growing number of these drugs that induce CRS and they're going into earlier lines of therapy. So this problem is only becoming much, much more significant for hospitals across the world. So at the moment, these bispecific antibodies will only be delivered in specialist cancer centers until there's a way to make them safer and easier to deliver. And POLB could make that treatment safe enough to extend bispecifics to a much wider treatment population. Just there in the bottom of this slide, so we have engaged a lot of key opinion leaders on this who also believe in the program. And that's Gareth Morgan from the U.S. Just to show you some of the data that we've presented before. So the last clinical trial that POLB 001 was in was an LPS human challenge trial. So this is essentially where you use a pro-inflammatory stimulus, LPS. It's a component of the bacterial cell wall that induces a mild inflammatory response in patients. So we can give this to healthy volunteers. It stimulates the immune system very similar to the way the immunotherapy would. And they get something that approximate Cytokine Release Syndrome. So it's an incredibly strong model for us to test the efficacy of POLB 001 in. What we also saw in that trial was that POLB actually had an excellent safety and tolerability profile, as we expected. We were able to confirm potent target inhibition, that's the p38 MAP kinase. And we had a clear dose response relationship observed, which is really important from a drug development perspective. And then we also, from a CRS perspective, had a major reduction of key inflammatory cytokines. On this slide, we're showing IL-6 and IL-8. So just briefly, this LPS challenge trial was placebo-controlled and had 3 different doses of POLB 001. So the gray line, as indicated underneath, is the placebo. The green line is 30 mg of POLB 001 given twice daily. The blue line, again, twice daily 70 mg, and the red line is the highest dose of 150 mg POLB 001 given twice daily. And what we can see in the graph is that actually, if you just give placebo with the LPS challenge, you see this spike of IL-6 and as well, on the right-hand side, IL-8. But actually, as we introduce increasing concentrations of POLB 001, we see a suppression of these increases, which is exactly what we hypothesize it will do in Cytokine Release Syndrome. So the lowest dose produced a small decrease, but the 2 upper doses, actually you can see, they almost overlap, and this is probably the maximal inhibition through p38, where the inhibition is in the region of 85% to 95%, which is really promising as we move forward into further trials. So we have the potential to effectively prevent Cytokine Release Syndrome while preserving key immune system functionality. I think that's a key element that we always have from clinicians in that a lot of the existing drugs and that completely blocked pathway, they have their downsides. They often induce cytopenias or other adverse events, which really isn't preferable in an indication like this. So as Jeremy mentioned, we are really excited at the moment. We recently announced that we have all the approvals in place to start dosing patients, and the trial is moving forward at speed. So POLB 001 first-in-patients TOPICAL trial, and it's being conducted in the U.K. So it's a trial of prevention of immune cytokine adverse events in myeloma. It's being led by Dr. Emma Searle, who's a leading hematologist based in The Christie Hospital in Manchester. And it's being run by Accelerating Clinical Trials. Again, we've previously spoken about this to the market, that this is a specialist blood cancer organization who are equipped to run trials in the U.K., in these clinical trial centers that we're tapping into to recruit these patients. It's a really strong team who know the sites, who know the investigators, who are equipped to really accelerate this trial the way we need to. And the objective of the trial is to investigate the safety of POLB 001 and also the efficacy, in particular, its ability to reduce the incidence of CRS in patients receiving an approved bispecific antibody, teclistamab. Teclistamab being an immunotherapy that induces Cytokine Release Syndrome. So we'll have approximately 30 patients, and we will be recruiting a patient population of relapsed/refractory multiple myeloma patients and receiving this antibody. So we are really excited. All of the leading sites in the U.K. are really participating on this trial. So it's been led by Dr. Emma Searle, as I mentioned, at The Christie. But also we have UCH, we have The Royal Marsden, Birmingham, NHS North Midlands, Royal Stoke and Edinburgh. And so we have an exceptionally strong team that we're really optimistic that we can complete this trial quickly. Just a little bit more detail about the actual trial itself. So this is the design of the trial. On the top left, this schematic is showing the trial design. So I mentioned with the bispecific antibodies earlier in the presentation that they're getting step-up of micro-doses. So if you were to give a full dose of these bispecific antibodies, what would happen is you'll activate your T cells, you get other immune cells activated, you get overwhelming Cytokine Release Syndrome, which could potentially kill patients. The only way at the moment to deliver them safely is to give these micro-doses. And the micro-doses are there to give the body a small exposure to cytokines. And the body needs to get used to seeing these cytokines without inducing severe CRS. And once the body has seen the cytokines once or twice, actually then they can go forward with normal dosing. But these step-up doses are critical purely to mitigate the risk of Cytokine Release Syndrome. These typically happen over a 5 to 8-day period. During this period, patients are typically hospitalized, depending on the cancer center that they're in. And so what we're trying to do in the trial is we are going to pre-dose POLB 001 for prevention from before that first step-up dose until after the first dose. So here in the schematic, that would be indicated on day 1, 4, 7. So we'd be dosing. Actually 96% to 100% of all the Cytokine Release Syndrome happens in that period. And that's the period that's really hard for clinicians actually managing these patients at the moment and is mandating the hospitalization. So twice daily oral dosing of POLB 001. It's a single-arm trial, meaning no placebo. But we're really trying to get the evidence of efficacy as quickly as possible, so we want to give everybody our drug. 30 patients, as I mentioned. Teclistamab, really promisingly, is being provided by J&J. And it's an open-label trial in that all the patients know that they're getting POLB 001. So we're really excited that we have fantastic investigators. We have the collaboration with J&J. And we have the right team to really deliver this trial quickly. And the protocol has been finalized. All the regulatory approvals are in place and site initiation deals are scheduled, and patient recruitment and dosing to commence shortly. And we hope to be able to give further updates as we go. The key endpoints, as I mentioned: incidence of CRS, severity of CRS, confirmation of the safety and pharmacokinetics. That's more just to make sure that the drug, as I mentioned, is exposed to patients at the right level. And then obviously, CRS management and tocilizumab usage. CRS management, what we mean is the duration of hospitalization. So everything to do with the current challenges of managing CRS to be managed or measured in this trial. We have a great team of investigators. We have J&J. That's because there is a massive amount of excitement about this program. If we can find a drug that really solves the CRS problem, I think a lot of people realize the potential of it. So there's also been a GBP 3.4 million grant to the University of Manchester and The Christie. The program is called RISE. So RISE is about reducing immune stress from excessive cytokine release with advanced therapies. And it's being led by the University of Manchester and NHS Christie Trust, where we're the lead site on the TOPICAL trial, is the clinical lead. We are the lead business partner because we are experts in Cytokine Release Syndrome at this stage. And J&J are an industry partner providing teclistamab for it as well. So it's being led by a fantastic cell therapist who delivers solid cancer cell therapies to patients, Dr. Jonathan Lim. He's a Clinical Senior Lecturer and Honorary Consultant Medical Oncologist at The Christie and the University of Manchester. So we really have a multidisciplinary team. And the whole idea of this grant is actually to research things of this is an on-target effect of immunotherapy. So there's nothing surprising that these immunotherapies induce Cytokine Release Syndrome. It's predictable. We know the mechanism, we know the triggers. We know how to potentially prevent it. But that's a great opportunity to learn more, to really research this in the clinic. So POLB 001 is going to be a key element of the overall research grant for preclinical and clinical, but the TOPICAL trial itself will be a central focus of it. So we'll be generating additional clinical evidence as part of this on CRS from bispecific antibodies and CAR T cell therapies. Because as Jeremy will have mentioned before, there is a major commercial opportunity for the prevention of CRS related to CAR T cell therapies as well, not just bispecific antibodies. And so this is real significant recognition of the unmet need in CRS, and it's something that we're really excited for. We do expect if there's positive results from this trial, that the interest in the program is only going to grow. So we're really excited moving forward. And with that, I will hand back to Jeremy. Jeremy Skillington: That's wonderful, Liam. Thank you for that. I think it's a very nice segue as we do talk about the market opportunities. So as I mentioned at the outset, we've done a lot of work trying to assess what the global CRS market looks like. We've taken on board some consultants to get that independent perspective. And I'd say it's a very important acknowledgement when it comes to the partnering and partnerships, kind of what the value we're bringing to the table is here. So as I say, we're looking, from our analysis, about a $10 billion market opportunity. And I'd break that down as to how we came to that number briefly. But I just want to flag that for both bispecifics and CAR T, these are quite expensive drugs in their own right. But as Liam mentioned, we believe that these are life-saving drugs. Sometimes there's cures observed. But for CAR T, now it's more of a laborious approach where you take a patient's T cells out, you re-engineer them, and you introduce them back in, and they're bringing the immune system closer to the tumor. And these are quite expensive. But as I said, these are reimbursed in the U.S. by the American insurance companies. When you look at bispecific antibodies, it's slightly less, but it's still a significant cost to the insurance companies. Now what we did with this analysis is that we narrowed in on 2 different tumor types, 2 different blood tumor types: diffuse large B cell lymphoma and multiple myeloma. And if you look at the markets in the U.S. and the European 5, the incidence of these diseases, they total to about 500,000 patients between now and -- between 2023 and 2030. So the market is kind of large. Market is growing. But what we did when we looked at what would we charge, what would we charge the insurance companies for POLB 001, we looked at a very interesting and probably very appropriate comparator. This is a drug, Neulasta, which is used to treat neutropenia. So when patients get chemotherapy as an example, then they get -- they're obviously trying to reduce their tumor burden, but it also reduces a lot of their kind of white blood cells. So this Neulasta brings those back up. When that was launched many years ago, it was introduced in at about $18,000 per cycle. So we kind of took that realm, that POLB 001 could be in that. If you take roughly $20,000 by the 500,000 patients, then you're looking at a $10 billion market opportunity just for these 2 tumor types and for these 2 markets, the U.S. and the EU 5. And obviously, we could go broader than that. We've mentioned a few times that CAR T cell therapies, bispecifics are now moving more into solid tumors, so there's an opportunity there where CRS is also observed. And interestingly, looking into autoimmune diseases. But that's a story for another night. But as I say, we're looking to prevent CRS from happening in the first place. And I think that if we -- this is where we got J&J's attention, for example. And I'll talk a little bit later on about our partnering initiatives. But they got the attention. To prevent is obviously better than cure. It's an old statement that's well worn. But they see that if we can prevent CRS, then they can get their drug, their bispecific antibody, as an example, into community hospitals, getting it away from these dedicated cancer centers. Because you need people on hand to manage the CRS, but if the CRS isn't there, then we're in a fantastic situation. So as I say, it is a cost to insurance companies, cost to the health care system. We talk about Grade 3 CRS actually costing greater than $70,000 as a management, as treatment. But of course, let's not forget the patients who have to go through this issue. So there's many things at play here. But more recently, this is the most recent piece of work that we did that was very enlightening, where it's one thing about understanding the patient population, these multiple myeloma, diffuse large B cell lymphoma, but we needed to talk to ultimately the payers. These are insurance company. We looked at the U.S. because that's the large and major market. And we partnered with Acumetis Global. So they held 3 different payers that cover 75 million lives in the U.S. They introduced them to POLB 001, the target product profile, what it is, what it does, what it's intended to do, and asked about payments. "What would you be willing to pay for these drugs?" And I think there's a -- it's quite a long quote here. I won't go through it all. But it was very clear that there's a willingness to pay for a commercially meaningful price for POLB 001. Because they know the offset. They know that they can -- patients will spend less time in hospitals, so overall their insurance burden is less. It's obviously beneficial for the patients. But it takes the pressure off the health care system as well. And maybe it spreads a little bit thinner. Instead of these patients being in these dedicated cancer clinics, they can go kind of outside to their community hospitals. And that's really where people are attempting to go, have the treatments on your doorstep. And I think from a psychological standpoint, these patients are already going through cancer treatment, but if they can get it closer, their treatments closer to home, all the better off because they'll have family support networks around. So as they say, they see that POLB 001 is a compelling CRS solution with significant market potential. So that was obviously music to our ears when we -- we kind of believed in the program, but to see it in black and white that the payers would be willing to pay was very exciting and very gratifying, I must say. But again, from the market opportunity, and I've outlined this already, so 500,000 patients. There is that bottleneck where they can't get access to the drug rapidly because beds are being taken up in the CAR T setting. As I say, if you can remove CRS, then you can open up this. And we've talked, as Liam said, many key opinion leaders, thought leaders in the space, multiple myeloma docs. And they're all echoing the fact that if you can reduce or eliminate CRS, then a whole load of infrastructure falls away. Their lives are easier, the patients' lives are easier. And as I say, we now, we're confident that the insurance companies are willing to pay for the drug as it goes forward. So again, very exciting time for the company. Again, there is -- I see a question coming in about partnering, so maybe I'll address that right now. With my background, I'm a scientist by training, but in the industry, I spent a lot of time on business development in the partnering setting. So we spent the last, in particular, the last 9, 12 months really focusing, ramping up the partnering, as we're getting closer to the clinic, that laying the groundwork, talking to the big pharma companies, as I said, the midsize companies, about 001, what we do. We've caught a lot of attention. And I think that happens, and it's not by coincidence, that it's closer to the clinic, because then there'll be a data readout, and as I mentioned, a derisking readout. So again, people appreciate that there are more and more cancer immunotherapies coming to the market, and CRS is still an issue with them. Pharma companies are looking to fill their own pipeline as well with new programs coming through. And that's all linked to the patent cliff. I mean it's been shared that GBP 300 billion in annual prescription drug revenue will fall off because of patent cliffs. They'll be substituted by generics. So pharma need to kind of boost their bottom lines, so they get more drugs into their pipeline. But I think when we talk to the smaller companies and show that we can have POLB 001 in combination with any and all CAR T or any and all bispecific, they see this as a significant market opportunity. So over the last, as I mentioned, 9, 12 months, we've attended a lot of conferences. JPMorgan in San Francisco this year was particularly productive. Again, face-to-face meetings with decision-makers at pharma companies. We attended BIO in Europe, LSX as well. And these are, again, lots of partnering meetings talking about POLB 001. Just last weekend, Liam and our clinical colleague, Mina, attended the British Society of Hematology, meeting directly with our investigators, again, building momentum on that front. And then in the near-term future, we're attending the European Hematology Association meeting in Stockholm and then BIO Convention in San Diego. And again, that's where all the pharma kind of descend on a city. Obviously, the EHA is hematology-specific, so we'll be talking directly to the decision-makers in the hematology or myeloma spaces. And then BIO is on the business development front. And we've got meetings set up there as well. And again, they're very excited to see the clinical data as it comes through. So I think, obviously, from our past successes, you could say, great discussions with Johnson & Johnson providing their bispecific antibody free of charge. They want to see CRS reduced, and we're hopeful we'll be able to do that with this TOPICAL trial we've discussed. And as I say, the midsize pharmas are interesting because they've got smaller pipelines, but they see this cancer supportive care element that they could obviously get this drug to market relatively quickly. We can talk separately on that, but these are very short-term trials because we're only looking at that initial immune or inflammatory response. And as I say, lots of really productive discussions there. We have a virtual data room that's populated and open. And we've got people in the data room kind of exploring the, as I say, the preclinical and clinical data we have. And it's all a case of once we have that clinical data in hand, then we kind of trigger those negotiations around, a deal and a transaction, to generate revenue from there. So again, I'll reiterate from a POLB 001 standpoint, we're very excited with the progress we've made. And obviously, in the not-too-distant future, there'll be very exciting milestones to report. I think we've gone over a little bit on time, so I will just kind of go briefly through the GLP-1 program. People are very familiar with GLP-1, initially diabetes drugs, but now very applicable to obesity. These are primarily given by injection, and there's a big need or an unmet need to have an oral option for that. We've partnered with AnaBio here down in Cork. They've got drugs that -- sorry. They've got products on the market that use this encapsulation technology. And it's more in the food science space. But we're using this technology to encapsulate GLP-1, protect it from the stomach acids. And when there's a change in pH, that is released in the small intestine, which is the site of action here. So a huge market, huge opportunity. In our partnering discussions we've had at the partnering conferences, people have reached out to discuss this program. And as we're standing now, we've got a clinical trial that's designed, ready to execute. We are moving into that kind of manufacturing phase, the timelines for manufacturing, that's going on. Again, it's -- the manufacturing has been demonstrated before. We've done a lot of the validation studies on acids, et cetera. So now it's just to get that GLP-1 material ready for the clinical trial. It'll be run by a Professor Carel le Roux up in University of Ulster. He's very well recognized in the metabolic disease space. Again, it's a very straightforward clinical trial in that it's 20 volunteers. We're looking at safety and tolerability and pharmacokinetics, getting the drug onboard. And we'll test that from glucose tolerance test. Very simple study where we want to see the drug having effect on metabolism essentially in these volunteers. So it's designed to get the rapid readout and so very excited to see this program move forward as well. Again, there's a good deal of interest in that from a business development standpoint. I'll wrap up with this slide. I certainly want to leave time for questions and I see there are a few coming in. But again, a reminder, a very experienced team. We are executing right now. And I think we've done a very -- I'm very proud of the team. We've done a terrific job the last 12 months to move 001 to be here. We are on the precipice of dosing patients, so that's very exciting. These are very high-value programs. I think we've found the right disease for POLB 001 to go after, this acute inflammatory condition. Importantly, with the fundraise last year, we've got our financial runway into 2027. So that gives us time and scope to negotiate the best deal for Poolbeg once we have the data in hand. But as I said, the partnering discussions have been on many levels, as I say, large and small companies. We've got many discussions going on in parallel, data room open, reviewing the preexisting data. But as I say, people are waiting for this clinical data to read out. Because that's the value inflection point. That's the derisking episode where you're having data in this TOPICAL clinical trial in multiple myeloma patients -- relapsed/refractory multiple myeloma patients. This will be the key trigger for Poolbeg. So again, thank you all for your time again this afternoon, this late afternoon. And what we'll do now is that we'll switch to some of the questions that came in, and again, appreciate your time on that. Jeremy Skillington: All right, so we'll jump straight in. Oliver has a question. When are the CRS trials due to be completed? Summer '26. Can you pin this down, June, July or August? Although summer in the U.K. is virtually a 2-week period. Nice one. Good bit of levity there. Also once completed, will it be go or no-go decision? Or is there a potential for a phased decision tree solution if not the results you're looking for? I think, listen, that's a really good question. We could spend a while kind of talking about that. I think we mentioned earlier on, like one of our ambitions was to get the data as quickly as possible. That goes without question. And this is why with ACT, who are going to run the clinical trials with Emma, we're zoning in on 6 clinical trial sites. Now we're exploring options for more. And what comes from that then is kind of rapid enrollment. That's ultimately the goal here, get more patients onboard quickly, get more drug onboard quickly. Liam and Mina and the team have done a terrific job of kind of lining up that kind of analysis that comes after that. It's well understood that teclistamab drives CRS in greater than 70% of patients. But we're going to analyze that immune and inflammatory response at a molecular level. So these are looking at all of the cytokines that are there, signs and symptoms, but at the kind of blood and molecular level looking at that. So it depends is probably the answer. But it is once we have that certain number of patients going through where we can kind of interpret the data. We've done statistics, et cetera, that up to 30 patients would be the full trial. But as mentioned previously, this is an open-label trial, so we'll have access to the data pretty rapidly on that for each individual patient. So it's not blinded, so we know that each patient will get the drug. So it's a really good question, but as I say, we're planning and what we've built so far is going to get rapid enrollment to say 6 clinical trial sites, maybe more. And then your question around decision trees. I mean it's -- obviously, we got to wait to see what the data is. But I think if the data is strong, and the way we've built up the business development, partnership aspects, I think there'll be multiple suitors here. I think there'll be strong interest if the data's positive. Because it can be applied to multiple pharma companies, and I mentioned the cancer supportive care area. So as I say, we'll be running full steam on those negotiations when it comes to -- one of the interesting questions here is kind of the deal type. We feel that, on the one hand, with the big pharma may come in and just take over and run the trial themselves, there could be opportunity to partner with a smaller company where we would kind of help and assist, kind of run the clinical trial. Because it is our baby in one sense, but it is our expertise in what we're doing. So you're right. There'll be decision trees and discussion negotiations, multiple parties. We'll figure that out. Oliver had a second question here. Is 30 people enough for a trial for a commercial outcome? Again, maybe, Liam, you can talk to that just around the stats discussions that we've had around how we ended up with 30. Liam Tremble: Yes. So really happy to, Jeremy. Yes, so 30 patients is essentially more than enough for our purposes right now. About 70% of these patients are going to have CRS, so there's going to be a very strong indication of the level of efficacy. The priority from a clinical development perspective is to really get into your placebo-controlled trials as early as possible once you have an idea of the effect size. So we're going to see the effects in Grade 1 and Grade 2 and also the other elements of CRS management, like hospitalization, that will give us a really good indication of how to design later-stage trials. So 30 patients for this purpose is actually ample. Jeremy Skillington: Cool. These are kind of numbers that are not plucked out of the air. There's been kind of deep analysis into what are the right numbers. So again, credit to Liam and the team for their discussions with qualified statisticians to come up with those numbers. All right. Another question here. Could we see a deal after interim data? I mean again, it's a good question. Maybe I've already answered it. But when it comes down to what that data looks like, and as I say, rapid enrollment, we'll get an early read into what the data look like, if it's -- if we're seeing an impressive suppression of that inflammatory response, that CRS, then I think for certain companies, that might be enough to transact. For others maybe, and I've been through this in my past where there's always that next experiment or the next data point or the next dataset. Some companies are maybe a little more conservative when it comes to decision-making. Maybe I'm alluding to the fact these are more the bigger guys who have to work the chain of command. But I do think that, as I say, having interim data will be a key point. And if it's positive, I think there'll be strong interest. Richard had a question. Your projected time scale towards commercialization. Again, commercialization is always tricky in this industry. I mean getting on the market is one question. Again, that'll be done with a partner and we're driving that forward. As I say, we're experts in CRS, we're experts in running these initial clinical trials. The larger clinical trials we can do ourselves. But having a partner onboard to kind of fund that would be critical. But there are -- that'll be kind of a few years down the line. But as I say, once it's launched on the market, then it'll be -- we feel it'll be broadly applied to any and all bispecific CAR T. So again timeline, that'll be driven by the partner and say that we don't see ourselves as obviously driving that forward ourselves in isolation. Potentially through a partnership. Another question. If data lands well this summer, what does success look like? That's a really good question. I mean in my mind, and this goes back to my kind of business development training, I mean, we're looking at a nice, substantial transaction. We're looking at a partner to come onboard with capabilities, with funding, with funds. What happens in the industry when it comes to these licensing transactions, whether, as I say, maybe people want to buy the program, buy the company, just license the program, that'll be for another time and other discussions. But I think that what we're seeing what success looks like is certainly a juicy upfront payment when it comes to the work that we've put in. Because we've done a lot of work. We've derisked the program. It's a large market, it's an attractive market. We've filed important intellectual property, so we'll be protected. So we see significant value for our contributions there. And then, as I say, the structure after that is down to the individual company we'll speak with or decide to collaborate with, whether it's, as I say, just passing the baby across that a large pharma could develop, or co-develop ourselves. But that's all -- we believe, with strong data, that Poolbeg will have the leverage for those negotiations because the interest is so high. Appreciate that. I think we have time for one more question. How much interest are you seeing in the oral GLP-1 for potential partners? Again, appreciate the question. Good question. In our most recent partnering conference attendances at BIO-Europe, for example, we had companies reaching out to us. I was always pleasantly surprised, some of them are kind of in Asia, some of them in Europe. Some of them already had existing metabolic disease programs, and they were looking to kind of branch out, add to their pipeline. I think -- I don't want to be flippant and talk about no-brainer. But if you get GLP-1 that can be delivered orally, it opens up a whole host of markets and market opportunities. It's a huge and growing market. And moving away from injectables, the industry wants to go there, the patients want to go there. So if we can demonstrate that clinical proof of concept in the trial that I outlined with Carel le Roux, I think there'll be strong interest then in partnering the program out. And again, revenue from upfront payments, et cetera. So appreciate that. I think we've ran slightly over time. Appreciate people's patience. But yes, we can wrap up now. Just again, thank you again for attending.
Operator: Good morning, and welcome to Fairfax's 2026 First Quarter Results Conference Call. [Operator Instructions] Your host for today's call is Peter Clarke, with opening remarks from Derek Bulas. Derek, you may begin. Derek Bulas: Good morning, and welcome to our call to discuss Fairfax's 2026 first quarter results. This call may include forward-looking statements. Actual results may differ perhaps materially from those contained in such forward-looking statements as a result of a variety of uncertainties and risk factors, the most foreseeable of which are set out under risk factors in our base shelf prospectus, which has been filed with Canadian securities regulators and is available on SEDAR+. Fairfax disclaims any intention or obligation to update or revise any forward-looking statements, except as required by applicable securities laws. I'll now turn the call over to our President and COO, Peter Clarke. Peter Clarke: Thank you, Derek. Good morning. Welcome to Fairfax's 2026 First Quarter Conference Call. I plan to give you some highlights and then pass the call to Wade Burton, our President and Chief Investment Officer of Hamblin Watsa, to comment on investments and Amy Sherk, our Chief Financial Officer, to provide some additional financial details. We had a great start to 2026 with operating income from our insurance and reinsurance companies adjusted to an undiscounted basis and before risk margin of $1.2 billion in the first quarter of 2026, up from $686 million in the first quarter of 2025. All components of our operating income were strong and up significantly from the first quarter of 2025. Underwriting income was $382 million, interest and dividend income of $561 million, and our profits of associates were $271 million. In the quarter, we had net losses on investments of $386 million primarily mark-to-market losses on bonds versus net gains on investments of $1.1 billion in the first quarter of 2025. That's a swing of almost $1.5 billion quarter-over-quarter. As we have always said, we expect investment gains to perform well over the long term, but will fluctuate quarter-to-quarter. Our net earnings for the first quarter of 2026 were $696 million. And all in, our book value per share at the end of the first quarter was $1,250, up 0.5% from year-end 2025 and adjusted for our $15 dividend. During the quarter, we purchased 375,000 shares for cancellation for $631 million. We expect to close two significant transactions in the second quarter of 2026. The sale of half our position in Poseidon for $1.9 billion, a pretax gain of approximately $837 million, and the sale of Eurolife's life operations for approximately $935 million for a pretax gain of approximately $350 million. In February of 2026, the Special Committee of Kennedy Wilson accepted the $10.90 per share offer from Bill McMorrow and us to take the company private, a 46% premium to the price it traded prior to the offer. We are waiting regulatory and shareholder approvals. We expect to close the transaction sometime in the second quarter. With the conflict in Iran, unfortunately, members of the Fairfax family again find themselves in harm's way. GIG management is ensuring all employees in the Gulf region have the support that they need to stay safe, and this is our first priority. It is still uncertain how long this will last, but Gulf continues to operate as usual under these most difficult conditions and losses related to this conflict have been minimal. Our thoughts and prayers are with all the employees at Gulf. I will now give you some additional detail on the components of our net earnings for the quarter. Our consolidated investment return was 0.8% driven by interest and dividend income, strong profits of associates, offset by net losses on investments, again, primarily on mark-to-market losses on our bonds. Consolidated interest and dividend income of $662 million was up 9% year-over-year, benefiting from our growing investment portfolio. Profits of associates of $371 million in the quarter was driven by Eurobank, the Waterous Energy Fund III and Poseidon. Our associate companies continue to post very solid stable results. In the quarter, we had net losses on investments of $386 million from mark-to-market losses on our bond portfolio, primarily from U.S. treasuries due to the increase in interest rates in the first quarter and losses on equity exposures of $82 million. Offset by other net gains of $60 million, primarily gains on foreign exchange, offset by mark-to-market losses on our preferred shares in Digit. The net loss of $82 million on our equity and equity-related holdings were driven by unrealized losses on Fairfax TRS of $342 million, offset by net gains on Orla and Strathcona. As I said earlier, and please remember, our net gains or losses on investments only makes sense over the long term and will fluctuate from quarter-to-quarter, for that matter, year-to-year. More on investments from Wade. As I mentioned in previous quarters, our book value per share of $1,250 does not include unrealized gains or losses in our equity accounted investments and our consolidated investments, which are not mark-to-market. At the end of the first quarter, the fair value of these securities is in excess of carrying value by $3.9 billion, an unrealized gain position or $190 per share on a pretax basis. This is a significant increase from a year ago at $67 per share and year-end 2025 at $150 per share. In the first quarter, net earnings included $184 million unrealized loss due to increasing interest rates in the quarter. This consisted of unrealized losses on our bonds of $364 million that I previously mentioned. Offset by the increase in discount under IFRS 17 on our insurance and reinsurance reserves of $180 million. For the first quarter of 2025, this number was a net gain of $120 million. Our insurance and reinsurance businesses wrote $8.7 billion of gross premium in the first quarter of 2026, up 4.1% versus the first quarter of 2025. Our North American Insurance segment's gross premium was relatively flat year-over-year decreasing $18 million or less than 1% from the first quarter of 2025 due to a softening insurance market. Crum & Forster's premium was down 2.7%, driven by its surplus and Specialty segment and Seneca's property business, offset by increases in its accident and health business. Northbridge's gross premium was down 4.8% in Canadian dollars, reflecting a competitive marketplace. In U.S. dollars, its premium was down only 0.4% due to the strengthening of the Canadian dollar. Zenith premiums were up 10% for the first quarter of 2025 -- '26, sorry, due to earned rate increases and new business in workers' compensation. Our global insurer and reinsurer segment was up 2.5%, with gross premiums of $4.8 billion in the first quarter of 2026 over the first quarter of 2025. Allied World's premium was up 3.7% in the quarter, with gross premiums of $2.2 billion. The Reinsurance segment was up 10.4% from new and renewal business, most notably crop, while its global insurance premium was down 2.6%, primarily from its North American Insurance segment, offset by growth in its global market segment. Odyssey's premiums were down 1.2% in the first quarter of 2026, with gross premium written of $1.5 billion. It's U.S. reinsurance business was the driver of the decrease primarily due to property treaty, reflecting reinstatement premiums from the first quarter of 2025 on the California wildfire losses that did not reoccur in 2026. Its insurance business at Hudson and Newline was relatively flat. Brit's gross premium was $810 million, up 3.8% in the first quarter of 2026, versus the first quarter of 2025. Excluding California wildfire reinstatement premium in the first quarter, gross premium was up 6.8%. Over half the growth came from the recent expansion of its Brit Re platform in Bermuda. Ki, the algorithmic follow-on Lloyd's syndicate developed within Brit, is in its second year operating as a stand-alone business. Ki's gross premiums was up 11.7% in the first quarter of 2026, driven by property treaty, casualty business, offset by open market North American property. Ki announced in the first quarter, it is adding a fifth capacity partner to its platform that will begin in the second quarter of 2026. Our international insurance and reinsurance operations gross premiums were $1.7 billion, up 16.4% in the first quarter of 2026 versus the first quarter of 2025 benefiting from high single-digit underlying growth and favorable movements of foreign exchange. Gulf was up 30% in the quarter, Bryte up 28%, Fairfax LATAM 9%; and Fairfax Central and Eastern Europe up 17%. Fairfax Asia gross premiums was up 3% year-over-year and on a net basis, was up 31%, with reduced cessions due to a new reinsurance program implemented in 2026. International operations currently account for about 20% of our overall gross premiums. Looking ahead, these operations offer strong long-term potential for sustained growth. Thanks to skilled management teams, emerging insurance markets and robust local economies. Our combined ratio was 94.1% in the first quarter, with underwriting income of $382 million, compared to 98.5% combined ratio and underwriting income of $97 million in the first quarter of 2025. The big driver of the difference year-over-year was lower catastrophe losses in the first quarter of 2026, with approximately 1.8 combined ratio points versus 12.7 points on the combined ratio in the first quarter of 2025, primarily from the California wildfire losses. This was offset by lower prior year favorable development in the quarter over last year. Our global insurers and reinsurers posted a combined ratio of 92.5%, Odyssey Group led the way with a combined ratio of 91.1%, Brit's combined ratio was 93%, Allied World had a combined ratio of 93.4%, and Ki's combined ratio was 94.7%. That included 3.8 points of separation costs. Our North American insurers had a combined ratio of 96% for the quarter. Northbridge had a combined ratio of 94.1%, Crum & Forster had underwriting income of $52 million for a combined ratio of 95.5% while our Zenith, our workers' compensation specialist, we are dealing with the effects of multiple years of price decreases in the workers' compensation space, although this is reversing, had an elevated combined ratio of 103.7% trending down in the first quarter of 2025 of 106.3%. Our international operations delivered a combined ratio of 95.8% for the quarter with underwriting income of $46 million with all our international segments producing underwriting income. Colonnade in Eastern Europe had an excellent combined ratio of 89.8%. Bryte continues to produce strong results with a combined ratio of 94.9% and Fairfax Asia had a combined ratio of 96.3%, led by Singapore Re at 85%. Gulf insurance, the largest company in our international operations, got off to a good start in 2026 with a combined ratio of 95.9% in the first quarter, notwithstanding the difficult conditions from the war in Iran. In the first quarter, our insurance and reinsurance companies recorded favorable reserve development of $86 million or a benefit of 1.3 points on our combined ratio. Each of our major segments recorded favorable reserve development. We are focused on setting our ongoing reserves at conservative levels especially on long tail lines. Through our decentralized operations, our insurance and reinsurance companies continue to produce strong results. Writing annualized gross premium of over $33 billion, with underlying margins remaining attractive, in the main, in spite of softening rates. In certain lines, it is becoming more competitive, but we benefit from our size and scale. And more importantly, we have exceptional long-term management teams that are all focused on the bottom line and have the experience to manage the cyclical nature of the insurance business. I will now pass the call to Wade Burton, our President and Chief Investment Officer of Hamblin Watsa to comment on our investments. Wade Burton: Thank you, Peter, and good morning. March 31, 2026, ends another good quarter on the investment side. Performance continues to be excellent. Equities are up 2.9% on the quarter, 28.9% for the last 12 months and 20.5% through 3 years. Similarly, our bonds have outperformed, up 0.3% on the quarter, 5.6% for the last 12 months and 4.9% through 3 years. Our fixed income portfolio was safe and earning strong interest income and our public equities associates and consolidated noninsurance investments continued to perform well. We ended the quarter with $49.8 billion in fixed income investments and $26.6 billion in equity and equity exposed investments. The fixed income portfolio includes $5.6 billion in mortgages, $6 billion in corporates, all very short term, mainly investment grade and no, I'll repeat, zero traditional private credit exposure and $38.2 billion in government bonds and treasuries. Duration is 2.2 years, average maturity is 3 years and our yield is approximately 5%. A lot of safety and flexibility is built into the fixed income portfolio, which is our response to the playing field as it sits. The economic and interest environment has many conflicting factors, so we're playing it safe, keeping lots of flexibility and making a good return as we wait. As I said, we have $26.6 billion invested in common shares, equity and associates, consolidated noninsurance equity investments and preferred shares, all doing well, especially the bigger investments. Peter already discussed the Poseidon sale. Otherwise, it was a quiet quarter, so I thought it would be a good quarter to give a discussion about how we look at investments in publicly traded common stocks versus investing in private companies. The underlying process is the same. We work to uncover true economic profits and/or profit capacity. We think about where those profits are going. We focus on balance sheet and balance sheet flexibility, then we think about the price we pay for those profits. The same underlying process for both public and for private. In both cases, we know management is a key factor. As Buffett pointed out, a great manager, can't save a leaky boat, but what we have learned is that they make a huge difference paddling boats that do float. The advantages of buying public common stocks is, one, the ability to capitalize on the moves of the stock market, and two, liquidity. The ability to enter and exit an investment quickly is a good thing. The advantages of making direct investments in private companies is we control the profits. That is we can choose to reinvest the profits in the businesses we've invested in or we can take the profits out and invest them elsewhere. In general, the flexibility to invest in either public or private companies is a huge advantage for us. It allows us to be opportunistic agnostic and truly seek the best possible investments. For example, today, with the Shiller P/E at all-time highs, you would not expect we'd find a lot of $0.50 in the stock market, and we aren't. But we have been able to make outstanding acquisitions on the private side, including Meadows, Peak and Sleep Country. We have the advantage of a history of being terrific long-term partners, 40 years of fair and friendly transactions with a long, long line of very happy partners, along with permanent no-call capital makes us an attractive home for many companies. To do all of this well takes a skilled and focused investment team, and I'm so proud of the team we've built over the last 10 or 15 years. Our people are decision makers, they are analysts and value investors. We have skilled defensive players and skilled offensive players, all have experience in public and private investments. And having the independence to make decisions is so important, and they're all doing it. We call them in where we need them on the bigger investments. And with that, it is amazing to watch them come together as a group. And having this team in place is especially important now given how big and globally spread out we are and how big we hope and plan to be in the next 50 years. I will now turn the call over to Amy Sherk, our CFO. Amy Sherk: Thank you, Wade. I'll begin my comments by discussing some of our key transactions. On March 9, 2026, AGT completed a CAD 450 million offering of its common shares at CAD 23 per share. Immediately prior to closing of the offering, Fairfax exercised its AGT equity warrants at CAD 22.50 per common share for aggregate consideration of CAD 340 million in exchange for settlement of a CAD 340 million loan receivable from AGT. Concurrent with closing, the company also acquired CAD 200 in AGT common shares in a private placement for CAD 23 per share. The company's ownership in AGT was diluted from 66% to 56% as a result of these transactions and we, therefore, continue to control AGT. The following 3 transactions were already discussed by Peter, so I will just provide some additional details. On March 10, 2026, the company announced that it entered into agreements to sell an aggregate equity interest of approximately 23.1% of Poseidon for aggregate proceeds of approximately $1.9 billion. Following the sales, Fairfax will retain an equity ownership of approximately 22.2% of Poseidon. The pretax gain on closing is estimated to be $837 million, and the company expects to continue to apply the equity method of accounting to its investment in the common shares of Poseidon following the sale. On October 13, 2025, the company announced that it had entered into a term sheet with Eurobank, pursuant to which Eurobank will acquire the company's 80% equity interest in the life insurance operations of Eurolife for cash consideration of approximately $935 million or EUR 813 million. The estimated pretax gain on closing is approximately $350 million. Accordingly, the company continues to classify assets of $3.3 billion and liabilities of $3.5 billion related to Eurolife life operations as held for sale at March 31, 2026. On February 16, 2026, the company and Kennedy Wilson entered into a definitive merger agreement pursuant to which Kennedy Wilson will be acquired in an all-cash transaction by a consortium led by certain senior executives of Kennedy Wilson together with the company. The consortium will acquire all outstanding common shares of Kennedy Wilson not already owned for $10.90 per share in cash, and the company has committed to providing the consortium with funding of up to $1.65 billion, principally to fund the transaction's cash purchase price. These transactions are expected to close in the second quarter of 2026. A few comments on our noninsurance company results in the first quarter of 2026, non-insurance companies reported operating income of $37 million in the first quarter of 2026 compared to an operating loss of $41 million in the first quarter of 2025, primarily reflecting strong share of profit of associates at Fairfax India, partially offset by nonrecurring expenses at AGT related to its initial public offering in the first quarter of 2026. Our noninsurance companies, including Sleep Country, Recipe, Dexterra, Meadows and Peak continued to perform well in the first quarter of 2026. Looking at our share of profit from investments in associates, we reported increased consolidated share of profit of associates of $372 million in the first quarter of 2026, compared to $129 million in the first quarter of 2025. Share of profit in the first quarter of 2026 principally reflected share of profit of $129 million from Eurobank, $117 million from the Waterous Energy Fund III and $77 million from Poseidon. I will close with a few comments on our financial condition. Maintaining an emphasis on financial soundness at March 31, 2026, the company held $2.5 billion of cash and investments at the holding company, had only $300 million drawn from its $2 billion unsecured revolving credit facility and an additional $2.1 billion at fair value of investments in associates and market-traded consolidated noninsurance companies owned by the holding company. Holding company cash and investments support the company's decentralized structure and enable the company to deploy capital efficiently to its insurance and reinsurance companies. At March 31, 2026, the excess of fair value over carrying value of investments in noninsurance associates and market-traded consolidated noninsurance subsidiaries was $3.9 billion compared to $3.1 billion at December 31, 2025, with the increase principally related to the announced sale of 23.1% of the company's investment in Poseidon, which we have already talked about. The pretax excess of $3.9 billion is not reflected in the company's book value per share, but is regularly reviewed by management as an indicator of investment performance. The company's consolidated total debt to total capital ratio, excluding noninsurance companies, increased to 27.8% at March 31, 2026, compared to 26.2% at December 31, 2025, reflecting increased total debt, principally due to the issuances of unsecured senior notes of $476.6 million or CAD 650 million in February 2026 and decreased common shareholders' equity. Subsequent to March 31, 2026, on April 15, the company redeemed at maturity $91.8 million principal amount of its 8.3% unsecured senior notes. And on April 29, 2026, the company announced its intention to redeem on May 29, 2026, all of its outstanding CAD 450 million full amount of 4.7% unsecured senior notes, which are due on December 16, 2026. Common shareholders' equity decreased to $25.8 billion at March 31, 2026, from $26.3 billion at December 31, 2025, primarily reflecting purchases of about 375,000 subordinate voting shares for cancellation for cash consideration of $631 million or $1,684 per share, payment of common share dividends of $329 million and other comprehensive loss of $227 million, primarily related to unrealized foreign currency translation losses net of hedges due to the strengthening of the U.S. dollar against various currencies. The company does view these unrealized foreign currency movements as market fluctuations, similar to our unrealized gains and losses on its equity and fixed income portfolios. This was all partially offset by our net earnings attributable to shareholders of Fairfax of $696 million. Lastly, book value per share was $1,250.14 at March 31, 2026, compared to $1,260.19 at December 31, 2025, representing an increase per basic share in the first quarter of 2026 of 0.5% adjusted to include the $15 per common share dividend paid in the first quarter. That concludes my remarks for the first quarter of 2026, and I'll turn it back to Peter. Peter Clarke: Thank you, Amy. And Denise, we are now happy to take any questions that you might have. Operator: [Operator Instructions] The first question today does come from Stephen Boland with Raymond James. Stephen Boland: Peter, I guess this is for you. I know you addressed this at the annual meeting and some of the events around that, but I just want to talk a little bit about softness. When I look at the premium that was reported between the North American and international this quarter, flat for North America, a little bit up in international. Is that the dynamic we're seeing? And what is the messaging going to the subsidiaries from head office? Or is it just intuitive that the subsidiaries are beginning to avoid where price -- pricing just isn't profitable down the line. Is there any messaging coming from the head office on that? Or you let the subsidiaries do what they do? Peter Clarke: No, that's a good question. And I think just to start off, there really doesn't have to be any messaging to our companies. They're very -- the presidents are very experienced and they've managed through cycles before. And it's very clear, we're all on the same page that underwriting profit is a focus and underwriting discipline. So there's no -- if you need to reduce your premium and pricing is inadequate, that's totally fine from us. And we take a long-term approach, long-term view. We're building the company over the long term. And so again, I think the presidents all do the right thing, all are focused on underwriting profit. And that message is very, very clear from Fairfax as well. Operator: The next question comes from Tom MacKinnon with BMO Capital Markets. Tom MacKinnon: Just a question with respect to Gulf. Net premiums written in 2025 were, in fact, flat to modestly down versus 2024. We got a spike up here in the first quarter of 2026. Is there any more color you can share with us? And I noticed that you've been increasing retention with respect to Gulf as well. Are there any concerns here about increasing retention in an area where there's heightened risk as well? So if you can provide any kind of more color on that, I'd appreciate it. Peter Clarke: Sure. For Gulf, yes, 2025 premiums were down. I think we disclosed that they lost a large health contract in Kuwait at the end of '24, which affected their premiums in 2025. And that treaty, in particular, they did cede a lot of business. They only retained a portion of the business. So that affected their net retentions. So coming into 2026 off a lower base, they are expanding again in the accident and health business, and it's coming off a lower base. So that's why you'll see the bounce back in the premiums and is partly responsible for the net retention increasing. So it's really driven by that one large contract that wasn't renewed in late 2024. Operator: Next question comes from Bart Dziarski with RBC Capital Markets. Bart Dziarski: I wanted to ask around the Poseidon transaction. So congrats on the announcement there, and just hoping you can give us some more color in terms of why now, why sell a portion and not the whole stake? And then what you expect to do with the proceeds once the transaction closes? Peter Clarke: No. Thanks for the question, Bart. No, Poseidon, it has been an excellent investment for us. I think we first invested around 2018, and our compounded annual return was 25% per year. Our cost was about $9.50, $10, and we carried it at $15.50, I believe. So we sold half the position for $230 had a very nice gain, $837 million, and we're very happy to hold the remaining 22%. Our partner, ONE, that took it public -- private, sorry, last year was wanting to increase its ownership. So we were fine selling about half of our position. Operator: The next question is from Jaeme Gloyn with National Bank Capital Markets. Jaeme Gloyn: Just want to quickly touch on the reserves and development this quarter. It looks like a little bit of a step down from this time last year and sort of the pacing that we've been seeing. Can you talk about a little bit more detail on perhaps what's driving that? Is there a shift in how you're looking at the portfolio? And I just want to sort of understand that trajectory if it's at these levels or this is sort of a little bit of a one-off. Peter Clarke: I think, Jaeme, I think when we look at reserves, first quarter is not really a big quarter for us to move reserves. In the fourth quarter, we do a thorough reserve analysis, actuarial review of all our reserves. So most of the actions are taken in the fourth quarter. So in the first quarter, it's usually a lower movement on the reserves than others. I think maybe last year, the favorable development was higher than normally expected. So quarter-to-quarter, especially in the first half of the year, I wouldn't really put any real focus on that number. Operator: That comes from Tom MacKinnon with BMO Capital Markets. Tom MacKinnon: Okay. Peter, you note the -- a bit of a shift here in terms of more premium growth coming out of international, I guess, than the North American and the global insurers and reinsurers. And now you're -- obviously, the international running around a 96% combined and the rest of the North American and global reinsurers running around 93%. So as you kind of shift more business into the 96% combined and versus the 93% combined, how do you feel about this $1.5 billion outlook for underwriting profit going forward? Peter Clarke: No, that's -- you're right. There has been -- in this quarter, at least, and there's been a shift between the mix of business between our larger companies, which are primarily a large portion of their business comes from North America. And that's really where we're seeing the softening of rates, and it's much more competitive. So as you said, we don't see as much growth there. They were about 1.5% for that -- the larger companies, they were up 1.5% in the first quarter. And then our international operations, where they're not seeing the price decreases as much, more attractive business, we would hope that, that the combined ratio will drop over time. Gulf, for example, they're still running a little bit above 95%. But historically, they've run in the below 95% low 90s. So I think we'll see that combined ratio for the international group continue to go down as well, helping the overall mix of business. We write about $33 billion now, and we benefit from that greatly. Like I said, 80% is still with our larger companies, but that 20% of international business, it's about $6.5 billion of premium, and that's quite significant, and it gives us the scale and diversity to manage these cycles. So... Operator: [Operator Instructions] We currently have no questions. Peter Clarke: Well, Denise, if there are no further questions, thank you for joining us on our first quarter conference call. Thank you very much. Operator: Thank you. That does conclude today's conference. We appreciate your participation. You may disconnect and have a great rest of your day.
Operator: Good day, and thank you for standing by. Welcome to Endeavour Mining's First Quarter 2026 Results Webcast. [Operator Instructions] Today's conference call is being recorded, and a transcript of the call will be available on Endeavour's website tomorrow. I'd now like to hand the call over to Endeavour's Vice President of Investor Relations, Jack Garman. Please go ahead, sir. Jack Garman: Hello, everyone, and welcome to Endeavour's Q1 2026 Results Webcast. Before we start, please note our usual disclaimer. On the call today, I'm joined by Ian Cockerill, Chief Executive Officer; Guy Young, Chief Financial Officer; Djaria Traore, Executive Vice President of Operations and ESG; and Sonia Scarselli, Executive Vice President of Growth and Exploration. Today's call will follow our usual format. Ian will first go through the highlights of the quarter. Guy will present the financials, and Djaria will walk you through our operating results by mine, before handing back to Ian for his closing remarks. We'll then open the line up for questions. I'll now hand over to Ian. Ian Cockerill: Thanks, Jack, and welcome to everyone joining us on the call today. Now Q1 2026 was a record quarter for Endeavour with a strong operational performance and elevated gold price, underpinning a very strong financial results. Production of 282,000 ounces was in line with our plan, and we expect to see progressive improvements as we move through the year as stripping activity opens up progressively higher grade ore through to Q4 later on this year, while all-in sustaining costs on a royalty adjusted basis also came in towards the lower end of our guidance in the quarter. This performance translated into a record free cash flow of $613 million, and that's equivalent to $2,176 per ounce produced. That's a 29% increase over the prior quarter. Through the year, we'll continue to focus on our margins and maximizing free cash flow from every ounce that we produce. This free cash generation transformed our balance sheet. We moved from net debt of $158 million in the previous quarter to now a net cash position of $405 million at the end of this quarter, a $563 million swing in just 3-months. Given the strong balance sheet position and our outlook, we're going to look to increase our shareholder returns through supplemental dividends within our H1 2026 dividend announcement and through continued opportunistic share buybacks. At prevailing gold prices, we expect supplemental returns to at least double -- to be at least double our $1 billion minimum commitment over the next 3-years. On organic growth, as we announced last week, the Assafou DFS confirms a high-quality, long-life asset that has very strong project economics. Early works are underway, and we're targeting a final investment decision before the end of this year. On the exploration front, we're accelerating resource definition of our Vindaloo Deeps target, and we expect to deliver maiden resource in the first half of this year. Simultaneously, our new ventures exploration program continues to expand our exploration footprint into the most prospective Tier 1 gold provinces with the latest strategic investment into Guyana. I'll now take you through each of these areas in a bit more detail. On Slide 7, you see production was 282,000 ounces, down from Q4 due to planned lower grades mined and processed, but in line with the mine sequence. All-in sustaining costs were higher in the quarter, largely due to higher gold price-driven royalty costs with some small impacts from the stripping activity and the higher power costs at Mana. But despite higher costs, our all-in sustaining margin of $2,976 an ounce was $751 per ounce higher than in Q4 as margins continue to consistently expand alongside the higher gold prices. On Slide 8 and the full year guidance, you can see group production and all-in sustaining costs remain on track to achieve guidance. The Q1 production of 282,000 ounces represents approximately 26% of the low end of our guidance range, and we're expecting higher production in the second half of the year, peaking in Q4 as per our planned mining sequence. On costs, while first quarter all-in sustaining costs of $1,834 an ounce sits slightly above the guidance range, this reflects higher royalty costs as a direct result of the rising gold price. On a gold price adjusted basis back to our budgeted level, underlying all-in sustaining costs of $642 an ounce were in the lower half of the guidance range. And let's say that's based on our $3,000 gold price. On capital, we expect both sustaining and nonsustaining capital to be weighted towards the first 3-quarters of the year, aligned with our stripping program. While growth capital of $500 million to $100 million is now expected to support early works at Assafou, mostly in the second half of the year. So overall, we're confident in our full year outlook and expect to see improvements throughout the year. Free cash flow reached a record $613 million in Q1, up 29% from Q4 and equivalent to $2,176 per ounce of gold produced. But we remain focused on maximizing free cash flow for every ounce that we produce, and as operational performance improves throughout the year, we expect to at least partially offset some of the impact of higher taxes in Q2 and Q3. The strong free cash flow has enabled us to rapidly de-leverage the balance sheet in Q1, reducing net debt by $563 million and moving to a net cash position of $405 million at quarter end. And this provides the financial flexibility to deliver our world-class organic growth project Assafou, whilst we pay out sector-leading returns to shareholders. As you know, our leverage target through the cycle is less than 0.5x net debt to adjusted EBITDA. That remains the case, but we do not intend to maintain a very large net cash position either. So we'll stick to our capital allocation model and look to increase shareholder returns while prioritizing Assafou's development as well as our exploration program. On Slide 11, our shareholder returns program is quite clear. Between '26 and '28, we're committed to return at least $1 billion to shareholders and we will maintain this commitment down to a gold price of $3,000 an ounce. And at prevailing gold prices, we could return more than double that minimum commitment to shareholders. Given the strong gold prices so far this year, we're on track to return a significant supplemental dividend when we announce our H1 '26 dividend in our Q2 results. So far this year, we've already completed $54 million of share buybacks, and we'll continue opportunistically and make up a significant component of our supplemental returns. On to our sector-leading organic growth on Slide 12. Now last week, we published the results of our definitive feasibility study, strengthening our confidence in the Assafou project and its potential to transform our portfolio, driving production growth, lowering costs and delivering long-term value. We discovered Assafou for $13 million in 2022. And based on the DFS at a $4,000 per ounce gold price, the project now has an after-tax value of over $5 billion with an internal rate of return of 55%. Now that's value creation and reflects the highly prospective region and the ability to accelerate projects quickly from discovery to production. The Assafou project will be relatively similar to other mines that we've built, albeit bigger. The DFS outlines a 5 million tonne per annum gravity and CIL processing plant optimized to support a smoother production ramp-up and to add additional redundancy to give optionality to expand the plant in the future as we develop and further expand the resource, the exploration resource in the immediate vicinity of the mine. Early works are already underway. Procurement of long lead items have started, detailed engineering and design is progressing and key tenders are already out. We have also launched land compensation negotiations as part of the resettlement action plan, which we need to finalize ahead of starting the resettlement, which is on the critical path. We're targeting a final investment decision before the end of this year and then a construction period of 24 to 30 months. Once construction starts, the resettlement, mining pre-stripping and ore commissioning are on the critical path to production. The resettlement is required for mining to start, so developing the resettlement action plan is a key part of our early works program. Assafou has the potential to be one of our largest, lowest cost assets with the longest mine life, capable of producing 320,000 ounces of gold per year at an all-in sustaining cost of $1,026 per ounce over the first 8 years of its planned 16-year mine life. The DFS also reflects our increased confidence in the mine plan, underpinned by nearly 100,000 meters of additional close spaced drilling. This has increased reserves and resources and introduced maiden proven reserves and measured resources, providing a much higher level of certainty over what we will mine and when, de-risking the ramp-up and early production profile. And importantly, we see significant exploration upside in the immediate vicinity of the mine that will support continued growth in reserves and resources and further enhance the mine plan over time with the potential to sustain production higher levels over this period for much longer. Looking at the exploration at Assafou on Slide 14. Most of our drilling has been focused on the Assafou deposit itself, and we've just started to step out beyond Assafou. We've already identified 20 highly prospective targets on this property that we are prioritizing with a guided $10 million spend for this year. We'll focus on advancing the Pala Trend 3 deposit following the 2025 maiden resource, defining Pala Trend 2 maiden resource and exploration drilling at the Pala Trend Southwest and Koumenagaré. At Assafou, we've discovered a new and highly fertile mineralized Greenstone belt and through our own land package and our strategic partnership with Koulou Gold, we expect to unlock significantly more value across this belt. Now Assafou is key to our organic growth outlook and along increased production at Sabodala-Massawa, we're targeting 27% growth in production to 1.5 million ounces by 2030 with a solid position in the first quartile. On Slide 16, following the launch of our new exploration strategy late last year, we've increased our exploration guidance to $100 million for this year, and we will prioritize adding near-mine resources across the portfolio, expanding resources at the Assafou deposit and nearby targets, whilst advancing new ventures to replenish the longer-term organic project pipeline. And as you can see on Slide 17, we are pleased that we signed a strategic investment of $20 million with Altair for a 9.9% stake. The Guyana Shield is one of the 4 Tier 1 gold provinces that we are targeting through our Greenfield and New Ventures program. And given the Guyana Shield is a continuity of the West African permian, we have a good understanding of the geology as well as the structural context. Now Altair has one of the largest consolidated land packages in Guyana, covering highly prospective ground to the south of recent significant discoveries at Oko West and Oko-Ghanie along the same shear zone. So we're excited about the prospectivity and the proceeds from our investment will be deployed to accelerate these exploration programs. Before I hand over to Guy, I just wanted to touch shortly on ESG. As a long-term partner in West Africa, we will always strive to deliver sustainable value to all of our stakeholders. In 2025 alone, we contributed $2.8 billion to host economies. And over the last 6 years, we've contributed $12.9 billion. This consistent delivery of value alongside continued improvements in governance, stakeholder engagement and ESG management systems is increasingly being recognized. And as a member now of the Extractive Industries Transparency Initiative, we met all transparency expectations in 2025, performing strongly relative to our peer group. In addition, our ISS rating has been upgraded, placing us in the top 10% of our sector, in line with the other strong ESG ratings we continue to maintain. And with that introduction, let me hand you over to Guy, who can take you through the Q1 financials. Guy, over to you. Guy Young: Thanks, Ian, and hello to everyone. As Ian said, Q1 was a very strong quarter financially, driven by the higher gold price and consistency in our operational performance. The realized gold price increased by $937 an ounce to $4,810 an ounce, supporting our record financial performance. Whilst quarter-on-quarter production was down slightly and costs were up partially as a result, adjusted EBITDA increased by 29% and adjusted net earnings increased by 64%. On the cash flow side, operating cash flows were up 21% and free cash flow was up 29%. On Slide 21, you can see that adjusted EBITDA reached a record $880 million, up 29% quarter-over-quarter, and our adjusted EBITDA margin also increased significantly by some 12% to 65%. The higher EBITDA reflects the combination of higher gold prices and lower operating expenses due to the lower production, while the improved margin demonstrates our ability to leverage the benefits of increased gold prices in our earnings. Moving on to Slide 22. Operating cash flow was up 21% to $737 million compared to Q4 2025 due to higher gold prices and lower operating expenses despite increased cash taxes and an increased working capital outflow related to trade and payables, inventory and receivables. Looking now at the operating cash flow improvement in some more detail on Slide 23. The increase in the realized gold price added $169 million to operating cash flow. Gold sold decreased by 24,000 ounces to 278,000 ounces in Q1, which impacted operating cash flow by $99 million. Operating and other expenses were $156 million lower than Q4 due to a number of factors. Firstly, lower nominal mining and processing costs on the back of the lower production, the completion of the hedging program last year, where we recorded a loss in Q4, and these were partially offset by higher royalties. Income taxes paid increased by $23 million to $46 million, reflecting the timing of corporate income tax payments as expected and provisional withholding tax payments at Sabodala-Massawa. On that point, please note for the full year, we've increased our cash tax guidance from $600 million to $700 million to the revised total of $660 million to $770 million, reflecting higher withholding tax payments related to an increase in cash repatriation on the back of higher gold prices. Cash income tax guidance is unchanged for the year. Finally, working capital was a $91 million outflow, a $75 million increase on last quarter's. Key drivers of the increase were a reduction in payables, which we expect in Q1, along with increased VAT and stockpiles. Turning to VAT first. VAT balances increased in Q1 -- sorry, whilst VAT balances increased in Q1, we've seen some positive developments in April with a resumption in direct VAT reimbursements in Burkina Faso, a reduction in processing times in Senegal and higher levels of reimbursements in Cote d'Ivoire, which, if maintained, will positively impact our Q2 working capital. The stockpile increase is due to some deferral in stripping at Hounde and the concomitant stockpile drawdown along with higher mining volumes at Ity. Both these trends are expected to normalize through the rest of the year. Although less material, we have built up supplies of some critical consumables like fuel and explosives to help mitigate any potential impacts from the closure of the Strait of Hormuz. Turning to Slide 24. Free cash flow reached a record $613 million in Q1, up 29% from Q4 despite the lower production and higher ASIC taxes and working capital outflow. Free cash flow has increased each quarter since Q2 2025 as we are benefiting from higher gold prices and successfully converting the majority of additional margin into free cash. The outlook remains very strong at current gold prices, particularly in H2 of this year. I would remind you, however, that for Q2, we expect free cash flow to be lower as a result of seasonal tax payments. This is normal regional tax seasonality with higher corporate income and withholding tax payments, representing approximately 65% of our full year payments to be paid in the quarter. On Slide 25, our cash flow significantly improved our net debt position as shown here. We started the quarter with net debt of $158 million and ended with $405 million of net cash. As detailed on the previous 2 slides, operating activities generated $737 million of cash flow in the quarter. Investing outflows were $125 million, including $75 million of sustaining capital, $45 million of nonsustaining capital and $6 million of growth capital. Financing activities included a net $75 million drawdown on the revolving credit facility alongside $27 million of share buybacks, $8 million of lease payments and $4 million of financing fees, all of which leaves us in a net cash position of $405 million at the end of the quarter. As Ian mentioned earlier, we do not intend to build a large net cash position, and we'll continue to follow our capital allocation model of increased shareholder returns after prioritizing assets for development and exploration requirements. Finally, moving on to net earnings. Earnings from mining operations increased to $776 million, reflecting the higher gold price, partly offset by royalties and sustaining capital. Other expenses decreased with the higher Cote d'Ivoire royalties in the prior quarter now being reported as part of our cost of sales. Deferred tax was a $97 million expense compared to a $53 million recovery in the prior quarter. The change reflects the accrual of additional withholding taxes ahead of expected increased cash upstreaming as a result of the higher gold prices, as I referenced earlier. Adjusted net earnings were $442 million for the quarter or $1.53 per share, up 65% from Q4. Thank you, and I'll now hand over to Djaria to walk you through the operating performance. Djaria Traore: Thank you, Guy, and hello, everyone. Before discussing our operating results, I want to talk about safety, which remains our top priority. We were deeply saddened that one of our contractor colleagues suffered a fatal injury at Mana on 6th of March, as we have previously reported. Following the incident, we've launched a comprehensive investigation, and we've identified several areas of improvement, particularly around contractor on-boarding, supervision and ongoing training. These actions are now being implemented across all our operations. Despite this incident, our total recordable injury frequency rate of 0.72 on a trailing 12-month basis has improved during the quarter and remains one of the lowest in the sector, and we continue all our efforts to eliminate fatal risks. Before turning to the mine-by-mine review, I wanted to touch on our first quarter performance compared to guidance on Slide 29. As Ian mentioned, we are on track to meet full year guidance with performance weighted towards H2 as production and costs are expected to improve at Hounde, Mana and Ity in the second half of the year, and this is in line with the mine plans. For quarter 1, group production was lower compared to last quarter of 2025 due to lower grades at Sabodala-Massawa, Mana and Ity, but again, in line with the mining sequence. The all-in sustaining costs were higher this quarter due to gold sales, higher royalty costs and increased stripping activity. Overall, we are pleased with our progress to date. Starting with Hounde on Slide 30. Production increased as we mine and process higher grades from the Kari West and Vindaloo Main pits. All-in sustaining costs have increased, but largely due to higher royalty costs at higher realized gold prices and to higher sustaining capital from increased waste stripping at Kari West and heavy mining equipment improvement. We will continue stripping at the Vindaloo Main pit pushback, which will support access to better grade to improve production for the year, with costs only expected to realize the benefit later in the year once the majority of the stripping has been completed. On Slide 31, at Ity, production decreased as we mine lower grades from the Bakatouo and Walter pits, while we also processed lower tonnes due to scheduled mill maintenance in quarter 1. All-in sustaining costs at Ity has improved due to lower sustaining capital and the benefit of byproduct silver sales, despite the higher gold prices and lower gold sales. Similar to Hounde, Ity's performance is expected to be weighted towards H2 as blended grades are expected to increase through the year. On Slide 32, you can see that production at Mana was lower quarter-over-quarter due to lower grades and the weighing down on mining activity in the Siou underground deposit, where the reserves are nearly depleted. Similarly, all-in sustaining costs were higher due to the lower levels of production and sales as well as higher royalty costs related to gold prices and the continued use of higher cost self-generated power. On costs, we expect that the grid power availability will improve during quarter 2 as the grid in Burkina Faso adds new capacity. We also continue to improve the resilience of our grid connection at Mana through the automation of the underground ventilation system and the installation of a new transformer and capacitor bank, which is expected to improve productivity and operating costs. In H2, the mining feed from the Wona underground deposit is expected to supplemented with ore from the open pit of Bana Camp, supporting slightly higher grade, throughput and production. Moving to Sabodala-Massawa on Slide 33. Production decreased due to lower grades mined and processed compared to the quarter 4 2025, but in line with the mine sequence. All-in sustaining costs increased due to lower gold sales, higher royalty costs related to the increased gold price and higher sustaining capital. As 2026 progresses, we expect to see steady performance from the CIL plant as improved grades are offset by slightly lower throughput. While on the BIOX side, we expect continuous improvement in throughput and recovery as the ongoing optimization work continues. At the end of quarter 1, we published a technical report for Sabodala-Massawa. And it's also important to remember that this is a conservative reserve only outlook that we intend to optimize and smooth-out through additional explorations and sequencing. The study outlined significant production growth into the high 300,000 ounces by year 2029 with an average production over the next 5 years of 335,000 ounces per annum. The significant increase in production is expected to be driven by the ramp-up of underground mining at the Kerekounda and Golouma deposits. As the mining ramps up, it is projected to deliver higher grade to the CIL plant, coupled with high grades through the BIOX plant from the Massawa North Zone deposit. We will expect to smooth this production profile through sequencing of Massawa North Zone and conversion of additional reserves, which would allow us to achieve and maintain production in the mid-300,000 ounces range for longer. Lastly, turning to Lafigue on Slide 35. Production increased as we mine higher grades from the main pit. We also benefited from improved recovery, which have increased following the completion of processing plant optimization project. All-in sustaining costs have also increased due to significant increase in sustaining capital related to the planned waste stripping this year and higher royalty costs due to the higher realized gold prices and the increased royalty rates. As stripping continues, we expect grades to decrease through the next quarter before again improving as we move into the next pushback in the second half of 2026. Overall, as you can see, the performance has been consistent and predictable during quarter 1. And as a result, we're well positioned for the rest of the year. Thank you for your time, and I will hand over to Ian. Ian Cockerill: Thank you, Djaria. As you've heard, we're off to a strong start operationally, and we've delivered another record quarter financially. But our key priorities from here are quite clear. Firstly, deliver on production and cost guidance; secondly, maximize free cash flow for every ounce that we produce to ensure an optimized balance sheet so that we can deliver sector-leading organic growth and sector-leading shareholder returns whilst remaining a trusted partner to our host countries. We certainly look forward to updating you on our progress throughout the year. And with that, I'd say thank you, and now I'll hand back to the operator, who will be in a position to open up for Q&A. Thanks very much. Operator: [Operator Instructions] We will now take our first question from the line of Alain Gabriel of Morgan Stanley. Alain Gabriel: The first question is for you, Ian. The cash balance is building very rapidly on today's gold prices, and you can easily finance Assafou, meet all your capital returns commitments and still have significant cash pile that is left. Although that's a good problem to have, it also brings some scrutiny on capital allocation. So how are you thinking about M&A at this point in the cycle? And do you think you have the capacity to take on a sizable project like Assafou and pursue M&A at the same time? That's my first question. Ian Cockerill: Thanks, Alain. Yes, look, it's a bit of a Hollywood problem, having the cash and the already well-defined organic growth pipeline. Irrespective of how much cash we have on our balance sheet, we are, as you know, we're really focused on growing this business in an organic fashion. We have lots of opportunities to do that. That's our principal focus. Our other focus is obviously on the exploration side. And I think the investment in Altair gives you another clear indication that's where we would -- we're happy to sort of put our money. We are patient capital investors. We seek the right opportunities to go in to create really outsized value returns to shareholders. It would be nice to do it every quarter, but we're taking a longer-term perspective on that. With respect to M&A, we constantly look. And if the right opportunity came along, obviously, we would look at it. To date, we've looked at several opportunities, but there's nothing has eventually turned out to be positive. But we're not averse to M&A, but our principal focus obviously is on organic growth. Alain Gabriel: That's very clear. And the second question is probably for Guy on the costs of -- or the energy cost impact on the business. Maybe if you can talk to us a little bit more about the diesel exposure across the group. How do you see the conflict impacting your cost base? Are you seeing any supply stress emerge on the supply chain? Because you seem to have managed this very well in Q1. So how are you thinking going forward of these dynamics? Guy Young: Alain, so let's just talk a little bit about the difference in our minds anyway between the security of supply and then the pricing risk. So to the first part, security of supply, as a general comment across all of our sites, we do not rely particularly heavily on fuel or any other related consumables that transit through the Strait of Hormuz. So we've got refineries that we rely on broadly regional, but in particular, in Cote d'Ivoire and Senegal and the crude input into those refineries is predominantly coming from Nigeria. We do have some other refined products that are coming from Northern Western Europe. But as a result of all of that and in discussion with our suppliers and the test of their business continuity planning, we don't perceive security of supply to be the key issue. It is what you've referred to more a question of pricing. When we look across the portfolio, and again, just bearing in mind that fuel is anywhere between 10% and 15% of operating costs, so it's significant, but not that material. When we run numbers bearing in mind local pricing, then we come up with a $10 per ounce AISC impact roughly for every $10 on the price of a barrel of oil. That is what we've seen so far. And when we look forward into the remainder of the year, that's what we're anticipating. So if I look purely at price variance at the moment, we can expect to see roughly a $25 increase in our Q2 costs relating purely to the price of fuel. The one other thing I would just quickly touch on, and Djaria mentioned it in her presentation, but the volume of our consumption of fuel does depend to some extent on grid availability. So where we see declines in grid availability, we will see higher volumes for self-generated power, and that in and of itself will drive a cost increase. So subject to the grid availability, roughly $10 per ounce for every $10 per barrel. Operator: We will now take our next question from the line of Ovais Habib of Scotiabank. Ovais Habib: Congrats on Q1 beat and really a great start to the year. Ian, a couple of questions from me. The first one was answered in regards to the supplies as well as the cost impact on the Middle East side. So that was good. Just moving on to Assafou. Ian, you released a robust DFS on Assafou, permits have been received. What's keeping you back on pressing the green light to start construction on the project? Ian Cockerill: Yes. Thanks, Ovais. Look, as you know, as far as Assafou is concerned, we already have the environmental permit. We have the exploitation permit. We're currently in negotiation with government around the mining convention. Obviously, it's important that we get that done. Part of that process involves the creation of a local entity, and that's a normal administrative process. I have to say the government of Cote d'Ivoire have been incredibly supportive on this project. They recognize the importance to the country as well as to us. And in fairness are really sort of trying their best to make sure that all necessary permits, approvals, whatever are sort of timeously being expedited. In terms of what is it that is still outstanding, obviously, one of the key issues, as we mentioned in the presentation, was finalization on the resettlement. We have two villages that sit on top of the ore body. We're in negotiations with those communities and seeking their assent and approval for -- to get moving. That is necessary before we can actually start mining activities because both those villages would potentially be within the normal sort of blast perimeter for the start of it. The other -- one of the other issues to be addressed is, there is a national road that runs through the footprint of the pit that needs to be diverted. We are very close to concluding the optimal diversion of that road. There's been some towing and throwing on that, but we're close to getting that concluded. Those, I think, are the two key outstanding issues. And obviously, I think it's always important as far as negotiations are concerned, the government knows that we're keen to progress. They're keen for this project to progress, but it's important that we keep our options open. But to give you some idea of our confidence that the project is going, we've already committed up to -- it's about $80 million worth of pre-expenditure principally aimed at long lead items such that this is another way that we can help derisk the project by making sure that long lead items can be manufactured, transported and delivered well on time, and they don't delay any of the build program. So we're running several things in parallel. I'm still reasonably comfortable that by the end of this year, we will formally announce the project. But I think you can see just by what we're actually doing already, we do believe that this is -- it's not a question of if this project goes, it's merely a question of when. It's as simple as that. Ovais Habib: Got it. And just maybe moving on to the exploration side, and maybe this is a question to Sonia if she's online. Obviously, you guys have a large exploration program for 2026. I just want to hear in terms of which target or area Sonia is most excited about? And when should we start receiving some exploration results? Ian Cockerill: Yes. Look, I'll pass on to -- Sonia is with us. I'll pass on, but I can tell you she's excited about all the areas. Sonia Scarselli: Thank you, Ovais, for the question. It depends how much time you have for me talking about the exciting pipeline. Look, if I just start to talk about a couple of areas, definitely, we have a great results at Vindaloo Deeps and Hounde, and we are planning to actually report the results of the maiden resource in the H1. So more to come on that with also a clear understanding of the upside potential. But then if we move into the other areas, we have exciting results in Sabodala-Massawa. We have completed a full portfolio review and identified over 20 new opportunities in the pipeline with the first one coming with a very clear resource -- major resource by the end of the year at Kawsara. So that's very exciting. And in parallel, we also have identified more underground potential in the area, both in Sabodala and Sofia, more to come towards the end of the year with concrete results. Then if we switch gear to Cote d'Ivoire, there's plenty there to look at. It's more around which one we prioritize first, but Ity continues to surprise us in a positive way. We had a very great result at the back end of last year, both into the greenfield and brownfield opportunities, and we are now infill drilling on the brownfield close to the CIL plant. And then Assafou, a lot of the work that we did in Assafou in the past couple of years was really to get the confidence on the Assafou resource. We have that. It's moving on with the DFS. And there is now quite a large potential of under-explored brownfield opportunities that we are progressing in parallel to get a better feeling. Those are less mature in terms of exploration activities. We will be able to give a little bit more better understanding both towards the end of this year as well as next year. But overall, it's a very exciting pipeline within our existing areas... Ovais Habib: Sorry, go ahead. Sonia Scarselli: No i was just going to... [Technical Difficulty] Operator: [Operator Instructions] We have the speakers back. Please continue. Ian Cockerill: Sorry, could the last speaker, please reask the question. I think we just completed Ovais' question and we're moving on to the next. Operator: You have any follow-up question, Ovais? Ovais Habib: No I am good. Thank you so much for answering my questions. Ian Cockerill: Apologies for cutting you short there Ovais, but we had an electronic glitch here. Operator: We will now take our next question from the line of Richard Hatch of Berenberg. Richard Hatch: Congrats on a very good quarter. You're delivering as you promised you said you would, and you're generating that free cash flow, which is really good to see. Look, just two questions. Firstly, just given the volatility that we're seeing in Mali, can you just talk a little bit around if that's creating any kind of instability in the broader region, if you're seeing anything in that regard to your operations? And then secondly, just on Vindaloo Deeps, you did sort of talk briefly about it there, but I just wonder if you might just be able to expand a bit more about what you're hoping to show the market on that when you update on the resource and how we should think about that into the short, medium and longer term? Ian Cockerill: Richard, thanks. Look, I think as everybody knows, Mali does not fall into any of our jurisdictions where we have operating assets. We have an old legacy asset, the Kalana mine that we're in the process of selling. That sale process continues. And certainly, our understanding is that the type of activity, that the civil unrest that's taking place does not appear to have migrated right down towards Kalana. It's a relatively, in Mali terms, much more benign region. So we're not -- we have no immediate impact on our operations due to Mali. In terms of the potential for spread across from Mali to elsewhere, at the moment, no. I mean the obvious place where there might have been some spread was into Burkina Faso. The situation in Burkina appears relatively calm. We're not seeing any deterioration in the local situation. The security forces are sort of on top of things in that country. We're working hand in glove with them. And again, we're not experiencing any current issues, and we're not anticipating any issues into the immediate future. As far as Vindaloo Deeps is concerned, as Sonia said, we will be -- in a short period of time, we'll be coming out with an update on the size of the resource and timing of when that would start coming into the plan. There's still one or two minor things to finalize. But as soon as that is ready for publication, we will come to the market. What I would say is I don't think the market is going to be disappointed. I think they're going to be very pleased with what's coming out of Vindaloo Deeps. Operator: We will now take our next question from the line of Amos Fletcher of Barclays. Amos Fletcher: I had a couple of questions. First one was just on working capital. Obviously, there's quite a lot going on within the working capital line this quarter in particular. But it was, I guess, quite a surprise how big the build was. I was just wondering, Guy, whether you can give us a bit of a steer on how you expect it to play out over the next few quarters? Guy Young: Sure, Amos. Thank you. Yes, working capital outflow was relatively significant. So I touched on it in the presentation, but maybe just walk through that again with a focus on stockpiles, which is the -- it's roughly 2/3 of that outflow. The stockpile increase is obviously in relation to mining tonnage. And the difference between our original expectation and our actual Q1 was an element of deferral of some of the waste stripping, particularly at Hounde, revolving around both production profile and fleet availability. So this is something that we expect to see pick up again in Q2 and marginally at the start of Q3. As we pick up in stripping activities, we should be seeing naturally something of a drawdown on stockpiles and further stockpile drawdown is anticipated at Sabodala-Massawa going into the second half. So with regards -- sorry, and Lafigue continued increase in stripping activity as well. So with the majority of our sites looking to do some stockpile drawdown, the types of build that you saw in the first quarter should not be repeating over the remainder of the year. And then without going into any detail as it wasn't part of the question, but I think there are positive trend indicators on both the VAT and the consumer build as well. So hopefully, the level of working capital build does not repeat through Q2, 3 and 4. Amos Fletcher: So potential for further build but smaller levels over the next couple of quarters, you'd say? Guy Young: So we could see build depending on sites. So as an example, we'd love to see some more stock at Mana, making sure that we've got plant utilization. Lafigue, Houndé and Sabodala should see some stockpile drawdown. Amos Fletcher: And then the second question, I just wanted to ask for, I guess, a broader update on the Senegal mining code revision process. Has there been any developments to report over the last few months on that? Ian Cockerill: Yes. Amos, no new developments to report on that as yet. Operator: We will now take our next question from the line of Carey MacRury of Canaccord Genuity. Carey MacRury: Congrats on the great start. Maybe just another question for Guy. You've got over $1 billion in cash now, but still have some money drawn on the credit facility. Just wondering, I assume you're going to pay that down later this year. And is there any plan to pay down the Cote d'Ivoire debt early or just leave that as is per the schedule? Guy Young: Okay. To the first question, the RCF drawdown, I think you know us pretty well. So you'll remember, we've got a cash cycle effectively that means predominant offshoring capacity comes via OpCo dividends. We will pay our withholding tax in Q2, effectively allowing us to commence with the repatriation in Q3. Speed of that repatriation dependent on mine site cash levels, that money comes offshore, utilize that to pay down the RCF. So current forecasts, we should have the RCF paid down in Q3 as soon as we get our OpCo dividends up. Carey MacRury: And on the Cote d'Ivoire debt? Guy Young: Thank you. I was really struggling to try and remember the second part of your question. I appreciate it. The Cote d'Ivoire debt, no, I think we'll keep that in place, Carey. So where we see -- as you can probably imagine, there is both cash and liquidity plus tax advantages for us to be holding local debt. So no, we wouldn't look to pay that off early. We would have alternative uses for that cash. So I expect the Cote d'Ivoire facility to remain in place and amortized as already disclosed. Operator: We will now take our next question from the line of Anita Soni of CIBC. Anita Soni: Most of them have been asked and answered, but I just wanted to ask about -- have you had any recent conversations with the S&P/TSX about index inclusion? I understand from the tech process that the S&P has reached out to stakeholders to look at including companies that are not incorporated in Canada in the TSX. And I know you were removed a couple of years ago. So I'm just wondering if you had any recent discussions with them? Ian Cockerill: Anita, Jack has informed me that the -- there is obviously talk of inclusion in the index of companies on TSX that are not Canadian domiciled. So that would obviously be a tailwind for us. But we haven't had any detailed conversations. So our understanding is it's early doors, but nothing tangible from our perspective in terms of contact no. Operator: We will now take our next question from the line of Mohamed Sidibe of NBC. Mohamed Sidibe: All of my questions have been answered. Just wanted to maybe ask a question on the timing of CapEx for Assafou as it relates to the pre-expenditures of $50 million to $100 million that you guided to for the year. Ian Cockerill: Mohamed, very simply, what we have done is we've identified the long lead items, basically buying in to the queue for mill shelves, big HPGR kit and what have you. So we flagged the level of expenditure around about plus/minus $80 million. I think you could say that, that expenditure would be spread over the year. It's not all going to come in one lump sum. We are in the process of discussing with various suppliers, getting the final quotes from them. And once that's done, obviously, there will be an element of timing of that spend. So you should assume it will be spread out over the balance of the year. Mohamed Sidibe: And congrats on a great quarter. Ian Cockerill: Thank you. Operator: We will now take our next question from the line of Felicity Robson of Bank of America. Felicity Robson: You've provided an update on Sabodala's production profile. Could you provide some color on where you see further scope to supplement this maybe with resource conversion or exploration in the near term? Djaria Traore: Thank you, Felicity. I think we, as you mentioned, are very happy to have published NI3-101, whereby we are stipulating that there will be an increase in production Sabodala-Massawa is purely currently on the mineral reserves. We've seen already an increase when you look at the production profile 2026 versus 2025. What we're also seeing is that from 2029, we'll see a significant increase all the way to in the mid-360 at least for the next 5 years. However, I think to answer your question, definitely, there's an additional upside at Sabodala-Massawa through resource conversion and additional exploration. For this year, we actually have a budget of almost $15 million to increase those resources at Sabodala-Massawa. Maybe Sonia will have additional information. Sonia Scarselli: Yes. Just to add to what Djaria was saying there. The increase of production in the late '20s driven mainly from the underground development and coming to the pipeline that bring in a very high-grade ore for us in Golouma and Kerekounda, which is very exciting. And then beyond what Djaria already talked about in terms of exploration upside, we have identified several opportunities, both in the exploitation permit and exploration permit that will start to add to the profile in the next couple of years starting with Makana which is brownfield nearby the CIL plant of non-refractory oxide and then moving into Kawsara as well as we are looking at some of the further underground potential. So we definitely have identified opportunities to maintain that pipeline and that profile beyond the end of the 2026. Operator: We will now take our final question for today from the line of Frederic Bolton of BMO Capital Markets. Frederic Bolton: I just want to follow up on Ovais' and Mohamed's questions on Assafou. So there is a $396 million in nonsustaining capital, which I think is on top of the growth CapEx that you have in your financial model. Can you please give me some color on what's within the nonsustaining CapEx? And then within your growth CapEx -- allocated for owners costs. That seems to be quite high when I comp that against other projects of similar size. Can you sort of dive into what might be driving the $250 million? Guy Young: Fred, it was breaking up a little, but I think I've got more or less what you were after. So the key element of the nonsustaining is effectively stripping. So I would just remind everyone, Assafou is relatively deep. So we have a very substantial pre-mining and stripping requirement at Assafou before we get into the ore body. So it is a fundamental driver of the nonsustaining CapEx. At that point, Frederic, on the owners cost we do have some elements within the owners cost that when we compare it to our previous projects would be regarded as slightly higher. I think what we've attempted to do is ensure that we have incorporated and encapsulated all specific costs associated with Assafou. So wherever we have people working on Assafou, bringing teams in, one of which, for example, we are going to be doing, which is a more fundamental cost management team that is being brought in as well as lessons learned from previous projects where we felt that we needed to be able to ramp up slightly earlier in terms of operational readiness. Those are the key factors driving the owner team costs. Frederic Bolton: Does that also include the management for the resettlement and the preparation for the highway diversion? Guy Young: We have the costs associated with the road diversion and power diversion in the infrastructure line, but you're absolutely right, there is a fairly significant effort going into the resettlement that Ian touched on earlier, and that would be included in the owners cost, yes. Operator: And that's the end of the question-and-answer session. Ian Cockerill: And thank you, everybody... Operator: Please continue, sir. Ian Cockerill: Okay. Thank you, operator, and thank you, everyone, for your time. I hope you've heard how pleased we are with the first quarter and how it's set up for continued success throughout the rest of the year. We look forward to meeting up with you again in the midyear when we give our Q2 and H1 results. Thank you all for listening today. Much appreciated. Thank you, and goodbye. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.
Operator: Good afternoon, everyone. My name is Bo and I will be your conference operator today. At this time, I would like to welcome everyone to CPKC's First Quarter 2026 Conference Call. The slides accompanying today's call are available at Investor.cpkcr.com. [Operator Instructions] I would now like to introduce Mr. Chris de Bruyn, Vice President, Capital Markets. Please go ahead, sir. Chris de Bruyn: Thank you, Bo. Good afternoon, everyone, and thank you for joining us today. Before we begin, I want to remind you this presentation contains forward-looking information. Actual results may differ. The risks, uncertainties and other factors that could influence actual results are described on Slide 2 in the press release and in the MD&A filed with Canadian and U.S. regulators. This presentation also contains non-GAAP measures outlined on Slide 3. With me here today is Keith Creel, our President and Chief Executive Officer; Nadeem Velani, our Executive Vice President and Chief Financial Officer; John Brooks, our Executive Vice President and Chief Marketing Officer; and Mark Redd, our Executive Vice President and Chief Operating Officer. The formal remarks will be followed by Q&A. In the interest of time, we would appreciate if you limit your questions to one. It is now my pleasure to introduce our President and CEO, Mr. Keith Creel. Keith Creel: Okay. Thanks, Chris, and thanks, everyone, for joining us on the call today. As always, I want to start by thanking our 20,000 strong family of railroaders across these 3 great countries that deliver the results we're honored to share with everyone today. So for the quarter, the team delivered revenues of $3.7 billion, volume growth 2% on an RTM basis. Operating ratio was 63% and earnings of $1.04. Overall, strong execution across the board operationally, commercially and financially, and they did this in a very dynamic environment. Certainly, the first quarter's results, we saw some impacts from volatile fuel and FX markets. That said, that tide has turned, and I'm very pleased with the underlying performance and our strong start in the second quarter. When I step back 3 years in our journey at CPKC, what gives me continued confidence is not just the quarter itself, but the trajectory that we're on as a network and as a company. On the operating side, the network again performed exceptionally well in the first quarter, building on our strong momentum from 2025, delivering first quarter operating results, record levels, reflecting continuous improvement we've seen since the merger. Productivity, velocity and asset utilization all continued to move higher, which tells me two things. First, the railroad is structurally better. And second, our people are executing with discipline each and every day. The gains are translating into better service capacity, improved efficiency, and that's exactly how we intend to continue to railroad. On the labor front and the safety side as well, I'm going to spend a couple of moments talking about our people. As we recently announced, reaching long-term tentative agreements with both SMART-TD and the BLET on the legacy KCS is a significant milestone for this company. These agreements improve quantity of life or our railroaders while providing the operating stability we need to continue driving performance and service reliability in this key growth corridor. Looking at safety, our focus remains unwavering. We made progress on the personal injury side. And while train accident frequency increased from an all-time low last year, our fundamentals remain extremely strong. On the commercial side, the franchise performed very well. We delivered solid volume growth across the network led by the record grain and continued momentum from our unique North American footprint. The exceptional grain volumes were supported by record harvest and our ability to efficiently connect Canada, the United States and Mexico. Automotive, International, Intermodal and our MMX service also contributed. FX mix and more macro factors pressured yields in the quarter of course, Regardless pricing discipline remains strong. And as we move through the year, the yields have improved as comparisons normalized and market conditions that became more supportive. On shareholder returns from a finance perspective with our balance sheet in a position of strength and the business generating strong cash flow, we announced a new share buyback program to repurchase up to 45 million shares. Yesterday, we announced a 17.5% increase to our quarterly dividend. We're certainly pleased to be in a position to continue returning cash to shareholders, particularly amidst a volatile market. So in closing, looking ahead, we feel very good about where we are. The network is running extremely well. Our unique growth drivers continue to remain firmly intact, comparisons improve through the year and most importantly, we have a team that knows how to execute and a franchise that continues to differentiate itself. We're going to remain focused on disciplined execution, strong service and delivering long-term value for our customers and our shareholders. Mark, over to you. Mark Redd: Yes. Thank you, Keith, and good afternoon. I want to start by thanking our operating employees who delivered first quarter operational results across the -- our record first quarter across the North American network. The quarterly results demonstrate a tremendous job providing strong service, delivering efficiency, managing costs through the winter. As we reflect on the 3 years as a combined company, our team has done a tremendous job of safely executing on our vision delivering resilient and industry-leading service for our customers. Now turning to the quarter. I'm very pleased with our network performance, which reflects a clear pattern of continuous improvement since the merger. Now as I step back since the first quarter of 2024, I can see our train weight and length has increased by 9% and 7%, respectively. Our locomotive productivity has improved by 8% and while the fuel efficiency has improved by 2%. Our velocity across the system improved to 4%. These results highlight our progress as ongoing productivity and velocity gains continue to drive improved cycle times, better asset utilization and dependable customer service for '24, '25 and as we look into '26 for the first quarter. And while these results are encouraging, we still see opportunity ahead, we are executing several focused velocity initiatives across the key North-South network to drive further improvement in the velocity in our fluidity and capacity. Now turning to labor, and I'm very pleased to share that CPKC reached a tentative long-term agreement with SMART-TD and BLET unions. This is an 8-year agreement covering approximately 1,700 train service employees across 11 U.S. states. Once ratified, our hourly agreements will be largely optimized across our U.S. network. This represents a key labor milestone and positions us for a drive -- for additional operating improvements. Importantly, these agreements bring meaningful improvements in pay, but also quality of life for our railroaders by delivering the stability and flexibility we need for operating efficiently and reliable over the next decade. Now turning to safety. Our focus remains on sustaining strong fundamentals and disciplined execution across the network. As I look at our FRA personal injuries, we landed at a 0.91 and our train accident frequency was 0.93. We continue to make progress in our personal injury performance. And while train accident frequency increased year-over-year, it follows an all-time record low in Q1 of 2025. We remain committed to our Home Safe program and to continue driving continuous improvement across our network. Now turning to resource and capital, we remain well aligned with our growth outlook and expect continued strong productivity improvements in 2026. From a capital perspective, we have received 36 of the 100 Tier 4 locomotives in addition to the 100 million that we delivered in 2025. These locomotives are delivering meaningful improvement in efficiency and reliability, particularly across the Canadian network. We are continuing to drive and deliver on our merger-related capital improvements, these upgrades continue -- or combined with focus and velocity initiatives improving speed and our velocity on the critical North South network. I'm also pleased to share that we have completed capital improvements on our portion of the SMX East-West corridor with CSX connecting shippers to Mexico, Texas and the U.S. where now speeds up to 49 miles an hour on this network. In closing, the network is operating from a position of strength with record performance supported by sustained improvements in efficiency, velocity and service, our investments in capacity, power and safety paired with the labor stability, and we are well balanced and resource network or reinforcing our ability to deliver reliable services volume growth. As we look through 2026, we remain focused on disciplined execution, delivering long-term value for our customers and our shareholders. With that, I'll pass it over to John. John Brooks: All right. Thank you, Mark, and good afternoon, everyone. I'm pleased with our first quarter performance and the way this network and team continues to deliver and execute for our customers. Despite a very high bar, this franchise again produced a record Q1 RTM growth, now 6 of the past 7 years, with the only exception being the strike year in 2022. This quarter, we again delivered solid volume growth across the franchise, supported by strong grain shipments, continued pricing discipline and contributions from synergies and self-help initiatives. While mix and macro factors impacted cents per RTM in the quarter, our underlying performance remains strong, and I'm encouraged by the momentum to start the second quarter. Now looking at our Q1 results. This quarter, freight revenue was down 3% on a 2% RTM growth. Cents per RTM was down 4%. We continue to deliver strong pricing with renewals exceeding the top end of our long-term 3% to 4% outlook. Yields in the quarter were impacted by FX, the removal of the federal carbon tax in Canada and negative mix. Now in April, cnets per RTM has inflected positive supported by our pricing, lapping the carbon tax removal, macro tailwind from higher fuel prices and moderating mix headwinds. Now taking a closer look at our first quarter revenue performance, I'll speak to in FX-adjusted results. Starting with our bulk business. Q1 was a record quarter for grain across revenue, RTMs and carloads with revenue up 14% and 12% volume growth. Canadian grain volumes were up 13%, supported by record harvest that's up 20% year-over-year. Our U.S. grain volumes rose 12%, driven by a record corn crop and higher volumes to Mexico and the Pacific Northwest. This performance highlights the strength and diversity of our franchise as customers leveraged our unique North American network to access new destination outlets, driving a 50% increase in trains from Canada and the U.S. into Mexico. Now looking ahead, we expect grain to continue to deliver outsized growth deep into the current crop year. In potash, revenues were down 2% on 2% volume growth driven by continued strong demand for export shipments. With solid demand fundamentals and Canpotex fully committed through the first half of the year, we continue to expect potash to be a solid contributor to our base business in 2026. To round out bulk, coal revenue was down 11% on a 10% reduction in volumes. This reduction was driven by a number of unexpected production-related issues at customer mines that impacted shipments through the quarter. As a result, coal alone reduced Q1 RTMs by over 1%. While we expect volumes to stabilize in the second half of the year, we expect coal to continue to be a headwind in Q2 and on the full year. Moving on to our merchandise business. Energy, chemicals and plastics revenue and volume declined 5% in the quarter. This decline was driven by lower refined fuel volumes to Mexico reduced Pemex heavy fuel oil shipments and the impact of a plastics plant closure late last year. Looking ahead, we are seeing our ECP volumes continue to stabilize, supported by increases in crude market share wins and self-help initiatives. Our forest products revenue declined 14% on a 10% decline in volumes. Volumes were impacted by tariffs on Canadian lumber exports to the U.S. along with the broader macro softness in housing in the pulp and paper markets. Now similar to ECP, we are seeing this business also stabilize with a focus on offsetting headwinds through truck conversion, synergies and market share gains. Encouragingly, we delivered record volumes of building projects into the Texas market during the month of March and orders have continued to improve as we move through April. Metals, minerals & consumer products revenues were down 1% on 3% volume growth. Growth in this space was supported by strong industrial development pipeline and synergies, including new long-haul business in sand, stone and other aggregates supporting construction activity across our network. This strength was partially offset by ongoing impact of tariffs on our cross-border steel business. Overall, we remain very encouraged by industrial developed momentum on our network and expect to continue mitigating tariff headwinds through targeted sales campaigns across our network. Moving on to the automotive sector. Revenue was down 6% on 2% volume growth. Our auto franchise delivered another quarter of volume growth from new business wins, including land bridge shipments from Mexico to Canada with a 13% increase in our average length of haul in this business unit. We delivered this performance despite challenging compares from pull forward shipments ahead of tariffs last year. While uncertainty remains in this area around production levels and automotive sales, we expect another year of outperformance and growth in automotive driven by our wins in 2025 and new opportunities that will come online later this year. Now closing with our intermodal business, revenue was down 1% on 3% volume growth. I'm pleased to announce that we extended new long-term contracts with Hapag-Lloyd and Loblaw Companies cementing the foundation of our intermodal franchise and unlocking new growth initiatives with both across Canada, the U.S. and Mexico for years to come. In International Intermodal volumes were up 8% and on business into the Port of Vancouver, including continued growth with our partners at Gemini. Now looking ahead, comparisons will be more challenging in the second quarter before new product offerings come online at the port of St. John and also at Lazaro and they pick up in the second half of the year. In domestic intermodal, volumes were down 1% in the quarter, our MMX train was up 12% year-over-year in Q1, marking the ninth consecutive quarter of double-digit growth on this train. This growth was offset by a slower ramp-up of our Mexico volumes in January, combined with demarketing low-margin business in domestic intermodal on our Canadian franchise. I'm also encouraged by early traction on our SMX service and partnership with the CSX. Following infrastructure investments made across this route over the past year, I'm excited to announce that we will formally launch a faster SMX product next week. The SMX will offer customers truck-like reliability linking some of North America's largest production and consumption markets between Mexico, Texas, Georgia and Florida. Looking ahead, we are encouraged by the timing of this launch as we are seeing early signs of incremental truck to rail conversions driven by higher fuel prices, tighter regulatory enforcement and reduced trucking capacity. Now to close, our results reflect strong execution, record grain volumes and continued unique contributions from synergies and self-help. With good momentum to start the second quarter, more favorable comparisons ahead in improving yields, this network is primed to deliver another solid year of growth. And with that, I'll pass it over to Nadeem. Nadeem Velani: All right. Thanks, John, and good afternoon. This quarter's results reflect strong execution and cost control across the network, which drove solid financial performance. While the quarter was impacted by fuel and FX headwinds. I'm very pleased with the underlying performance of the business. The resilience of our network and our growth opportunities remain intact. Our core performance continues to be strong, reflecting the strength of our franchise durability of our operating model and consistent execution by our team. Now turning to our first quarter on Slide 12. CPKC's reported operating ratio was 66%. Our core adjusted OR was 63%, up 50 basis points from last year. Diluted earnings per share was $0.94 and core adjusted diluted EPS was $1.04, down 2% versus last year. The year-over-year decline included approximately $0.04 of impact from foreign exchange and $0.03 of impact from changes in fuel price. We also saw an additional $0.01 impact from FX losses on cash and net working capital below the line. Taking a closer look at our expenses on Slide 13, I will speak to the year-over-year variances on an FX-adjusted basis. Comp and benefits expense was up 2% versus prior year. During the quarter, wage inflation and higher stock-based compensation were partially offset by continued productivity gains from improved train weights and workforce optimization. We expect to generate continued strong labor productivity in 2026, with headcount up modestly on mid-single-digit volume growth. Fuel expense was $458 million, down 4% year-over-year. The decline was driven primarily by the elimination of the Canadian federal carbon tax on April 1, 2025. Along with improved efficiency and benefit from our contract discount, partially offset by the impact of changes in diesel benchmark prices. Our 2% improvement in fuel efficiency drove $8 million in year-over-year savings from improved train weights and locomotive productivity. Materials expense was $127 million, up 3% year-over-year. The increase was primarily driven by volume-related expense and inflation, partially offset by efficiency gains from contract optimization and lower locomotive material costs. Equipment rents were $95 million, flat versus last year, driven by efficiency gains, offset by volume-related expenses. Depreciation and amortization expense was up 4% driven by a larger asset base. Purchased services and other expense was down 3% versus prior year. The improvement was driven by productivity and in-sourcing initiatives, partially offset by cost inflation. Now moving below the line on Slide 14. Other expense was $20 million, a $13 million increase year-over-year, driven primarily by FX losses on cash and net working capital. Net interest expense was $228 million or $223 million, excluding purchase accounting. The increase was driven primarily by interest on new debt partially offset by lower credit facility and commercial paper balances as well as debt repayments. Income tax expense was $275 million or $305 million adjusted for purchase accounting and significant items. We continue to expect the full year core adjusted effective tax rate of approximately 24.75%. Now turning to Slide 15 and cash flow. Net cash used in investing activities was down 6%, primarily driven by 7% lower capital spend. We remain well on track to deliver full year CapEx $2.65 billion, a 15% reduction year-over-year. We also maintained a balanced and opportunistic approach to shareholder returns, deploying $680 million through share repurchases in the quarter. Along with dividends, shareholder return spend increased 69% in Q1. I'm also pleased to share that yesterday we announced a 17.5% increase to our dividend, reinforcing our commitment to balance shareholder returns. In closing, with the network continuing to run well, toughest quarter from a compares perspective behind us and a strong start to the second quarter, we are well positioned to deliver another year of strong results. The business is executing at a high level, generating strong cash flow and providing meaningful capacity to return cash to shareholders. I fully expect us to return to double-digit EPS growth here in Q2 and the second half, and we'll deliver on our full year double-digit EPS guidance. With that, let me turn it back to Keith. Keith Creel: Thank you, gentlemen. Let me go back to the operator, and we'll open it up for questions. Operator: [Operator Instructions] We'll go first this afternoon to Fadi Chamoun with BMO Capital Markets. Fadi Chamoun: Yes. Thank you. to I think the year was always expected to kind of start slow from a volume growth perspective versus the mid-single-digit guide for the year. Maybe if you can, John, share with us what you are hearing from customers, what does the pipeline look like in the segment that you expect to kind of lift you to that mid-single-digit range as we go into the balance of the year? And if there's any framework to think about what Q2 volume potentially you're kind of looking for? . John Brooks: Yes. All right, Fadi. So yes, it was certainly an interesting Q1. It just genuinely started off slow, and then we had some pent-up demand and actually February turned out to be quite strong in March sort of as we expected, as I mentioned, we definitely weren't counting on the drag related to the coal side of the business. Now looking ahead, I'll tell you, just about everything outside of our coal business has inflected positive. I'm quite pleased despite the tariff headwinds that remain out there and some of the challenges, particularly in our ECP space that we faced in Mexico with refined fuels. Despite that, they've clawed their-self even back to sort of flat year-over-year on strong demand and growing demand in crude and also our plastics business. So look, I fully expect our bulk business, that being Canadian grain, U.S. grain and potash to continue to provide really strong numbers as we move through Q2 and into the back half of the year, Fadi. I'm definitely not counting on our coal business, and that's going to have to be a headwind that we're going to have to sort of erase or make up for. As I look at our merchandise ECP forest products business, as challenged as those areas have been. As I monitor our car orders, we after week in those three segments. We've seen a pretty steady increase. When I said we sent record volumes into Texas of building products in March. To be honest with you, a lot of that was Canadian stuff coming cross border. So that's a really positive sign and a sign that we haven't seen for quite some time. And I'll tell you, I think a lot of it's driven by there is product moving in some of these traditional lanes. It's been moving truck. And I think what we're starting to see is some of this stuff slip back over to rail, not only in a little bit of an intermodal tailwind in that front, but also a carload tailwind we're seeing in some of these areas. So I do believe that's positive. We're going to watch it. I'm not spiking the football at all. But certainly, there's some upside there. And then as I go down the list, we're going to continue to outperform in the automotive sector. The team has just done a really good job to put pucks in the net and there's some stuff that's coming on yet. There's a little bit of pent-up demand that wasn't moved in the first half of the year that we're going to see. And then finally, on the intermodal side, I couldn't be more excited about our SMX product. That thing is going to pay dividends this year. We're going to see growth in the back half of the year on that partnership with the CSX. I think we proved it with the MMX you develop a product that can compete head-to-head with trucks, and they will come. And the fact that we're launching this in a really, I think, improving environment is only going to help I think our sellers to go out and try to fill that train up. So I hope that helps. Fadi Chamoun: Yes, sure. Maybe one follow-up on this Loblaw, Hapag-Lloyd contract you talked. Is this a renewal? Or is there a scope change in that relationship? John Brooks: Well, maybe a little bit of both. They are contract renewals that we -- prior contracts that we had in place that we've extended for long term with both. I think the neat thing about them and really because of the breadth of this new network, we've been able to intertwine a whole lot of new opportunities within those -- both of those contracts. It's frankly staggering the amount of trucks that a company like Loblaw utilized coming up from Mexico or the United States and how we can create and develop new solutions, not only dry van, but reefer solutions with them. And also, as we've talked about a lot with Hapag-Lloyd, I'm excited about the opportunity to how we are continuing to grow our St. John. We're excited about what the future might hold with them if, in fact, that progresses and goes forward as we look to next year. And Hapag continues to win not only in the Mexico, intra-Mexico market, Fadi, but also we continue to slowly build volumes going northbound and all that coming out of Lazaro. So they are traditional contracts that we're extending forward but they also have quite a bit of sort of new tentacles related to what this network brings to the table. Operator: We go next now to Chris Wetherbee with Wells Fargo. Christian Wetherbee: I maybe wanted to pick up on what sort of the Nadeem ended with in terms of the guide for the rest of the year, a slower start for earnings growth sounds like 2Q, you're expecting to reaccelerate into the double-digit growth range for earnings. I guess we heard from John about some of the top line opportunities. Maybe just sort of help fill out sort of the walk from where we were in 1Q to the ability to get back to that double-digit year-over-year EPS growth in 2Q and beyond? Nadeem Velani: Sure Chris. So a couple of things. Number one, we're Q1 was very much according to plan. Like when we look at -- John mentioned the revenue cadence. Operationally, Mark and team had the railroad running very well. And pleased with some of the productivity initiatives. So -- but that being said, we had our toughest comp from a currency point of view. So Canadian dollar was quite weak a year ago in January, and that it's created quite a headwind year-over-year. You saw it in the cents per RTM and that's probably a bit of a surprise as far as the overall cents per RTM, combine that with fuel and the carbon tax surcharge that went away. So effectively, those had headwinds dissipate. And in fact, fuel turns into a bit of a tailwind. We saw the headwind in March with spot fuel increase our costs right away, but we don't get the fuel surcharge until delayed. And so we saw that results here in April. And so as we look at Q2, I feel very confident both with record volumes that we're moving today, April is going to be a record month for us across the board in CPKC history and combined the two companies. So the top line perform extremely well. The railroad continues to run well, the FX headwinds, we even had some unique things as far as below the line that impacted us just with the volatility on currency, that goes away. And so some of that noise disappears and the underlying business continues to perform and gives us strong confidence in that strong double digits here in Q2 and a very good back half in what we see as far as both from a volume point of view and what we can deliver with this lower cost base. So we're pretty bullish, Chris. Operator: We'll go next now to Kevin Chiang at CIBC. Kevin Chiang: You talked about some of the headwinds related to the coal franchise. I think some of that might be related to maybe some of the adjustments, Glencore is making to the Elk Valley Resources, play that they acquired from Teck. Just wondering, do you see this as primarily a 2026 issue and they ramp up in '27? Or is this an adjustment that could take a little bit longer and bleed into next year potentially? . John Brooks: Yes, Kevin. So honestly, I think the feedback so far is we're going to probably continue to struggle somewhat through Q2. I do believe there's some optimism around some things that they want to deploy the second half of the year that could bring some upside to those volumes. Now at the end of the day, I think the lost opportunity these first 4 months in the next couple of months will be hard to make up in terms of sort of full year compares. But we remain optimistic that the second half of the year, and I think they remain optimistic that the second half of the year will be better. I know they continue to work through some of the permitting in issues that have been out there for quite some time now. I don't really have any additional feedback at this time. And what that looks like timing-wise with the federal government. Operator: We go now to Tom Wadewitz at UBS. . Thomas Wadewitz: Keith, I wanted to ask you about -- I know you get this last couple of calls, but I just saw that kind of news today as the Rail Coalition against -- or the Coalition against the rail merger. And shipper groups, Teamsters, rail coalition, CPKC, BNSF. So what is your thought on that? It seems like something different than what we've seen in the past. I guess the -- what you think the group may do and just how we should maybe try to understand that as part of the process with UP-NS. Keith Creel: Well, I think at a high level, Tom, the group is more of a collective voice, a unified board very similar voice. We've not been very bashful about this. We have very strong views against the merger and the risk that the merger entails and represents for our industry. Many others do as well. The momentum continues to build, we encourage, continue to encourage all the stakeholders to make sure that they share their views because at the end of the day, this is in a 3-, 4-year decision. This is a forever decision. So to -- in my mind, push forward with the merger that creates such and such scale unparalleled for this industry in a forever way, that not only creates that entity, but most likely triggers an eventual duopoly is essentially putting the nation's rail network at risk. And I just don't believe, and I believe there's probably a lot of people that feel the same way that I do that UP and NS are entitled to do that. They're not playing with house money. This is the nation's economy that depends upon a robust and fluid and efficient rail network. We've had tremendous consolidation I believe, and I believe others believe we're consolidated enough. And at the end of the day, the facts will bear if we're correct. The market concentration as much as some have been dismissive in their comments about it. It's much more than just having 39% GTMs and comparing yourself to a heavily GTM railroad that moves a lot of grain, and moves a lot of coal when you compare that's essentially west of the Mississippi railroad -- Mississippi River, we're talking about 43 states. We're talking about Trans Nashville, the entire continent. So at the end of the day, that's a lot at risk and at state. The facts will bear it out. I don't think it's as simple as the applicants are presenting. And I believe Jim and Mark are going to present their best story. I'm looking forward to reading their improved story. The last one, obviously, was grossly insufficient. In my view, and I don't think I'm the only one again that shares that view. So again, I think that consolidation and that coalition that you see is just a unified voice of a common concern. Enough is enough. We've had enough consolidation and for what? Who benefits? Versus who's at risk. And in the end, those rules that the STB will govern by and I believe this body will be very independent in assessing all these facts. At the end of the day, all the facts stack up and a measurement is going to be made and to meet public interest and to demonstrate enhanced competition. And then all the benefits are going to exceed the harms. And I just think it's impossible with the set of facts that are going to be presenting given the scale and the market power and the operational risk that it represents. So again, more to come. Let's get the application tomorrow. We're all eagerly looking forward to receiving it and reviewing it. I'll be in Missouri when I receive it. That's a show-me state, I'm looking for something to show me to feel differently. And at this point, I don't. Operator: We'll go next now to Jonathan Chappell of Evercore ISI. Jonathan Chappell: John, as far as this ramp in RTMs, are there other opportunities in energy that have kind of presented themselves recently, given what's going on in the Middle East, whether that's crude by rail, frac sand, NGLs any line of sight on kind of real volume moves there as these hostilities kind of prolong themselves much longer than anyone anticipated? . John Brooks: Yes. Thanks, Jonathan. Geopolitical events sort of I instantly begin to look to the sort of 3Fs, food, fuel, fertilizer, they're usually benefits of when you see these types of things globally. And I do believe we're seeing shoots kind of across all those areas. I'll tell you, though, I wouldn't say anything significant has really emerged specifically in those areas. We are definitely seeing an uptick in our plastics business. We have, I would say, very spot-related type of crude opportunities that we've seen come on, maybe some unique fertilizer opportunities here and there. Nothing I would consider honestly, super needle moving. The needle movers that are emerging are really tied to fuel price and tied to trucker regulation and release capacity and those things. That's really where we're starting to see the needle move. And as I mentioned, everyone kind of instantly looks at intermodal as the big beneficiary there. And certainly, we're going to see some of that, and we're deep into those discussions on the intermodal front. But as much as I'm starting to see it across our consumer base, our merchandise customers in that. And so that becomes pretty exciting because that's a really good business. And the challenge will be the team, how do we make it sticky? How do we not allow that truck to convert or that shipper to convert that to rail, how do we then make them stick with rail. I think there's a great opportunity for that right now. So yes, that's what we're seeing. Operator: We'll go next now to Walter Spracklin with RBC Capital Markets. Walter Spracklin: I'm comparing the U.S. rails here and how they did in the quarter relative to the Canadian rail coming a little light. I'm just wondering if there's any divergence you're seeing, I don't know John, you're the best one to answer this. But economic divergence, is it tariff related? Is it the truck regs that are helping U.S. and not Canada? And just related to that divergence? I know the Feds in Canada have been talking a lot about larger projects. But speaking to our engineering construction companies, they're not building it in their pipeline yet. So curious if you're hearing any rumblings about any project development that would -- if there is that divergence, kind of contract that divergence a little bit here as we go into 2027 and close out the year? . John Brooks: No, I don't think so, Walter. Our industrial development pipeline, and I think that's kind of what you're somewhat referring to is pretty robust, like it is -- you look at our -- again, MMX, that business unit is in -- that is largely our steel franchise which was heavily dependent on cross-border steel that is still effectively shut off. But I don't have the numbers exactly in front of me. I think RTMs are up 5% plus. We haven't seen that for quite some time. And I think we are benefiting from some of these industrial development opportunities, construction data centers, that partners like Martin Marietta in sand movements, rock movements that are all supportive of this that I think you also heard from our peers in the U.S. There's no doubt our competitor in Canada and us, we're still facing pressures relative to some of these tariffs in steel and forest products in that. But I'm also pretty encouraged about what our U.S. franchise is producing. So I'm going to say no. I don't think there's a big divergence there. . Nadeem Velani: Walter, it was simply in both cases, if you look at the yield, you look at the cents per RTM, I think there was an underestimation of the impact of currency on cents per RTM. We had some added headwinds from FX below the line, which, again, go away and then the carbon tax goes away. So I think that's what drove the a bit of a softness on the top line was really the cents per RTM. And again, that's a temporal issue that goes away. There's nothing structural. I think structurally, if you look at how the Canadians are performing from a volume point of view, from an RTM point of view. I think we're both kind of top of the pack. So no change whatsoever. John Brooks: Yes. And even to add to that, Walter, like our automotive franchise, and I said it saw a 13% jump in the average length of haul. And I think overall, in the quarter, we were up 3% on our length of haul. The truth be told that we just had a lot of areas, short-haul steel business to the border that is not moving. We saw kind of a slow start to our automotive franchise coming out of Canada into the U.S., again, fairly short haul, high cents per RTM. We saw a really good growth, 21% growth of our -- what we call our land bridge business. That's business linking Canada and Mexico. So it just kind of had a perfect storm of business mix, and then you throw on top of it, record grain movements, which is on average a little lower cents per RTM against the total book and those pressures, those mix pressures that Nadeem described I think came through much heavier than even we expected. Operator: We'll go next now to Ravi Shanker at Morgan Stanley. Ravi Shanker: Keith, would love your views on the upcoming USMCA negotiation, obviously, a big catalyst for you guys and your peer. What do you think are the potential puts and takes and kind of the boundary of outcomes there, do you think? And again how might you react to that in both directions? Keith Creel: Well, I mean, at the end of the day, the bottom line is, I think we have 3 nations that depend upon each other to trade. I think we're in a unique position to enable that trade, Ravi. Short term, I would say, buckle up. President Trump has been consistent in his expectations. His objective through these negotiations, a renewal disagreement as it might be renewed. There'll be some bilateral negotiations between Canada and the U.S., there'll be bilateral perhaps first between Mexico and the United States and some trilateral. But again, at the end of the day, it all leads to increased trade between the nations and even a rebalanced trade balance favoring the United States, still involves this network. So we're in a good place. We had growth after the last round. We'll have growth after this round. This network is in a very unique position to participate in some are all a part of that. Ravi Shanker: Got it. As a quick follow-up, kind of is there any variability to your guide based on the outcomes there? Or do you think it's kind of pretty straightforward? Nadeem Velani: No, it's not dependent on that. . Operator: We'll go next now to Brian Ossenbeck at JPMorgan. Brian Ossenbeck: Wanted to clarify, Nadeem, if -- you talked about stock-based comp, I might have missed it but I wanted to see what that headwind was during the quarter and how we should think about that for 2Q? And then for John, we're hearing a lot more about truckload conversion for obvious reasons. But I don't really recall hearing that too much in the past before the merger. So maybe you can help unpack what's different this time? Is it more of the investments like that SMX and some of the other cross-border stuff you've been doing? Or is there actually more from like for legacy CPKC, is also able and willing -- the shippers are willing to kind of convert more over to your network as well. So just some thoughts on what we're seeing here now versus prior history would be helpful. Nadeem Velani: Brian, stock-based comp was about $15 million headwind in the quarter, so a little over $0.01. John Brooks: And Brian, I would say, actually, when we put our transcon intermodal product in place at CP in the day, we've actually had a lot of success as legacy CP in growing that truck conversion business across Canada. We didn't talk about it a lot but a lot of vendor conversions with customers such as Canadian Tire or even Loblaw, who we talked about earlier. So that's actually been a pretty good story and our growth in our reefer business, even across Canada also was a pretty good truck conversion story. Specific to CPKC and most recently, it's all about the MMX and the great product that Mark and his team have put in place and we've been able to execute and grow. I'll tell you, we -- again, we started with 0 on that train and we're probably running north and south about 70% capacity. Now we've done a heck of job to grow that and we've just grown it frankly on the speed and efficiency of that service. And honestly, I believe if this year continues to shape up and these fuel prices continue to stay where there are, we're going to pile on quite a bit more freight onto that thing. And there might actually be some discussions about what another train payer could look like. I'm not bullish on it. And I think we've been very transparent about the SMX. We introduced it during our original Investor Day. I think collectively, we saw a vision to create a best-in-class product, a competitive product into the Southeast. And frankly, you just look at -- I think it's -- close to 40% of Mexico trade is with Texas, Georgia and Florida. It's just right in the wheelhouse of this product. So it's exciting that we got a partner in CSX, who's highly motivated. We got a strong sales force in Mexico, in the southern part of our U.S. that is pounding the pavement and selling the benefits of this product. So again, I think a lot what you're going to see under that product is all going to be truck-to-rail conversion. Mark Redd: And John, I would just add just the competition between the railroads now with the new service and from our train trip, I mean, Keith took with the leadership with CSX, we've been able to get that railroad up to 49 miles an hour. So we've got a premium package on that end of the railroad that was shine come here, I guess, in a week. John Brooks: Yes. Look, I expect to run -- we're going to run under 40 hours between Dallas and Atlanta. This thing is going to fly. Kevin Chiang: It's 3 Days, Atlanta to Monterrey. John Brooks: And will be 3 days or better, Mexico to Atlanta. And with our secure border, with our bridge capacity and that, it's going to be a really good product. Operator: We'll go next now to Brandon Oglenski at Barclays. Brandon Oglenski: And John or Mark, maybe this is a good follow-up. I mean I think part of the success you had with MMX and maybe you can tell me I'm wrong but it's controlling the journey from end to end, right? So how are you going to ensure that operational integrity when it's not just your network, it's running on but you're also partnering with CSX on this, right? So maybe can you elaborate on that? . John Brooks: I can start, Mark. I'll just tell you this. The CSX team is all in. They've invested in that franchise just like we have to get those rail speeds up. There's not been a blink, not been a waiver, whether it's Mike Cory and Mark working on what the ultimate product looks like or myself and Maryclare and her team working on how we go to market and what customers optimally fit onto that train. So you're right, it is unique. But I also think here is going to be a great example of where you put two Class 1s together, your partner, you get like-minded and you go attack some very specific markets with the best-in-class product. Mark Redd: And frankly, we put a lot of capital on both sides. We put some sidings in. We've increased the capacity and we get fixated on Atlanta, it's beyond Atlanta for CSX. How can we continue to grow and build product beyond Atlanta on their side and help them get down to Mexico and Wylie as well. There's plenty of business to do in Wylie. Keith Creel: Let me -- Brandon, let me put the exclamation point on that. Expectations are set from the top. This whole initiative is something that I've personally been involved in since day 1 in partnership with the CSX. Steve is committed to this. I'm committed to this. So top to bottom, bottom to top. These 2 organizations are mobilized and equipped to create a unique market solution that makes that border seamless that can be replicated in the marketplace. That's what our entrepreneurial spirit looks like. That's what creating your own self-help looks like. That's what strategic partnership looks like. That's the difference. And it's undeniably unique, network and commitment. Operator: We'll go next now to Konark Gupta with Scotia Capital. Konark Gupta: And just going back to the yield comment earlier on in the call. inflecting up in Q2. Is it referred to as up from last year's Q2 or it's up sequentially from Q1? So just trying to unpack that there? And also, any sense of fuel impact as we move into the next 3 quarters? I think you are going to be covering some of the costs through the fuel surcharges. So any sense on EPS or OR impact? Keith Creel: Well, it's up relative to last year quarter-to-date, about $0.05 since per RTM. Nadeem Velani: Can you repeat the second question? Konark Gupta: Yes. So on the fuel side, I think it was a $0.03 headwind in Q1. As you cover the fuel cost with surcharges, what do you expect the EPS impact to be in Q2 and the second half? Nadeem Velani: Yes. So we'll see a small impact in Q2. The fuel price will be basically a bit higher than we saw in the full quarter in Q1, of course, we'll have the full 3 months of elevated prices but we should be able to offset that with our fuel surcharge. So net-net, we'll have a small positive. If you think about the delay in the fuel surcharge that went from March into April and Q2. That make sense? Konark Gupta: Yes. Nadeem Velani: Basically a delay of earnings from Q1 to Q2, think about it that way. Konark Gupta: Yes, I was just making sure like the EPS impact is not going to be as noisy in the future quarters. Nadeem Velani: No, especially with currency and as you asked about cents for RTM and so forth. So effectively, a lot of the -- I mean, there's obviously going to be volatility with kind of the world we live in. But I'd say that the worst is behind us and we'll start seeing, in fact, a positive certainly from the fuel surcharge. So that's what gives us confidence in our Q2 being much stronger as we lap some of this noise with the carbon taxes, et cetera. Operator: We'll go next now to Ken Hoexter with Bank of America. Ken Hoexter: So Nadeem, just appreciate the double-digit EPS outlook and it's accelerating. Maybe just parsing some mix contributions, I guess, the last 5 years, you've averaged about a 250 basis point improvement in the operating ratio from first quarter to second quarter. Can you give any thoughts on that level given the impact of fuel that you just talked about with Konark and kind of the volume growth that John is targeting? And then same thing, thoughts for the full year. Can you beat last year's sub-60 target on an adjusted basis? And I don't know maybe your thoughts on cost headwinds should you focus on -- I think you brought up incentive comp before or synergy targets post the merger, maybe just wrap that all up on the cost side. Nadeem Velani: Yes. Thanks, Ken. So I'd say that the same level sequentially year-over-year, the historical sequential improvement is pretty much in line. So we do see despite the fuel surcharge headwind on the OR because there's a push of revenues effectively from, as I just mentioned, from March into April, you'll see a bit of a benefit. So I feel comfortable with that historical sequential improvement of that 200, 250 basis points is doable. And for the year, I have confidence that we can improve the OR year-over-year despite, again, the headwind from -- potentially from fuel surcharge. I think a lot of our cost takeout, cost initiatives and productivity initiatives that we have in place puts us in a position to still be able to improve the OR. I think we were 59.9% last year. I think we could improve on that for 2026. Keith Creel: I think another point to not overlook is, we were about to lap Day N last year. It's something we all like to forget, obviously, something we learned a lot from. But certainly, a lot of unnecessary cost and pain and velocity in assets that started the 1st of May, went through effectively the worst of it even through August. So certainly, we'll capture -- recapture that with very fluid network. Cost is going to go down, revenue is going to go up. Those will all be very beneficial and supportive to the comments that Nadeem has made. Operator: We'll next now to Scott Group with Wolfe Research. Scott Group: Keith, I'm wondering, do you think there's a potential path to a settlement where maybe you're -- I don't know, supportive, maybe not that but maybe less opposed to a merger? And then I just had a random like thought question on fuel. Like the truckers all do weekly lags, FedEx, UPS used to do monthly lags. Now they do weekly lags on their fuel surcharge. Like ultimately, it doesn't really matter, you're eventually get made hold. But like why do you think the rail still have these monthly and for some of the rails, 2-month lags on fuel? Why does that make sense though. Keith Creel: I'll be simple in my answer, Scott. I think there's 0 chance of a negotiated agreement. No. No full stop, no merger needed. I'm not interested in negotiating. Scott Group: Got it. John Brooks: I think it's a great idea. I would remind you, we've already got a -- we definitely have the fastest reacting fuel surcharge, I believe, in the industry. I do believe there also is tariff notification laws or rules with the STB that probably somewhat governed both here in Canada and also in the U.S. on how we could announce those changes and still meet those regulations. I'm all about brainstorm an idea how we can figure it out though. Operator: We'll go next now to Stephanie Moore with Jefferies. Stephanie Benjamin Moore: Great. Simple one for me here. Maybe just wanted to get a sense on how we can think about maybe some of the capital return increases, particularly the buyback boost. Is there anything you're signaling here that you want to highlight? Nadeem Velani: No, I'd say that we're generating a good -- significant amount of free cash. I think long-term CP has always been a -- one to not sit on cash. And we've been very successful as far as buying back stock at value-creating levels. As we sit here today, we see that continue. And so certainly, share buybacks are going to always be a part of our shareholder return philosophy. We also added to our dividend payout and increased our dividend by 17.5%. And that's just reflective of being balanced. So when we speak to our shareholders and the evolution of our shareholders, there's those that also like dividends. We are at the lowest payout ratio in the industry. So we have room to grow there. But we just see ourselves as the growth opportunity is larger. There'll be time to do the dividend at a more meaningful level but we needed to start ratcheting that up a little bit but we still see buybacks as a meaningful value creation opportunity. Operator: We'll go next now to Ari Rosa with Citigroup. Ariel Rosa: So I actually wanted to stay on the buyback comment. Keith or Nadeem, I believe you guys made the decision to pull forward the timing of the buyback last year because you felt the shares were undervalued. Here we're looking at the stock is up about 15% year-to-date. It's not necessarily a comment on, over time we continue to think stock compounds nicely. Obviously, that's -- there's a compelling case for that. But has there been a shift, I guess, in the appetite for the buyback relative to the dividend? It's a fairly sizable dividend increase. Just trying to understand how you're thinking about that. And then obviously, as the share price moves higher, does it make it harder to hit that target to repurchase 5% of shares? Or are you pretty committed to that level of buyback? Nadeem Velani: So last year, we had a 3.5% program or 4% program, which we completed. And we're quite aggressive. The stock price in Canadian dollars was closer to about CAD 106 and CAD 107. And we saw an opportunity value creation that was coming off the heels of strengthening our balance sheet and having good discussions with the rating agencies. And so we had similar discussions when we completed our buyback in November of last year. And that's why we came to the conclusion and came to announcing our new buyback in January. We made it a little larger and part of that is just showing the resiliency of our balance sheet and our ability to continue to service our debt and the diversity of our franchise and the growth story, et cetera. I think we took advantage of a opportunity in the market to go to take on some additional debt prior to some of the geopolitical noise that raised rates. And so I think we were -- very advantageous timing. And so we see an opportunity to continue to buy back the shares. We're not going to hold off. Are we going to be strategic and buy back at value-creating prices? Yes. So there's times when we will pause. And given all the volatility in the marketplace, there is opportunity sometimes to be strategic. You're never going to completely -- you can't get too cute on some of those things, especially when you have a $45 million or 45 million share authorization. But I fully expect we will complete it. We'll complete it by the end of the year. And like we've seen today, some near-term pullback with some volatility in the market, we could take advantage of that and we will. Operator: And ladies and gentlemen, we have reached our allotted time for Q&A today. I would like to turn the conference back to you, Mr. Creel for any closing comments. Keith Creel: Okay. Just a few comments. Listen, we started the second quarter with a lot of momentum. We're in a very good position to operate -- to execute operationally, commercially and financially, that's exactly what we're focused on and intend to do in the second quarter to continue this very unique value-creating story at CPKC. We look forward to sharing those results soon. Be safe. Operator: Thank you gentlemen. Again, ladies and gentlemen, this brings us to the conclusion of CPKC's first quarter earnings call. Again, thanks so much for joining us, everyone. We wish you all a great evening. Goodbye.
Operator: Good day, and thank you for standing by. Welcome to Endeavour Mining's First Quarter 2026 Results Webcast. [Operator Instructions] Today's conference call is being recorded, and a transcript of the call will be available on Endeavour's website tomorrow. I'd now like to hand the call over to Endeavour's Vice President of Investor Relations, Jack Garman. Please go ahead, sir. Jack Garman: Hello, everyone, and welcome to Endeavour's Q1 2026 Results Webcast. Before we start, please note our usual disclaimer. On the call today, I'm joined by Ian Cockerill, Chief Executive Officer; Guy Young, Chief Financial Officer; Djaria Traore, Executive Vice President of Operations and ESG; and Sonia Scarselli, Executive Vice President of Growth and Exploration. Today's call will follow our usual format. Ian will first go through the highlights of the quarter. Guy will present the financials, and Djaria will walk you through our operating results by mine, before handing back to Ian for his closing remarks. We'll then open the line up for questions. I'll now hand over to Ian. Ian Cockerill: Thanks, Jack, and welcome to everyone joining us on the call today. Now Q1 2026 was a record quarter for Endeavour with a strong operational performance and elevated gold price, underpinning a very strong financial results. Production of 282,000 ounces was in line with our plan, and we expect to see progressive improvements as we move through the year as stripping activity opens up progressively higher grade ore through to Q4 later on this year, while all-in sustaining costs on a royalty adjusted basis also came in towards the lower end of our guidance in the quarter. This performance translated into a record free cash flow of $613 million, and that's equivalent to $2,176 per ounce produced. That's a 29% increase over the prior quarter. Through the year, we'll continue to focus on our margins and maximizing free cash flow from every ounce that we produce. This free cash generation transformed our balance sheet. We moved from net debt of $158 million in the previous quarter to now a net cash position of $405 million at the end of this quarter, a $563 million swing in just 3-months. Given the strong balance sheet position and our outlook, we're going to look to increase our shareholder returns through supplemental dividends within our H1 2026 dividend announcement and through continued opportunistic share buybacks. At prevailing gold prices, we expect supplemental returns to at least double -- to be at least double our $1 billion minimum commitment over the next 3-years. On organic growth, as we announced last week, the Assafou DFS confirms a high-quality, long-life asset that has very strong project economics. Early works are underway, and we're targeting a final investment decision before the end of this year. On the exploration front, we're accelerating resource definition of our Vindaloo Deeps target, and we expect to deliver maiden resource in the first half of this year. Simultaneously, our new ventures exploration program continues to expand our exploration footprint into the most prospective Tier 1 gold provinces with the latest strategic investment into Guyana. I'll now take you through each of these areas in a bit more detail. On Slide 7, you see production was 282,000 ounces, down from Q4 due to planned lower grades mined and processed, but in line with the mine sequence. All-in sustaining costs were higher in the quarter, largely due to higher gold price-driven royalty costs with some small impacts from the stripping activity and the higher power costs at Mana. But despite higher costs, our all-in sustaining margin of $2,976 an ounce was $751 per ounce higher than in Q4 as margins continue to consistently expand alongside the higher gold prices. On Slide 8 and the full year guidance, you can see group production and all-in sustaining costs remain on track to achieve guidance. The Q1 production of 282,000 ounces represents approximately 26% of the low end of our guidance range, and we're expecting higher production in the second half of the year, peaking in Q4 as per our planned mining sequence. On costs, while first quarter all-in sustaining costs of $1,834 an ounce sits slightly above the guidance range, this reflects higher royalty costs as a direct result of the rising gold price. On a gold price adjusted basis back to our budgeted level, underlying all-in sustaining costs of $642 an ounce were in the lower half of the guidance range. And let's say that's based on our $3,000 gold price. On capital, we expect both sustaining and nonsustaining capital to be weighted towards the first 3-quarters of the year, aligned with our stripping program. While growth capital of $500 million to $100 million is now expected to support early works at Assafou, mostly in the second half of the year. So overall, we're confident in our full year outlook and expect to see improvements throughout the year. Free cash flow reached a record $613 million in Q1, up 29% from Q4 and equivalent to $2,176 per ounce of gold produced. But we remain focused on maximizing free cash flow for every ounce that we produce, and as operational performance improves throughout the year, we expect to at least partially offset some of the impact of higher taxes in Q2 and Q3. The strong free cash flow has enabled us to rapidly de-leverage the balance sheet in Q1, reducing net debt by $563 million and moving to a net cash position of $405 million at quarter end. And this provides the financial flexibility to deliver our world-class organic growth project Assafou, whilst we pay out sector-leading returns to shareholders. As you know, our leverage target through the cycle is less than 0.5x net debt to adjusted EBITDA. That remains the case, but we do not intend to maintain a very large net cash position either. So we'll stick to our capital allocation model and look to increase shareholder returns while prioritizing Assafou's development as well as our exploration program. On Slide 11, our shareholder returns program is quite clear. Between '26 and '28, we're committed to return at least $1 billion to shareholders and we will maintain this commitment down to a gold price of $3,000 an ounce. And at prevailing gold prices, we could return more than double that minimum commitment to shareholders. Given the strong gold prices so far this year, we're on track to return a significant supplemental dividend when we announce our H1 '26 dividend in our Q2 results. So far this year, we've already completed $54 million of share buybacks, and we'll continue opportunistically and make up a significant component of our supplemental returns. On to our sector-leading organic growth on Slide 12. Now last week, we published the results of our definitive feasibility study, strengthening our confidence in the Assafou project and its potential to transform our portfolio, driving production growth, lowering costs and delivering long-term value. We discovered Assafou for $13 million in 2022. And based on the DFS at a $4,000 per ounce gold price, the project now has an after-tax value of over $5 billion with an internal rate of return of 55%. Now that's value creation and reflects the highly prospective region and the ability to accelerate projects quickly from discovery to production. The Assafou project will be relatively similar to other mines that we've built, albeit bigger. The DFS outlines a 5 million tonne per annum gravity and CIL processing plant optimized to support a smoother production ramp-up and to add additional redundancy to give optionality to expand the plant in the future as we develop and further expand the resource, the exploration resource in the immediate vicinity of the mine. Early works are already underway. Procurement of long lead items have started, detailed engineering and design is progressing and key tenders are already out. We have also launched land compensation negotiations as part of the resettlement action plan, which we need to finalize ahead of starting the resettlement, which is on the critical path. We're targeting a final investment decision before the end of this year and then a construction period of 24 to 30 months. Once construction starts, the resettlement, mining pre-stripping and ore commissioning are on the critical path to production. The resettlement is required for mining to start, so developing the resettlement action plan is a key part of our early works program. Assafou has the potential to be one of our largest, lowest cost assets with the longest mine life, capable of producing 320,000 ounces of gold per year at an all-in sustaining cost of $1,026 per ounce over the first 8 years of its planned 16-year mine life. The DFS also reflects our increased confidence in the mine plan, underpinned by nearly 100,000 meters of additional close spaced drilling. This has increased reserves and resources and introduced maiden proven reserves and measured resources, providing a much higher level of certainty over what we will mine and when, de-risking the ramp-up and early production profile. And importantly, we see significant exploration upside in the immediate vicinity of the mine that will support continued growth in reserves and resources and further enhance the mine plan over time with the potential to sustain production higher levels over this period for much longer. Looking at the exploration at Assafou on Slide 14. Most of our drilling has been focused on the Assafou deposit itself, and we've just started to step out beyond Assafou. We've already identified 20 highly prospective targets on this property that we are prioritizing with a guided $10 million spend for this year. We'll focus on advancing the Pala Trend 3 deposit following the 2025 maiden resource, defining Pala Trend 2 maiden resource and exploration drilling at the Pala Trend Southwest and Koumenagaré. At Assafou, we've discovered a new and highly fertile mineralized Greenstone belt and through our own land package and our strategic partnership with Koulou Gold, we expect to unlock significantly more value across this belt. Now Assafou is key to our organic growth outlook and along increased production at Sabodala-Massawa, we're targeting 27% growth in production to 1.5 million ounces by 2030 with a solid position in the first quartile. On Slide 16, following the launch of our new exploration strategy late last year, we've increased our exploration guidance to $100 million for this year, and we will prioritize adding near-mine resources across the portfolio, expanding resources at the Assafou deposit and nearby targets, whilst advancing new ventures to replenish the longer-term organic project pipeline. And as you can see on Slide 17, we are pleased that we signed a strategic investment of $20 million with Altair for a 9.9% stake. The Guyana Shield is one of the 4 Tier 1 gold provinces that we are targeting through our Greenfield and New Ventures program. And given the Guyana Shield is a continuity of the West African permian, we have a good understanding of the geology as well as the structural context. Now Altair has one of the largest consolidated land packages in Guyana, covering highly prospective ground to the south of recent significant discoveries at Oko West and Oko-Ghanie along the same shear zone. So we're excited about the prospectivity and the proceeds from our investment will be deployed to accelerate these exploration programs. Before I hand over to Guy, I just wanted to touch shortly on ESG. As a long-term partner in West Africa, we will always strive to deliver sustainable value to all of our stakeholders. In 2025 alone, we contributed $2.8 billion to host economies. And over the last 6 years, we've contributed $12.9 billion. This consistent delivery of value alongside continued improvements in governance, stakeholder engagement and ESG management systems is increasingly being recognized. And as a member now of the Extractive Industries Transparency Initiative, we met all transparency expectations in 2025, performing strongly relative to our peer group. In addition, our ISS rating has been upgraded, placing us in the top 10% of our sector, in line with the other strong ESG ratings we continue to maintain. And with that introduction, let me hand you over to Guy, who can take you through the Q1 financials. Guy, over to you. Guy Young: Thanks, Ian, and hello to everyone. As Ian said, Q1 was a very strong quarter financially, driven by the higher gold price and consistency in our operational performance. The realized gold price increased by $937 an ounce to $4,810 an ounce, supporting our record financial performance. Whilst quarter-on-quarter production was down slightly and costs were up partially as a result, adjusted EBITDA increased by 29% and adjusted net earnings increased by 64%. On the cash flow side, operating cash flows were up 21% and free cash flow was up 29%. On Slide 21, you can see that adjusted EBITDA reached a record $880 million, up 29% quarter-over-quarter, and our adjusted EBITDA margin also increased significantly by some 12% to 65%. The higher EBITDA reflects the combination of higher gold prices and lower operating expenses due to the lower production, while the improved margin demonstrates our ability to leverage the benefits of increased gold prices in our earnings. Moving on to Slide 22. Operating cash flow was up 21% to $737 million compared to Q4 2025 due to higher gold prices and lower operating expenses despite increased cash taxes and an increased working capital outflow related to trade and payables, inventory and receivables. Looking now at the operating cash flow improvement in some more detail on Slide 23. The increase in the realized gold price added $169 million to operating cash flow. Gold sold decreased by 24,000 ounces to 278,000 ounces in Q1, which impacted operating cash flow by $99 million. Operating and other expenses were $156 million lower than Q4 due to a number of factors. Firstly, lower nominal mining and processing costs on the back of the lower production, the completion of the hedging program last year, where we recorded a loss in Q4, and these were partially offset by higher royalties. Income taxes paid increased by $23 million to $46 million, reflecting the timing of corporate income tax payments as expected and provisional withholding tax payments at Sabodala-Massawa. On that point, please note for the full year, we've increased our cash tax guidance from $600 million to $700 million to the revised total of $660 million to $770 million, reflecting higher withholding tax payments related to an increase in cash repatriation on the back of higher gold prices. Cash income tax guidance is unchanged for the year. Finally, working capital was a $91 million outflow, a $75 million increase on last quarter's. Key drivers of the increase were a reduction in payables, which we expect in Q1, along with increased VAT and stockpiles. Turning to VAT first. VAT balances increased in Q1 -- sorry, whilst VAT balances increased in Q1, we've seen some positive developments in April with a resumption in direct VAT reimbursements in Burkina Faso, a reduction in processing times in Senegal and higher levels of reimbursements in Cote d'Ivoire, which, if maintained, will positively impact our Q2 working capital. The stockpile increase is due to some deferral in stripping at Hounde and the concomitant stockpile drawdown along with higher mining volumes at Ity. Both these trends are expected to normalize through the rest of the year. Although less material, we have built up supplies of some critical consumables like fuel and explosives to help mitigate any potential impacts from the closure of the Strait of Hormuz. Turning to Slide 24. Free cash flow reached a record $613 million in Q1, up 29% from Q4 despite the lower production and higher ASIC taxes and working capital outflow. Free cash flow has increased each quarter since Q2 2025 as we are benefiting from higher gold prices and successfully converting the majority of additional margin into free cash. The outlook remains very strong at current gold prices, particularly in H2 of this year. I would remind you, however, that for Q2, we expect free cash flow to be lower as a result of seasonal tax payments. This is normal regional tax seasonality with higher corporate income and withholding tax payments, representing approximately 65% of our full year payments to be paid in the quarter. On Slide 25, our cash flow significantly improved our net debt position as shown here. We started the quarter with net debt of $158 million and ended with $405 million of net cash. As detailed on the previous 2 slides, operating activities generated $737 million of cash flow in the quarter. Investing outflows were $125 million, including $75 million of sustaining capital, $45 million of nonsustaining capital and $6 million of growth capital. Financing activities included a net $75 million drawdown on the revolving credit facility alongside $27 million of share buybacks, $8 million of lease payments and $4 million of financing fees, all of which leaves us in a net cash position of $405 million at the end of the quarter. As Ian mentioned earlier, we do not intend to build a large net cash position, and we'll continue to follow our capital allocation model of increased shareholder returns after prioritizing assets for development and exploration requirements. Finally, moving on to net earnings. Earnings from mining operations increased to $776 million, reflecting the higher gold price, partly offset by royalties and sustaining capital. Other expenses decreased with the higher Cote d'Ivoire royalties in the prior quarter now being reported as part of our cost of sales. Deferred tax was a $97 million expense compared to a $53 million recovery in the prior quarter. The change reflects the accrual of additional withholding taxes ahead of expected increased cash upstreaming as a result of the higher gold prices, as I referenced earlier. Adjusted net earnings were $442 million for the quarter or $1.53 per share, up 65% from Q4. Thank you, and I'll now hand over to Djaria to walk you through the operating performance. Djaria Traore: Thank you, Guy, and hello, everyone. Before discussing our operating results, I want to talk about safety, which remains our top priority. We were deeply saddened that one of our contractor colleagues suffered a fatal injury at Mana on 6th of March, as we have previously reported. Following the incident, we've launched a comprehensive investigation, and we've identified several areas of improvement, particularly around contractor on-boarding, supervision and ongoing training. These actions are now being implemented across all our operations. Despite this incident, our total recordable injury frequency rate of 0.72 on a trailing 12-month basis has improved during the quarter and remains one of the lowest in the sector, and we continue all our efforts to eliminate fatal risks. Before turning to the mine-by-mine review, I wanted to touch on our first quarter performance compared to guidance on Slide 29. As Ian mentioned, we are on track to meet full year guidance with performance weighted towards H2 as production and costs are expected to improve at Hounde, Mana and Ity in the second half of the year, and this is in line with the mine plans. For quarter 1, group production was lower compared to last quarter of 2025 due to lower grades at Sabodala-Massawa, Mana and Ity, but again, in line with the mining sequence. The all-in sustaining costs were higher this quarter due to gold sales, higher royalty costs and increased stripping activity. Overall, we are pleased with our progress to date. Starting with Hounde on Slide 30. Production increased as we mine and process higher grades from the Kari West and Vindaloo Main pits. All-in sustaining costs have increased, but largely due to higher royalty costs at higher realized gold prices and to higher sustaining capital from increased waste stripping at Kari West and heavy mining equipment improvement. We will continue stripping at the Vindaloo Main pit pushback, which will support access to better grade to improve production for the year, with costs only expected to realize the benefit later in the year once the majority of the stripping has been completed. On Slide 31, at Ity, production decreased as we mine lower grades from the Bakatouo and Walter pits, while we also processed lower tonnes due to scheduled mill maintenance in quarter 1. All-in sustaining costs at Ity has improved due to lower sustaining capital and the benefit of byproduct silver sales, despite the higher gold prices and lower gold sales. Similar to Hounde, Ity's performance is expected to be weighted towards H2 as blended grades are expected to increase through the year. On Slide 32, you can see that production at Mana was lower quarter-over-quarter due to lower grades and the weighing down on mining activity in the Siou underground deposit, where the reserves are nearly depleted. Similarly, all-in sustaining costs were higher due to the lower levels of production and sales as well as higher royalty costs related to gold prices and the continued use of higher cost self-generated power. On costs, we expect that the grid power availability will improve during quarter 2 as the grid in Burkina Faso adds new capacity. We also continue to improve the resilience of our grid connection at Mana through the automation of the underground ventilation system and the installation of a new transformer and capacitor bank, which is expected to improve productivity and operating costs. In H2, the mining feed from the Wona underground deposit is expected to supplemented with ore from the open pit of Bana Camp, supporting slightly higher grade, throughput and production. Moving to Sabodala-Massawa on Slide 33. Production decreased due to lower grades mined and processed compared to the quarter 4 2025, but in line with the mine sequence. All-in sustaining costs increased due to lower gold sales, higher royalty costs related to the increased gold price and higher sustaining capital. As 2026 progresses, we expect to see steady performance from the CIL plant as improved grades are offset by slightly lower throughput. While on the BIOX side, we expect continuous improvement in throughput and recovery as the ongoing optimization work continues. At the end of quarter 1, we published a technical report for Sabodala-Massawa. And it's also important to remember that this is a conservative reserve only outlook that we intend to optimize and smooth-out through additional explorations and sequencing. The study outlined significant production growth into the high 300,000 ounces by year 2029 with an average production over the next 5 years of 335,000 ounces per annum. The significant increase in production is expected to be driven by the ramp-up of underground mining at the Kerekounda and Golouma deposits. As the mining ramps up, it is projected to deliver higher grade to the CIL plant, coupled with high grades through the BIOX plant from the Massawa North Zone deposit. We will expect to smooth this production profile through sequencing of Massawa North Zone and conversion of additional reserves, which would allow us to achieve and maintain production in the mid-300,000 ounces range for longer. Lastly, turning to Lafigue on Slide 35. Production increased as we mine higher grades from the main pit. We also benefited from improved recovery, which have increased following the completion of processing plant optimization project. All-in sustaining costs have also increased due to significant increase in sustaining capital related to the planned waste stripping this year and higher royalty costs due to the higher realized gold prices and the increased royalty rates. As stripping continues, we expect grades to decrease through the next quarter before again improving as we move into the next pushback in the second half of 2026. Overall, as you can see, the performance has been consistent and predictable during quarter 1. And as a result, we're well positioned for the rest of the year. Thank you for your time, and I will hand over to Ian. Ian Cockerill: Thank you, Djaria. As you've heard, we're off to a strong start operationally, and we've delivered another record quarter financially. But our key priorities from here are quite clear. Firstly, deliver on production and cost guidance; secondly, maximize free cash flow for every ounce that we produce to ensure an optimized balance sheet so that we can deliver sector-leading organic growth and sector-leading shareholder returns whilst remaining a trusted partner to our host countries. We certainly look forward to updating you on our progress throughout the year. And with that, I'd say thank you, and now I'll hand back to the operator, who will be in a position to open up for Q&A. Thanks very much. Operator: [Operator Instructions] We will now take our first question from the line of Alain Gabriel of Morgan Stanley. Alain Gabriel: The first question is for you, Ian. The cash balance is building very rapidly on today's gold prices, and you can easily finance Assafou, meet all your capital returns commitments and still have significant cash pile that is left. Although that's a good problem to have, it also brings some scrutiny on capital allocation. So how are you thinking about M&A at this point in the cycle? And do you think you have the capacity to take on a sizable project like Assafou and pursue M&A at the same time? That's my first question. Ian Cockerill: Thanks, Alain. Yes, look, it's a bit of a Hollywood problem, having the cash and the already well-defined organic growth pipeline. Irrespective of how much cash we have on our balance sheet, we are, as you know, we're really focused on growing this business in an organic fashion. We have lots of opportunities to do that. That's our principal focus. Our other focus is obviously on the exploration side. And I think the investment in Altair gives you another clear indication that's where we would -- we're happy to sort of put our money. We are patient capital investors. We seek the right opportunities to go in to create really outsized value returns to shareholders. It would be nice to do it every quarter, but we're taking a longer-term perspective on that. With respect to M&A, we constantly look. And if the right opportunity came along, obviously, we would look at it. To date, we've looked at several opportunities, but there's nothing has eventually turned out to be positive. But we're not averse to M&A, but our principal focus obviously is on organic growth. Alain Gabriel: That's very clear. And the second question is probably for Guy on the costs of -- or the energy cost impact on the business. Maybe if you can talk to us a little bit more about the diesel exposure across the group. How do you see the conflict impacting your cost base? Are you seeing any supply stress emerge on the supply chain? Because you seem to have managed this very well in Q1. So how are you thinking going forward of these dynamics? Guy Young: Alain, so let's just talk a little bit about the difference in our minds anyway between the security of supply and then the pricing risk. So to the first part, security of supply, as a general comment across all of our sites, we do not rely particularly heavily on fuel or any other related consumables that transit through the Strait of Hormuz. So we've got refineries that we rely on broadly regional, but in particular, in Cote d'Ivoire and Senegal and the crude input into those refineries is predominantly coming from Nigeria. We do have some other refined products that are coming from Northern Western Europe. But as a result of all of that and in discussion with our suppliers and the test of their business continuity planning, we don't perceive security of supply to be the key issue. It is what you've referred to more a question of pricing. When we look across the portfolio, and again, just bearing in mind that fuel is anywhere between 10% and 15% of operating costs, so it's significant, but not that material. When we run numbers bearing in mind local pricing, then we come up with a $10 per ounce AISC impact roughly for every $10 on the price of a barrel of oil. That is what we've seen so far. And when we look forward into the remainder of the year, that's what we're anticipating. So if I look purely at price variance at the moment, we can expect to see roughly a $25 increase in our Q2 costs relating purely to the price of fuel. The one other thing I would just quickly touch on, and Djaria mentioned it in her presentation, but the volume of our consumption of fuel does depend to some extent on grid availability. So where we see declines in grid availability, we will see higher volumes for self-generated power, and that in and of itself will drive a cost increase. So subject to the grid availability, roughly $10 per ounce for every $10 per barrel. Operator: We will now take our next question from the line of Ovais Habib of Scotiabank. Ovais Habib: Congrats on Q1 beat and really a great start to the year. Ian, a couple of questions from me. The first one was answered in regards to the supplies as well as the cost impact on the Middle East side. So that was good. Just moving on to Assafou. Ian, you released a robust DFS on Assafou, permits have been received. What's keeping you back on pressing the green light to start construction on the project? Ian Cockerill: Yes. Thanks, Ovais. Look, as you know, as far as Assafou is concerned, we already have the environmental permit. We have the exploitation permit. We're currently in negotiation with government around the mining convention. Obviously, it's important that we get that done. Part of that process involves the creation of a local entity, and that's a normal administrative process. I have to say the government of Cote d'Ivoire have been incredibly supportive on this project. They recognize the importance to the country as well as to us. And in fairness are really sort of trying their best to make sure that all necessary permits, approvals, whatever are sort of timeously being expedited. In terms of what is it that is still outstanding, obviously, one of the key issues, as we mentioned in the presentation, was finalization on the resettlement. We have two villages that sit on top of the ore body. We're in negotiations with those communities and seeking their assent and approval for -- to get moving. That is necessary before we can actually start mining activities because both those villages would potentially be within the normal sort of blast perimeter for the start of it. The other -- one of the other issues to be addressed is, there is a national road that runs through the footprint of the pit that needs to be diverted. We are very close to concluding the optimal diversion of that road. There's been some towing and throwing on that, but we're close to getting that concluded. Those, I think, are the two key outstanding issues. And obviously, I think it's always important as far as negotiations are concerned, the government knows that we're keen to progress. They're keen for this project to progress, but it's important that we keep our options open. But to give you some idea of our confidence that the project is going, we've already committed up to -- it's about $80 million worth of pre-expenditure principally aimed at long lead items such that this is another way that we can help derisk the project by making sure that long lead items can be manufactured, transported and delivered well on time, and they don't delay any of the build program. So we're running several things in parallel. I'm still reasonably comfortable that by the end of this year, we will formally announce the project. But I think you can see just by what we're actually doing already, we do believe that this is -- it's not a question of if this project goes, it's merely a question of when. It's as simple as that. Ovais Habib: Got it. And just maybe moving on to the exploration side, and maybe this is a question to Sonia if she's online. Obviously, you guys have a large exploration program for 2026. I just want to hear in terms of which target or area Sonia is most excited about? And when should we start receiving some exploration results? Ian Cockerill: Yes. Look, I'll pass on to -- Sonia is with us. I'll pass on, but I can tell you she's excited about all the areas. Sonia Scarselli: Thank you, Ovais, for the question. It depends how much time you have for me talking about the exciting pipeline. Look, if I just start to talk about a couple of areas, definitely, we have a great results at Vindaloo Deeps and Hounde, and we are planning to actually report the results of the maiden resource in the H1. So more to come on that with also a clear understanding of the upside potential. But then if we move into the other areas, we have exciting results in Sabodala-Massawa. We have completed a full portfolio review and identified over 20 new opportunities in the pipeline with the first one coming with a very clear resource -- major resource by the end of the year at Kawsara. So that's very exciting. And in parallel, we also have identified more underground potential in the area, both in Sabodala and Sofia, more to come towards the end of the year with concrete results. Then if we switch gear to Cote d'Ivoire, there's plenty there to look at. It's more around which one we prioritize first, but Ity continues to surprise us in a positive way. We had a very great result at the back end of last year, both into the greenfield and brownfield opportunities, and we are now infill drilling on the brownfield close to the CIL plant. And then Assafou, a lot of the work that we did in Assafou in the past couple of years was really to get the confidence on the Assafou resource. We have that. It's moving on with the DFS. And there is now quite a large potential of under-explored brownfield opportunities that we are progressing in parallel to get a better feeling. Those are less mature in terms of exploration activities. We will be able to give a little bit more better understanding both towards the end of this year as well as next year. But overall, it's a very exciting pipeline within our existing areas... Ovais Habib: Sorry, go ahead. Sonia Scarselli: No i was just going to... [Technical Difficulty] Operator: [Operator Instructions] We have the speakers back. Please continue. Ian Cockerill: Sorry, could the last speaker, please reask the question. I think we just completed Ovais' question and we're moving on to the next. Operator: You have any follow-up question, Ovais? Ovais Habib: No I am good. Thank you so much for answering my questions. Ian Cockerill: Apologies for cutting you short there Ovais, but we had an electronic glitch here. Operator: We will now take our next question from the line of Richard Hatch of Berenberg. Richard Hatch: Congrats on a very good quarter. You're delivering as you promised you said you would, and you're generating that free cash flow, which is really good to see. Look, just two questions. Firstly, just given the volatility that we're seeing in Mali, can you just talk a little bit around if that's creating any kind of instability in the broader region, if you're seeing anything in that regard to your operations? And then secondly, just on Vindaloo Deeps, you did sort of talk briefly about it there, but I just wonder if you might just be able to expand a bit more about what you're hoping to show the market on that when you update on the resource and how we should think about that into the short, medium and longer term? Ian Cockerill: Richard, thanks. Look, I think as everybody knows, Mali does not fall into any of our jurisdictions where we have operating assets. We have an old legacy asset, the Kalana mine that we're in the process of selling. That sale process continues. And certainly, our understanding is that the type of activity, that the civil unrest that's taking place does not appear to have migrated right down towards Kalana. It's a relatively, in Mali terms, much more benign region. So we're not -- we have no immediate impact on our operations due to Mali. In terms of the potential for spread across from Mali to elsewhere, at the moment, no. I mean the obvious place where there might have been some spread was into Burkina Faso. The situation in Burkina appears relatively calm. We're not seeing any deterioration in the local situation. The security forces are sort of on top of things in that country. We're working hand in glove with them. And again, we're not experiencing any current issues, and we're not anticipating any issues into the immediate future. As far as Vindaloo Deeps is concerned, as Sonia said, we will be -- in a short period of time, we'll be coming out with an update on the size of the resource and timing of when that would start coming into the plan. There's still one or two minor things to finalize. But as soon as that is ready for publication, we will come to the market. What I would say is I don't think the market is going to be disappointed. I think they're going to be very pleased with what's coming out of Vindaloo Deeps. Operator: We will now take our next question from the line of Amos Fletcher of Barclays. Amos Fletcher: I had a couple of questions. First one was just on working capital. Obviously, there's quite a lot going on within the working capital line this quarter in particular. But it was, I guess, quite a surprise how big the build was. I was just wondering, Guy, whether you can give us a bit of a steer on how you expect it to play out over the next few quarters? Guy Young: Sure, Amos. Thank you. Yes, working capital outflow was relatively significant. So I touched on it in the presentation, but maybe just walk through that again with a focus on stockpiles, which is the -- it's roughly 2/3 of that outflow. The stockpile increase is obviously in relation to mining tonnage. And the difference between our original expectation and our actual Q1 was an element of deferral of some of the waste stripping, particularly at Hounde, revolving around both production profile and fleet availability. So this is something that we expect to see pick up again in Q2 and marginally at the start of Q3. As we pick up in stripping activities, we should be seeing naturally something of a drawdown on stockpiles and further stockpile drawdown is anticipated at Sabodala-Massawa going into the second half. So with regards -- sorry, and Lafigue continued increase in stripping activity as well. So with the majority of our sites looking to do some stockpile drawdown, the types of build that you saw in the first quarter should not be repeating over the remainder of the year. And then without going into any detail as it wasn't part of the question, but I think there are positive trend indicators on both the VAT and the consumer build as well. So hopefully, the level of working capital build does not repeat through Q2, 3 and 4. Amos Fletcher: So potential for further build but smaller levels over the next couple of quarters, you'd say? Guy Young: So we could see build depending on sites. So as an example, we'd love to see some more stock at Mana, making sure that we've got plant utilization. Lafigue, Houndé and Sabodala should see some stockpile drawdown. Amos Fletcher: And then the second question, I just wanted to ask for, I guess, a broader update on the Senegal mining code revision process. Has there been any developments to report over the last few months on that? Ian Cockerill: Yes. Amos, no new developments to report on that as yet. Operator: We will now take our next question from the line of Carey MacRury of Canaccord Genuity. Carey MacRury: Congrats on the great start. Maybe just another question for Guy. You've got over $1 billion in cash now, but still have some money drawn on the credit facility. Just wondering, I assume you're going to pay that down later this year. And is there any plan to pay down the Cote d'Ivoire debt early or just leave that as is per the schedule? Guy Young: Okay. To the first question, the RCF drawdown, I think you know us pretty well. So you'll remember, we've got a cash cycle effectively that means predominant offshoring capacity comes via OpCo dividends. We will pay our withholding tax in Q2, effectively allowing us to commence with the repatriation in Q3. Speed of that repatriation dependent on mine site cash levels, that money comes offshore, utilize that to pay down the RCF. So current forecasts, we should have the RCF paid down in Q3 as soon as we get our OpCo dividends up. Carey MacRury: And on the Cote d'Ivoire debt? Guy Young: Thank you. I was really struggling to try and remember the second part of your question. I appreciate it. The Cote d'Ivoire debt, no, I think we'll keep that in place, Carey. So where we see -- as you can probably imagine, there is both cash and liquidity plus tax advantages for us to be holding local debt. So no, we wouldn't look to pay that off early. We would have alternative uses for that cash. So I expect the Cote d'Ivoire facility to remain in place and amortized as already disclosed. Operator: We will now take our next question from the line of Anita Soni of CIBC. Anita Soni: Most of them have been asked and answered, but I just wanted to ask about -- have you had any recent conversations with the S&P/TSX about index inclusion? I understand from the tech process that the S&P has reached out to stakeholders to look at including companies that are not incorporated in Canada in the TSX. And I know you were removed a couple of years ago. So I'm just wondering if you had any recent discussions with them? Ian Cockerill: Anita, Jack has informed me that the -- there is obviously talk of inclusion in the index of companies on TSX that are not Canadian domiciled. So that would obviously be a tailwind for us. But we haven't had any detailed conversations. So our understanding is it's early doors, but nothing tangible from our perspective in terms of contact no. Operator: We will now take our next question from the line of Mohamed Sidibe of NBC. Mohamed Sidibe: All of my questions have been answered. Just wanted to maybe ask a question on the timing of CapEx for Assafou as it relates to the pre-expenditures of $50 million to $100 million that you guided to for the year. Ian Cockerill: Mohamed, very simply, what we have done is we've identified the long lead items, basically buying in to the queue for mill shelves, big HPGR kit and what have you. So we flagged the level of expenditure around about plus/minus $80 million. I think you could say that, that expenditure would be spread over the year. It's not all going to come in one lump sum. We are in the process of discussing with various suppliers, getting the final quotes from them. And once that's done, obviously, there will be an element of timing of that spend. So you should assume it will be spread out over the balance of the year. Mohamed Sidibe: And congrats on a great quarter. Ian Cockerill: Thank you. Operator: We will now take our next question from the line of Felicity Robson of Bank of America. Felicity Robson: You've provided an update on Sabodala's production profile. Could you provide some color on where you see further scope to supplement this maybe with resource conversion or exploration in the near term? Djaria Traore: Thank you, Felicity. I think we, as you mentioned, are very happy to have published NI3-101, whereby we are stipulating that there will be an increase in production Sabodala-Massawa is purely currently on the mineral reserves. We've seen already an increase when you look at the production profile 2026 versus 2025. What we're also seeing is that from 2029, we'll see a significant increase all the way to in the mid-360 at least for the next 5 years. However, I think to answer your question, definitely, there's an additional upside at Sabodala-Massawa through resource conversion and additional exploration. For this year, we actually have a budget of almost $15 million to increase those resources at Sabodala-Massawa. Maybe Sonia will have additional information. Sonia Scarselli: Yes. Just to add to what Djaria was saying there. The increase of production in the late '20s driven mainly from the underground development and coming to the pipeline that bring in a very high-grade ore for us in Golouma and Kerekounda, which is very exciting. And then beyond what Djaria already talked about in terms of exploration upside, we have identified several opportunities, both in the exploitation permit and exploration permit that will start to add to the profile in the next couple of years starting with Makana which is brownfield nearby the CIL plant of non-refractory oxide and then moving into Kawsara as well as we are looking at some of the further underground potential. So we definitely have identified opportunities to maintain that pipeline and that profile beyond the end of the 2026. Operator: We will now take our final question for today from the line of Frederic Bolton of BMO Capital Markets. Frederic Bolton: I just want to follow up on Ovais' and Mohamed's questions on Assafou. So there is a $396 million in nonsustaining capital, which I think is on top of the growth CapEx that you have in your financial model. Can you please give me some color on what's within the nonsustaining CapEx? And then within your growth CapEx -- allocated for owners costs. That seems to be quite high when I comp that against other projects of similar size. Can you sort of dive into what might be driving the $250 million? Guy Young: Fred, it was breaking up a little, but I think I've got more or less what you were after. So the key element of the nonsustaining is effectively stripping. So I would just remind everyone, Assafou is relatively deep. So we have a very substantial pre-mining and stripping requirement at Assafou before we get into the ore body. So it is a fundamental driver of the nonsustaining CapEx. At that point, Frederic, on the owners cost we do have some elements within the owners cost that when we compare it to our previous projects would be regarded as slightly higher. I think what we've attempted to do is ensure that we have incorporated and encapsulated all specific costs associated with Assafou. So wherever we have people working on Assafou, bringing teams in, one of which, for example, we are going to be doing, which is a more fundamental cost management team that is being brought in as well as lessons learned from previous projects where we felt that we needed to be able to ramp up slightly earlier in terms of operational readiness. Those are the key factors driving the owner team costs. Frederic Bolton: Does that also include the management for the resettlement and the preparation for the highway diversion? Guy Young: We have the costs associated with the road diversion and power diversion in the infrastructure line, but you're absolutely right, there is a fairly significant effort going into the resettlement that Ian touched on earlier, and that would be included in the owners cost, yes. Operator: And that's the end of the question-and-answer session. Ian Cockerill: And thank you, everybody... Operator: Please continue, sir. Ian Cockerill: Okay. Thank you, operator, and thank you, everyone, for your time. I hope you've heard how pleased we are with the first quarter and how it's set up for continued success throughout the rest of the year. We look forward to meeting up with you again in the midyear when we give our Q2 and H1 results. Thank you all for listening today. Much appreciated. Thank you, and goodbye. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.
Operator: Good afternoon. This is the conference operator. Welcome, and thank you for joining the Credit Agricole First Quarter 2026 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Clotilde L'Angevin, Deputy General Manager of Credit Agricole. Please go ahead, madam. Clotilde L'Angevin: Thank you. Thank you very much. Hello, everybody. I'm conscious that this is a very busy day for you, so I'm going to try to be short. And so starting on Page 4 to tell you that we have solid results this quarter for Credit Agricole S.A., EUR 1.7 billion despite the turbulent environment. All of the Q1 2025 figures here are presented in pro forma. So for the Q1 2026, we don't change anything. But to compare it with the past, we consider that in the past, Banco BPM had been equity accounted at 20.1%. Now net income, therefore, increased by 1.8 percentage points -- percent sorry, pro forma, thanks to an increase in revenues to EUR 7 billion, supported by sustained activity, ongoing digitalization and strong client capture. We also have strong operational efficiency. The cost-to-income ratio improved by 0.6 percentage points quarter-on-quarter in CASA. And we have well-controlled risks with cautious provisioning on this quarter in the context of the conflicts in the Middle East. And all of this leads to a strong profitability, and we're posting a high ROTE at 13.7%. CET1 ratio is at 11.4%, well above the 11% target, which is impacted notably by M&A operations. We increased our position this quarter in Banco BPM capital, now reaching 22.9% since we decided to seize the opportunity of a dip in the share price in March to continue to build up our stake, but no change in our strategy. The group continues to develop. We announced this quarter the acquisition of a small Ukrainian bank, Lviv, in the west of the country that will allow Credit Agricole Ukraine to strengthen its positions with SMEs and with corporates in the agri sector. And we launched a couple of weeks ago, the European digital platform, Credit Agricole Savings in Germany, only 5 months after it was announced in our medium-term plan, ACT 2028. On the next slide, you see the key figures. We have a good performance of the group Credit Agricole, with a strong increase in net income, 5.5%, driven by revenues, 2.8%, which reached this quarter the record level of EUR 10 billion. In particular, this is thanks to the strong performance of regional banks revenues, 7.8%, which benefited from a spectacular upturn in net interest income by 34%. There is a cautious provisioning in all of the business lines in the context of geopolitical uncertainty, which leads to an increase in cost of risk on outstandings over 4 rolling quarters this quarter, but it remains under control. And of course, we maintain a strong position in terms of solvency and liquidity. So I talked to you about the impact of Banco BPM. We also have unfavorable market effects on insurance OCIs and on market RWAs for the CET1 of CASA. And we also have a front-loading of the consumption of CACIB's RWAs in order to accompany their customers. We can come to that a little bit later on when we talk about solvency. Now moving to Slide 7, activity. Activity was sustained across all of the business lines this quarter. This supported, in fact, the revenues. So what we can note this quarter is a strong customer capture, 600,000 new customers this quarter, 450,000 in France in retail banking. And what's important is that it also benefited from increased digital acquisition in France and in Italy. So we had client capture that was boosted by digital acquisition, in particular, for LCL with the launch of L by LCL Pro, which explains the increase in customer capture for the professionals, 20% of capture on professionals was digital. Digital acquisition also explains 40% of client capture for Credit Agricole Italia. And we're launching several 100% self-care digital solutions in France in home loans, in savings with the launch of full self-care securities accounts and share savings plans and with a new life insurance contract, Oriance . And in the regional banks, we're going to launch a full digital onboarding in a couple of days. Now if I move business by business to activity, in retail banking in France, credit production was strong, even though this performance was mainly driven by regional banks production in a very competitive market. Corporate and professionals loan growth was 7%. And in Italy, we had a very dynamic loan production for the corporates x 2 quarter-on-quarter in the context of a competitive market. And production is very dynamic in Poland, in particular, for individuals and in Egypt. The loans outstanding in the on-balance sheet assets continued to grow in France and in Italy, also the off-balance sheet assets. And so therefore, Asset Gathering division posted a very dynamic quarter. Thanks to insurance, where we have an increase in premium income on all of the activities, savings and retirement, personal insurance, P&C. We had a record net inflows of EUR 5.7 billion, of which EUR 1.5 billion, thanks to the Oriance solution, and we reached EUR 18 million contracts in P&C this quarter. We have a weather-related effect impact, but activity is still very strong. For Amundi, we have very strong net inflows and growing AUMs. The medium- to long-term inflows are strong, in particular, thanks to ETFs and index-based solutions and activity is dynamic in the third-party distributions and retirement solutions. And finally, in wealth management, the AUMs are increasing, and you can note the fact that we finalized the acquisition of the wealth management customers of BNP in Monaco this quarter. For personal finance and mobility, production increased year-on-year despite the unfavorable conditions in the car markets that weighed on our mobility activity and in particular, on remarketing, we had an increase in the stock of used cars this quarter, but production increased year-on-year for personal finance and mobility. And finally, in Large Customers division, the CIB posted its second best quarter after the record level that it had reached in the first quarter of last year. And so excluding FX impact, CIB is stable at this level, thanks to an excellent performance of investment banking and despite the wait-and-see attitude of our corporate customers and financing activities and the fact that FICC was impacted by a lower activity on primary markets. And finally, for CACEIS we had a high level of settlement and delivery volumes. It was boosted by market volatility. And of course, we continue to transform our business after the integration of the European activities of RBC. Now this feeds into revenues on the next slide that increased by 0.9% this quarter. If we read it on a like-for-like basis, i.e., if we exclude the Amundi U.S. deconsolidation for EUR 90 million in the first quarter of last year, and the impact of the first consolidation of ICG shares this quarter for EUR 68 million this quarter, revenues increased by 3.2%, sorry, Q1, Q1. Like-for-like, all of the business lines contributed positively to the growth in revenues, except for the Large Customers division, which is impacted by a EUR 69 million FX effect. Asset Gathering revenues decreased due to the scope effect. But excluding these two scope effects, we have an increase of EUR 59 million. It's mainly thanks to higher management fees and performance fees at Amundi, which more than offset a slight decline in insurance revenues impacted by the weather-related events that I talked to you about, storms and floods in P&C and impacted by a deterioration of market conditions in savings and retirement that was mostly absorbed by the CSM, but we have a residual revenue impact. For Large Customers, I was telling you that we have a very high quarter, second best after the record level that it reached in Q1 2025. For SFS, we have a positive price effect, which was offset this quarter by a change in the residual values of the cars in Drivalia. Drivalia, as you know, is a subsidiary of Credit Agricole Auto Bank. So this is why it has an impact on revenues. For retail banking, we had a very strong upturn in net interest income for LCL, plus 13% and a stability of net interest income in Italy. And we can see right now what we talked about in the medium-term plan for France, an increase in the net interest income, thanks to a reduction in the cost of resources, a normalization of the customer deposit mix and the rate effect and also the gradual repricing of loans and fees increased in all geographies. And finally, on the Corporate Centre, we had favorable volatility effects. Now moving to expenses. We have -- again, on a like-for-like basis, we have positive jaws, 1.7 percentage points. So we do have a few positive factors, in particular, the favorable FX impact on CIB costs and decreased provisions for variable compensation. But more importantly, operational efficiency is improving. We have this quarter, the full effect of the synergies for the CACEIS RBC operation, and therefore, we can confirm EUR 100 million additional income in 2026 linked to this operation. The group integration with [ Indosuez ] is progressing also. We now have 40% of synergies that are realized. And Amundi and Credit Agricole Italia are expecting cost savings in the subsequent quarters. We talked about that at the end of last year. And these positive jaws that we observe, we can observe them despite the fact that we continue to invest in our investments. We continue to invest in the transformation of LCL, as you can see here in retail banking. And we invest also in SFS for our Credit Agricole savings and development platform in Germany, for which the total costs are expected to be below EUR 50 million in 2026. Now moving to cost of risk. Cost of risk, in fact, decreased this quarter compared to the Q4 2025, but increased by 32% compared to Q1 2025, mainly due to our prudent provisioning in the context of geopolitical and economic uncertainty. Because as you can see, most of the increase is due to Stage 1 and Stage 2 provisioning, about EUR 100 million, including scenario updates. We adjusted the weighting of the different scenarios. This is for about EUR 38 million. And we added overlays, geographic and sectorial overlays related to the conflict in the Middle East, around EUR 28 million. So we have about EUR 60 million provisioning due to the Middle East conflict. We have other provisions that include legal risk that represent EUR 39 million, and those include an adjustment of EUR 17 million for the U.K. car loan litigation after the FCA released the conclusions of their consultation that they had launched at the end of last year. And so as you can see, despite these elements, the Stage 3 incurred cost of risk is very close to the Q1 2025 levels after a significant increase in Q4 2025. And if we look at what happens by business line, half of Stage 3 and total cost of risk is explained by SFS with CAPFM being the main contributor, but the increase in cost of risk for CAPFM is mainly driven by these S1, S2 additions. The Stage 3 provisions are relatively stable and they're even decreasing, in fact, due to successful sales of NPL portfolios. The increase in CIB is essentially due to Stage 1 and Stage 2 provisions linked to the Middle Eastern conflict and the cost of risk remains broadly low with investment-grade customers mainly and a diversified and a balanced geopolitical risk. For French Retail Banking, the cost of risk is under control after a strong increase in the Q4. The default flow remains steady, both for LCL and the regional banks, and it's mainly driven by professionals and SMEs. So what we're doing is we're continuing to monitor quite closely the same sectors that we talked about last year, retail, distribution, automobile, transportation for LCL and for the regional banks, real estate professionals, construction and farmers. And in Italy, cost of risk is decreasing and credit quality indicators are improving. So to conclude on this, there's no surge in loan loss provisions. We have an annualized cost of risk on outstandings that decreased Q1, Q4 and our credit quality indicators remain at a very good level. We have the NPLs that are stable. We have coverage ratio for CASA and loan loss reserves that are increasing, which will allow us to absorb surges in Stage 3 cost of risk going forward. As you know, our provisioning is always prudent, and that's also why, as I said, we remain cautious, and we continue to monitor closely these sectors that I was talking about. Skipping Slide 11 to move on to the Slide 12 on income. In fact, we have a solid income in a volatile environment. I just wanted to make two comments, the fact that we have equity accounted entities that are increasing. We have a decrease for SFS for leases related to losses on remarketing activity in the current automobile context, and we have an unfavorable base effect in China, but we have an up for Asset Gathering related to the ICG first consolidation impact. This is a one-off of EUR 85 million. And we also have a Victory Capital scope effect, which is the [ running ] contribution this quarter, thanks to synergies. So we now have ICG at 5.2%, and we plan to increase it to 9.9% over the rest of the year. And so next quarters, we're going to have a regular contribution in our equity account on ICG, but for this time, it's a one-off. And also, you have to recall that we're benefiting this quarter from the fact that we do not bear minority interest on CACEIS any longer compared to EUR 35 million per quarter in the Q1 2025. But most importantly, gross operating income is increasing on a like-for-like basis by 5.5%. We have 1.8% net income growth to EUR 1,676 million. So a very strong performance this quarter, thanks to strong activity and good operational efficiency. Solvency. Now we have a very high level of capital this quarter, and the CET1 ratio is at 11.4%, which is still well above our target at 11%, thanks to retained results. But we did have a decrease from 11.8% to 11.4% due to a certain number of elements. First, we have organic growth, 23 basis points. In particular, with an impact of CIB, which accounts for 14 basis points. Why? Because we have a couple of elements. We can come back to that afterwards, but we have, in particular, a market impact on the RWAs. And we also have a front-loading of the annual RWA budget in the first quarter for CACIB in the context of strong activity in March to support the customers of CACIB. That's the first dimension. Second, we have an M&A impact, 17 basis points, out of which we have 14 basis points linked to the increase in our stake in Banco BPM to 22.9% that I was talking about. In fact, this gives me the opportunity to mention the fact that in our past acquisitions, we completed the analysis that we did at the end of last year that showed that we had met our ROI criteria. In addition to these figures, we computed the average return on capital. You have that in the annex, and it's around 18%. So a quite profitable M&A past acquisitions. So organic growth, M&A. Finally, we have a methodological impact with CRR3 adjustments, and we have market effects on the insurance OCIs due to the rate spread and equity fluctuations by 4 basis points. So all in all, we remain at a very strong level of CET1 ratio for CASA, 11.4%, which allows us to provision EUR 0.26 per share in terms of dividend. The RWAs are increasing also due to a foreign effect -- foreign exchange impact for CACIB. This foreign exchange impact has no effect on the CET1 because, as you know, we immunize our CET1 ratio against adverse foreign exchange fluctuations on the dollar by neutralizing the impact on the numerator, but you do have that in the increase in the RWAs. Moving to the slide on the CET1 ratio of Group Credit Agricole. We have very strong capital at this level. As you know, our objective is not to accumulate capital at the level of CASA. So the relevant figure for the group is that of group Credit Agricole. We're very comfortably above our SREP requirement, which, as you know, has increased by [ 50 basis points ] this quarter due to the increase in the systemic buffer, but we're still very comfortable with 670 basis points above the requirement. And we have more or less the same impact that we had for CASA that I talked about. We have a little bit more limited impact of Banco BPM due to the exemption threshold that I was talking to you about last time. RWAs are increasing a little bit due to technical adjustments on the Basel IV impact on the corporate RWAs of the regional banks. And the leverage ratio is very comfortable as well as the TLAC and the MREL ratio. On liquidity on the next slide, very comfortable liquidity position, very high level of liquidity reserves, EUR 475 billion. The LCR and NSFR ratios are excellent. And just to tell you that almost 2/3 of our funding plan had already been completed during the first quarter. So we're very comfortable also in terms of funding plan. And as you can see here, we have stable customer deposits and very diversified and granular deposits. On the next slide, on transitions, we presented new targets in our ACT 2028 plan. Our objective, as you know, is to be a leader in customer capture and technology and, of course, a leader in transition, and we reaffirmed our net zero commitments. And so we have new targets, which are the following: one, to reach a green-brown ratio of 90:10. So we're well on track to reach this. Our second target is to reach EUR 240 billion in financing of environmental and social transition. The split today is 65% environment and 35% social. Again, we're well on track. And finally, CACIB should reach EUR 1 billion in annual revenues from sustainable finance. And just note that on the 24th of April, Amundi announced that they would be the asset manager of the GGBI fund. So that's something which we're proud of as well. And so coming to the last slide that I'm going to comment on, Slide 17, to conclude by saying that net income increased this quarter pro forma for CASA in the group, thanks to strong activity in all of the businesses in asset management, in insurance, thanks also to strong improvement in net interest income in France. We conquered customers. We accelerated digitalization. We rolled out -- started to roll out our medium-term plan with the launch of this European digital platform, CA Savings in Germany. We announced the acquisition this quarter of a small Ukrainian bank. We increased our position in Banco BPM capital that now reaches 22.9%. And so revenues increased to EUR 7 billion, thanks to this activity, digitalization and strong client capture. Operational efficiency is strong with favorable jaws and an improvement in cost-to-income ratio. Our risks are well controlled. We have cautious provisioning in the context of the conflict in the Middle East. And all of this leads to strong profitability. We're posting a high ROTE ratio at 13.7%. So these are very strong and solid results in an uncertain environment. I'm going to stop here. Thank you very much for your attention, and we can now open the floor to questions. Operator: [Operator Instructions] The first question is from Giulia Miotto, Morgan Stanley. Giulia Miotto: I have two. So first of all, on BAMI, you have increased the stake to 22.9%, but you have room to increase more to 29%. So how should we think about this one? Shall we assume that whenever there is a dip, you are interested to increase this? And also, in the past, you have stated that your preferred outcome would be a merger. Is that still how you're thinking about that? So that's the first question. The second one is instead on the launch in Germany, you said it's a couple of weeks old. Can you perhaps share some stats on how that is going, how you launched, what type of clients you are attracting, that would be super interesting. And then -- sorry, I actually have a final one, a number -- question on SFS. Revenues were down quarter-on-quarter. Costs were up. Any comment on the evolution of this business? Clotilde L'Angevin: All right. Thank you, Giulia, for your questions. So first, on Banco BPM. So first of all, maybe to explain a little bit, we had an authorization by the ECB to cross the 20% threshold and therefore, exercise significant influence without taking control. So we seized the opportunity of a dip in the stock price of Banco BPM to go beyond our 20.1% stake. And we did this for market reasons, we're not changing our long-term strategy. And our long-term strategy is really to be able to contribute to the value creation of Banco BPM. And so that's why we submitted our own list of candidates for the directors of Banco BPM as well as our own list of candidates for the statutory auditor role in order to offer a positive contribution to governance, holding more than 20% of capital. So our objective was to promote the creation of long-term value by presenting candidates with very solid and relevant expertise, and we had 4 directors that were selected at the end of the AGM, which corresponds, in fact, to our stake of 22.9%. So we're not ruling ever going out beyond, but you have to bear in mind that the authorization that we requested from the ECB was to cross the 20.1% threshold and therefore, exercise significant influence without taking control. On your question regarding the different scenarios, as always, there's a lot of scenarios that are possible. Most of them don't depend on us. They're positive for us because we have a strong position. We want to position ourselves as a long-term partner of Banco BPM. And I just want to remind you of the fact that our strategy has not changed in Italy. We have this partnership with Banco BPM, but we really want to develop our universal banking model in the long term, in particular, with Credit Agricole Italia for which we want to develop digitalization synergies with the other businesses. And we also want to develop these businesses, which are all present in Italy. So no change in this strategy, but our strong position allows us to be comfortable and a long-term partner of Banco BPM. That's on your first question. On your second question, yes, indeed, it's a couple of weeks old, but we're confident as to the success of this savings platform in Germany. So just to recall, in the medium-term plan, we said that we wanted to target 2 million customers. We're now at 1 million customers. We have EUR 15 billion in on-balance sheet savings, which we want to double in Germany. So the savings platform is going to help us do that. In fact, it's relatively simple because we already have the legal entity, Creditplus, what we're doing is we're building with a very low cost, in fact, it's less than EUR 10 million, this savings platform that will be turned into an app at the end of the year in order to provide also day-to-day banking. And what we consider to be our competitive edge is the fact that compared to a lot of competitors who have a limited number of on-balance sheet solutions. We have 7 offers in terms of on-balance sheet savings. So this is going to be interesting for the targets that we have, which are mass affluent and affluent customers. And then down the line, what we want to do is we want to expand by plugging onto that the off-balance sheet solutions, i.e., Amundi, Credit [ Agricole ] to really expand on the offer. But even with these 7 products that we have, we consider that we already have a competitive edge. So that was on Germany. Now on SFS. Maybe -- if we look on SFS, maybe a little bit more widely because we have a certain number of drivers for SFS. We have consumer finance per se for which we have strong positive price effects. And then we have a revenue impact of the second dimension, which is mobility. Now how is this working in terms of mobility? Now remember, in the Q4, we had talked about the reviewal of remarketing values of the vehicles for Leasys. Leasys is equity accounted, but we also have leasing activity in Credit Agricole Bank, which represents revenues for us. And so what happened in the Q1 was that in the first quarter, we have, as you know, an automobile market that is still slowing down, and this had impacted some of our partners, particularly in electronic -- electric cars. And so what we did for Credit Agricole Bank was to adjust the residual value of our vehicles portfolio, in particular, in the U.K. and in Italy. But production is increasing for Credit Agricole Bank, both compared to Q1 2025 and compared to Q4 2025. So we have a production that is increasing, but we have a negative impact of this revision of residual values at Drivalia. And we also have an impact at Leasys, which is due most here now to a decrease in car resale performance due to the increase in the stock of used vehicles. So we have -- to kind of sum it up, we have an automobile market that is depressed and in particular, with a certain number of players with which we have strong commercial activity ties who have had observed an increase in the stock of used cars. This has an impact on the residual value and the marketing value of our vehicles. But down the line, we're developing the drivers of profitability for mobility generally. Value-driven pricing, diversification of distribution channels, the improvement of remarketing processes with IT tools, efficiency. So of course, the evolution of the market is going to be key. And of course, there is a sensitivity. There is sensitivity of the residual values that every quarter have to be adjusted. But we have these drivers going forward, which allow us to be confident on the -- in particular, the restoration of profitability for leases. Operator: The next question is from Jacques-Henri Gaulard, Kepler Cheuvreux. Jacques-Henri Gaulard: If I may come back on SFS for a minute, I think the issue I have with it is the fact that it's sort of supposed to actually improve, and it seems the improvement really takes a lot of time. So it's more about getting a sense about where you think this business is going to turn around both at revenue level, but also on the equity accounted side. And when can you say, okay, we've definitely turned the page of that, and we're going to be able to actually look forward to, I don't know, second half of this year [ or 2027. ] That's the first question. The second is on capital. I mean, really, it happens that you had the consolidation of BPM. It's more the fact that everything being equal, do you think that we can proxy the CET1 towards the end of the year as being more or less now the retained earnings x 3, whatever that is. And are you expecting any sort of turbulence that could actually derail from that? Clotilde L'Angevin: All right. Thank you, Jacques-Henri. So in terms of inflection, we have to be very cautious because we do depend on the automobile market. And we do have, as I was saying, a strong sensitivity of the remarketing value of our automobiles to the stock of the vehicles -- of the used car vehicles. And this stock of the used car vehicles also depends on the capacity -- the production capacity of a lot of our partners. So for example, we're confident, for example, that Tesla is going to pick up. GAC, which is our partner in China. Also, there are more difficulties for Stellantis, but this is something that really depends on the market. Now profitability will pick up over the year, but it's true that we will have an effect of, in particular, the revision of remarketing value of the used cars in the Q4. We will going to carry a little bit of that effect from the next quarters because it does have an impact on the price that we're going to resell our cars at. So there will be an impact that will continue in 2026, but we are in a reversal, of course, compared to the Q4 of 2025. Now in terms of CET1, maybe to just take the opportunity of your question to really come back a little bit to the different elements that can explain the evolution that we have here in terms of the capital for CASA. So you're talking about what we can see by the end of the year. The guidance that I can give you for the end of the year is more that for the medium-term plan. For the medium-term plan, we're still -- we talked to you about the fact that we would have strategic flexibility of 150 basis points by the end of 2028 that could be used for M&A or for an exceptional dividend if we do not use that type of M&A. This quarter, we have used about 16 basis points -- 16, 17 basis points for M&A. And so excluding that, we're still very comfortable with our strategic flexibility at the end of the plan. And we're very comfortable also with the CET1 ratio that should remain comfortable by the end of 2026. Now why is that? Is that -- we're going to have indeed retained earnings. And what's also interesting is that a part of the impact of the RWAs of CACIB this quarter is, in particular, due to market activities, about EUR 3.1 billion in terms of market activities, as you can see on the CET1 slide. And we can say that roughly 2/3 of that are potentially reversible if the markets normalize. We have a volatility effect on the SAR of the trading portfolio. We have a trading book counterparty risk. These two effects are effects that could be reversible. So that's maybe -- if we break down the RWAs of CACIB, I guess we can say we have three dimensions. One is an FX effect, EUR 1 billion linked to the appreciation of the dollar between the Q4 and the Q1. Two is this effect linked to the market activities of which 2/3 are potentially reversible. And the rest is a front-loading of organic growth. We often have a front-loading of organic growth for the CIB in the first half of the year. And so we expect that we're going to have the impact on income, on revenue of that also by the end of the year. But again, all in all, we're comfortable with our CET1 ratio end of the year and 2028 and more importantly, with the strategic flexibility we were talking about in the medium-term plan. Operator: The next question is from Delphine Lee, JPMorgan. Delphine Lee: So first one is just double checking the guidance on net interest income that for LCL remains high single digit because obviously, that would imply a slowdown compared to Q1. And also what do you factor in for [ Livret A ] in your guidance? And also secondly, on Cariparma, I think you previously guided to -- for the year to have a bit of pressure on NII. Is that still the case? And is it something we should expect for the coming quarters? And then my last question is just to come back on Banco BPM. Just wanted to have a little bit of your thoughts around sort of the M&A scenarios. I know you mentioned they're not in your control. It looks like discussions have moved from Cariparma to now Monte dei Paschi. So just trying to understand a little bit sort of what you think could be possible for the group in terms of defending partnerships? Clotilde L'Angevin: All right. Thank you, Delphine, for your questions. So maybe first on net interest income for LCL, there is no change in our high single-digit guidance for 2026. Even though it's true that the rate scenario -- in fact, you still have these three effects that I was talking to you about before. On the asset side, you have a repricing. And the marginal increase in the rate scenario is favorable in this respect. Long-term rate increase is favorable for this repricing. It depends on the competitive capacity of LCL to reprice, but the rates are increasing in LCL and the regional banks. First point. Then you have on the liability side, you have the short-term rate where you can have a slight increase that can decrease the positive impact because you know that for the liabilities, the positive effect is when the cost of resources decreases. But we're well hedged against any increase in short-term rates because this time around, we don't have a real shock to the net interest to the rates. And so we should not have any significant shift in the liabilities mix. And also our macro hedging is quite strong, in particular for inflation. So things are relatively positive. We have no change in this high digit single -- high single-digit guidance for 2026, even though we have to always be careful as to the repricing capacity in a competitive market. Now for [ Livret A, for Livret A, ] we usually have a tendency to hedge the [ Livret A. ] So we do -- we could consider that we have, for example, a EUR 90 billion impact for the regional banks -- EUR 90 billion pre-centralization of [ Livret A ] for the regional banks. You have about EUR 18 billion for LCL pre-centralization. So you could consider an impact of the decrease in [ Livret A ] on that, which you can calculate, which is going to be a couple of hundred million, but this would be before hedging, and we have a tendency to hedge. So the impact on [ Livret A ] for us is relatively neutral. For your question on Credit Agricole Italia. Now we have a very competitive housing market in Italy. We have, in particular, renegotiations, which have an impact. And in fact, they did have an impact this quarter on the loans outstanding for the home loans, which was -- which decreased in Credit Agricole Italia this quarter. I talked about a very strong increase in corporate loan production. But in housing, we have a market which is very competitive. But despite this, we were quite happy to have the stabilization of net interest income. We're still prudent in terms of our guidance. So no change in our guidance in this respect, i.e., maybe just below 0 or around 0 this year before picking up afterwards in the coming years. M&A for Banco BPM. All right. So well, in fact, for M&A for Banco BPM, even though there's lots of -- there's been lots of noise, rumors, et cetera, regarding Banco BPM. For us, things have not really changed except the fact that since we are now -- we now have 4 seats at the Board, we will participate in the analysis of any scenarios that could present themselves to Banco BPM. And so we would participate in any decision regarding these different scenarios. That's all I can tell you for now. We're now -- we now have seats on the Board, and so we're going to be a player. We are at the table. We are a player in these different scenarios. But to tell you the truth, as I was saying before, a lot of these scenarios do not depend on us, but I think most of them are positive. Because as I was saying, we are a long-term player in Italy. We have many ways that we can develop in Italy, for example, organically through CAI, organically through our businesses. So all of this is positive. Operator: Next question is from Sharath Kumar, Deutsche Bank. Sharath Ramanathan: Firstly, on asset quality, your Middle East exposure at EUR 21 billion seems higher than peers. Can you elaborate on the nature and the risks in case of a prolonged conflict in the Middle East? And more broadly on asset quality, what risks do you see if oil prices remain well above $100 a barrel for a prolonged period? Then a couple of clarifications. Firstly, on the capital consumption for Banco BPM, when you increased the stake in 2025, the CET1 consumption was proportionately smaller commensurate to the stake increase versus the minus 14 basis points impact you have now. So if you can clarify on that? And lastly, again, a follow-up on Specialized Financial Services. Can you quantify the used car sales contribution maybe in '25 and first quarter, just to see where -- how much is the delta? And on equity accounted entities, previously, you said double-digit contribution from Leasys for 2026. Do you stick to this view? Clotilde L'Angevin: All right. Okay. Thank you. Now if I look at your question on loan loss reserves, if I move to Page 47 (sic) [ Page 46 ] in the annex, you have this level of loan loss reserves, which is at EUR 22.6 billion for Group Credit Agricole and EUR 9.7 billion for Credit Agricole S.A. And as you can see here, you have -- and you could do that if you have even longer period, you can see that prudent provisioning for us is in our DNA. In fact, we are provisioning, but we have always been doing so in the face of uncertainties, geopolitical uncertainties. And so this is also why we have this very high level of loan loss reserves, even though as you know, the impaired loans ratio, as you can see on Page 47 (sic) [ Page 46 ], is stable. And this is also why we have this very high coverage ratio of 82.6% at the level of the group. We have with our Stage 1 and 2 outstanding loan loss reserves, EUR 9.3 billion. We have about 3 years of cost of risk. And for CASA, with EUR 3.4 billion, we have about 1.5 years of cost of risk. But this is, in fact, a structural policy that we have, which is always to provision in a very prudent manner, the risks, and this is what we did this quarter. But of course, this is something that can, therefore, absorb any surge in Stage 3 cost of risk going forward. In terms of capital consumption, so I don't want to go back to the very technical discussion that we had in the Q4 regarding the first consolidation of Banco BPM. But just to tell you a little bit how things are working when you have these 14 basis points for the CET1 is that, in fact, when we increased our share from 20% -- 20.1% to 22.9% in fact, we're increasing it based upon an equity accounted value, which we have integrated around EUR 10. So we have a goodwill now based upon that. Any additional purchase of shares of Banco BPM has to be done with a goodwill. So you have a goodwill impact that is directly deducted, right? And because last year, when we did the first consolidation, we didn't have any goodwill because we consolidated at cost. And so we had badwill, right? So now you have a goodwill impact first, around EUR 120 million. And you also have an RWA impact, which is different from CASA between CASA and group Credit Agricole because for CASA, as you know, we have saturated the exemption threshold for the more than 10% participation, but we have not done that [indiscernible]. So that's why the impact for CASA is 14 basis points, whereas the impact for the group is 5 basis points. And then your last question on the used cars. In fact, we have a couple of dozen impacts of the residual value of cars for Drivalia that compensate for a favorable price effect for SFS on revenues. So you have just about, let's say, around EUR 30 million impact on -- positive impact on price effect and around EUR 30 million impact this quarter for Drivalia of the residual value of used cars. And for leasing, we have, of course, a remarketing issue. And what I can tell you about that is that we're having a situation where we're just about breakeven for Leasys, and we still confirm the guidance that I gave you at the -- in the Q4 call, which was a single-digit contribution for 2026. Operator: The next question is from Stefan Stalmann, Autonomous Research. Stefan-Michael Stalmann: I have two questions, please. So the first one is on your organic risk-weighted asset growth that you highlighted. It seems that you have actually seen a very major expansion of your exposure to non-bank financial institutions, so NBFI, which obviously receives quite a lot of market scrutiny these days. Can you maybe add a little bit of color on why you have grown this portfolio so rapidly in the first quarter? And the second point goes back to your ROIC disclosure. That's very helpful. It looks like you spent EUR 12.5 billion on your acquisitions over this time horizon, but your regulatory capital requirements were about EUR 4 billion lower. Can you maybe explain what exactly drove that discount and which transactions, in particular, required so much less regulatory capital than what you spent on these deals? Clotilde L'Angevin: All right. So first, the question on our exposure. As you can see on Page 50 in the annex, we have our exposure to other nonbinding financial -- non-banking sorry, financial activities that have not changed significantly. This figure is something that takes into account a lot of elements that are not only, for example, hedge funds, but you have securitization vehicles, you have monetary funds, you have hedge funds, you have broker-dealers, investments, you have all of the insurance banks outside of the EU. So this figure, for example, when you have securitization by CACIB for its customers, it's our NBFI and it's a figure that, in fact, adds up a lot of bits and pieces and that's difficult to interpret. What I want to tell you regarding the fact that the issue that has worried maybe a lot of observers recently is regarding our debt fund exposure. And so on private debt, our exposure as of end of March is EUR 2.9 billion, very low, 0.2% of our commercial lending. And as you can see on Page 49, we gave you a certain number of elements regarding the LBO exposure, which is very low, commercial real estate, which is again low with a lot of investment grade. And of course, our Middle East exposure, which is, in fact, mainly on the sovereign and state-owned exposures. Now thank you, Stefan, for highlighting, in fact, the work we did, the team's work to calculate, in fact, the return on capital of these operations. These operations, the EUR 12.5 billion that I was talking about, in fact, we looked at the operations that it is possible to calculate an ROIC on. So you have on big operations, you're going to have a lot of Amundi operations. You have Pioneer, for example, you have Lyxor, you have Sabadell Asset Management. We have also [ Indosuez ] operations with the group. We have CACEIS for example, for Santander. So we have a lot of different operations. Of course, the buyback of the Santander Securities Service share in CACEIS. So all of these operations have different figures in terms of regulated capital. And what I wanted to stress about was the fact that to calculate this return on invested capital, what we take into account is we take the net income group share. And on the denominator, we take the effect of the minority interest, the goodwill, badwill, and we suppose that we have 11% of RWAs. So all in all, the calculations are different for each of these types of operations that I talked about, but they have very different maturities. The ROI is different according to the timing. The ROIC is different according to the timing. And this is a picture of these operations as of 2025. But really what we wanted to insist upon was the fact that we have the very strict financial criteria that we talked about in the medium-term plan, ROI accretive. This is a figure that shows you that we have this accretive nature of our activity, but also the integration capacity and the alignment with our strategy. So this is what we wanted to insist upon on, and insisting upon the fact that the 18% figure is quite strong. Stefan-Michael Stalmann: Could I just follow up on this, please? I mean the common denominator here on the slide seems to be that from a regulatory capital perspective, you need a lot less capital than what you actually spent on the acquisitions. And I'm just curious about why this gap is there. Is there anything that you -- any color that you could add there? Clotilde L'Angevin: I think what it really depends on the nature of the operation and the nature of the businesses that made these acquisitions, Amundi, CACEIS and [ Indosuez ]. And so when we look at the denominator for CET1, the way we look at it is that we take off the impact of goodwill, badwills, minority interest, and we consider that we have 11% of RWAs, which is, in fact, a way that we transpose the targets that we have for CET1 to the different businesses. So it's de facto an internal allocation of RWAs between our businesses. So this is the way we look at the profitability of these operations business by business, comparing them to the target we have, which is 11% of CET1. Operator: The next question is from Benoit Valleaux, ODDO BHF. Benoit Valleaux: Two short questions on my side on insurance. The first one in P&C. You have an increase of your combined ratio of 2.5 percentage points versus last year. You mentioned a very high level of nat cat losses in Q1. I'd just like to know if you can quantify in absolute terms this level of nat cat Q1 this year versus -- and the change versus Q1 last year, just to see how revenues in P&C would have evolved without this nat cat event. And the second question on the life side. So very strong activity in Q1. Nevertheless, the CSM decreased by 1.9 percentage points due to negative market impact. I'd just like to know what would have been the increase without this market impact into the CSM. Clotilde L'Angevin: All right. Thank you, Benoit, for your questions. They are very -- always very interesting on insurance. So regarding the weather-related claims, in fact, the gross impact is just above EUR 200 million this quarter. It's a gross impact linked to storms on the Atlantic front, to floods. And so this impact is quite close to -- if you do a rule of thumb to what we could expect with the market share of P&C Pacifica, which is about 12% market share for this type of insurance. And so this is the gross impact. And thanks to a certain number of absorption mechanisms, thanks to reversals of provisions, what we can say is that the impact in terms of variation Q1-Q1 of this weather-related claims is below EUR 50 million. That's the first point. The second point is that indeed, we always look now for insurance at the CSM. And what's important for us is always to say, and this is what we say this quarter, that we have a new business contribution that is higher than the CSM allocation. But you're right to point out the fact that we had a decrease in March compared to December due to these market effects. We have market effect on revenues in [ Credit Agricole Assurances ] due to the equity I mentioned, but we also have and that's the most -- the majority of it, the market effect in insurance feed into the CSM. Now if we did not have this market impact, we -- I can say we would have about plus 8% impact, [ plus 8% ] growth of the CSM between December and March, which is quite logical if you look at the very strong and record net inflows this quarter of insurance, which was, as you can see, EUR 5.7 billion this quarter. So this is reflected in the growth, excluding market effects of the CSM, which remains at a very high level, [ EUR 27 billion. ] Operator: The next question is from Tarik El Mejjad, Bank of America. Tarik El Mejjad: Just a very quick two questions, please. First one is on the capital treatment of future growth or provisioning, if that goes both ways? And how often you will adjust basically that provisioning? Is it every quarter? Or is it your own judgment? And secondly, on... Clotilde L'Angevin: Sorry, Tarik. Can you repeat the question, sorry, the capital provision on what, sorry? Tarik El Mejjad: On growth, the growth you have on your capital trajectory in the quarter that you took upfront. Clotilde L'Angevin: Okay. The front-loading of RWAs in CACIB, that's what you're talking about, right? Tarik El Mejjad: Correct. And sorry, been a long day. And then the -- on CASA -- sorry, on the -- yes, CASA, I mean, Credit Agricole's EUR 800 million investments in CASA. I mean, I know you say as Credit Agricole, but I mean, the liquidity now is getting even lower. And what do you think the rationale and the end game there? Clotilde L'Angevin: All right. Thank you, Tarik, for your questions. It's been a long day, I know, for all of you guys. So thank you for listening to all of these elements that are oftentimes technical, but which reflect the diversity of our group. So this front-loading, the front-loading that we have of CACIB is, in fact, relatively -- of the RWAs of CACIB, sorry, is in fact, not that special because we do have a tendency to front-load the RWAs in order to front-load the effect that we're going to have in revenues. This time, we front-loaded the organic growth to take an advantage of the active markets in March. So this dimension is not per se reversible. It's the front loading. What's reversible is the 2/3 that I was talking about of the impact on RWAs of the market activities, the volatility impact and the counterparty issuer spreads for the trading book counterparty risk. So here, this -- so if you take that off, if you take off the FX effect, the rest of the growth of CACIB, you're going to have between EUR 1 billion and EUR 2 billion, that's the front-loaded organic growth. You have a little bit which is related, by the way, to rating downgrades in line with increased provisions, but the rating downgrades, when is that going to stop, it's difficult to say. But I would not say that the front-loading is reversible. I would say that the front-loading, we hope to see the impact on results in the coming quarters of this front-loading. Now the SAS, as you know, we are -- SAS Rue La Boetie, which is our today, 63.5% shareholder. So we are, as you know, the daughter, they are the mother. So I cannot comment on what they're saying. But what I can tell you is that they are a very sophisticated investor that knows us very well. And so this program, as you know, they said that they would remain below 65%. They reiterated that, that they had said before. This program is a way for our regional bank, the mother, to really take stock of the fact that we have strong profitability and it is a good idea to invest in Credit Agricole S.A. for the future. They have -- they trust very much our medium-term plan, which is based on customer capture, which is based on transformation, which will provide strong profitability, EUR 8.8 billion in net income at the end of the medium-term plan. And this is very much aligned with their objectives, which is to develop customer capture, to develop performance profitability, to develop capital liquidity at the level of the group. So all of this is very consistent. There is no change in any form of endgame from what -- as much as I know of. For us, it's really the fact that they're investing in a very profitable stake, which is CASA. Operator: The next question is from Alberto Artoni, Intesa Sanpaolo. Alberto Artoni: I have just two quick ones. The first is on capital. And I just noticed that there are 11 basis points of capital consumption this quarter, which relates to methodologies and model changes. And I was wondering if this 11 basis points can -- is on top or can be referred to the slide that you presented when the ACT '28 plan was introduced in which you allowed for 40 basis point regulatory and methodology increases during the plan. So is this part of this 40, so it means that there are 29 left? Or is still 40 to go and this is on top? Clotilde L'Angevin: All right. Thank you for your question. In fact, when we look at the medium-term plan, we look excluding CRR3 impact. And this 11 basis points impact is, in fact, an end of the year impact of CRR3. So it is excluded from the 40 basis points of methodology because what we do in the medium-term plan is that we consider everything to be besides CRR3 impact because in the medium-term plan, if you recall, we had talked about the CRR3 impact, which was 50 basis points. And then we added on this 40 basis points, which was regulatory and methodological impact, including FRTB, which is beyond CRR3. So what I think we can say is that this is kind of the end today of CRR3 impact mostly, mostly. Alberto Artoni: Okay. Very clear. And my second question, just a quick clarification on the Banco BPM stake. Is there -- do the regional banks have a direct stake in Banco BPM? So at the group level, what is the stake? Is it higher than 22.9% or is it 22.9%? Clotilde L'Angevin: No, it's 22.9%. 22.9%, CASA stake. Alberto Artoni: Okay. Okay. So the group does not -- the regional banks do not hold any stake in Banco BPM. Clotilde L'Angevin: Yes. Indirectly, of course -- no. Our stake is 22.9% and it's CASA. Operator: The next question is from Chris Hallam, Goldman Sachs. Chris Hallam: Just two. The first is a bit of a follow-up to Jacques-Henri's question earlier on capital. Could you just maybe just remind us what you can already see coming on capital through the remaining 9 months of the year? Because if I look over the last 5 years or so, you typically haven't really seen an increase in the CET1 ratio through the second, third, fourth quarter for a variety of reasons, including M&A. But consensus as of today now has a 60 basis point increase from here to year-end. So any steer you could give on that would be super helpful. And then again, it's a bit of a follow-up to an earlier question. So not regarding the 14 basis points on BPM, but just how much capital is the whole BPM stake currently consuming? Or put another way, if you sold it today at the latest price, how much capital would be released? Clotilde L'Angevin: All right. So it's difficult to tell you, Chris, for the capital. I prefer to give you guidance regarding the medium-term plan. For the medium-term plan, we're comfortable with our 11% target and our 150 basis point flexibility to which we take off the 16 basis points that we have today. That's all I can tell you, but I can tell you that we're not worried about capital going forward also because we always know that we can develop also the optimization, the securitizations that we can do in particular with SRTs because, as you know, our SRTs are lower than that of what our peers are doing today. Now for Banco BPM, for Banco BPM, we have a EUR 3 billion stake that we equity accounted at the end of last year. Now we have an increase in that, which we bought at the share price, of course. So you have to add to that the share price impact, but in any case, this capital impact of the equity accounted value plus the impact of the increase in the share price, which represents about EUR 120 million in terms of goodwill. This is something that will generate in terms of equity accounted value. It will generate based upon, of course, the income of Banco BPM, something around EUR 100 million every quarter in terms of P&L impact. Operator: The next question is a follow-up from Sharath Kumar, Deutsche Bank. Sharath Ramanathan: Apologies for following up. Just two quick ones. Firstly, on Leasys equity contribution, I think you said double-digit contribution during the fourth quarter earnings. Today, I heard you say single-digit contribution, if you can clarify? Secondly, on interim dividend, can you confirm if the policy is to pay 50% of the first half net profit in October? Clotilde L'Angevin: All right. Thank you. Yes, for Leasys, what I'm telling you when I'm talking about double-digit contribution is talking about the year contribution for the year 2026. So here, we were just about breakeven in the first quarter. So you can see that that's going to pick up because what I'm confirming is a double-digit contribution to yearly net income. And so yes, for the interim, what we're going to do is we're going to apply a 50% payout ratio on the 15th of October based upon the first half year net income. And so we're really adopting market practice in this respect. Operator: [Operator Instructions] Miss L'Angevin, there are no more questions registered at this time. I turn the conference back to you for any closing remarks. Clotilde L'Angevin: All right. Thank you. Thank you very much, everybody. I'm really feeling for you in this very long day. I just wanted to tell you that we have our next meeting for you guys, which is the workshop that we're organizing for LCL, which is on the 26th of May, sorry. Thank you, Cecile. On the 26th of May, so we're going to be very happy to see you at that time. That's our next meeting. And of course, we have the General Assembly just before that on the 20th of May in Saint-Brieuc in Brittany, where we hope there's going to be a lot of sun. So looking forward to see you guys there and have a very relaxing weekend after this long week of earnings calls. Bye-bye, everyone. Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Morguard Real Estate Investment Trust 2026 First Quarter Results Conference Call. [Operator Instructions] This call is being recorded on Friday, May 1, 2026. I would now like to turn the conference over to Andrew Tamlin, Chief Financial Officer. Please go ahead, sir. Andrew Tamlin: Thank you, and good afternoon, everyone. My name is Andrew Tamlin, Chief Financial Officer of Morguard REIT. Welcome to Morguard REIT's first quarter 2026 earnings conference call. I am joined this afternoon by John Ginis, Vice President of Retail Asset Management; Tom Johnston, Senior Vice President of Western Office Management; and Todd Febbo, Vice President of Office Asset Management, Eastern Canada. Thank you all for taking the time to join the call. Before we jump into the call, I would like to point out that our comments will mostly refer to the first quarter 2026 MD&A and financial statements, which have been posted to our website. I refer you specifically to the cautionary language at the front of the MD&A, which would also apply to any comments that we would make on this call. Our first quarter results were in line with expectations and consistent with last year's results. We have seen some softness in the office net operating income from two larger tenants that have given back space in Ottawa and Vancouver in recent months, but this has been mostly offset by improved retail results coming primarily from our enclosed model asset costs. The REIT's net operating income for the first quarter was $25.6 million, which was down slightly from $25.7 million in 2025. While we are missing the income from the two failed Bay stores, which form part of the 2025 results, we have had some good success in adding other quality tenants in the last 12 months throughout the portfolio. Further, positive leasing spreads throughout 2025 have also helped to improve the retail net operating income. Our community strip portfolio continues to produce solid same-store growth of 2.2%, allowing for one asset with a failed Peavey Mart, which I'll discuss in more detail later on. Just touching on the two Bay stores that we received back in 2025, at this point, we are focusing on short-term options for these two spaces. It will take some time to sort through these former Bay tenancies at Cambridge, and we are dedicating more focus to the broader redevelopment going out at St. Laurent, rather than the specific Bay vacancy at the site for now. Notwithstanding the failure of the Bay, there are still lots of positives in the retail sector. There remains lots of good conversations involve -- involving well-known national brands. It still remains expensive to construct new retail space, and hence, a lot of retailers are looking at options of existing space. The decline in office net operating income is primarily attributed to 84,000 square feet in space that was returned to the landlord in two separate occasions in the last few months. These two assets were located in Ottawa and Vancouver. All of our other office assets are seeing either similar or improved occupancy from a year ago and is consistent with the general theme of companies imposing back to the office policies. We believe these two vacancies will be short term in nature as both buildings are well located in favorable urban areas in these two cities. Our teams are focused on leasing opportunities in these areas. Just commenting quickly on our Penn West Plaza -- at our Penn West Plaza asset, our occupancy for this asset is still in the range of 80%, which we are pleased with. We are expecting net operating income for this asset to be approximately $2 million higher in 2026 than 2025, all to be reflected in the final three quarters of the year. This relates to some inducements booked in 2025 to gain tenancies that have started to burn off. Our leasing teams have noticed increasing interest in tours from office space in major urban areas as companies continue to push their employees to get back in the office. We are cautiously optimistic that this will translate into future office leasing deals into 2026 and 2027. Looking at the remainder of 2026, we do expect our retail results to remain stable. While we have a full year of the missing Bay income to work through, we are still seeing positive retail fundamentals, and there are some retail developments that we were working on, which I will touch on in a few minutes. We are expecting to see some continued softness in the office members in 2026 as we work through the vacancies in both Ottawa and Vancouver. Turning to financing and liquidity. The trust is $61 million in liquidity at the end of the year -- at the end of the quarter, which is down from $68 million at the end of 2025. The trust also has $218 million in unencumbered assets, along with some up financing opportunities in 2026. The trust interest expense declined $400,000 in the first quarter of 2026, mainly due to some lower interest rates on mortgage renewals. So far in 2026, the trust rated two mortgages totaling $27 million, lowering the interest rate from an average of 5.4% on these mortgages to an average of 4.7% on renewal. The trust has approximately 22% of its debt is variable at the end of the quarter, which has increased slightly from 21% at the end of the year. We do expect to see some opportunities for up financing in 2026 as we are currently in discussions with a number of lenders about these mortgages -- mortgage renewals. In general, we have seen this market open up more in the last year with lower spreads, especially on attractive assets along with lenders being more open to looking at lending opportunities for office product. As mentioned in past quarters, the trust's operating capital reserve has been established to be $35 million in 2026, which is unchanged from 2025. This equates to $8.750 million per quarter. Actual cash spent for the quarter amounted to only $3.4 million, which is typical to have a slow quarter of capital spending during the Canadian winter. Our overall occupancy level of 84.8% at March 31, 2026, has declined from 87.7% a year ago, due primarily to the Bay failures at Cambridge and Ottawa in addition to the office vacancies that I mentioned previously. We do expect this percentage to start to rise in the coming quarters as additional leasing deals get booked. When looking at the 1 million in remaining square feet that's coming up for renewal in the last three quarters of 2026, we do feel good about the vast majority of this space. I note that there are two retail tenants between 10,000 and 15,000 square feet each, along with the 35,000 square foot industrial that we anticipate will not be renewing. We do not anticipate that the retail vacancies will have much of an impact on our overall net operating income, and we do anticipate finding a replacement tenant for the industrial building in short order. Looking quickly at 2027 for the same tenant threshold. It is a similar story with only a couple of smaller office industrial type tenants that are at risk, none of which will be overly impactful. As mentioned in past quarters, we are now embarking on a strategic merchandising program for St. Laurent, which will see the addition of some new nationally recognized brand names being added to the tenant roster along with expansion plans for other tenants on the existing rent roll. The current development spend in the amount of $6.2 million includes build-outs for tenants such as Sephora and H&M. These are all now open, and we have received very positive reviews about their impact. We ultimately expect to spend in the range of $25 million to $30 million as we look to add more discriminating tenants and also look to activate the former Sears space at St. Laurent. We are looking to announce the next phase of this project shortly, which will continue to offer traffic generating mix of tenants to this asset. The trust also has had two No Frills grocery deals, which have been undertaken. During the fourth quarter of 2025, a new No Frills grocery store opened at Parkland Mall in Red Deer, and we are now seeing the income for that space. This cost was $1.5 million and activated previously vacant space. There is also a new Frills opening at the center in Saskatoon, an early center with a cost of approximately $5 million. The trust believes that both of these new popular grocery options will be strong additions to these malls. The trust will also be retenanting the old Peavey Mart box at our open-air retail asset Airdrie. The new tenant will be a gym operator and will represent a combined spend of approximately $1.5 million and will be quite accretive to the income of the REIT starting in 2027. Wrapping up, we continue to believe that there are strong fundamentals in the retail leasing environment and that the office fundamentals have changed for the better. We are looking forward to continued positive leasing conversations for all of our assets. Most of our enclosed malls remain dominant in their geographical area and our strip malls, which are largely grocery-anchored, have performed steady. Beyond our retail assets with high-quality office buildings in Canada's largest markets with a high degree of government office tenants. We continue to be positive about our business and the objective of building value for our unitholders. We look forward to continuing to execute our strategy, and thank you for your continued support. We will now open the floor to questions. Operator: [Operator Instructions] Our first question comes from the line of Linda Wang from TD Cowen. Linda Wang: This is Linda Wang on for Jonathan. So my first question is for the $159 million convertible debenture that's maturing at the end of this year. I was wondering if you could please provide some details on the plan for this amount. Andrew Tamlin: Thank you for the question. We're looking at doing a new issue for those debentures at some point later this year. It will be at an interest rate higher than the existing rate, but we are forecasting really just to do a new issue approximately the same amount, give or take. We'll be monitoring the market and that will be instructive as far as when we're going to be doing that. Linda Wang: Okay. And then on the office vacancies in Vancouver and Ottawa that you mentioned earlier, I was wondering if you have a time line on the backfill of those spaces? And then also specifically for the office portfolio, if there's any other similar downsizing or any material nonrenewals for the remainder of the year? Andrew Tamlin: I would expect we'd be able to fill those vacancies in the next year or two. It's -- these are going to be pretty good areas and will be in demand. So they shouldn't be open for too long. And there is nothing else that we're really worried about from an office perspective. I've just mentioned a few retail tenants that will be vacating. But on the office side, we feel pretty good about everything in the next year or so. Linda Wang: Okay. Sounds good. And then on the HBC location, I believe -- and I believe John mentioned during the last call, and you mentioned earlier that you can expect like a short-term lease. I was wondering if you have any updates specifically relating to that? And then also any updates on the long-term plan? Andrew Tamlin: Do you want to take that, John Ginis? John Ginis: Sure. Thanks, Andrew. Hi, Linda. So with respect to Ottawa, starting there, St. Laurent, we have executed a deal to backfill the lower level of the former HBC box with Urban Behavior. They will took occupancy actually today, and they should be open and operational within a matter of 3 to 4 days. Just as a reminder, they have been an occupant of ours at the shopping center in our former Sears. They have been operating there for about 4 years and have performed quite well. So retaining them was true their benefit and our benefit as well. Andrew spoke in his introductory remarks that we are looking to announce remerchandising of the former Sears premises. We'll talk about that in Q2. For the upper level of the former Sears, we're working through a transaction right now to lease that space and again, hoping to announce that in Q2 as well. You want to pivot to Cambridge. Cambridge two-level space, albeit it is a single-level mall, so it's a little bit more difficult to lease both levels. We are currently working through a transaction to lease the lower portion of the HBC space there. I can't give any specifics right now, but we're working through some documentation as we speak. Linda Wang: Okay. And then one last question for me. On the renewal for retail space in Q1. I believe the uplift on renewal was negative 9% for the enclosed regional centers and plus 2% for the community strip centers. I was wondering if there's any particular reason that drove this to be lower than 2025 average uplift? Andrew Tamlin: Yes. We typically see a trend like that in the first quarter, and it's really a function of some of the Christmas-type tenancies that are coming off the roles. So it's -- I would call that more temporary than anything. Linda Wang: Okay. And then I guess for the remaining, like the upcoming quarters, we can expect similar uplift compared to 2025 then? Andrew Tamlin: I would be expecting uplifts. I can't -- it's tough to put a number to it, but, yes, what I would say is that I don't know that -- we're not anticipating is what we're seeing in the first quarter will continue for the rest of the year, and this is more of a short-term seasonal trend. Operator: There are no questions at this time. Mr. Tamlin, please continue. Andrew Tamlin: Okay. Thank you, everybody, for joining the call, and we look forward to talking to everybody in Q2. Thank you, and enjoy the weekend. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to Camden Property Trust First Quarter 2026 Earnings Conference Call. I am Kimberly Callahan, senior vice president of investor relations. Joining me today for our prepared remarks are Richard J. Campo, Camden’s executive chairman; Alexander Jessett, chief executive officer; Laurie A. Baker, president and chief operating officer; and Unknown Executive, chief financial officer. D. Keith Oden, executive vice chairman, and Stanley Jones, senior vice president of real estate investments, will also be available for the Q&A portion of our call. Today’s event is being webcast through the Investors section of our website at camdenliving.com, and a replay will be available shortly after the call ends. Please note this event is being recorded. Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filings with the SEC, and we encourage you to review them. Any forward-looking statements made on today’s call represent management’s current opinions, and the company assumes no obligation to update or supplement these statements because of subsequent events. As a reminder, Camden’s complete first quarter 2026 earnings release is available in the Investors section of our website at camdenliving.com, and it includes reconciliations to non-GAAP financial measures discussed on the call. We would like to respect everyone’s time and complete our call within one hour. So please limit your initial question to one, then rejoin the queue if you have a follow-up question or additional items to discuss. If we are unable to speak with everyone in the queue today, we would be happy to respond to additional questions by phone or email after the call concludes. At this time, I will turn the call over to Richard J. Campo. Richard J. Campo: Good morning. Our theme for today’s pre-call music is change. We recently announced some important changes to Camden’s executive team. With the promotions of Alexander Jessett, Laurie A. Baker, and Ben Fraker, we continued our longstanding commitment to succession planning featuring Camden’s homegrown talent. This will ensure the continuity of Camden’s family values, institutional knowledge, and unique culture. Alex, Laurie, and Ben each bring 25-plus years of tenure at Camden to their new leadership roles. And in the words of REO Speedwagon, I will be here when you are ready to roll with the changes. These promotions will ensure that Camden will be ready to roll with the changes in the years ahead. But one thing that never changes is Camden’s commitment to workplace excellence, which was recently reinforced by our place on the Fortune Best Place to Work list in America for the nineteenth consecutive year, ranking number 13 this year. 96% of our employees say Camden is a great place to work, which has led to the highest customer sentiment scores that we have ever seen. The macro case for improving apartment fundamentals continues to be strong. New supply has peaked and has been cut in half in most of our markets. First-quarter apartment net absorption was one of the best since 2016 despite slow job growth and tepid consumer sentiment. Apartments provide consumers with a compelling low housing cost alternative to owning a home. I want to give a big shout-out to Camden team members for continuing to improve the lives of our teammates, our residents, and our stakeholders one experience at a time. Next up is no stranger to you, but our new CEO, Alexander Jessett. Alexander Jessett: Thanks, Rick, and good morning. As Ben will cover in detail, we had a strong first quarter. Much of the outperformance was timing related, and we are looking forward to seeing how our peak leasing season unfolds throughout the remainder of this quarter and next. In the first quarter, we recorded our lowest bad debt level since the onset of COVID-19, at less than 40 basis points. We attribute this in part to income tax refunds received by many of our residents, combined with their continual financial strength and the impact of our enhanced resident credit screening. For middle and higher income earners, 2026 tax refunds are up approximately 10% over last year, creating enhanced spending power. Despite headline reports of declining consumer sentiment, the data illustrates the financial health of our target demographic remains strong, with spending up 3% year-over-year primarily on services and retail. Our renters pay a low 19% of their income toward rent, allowing them additional discretionary funds often not seen in the more expensive coastal markets. On the demand side, our markets remain strong. CBRE’s latest headquarter relocation study, which covers 725 public announcements between 2018 and 2025, shows activity accelerating in 2025 and concentrating on a short list of metros. Dallas–Fort Worth remains a top destination with more than 100 headquarter relocations since 2018. In 2025 alone, the metro added another 11 interstate or international headquarters from higher-cost markets, including Los Angeles, the Bay Area, New York, and Chicago. Additionally, for the twelve months ended January, Dallas led the nation in absolute job growth, followed by Houston at number two, and Austin at number four. On a percentage basis, Austin led the nation with most of our markets in the top 30. The Houston metro area led the nation last year in population growth, with just under 127 thousand new residents added in the twelve-month period ending 07/01/2025. That equates to one new resident every 4.1 minutes, or 347 new residents each day. Among the top 10 metros with the largest population gains, only the Dallas–Fort Worth metro came close, with roughly 124 thousand new residents. No other metro added even half as many. This disparity highlights Texas’s appeal to workers and families supported by relatively strong job markets, lower cost of living, and the absence of a state income tax. Beyond Dallas–Fort Worth, the CBRE relocation study showed a group of Sunbelt and growth markets emerging as consistent headquarter winners. It highlighted Miami, Austin, Charlotte, Nashville, Phoenix, Tampa, Atlanta, and Raleigh–Durham as rising contenders with a pro-business climate, including tax advantages, labor availability, and lower costs. The decades-long trend of domestic migration to the Sunbelt normalized in 2025, not disappeared. In fact, WIN’s migration tracker shows domestic migration reaccelerating in 2026 as compared to 2025 in most of our markets, with sequential annual increases over 10% in Austin, Dallas, Houston, Orlando, Phoenix, and Tampa. Camden is in the right high-demand markets ready for the upcoming lower supply environment. Turning to the real estate front, our California sales process is progressing on schedule. As we shared previously, we have had strong interest, with over 230 companies signing confidentiality agreements. We are currently in the diligence process with one buyer for the entire portfolio, with an anticipated close date in late June or early July. If it does not work out with this buyer, there are other strong buyers who could step in, although with a later closing date. At this point, we are not going to comment further on the potential buyer or the sales price other than to say it is in line with expectations. We continue to assume approximately 60% of the sales proceeds will be reinvested through 1031 exchanges into our existing high-demand, high-growth Sunbelt markets. The remainder of the proceeds, modeled at $650 million, has been used for share repurchases in late 2025 and year-to-date 2026. During the first quarter, we disposed of a high CapEx 40-year-old community in Dallas for $77 million, generating an approximate 12% unlevered IRR over an almost 30-year hold period. After quarter end, we acquired Camden Alpharetta, a 269-home apartment community in the Atlanta, Georgia metro area, and Camden at Lake Nona, a 288-home apartment community in the Orlando, Florida metro area, for a combined $170 million. We are actively underwriting several other acquisition opportunities and remain confident we can effectively deploy the 1031 proceeds from the California sale. However, as I previously noted, the timing of the exchanges can add considerable variability to our 2026 earnings, as we do not receive the sales proceeds until we complete the exchanges. I will now turn the call over to Laurie A. Baker, our president and chief operating officer. Laurie A. Baker: Thanks, Alex. Camden’s operating performance to date is generally in line with our expectations. While our first-quarter results were slightly ahead of budget, the outperformance was mainly driven by timing-related items. Overall, and as expected, we saw slow but steady improvements across our portfolio as we moved through the first quarter and into the beginning of peak leasing season. Our preliminary results for April are on track, with modest improvements in both occupancy and blended lease-rate growth compared to the first quarter. Turnover remains exceptionally low and our first quarter 2026 annualized net turnover rate of 30% was one of the lowest in our company’s history. This is in part due to minimal move-outs related to home purchases, which accounted for 9.2% of our total move-outs this quarter. But it also reflects record levels of resident retention, which are a testament to Camden’s unwavering focus on customer service and providing living excellence to our residents. We will continue to focus on renewals and retention going forward, helping us protect and maintain occupancy and to mitigate expenses related to unit turnover. Renewal offers for May, June, and July were sent out with an average increase in the mid-3% range. Our team at Camden remains committed to this year’s rallying cry of smarter, faster, better, which means smarter in leveraging data, insights, and AI to drive better outcomes, remove repetitive tasks, and improve our margins, faster with AI to enable quicker, more efficient service for our customers and teams, and better by amplifying our people and improving the customer experience as reflected in our highest customer sentiment score to date in the first quarter. I will now turn over the call to Unknown Executive, Camden’s chief financial officer. Unknown Executive: Thanks, Laurie, and good morning, everyone. I will begin with our capital markets activity from the quarter, followed by a review of our first-quarter results and our outlook for the second quarter and remainder of the year. During the first quarter, we continued to take disciplined actions to further strengthen our balance sheet and enhance our long-term financial flexibility. We proactively recast our $1.2 billion revolving line of credit, extending its maturity four years while preserving attractive covenant terms and lowering all-in pricing by 15 basis points. The recast enhances our liquidity position and reflects the continued support we receive from our bank partners. During the quarter, we also issued $600 million of 10-year unsecured bonds at an all-in effective rate of 5%. This issuance allowed us to lock in long-term fixed-rate financing, extend our weighted-average debt maturity, and reduce near-term refinancing risk. As Alex previously mentioned, we were active with our share repurchases during and subsequent to the quarter, with share repurchases of $423 million at an average price of $104.08 per share. These repurchases, along with $271 million in repurchases completed in 2025, reflect our disciplined and opportunistic capital allocation approach as our shares trade at a significant discount to NAV. While we will continue to monitor our share price performance, our updated full-year 2026 guidance assumes no other share repurchases. As a result of these actions, we ended the quarter with strong liquidity, well-laddered maturities, and leverage metrics that remain comfortably within our long-term targeted range. Turning to our first-quarter results, we delivered a solid start to the year. For the first quarter, core FFO was $1.70 per share, which exceeded the midpoint of our guidance by $0.04 per share, which we can attribute to the following items. The outperformance compared to guidance was driven by $0.01 from higher revenues from our operating properties, primarily attributable to lower-than-anticipated bad debt and higher collections on delinquent rent. Another $0.02 resulted from property expense savings, which were largely timing related and not indicative of a change to our full-year expense outlook. The remaining $0.01 of the beat was due to the timing of third-party construction fee income, which we had previously expected to earn later in 2026. Operating conditions during the quarter tracked our expectations for lease trade-out and occupancy. Additionally, outside of our core operating results, we recorded $58.2 million of non-core FFO charges, most of which were related to the previously disclosed $53 million class action lawsuit settlement detailed in the 8-K furnished on April 9. The remaining charges were primarily due to $4.9 million of anticipated investment losses from two climate technology funds. Turning to full-year 2026 same-store guidance, while we experienced better-than-expected bad debt and delinquency results during the first quarter, we believe it is premature to extrapolate one quarter’s performance into a full-year trend, particularly given market variability. As a result, we are reaffirming the midpoint of our full-year same-store revenue guidance at 0.75%. Similarly, the first-quarter expense outperformance was largely timing related, so we are reaffirming the midpoint of our same-store expense guidance at 3%. With the midpoints of both revenue and expense guidance unchanged, the midpoint of our same-store NOI guidance remains unchanged at negative 0.5%. Our same-store guidance continues to assume improving lease trade-out fundamentals as we enter peak leasing season, along with moderation in new supply pressure as the year progresses. With no change in our expected same-store results, and transaction volume and timing in range of our original plan, we are keeping the midpoint of our full-year core FFO per-share guidance of $6.75. We also provided guidance for the second quarter of 2026. We expect core FFO per share for the second quarter to be within the range of $1.65 to $1.69, representing a $0.03 per-share sequential decline from the first quarter at the midpoint. This anticipated decline is driven by a $0.04 sequential decrease in same-store NOI as higher expected revenues during our second quarter are offset by the seasonality and timing of certain repair and maintenance expenses and the timing of our annual merit increases. This $0.04 same-store NOI decrease is partially offset by $0.01 of additional non-same-store NOI from our completed and projected net acquisitions. In closing, Camden remains in a strong financial position. Our balance sheet strength, ample liquidity, and disciplined capital allocation provide us with meaningful flexibility as operating conditions evolve. At this point, we will open up the call for questions. Operator: We will now open the call for questions. The first question comes from Eric Wolfe with Citi. You may go ahead. Eric Wolfe: I think you said that April blends were modestly better than the first quarter, which I came in at, I think, around negative 1.4%. But you also said that April was generally in line with your expectations and what you had in guidance thus far. Could you maybe just talk about sort of the ramp that you expect for the rest of the year? I guess, it would seem like based on your guidance that you expect a pretty big ramp. I was just curious when you expect to see that, and if you see any early signs of that increase in spreads based on your Street data. Thanks. Alexander Jessett: Yeah, absolutely. So let us sort of frame it. Let us first talk about occupancy. April occupancy is right around 95.4%. That compares to 95.1% in the first quarter, so that is a pretty considerable increase. And then when you look at blended rates, blended rates for us in April—certainly not giving interim data because I do not want our peers to smack me—but we are seeing blended rates up about 100 basis points in April as compared to what we saw in the first quarter. So all of that is in trend and absolutely positive. If you look at how we are thinking this is going to lay out for the rest of the year, what we are anticipating is a pretty strong third quarter, with the hope that at that point in time, we have got enough of the new supply absorbed, and then that leads into sort of an atypical better fourth quarter than what you would normally see because you have got supply coming down so dramatically. So that is what is built into our numbers. I will tell you at this point in time, we are feeling pretty good about how April is shaking out, and we are certainly seeing several of our markets that I would classify as showing green shoots. The markets that are jumping out to me would be Atlanta, Dallas, Orlando, Nashville, Raleigh, and Southeast Florida. And we think those are going to be the markets that are really going to lead us in this sort of return to normalcy as all that excess supply is absorbed. Operator: The next question comes from Jamie Feldman with Wells Fargo. Jamie Feldman: Great. First, congratulations, everyone, on all the changes. Excited to see what comes next. I guess as we think about going back to those comments, can you talk about concessions? How have they been trending, and then as you think about the ramp you expect to see for the rest of the year, your expectations for concessions coming in and how that helps? Alexander Jessett: Yeah. I mean, as you know, we do not offer concessions. And so what we are doing is we have to look and see what is out there in the marketplace. And the good news is that we are seeing concessions come down fairly meaningfully in most of our markets. And once again, that is really tied to supply. If you look at the vast majority of our markets, new supply is down 50% since peak. And because of that, you are no longer in a situation where you have got a lot of developers that are trying to go from 0% occupied to 95% occupied and offering every single concession possible to get you there. So we are seeing concessions come down, as I said, pretty considerably in most of our markets. And really the easiest way and sort of the best comp that I have for that is the one asset that we have got in development, which is our Village District community in Raleigh. In that particular community, remember that we always assume that you are going to give one month free in a new lease-up, and that is to compensate for the fact that there is construction activity, etcetera, going on. And we are offering a concession there, but it is not much over that one month. And so what that really does tell you is that concessions are starting to get into check in our markets. Operator: The next question comes from Austin Todd Wurschmidt with KeyBanc Capital Markets. Please go ahead. Austin Todd Wurschmidt: Yeah. Laurie, I think you indicated asking rates on renewal leases are going out in the mid-3% range. I think last quarter you were sending out around 3% to 3.5% and achieved closer to or just below, I think, 3% was the number. Just curious what the take rate has been from the asking versus achieved, and do you think that starts to narrow a little bit as you get into the peak leasing season as it sounds like things have picked up a bit? Laurie A. Baker: Yeah. So we saw that in the first quarter—we were going out with the range in the mid-3s, and I think we reported that last quarter—and what we saw is just a little bit of price sensitivity in the first few months of the year, but we are now starting to see in our May, June, July lease renewals that are going out that we are able to get a little bit more of an increase in those numbers. And with our renewals being so high, we are feeling pretty good about kind of landing right around the same range of usually 50 basis points below where we send offers. And so as we have the opportunity to push in markets where we are getting a little more pricing power, we will continue to do so. In the markets where there are more concessions and supply, we may not be able to get to those top-line numbers that we are going out at, but we feel pretty good about the conversations we are having out there. And just know, it has a lot to do with how well we take care of our residents and explaining to them the costs that are associated with moving and the product we provide and the service level we provide. Those conversations typically go pretty well. So we are feeling good. Our teams are very focused on explaining what the concession market is and how our net pricing equates to that. So I think we are feeling good about, as we said earlier, going out with the mid-3s and a little higher as we get into our peak summer. Operator: The next question comes from Stephen Thomas Sakwa with Evercore ISI. Please go ahead. Stephen Thomas Sakwa: Thanks. I guess I wanted to ask maybe kind of a size/portfolio question. Obviously, there have been some stories about industry consolidation. And I am just wondering, at your portfolio size, as you think about the data you gather from your existing assets, do you think that data would be better if you were two, three, 4x bigger? And how are you using other data sources to think about pricing today? Alexander Jessett: Yeah. So the first thing I will tell you, we try not to comment on rumors about mergers and acquisitions that are out there. So that is point number one. Point number two, we are very fortunate, and the investor community is very fortunate, that leadership at all companies are really good. And so, whatever decisions other companies make, we have got to believe are right for them. For us, the way we sort of think about this is that bigger is not better. Better is better. And if you look at long-term trends, there is absolutely no correlation between the size of the company and total shareholder return. So that is the big-picture way of looking at it. And then when you look at data, here is what I will tell you. With the scale we have, we have got enough information. We have got enough data to make the appropriate decisions across every aspect of our business. And I do not think that if we were in a situation where all of a sudden we were two or three times the size we are, that we would see any type of significant increase in our ability to collect data, analyze data, and utilize data. I think we are in a world where we have got perfect clarity into all of our information. And remember that we are a pretty good-sized company, and we have got a lot of units that we can look at, and we see how those units are behaving, and we can see how our consumers are behaving. And so I am not really sure that there are any real significant improvements on the data side to come from being considerably bigger. Operator: The next question comes from Jana Galan with Bank of America. Please go ahead. Jana Galan: Thank you. Maybe a question on acquisitions as you prepare to deploy the disposition proceeds. Can you talk about cap rates in the Sunbelt markets you typically underwrite, year-one rent growth, and if you are seeing more opportunity in kind of core products or are you looking at maybe unstabilized or lease-up? Alexander Jessett: Sure. So, obviously, transaction volumes are still clearly below sort of pre-COVID levels, but today are trending in line with where we were in 2025. We are evaluating a number of opportunities as we look to redeploy the proceeds from the California transaction. Not seeing a lot in terms of lease-up acquisition opportunities this year. Those types of opportunities—I think sellers who have properties in lease-up—are really trying to get them to a point of stabilization before they go to the market to create as much liquidity for that asset as they possibly can. From a pricing standpoint, cap rates have really been stable over probably the last 18 months. The trades for newer, well-located properties in the Sunbelt—those cap rates are in the 4.5% to 5% range and have been for some time. That is certainly what we are seeing. Operator: The next question comes from Richard Anderson with Cantor Fitzgerald. Please go ahead. Richard Anderson: Hey, thanks. Good morning and congrats to everyone for all the moves—very exciting. So, my question is on sort of the cadence of the “recovery” from here. I think if we were sitting here at this time last year, we probably would have thought by now we would be seeing more in the way of real, you know, CPI-plus at least type growth, particularly out of the new lease category. It seems like that got delayed a year, given the tail of supply. But I am curious if you could comment about what you think the cadence of the growth recovery will be as we get into 2027? Is it more of a hockey stick like we saw in 2022—I would hope not—or more of a gradual improvement based on whatever forces are at work as supply burns off? I am just curious how you envision sort of the cadence from that third-quarter strength that you talked about and onward. Thanks. Alexander Jessett: Yeah, absolutely. So the first thing I will tell you is if you go back and look at 2025, if you remember, we had a little bit of a head fake because in 2025, April looked fantastic, and then all of a sudden, things just stopped pretty quickly, and a lot of that was tied to the factors that we know—“liberation day,” etcetera. If you look at what we are assuming, we are assuming that this recovery could look a lot like what we saw coming out of the GFC. And if you look at what we saw coming out of the GFC, we saw several years of really considerable growth. You look at 2011, I think our NOI was up about 7%. 2012, it was up 9%. 2013, it was up 6%. So you could see something similar to that. Now, if you look at the cadence, we certainly are—and I know you said you hope it is not a hockey stick—we are anticipating sort of a hockey stick in the latter part of 2026 as we get through this absorption. Then, when you get into 2027, at that point in time—clearly not going to give any guidance—but I would anticipate, if you just look back at what we saw coming out of the GFC, then it becomes a steady but strong growth on a go-forward basis. I would just add to that some numbers around the completions in Camden’s markets. The cadence looks like: in 2025, we had 200 thousand completions; that drops to about 140–150 thousand this year; that drops to 135 thousand in 2027; and down to 120 thousand in 2028. The thing that is important about that is it is very hard to change the trajectory of that completion number because if it is not already under construction, it is not coming by 2027. Operator: The next question comes from Bradley Barrett Heffern with RBC Capital Markets. Please go ahead. Bradley Barrett Heffern: Yes, thanks, everybody. Congratulations on all promotions. Glad to see the music is sticking around amid all the changes. Going back to the 1Q blends, typically we see a jump sequentially in the first quarter. Your peers have generally reported that. Last year was 100 basis points higher or so in the first quarter. Sounds like that was already assumed in guidance, but I am just wondering if you can talk through why you did not expect or see that sort of normal seasonal pattern. Alexander Jessett: Alright. So the first thing is, music is not going anywhere. Love our music, and expect to see that for, to the point whenever I am handing it over to somebody else. That music will continue. If you think about the first quarter, what we were doing in the first quarter was making sure that we were setting ourselves up appropriately for the rest of the year, and we feel good about the way our first quarter unfolded. It was in line with our expectations. It was in line with our guidance. It is interesting because there is obviously going to be a lot of comparison between the multifamilies, and we completely understand that. We are all in different markets. If you look at the markets in which we overlap with our competitors—and in particular, one of our competitors—we outperformed in most of those markets. And so however you get there on the revenue side, our revenue results, we feel really good about, and we feel that we are doing the right thing to set ourselves up for a successful second, third, and fourth quarter of this year. And when we look at our April results, our April results are doing very well, as we just talked about, and so we feel very good about how our trend is looking. Operator: The next question comes from Haendel St. Juste with Mizuho. Please go ahead. Haendel St. Juste: Hey, guys. Congrats on the promotions and thanks for taking my question. My question is on the buyback/capital deployment. As you said, you repurchased the $650 million that you outlined on prior calls. Another couple hundred million or so capacity in the buyback. Can you talk more about capital allocation from here, your level of interest in maybe more buybacks? Are they more dependent on incremental dispositions beyond the SoCal portfolio sale? Could you shift a bit of capital from maybe acquisitions to more buybacks? So some thoughts here on capital deployment, the options on the table, then remind us the tax limitations regarding 1031s. Thanks. Unknown Executive: Sure. So between 2025 and 2026, we bought back $693 million in advance of our California sale at an average price of $105 and change. That represents a 6.4% FFO yield. So that has been an excellent source and allocation of our capital. Like I said in my prepared remarks, we are going to continue to monitor our share price performance, but as of now, for our transaction plan, we have no additional share repurchases in our 2026 guidance. And as far as taxable room, we have planned for $1 billion in acquisitions, which is about the amount we need to maximize the use of proceeds to offset any additional special distributions we would need to make. But I will point out, just because we do not have any other share repurchases in our guidance, that does not mean that we will not do any additional share repurchases. We have plenty of capacity under our balance sheet, plenty of capacity with our leverage once the California transaction closes, that we can absolutely do more share repurchases. And so that is absolutely something that is up there for opportunities for us as we go forward. Operator: The next question comes from John P. Kim with BMO Capital Markets. Please go ahead. John P. Kim: Thank you. On the Southern California portfolio sale, I know you do not want to get into the details of it. But I wanted to ask about the rationale of selling to one buyer for the entire portfolio rather than splitting up the portfolio where you might have gotten better pricing. And given the amount of interest that you have gotten on this sale, why not more actively pursue acquisitions ahead of closing of it? Alexander Jessett: Yeah. We had a lot of interest, and we had a lot of interest on both the portfolio side, individual asset side, and then sub-portfolio sides. We believe at this point, what we have done with picking the one buyer that we have picked is we have limited our execution risk while maximizing proceeds. Now it is important to note that there were a lot of buyers clustered together, and so we did make a choice going with a particular buyer because of the strength of that buyer. But to your point, whether we could maximize proceeds by splitting it up—maybe we could have done a little bit more—but it would have introduced additional risk that we did not think made sense to us. And then as I did point out in prepared remarks, even though we have picked the buyer and we are still in the diligence process, the good news is that there were several buyers, and there are several buyers that are around. I think there are several buyers really hoping that our current buyer falls out, but we do not think that is going to happen. And then when it comes to opportunities for more acquisitions, we are really active right now. Since the last couple of weeks, we have actually been awarded $250 million worth of acquisitions. So that gets us up to pretty close to halfway towards our $1 billion goal. There is a lot out there, and I will tell you right now, we are the prettiest buyer in the market. Everybody is coming to us. Everybody is showing us opportunities because they know that we have the capacity to close, and they know that we are for real. And so I am expecting that we are going to come out with a really, really great additional portfolio to enhance what we have today from this process. So feeling really good about the acquisition opportunities, feeling really good about the California process and how it is progressing. Operator: The next question comes from Alexander David Goldfarb with Piper Sandler. Please go ahead. Alexander David Goldfarb: Hey. Good morning down there, and congrats all around Alex, Laurie, and Ben. I guess you guys will have to lead the Camden company skits at those off-sites. So question for you about the demand and supply. You and a number of the other Sunbelt players have all commented that certain markets are rebounding and showing strength. But overall, as you outlined, it is still going to be a tough market until later in the year. Is this a matter of there were a lot of projects from last year that just had slow lease-ups? Is this stuff that leaked into this year? Or is it that you need faster jobs? Basically, I am asking, is this a jobs issue, or is this a supply issue? And if it is supply, was this just projects that got delayed from last year or slower lease-ups? Just trying to better understand the dynamics here. Alexander Jessett: Alex, I am going to hit the most important point first. Rick and Keith are not going to be let out of skits. Fully anticipate seeing them, and seeing them dressed up, on a continual basis. This is entirely a supply story. Demand in our markets is incredibly strong. As I laid out in the prepared remarks, you can look at domestic migration. You can look at job creation. You can look at corporate headquarter relocation. All of those favor our markets over the coasts. This is merely a matter of absorbing the existing supply that is out there, and that is why we feel very good about how the latter part of 2026 should end up because you will have that excess supply being absorbed. To a point that was made earlier, if you look at our markets, our market supply is down 50% over its peak. If you look at most of our markets, and you just look at a year-over-year basis, you have got supply down anywhere between 20% to 60%. What that tells you is once that supply is absorbed, we are going to have very, very healthy revenue growth. Operator: The next question comes from Adam Kramer with Morgan Stanley. Please go ahead. Adam Kramer: Good morning. This is Derek Metzler here with Adam Kramer. My question is about the difference in Class A versus Class B—or affordable by comparison—product and urban versus suburban product. And as supply comes down and, obviously, it is mostly Class A, high-quality product supply that is coming down, how do you see the outlook for the Class A versus Class B and other products in your portfolio and across your markets performing over the next few quarters or years in the better supply environment? Alexander Jessett: Yeah. So A’s versus B’s for us right now is pretty flat. Where we are seeing the delta is suburban versus urban, and if you look on the revenue side and you just look at last quarter, our urban assets actually were 70 basis points better than our suburban assets. Once again, and to the earlier question, this is entirely a supply story. If you look in our markets, apartment supply is falling fastest in urban areas. And because of that, that is where we are seeing the additional pricing power. And then it is in statistics like that that make us feel very good about our ability to get positive rent growth as we move through the year because we do know that once you get past the supply falling in the urban areas, it is going to fall in the suburban areas as well. We will get it all absorbed, and that is what should lead to continued strength as we go throughout the year. Operator: The next question comes from Michael Goldsmith with UBS. Please go ahead. Michael Goldsmith: This is Amy on with Michael. We wanted to touch on Houston where occupancy was down pretty materially year-over-year in the quarter. Wondering what the outlook is for that market and if you think that the recent higher gas prices could have any positive impact there? Alexander Jessett: For Houston, Houston is a really interesting market. If you look at all of the fundamentals in Houston, they are fantastic. When you actually look at the results, though, they are not as great. And there are some really interesting data around consumer sentiment that seems particular to Houston. Houston’s consumer sentiment has fallen pretty dramatically in 2026 as compared to 2025. I think a lot of that is around just some of the effects of immigration, which does have a huge impact to Houston. And I think that that negative customer sentiment is having an impact in the way the Houston consumer spends their money. And, obviously, that is impacting rent. But if you get past the sentiment issue—and what we know about sentiment is humans are incredibly resilient, and they have an ability to return to the positive really fast—once they get past that sentiment issue, they are very strong. In Houston in particular, we have got a lot of job creation. We have got a lot of population growth. We know our consumer is doing really well. In fact, our rent-to-income in Houston is 16%. It is one of the lowest in our entire portfolio. So the consumer is there. The consumer has the ability to spend more money. Supply has come down pretty dramatically. Houston will get better. It is just a sentiment issue. Richard J. Campo: Let me add to that a little bit. When you think about consumers today—and Houston is a great example of that—and I echo Alex’s issue about immigration because immigration is a big issue, and it is definitely stressing a lot of folks out, especially since Houston is the most diverse city in America. We have a minority majority of Hispanic people that live here, and 25% of our population is foreign born in Houston. But the consumer in general is interesting. When you think about consumer sentiment generally across the country, it is not great. But if you look at job growth, wage growth, and consumer spending, it is good. So the consumer is kind of stressed about a lot of things. The things that they are stressed about are, number one, inflation continues to be an issue. And when you think about inflation, housing—so in Houston, for example, housing prices have gone up 60% since the pandemic. In Houston, Texas, people go, “Oh, it used to be affordable here,” and that is bothering consumers. But if you look nationwide, it is the same issue. Housing costs are up. Apartment rents, of course, have been flat for 36 months, but housing prices continue to be up. Interest rates were up. So all those things have kind of created this. And this uncertainty, by the way, politically, has created this tension in the consumer. The interesting part is the consumer is actually doing really well. And so the feeling they have is bad; the underlying consumer strength is good. But to Alex’s point, that tension or that stress or that feeling of uncertainty and “bad” that the consumer has is making them slower to make housing decisions and to move around. So you have less moving around than you would normally have. The other thing I think is really interesting is that when you look at what has happened to college people who graduated from college this year and last year, there has been sort of a failure to launch for about 10% or 12% of those graduates. If you look at stats on people living at home that were not living at home before, pre-COVID we have about a 900 thousand increase in 20- to 25-year-olds that are living at home or with roommates today. So it is a really interesting, kind of weird place. Even though the world is good from a consumer perspective, they are fairly uncertain. Operator: The next question comes from Richard Allen Hightower with Barclays. Please go ahead. Richard Allen Hightower: Hey, good morning, guys. I guess I want to combine two categories into one question for a second. So if I think about the earlier question about sort of the benefits of scale and data and how that informs revenue management and then, of course, the fact that you and several of your peers have sort of put the RealPage lawsuit stuff in the rearview mirror at this point. And I know that revenue management around that topic has already sort of changed throughout the industry. But just maybe help us understand, when you combine those two threads, what has changed about the way units get priced, how you use information, how the competitive marketplace uses information in a different way, and has anything really changed fundamentally on the ground since then? Alexander Jessett: So if you look at RealPage, first of all, all of that litigation—we did come to an agreement in terms—but it is not in the rearview mirror yet. We have got a little ways to go, and so hopefully we can stop talking about that in the next couple of quarters completely. If you look at the way revenue management works, revenue management really does rely a lot on your existing data—on your existing units, the amount of tours you give, how long that particular unit has been on the market, the occupancy of your particular community. And so fundamentally, sure, there have been some changes in the way revenue management works. We do not think that any of those changes will have any negative impact on us whatsoever. The other thing that is really important is, if you look at the way we do it, we have a full-time department called the revenue management department that does nothing but all day long price our individual units. Revenue management software is a tool. It is a tool that our humans use. And so our humans are constantly going through, repricing every single day, looking at recommendations, etcetera. One of the things that we used to say five, ten years ago was whenever we bought an existing community that was using YieldStar or some other revenue management software but only just had it turned on without any additional human interaction, we used to say we love to buy those because we knew we could come in and we could absolutely use our talents, use our resources, use our institutional knowledge, and use our data and make it better—make it perform far better than revenue management software on its own. So we do not think there is going to be any delta, any differential here whatsoever. And the reality is that we have all been using a “compliant” software now for quite some time. So we feel good about the resources we have and feel good about the way we will price our real estate and do not expect to see any negative impact whatsoever. Laurie A. Baker: Yeah, and I would just add that the benefit we have today is the fact that there are new operating models. There are new tools. We have AI. We have a BI team that is continuing to work with our on-site teams and that revenue team to provide data via our dashboards and gain more insights that we have just never even had the ability to make in-the-moment, real-time decisions about what is happening in the field. And so by the nature of how we have evolved as an organization—and our revenue team who has been involved since the very beginning—they have such good insight into what is happening with all of our properties, and getting the weekly, daily information allows us now to even price better with that information and those tools. But as Alex shared, this has always been based on what we do internally with our strategy, and our strategies change. Sometimes what is happening in a submarket or at a local community is driven by some of the outside circumstances, but it is our on-site team and the data we have about our occupancy and our traffic and our leasing velocity that dictates how we price and how we look at our renewals. Operator: The next question comes from Analyst with Goldman Sachs. Please go ahead. Analyst: Yes. Hi. Thanks for taking my question. Just wanted to go back to the tax refund benefit. Do you think that has been a big driver of the April sequential improvement in blends, just because up until this point it does not sound like we were seeing the typical seasonal uplift we would usually expect? And how do you think about the duration of that benefit into future months? Alexander Jessett: It is really interesting when you look at the data. So you saw this large increase in tax refunds, and what happened was folks spent it on a couple of things. One of them—which is, to quote somebody else here, somewhat un-American—they used it to pay down debt. And so that is sort of a one-time benefit. And then they used it for a lot of discretionary spend—think going to restaurants, think retail shopping. So they are absolutely spending the money. I do not think that that is the driver of what you are seeing in the April uptick. I think the driver of what you are seeing in the April uptick is us hitting the typical leasing season and the continued absorption of supply. So I do not think that is the factor. But I clearly do think it was a large component of our bad-debt significant outperformance in the first quarter. Operator: The final question comes from Alex Kim with Zelman and Associates. Please go ahead. Alex Kim: Hi. Congrats to everyone for the respective moves, and thanks for taking my question. I wanted to ask a little about the development environment today and some of the economics that you are seeing, particularly in relation to your capital allocation strategy. Where does development sit relative to acquisitions and then potentially looking at share repurchases? And then, just a bit more specifically, on Ken and Baker given that Denver seems to be a bit slower in the timeline for its recovery in revenue and operating fundamentals? Thanks. Alexander Jessett: If you look at the best uses of our capital today, number one is share repurchases. Obviously, we are limited on how much we can buy back if we are using dispositions to fund that. Once you get past that, developments and acquisitions are sort of a toss-up. At one point, I would have said development, absolutely—three years ago, development was absolutely better than acquisitions. Today, what we are seeing is that you can buy real estate at a discount to replacement cost almost everywhere. And so what that means is that acquisitions become a better use of capital if you are just looking at it from 10,000 feet. Then when you start to dial it back and you start to really dig into the numbers, there are certain environments and certain locations where developments make more sense. And so we certainly are continuing to do our developments. We will talk about Baker in a second, but we do have other land sites we control. At this point in time, we control three additional land sites that we have not purchased. Those three additional land sites we intend to buy this year, and those will be developments, and those will be developments that we believe are going to create pretty significant value for our shareholders. But keep in mind that we are talking about three development land sites versus buying $1 billion of stabilized assets. So that should answer the question right there about what we think is a better use on a broad stroke. When you look at Baker, Baker has been sitting there on our development pipeline for quite some time. The reason why it has been sitting there and not started is, at this point in time, the math is not that great. And we are in no hurry to go start something that we do not believe is the right thing to do for our shareholders. So we will continue to evaluate Baker. Baker is in the central business area of Denver. As everybody knows, that area is really soft right now. So we need to see some improvements in that area. If we see improvements in that area, we will start that development. And if we do not, we will not. We are committed to doing what is right for our shareholders and making sure that we use our capital to create the best investments. Operator: This concludes our question and answer session. I would like to turn the conference back over to Richard J. Campo for any closing remarks. Richard J. Campo: Thank you for joining us today and look forward to seeing all of you really soon. Hope everybody has a great weekend. Take care. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Operator: Good morning, everyone, and welcome to the Mohawk Industries, Inc. First Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To withdraw your questions, you may press star and 2. Please also note today's event is being recorded. At this time, I would like to turn the floor over to Nicholas Manthey, Chief Financial Officer. Please go ahead. Nicholas Manthey: Thanks, Jamie. Good morning, everyone, and welcome to the Mohawk Industries, Inc. quarterly investor conference call. Joining me today on the call are Jeffrey S. Lorberbaum and Paul De Cock. Today, we will update you on the company's first quarter performance and provide guidance for 2026. I would like to remind everyone that our press release and statements that we make during the call may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, which are subject to various risks and uncertainties, including, but not limited to, those set forth in our press release and our periodic filings with the Securities and Exchange Commission. This call may include discussion of non-GAAP numbers. For a reconciliation of any non-GAAP to GAAP amounts, please refer to our Form 8-Ks and press release in the Investors section of our website. I will now turn the call over to Jeff for his opening remarks. Jeffrey S. Lorberbaum: Thank you, Nick. Our performance for the first quarter was in line with our expectations despite a challenging environment. Our adjusted EPS was $1.90, up approximately 25% versus the prior year. Our results include benefits from productivity, restructuring, and product mix, offset by inflation and volume. Last year was impacted by the system conversion and had four fewer days. Our net sales were approximately $2.7 billion, an increase of 8% as reported or a decrease of 2.6% on a constant basis. Across our regions, the commercial sector continued to outperform residential, new home construction remained soft, and consumers continued to defer home purchases and remodeling projects due to economic uncertainty. We are implementing productivity actions and executing our previously announced projects to enhance our results. During the quarter, we repurchased 607 thousand shares of stock for $64 million as part of our current stock buyback authorization. Our strong balance sheet provides strategic and operational flexibility to take advantage of opportunities that arise. In February, the conflict in the Middle East intensified, increasing uncertainty in global energy markets. The full impact of the conflict is unpredictable given the disruption to the worldwide supply of oil and natural gas. Higher gasoline and diesel prices were the fastest and most visible impact of supply disruptions and are contributing to a more cautious consumer outlook. Energy prices as well as the cost of oil and natural gas derivatives are also increasing, which affects the costs of many of our products. Depending on the duration of the conflict, the economic impact will vary across our markets, with increased inflation reducing consumer sentiment and discretionary spending. U.S. natural gas prices have been less impacted due to significant domestic production, though oil prices in the U.S. have risen as they follow worldwide trends. In the U.S., 10-year treasury yields have increased, creating a corresponding rise in mortgage rates. The European continent will be more affected due to the dependence on oil and gas from the Middle East. We have made forward purchases to limit our exposure. European governments are reviewing initiatives to lessen the impact on businesses and consumers, such as cutting energy taxes, implementing fuel price caps, and coordinating European gas storage. The energy markets will remain volatile until the global supply normalizes. We are implementing price increases across many products and geographies and further price increases could be required. The impact of higher cost of raw materials will be greater in the second half of the year due to our flow-through of inventory. We are continuing to launch new product collections with industry-leading designs and features to enhance our sales and margins. We are implementing operational strategies that we have used to navigate past disruptions, prioritizing adaptability and cost control. We are maintaining flexibility to align with evolving demand, supply availability, and volatile costs. We are focused on the controllable parts of our business, including sales initiatives, inventory levels, and discretionary spending and investments. Now Nick will provide the details of our financial performance for the quarter. Nicholas Manthey: Thanks, Jeff. Our Q1 2026 financial results: Net sales for the quarter were $2.7 billion, up 8% as reported and a decrease of 2.6% on a constant basis. Our Global Ceramic segment delivered stronger mix, and we lapped the impact of the order management system conversion in Flooring North America, which partially offset the slower market conditions across our markets. Gross margin was 23.5% as reported and 24.8% on an adjusted basis. This is up 70 basis points from prior year, as the benefit of restructuring and productivity initiatives of $32 million and favorable FX of $20 million offset the increased input costs of $28 million. SG&A expenses were 19.4% as reported and 19.3% excluding charges, in line with prior year levels. That gave us operating income as reported of $112 million, or 4.1% of net sales. We had $38 million in nonrecurring charges, primarily related to our restructuring actions initiated last year. Our adjusted operating income was $149 million, or 5.5% of sales. That is an increase of 70 basis points versus prior year. The benefits of lapping the prior-year order management system conversion of $30 million and our restructuring and productivity initiatives of $36 million were partially offset by increased input costs of $38 million. Lower volumes given the weaker market conditions were offset by extra days in the quarter. Interest expense was $2 million, a decrease to prior year due to the reduction in short-term debt and the benefit of increased interest income. Our adjusted tax rate was 19.4%, and we are forecasting the full-year 2026 tax rate to be between 19% and 20%. That gave us earnings per share on both a reported and adjusted basis of $1.90. Turning to the segments. Global Ceramic had net sales just under $1.1 billion. That is a 10.4% increase as reported and basically flat on a constant basis. The ceramic business delivered positive price/mix given strength in the commercial channel and continued success in the countertop business, offset by lower volumes in the residential channel. Adjusted operating income was $55 million, or 5% of sales. That is an improvement of 20 basis points compared to the prior year, as the combination of productivity initiatives of $21 million and positive price/mix of $13 million only partially offset an increase in input costs of $30 million. Flooring North America net sales were $880 million. That is a 2% increase as reported, or a 4.1% decrease on a constant basis as sales were impacted by slower conditions in both new residential construction and residential remodeling. We had adjusted operating income of $35 million, or 4% of sales. That is an improvement of 100 basis points compared to prior year, as we lapped the impact of the order management system conversion of $30 million, which was partially offset by increased input costs of $13 million and the net impact of lower volumes. In Flooring Western World, we had sales of $751 million as reported. That is a 12.2% increase, or a decrease of 4.4% on a constant basis, with the decrease in volumes in the residential remodeling market impacting our flooring categories, partially offset by volume growth in both our panels and insulation businesses. Adjusted operating income was $74 million, or 9.8% of sales. That is an improvement of 70 basis points compared to prior year as the combination of productivity gains and lower input costs of $14 million were more than enough to offset negative price/mix. Corporate expenses and eliminations were $14 million in the quarter, and we estimate full-year 2026 expenses to be between $52 million and $55 million. Looking at the balance sheet, cash and cash equivalents ended the quarter at $872 million with free cash flow of $8 million in the quarter, which is in line with seasonal trends. Inventories were just shy of $2.7 billion, up less than 1% compared to prior quarter due to inflation. Property, plant, and equipment ended the quarter at just under $4.7 billion. CapEx spending in the quarter was $102 million, and we plan to invest approximately $480 million in 2026, focused on cost reduction initiatives, product innovation, and maintenance. The balance sheet remains in a very strong position with net debt of $1.2 billion and a net debt to EBITDA ratio of 0.9. In summary, our strong balance sheet provides us flexibility to navigate a challenging macro environment while staying positioned to pursue opportunities as the market recovers. Now Paul will review our Q1 operational performance. Paul De Cock: Thank you, Nick. Our Global Ceramic segment delivered improved sales and profitability year over year. All regions are responding to their local markets with new styles and sizes that are improving our average price and distribution in both residential and commercial. Our premium collections increased our mix with advanced technologies that enhance the visuals. Across all regions, productivity improvements and restructuring actions are improving our results. In the U.S., we benefited from stronger commercial sales and increased retail partnerships, which offset ongoing weakness in the builder channel. In March, we introduced our spring collection, which emphasizes higher-end decorative wall tile and large polished floor tile to enhance our mix. We announced price increases on ceramic tile and quartz countertops to offset the higher material and transportation cost. We continue to expand our countertop business with quartz volume growing as we ramp up our new production and introduce higher value products. The U.S. International Trade Commission recently ruled that imported quartz countertops from around the world are harming domestic production, and the Commission is determining tariffs and quotas to safeguard the industry. In our European ceramic business, we delivered solid sales and margin improvement with investments in sales personnel, showrooms, and new collections. In the region, we have greater participation in the commercial channels, which is outperforming the residential markets. The industry has announced limited price increases at this point given the market softness. We have purchased a portion of our natural gas requirements this year, which will reduce the impact of higher energy prices. Our Latin American ceramic businesses have been less impacted by the conflict. We are raising prices in Mexico and Brazil in response to increasing natural gas and transportation costs. In Mexico, our volume improved as we expanded distribution, improved service times, and grew sales with large-sized polished porcelain collections. In Brazil, our new product introductions are improving our mix, with growth in the higher value porcelain category. U.S. reciprocal tariffs on Brazil significantly reduced, which will improve our export volumes to the United States. Brazil's economy remains sluggish and the Central Bank is now cutting interest rates to stimulate growth. Our Flooring Rest of the World segment's results were driven by productivity, cost improvements, and additional days in the period. As the new year began, the European market was showing some improvement after multiple central bank rate cuts and lower inflation. With the war in Iran, consumer confidence declined as fuel and energy costs increased. We are implementing price increases to offset the higher costs impacting our business. In the quarter, our laminate sales benefited from growing retail partnerships and the success of our new collections, which combined elevated style and performance. We updated our LVT designs, added offerings at new price points, and expanded our retail distribution. Our sheet vinyl sales to the Middle East were disrupted, and alternative transport options are improving shipments. Our panels business improved sales and margins with our premium products, and we implemented price increases. We have since announced additional price increases to cover further inflation. Our new MDF recycling plant is expanding production and will further benefit our costs. Our insulation business performed well and improved our costs by reengineering our products. We are growing our insulation sales in Germany and Eastern Europe to support the start-up of our manufacturing facility in Poland. Our businesses in Australia and New Zealand improved results with favorable pricing, mix, and cost. Our new carpet collections, national promotions, and increased participation in the new construction channel enhanced our performance. Our Flooring North America segment remained slow during the quarter given lower remodeling and new construction activity and inventory reductions in the channel. Our results were positively impacted by restructuring, system improvements, and additional days in the period, partially offset by lower volume and inflation. Commercial continued to outperform residential, and we are improving our position in retail and new construction channels. During the quarter, we announced pricing actions in response to material, energy, and transportation increases. Mortgage rates rose almost half a point in March, leading to slower new home sales and declining builder sentiment. While new home sales softened, we have increased our presence in the top national and regional builders. We improved our hard surface mix with our best-in-class laminate, hybrid, and LVT collections. Our proprietary accessories coordinate with our hard surface offering, increasing complementary sales. Our new carpet introductions are being well received, with a focus on our premium polyester and SmartStrand collections. In February, we launched the industry's first carpet collections certified by the Asthma and Allergy Foundation to significantly reduce household allergens using natural probiotics. Our commercial order backlog has seasonally improved, with our carpet tile collections outperforming. Our recently acquired rubber flooring products are being embraced by architects and designers and are creating additional specification opportunities for our other commercial products. I will now return the call to Jeff. Jeffrey S. Lorberbaum: Thank you, Paul. One month into the second quarter, we continue to adapt our business to changes caused by the Middle East conflict. Thus far, we have announced price increases across much of our portfolio due to inflation, and our order backlog has continued to grow. Across our regions, the commercial channel remains solid, while residential remodeling and new home construction could be impacted by lower consumer confidence. Our high-end collections are performing better in the market, and our new products are enhancing our mix. We are maximizing our flexibility to react to changes in our supply chain, operating costs, and market demand. Presently, we are containing costs, reengineering products, and limiting capital expenditure. We will not see the full impact of our pricing actions and rising costs until the third quarter. The degree to which the Middle East conflict will impact our markets depends on the duration of the disruptions and the inflationary pressure. Given these factors and one less shipping day in the second quarter, we expect our adjusted EPS to be between $2.50 and $2.60, excluding restructuring or other one-time charges. We are managing all aspects of the business we can control and responding to market changes as they arise. In the past, Mohawk Industries, Inc. has adapted to cyclical changes as well as dramatic market disruptions while enhancing our business for the long term. Increased new home construction is necessary to satisfy growing household formations, and we expect deferred remodeling of aging housing stock across our regions will significantly increase flooring demand. As we navigate the current conditions, we are prepared to capitalize on the rebound in our industry that lies ahead. We will now open the call for questions. Operator: We will now begin the question and answer session. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys. To withdraw your questions, you may press star and 2. In the interest of time, we do ask that you please limit yourselves to a single question and a follow-up. At this time, we will pause momentarily to assemble the roster. Our first question today comes from Trevor Scott Allinson from Wolfe. Please go ahead with your question. Trevor Scott Allinson: Hi. Good morning. Thank you for taking my questions. Jeff, I appreciate there is a lot of uncertainty in the market right now. At times in the past, you have given a range of outcomes for your business. Can you talk about what that range of outcomes looks like here as we move through 2026 and into early next year? What drives the high end versus the low end? And how are you running your business today to account for the uncertainty and prepare for either end of that spectrum? Jeffrey S. Lorberbaum: There is a lot of uncertainty in the marketplace, and we are preparing for multiple options and staying flexible. We look at the best case as we think forward. The supply of the Middle East could open up in the near term and could return the supplies to normal over the next six months. This would remove the economic uncertainty and would improve the category and the flooring industry in the second half. We would expect the inflationary pressures to remain, though, throughout the year. The alternative view is that the disruption in the Middle East stays for a significant period of time. The inflation continues to increase, and it could result in a pullback by both consumers and businesses. In this case, we have alternative plans to adjust our business strategy to manage through at lower rates. Our strategy is to remain flexible and to adapt to the changes that occur. As a reminder, most flooring projects being initiated today are really to meet the changing needs because they have been down since 2022 and should limit some of the downside if it gets worse. We expect a significant recovery given these four years of postponed flooring purchases. Trevor Scott Allinson: Okay. Thanks for that. That was very helpful. And then second question, perhaps related to those comments. Last quarter, you talked about expecting both sales and adjusted earnings to be up on a year-over-year basis in 2026. Given all the macro uncertainty, should we still think that it is a good base case for you to be able to grow those sales and adjusted earnings this year? Jeffrey S. Lorberbaum: In February, we had expected the category to improve, so we are really focused on maximizing opportunities this year. With the war interrupting things, the environment has really changed, and we are managing the inflation's impact on our margins. At this point, as we just went through, the potential impacts are really unpredictable, and it is too early to tell where it is going to end up. We will have to see how the conditions evolve. Operator: Thank you for all the color, and good luck moving forward. Our next question comes from John Lovallo from UBS. Please go ahead with your question. John Lovallo: Good morning, guys. Thanks for taking my questions. The first one is, can you provide some additional color on just maybe the magnitude of the price increases across regions and some of the key products? And what type of realization are you expecting given some of the challenges from a volume standpoint in the market? Jeffrey S. Lorberbaum: The conflict in the Middle East has really dramatically increased our material, energy, and transport costs across all the different product categories. We are seeing some differences in each region and product categories given different dynamics, and as you would expect, Europe is more affected given their energy dependence on the Middle East. Some of our products are also delivered over long distances, so we have to increase the prices to cover the freight cost as well. We have announced increases across the businesses, generally in the mid to high single digits, with significant variations by both product and geographies. And just to note, the imported products that we and the industry have had really long supply chains, and the price increases due to that will lag some of the others. John Lovallo: Got it. And then maybe to push a little bit more on this, if I can. Let us just say that things stay as they are today. Do you believe that you have enough pricing in the market to offset the current level of inflation, or would additional pricing be needed just to offset what we know today? Nicholas Manthey: Yeah, John. Thanks. I think if you look at Q1, our price/mix and productivity offset the impact of inflation. We expect similar dynamics in Q2. As Jeff outlined, we announced some more price increases in response to the inflation, and we will really see the full impact of both the inflation and the pricing in the second half, and we will adjust as necessary as the environment evolves. John Lovallo: Okay. Thank you, guys. Operator: Thanks, John. Our next question comes from Susan Marie Maklari from Goldman Sachs. Please go ahead with your question. Susan Marie Maklari: Thank you. Good morning, everyone. My first question is around the benefits of the new products. Can you talk about how the momentum you are seeing there is helping you to enhance the mix and incrementally perhaps offset some of that inflationary pressure that you are seeing? And do you also think that you are continuing to gain share with these new products? Jeffrey S. Lorberbaum: Each of the different businesses has new product introductions. There is a significant portion of them that are higher-value products with more differentiation and command higher prices in the marketplace. With that, each of the different businesses is introducing unique products with different features and benefits. Ceramic is driven a lot by technologies of different sizes, as well as different visuals with different decorating technologies to be able to create them. On the other side, we are introducing LVT collections with all the latest technologies and multiple alternatives for PVC in the marketplace, with better performance, better scratch resistance, and other characteristics. The carpet categories are introducing premium products in polyester, and the anti-allergen carpets have never been done, which is a concern by many consumers. In each of the categories, there are different products to provide reasons for the consumers to trade up and spend more money. Susan Marie Maklari: Okay. Thank you for that. And then turning to the margins, you have done a lot in terms of cost cutting and you are realizing some nice productivity across the business despite the headwinds. Can you talk about the ability to continue to see further productivity? And then any thoughts on how we should think about second quarter margins just across the three segments? Nicholas Manthey: Yes, Susan. On productivity, we generated over $200 million of productivity and restructuring savings last year. This year, we have another $50 million to $60 million of restructuring savings that we should realize. In addition to that, over the last few years, we have had additional productivity ranging from $80 million to $100 million. We will continue to evaluate different ways to rationalize our cost structure as we go forward and the environment changes. On Q2, we are assuming the present demand trends continue through the second quarter and there is somewhat of a limited impact from the conflict. The market volumes have been declining. We have seen oil and gas prices increase, which will begin to impact our cost in Q2. We do expect price and mix will improve and help address that higher inflation. Jeffrey S. Lorberbaum: And then, back to your original point, productivity and restructuring will continue to lower our costs similar to Q1. Susan Marie Maklari: Okay. So is it reasonable to assume that you see a fairly normal seasonal sequential lift in the margins? Nicholas Manthey: Yes. Typically, Q2 is our strongest quarter of the year. So going from Q1 to Q2, that is what you would expect. Susan Marie Maklari: Okay. Alright. Thank you. Good luck with the quarter. Operator: Thanks, Susan. Our next question comes from Adam Baumgarten from Vertical Research. Please go ahead with your question. Adam Baumgarten: Hey. Good morning, everyone. Just a question on input cost headwinds. Can you maybe size, as it stands today, what you are thinking about for the back half? As you said, you are going to kind of see the peak levels at that time frame? Nicholas Manthey: I think we are seeing inflation across the different materials, energy, and transportation. We are not going to quantify a precise impact given it is changing pretty much daily. In terms of cadence, the impact will begin in Q2 and ramp up into Q3. Jeffrey S. Lorberbaum: If you look at each of the different product categories, they are all driven by different things. Our carpet, LVT, and insulation are all oil-based and energy intensive, so the materials are being driven by the changes in gas and oil and the materials as well. In the ceramic business, it is really heavily caused by natural gas and transportation costs, and the transportation costs are both for raw materials as well as for shipping our products. The other businesses are wood-based, which is laminate, wood, and panels. They have significant chemical costs in them to put them all together, as well as energy and transportation costs. As we said before, inflation in Europe is higher, and we purchased a portion of the natural gas ahead to limit the volatility. We do see that the U.S. and Mexico have more stable natural gas prices and are less affected by it. We have announced price increases to cover all this as we go through. Adam Baumgarten: Okay. Great. That is helpful. And then just, I believe you guys and maybe your competitors had some price increases out on certain products earlier in April, and it has been about a month. Just curious how those are going as it pertains to that. Paul De Cock: Yes, that is correct. We have recently announced more price increases of mid to high single digits. With these levels of inflation, the industry must pass them through. Jeffrey S. Lorberbaum: In the marketplace, all the prices are going up. The market seems to be understanding it, and we think we are going to have to push them through because we need it. It is possible, given what is going on with the energy markets, we could need more. Operator: Got it. Thanks. Our next question comes from Stephen Kim from Evercore. Please go ahead with your question. Stephen Kim: Thanks very much, guys. Appreciate it. I think I heard you say in Flooring Rest of World that inputs were a positive, even though I think for the company as a whole, it was a headwind of, I think, $38 million. So just trying to understand, can you give us some context around that? I imagine you are anticipating that will probably flip negative again based on your comments. But could you just provide some context around the input in Flooring Rest of World? Nicholas Manthey: Yes, Steve. We did see some positivity in Q1 on a year-over-year basis. You are right. Given the conflict, we are seeing the natural gas and oil prices go up in Europe, and so we would expect that inflation to begin in Q2 and ramp up in the back half. Stephen Kim: Okay. That is helpful. Secondly, and maybe a little more broadly, I want to touch on the innovation comments that you made. There was a comment in your press release about reengineering products, and I wanted to get some understanding of what that meant. Are there certain products that you particularly want to call out? And then at a higher level, there is a lot about the wars, the lingering impact of the war that we do not know. The one thing we do know is that it has put a pause on shipments, and yet innovation is continuing, I would assume, uninterrupted. So what I am curious about is do you actually have a situation where that delay, this pause, if you will, in production and shipping could actually be a positive for you as you continue to work on innovation and R&D? Is this something that could actually lead to a competitive advantage for you as you develop new products such that when the conflict ends, when consumer confidence improves, you could actually capitalize on the R&D that was done during, let us say, a more quiet period? Is that a reasonable way of thinking about it, or is that not? Jeffrey S. Lorberbaum: It is a continuous process, and when you bring new products to market, depending on which market, it takes anywhere from nine months to a year and a half to flip them into the marketplace and then to mature over time. So it is not an immediate impact to get them pushed through the marketplace as normal. The big piece is that the industry and category started going down in 2022. It started with consumers pushing out things, housing sales going down around the world, and there is a huge pent-up demand and need for people in housing. The housing stock continues to get older, and when more confidence comes back, we are expecting many years of catch-up from what has not been spent the last three or four. Stephen Kim: And the role of new products in that, particularly in areas like the hybrid products in North America, for example. I am curious as to whether or not you think that category will be a little more settled and allow you to scale up production better than if, let us say, the consumer response had occurred last year. Is that a reasonable way of thinking about it? Jeffrey S. Lorberbaum: I do not think there is going to be that much difference relative to the new products because we have the capacity to support whatever is needed in the marketplace and react to it as we go through. I think the bigger impact is helping us increase the margins as the business increases and you get leverage in all the fixed costs over the business as it occurs. Stephen Kim: Okay. Great. Thanks very much. Operator: Thanks, Stephen. Our next question comes from Rafe Jason Jadrosich from Bank of America. Please go ahead with your question. Rafe Jason Jadrosich: Hi. Good morning. Thanks for taking my question. Paul De Cock: Good morning. Rafe Jason Jadrosich: Just to start, can you give an update on the Russia business? Just how big it is and how it has been performing? Jeffrey S. Lorberbaum: We do not break it out in that detail, but the Russian business has been performing well. There have been no impacts on the business and how we operate it. We continue to generate cash in the business. The business has slowed down with the general economy over there, and we are adapting to it. We have a leadership position in the category, and we are complying with all the regulations. Rafe Jason Jadrosich: That is helpful. And then I think last quarter you gave a little bit of color on what you were expecting full year for inflation. Obviously, the environment is moving around a lot. Is there any way to quantify the level of inflation in the first half relative to what you are expecting in the second half? Nicholas Manthey: Yeah, Rafe. The inflation will really begin to increase in Q2 and ramp up into the second half. Our pricing and other actions are intended to pass through those costs. As Jeff outlined, it really varies by product and region, and we will adjust our pricing as the levels of inflation change. Rafe Jason Jadrosich: Just asking another way, for the first half, do you have an aggregate—what is the inflation embedded in the first half? Nicholas Manthey: We are not going to break it out in that detail, but we do have inflation in the first half of the year, given the different aspects of our input costs. Rafe Jason Jadrosich: Okay. That is helpful. Thank you. Operator: Thanks, Rafe. Our next question comes from Philip H. Ng from Jefferies. Please go ahead with your question. Philip H. Ng: Hey, guys. I think it is more of a recent practice, but any color on how much you buy ahead in Europe on the gas side of things? And were you able to lock in some of that price before the war? And then, Jeff, I think in 2022, some of your competitors in Italy had some issues on the energy side of things, and Italy is a big import of LNG. Are any of your competitors having trouble sourcing energy? Are they hedged? I was a little surprised with the comment that pricing in Europe for ceramics was a bit more muted. Jeffrey S. Lorberbaum: Yes. We did buy gas before it went up. We continue to buy gas, and we continue to make decisions of what to buy on a going-forward basis to reduce the volatility of the European gas prices. We will have to see what happens in the marketplace with the inventories, gas prices, and the volatility. If the gas keeps going up, the industry will have to respond to it as we go through. There are other areas around the world like India where they do not have enough natural gas. That cut back the industry, and ceramic production we believe is off almost by 80% because they do not have the gas to do it. That should also create opportunities as we go around. Philip H. Ng: Okay. That is helpful. On the North American carpet, I believe you and your biggest competitor have a large concentration in share. There are a bunch of smaller guys. Give us some perspective on how the cost curve looks for carpet in the U.S. between the two of you. Does that drop off pretty hard? And just given where raws are shaping up in the back half, if you do not see much traction, are some of these smaller guys cash flow negative, operating at a loss, and how would you stack up in that situation as well? Paul De Cock: Thank you for the question. The market is soft in carpet in general. Remodeling and new construction sales have slowed. We have announced price increases to cover the inflation. We are introducing new products to also improve our mix, and we are taking further actions to cut our costs. Carpet volumes should improve as the market recovers. Jeffrey S. Lorberbaum: There has been some limited capacity taken out of the industry by us and others. There have been some smaller ones to go out, but not enough to change anything. Operator: Okay. Thank you so much. Thanks, Phil. Our next question comes from Richard Samuel Reid from Wells Fargo. Please go ahead with your question. Richard Samuel Reid: Thanks so much, guys. I just wanted to circle back to the prepared remarks. I heard a comment about your order backlog growing. I am just curious, is that restricted to any particular end markets or categories? We would love some additional context there. And then I also heard a comment about some of your channel partners reducing inventories. So perhaps two things that might be a little diametrically opposed there. Just want to flush those out. Thanks. Jeffrey S. Lorberbaum: As we came into the new year, the expectations for we and the entire industry were greater than they have turned out with the war. So we came into the year, and there were channels that started lowering some of their inventories as we started into the year. The backlog, as we have gone through, the trends of our business from March to April have not changed. The incoming orders are similar to those. The backlog has actually increased in April. We do not see any dramatic change in it now. On the other side, when you have price increases like we are having, there is some pull-forward, but we do not have enough view into the inventories of our customers to know how much that is. Richard Samuel Reid: That is helpful. Maybe switching gears, it is great to hear the commercial end market strength. Restricting the question to the U.S., in the past you have called out institutions and hospitality as areas where you have been growing. What is the latest on commercial end markets, and where are the areas where you are seeing the most strength? Paul De Cock: Around the world, we see the commercial channel continuing to outperform residential. The segments that are performing better would be hospitality, education, health care, and government. To increase specifications, we are expanding our showrooms, product features, and specialized sales forces to go after those segments. Richard Samuel Reid: All helpful context. I will pass it on. Thanks. Operator: Thanks, Sam. Our next question comes from Collin Verron from Deutsche Bank. Please go ahead with your question. Collin Verron: Great. Thanks for taking my question. I just want to follow up on the backlog building. Is that across the portfolio, or are you seeing pockets of weakness and strength just given what is going on in the Middle East? I thought it sounded like there was probably a little bit of caution, so maybe some downside in volume trends into April, but it sounds like they are building. Any clarification there would be helpful. Jeffrey S. Lorberbaum: It is generally across all the businesses. The backlogs are generally higher than they were a month or so ago. We are having difficulty separating the ongoing business trends from inventory changes in the customers. We are not going to be able to know that for a while. Collin Verron: Okay. That is helpful. And then just following up on natural gas, is there any way to understand how much of the gas you have already hedged for this year versus how much you would need to buy just to service production levels for the remainder of the year? Jeffrey S. Lorberbaum: It is different by business and different by country. In some countries, you cannot do it; the country purchases it and the price is the same. In other countries, we can purchase ahead. So it is not as simplistic an answer as you would like to have. Collin Verron: Understood. Thank you, and good luck. Operator: Thanks, Collin. Our next question comes from Michael Glaser Dahl from RBC. Please go ahead with your question. Michael Glaser Dahl: Hi. This is Mike. Just a follow-up on the near-term demand comments. What are you guys specifically assuming in the 2Q guide in terms of demand trends? Is it more of the same from what you have seen in April? And then on that order backlog comment, the sequential increase, is there any way you could help frame that on a year-over-year basis? Nicholas Manthey: Thanks, Mike. Again, we are assuming that the present demand trends continue through the second quarter, and there is limited impact from the conflict. Market volumes have been declining for a little while, and so we do not expect a big change in Q2. Jeffrey S. Lorberbaum: At this point, we have not seen a decrease in the sales and order trends. We are going to have the impact of the increase in prices as we go through, starting in the second quarter and ramping up in the third quarter. We will have to see how things evolve. The question we all have to answer is what is going to happen to the consumer confidence and spending patterns given the inflation that is coming through the marketplace and how the consumer is going to react. We are all going to get to find out together. Michael Glaser Dahl: Fair enough. From all the pricing that you have announced, are there regions or products where you could rank order where you think you have the most pricing power versus the least? Or if it is easier, just by segment, when we think about modeling the pricing tailwind. Jeffrey S. Lorberbaum: I am not sure there is a dramatic difference in any of them. The biggest differences would be the amount of inflation based on how big the cost increases impact each product category. It may sound different, but the ones with the highest inflation may be the easiest because the industry has to force through more. The imported products with long supply chains—those product categories—it is going to take a while before the chemical costs flow through, but they are going to flow through. Michael Glaser Dahl: Understood. Appreciate the color. Operator: Our next question comes from Michael Jason Rehaut from JPMorgan. Please go ahead with your question. Michael Jason Rehaut: Thanks. Good morning, everyone. First question, I just wanted to circle back to the price increases relative to the cost inflation that you expect to see in the back half. I just wanted to be sure of two things. First, when you talk about the cost increases, it is the ones that you have already announced in April—mid to high single digits—if that is really, at this point, what we are talking about. And second, as you see the cost inflation today, are the price increases sufficient to offset the back half cost inflation? Nicholas Manthey: Mike, our pricing that we have announced along with other cost actions are intended to offset the higher cost. We have announced mid to high single digits across most of our categories. Inflation is changing daily and weekly. We will adjust and adapt as we go through the second half of the year, and our intent is to pass them through. It is possible we will have to announce additional price increases if things keep inflating. Michael Jason Rehaut: Right. Okay. And the second question, just on mix. If you are seeing any green shoots of mix—I am really thinking about North America here, ceramic and North America flooring. How would you characterize the mix trends in residential? Have they improved at all? And could this be any help as well in the back half as you combat some other margin pressures? Jeffrey S. Lorberbaum: The higher-end consumer has more money and is spending more. That is helping on one side. On the other side, the middle is either postponing or trading down. There is huge pressure in the builder market to put in low-cost products in order to keep the prices of homes down. So you have both things going at the same time. I think that the people with money will continue to spend. We talked to some of our retailers. Some of them say the traffic is slower, but the people coming in are spending more money. We will have to see how the whole thing evolves. A lot of it is around consumer confidence and how they react to all this. Michael Jason Rehaut: Alright. Thank you very much. Operator: Thanks, Mike. Our next question comes from Keith Brian Hughes from Truist. Please go ahead with your question. Keith Brian Hughes: Thank you. The last time we saw this kind of inflation, a couple years ago during COVID, you saw some pretty significant hit on mix. Is there anything that has changed in the industry? Any reason we would feel less of that pressure? These are pretty significant price increases you are talking about. Jeffrey S. Lorberbaum: It is possible that we could see some declining mix in a piece. We are raising all the product categories to cover it, but it is not abnormal that some customers trade down. The higher-end customers have money, so it is not going to affect them. The higher end of the business has been doing better. But it is possible there will be some mix decline as people try to maintain budgets. Keith Brian Hughes: Okay. And we talked a lot about price increases and cost increases on this call. Is carpet where you are seeing the biggest inflation coming right now just based on the fibers that you use? Paul De Cock: No. We see inflation across the board in all the different categories. We have all the chemical input costs going up with similar levels, and as that filters through, we will have to take up the prices. In Europe, we see higher increases like we said. The impact of energy in Europe is much more significant, and so in some of our product categories, we see much higher impacts than on the flooring side, and we are acting appropriately. Jeffrey S. Lorberbaum: If I had to pick one that was highest, in Europe our polyurethane insulation business has a chemical component, and there are some shortages in the marketplace. We are putting through really significant increases in the category along with the competitors in the marketplace. Keith Brian Hughes: Okay. Thank you. Operator: Our next question comes from Matthew Bouley from Barclays. Please go ahead with your question. Matthew Bouley: Good morning. You have Anita Dahlia on for Matt today. Thank you for taking my questions. First off, we have seen industry peers announce price increases over the past few months, but as they too see some degree of incremental cost inflation, have you seen a continuation in disciplined pricing across the industry? Or is there evidence of share gain coming at the expense of price, either for Mohawk Industries, Inc. or competitors across LVT, carpet, and ceramic? Jeffrey S. Lorberbaum: The increases are flowing through the marketplace. It takes a while to go through. We will not see the full impact of them for another few weeks or even more. So we will have to see. So far, we are seeing more discipline than normal given the amounts of the increases. Everybody needs more to cover the cost. Matthew Bouley: Okay. That is helpful. Thank you. Then second, I wanted to talk a little bit more about the setup in Europe. You mentioned Europe has understandably become more impacted following the Middle East conflict. Any color on the trends you are seeing since last quarter? Specifically, are consumers deferring projects, or is it more a function of mix down? Paul De Cock: The market was showing some improvements in January following the multiple rate cuts that the European Central Bank had executed. But after the start of the war, consumer confidence declined, and that reduced the discretionary spend in the market. As we discussed, energy prices are higher in Europe. They are causing greater inflation, and we will have to push up the prices more. But consumers have record savings, and mortgage rates are much lower in Europe, and that should support growth as confidence comes back. Matthew Bouley: That is helpful. Thank you. Operator: Our next question comes from Brian Biros from TRG. Please go ahead with your question. Brian Biros: Hey. Good morning. Thank you for taking my questions today. How quickly can you pass on price in today’s market relative to previous price increases? Inflation pressures are well known, but the demand side is not really there. So I am curious how those conversations go and how quickly that can be reflected in today’s market once you announce an increase. Jeffrey S. Lorberbaum: The entire world knows this is going on. Our customers know what is going on. Our competitors have the same pressures we do. So the marketplace understands that it has to happen. In some cases, it may feel a little easier up to this point or not, but we are not through fully implementing it. On the other side, there is a concern that there is more to come, and so all of those things are affecting the way the industry is acting. Brian Biros: Okay. And then margins expanded in Q1. I think that might be the first time in maybe five or six quarters. Nice to see some level expansion even after all the restructuring efforts, and that was on lower volume still. It feels like there are still going to be pressures for the rest of the year, but do you guys look at Q1 as some type of indicator of what financials you can put up when things start to turn? Putting that in context would be helpful for thinking about Mohawk Industries, Inc. beyond the next few quarters. Thank you. Nicholas Manthey: Q1 market conditions were still very pressured. Looking forward, in the near term, our margin will depend on how the conflict evolves. We will have the inflation, and we are taking price to mitigate it. As Jeff mentioned, consumer confidence could be lower and could impact volumes. We are really focused on our productivity and restructuring efforts to lower our costs, and we do believe that over the long term, there is potential for margins to grow from here. Jeffrey S. Lorberbaum: As we said earlier, we talked about potential good outcomes and bad outcomes. Either one is still possible, and we have to be prepared to adapt to either one, hoping for the best. Operator: Our next question comes from David MacGregor from Longbow Research. Please go ahead with your question. David MacGregor: Thanks for taking the questions. I wanted to focus on the commercial business for a moment, and maybe it is a strategic question, Jeff. Given the relative resilience of the commercial businesses, as well as a different competitive structure and more opportunities for growth in that market segment, have you considered allocating capital to the expansion of that side of the business and bringing the residential/commercial mix more into balance? Jeffrey S. Lorberbaum: The commercial business is much smaller than the residential business. The opportunities are much less. So achieving the same market shares, the commercial business is dramatically smaller than the other. With that, we continue to invest more money in product innovation in the commercial market. It is easier to sell and promote features and benefits that are differentiated. We continue to invest to create differentiated offerings that we can specify in the marketplace. We are investing in more showrooms and investing in our sales organization to create more specifications. We agree with you. It is a good place to be. David MacGregor: I was asking the question more from an M&A standpoint. Jeffrey S. Lorberbaum: From M&A, we would consider the right commercial businesses that fit with ours and we think we can add value to. There will be opportunities as they arise over time in both the U.S. markets as well as the world markets. David MacGregor: Got it. Second question is the obligatory tariff expense question. A lot of noise and moving parts on this, but what is your current expectation for 2026 gross tariff expense prior to mitigating actions? Nicholas Manthey: The tariffs were reduced from a few months ago. Jeffrey S. Lorberbaum: But with the inflation occurring because of the conflict, the net effect is our costs are going to increase, and that is why we are taking the pricing adjustments to mitigate the higher cost. David MacGregor: Okay. You have not quantified that for the street? Nicholas Manthey: No. The tariff environment is changing, and we will see how it evolves. David MacGregor: Understood. Thanks very much. Operator: Thank you. And with that, ladies and gentlemen, we will be concluding today's question and answer session. I would like to turn the conference call back over to Jeffrey S. Lorberbaum for any closing remarks. Jeffrey S. Lorberbaum: We have managed global turmoil many times in our history, and it is always followed by an industry recovery. We expect multiple years of above-trend growth when it happens this time. As that occurs, in our industry the pricing and margins increase, our mix improves with people buying higher-value products, and we get significant leverage off of our cost structures and all the actions we have taken over the past few years. We appreciate you taking the time and being with us today. Thank you very much. Operator: The conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.
Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to Magna International First Quarter 2026 Results Webcast and Conference Call. [Operator Instructions] I would now like to turn the conference over to Louis Tonelli, Vice President of Investor Relations. Louis, please go ahead. Louis Tonelli: Thanks, operator. Hello, everyone, and welcome to our conference call covering our Q1 2026 results. Joining me today are Swamy Kotagiri and Phil Fracassa. Yesterday, our Board of Directors met and approved our financial results for the first quarter of '26 and our updated outlook. We issued a press release this morning outlining both of these. You'll find today's press release, the conference call webcast, the slide presentation to go along with the call and our updated quarterly financial review all in the Investor Relations section of our website at magna.com. Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. Such statements involve certain risks, assumptions and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our safe harbor disclaimer. Please also refer to the reminder slide included in our presentation that relates to our commentary today. With that, I'll pass it over to Swamy. Seetarama Kotagiri: Thank you, Louis. Good morning, everyone, and thank you for joining us today. We appreciate your time and interest. Let's get started. Overall, I was very pleased with our strong Q1 2026 results, where we drove margin expansion with disciplined execution. In the quarter, sales were up 3% with weighted growth over market of 3%. Adjusted EBIT was up 58% with adjusted EBIT margin expanding 190 basis points to 5.4%, and adjusted EPS rose 77% to $1.38. We continue to demonstrate traction from our operational excellence initiatives across the company. Our robust cash flow reflects improved operating performance. We generated $677 million in operating cash flow and $372 million in free cash flow. In addition to strong earnings growth, our team did a great job securing additional commercial recoveries related to previous EV investments. Moody's recently reaffirmed its A3 credit rating for Magna and improved the outlook to Stable. We ended the quarter with a 1.5x rating agency leverage ratio, ahead of our expectations with $1.6 billion in cash on hand. Our 2026 outlook reinforces our confidence in our margin, EPS and cash flow trajectory. We continue to expect weighted sales growth over market of about 1.5% at the midpoint. We are reaffirming our prior outlook ranges for adjusted EBIT margin, adjusted EPS and free cash flow. While the situation in the Middle East introduces some uncertainty, we have a track record of navigating external disruptions, and we are confident in our ability to execute on what's within our control. Importantly, we expect to mitigate most cost headwinds over time. We remain focused on executing our proven capital allocation framework. We continue to invest in our business to support further profitable organic growth while returning $575 million in capital, including $440 million in stock repurchases to shareholders in the quarter. At the end of March, we had about 17 million shares remaining and available for repurchase under our NCIB. We plan to repurchase the remaining shares during 2026. We recently announced the margin accretive dispositions of our lighting and rooftop systems businesses. The transactions are consistent with our long-standing principles around portfolio management. We have highlighted in the past that we manage our portfolio using an objective set of criteria and regularly assess our product lines based on their addressable markets, market positions and returns. Specifically, we want to participate in meaningful or growing markets with stable or growing profit pools, strong or a clear path to strong market positions, profitable growth and sustainable competitive advantage. This has long been a key principle that ensures that we manage Magna for long-term success. The dispositions allow us to streamline the portfolio and focus on businesses that advance our long-term growth, margin and return objectives. The transactions are expected to close in the second half of the year. In our outlook, we have removed about $350 million of sales with minimal earnings and free cash flow impact. One example of our team's execution and innovation is the recent expansion of our hybrid driveline portfolio with the introduction of a dedicated hybrid drive for range-extended electric vehicles. The new system offers several advantages, including reduced size, weight and system cost, multiple operating modes and applicability across a broad range of vehicle segments. It underscores our commitment to providing OEMs with adaptable driveline solutions that support a wide range of vehicle performance and market expectations. Our team continues to partner closely with our OEM customers to deliver solutions that support Magna's growth. With that in mind, I would like to highlight a couple of recent complete vehicle EV program launches in Austria for China-based OEMs. This past quarter, we launched a second complete vehicle program for GAC. We also recently launched a third model, the P7+ for XPENG. Since September of 2025, we have now launched 5 vehicle models for these 2 China-based OEMs. More recently, we were awarded a fourth program with XPENG, which will launch later this year. This reinforces Magna's strong position in vehicle manufacturing and highlights the value of our flexible state-of-the-art production process, enabling fast-to-market, high-quality vehicles for any customer in the European market. Recently, Magna was once again recognized by Ethisphere as one of the world's most ethical companies marking our fifth consecutive year of recognition. This reflects our ongoing commitment to integrity, ethical decision-making and doing what's right, something we are very proud of. With that, I'll turn the call over to Phil. Philip Fracassa: Thank you, Swamy, and good morning, everyone. I will begin on Slide 19 with a summary of our strong first quarter results. Sales were $10.4 billion in the first quarter, up 3% from last year. Adjusted EBIT margin improved 190 basis points to 5.4%. Adjusted earnings were $1.38 per share, up 77%. And free cash flow was very strong at $372 million, up $685 million from last year. Each of these metrics came in ahead of our expectations. Now I'll take you through some of the details. Let's start with sales on Slide 20. First quarter sales were up 3% overall compared to last year. Excluding foreign currency translation, sales were down about 2%. Global light vehicle production declined 7% in the quarter. On a Magna-weighted basis, we estimate light vehicle production was down about 5%. This translates to 3% growth over market for Magna consolidated and 5% growth over market, excluding Complete Vehicles. Looking at the sales walk, foreign currency translation was positive $520 million or about 5%, driven by a weaker U.S. dollar compared to last year. Volumes, launches and other was relatively flat as lower light vehicle production, the end of production on certain programs, including the Ford Escape and normal course customer price concessions were largely offset by the launch of new programs, including the Ford Expedition Navigator, Mercedes-Benz CLA and Jeep Cherokee Recon and net favorable program sales mix. Sales in Complete Vehicles, excluding foreign currency, declined $172 million despite higher unit volumes. The higher unit volumes reflected new assembly programs and grants, including with XPENG and GAC, where sales are recognized on a value-added basis. Volumes with other customers where sales are generally recognized on a full cost basis, declined year-over-year collectively. This resulted in net lower assembly sales dollars. Engineering revenue was also lower, in line with our expectations. Now let's move to EBIT on Slide 21. First quarter adjusted EBIT was $558 million, an increase of $204 million or 58% from last year. Adjusted EBIT margin was 5.4%, up 190 basis points. Looking at the pluses and minuses, our largest benefit came from operational performance, volume and other items, about 80 basis points. This reflects continued momentum from operational excellence and other cost reduction initiatives. We also benefited from prior restructuring actions and favorable net foreign exchange gains. These positives more than offset the impact of lower organic sales and unfavorable mix. Equity income contributed around 70 basis points in the quarter, reflecting a favorable commercial settlement at one of our Power & Vision joint ventures that was originally planned for the second quarter. Margins were also supported by higher sales, favorable mix as well as productivity and efficiency improvements. Discrete items added around 55 basis points, driven mainly by lower warranty costs as we had a large expense accrual last year in seating. We also benefited from net favorable commercial items year-over-year in the quarter. And finally, tariff costs net of recoveries, reduced margins by about 15 basis points. While recovery mechanisms are in place with some customers, discussions with most OEMs for 2026 are ongoing, and we are following the frameworks we established last year. We remain confident that our net tariff impact for 2026 will be similar to 2025. In other words, a roughly neutral impact to EBIT margin for the full year. Looking below the EBIT line on Slide 22. Interest expense was $13 million lower than last year due mainly to our strong first quarter free cash flow. This led to lower short-term borrowings and higher cash balances, resulting in lower net interest expense for the quarter. Our first quarter adjusted tax rate was 23.8%, an improvement of 190 basis points versus last year. For the full year, we continue to forecast an adjusted tax rate of approximately 23%. Adjusted net income was $386 million, up $167 million or 76% from last year, driven mostly by the higher EBIT. And first quarter adjusted EPS was $1.38, up 77% from last year, mainly reflecting the higher net income as well as a slightly lower share count. Next, let's take a brief look at our business segment performance, which is summarized on Slide 23. Three of our four segments posted higher sales year-over-year and growth above market in the quarter with a notable 6% year-over-year increase in Power & Vision. The exception on the sales line was complete vehicles, where sales declined 4% as net lower volumes on full cost programs and lower engineering revenue were only partially offset by favorable foreign currency translation and the benefit of recent value-added program launches with China-based OEMs. Turning to EBIT. Body Exteriors & Structures, Power & Vision and Seating all posted notable year-over-year improvements in adjusted EBIT dollars and margins, reflecting strong operational execution. Power & Vision also benefited from a favorable commercial settlement in equity income, while Seating benefited from lower warranty costs. Complete Vehicles margin was lower than last year, but in line with our expectations, reflecting the impact of lower engineering revenue, offset partially by productivity and efficiency improvements. Now let's look at cash flow on Slide 24. In the first quarter, we generated $677 million in cash from operations, an increase of $600 million from last year. Operating cash flow in the current period includes over $450 million in balance sheet-related customer recoveries for certain EV programs in North America. We had originally expected to receive most of these recoveries later in 2026. Investment activities in the quarter included $219 million in CapEx, representing 2.1% of sales and $168 million for investments, other assets and intangibles, offset partially by proceeds from normal course asset dispositions. Netting everything out, we generated free cash flow of $372 million in the quarter, above our expectations and the most cash we have ever generated in the first 3 months of the year. We continue to return capital to shareholders in the first quarter with $135 million in dividends, along with $440 million in share buybacks. We repurchased 7.6 million shares during the quarter under our NCIB authorization, which left us with close to 17 million shares remaining at the end of March. We're planning to repurchase those shares before the NCIB expires in early November. Turning to Slide 25. Our balance sheet and capital structure remain strong. At the end of March, we had almost $5 billion in total liquidity including $1.6 billion of cash on hand. Our rating agency leverage ratio was 1.5x on March 31, better than we anticipated 3 months ago. This puts Magna in great position to continue our share repurchase strategy in 2026 and beyond. And we're pleased to note that Moody's recently affirmed Magna’s A3 investment-grade credit rating with an improved outlook of Stable. Next, let me cover our current outlook on Slide 26. Compared to our February outlook, we've reduced our North American production forecast by around 100,000 units to $14.9 million, and we reduced Europe by 200,000 units to $16.6 million, both reflecting current market conditions. Our China production assumptions remain unchanged. We've also updated our currency assumptions to reflect recent exchange rates. We're now expecting a slightly stronger euro, Canadian dollar and Chinese yuan in 2026 as compared to our February outlook. We continue to actively manage input costs and other volatility through commercial recoveries and cost actions. Our outlook reflects our current visibility into the balance of the year, and does not assume a prolonged geopolitical conflict in the Middle East. Moving to Slide 27. We are reaffirming our prior outlook ranges across key metrics including adjusted EBIT margin, adjusted EPS and free cash flow. We have slightly lowered our sales outlook range for the updated light vehicle production estimate provisions we covered earlier along with the expected second half closings of the lighting and rooftop systems divestitures within Power & Vision, offset partially by the benefit of foreign currency translation from a weaker U.S. dollar. We're also forecasting lower interest expense, reflecting the favorable timing of commercial recoveries, which should result in less borrowings throughout the year. All other outlook metrics from February are unchanged. Note that we continue to expect strong margin expansion with adjusted EBIT margin between 6% and 6.6%, despite slightly lower sales. Adjusted EPS between $6.25 and $7.25 per share and free cash flow between $1.6 billion and $1.8 billion. And while we don't provide a quarterly outlook, I would like to offer a framework for how we're thinking about EBIT and margin cadence for the rest of 2026. We expect 2026 adjusted EBIT to be back half weighted with first half EBIT just under 45% of full year EBIT. We're taking a measured approach to the second quarter, given the ongoing geopolitical dynamics and the potential for near-term volatility with adjusted EBIT margins expected to be relatively flat with the second quarter of last year. That's it for the financial review. Now I'll turn it back to Swamy to wrap things up. Swamy? Seetarama Kotagiri: Thank you, Phil. Before we take your questions, let me recap a couple of key points. We had a strong start to 2026 with adjusted EBIT margin expansion, cash generation and solid weighted sales growth over market. We are positioned for continued margin expansion and shareholder returns, supported by a solid 2026 outlook that is largely unchanged from February, reflecting our confidence in our operating performance. We are executing a disciplined capital allocation strategy, including significant return of capital and portfolio actions aligned with long-term value creation. Most importantly, we remain highly confident in Magna's future. We hope to see many of you in November at our investor event in New York City, where we will go into detail on our strategy, key initiatives and long-term financial outlook. Thank you for your attention. Now operator, let's open it up for questions. Operator: [Operator Instructions] And your first question comes from Alex Perry with Bank of America. Alexander Perry: Congrats on all the progress. I guess just first, I wanted to ask, can you give us an update on your raw material exposure. I guess, particularly on the resin side, what is the impact expected to have on the margins. Were there any other offsets that allowed you to keep your EBIT margin guide? And how should we think about sort of the flow-through there? Philip Fracassa: Sure, Alex. This is Phil. I'll start and then Swamy can chime in. Relative to raws, if we take a step back, if we look at exposures like steel and aluminum, as an example, we're largely protected through OEM resale programs and other pass-through mechanisms. The vast majority of our exposure there is covered. On resins, it would be a little bit less. A meaningful portion would be covered by pass-throughs as well or not resale, but more pass-throughs. But think of it as sub-50%, so a little bit exposed there. But as resins move, we would do what we normally do, which is kind of work with customers to recover the higher input costs. Looking at the first quarter, I'd say we saw minimal impact on all of that. We saw a little bit of higher freight costs in the quarter, but minimal impact across other input costs. And as we've talked about kind of many times, as we see input costs move, we typically recover on a lag basis to the extent if oil stays high, resins stay high, we would work with our customers to recover that over time and frankly, would expect to recover the bulk of any swings over the course of the rest of the year. Last comment I would make on, we get a lot of questions on energy, particularly in Europe, but we're in a much better position now than we were, say, in 2022. We're hedged about 2/3 of our both electricity and natural gas spend in Europe for this year and about 50% hedged for next year. So swings in costs, near term, we're pretty well protected there as well. Swamy, anything else? Seetarama Kotagiri: No, I think you covered it well, Phil. The one thing that you might look at is the logistics and the freight costs. But that's the reason why we talk in terms of ranges. We feel pretty confident based on everything that you said, we would be able to contain it. Alexander Perry: Really helpful. And then I guess just my follow-up question. So the production outlook came down a bit, but you kept sort of all the segments the same other than Power & Vision, which came down a bit. Maybe walk us through why that is and sort of how you're thinking about production in the various segments? Philip Fracassa: Sure, Alex. So what happened there was we had 3 things that happened in the outlook. First, we took the production estimates down, as you referenced, which was a slight downward revision in the revenue, if you will. We took foreign currency up as we're modeling a slightly weaker U.S. dollar than before. And that sort of offset one another as compared to February across most of the segments. And the one exception was P&V, where we also layered in the anticipated closing of lighting and rooftop systems and kind of in the second half, call it, near the end of the third quarter sort of what we modeled. And that kind of had the effect of bringing P&V revenue down about $400 million or so if you look at the outlook. But it was really kind of FX and vehicle production offsetting one another in the other segments. And honestly, the fact that we held the margins despite that because oftentimes when foreign currency improves, we don't get the same incremental that we do when volume goes up or down. So we were able to kind of offset that, hold the margin range where it was, hold the EPS range where it was, just given the -- given how well the business was performing, particularly in the first quarter of the year. Alexander Perry: That's incredibly helpful. Best of luck going forward. Operator: Your next question comes from the line of James Picariello with BNP Paribas. James Picariello: Can you just speak to the favorable commercial item? Can you just provide more color on what actually took place? Was it unexpected for the full year? Or was it more of a timing shift within the year in terms of the ability to get that recovery, which showed up in equity income, right? Philip Fracassa: Yes, exactly, James. So 2 things there. It was a recovery in the first quarter in equity income, it hit P&V. We had initially planned for it in the second quarter. So it wasn't a variance for the full year. It was a timing shift between Q2 and Q1, and it really related to recoveries for past investments in EV programs. And just to kind of give you an order of magnitude, it was the bulk of the equity income improvement in margins year-over-year was probably 60 basis points of that improvement was that item. And again, hitting in P&V, you'll note that P&V had really strong performance in the quarter, revenue up strong incremental margin on the revenue. But even excluding that item, the incrementals in P&V would have been quite strong on the order of 30% even without that item. So P&V performed really well, good growth across several different launches, good growth in some of our camera businesses, et cetera. But to answer the question, it was a onetime item, but it was timing between Q2 and Q1. James Picariello: Okay. That's crystal clear. Appreciate that. My apologies if I missed this in the prepared remarks. But for the lighting and rooftop divestiture, should we expect any proceeds from that? Or is it more of a partnership handoff type of arrangement because it's zero -- has neutral EBIT? Seetarama Kotagiri: James, as I said in the remarks, the transactions will be closing later this year, obviously, subject to approvals. They are margin accretive because they were below the Magna average, I would say. But it is a -- going back to the guiding principles, if you look at it from a strategic perspective in terms of market position, in terms of returns, we did not feel it was the right home and not the right path with us. That was the reason why the divestiture was done. We'll continue to look at portfolio just like we've always said with an objective lens. Philip Fracassa: Yes. And maybe just to round that out, James, I would want to point out that on our GAAP results, we did have -- we did book a loss related to those divestitures in the first quarter, just given where they were in terms of negotiations at the end of the quarter. So that was over a $400 million impairment that we took in the first quarter, which would be in the GAAP results excluded from adjusted. Seetarama Kotagiri: And there are some modest proceeds that will be used in the normal course, James, right, in terms of the cash flow looking at the balance sheet and how it will be used for share repurchases. James Picariello: Is this the beginning of a like ongoing pruning of the portfolio of smaller businesses? Or is this mainly a one-off? I'm just curious if there's anything strategic and sustained behind this type of sale for you guys? Seetarama Kotagiri: Yes. I don't think it is a onetime or it's -- if you go back into the last 10 years, you would have seen few pressure controls, you would have seen in the years. Honestly, James, this is an ongoing process. We continue to look at it every year. Can't speculate or won't comment on future actions, but I can tell you this is really a very rigorous ongoing process. Operator: Your next question comes from the line of Dan Levy with Barclays. Dan Levy: So your guide assumes 35 to 40 basis points of operational excellence. And you just did in the first quarter, I think it's 80 basis points. I know there's other stuff in that category in your earnings bridge. But maybe you can just give us a sense within the quarter, why you were out punching on that 35 to 40 basis points? And what changes in subsequent quarters? Or is there potential upside on that 35 to 40 basis points? Seetarama Kotagiri: Dan.The 35 to 40 basis points that we talked about obviously encompasses a lot of things that go on. The specific larger operational excellence initiatives that I mentioned in the past are really specific, for example, enterprise-wide digital architecture, data backbone, real-time performance management through data streaming dashboards and scalable automation of material handling and so on and so forth. But beyond that, there are thousands of initiatives that every division looks at in terms of material savings, in terms of OEE improvements. You can't really put an exact cadence. Definitely, with some of the programs in place and feel comfortable, the proliferation is a little bit accelerated. And it also depends on the cadence of how many ideas or VA/VE initiatives are in place in the fourth quarter and how they can materialize in Q1, right? But all in all, I would say we feel pretty good about the 35 basis points, 40 basis points. And if the macros hold good, yes, we feel pretty good that we'll keep that and continue the path. Philip Fracassa: Yes, Dan, just 2 things I might add there. We did accelerate really well last year with the operational excellence initiative. So probably a bit of an easier comp in the first quarter than maybe the comps we'll have as we move through the year. That would be one. But I would say, stepping back, a stronger than we expected performance on the operational excellence front in Q1. So to your point about if we can keep that going, I would agree with you that, that would present some upside for us. Seetarama Kotagiri: And that's why I keep saying, as we look at the proliferation, we are still in the early innings of the factory of the future. Dan Levy: Great. Okay. And then I just wanted to follow up on James' question on the divestitures here. So I get, there's constantly a portfolio review process to make sure that the products that you're in, that you have a strong market position, that's a relevant market and these businesses didn't clear that threshold. I guess I would just ask more broadly, the broader Magna portfolio, what percent of that would you deem to be in a market position that is not where it should be and where it's a tougher path to sort of getting to an appropriate market position? And how would you characterize Seating as it relates to your market position and path to improving the market position? Seetarama Kotagiri: Yes. It's a long question, Dan, and, you know, it's a complex one. As you look at most of the products, right, we're not really saying we have to be #1, but you need to have meaningful market position, but along with it also good returns and good profitability. And it's not at any one point in time. You have to look at it, you invest, you go through cycles. And if you see a good path and if you see good progress, we continue to stay on it. Specifically to seating position, we -- again, it's not just looking at it broadly as a global market. In North America, we have a good position. We have good position in Europe. We have really good position now in China. And more importantly, we have some really good innovation in terms of not just the product, but how we assemble the seat and how we take it forward. And as part of this operational excellence or Factory of the Future initiatives, you'll start seeing that. Hopefully, we can talk to you a little bit more when we see you in November for the Investor Day. But we feel pretty good, and you'll continue to see the traction on the profitability and the returns in that segment. Operator: Your next question comes from the line of Chris McNally with Evercore ISI. Chris McNally: Swamy, a little bit of a broader question around some of the risks in the second half of the year. And I know this is high-arching question that, you know, I think everyone is getting asked. But I'm curious your perspective, if you're more worried about sort of the known, unknowns in the second half or the unknown, unknowns. So when I think about known unknowns, raw materials transport, second half volumes sort of the typical that you're curious duration of the issue of the conflict. But the unknown unknowns is the one that we are having the hardest time grappling with as investors in the self, and things like memory availability, chip availability or just other disruptions. Just maybe you could opine on those 2 buckets for what you're seeing sitting here in April? Seetarama Kotagiri: Yes, Chris, I'm going to use your terminology, known unknowns and unknown unknowns. Honestly, I think if it's a known entity or variable, right, for example, things that you just mentioned, we at least have a scenario analysis and a playbook to say how we are going to address it. And that's the reason why we talk about outlook and ranges and not specific numbers. The bigger question is the unknown unknowns, right? Because you haven't thought about it. You might have some scenario planning, but it's not as granular. So those are the bigger questions. If you look at the DRAM, we are focused on it. We are tracking it. We are monitoring it. We're working with our customers. Continuity is the most important in terms of supply. We are doing that. We're managing costs through sourcing actions and customer alignment. That we believe, if the world doesn't flip upside down, we can manage it within our outlook ranges. That's an example of something that is a scenario planning and we can address. Things that we don't know in terms of complete volatility, big macro issues, lack of certainty and volatility are the 2 things that you have to constantly worry about. Chris McNally: That's great. And if we could just double click, Swamy, on the one on memory because we obviously get this question a lot. We see obviously everything going on with AI and the hyperscalers. But -- is it fair to summarize that the industry's view because I think that many companies have been asked this, that right now on memory, there's more of an issue around price, meaning you may have had some contracts and basically memory providers are coming back and asking for closer to spot as opposed to contract, and that's some of the risk as opposed to literally pulling the volume, which would not allow for cars to be made. Is that a fair summary of where the industry kind of view is right now that there's a little bit more of this price discussion, I want to be paid for spot as opposed to pulling volumes? Seetarama Kotagiri: The short answer, Chris, I would say your summary is correct in the short term, right? It's more a pricing and how do we manage that in terms of demand and keeping capacity and so on and so forth. In the long term, you've got to look at design options and so on. In short, your summary is correct. Operator: Your next question comes from the line of Joe Spak with UBS. Joseph Spak: Phil, just -- I'm sorry to go back to this. I just want to make sure I understand some of your comments on recoveries because it sounded like maybe it was, I don't know, $60 million, $70 million in EBIT. I'm trying to just sort of figure out how that relates to -- in the report, it said the recovery for your investments in the quarter was like $475 million in cash flow. So I just want to make sure those numbers are correct, that part of that recovery in the cash flow was not in the operating income. And then on that recovery in the cash flow, I just want to make sure that is what you sort of expected? And is that mostly done? Or do you still expect more cash recovery to come down the pike? Philip Fracassa: Yes. Thanks, Joe. Great question. So I think you've got it right. So first of all, the 60 basis points or call it, $60-ish million, the equity income item was did run through the P&L, but it's the $475 million that we called out in our MD&A was really balance sheet only. So the vast majority of that recovery was a balance sheet recovery. So getting sort of reimbursed for prior investments that we made that were sort of sitting on the balance sheet. So very little P&L impact from that. And we did largely expect that in 2026, but just later in the year, maybe a little bit overall for the full year, maybe a little bit higher than we previously anticipated. But -- so is there any more to come? There's a little bit more we would expect between now and the end of the year, not of that same order of magnitude. It's reflected in the full year outlook as we continue to work with customers on other negotiations that are ongoing. But the -- beyond that $60 million that ran through equity income, we had very little running through the P&L for the other recoveries. It was really just cash only. Joseph Spak: Okay. Really appreciate that clarification because I was having trouble connecting those 2. Second question, Swamy, and I apologize in advance because I don't want to put you in the middle of a geopolitical storm, but there have been reports of Chinese OEMs looking to maybe build vehicles in Canada. And I was wondering if you were able to comment on any conversations you might have or even more broadly, how you would view that potential opportunity? Because obviously, you mentioned some of the wins with the domestic Chinese, whether it's Complete Vehicles or others. So you have that good relationship there. And I was wondering how that could sort of spill over to this region. Seetarama Kotagiri: Yes, Joe, for the exact reason that you mentioned, I would like to remain a businessman and a capital allocator and not a policy commentator. So I won't comment on speculation. I can say that Magna's model is to be neutral global partner to all OEMs. And we are not -- as you've heard me talk about it, we continue to win business in Europe with our Complete Vehicle assembly with all OEMs. Today, it happens to be the Chinese OEMs. And we continue to win business in China with Chinese OEMs. Any OEM that continues to grow in the ecosystem, we have an opportunity to supply Magna systems and components and also do vehicle assembly where possible. Operator: Your next question comes from the line of Tom Narayan with RBC Capital Markets. Thomas Ito: This is Thomas Ito on for Tom. It looks like your guidance implies some pretty substantial margin uplift in BES and Seating for the remainder of 2026. Just wondering, is this sort of just the timing of customer recoveries or are there other factors going on in these segments? Philip Fracassa: No. I mean, I would say it's really continued progress on the operational excellence initiatives and then obviously getting really strong pull-through revenue. The P&V was a -- we're expecting strong growth in P&V for the full year. We didn't have the item in the first quarter. For the full year, the margins will be on the implied guide would be pretty close to the first quarter performance, but still really solid growth year-over-year. And the BES and Seating over the course of the rest of the year would expect the operational excellence really being the biggest item that's kind of sticking out relative to the improvement from Q1 through to Q4. I don't know, Louis, anything else you'd add. Thomas Ito: Okay. Got it. And I guess as a quick follow-up, we saw another supplier announce some revenue impacts related to the IEEPA tariff adjustments. Could you just comment on whether any such adjustments are incorporated in that '26 guidance? Philip Fracassa: Yes. I mean it's a great question and I figured we would get it. So on tariffs, let's just take a step back. We came into the year based on last year's rates, if you will. We had about $160 million gross impact last year. The run rate would have put us at around $200 million this year. Again, looking to recover that from our customers. We had a lot of development. IEEPA came out, 122 came in. We had some changes in 232. Net-net, our gross exposure has come down. So from $200 million, now we're thinking it's closer to last year's number actually, right around $160 million. Our net exposure relatively unchanged and we still expect maybe a little bit better, but relatively unchanged. We still expect a margin headwind of less than 10 basis points, but year-over-year would be neutral in that scenario. And then relative to the last element would be the refunds, I would say we are working to file those refund claims sort of as we speak. We're in the midst of filing them as we speak. And it's a good sized number. We talked about it was probably over half of our tariff exposure, roughly half of our tariff exposure was IEEPA. So as those refunds are filed, as those refunds come in, we didn't book any of those refunds in the first quarter. As those refunds come in, we'll obviously work with our customers on that given that they funded -- they covered about 80% of our tariff costs last year. So we'll work with them as those refunds come in to make sure that they're allocated appropriately. Operator: Your next question comes from the line of Emmanuel Rosner with Wolfe Research. Emmanuel Rosner: I was hoping to follow up on the comments you made in the prepared remarks about the expected cadence of earnings this year. And in particular, I think you said Q2 margins would be broadly stable year-over-year. Can you just give us a few of the puts and takes in there? Is there some timing of things that shifted from Q2 into Q1? Or I guess, how should we think about the stable margin year-over-year this quarter? Philip Fracassa: Yes. I think it's -- well, relative to expectations, we had that equity income item that kind of moved from Q2 to Q1. But as we sort of set up the cadence for the rest of the year, we did, I would say, deliberately take a little bit more measured view on the second quarter, a little bit more cautious view, if you will. And so as you look at year-over-year at sort of the midpoint of the guide, we'd probably see a little bit of increase in revenue year-over-year with kind of a proportionate incremental margin kind of keeping margins relatively flat. We've got foreign currency as a positive in there, which kind of come through as with a little bit lower margin and then the volumes kind of coming down a little bit with a little bit bigger impact. So really nothing more than that. The operational excellence continues, but it was really more just trying to be a little bit more measured in how we were thinking about the second quarter as kind of we're sitting here in time and space. But as we look out to the rest of the year, still very confident in the full year guide and very confident in the margins and earnings, et cetera. And if you remember in February, we talked about first half EBIT being kind of slightly above 40%. This time around, we're probably seeing a little bit more one half weighting on the EBIT, maybe sub 45%. So think 43-ish kind of percent first half, second half, and that should kind of get you in the ballpark. Emmanuel Rosner: Okay. That's helpful. And then I was hoping to ask about your growth over market, which I think you said you measured it as like 3 points for this quarter, I guess, for Q1 or 5x Complete Vehicle, still good conviction in, I think, 0% to 3% for the full year. Can you talk about some of the upcoming big launches that you have that will drive this growth of the market and potentially serve like any sort of cadence within that? Seetarama Kotagiri: Emmanuel, I think like you said, it's really a reflection of the launch activity. It's a bit of good program mix and also content growth across all our core segments. So net-net, if you look at the end of production programs and compare it to the new production launches that we have, which is many across these different geographic regions, different customers, different programs. And if you take the content, so that's positive net-net, right? So that's the reason why we are seeing that. And the Complete Vehicles, you heard me talk about the specific program launches with GAC, with XPENG and the discussions continue. Operator: Your next question comes from the line of Colin Langan with Wells Fargo. Colin Langan: I just want to follow up again on the recovery impact. You mentioned the 60 basis points from JV. If I look at the slides in discrete items, it looks like half of the discrete items are also recoveries. So is there another $25 million, $30 million outside of the JV recoveries? And then I thought last quarter, you had said that recoveries for the year were neutral, and yet we have a big help in Q1. So does that mean as we go into the second half, that there's headwinds as those recoveries are down year-over-year? Philip Fracassa: So on the first part of the question, yes, in the discrete items, we did see the favorable warranty costs, which was a big item. And we also had the net impact of -- we did have favorable commercial items as well, which sort of spans the gamut of not just EV-related recoveries, but recoveries for other commercial matters as well. And as you know, that can sort of vary quarter-to-quarter. I think we did talk about coming into the year thinking we'd be largely neutral for the full year on the P&L with respect to recoveries. But on the cash, we did get a fair amount of cash for EV-related recoveries last year. If you remember, in the fourth quarter, we had a big cash inflow in the fourth quarter. So we did expect recoveries as it related to the EVs to be a fair bit comparable. So we do expect to be that way for the full year. So we -- it was more front-loaded this year. It was a little bit more backloaded last year. But our guide of free cash flow of kind of $1.7 billion at the midpoint sort of implies about $1.3 billion for the rest of the year, and that will be, as always, is kind of back half weighted. Louis Tonelli: On the recoveries, the recovery related to equity income was kind of in the equity income in the roll between '25 and '26. So I guess it's just bucketing. We had that in equity income is part of the reason why we had higher margin this year, not in this kind of recoveries. Recoveries we're talking about here are more on a consolidated basis. Colin Langan: You still expect recoveries to be neutral for the year. The initial guide did incorporate the JV help from recoveries. Seetarama Kotagiri: It did, yes. Colin Langan: And then just broadly, if I go into the second, I mean, Q2 is supposed to be flat. Organic sales are -- I think the guide implies are fairly slightly down actually. You have $100 million sort of implied EBIT improvement. I kind of feel of like we're out of some of the puts and takes outside of warranty. JV incomes are, I think, kind of most of that good news in the initial guide is done. So is it all just operational efficiencies or other items that are kind of going to add some help to kind of offset the -- at least at the midpoint, weaker sales? Seetarama Kotagiri: Yes. I would say some of it is as you talked about operational excellence, but as new programs come in, they have different economic terms, and there is a mix of, as I said, launches, right, that are happening towards the second half of the year. So I would say it's a combination of the 2 columns. Operator: Your next question comes from the line of Andrew Percoco with Morgan Stanley. Andrew Percoco: I wanted to start out on your disposing of your lighting and rooftop systems business. But I kind of want to get a sense for is there anything -- as we think about the evolving landscape, particularly around ADAS and AVs, are there any areas where you might want to grow your portfolio or add to the offerings that you currently have around that ecosystem? Seetarama Kotagiri: Yes. Andrew, I think I've said that the last couple of quarters, and we feel pretty good where we stand with our portfolio right now. I think the focus is really on organic growth and trying to get the efficiencies up, get the traction that we have in operational excellence continue, focus on the cash flow and continue the journey right now. But if there is some really good opportunity in terms of small tuck-ins that add value here and there, obviously, we'd be open to it. But our focus really is on continuing to keep the roadmap that we have in front of us for cash flow and good value. Andrew Percoco: Okay. That makes sense. And then maybe just around these recoveries. I'm curious like if you -- if you or the industry in general, are planning to adjust how you maybe strike these contracts with your OEM partners going forward. I know there's been a big kind of rightsizing exercise in the industry around EV manufacturing capacity, but the OEMs are still very much committed to exploring new vehicle platforms. So I'm just curious, as you kind of think about that next cycle, how you might evolve that contracting structure to maybe avoid some of the overinvestment that we've seen in prior cycles? Seetarama Kotagiri: Yes. I don't know if we can change the decision of the OEMs, but we definitely can bring our opinion to the table. And there are cases where we have looked at different terms, right, there is sharing of capital deployment, let's say, looking at volumes and how we band them and how we look at the step function of cadence as you go into the program rather than putting all the capacity upfront. There are several of those discussions. We are fortunate to have those strategic discussions with the customers. And as an industry, I think the big elephant in the room is like how do you become good stewards of the capital, right? How do you extrapolate what's there, what's capacity that's existing, how do you use it more efficiently rather than just adding more. But like you said, it's a 2-way traffic, and we have many of those discussions. Operator: Your next question comes from the line of Jonathan Goldman with Scotiabank. Jonathan Goldman: Most of them have been asked already. I guess just one on the guidance. I think you talked about the rooftop and lighting business being below the Magna consolidated margin levels, but you maintained the margin guidance for the year. I would have thought the divestiture may have been margin accretive. So I just want to know what are the offsets there? Seetarama Kotagiri: So I think, Jonathan, good question. But we are looking at the broad picture of Magna, given the uncertainty in the market that we have. And what we're looking at, that's the range we are talking about. Philip Fracassa: Yes. The only -- yes, that's exactly right. The only thing I would add, Jonathan, is it was really -- we're talking about, call it, 3 to 4 months of the year, so not a big number in the current year. And the other point to keep in mind, too, is we took revenue up for currency, which comes through at an EBIT margin, if you will. We took revenue down a little bit for volume, which sort of comes out at an incremental or a decremental as the case may be. So there's a little bit of that going on there, too. But there's no question to both P&V and to Magna as a whole, that the divestitures would be modestly accretive to margins just given where they were operating. Jonathan Goldman: Okay. That's good color. And then maybe just circling back on that one, Phil, the revenue guidance, maybe switching to mix, maybe more currency in the sales this year. Is the offset the lower production volumes that you've updated the guide for? Philip Fracassa: Yes. I would say when you think about -- so we're kind of holding the EBIT -- we're holding the EPS guide, we did see a little bit of a benefit on the interest line below EBIT as, you know, the free cash flow in the first quarter was much sooner than we anticipated that cash coming in. So it will result in lower borrowings throughout the year, a little bit of interest benefit. So while revenue is down a little bit, with holding margins would bring EBIT down a little bit, a little bit of offset in interest expense, which kind of enables us to hold the range where it was before. And again, kind of holding the range despite the strong Q1 was really as much just being a little bit prudent on the rest of the year at this point. Operator: Your next question comes from the line of Mark Delaney with Goldman Sachs. Mark Delaney: One on margins. When considering the efficiency efforts that the company has underway for this year, the expectation of 35 bps to 40 bps as well as the portfolio optimization you announced relative to lighting and the rooftop part of the business. Maybe put that into the context of where Magna thinks its EBIT margins can go over the medium to longer term. And in the past, the company has spoken about the potential to get to a 7% plus type range. I'm curious where you think you are on that journey, especially in light of some of the decisions and progress you reported today. Seetarama Kotagiri: I think I can tell you we are in a good path to the roadmap that we laid out. Right now, we are focused on executing like we did in Q1 over the last 2 or 3 quarters, and we see a good path into '26. That's why we were able to reaffirm the outlook of 2026. Now regarding the midterm and long term, I would say the best time to get through that without confusing anything is the November Investor Day. We will be able to lay out the next 3 to 5 years. Mark Delaney: Looking forward to that. And my last question was around the production environment. You already described your view on overall production volumes by region, but we're hoping you can share a bit more around mix. And curious if you're seeing any changes in the kinds of vehicles your OEM customers are looking to manufacture? And perhaps is there some increase in the number of EVs and hybrids that they're planning to make in light of the recent increase in gasoline prices? Seetarama Kotagiri: Not really a significant shift in what's been talked about. Obviously, there's an increased interest in hybrids, and it's very regional. In China, we continue to see the EV proliferation. In Europe, it's a little bit more hybrids and EVs continue there at a slower pace maybe. In the North America, we see renewed interest in hybrids. But in terms of vehicle segments, no, not really, we are not seeing a material shift in anything else. Operator: Your next question comes from the line of Michael Glen with Raymond James. Michael Glen: Swamy, with the wins happening in Europe with the Chinese OEMs, are you at all supplying any parts to those vehicles yet? Or is it strictly assembly? Is there an opportunity to expand and supply parts? Seetarama Kotagiri: Yes. I think, Michael, right now, it is just assembly. Obviously, the conversations as this expands into volume, there is a localization discussion, and that's where we see the opportunity for other system and component supply. Michael Glen: Okay. And then just following on that, maybe just broadly with Europe. I know you don't break Europe out separately as a segment. But how do we sort of think about gains with new entrant OEMs into Europe and then what appears to be the lagging legacy OEMs. As a whole, is this a net negative to Magna? Or are the gains being made with the new entrants offsetting a difficult legacy business? Seetarama Kotagiri: Yes. Difficult to break down at that granularity for sure, Michael. I think I would say with the presence of Magna in China and as we continue to build that relationships, we believe that they come to different parts of the world, we will have a seat at the table. At this point of time, it's very difficult to talk at that level to say how much and how it's offsetting and so on. But overall, we still continue to grow our business in Europe. Operator: That concludes our question-and-answer session. I will now turn it back to Louis Tonelli for closing comments. Louis Tonelli: All right. Thanks, everyone, for listening in today. If you have any follow-up questions, please don't hesitate to reach out to me. Thanks, and have a great day. Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you all for joining, and you may now disconnect.
Operator: Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Black Diamond Group First Quarter 2026 Results Conference Call. [Operator Instructions] I would now like to turn the call over to Emma Covenden, VP, Investor and Stakeholder Relations. Please go ahead. Emma Covenden: Thank you. Good morning, and welcome to Black Diamond Group's first quarter 2026 results conference call. With me this morning we have Chief Executive Officer, Trevor Haynes; Chief Financial Officer, Toby Labrie. Chief Operating Officer of Modular Space Solutions, Ted Redmond, Chief Operating Officer of Workforce Solutions, Mike Ridley; and President of Royal Camp Services, Jon Warren. Please be reminded that our discussion today may include forward-looking statements regarding Black Diamond's future results and that such statements are subject to a number of risks and uncertainties. Actual financial and operational results may differ materially from these forward-looking expectations. Management may also make reference to various non-GAAP financial measures in today's call such as adjusted EBITDA or net debt. For more information on these terms and others, please review the sections of Black Diamond's first quarter 2026 management discussion and analysis entitled Forward-Looking statements, Risks and Uncertainties and non-GAAP financial measures. This quarter's MD&A, financial statements and press release may be found on the company's website at www.blackdiamondgroup.com and also on the SEDAR+ website at www.sedarplus.ca. Dollar amounts discussed in today's call are expressed in Canadian dollars, unless noted otherwise and may be rounded. The format for today will be similar to prior calls. Trevor will start with a high-level overview of the company's performance and highlights from the quarter, including our view of the current and forward-looking operating environment. Trevor will then pass the call over to Toby for a more in-depth summary of the financials, including details of the quarter, and then we will open the line for question and answer. With that, I'll turn the call over to Trevor. Trevor Haynes: Thank you, Emma. And good morning, everyone. Thank you for joining our earnings conference call today. Yesterday afternoon, Black Diamond Group reported our first quarter 2026 results, showcasing continued stability across the platform. Consolidated revenue of $130 million increased by 27% with adjusted EBITDA of $32 million, up 21% in the comparative quarter. These results are inclusive of contribution from Royal Camp Services, which was acquired in November of 2025. Consolidated rental revenue increased 16% year-over-year to $43.8 million, driven by disciplined capital allocation for organic fleet growth, optimal and steady utilization and moderate rate improvement. Contracted future rental revenue totaled a robust $142.5 million at quarter end, which we continue to view as healthy and supportive of activity levels as we progress through the year and into the next. This trend of compounding performance across the business is not only a result of our well-defined growth strategies and strong leadership across the platform, but also the ability and character of our high-performance teams. Thank you all for your dedication to safety and serving our customers, disciplined focus on execution and relentless commitment in creating value for our stakeholders. Total capital expenditures were $16.8 million, consistent with the comparative quarter and capital commitments at quarter end totaled $26.5 million, largely allocated toward contract-backed asset additions. The organic reinvestment in the business underscores our commitment to putting our shareholders' capital to work prudently and in a manner that garners the highest rates of return. Given this, we will maintain our disciplined capital deployment approach and further scale our fleet in line with end market demand. Beyond organic growth of the business, the company is also well positioned to take advantage of all capital allocation mechanisms at our disposal, including accretive inorganic opportunities, debt repayment and return to shareholders through dividends or share buybacks. Our recent expansion of the asset-based lending facility to $550 million from $425 million with an uncommitted accordion of $75 million at preferred terms ensures we have the financial flexibility to continue scaling business. Looking ahead, our outlook remains constructive, with convexity of optionality across the business. We continue to see stable baseline performance across all our operating businesses underpinned by high-margin recurring rental revenue and generally healthy end market dynamics across Canada, United States and Australia. For WFS, the breadth and volume of opportunities in our pipeline suggests that nation-building thematic in Canada is indeed a substance and the pending impact of asset deployment on fleet utilization is a matter of timing. We remain bullish on our ability to unlock the significant operating leverage in this area of the business, but caution a realistic assumption on the timing of this scenario. MSS remains a resilient cash-generative business with clear runway for growth, underpinned by strong fundamentals and tailwinds in the infrastructure and construction verticals. While U.S. public sector education funding uncertainty has impacted the cadence of new sales, we expect this to stabilize moving forward. Finally, we are encouraged by the exponential growth trends we're seeing in LodgeLink. This performance reinforces its accretive potential which we expect to compound as the platform moves toward general availability of its new generation 3.0 product as we exit 2026. To summarize, we are pleased with the results of the company in the first quarter and expect similar steady near-term performance to carry through the first half of the year with the potential for a more pronounced acceleration in the back quarters with strong financial flexibility, disciplined capital allocation, best-in-class operational execution and a growing base of high-margin rental revenue, we are well positioned to continue compounding value through 2026 and beyond. With that, I'll now turn the call over to Toby. Toby Labrie: Thanks, Trevor, and good morning, everyone. I'll focus today on the results of our segments, margins and balance sheet. First, I'll address earnings per share for the quarter while EPS declined $0.06 from the comparative quarter, the decrease was due to several circumstantial factors versus any indication of eroding business performance beyond its typical episodic nature as shown through our growing consolidated revenue, EBITDA and cash flow. First, the impact of depreciation and amortization related to the acquired Royal Camp business had a $0.075 impact on EPS. EPS was also impacted by shares issued in conjunction with the bought deal and acquisition of Royal Camp services last year, higher stock-based compensation due to the increased share price and moderated activity in the company's legacy WFS operations due to the prepayments of a large U.S. contract in Q4 2025, partially offset by meaningful contributions from Royal Camp and stable performance from MSS. With respect to specific business unit performance, I'll begin with Workforce Solutions, where revenue of $81.5 million increased 54% and adjusted EBITDA of $18.9 million was up 48% from the comparative quarter, driven primarily by large services growth and contributions from Royal Camp services. Utilization for the segment was 56.5%, leaving meaningful available fleet capacity as we look to significant opportunities on the horizon. MSS generated rental revenue of $26.8 million, up 5%, with adjusted EBITDA of $19.4 million, consistent year-over-year. Utilization remained within the optimal range at 77.7% and average monthly rates increased 3% on a constant currency basis. We continue to see strength in our value-added products and services with VAPS revenue increasing 35%, driving VAPS as a percentage of rental revenue to 10.8% which continues to be an important focus and driver of margin expansion. LodgeLink delivered a strong quarter with total trade value of $32.7 million, an increase of 52% generating net revenue of $3.7 million, up 37% and total travel segments increasing 15% to 154,979 from the comparative quarter. From a balance sheet perspective, net debt at quarter end was $330.7 million, with net debt to trailing 12-month adjusted leverage EBITDA of 2.1x remaining at the low end of our target leverage range. Liquidity at quarter end was $93.3 million prior to the $125 million expansion of the ABL facility, providing flexibility to support further growth. The average interest rate paid on debt during the quarter was 4.21%, which was 62 basis points lower than the comparative quarter as benchmark interest rates are lower year-over-year. Business' ability to generate stable and growing free cash flow supported by a strong balance sheet remains a defining characteristic of Black Diamond. In the first quarter of 2026, we generated $17.8 million of free cash flow, representing a 5% increase from the comparative quarter. We also continue to make progress on the ERP implementation. Total investment to date is approximately $9.3 million with roughly $2.6 million remaining. Project is on schedule with this phase of MSS and corporate scheduled to go live in the current quarter. To reiterate Trevor's comments, we remain confident in the performance of the business. The near-term outlook is steady from these first quarter results with meaningful improvements expected in the second half of 2026 due to seasonal education and construction sector related activity. We continue to gain confidence in a further potential positive inflection point beginning as early as late 2026 aligned with progress on major nation building, infrastructure and resource projects in Canada. While the timing of large-scale construction project starts often extends beyond initial expectations, their extended duration once underway, has historically provided durable multiyear demand that we believe we are well positioned to capture over time. With that, operator, I'll ask you to open the call for questions. Operator: [Operator Instructions] Your first question comes from the line of Kyle McPhee from ATB Cormark. Kyle McPhee: I just want to start on the workforce demand wave on the way here. I'm hoping you can help us quantify some of the upside potential here. Do you expect to be able to start utilizing all of your unutilized camp fleet assets over the midterm? Is the demand coming down the pipe enough to soak up all of your excess suite notably when you layer in your odds of winning a chunk of this business on the way. Trevor Haynes: Kyle, thanks for the question. The simple answer is yes, although there's many factors involved. Certainly, what we're looking at here, from my perspective, having been involved in remote accommodation business for a better part of 40 years. I don't think I've ever seen a pipeline of active project bidding like we have today. And by that, I mean the breadth of what we're seeing certainly across pretty much every type of mining across the country as well as energy infrastructure basically coast to coast and across the north when you pull in the Canadian military initiatives. So from that perspective, we're very optimistic, and it's based on what we're seeing in our pipeline. When we add up the number of beds of demand when we think of everything that we're quoting to, it does exceed the available capacity. We've got about 6,000 beds of ready-to-deploy assets. So then we have to get into the nuance of, well, which projects go ahead in the near term and in what combination and how do we align. I would say, Mike, we're really well positioned with regard to our First Nations partners, our relationship with customers, et cetera, et cetera, our capabilities. Maybe add a little bit more granular color. Michael Ridley: Yes. I mean, if and when these go, whether FID is later this year or early next year, Trevor's point with some of our partnerships that we have in Western Canada, in particular, we're very well positioned and poised to win our fair share of work. And even beyond these nation-building projects, the sales pipeline in all of our markets right now is very, very active. When you look at mining in Eastern Canada, for example, even in the West, construction, government spend, disaster relief, homelessness, oil and gas in the Duvernay and Montney is also very active. And then moving down into the U.S., solid oil and gas sector, construction, everybody's talking about data centers these days and what they bring and benefiting potentially for Black Diamond, not only our workforce business, but we're very active with our MSS business on data centers as well. And then over in Australia, again, a really strong resource sector, construction, government, education. So yes, I would agree with Trevor's comments around -- I've been in the industry since '97. And in terms of what the sales pipeline looks like it's as strong as I've ever seen it. Trevor Haynes: As much as we talk about the timing with regard to major projects and sort of the front-end ramp-up characteristics of those projects. It's important to point out, there's many smaller projects around mining, et cetera that are mobilizing now. So there isn't this sort of gap we're looking at before the bigger projects pick up, and that's what gives us the confidence of current operating levels, Jon, anything to add from the Royal perspective. I think quick to point out to investors, we now have the full menu so to speak, of providing catering along with assets. So the opportunity is even bigger. Michael Ridley: Yes, definitely. The timing is the key thing. Even with some starting what's coming off and how do those roll into the other projects, I think that will be a big part of it. So -- and then as far as the operational side goes, ramping up for that, I think we have good opportunity to roll the operations into those different projects as they come on. Trevor Haynes: To summarize, Kyle, we really like what we're looking at in our opportunity pipeline. We're very active, and we do believe we're really well positioned with the great Royal team and platform added to the Black Diamond capabilities. So we just need the thematic to evolve over the next months, and we believe we'll see activity gradually climbing. Kyle McPhee: Okay. That's a lot of good color. Really appreciate it. Trevor, you mentioned you add up the total potential pipeline of sector-wide bed demand. Can you share what that kind of total pipeline number is, sector-wide? Trevor Haynes: Well, it's complicated because you get some elements of duplication where you have multiple subcontractors bidding on the same pipeline project, et cetera. So it's difficult for us to comment. I would say it's netting out of that, I mean, we're well in excess of $1 billion of high-quality outstanding bids, that's being somewhat conservative. I'm sure you can get read-throughs from some of our general contractor customer partners and what they're looking at and how they talk about their bid pipeline, et cetera. I think ours would chime with theirs. Kyle McPhee: Yes. And I'm not even just talking specific to Black Diamond. Just if all projects in the pipeline come to fruition sector-wide, how many more beds are needed. I think some of your peers are kind of softly indicating 10,000 to 15,000 more beds, maybe more, does that sound ballpark accurate? Trevor Haynes: Certainly. I think it's a scenario if all of these large projects go ahead, most of the existing beds, you can decide who wins prime contracts, et cetera, and how we organize amongst the industry. But pretty much everything existing will be needed to go out. And then we get into a question of been a long time since any meaningful capacity has been built for remote accommodation in Canada. So what is the capacity of the supply chain, and it's sort of an open question. But what we want to focus on currently is making sure we're positioned to service our customers on the immediate opportunity, and we've got a reasonable amount of capacity to match with that. And as we work through it, we'll start taking up -- the question of how to strategically add capacity if that's what's needed. Kyle McPhee: And do you expect this type of demand to benefit your MSS segment as well. I mean you just briefly mentioned the U.S. data centers might benefit both segments. But all these big infrastructure projects across Canada. Is that WFS beneficiary only? Or do you expect it to be meaningful for MSS? Trevor Haynes: No, it's absolutely an opportunity for the MSS platform as well. All of these remote locations also require the temporary project office, hard wall laboratories, security, training buildings, all over these project sites, and then areas of infrastructure build that aren't remote and don't require or not to the extent that the truly remote projects do require temporary accommodation for trades, they still require the site infrastructure for all the various types of temporary buildings. So we think the thematic applies to both MSS and WFS. And then, Ted, when we look at the U.S. side for MSS, the data center opportunity is much bigger for our BOXX Modular platform than for our workforce platform. And maybe bit of color on that, Ted. Edward Redmond: Yes. These data center projects are large construction projects. The data center trend has been going on for 10 years, and we've been participating in it over the last 10 years. What's changed is the dollars being put into it have increased dramatically and I think there's well over $1 trillion of data center projects in the U.S. So we're participating in this growth. We've got long-term contractor customers who were renting construction complexes too to house their construction staff. And once you get on a project to keep adding in more buildings on the sites that they have. So once you get on a site, your buildings stay on for quite a long time. So we're currently on a significant number of data centers, and we think that, that's going to continue. Trevor Haynes: If we switch back to the Canadian nation building thematic, any -- in Ontario, Darlington, et cetera, boost infrastructure and around our major cities, high-speed rail. This is all right down the fairway for MSS, Ted. Edward Redmond: There's almost $1 trillion of Canadian infrastructure projects, all the ones Trevor mentioned. And we're strong in the Ontario market. We're already working on a number of those infrastructure projects and bidding on the ones that are coming forward. Operator: Your network question comes from the line of Frederic Bastien from Raymond James. Frederic Bastien: It's been, I guess, nearly 6 months that you've had that Royal has been under your ownership. Can you just indicate how well the acquisition is going? Is it going as planned? Any anything that we -- you can point to that would help in our modeling as well. Trevor Haynes: The integration until we've done close to 35 acquisitions, many great outcomes. I would say so far with Royal, it's probably the quickest and most seamless integration from a people perspective. Really great alignment. The Royal team are really good solid group of professionals, and it's fit in well with our team. So we're already working in concert on the commercial side. And looking at all the assets as one asset pool as we match up against opportunities. So from that perspective, it's gone well. Some of the synergies, I think, Mike and Jon we've replaced external caterers with Royal to a really positive effect and picked up an element of margin in operated facilities. And it takes a bit longer on the system side for switchover of ERP, et cetera. But I would say, from integration, that's the work that's left to do, but a big risk of whether or not the businesses have good social fit, I think, is pretty low. Jon, maybe you can. Daryle Warren: Yes. I honestly couldn't see it pulling any better. The 6 months has just flown by. It seems like it was yesterday, but it seems like it was so far back. The teams just came together in every department very well. Our IT is fully integrated now. We're on the Black Diamond platform doing very well. The catering operations at Sunset Prairie. We're getting great accolades there, as you mentioned, now we're getting that margin. So we moved into a couple of drill counts as well, and we're working together on that. And then the cross-marketing the platforms, Trevor was speaking about and how we can bring MSS into workforce, and we've got several units that are in place in different locations. Very happy with that. Trevor Haynes: I think the exciting part is being able to bring the full turnkey across the Black Diamond platform and the asset platform to the Royal platform. The upside is in the new revenues we should be able to capture that would be more difficult on our own. Hopefully, that addresses your question, Frederic. Frederic Bastien: Yes, that's helpful. Could you address seasonality of the business? How do we think about historically as we go into the spring breakup, things slow down with respect to energy services company, how is Royal similar to that or not similar? Trevor Haynes: When you think about the energy sector, the way it works today is much different than the old shallow drilling days. I mean we see less and less seasonality, but I'll let Jon and Mike comment on that. Daryle Warren: At some of the open camps, we do have the drilling rigs that do quiet down for pretty much the month of April. But it's also the start of turnaround season. So -- but we lost in drilling, we gained a turnaround and right behind that international. Trevor Haynes: Turnaround at the oil sands. Daryle Warren: Yes, the oil sand side of things. So -- and we're starting to see the rig starting to come back in May. So it was a very short break up. It's not like it was 10 years ago or 15 years ago, where it would be a 3-month season, it was very quiet so. Trevor Haynes: Quick to point out a lot of the Royal revenue comes from long-term operating cams, where Royal is providing the turnkey service, a good deal of that is mining related. Daryle Warren: And mining very, yes, constant. It doesn't really have a season where it slows up. Trevor Haynes: So a little less seasonality, Frederic currently and going forward is our expectation. Michael Ridley: And just one other -- I feel like I talk about it every quarter is just, again, our core strategy in being more diversified and not necessarily focused on oil and gas, I think it really balances out the year very nicely in terms of the type of work that we're focused on in all sectors where it is much less seasonal than it was to Jon and Trevor's point years ago. Frederic Bastien: Awesome. And one more for me, please. MSS, obviously, you have grown this business through acquisition in the past. You were busy on the workforce side last year. You also did an acquisition in LodgeLink. How's the M&A landscape looking for that particular space rentals business? Trevor Haynes: Yes, we maintain healthy pipeline, as you know, ebbs and flows, the number of platforms that are looking to sell. Also, we have competition. So we start to predict when and whether we're able to complete something, but we're always working on it. And I think we've got a pretty good reputation in our industries as good buyers. I would point out on the MSS side, the industry is more and more consolidated. And so there's just fewer pieces out there. And so our first means of growth is organic and where we have strong end market demand. We're leaning in, it's a lower risk, actually higher return debt way to grow. And if we can augment that with some tuck-ins, we'd be very happy. I don't know if there's anything you would add there, Ted. Edward Redmond: Well, we're putting out a significant amount of capital over the last 5 years. And our target is to have good, strong organic growth. So we've got a whole series of growth strategies we're working on around that. And we're definitely looking for opportunities in all of our markets where we've got high utilization by customer demand, and we just -- we try to make sure that we have the fleet available to meet that customer demand. Trevor Haynes: We've got the dry powder to transact. So for all the analysts on the call, maybe not your investment bankers to bring us some fantastic ideas. Operator: Your next question comes from the line of Razi Hasan from Paradigm Capital. Razi Hasan: Maybe just one on the gross margin. Could you maybe give us some indication on how you see gross margin levels through the remainder of the year? Trevor Haynes: Thanks for the question. I think let's go straight to you, Toby. Toby Labrie: Yes. Thanks, Razi, for the question. Our margins within our existing revenue streams are -- continue to remain fairly consistent. We expect those to remain fairly consistent. So the biggest fluctuation you'll see is generally with the revenue mix itself. And so as we have higher rental revenue -- rental revenue being our highest margin business, lodging kind of following up as the second and then our nonrental being the lower margin business. So as that mix changes from quarter-to-quarter, you'll see changes in our overall margin levels. So with Q1 being relatively late on sales and nonrental seeing a bit higher gross margin levels overall. And as we see higher sales volumes and higher overall revenue typically in Q3 when we have more education, sales and nonrental-related activity, in particular, we tend to see a bit our overall margins dropping a little bit. But overall, on a full year basis, we expect things to be pretty consistent year-over-year. Razi Hasan: Okay. That's helpful. And then maybe just one more. I think you mentioned earlier, Trevor, just in regards to having a realistic time line for capital deployment on nation-building projects. Could you maybe talk about how you think utilization levels in the workforce segment carry through for the remainder of the year, you're at 56.5% or so now. How do you see that ending by the end of the year? Trevor Haynes: Yes. I mean that's something we look at and try to forecast out here. It's not an exact science because even when projects go to field level execution, and we expect a few -- that are in the headlines to move forward this year. The front-end work of preparing sites and starting to move the initial capacity for housing trades. There's a ramp-up element to it. Some of these locations are complicated, impacted by weather and various restrictions on action, et cetera. So what we expect to see is being able to give indication that we are mobilizing on larger projects, and then you would see operations type of revenue upfront as we begin to move assets in place and then a ramp-up on each project as the capacity grows to peak demand alongside of the number of trades that are going into the site. That isn't exactly a 1% increment, they do go out in blocks. And so you're going to see these sort of staircase step changes in utilization as we progress to a higher utilization run. So I'm not sure if that's a very precise answer for you, but that's the way we think about what happens over the next 3, 4, 5 quarters here. Operator: The next question comes from the line of John Gibson from BMO Capital Markets. John Gibson: When we think about unused capacity out there for workforce, you and your peers report in the mid-50s utilization, but based on increasing work in labor housing requirements is most of this equipment able to go back to work or could we reach a point where we maybe need new build workforce holding more quickly than expected? Trevor Haynes: John, thanks. To begin with characterizing the condition of our unutilized fleet, our view is that when we talked about 6,000 beds of capacity that essentially all of that is in market-ready condition. There's always a little bit of work as we assemble them, an air conditioner might not turn on or something, and so we have a little bit of maintenance capital. So we do believe that the fleet is ready for market. As we said earlier, based on what we see in the pipeline there are scenarios where demand could exceed our internal capacity. We think we've got arrangements in place that would allow us to access other equipment existing in the market, be able to meet demand prior to backing the decision of how to add new manufacturing capacity into our system or into our industry. So we kind of have a sort of a staged view of how utilization may exceed what we have available in our system. But again, our capacity is marketable with very little capital required to get it to market. If that's the primary question. John Gibson: Yes. I guess what I was -- that answered my question mostly. I just was wondering like, are we seeing a higher level of customization now that may require some new build equipment if not in your existing fleet more quicker than expected? Michael Ridley: Yes. I don't think much. I mean we are putting -- just to sort of add on the Trevor. I think the short answer is that most of our units are ready to go with minimal capital required to get into the market. Customization, project-specific with good term, good customers, good returns. We will certainly look at deploying capital in that regard -- some of our other asset types or subscribers are small format asset, we are adding capital in that area, 3-person sleepers, 4-person sleepers, self-contained units, drill camps. Not necessarily a huge piece of the pie, but we're putting capital into that to serve some of the changing dynamics in the oil and gas sector, for example, what the market is demanding. Trevor Haynes: And it's also because we're essentially fully utilized with those managers that were more streaming in the Montney. Michael Ridley: Yes. And with that, we're seeing reimprovement in that particular area as well. So yes. The base large-format fleet though is ready to go. Daryle Warren: Sorry, just going to mention the type of fleet that we have goes well with the demand, the layouts and such is exactly what is being asked for. Trevor Haynes: The private watch format. Daryle Warren: Yes. In combination of Black Diamond and Royal's fleet just mention it as well. John Gibson: No, that's great. That answers it. Second one, can you talk more specifically about military-related spending and how you're positioned, are you seeing demand on the WFS or MSS side and just, I guess, how are you positioned with government qualifications, that sort of stuff to win your share work there? Trevor Haynes: Yes. Interestingly, we've been spending time building relationships with Canadian military and government procurement staff, say, 4 years Emma and also handles our government relations. So we've positioned ourselves quite well with our security clearances and certifications, et cetera, we did create a new corporate entity called Black Diamond Defense Services based in Ottawa with the skill sets for being able to effectively interact and those customers on the specifics of what they need. And so when we think about that, it's opportunity for all 3 businesses and assess WFS as well as LodgeLink. And with various partners to take on expanded scope to provide larger turnkey contract outcomes for Canadian military. We're running in parallel or some opportunities that are moving forward quite quickly. And so I think, like Jon, we're going to see project deployment of some magnitude, likely over the next 6 months will show revenue from military. Daryle Warren: Yes. It's -- we've got a project we're working on right now that potentially is looking good for Q3 for deployment and operations to handle workforce accommodations on one of those projects. Trevor Haynes: Infrastructure build and it should be 5, 6, 7 years. So short answer, we've been working on it for a while. We're positioning as best we can, and we've got real opportunities in that vertical. John Gibson: Okay. Great. Appreciate that. Last one for me. I'm not sure if you can answer this. But what percentage of your U.S. business would be data center levered now? And where does this get to over the next few years? Trevor Haynes: I'm not sure we have that on hand, Ted, but maybe you do. Edward Redmond: Yes. I don't have an exact number for you. I think it's increasing part of our business. Our business is very diversified. We're in many of the major markets in the U.S. Southwest and the U.S. East, those cities have a lot of different projects going on them, data centers, are not uniformly distributed. There are some states where there's more data centers like Texas, and we've got significant data center activity in Texas. Other states are less data center friendly. So it is a much less than 50% of our construction activity in construction. If you look at our MD&A, you can see is only a portion of our total revenue. So it's a meaningful but and growing segment of our business. Operator: Your next question comes from the line of Vritti Munjal from Canaccord Genuity. Vritti Munjal: I'm filling in for Matt. You've indicated LodgeLink 3.0 is progressing towards general availability. Could you give us some color on the time line? And how should we expect the economics of the new platform relative to the current platform? Kind of more specifically, does it improve revenue margin structurally? Or do you see like more volume-driven benefits? Trevor Haynes: Yes. Thank you for the question. We're really excited about what's happening at LodgeLink. We've done a lot of work in positioning LodgeLink for its next phase, and we've been working at that as we've talked about 3.0 for the better part of 15, 16 months now. The new product, which is sort of a much more integrated, more dynamic type of workforce travel solution, it is really compelling. We're in -- we're just moving from pilot phase to advanced pilot. We expect to have the product in beta this summer and at a certain point this fall, I don't have an exact date yet. We'll see how beta goes. We expect to have general availability or GA. As we get there, there'll be a maturing of the revenue model that we anticipate will bring in a new type of user or revenue to add to the margins that we enjoy on the supply and through our intermediary partners. At the same time, our customer sign-ups, even prior to 3.0 availability have been really quite strong and retention of our largest long-term customers continues to be high 90s to 100%. So we've got lots of validation points that what we're doing is adding value in the ecosystem of demand and supply. And really, what we're doing here is really complicated itineraries moving large groups of people around. So we're really excited. We think we'll get to GA later this year. Quickly, the inflection point will show. Certainly, our KPIs will give a strong indication, but it is business-to-business sale and business to business sort of operational behavior will change for our customers' teams. And so there's an element of transition time line there. But we hope to have some really good data points to indicate whether the market -- product is hitting the market or the target market by late this year. Nothing has changed in our view about how large this addressable market is. We've got good traction in Australia, and we're looking more broadly at Asia Pacific and we just think this is going to be a tremendous part of our business as we continue to move through the next phase. So thank you for asking. Vritti Munjal: Yes, that's very helpful. Just one more for me. With regards to the Spencer Group integration this quarter, you -- the margin compression this quarter you attributed to Spencer Group corporate travel mix. Is 11%, 11.5% the right steady-state margin that we expect for LodgeLink? Or do you expect say, the crew accommodation business to reaccelerate and pull up the blended margin back to the 12%, 13% range we've seen before the acquisition. Trevor Haynes: The blended margin. If we look at the business without the Spencer revenues added, we actually had slight margin improvement that we would ascribe to elements of economy of scale as we're just handling more and more volume. When we blend in the more traditional travel management revenue streams, the margins are lower, but it's a profitable small business part of our LodgeLink platform. Mostly the intent was to get infrastructure, the IATA licenses, et cetera, to be able to grow our LodgeLink business in Australia. So why do I point that out? Because we anticipate seeing significant growth on the LodgeLink side, moderate growth on the traditional travel management. And so the margins even on a blended basis will increasingly be influenced by the LodgeLink side. So you should see gradual improvement as that mix changes based on the different growth levels of the 2 types of revenue stream. Hopefully, that makes sense to you. I don't know, Toby, if I explained that well enough. Toby Labrie: Yes. Yes, I think that's right. I think the -- you saw the margins blend down even though we were seeing margin expansion year-over-year. But as Trevor mentioned, as we continue to see that mix of revenue shift towards stronger growth on the accommodation side. We should see that on a sequential quarterly basis continue to improve. Operator: That concludes the question-and-answer session. I would now like to turn it over to Trevor Haynes for closing remarks. Trevor Haynes: Thank you. Thank you, everyone, for joining today. Once again, we're pretty pleased with how the business is operating. We think we've got a great deal of optionality as we look forward with a nice stable base and compounding our core business here. And thanks again to our teams across the platform for their great work. Hope everybody has a great day and a good weekend. Thank you. Operator: That concludes today's meeting. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to Advantage Energy Limited Q1 2026 Results Conference Call. [Operator Instructions] Also note that this call is being recorded on Friday, May 1, 2026. And I would like to turn the conference over to Brian Bagnell, Vice President. Please go ahead, sir. Brian Bagnell: Thank you, Sylvie, and welcome, everybody, to today's conference call to discuss Advantage's first quarter 2026 results. Before we begin, I'd like to remind listeners that our remarks today will include forward-looking information and references to specified financial measures. Advisories on these items are contained in our news release, MD&A and annual information form, which are available on our website and on SEDAR. I'll also note that we posted an updated corporate presentation on our website. I'm here today with Mike Belenkie, President and CEO of Advantage; Craig Blackwood, our CFO; and the other members of our executive team. We'll start today by speaking to some of our financial and operational highlights. Once Mike has finished speaking, we'll pass it back to the operator for questions. And as usual, I'd like to ask that if you have any detailed modeling questions that you follow up with us individually after the call. And with that, I'll turn the call over to Mike Belenkie. Michael Belenkie: Thank you, Brian, and thanks, everyone, for joining us today. It's my pleasure to discuss our results for the first quarter of 2026, and the year is off to a great start. Advantage generated adjusted funds flow of $121 million or $0.73 per share. It was a highly active quarter with capital spending of $136 million, which is almost 50% of our full year capital budget just in the 1 quarter. We offset a portion of our spending by selling an unutilized infrastructure asset for $12 million plus assets in kind with an additional $7 million. And this helped us keep debt levels relatively flat at $556 million. Production averaged 81,375 BOEs per day in the quarter, which was a 2% increase from the fourth quarter of 2025. And liquids continue to play an increasingly important role in our business, generating 44% of total sales revenue during the quarter at an average realized price of $84 per barrel. So even in a quarter with weak gas prices and an intensive spending profile, the business continues to generate strong cash flows. We drilled 12 gross wells in Glacier and Valhalla and 13 gross wells were recently brought on production. Our oil-weighted Charlie Lake asset continues to exceed expectations with 5 wells brought on production in the first quarter. We're forecasting the asset will deliver over $120 million of free cash flow this year, reinforcing the benefits of diversification. Meanwhile, our recent wells in Valhalla Montney delivered strong initial rates and well condensate ratios exceeded 185 barrels per million cubic feet, which is in line with the greater Wembley play, though this is early data, and we will be keeping an eye on the decline profiles. Most significantly during the quarter, construction of our new 75 million cubic feet per day progress gas plant reached mechanical completion and commissioning is now underway. The progress gas plant is perfectly located at the intersection of 3 of our liquids-rich plays, the Valhalla Montney, the Progress Montney and the Charlie Lake. Not only will this plant drive the next phase of growth for Advantage and help reduce operating costs, but it's also a realization of a regional development strategy we've been pursuing for the last 15 years. The last pieces of the puzzle have now fallen into place with Glacier, Valhalla, Progress and the overlapping Charlie Lake assets all the way up to Gordondale, now forming one massive contiguous resource block with a network of owned and operated strategic infrastructure. This is a significant milestone for us, and I'd like to take a moment to thank our team for their hard work, finishing this important project on time and on budget. With spending on Progress behind us, we're entering a period of highly efficient capital development with escalating free cash flow. We don't plan to spend any capital on capacity expansions for at least 2 years, with almost all spending aimed at high rate of return wells into existing infrastructure. We have less than $100 million of capital planned in the second half of 2026. This has brought us to an important inflection point in our capital efficiency and free cash flow profile. Beginning in the third quarter of 2026, we expect production to average approximately 90,000 BOEs per day, and it should stay there through to the end of 2027, and beyond and that will deliver production growth in 2027 of about 7% over 2026. Now looking forward, our corporate strategy remains the same to maximize cash flow per share without compromising our balance sheet. This means a laser-like focus on picking the highest rate of return wells with every penny of discretionary capital. Naturally, our liquids plays have superior returns right now with AECO hovering around $1 per GJ and WTI at $100. This is a historical disconnect. At these prices, we expect our forecasted oil and NGL volumes to average approximately CAD 100 per barrel and account for 58% of sales between the second and fourth quarters of 2026. We're reallocating approximately $25 million of capital this year from Glacier gas targets, which at strip would be expected to have payouts of about 1.5 years. to Wembley oil targets, which are expected to have payouts of about 8 months. Our Charlie Lake wells currently have payouts of about 6 months. Although the BOE volumes for oil wells are typically lower than gassy wells. And when I say that, I'm speaking about the IP30s and so on. The impact of our -- the impact of these shifting to oil wells in our 2026 program will be minor on our total production forecast. So there is no need to adjust our 2026 production guidance. Depending on how long oil prices remain strong, we may shift additional capital to liquids drilling later this year. Debt reduction remains a top priority. We expect to achieve our net debt target range of about $400 million to $500 million during the second half of 2026 with cash flows supported by our hedging program and market diversification even if natural gas pricing remains weak. Given our proximity to that target, Advantage is opportunistically allocating a portion of free cash flow to share buybacks through the second quarter and into the summer. That approach is consistent with our long-standing capital allocation framework, especially given our current trading dynamics with Canadian gas producers trading at a significant discount to the greater market and Advantage at a discount within that group. We have hedged approximately 41% of our forecasted natural gas production in 2026 as well as 29% of our production in '27 and 18% in 2028. As a result of our hedging and downstream market diversification, our AECO exposure has now fallen to approximately 18% for the remainder of 2026. We have also hedged approximately 42% of our crude and NGL production this year and 26% in 2027. These steps have been important to reduce the volatility of our cash flows by reducing exposure to localized pricing weakness. As we look a little further into the future, we expect to continue our 5% to 10% annual production growth for the foreseeable future, although this growth is always carefully tuned to suit the commodity price outlook. We have owned and operated gas capacity that exceeds 500 million cubic feet per day plus the midstream service, and this is adequate for us to grow our production to 100,000 BOEs per day without any major infrastructure expansions. Depending on commodity pricing, we could be approaching this 100,000 BOE per day milestone as early as year-end 2028. And as one more thing, we also have an additional 100 million cubic feet per day of capacity ready to be reactivated at Conroy in British Columbia when market conditions are supportive for us to enter the province. I also want to briefly touch on Entropy. Construction of the Glacier CCS Phase 2 project is almost complete and commissioning is expected to begin in the coming months. This project is intended to substantially decarbonize the Glacier facility and drive a positive step change in operating income, which comes from contracted power sales and contractually guaranteed carbon pricing. All funding for the project is being provided by Brookfield and Canada Growth Fund. Overall, our message today is straightforward. The first quarter reflected a business that continues to perform well through the commodity price cycle while approaching a major step change in capital efficiency. We are bringing the Progress gas plant into service, improving our commodity exposure through hedging and market diversification and moving towards a period of strong free cash flow, driving debt reduction and ramping share buybacks. So with that, I'd like to thank our employees, our Board and our shareholders for their continued support. I'll pass it back to Brian for questions. Brian Bagnell: Thank you, Mike. Sylvie, we'll pass it over to you to see if there are any questions from the phone lines. Operator: [Operator Instructions] And currently, sir, it appears we have no questions registered from the phone line. Brian Bagnell: Okay. Thank you, Sylvie, and thank you, everybody, for joining the call today. If you have any questions, please feel free to follow up with us after the call. Thank you very much. Operator: Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have yourselves a good weekend.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's First Quarter 2026 Investor Call. This call and the associated webcast are the property of Liberty Global, and any redistribution, retransmission or rebroadcast of this call or webcast in any form without the express written consent of Liberty Global is strictly prohibited. [Operator Instructions] Today's formal presentation materials can be found under the Investor Relations section of Liberty Global's website at libertyglobal.com. [Operator Instructions] Page 2 of the slides details the company's safe harbor statement regarding forward-looking statements. Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the company's expectations with respect to its outlook and future growth prospects and other information and statements that are not historical facts. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed in Liberty Global's filings with the Securities and Exchange Commission, including its most recently filed Forms 10-Q and 10-K as amended. Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectation or in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Mike Fries. Michael Fries: All right. Thanks, operator. Hello, everyone. I appreciate you joining the call today. As usual, Charlie and I will handle the prepared remarks and the presentation, and then I have my core leadership team on the call with me and on standby for Q&A as needed. We've got a lot of ground to cover, so I'm just going to jump right in on the first slide, which provides some key takeaways from the quarter. To begin with, we delivered strong operational performance, and we'll go through it all in a moment. But one big headline here, this was our fourth straight quarter of steady broadband improvement across each of our big 3 markets with fixed and mobile ARPUs remaining largely stable. Now Charlie will walk through how this translates into our financial results, but the punchline is, we will be confirming all of our 2026 guidance today. There are lots of reasons for this commercial momentum, including our multi-brand strategies, our network investments, AI implementations around personalization and churn and call centers. And we'll talk about all that a bit today. But really, what we'll do in our second quarter call is do a deeper dive on our AI initiatives. So stay tuned for that. Equally important for this audience is the fact that we are making real progress on the value unlock initiatives announced this past February. The acquisition of Vodafone's 50% stake in our Dutch JV is on track to close this summer, and we see no obstacles to getting that deal done on time. And that, of course, is just one of the main building blocks underlying our strategy to spin off our Benelux assets in the second half of next year. And I'll walk you through each of those building blocks in just a moment as well as the value we could and should create for you all by spinning off the Ziggo Group. Now quickly on Netomnia, that transaction in the U.K. is now officially in the regulatory process. And while the noise from 1 or 2 competitors has escalated recently, we're pretty confident this deal will be approved. It's a very positive development for the U.K. fiber market, which is in desperate need of rationalization, as you all know. And it's a great outcome for VMO2 for all the reasons we reviewed on the last call. And finally, you won't be surprised to hear that we are highly focused on capital allocation at the corporate level. Over the last 2 years, we brought our net corporate costs down by 75%. We talked about that on the last call. And we've articulated what we believe is a clear investment strategy around telecom and growth, and we strengthened our balance sheet. After funding the $1.2 billion needed to close the Vodafone transaction and executing on around $700 million of asset sales from our growth portfolio, we should end the year with around $1.5 billion of corporate cash. And as noted here on the slide, through April, we've generated around $300 million in proceeds. So we're sort of on our way. And then finally, just one quick remark on the broader telecom environment in Europe. As you would know, the sector has performed well in the last 12 months or so. That's driven in part by improved operational performance, reduced CapEx and a general rotation out of software and into industrials. You're all familiar with those trends. I would add to the list what appears to be an improving regulatory climate in Europe when it comes to telecom broadly and more specifically when it comes to consolidation. Now we await the formal release of the EU merger guidelines, for example, but these changes are expected to redefine the rules, and that's going to be a big positive together with an increasing commitment to sovereignty to our sector and the broader telecom industry. So I'm sure you're aware of that, but important to note. Now moving on to the next slide, let me start by saying that there will come a point in time when I don't need to put this chart in the deck. But for now, I think it's helpful to summarize our operating structure, specifically our 3 core pillars of value creation, Liberty Telecom, Liberty Growth and in the center Liberty Global itself and to highlight the strategies we're executing to create and deliver that value. Liberty Growth on the far right houses our portfolio of media, infra and tech investments totaling $3.4 billion today. And here, we're focused on rotating capital, investing in high-growth sectors with scale and tailwinds. We'll try to spotlight a few of those in each quarter. And today, we'll lay out the thesis for the experienced economy. In the center sits Liberty Global itself with $1.9 billion of cash and a team with decades of experience operating and investing in these businesses. And as we reported last quarter, we've restructured our operating model and reduced net corporate costs by 75% since 2024 to around $50 million this year. And these 2 asset pools alone, by the way, our cash and the market value of our growth investments, exceed the current price of our stock by around 30%, which means, of course, that everything in our core Liberty Telecom business on the left, nearly $22 billion of revenue, $8 billion of EBITDA and 4 incredible converged telecom champions are receiving no value at all on our stock. In fact, negative value, if you give us credit for our substantial reduction in corporate costs. Now as we said over and over and over, our primary goal here in Telecom to drive commercial momentum and importantly, to unlock value for shareholders. And that was the impetus behind our Sunrise spin-off, which you all know about and which we believe has worked extremely well for investors. And that's why in the last call, we described the formation of the Ziggo Group, a combination of our Benelux assets in Holland and Belgium and our intention to spin off our interest tax-free to shareholders in the second half of 2027. So where are we on that specific initiative? I referenced earlier the building blocks that form the foundation of our expected value unlock for the Ziggo Group. And you can see the most significant ones outlined on the left-hand side of the next slide. Let me just say that each of these steps, each of these blocks, if you will, are centered around strategic catalysts, free cash flow growth and deleveraging. And they each represent a foundational element of the value creation plan here. This is the primary blueprint we've been executing, of course, with dozens of overlays and work streams, but it should give you greater confidence and awareness of our plans here. Let's start with Belgium. The first step was, of course, separating Telenet from its fixed network, which is now a 2/3, 1/3 JV called Wyre. This restructuring accomplishes or has accomplished 4 key things. First, it isolates a significant fiber CapEx and debt capital needed to upgrade the HFC network in Flanders into an off-balance sheet vehicle. Second, it precipitated a comprehensive network cooperation agreement between Wyre and Telenet on one hand and Proximus and its fiber asset, Fiberklaar on the other hand, which I'm pleased to say was just signed yesterday and will result in a single network ours or theirs in about 75% of Flanders. That's a great, great outcome. Third, it creates a cleaner, more consumer and B2B focused Telenet, ServCo, with a significant free cash flow turnaround story supported by declining mobile CapEx and mostly AI-driven OpEx reductions. And then fourth, it facilitates a reduction in Telenet's leverage from both the rebalancing of debt between Wyre and Telenet and the sale of a portion of our stake in Wyre at a premium, by the way, which will be used to repay debt at Telenet. So really critical steps to getting where we want to be. Moving to the Netherlands. For me, the first strategic catalyst here was bringing in a new management team, one that could set the tone for a return to growth and for winning results in the Dutch market, and Stephen and his team have delivered exactly that. And the second strategic catalyst was, of course, reaching an agreement with Vodafone to buy their 50% stake in our Dutch JV. This deal, as I just said, is scheduled to close in less than 3 months. Now -- not only is that deal accretive from a financial point of view, but it strategically unlocks about EUR 1 billion in synergies we referenced and it provides the structural elements necessary to complete a tax-free spin-off next year. Each of these steps accelerates our commitment to reducing leverage at VodafoneZiggo, which we'll accomplish through asset sales, a return to EBITDA and free cash flow growth and synergies. Now on the top right of this slide, you can see a side-by-side of Sunrise and the combined Ziggo Group. If you look at 2025, the Ziggo Group is bigger. It's about 2 to 2.5x larger in revenue and EBITDA and a bit more profitable. But importantly, you'll see that in 2028, we're estimating free cash flow of around EUR 500 million and leverage of 4.5x, which presents a comparable financial profile to Sunrise when we spun it off in Q4 '24. The chart on the bottom right provides an illustrative bridge to the EUR 500 million of free cash flow, which is estimated to be EUR 120 million this year. And the biggest components of that, as you can see, are the nonrecurring nature of some costs this year in Holland, combined synergies, Telenet's mobile CapEx reduction and organic EBITDA growth. We think the Ziggo Group represents a compelling equity story and it's anchored around 4 selling points. Number one, this is a strong regional business with 2 of Europe's most rational telecom markets that are best-in-class brands. Number two, we have clear network strategies here with declining CapEx as 5G investments subside and fiber costs are moved off balance sheet in Belgium and a cost-efficient DOCSIS 4 rollout in Holland. So declining CapEx and great visibility to the network strategies. Number three, rising free cash flow and declining leverage, and that's supported by organic growth, synergies and EUR 1.2 billion to EUR 1.4 billion of local asset sales I've already described, towers, property, et cetera. And then number four, our commitment to pay dividends from free cash flow as we've done with Sunrise. So we have lots of work to do, but this plan and this path forward is clear for us, and we look forward to updating you each quarter on our progress. Now what does it all add up to? I'm sure many of you are wondering what sort of value creation do we think is achievable here. The chart on the next slide is actually simpler than it looks, but it moves left to right, and it demonstrates how we have and how we intend to create value through this unlocked strategy. Let's start on the far left. The day we announced our intention to spin off Sunrise in February 2024, our stock closed at $18. Of course, 9 months later, we completed the spin-off and using Sunrise's current stock price, we feel we delivered a tax-free dividend that's valued today at $13 per Liberty share. So together with our $12 stock, you get to $25 or about a 40% value appreciation in the last 14 months or so. So far, so good. About 2 months ago, we announced the second step in our value unlock strategy with our intention to consolidate Benelux and spin off the Ziggo Group in the second half of next year. So what might that be worth? And these numbers are illustrative. Lawyers, maybe, say that, of course. But if we -- if you move to the right and the third column, I think you'll see the answer. We believe a publicly listed Ziggo Group, if it were to trade at, let's say, the same implicit valuation of Sunrise today and essentially an 11.5% free cash flow yield could be worth up to $14 per Liberty share based upon the 2028 free cash flow estimate of EUR 500 million that we just discussed. And without debating the point, we believe this could be conservative. As you would know, many of our peers, KPN, Swisscom, Orange, Zegona, they trade at free cash flow yields of 5% to 7%, albeit with different leverage profiles. So let's stick with the 11.5% free cash flow yield. The primary question then is where will Liberty itself trade post spin. Remember, we believe that the entire Liberty Telecom Group has negative value on our stock today. We're around $4 per share despite our announced intentions regarding Ziggo, with our cash and growth assets worth $16 and our stock at $12, that's the only conclusion we can reach. Now to arrive at $14 post the Ziggo Group spin, we simply added our pro forma cash balance after the Vodafone deal and asset sales, together with the value of our remaining growth assets, including our residual stake in Wyre, and we get to $14. By the way, these numbers assume that the market continues to assign no equity value, that's 0 equity value to our remaining telecom businesses in the U.K. and Ireland. Of course, we think there is substantial equity value in these businesses, but we don't need to agree on that to get to these numbers. So to recap, if you follow the light blue boxes, from February '24, the day we announced our plan to spin off Sunrise to today, we created $7 on what was an $18 stock. So that's 40%, and we believe for those who had held on to the Liberty stock and the Sunrise stock, that number gets to 41% with the Ziggo Group spin. If you do the same thing with the dark blue boxes for those who bought their shares after the Sunrise spin-off, we think we can take $12 today to as much as $28 by the second half of next year when we spin the Ziggo Group. Now while there are no sure things in life and plenty to do between now and then, trust me, the building blocks we think are in place, and we feel good about the plans and these estimates here. Now one of the reasons for that good feeling is the progress Stephen and his team have made over the last 5 quarters. This next slide summarizes some of those initiatives and some of the progress beginning early last year when we repositioned broadband pricing, we changed the operating model and rejuvenated our campaigns, even expanded our footprint through the deal with Delta Fiber. As a result of that, we saw steady improvements right away in broadband, where we've been losing over 30,000 subscribers every quarter. Those changes continued into '26 when we rejuvenated the Ziggo brand with a new campaign, The Everything Network, that was supported by our UEFA rights, by the way, which we just extended. We also launched broadband into our no-frills flanker brand, bringing a simple and value-driven connectivity product to that critical segment. And you can see at the bottom right, the broadband net adds have been moving in the right direction for 4 straight quarters. In fact, our first quarter result was the best in 3 years, driven by all the initiatives I just referenced, pricing adjustments, new campaigns, product expansion and network improvements. And by the way, we have the largest reach of 2-gig broadband services in the country. And we just launched field trials with DOCSIS 4 in anticipation of launching 4 and 8 gig products later this year. So operationally, VodafoneZiggo is in great shape and improving, exactly what you want to see as we plan for a public listing next year. Now the next 2 slides summarize Q1 operating performance across our 4 markets. I'm going to do this quickly since the CEOs are on the call and they can provide color if needed. I think the main headline here is that we continue to see good broadband trends pretty much across the board and stable fixed and mobile ARPUs. Starting with VodafoneZiggo, like I just talked about, our broadband performance improved for the fourth consecutive quarter and postpaid mobile net adds also improved sequentially. We continue to invest in our fixed and mobile markets in Holland with both the Vodafone and Ziggo networks receiving outstanding awards in the Umlaut test. With ARPUs of nearly EUR 57 in fixed and EUR 18 in mobile staying steady, this has been a good outcome. Turning to Belgium. Telenet delivered its highest quarterly broadband result in 10 years, driven by successful cross-sell campaigns and strong performance with our BASE, our flanker brand there. Postpaid mobile results remain subdued in Belgium as the market is pretty competitive. And here, too, our base brand is outperforming, while both mobile ARPU at EUR 16 and fixed ARPU at EUR 63 remained largely stable ahead of upcoming price adjustments in Q2. Now turning to the U.K. on the next slide. Despite a market that remains highly competitive, Virgin Media O2 delivered a third straight quarter of broadband improvement with just 6,000 losses compared to 43,000 losses a year ago. And this was supported by strong commercial and retention initiatives and, of course, lower churn. Importantly, and despite pressure on the overall market pricing, here, our fixed ARPU remained relatively stable at GBP 46.50, supported by more and more personalized and AI-driven pricing. And with the Netomnia deal working its way through the regulatory process, we continue our fiber-to-the-home expansion with 8.7 million fiber homes available today. In U.K. mobile, we launched O2 Satellite. You might have seen that making us the first operator in the U.K. to switch on direct-to-device satellite connectivity. In addition, our mobile network transformation is progressing with new RAN upgrade agreements and the transfer of the second tranche of spectrum from Vodafone 3, that's hugely important to us. O2 now has the largest 5G stand-alone footprint in the U.K. Net postpaid losses of 60,000 were materially better than last quarter as churn from the Q4 price adjustment, we've talked about that, subsided, and ARPU of around GBP 17 was broadly stable. In Ireland, lastly, we continue to execute strategically with growth in wholesale and off-net traffic more than compensating for retail pressure on-net. Fixed retail ARPU of EUR 61 remained stable despite no price rise in '25. And importantly, our fiber rollout, this is critical, remains on track to be substantially complete in 2026, with nearly 20% of the retail base now taking a fiber product, and that will also drive free cash flow in 2027 and beyond. Now just one slide on our Liberty Growth portfolio, currently valued at $3.4 billion and centered around 4 key verticals you know: infrastructure and energy, technology and AI, services and, of course, media and sports. Our strategy here has been consistent for some time. We are exiting positions that are no longer strategic and using that capital to both invest in new opportunities as they arise and as needed, provide capital for transactions that will unlock value in our telecom assets. That second point is really important. Historically, we've divested investment positions totaling something like $1.6 billion since 2019, and we've targeted another $700 million in sale proceeds this year, of which, as I said, $300 million is already accounted for. Now a few comments on sports and live events. Of course, we're already invested heavily here through Formula E, but we also believe there are significant structural tailwinds that warrant us evaluating additional opportunities, and we're doing that. And these points are probably well known to all of you, I'm sure, but there's clearly a generational shift from physical goods to experiences, that's live events, sports, travel and entertainment. Many of these markets are fragmented and most are protected from AI disruption. So it's an interesting space. It's also a clear momentum in the sector, right? Just look at sports, global revenue in sports growing well in excess of GDP over the last 10 years and by almost everybody's estimation, poised to increase and accelerate from here. What's our right to play, you might be asking? Well, we know how to consolidate fragmented industries, both in telecom, but also we've been doing that for decades and recently with All3Media before exiting at a premium. We've got strong relationships across these sectors. Really, the deal flow is the easy part. And when you factor in our expertise in things like treasury, operations and technology, it's a pretty strong combination. And we have a good track record in sports, specifically with Formula E, the fastest-growing motorsport globally and one of only 8 global sports leagues, which is a great segue to my last slide. I always get excited when I talk about Formula E, sometimes too excited. But I think this moment is perhaps our biggest yet. Like over the last 10 years, and you've been following this, we have constantly innovated, investing significant energy and time in the car, the technology and the racing. Well, the wait is over. Last week at the [indiscernible] circuit in France, Formula E unleashed the next-generation race car, GEN4, we call it, and the motorsports world is still reverberating. First of all, you have to see it in person. Yes, it is a beast, but it's a beautiful, beautiful race car. The step-up in power and performance is incredible. 600 kilowatts of power represents a 71% increase in base output over the current GEN3 Evo car. The acceleration is insane, 0 to 100 kilometers in 1.8 seconds. That's meaningfully faster than an F1 car and top speed in excess of 335 kilometers an hour, nearly 210 miles per hour. We estimate -- because it's an estimate at this point, that lap times will decrease by 10 seconds on average from the current generation car. That's a lifetime in racing. It's also the first single-seater race car with active all-wheel drive all the time, which will provide incredible acceleration in torque out of the turns. And of course, it meets all of our expectations from a sustainability point of view. It's made from at least 20% recyclable materials. It's 98.5% recyclable itself and allows us to continue claiming that our race-related carbon footprint for the entire championship would fit into F1 team, by the way. Speaking of F1, yes, we might have taken a few shots at them since the GEN4 launch. It might be deserved also, you're obviously aware of the issues they're dealing with currently and that they're going through with the hybrid engine. And it just reinforces our view that going halfway on anything does not make history. And we love the position that we're in technologically, competitively from an entertainment and motorsports point of view. But hey, just don't take my word for it. In the next slide, you can see -- go ahead and scan social media, the motor sports press. There is widespread consensus. I know I'm quoting this GEN4 car is a "monster." It's "ushering" in the most extreme era of electric cars, and it's expected to change perceptions of Formula E forever. Even Max gives it a thumbs up, as you can see on the bottom right. So anyway, super excited about GEN4 car in front of the E. And with that, Charlie, I'll turn it over to you. Charles Bracken: Thanks, Mike. My first slide sets out the Q1 financial results for our Benelux companies. Now as you can see on this slide, we're now presenting Wyre's financial performance for the first time separate to Telenet to give investors clarity on their respective financials before we complete the full separation of the 2 companies and their capital structures later this year. VodafoneZiggo reported a revenue decline of 1.8% in Q1, driven by a lower customer base and ongoing repricing impact. Now this was partially offset by the price indexation and higher revenue from Ziggo Sports and adjusted EBITDA declined 6.4%, driven by higher marketing costs and some incremental investments in network resilience and service reliability, in line with our guidance in March. At Telenet, revenue was broadly stable in Q1, reflecting our strategic decision not to renew Belgium football rights, which was partly offset by a strong broadband performance, which was driven by effective cross-selling into the video customer base. Adjusted EBITDA grew 8.9%, driven by lower content costs following the exit from the football broadcasting rights. And at Wyre, revenue declined by 1%, impacted by the implementation of a new pricing model, which was partially offset by strength in wholesale growth. Adjusted EBITDA declined by 4.6%, and this was driven by an investment in build capability as we start to accelerate Wyre's fiber build-out capability. Turning to the U.K. and Ireland. Virgin Media O2 delivered a total service revenue decline of 3% on a guidance basis. Now this was impacted by competitive pressure in the consumer fixed market and lower B2B revenue as the newly rebranded O2 business rationalizes its product portfolio to support its long-term growth in the mobile segment. This was partially offset by wholesale revenue growth, which was supported by growth in MVNO revenue and adjusted EBITDA declined by 3.4% as a result of the lower total service revenues and a noncash provision for legal matters recorded in the quarter. This was partially offset by cost reduction initiatives. At Virgin Media Ireland, revenues declined by 1.4% in Q1, impacted by intense competition in the consumer fixed and mobile markets as well as a decline in advertising revenues at VMTV. This was partially offset by a strong wholesale performance. Meanwhile, adjusted EBITDA declined by 7.1%, driven by these top line pressures and was also impacted by a one-off benefit in Q1 last year. Turning to the next slide. We remain committed to our disciplined capital allocation model as we rotate capital into higher growth investments and strategic transactions. Starting on the top left, Telenet reported EUR 10 million of free cash flow during the quarter and is expected to deliver at least EUR 20 million of free cash flow for the full year. Additionally, Liberty Corporate delivered adjusted EBITDA of negative $2 million, putting us firmly on track to achieve our full year 2026 guidance of negative $50 million. Turning to the bottom left. CapEx has meaningfully stepped down at Telenet in Q1 on a guidance basis, driven by the 5G upgrade nearing completion at the end of 2025 and lower spend on digital platforms. Capital intensity remains elevated at the other OpCos, reflecting investments in our fixed networks and also 5G upgrades. Moving to the Liberty Growth walk in the top right. The fair market value of our growth portfolio remained broadly stable versus 2025 year-end at $3.4 billion. This was driven by modest investments in AtlasEdge, egg Power, NextFibre and EdgeConneX, offset by the partial disposals of our ITV and some of our EdgeConneX stake as well as a positive fair market value adjustment at EdgeConneX, along with the recent decision to move Liberty Blume out of our Corporate & Services segment and into the growth portfolio. Turning to our cash walk on the bottom right. We ended the quarter with a consolidated cash balance of $1.9 billion. Q1 distributable free cash flow was impacted by high CapEx levels related to the fiber-to-the-home rollouts at Wyre and Virgin Media Ireland. In addition to working capital movements at Telenet, that's worth noting, we continue to anticipate that Wyre will draw on its stand-alone facility following BCA approval, and will fully repay the short-term funding provided by Liberty Global consolidated cash by Telenet. As a reminder, we are aiming to end 2026 with around $1.5 billion of corporate cash despite the expected outflows associated with the incremental Vodafone stake and also, to a lesser extent, the Netomnia acquisition. And finally, turning to our full year guidance targets for 2026. We are reconfirming all guidance metrics of VMO2, VodafoneZiggo and Telenet as well as our guidance for corporate costs. And that concludes our prepared remarks for Q1, and I'd like to hand over to the operator for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Carl Murdock-Smith with Citigroup. Carl Murdock-Smith: That's great. Two questions, please. Firstly, I wanted to ask on Virgin Media O2 about the wholesale service revenue growth. In the release, you say that, that included GBP 15 million of fixed pre-enablement and installation income. Am I right in saying that, that increase was due to a change in accounting treatment, meaning that it's now recognized as revenue, whereas previously it wasn't? I recognize that it's low margin, but that has provided almost a 1% boost to service revenue overall in Q1. So my question is, did you know about that change in treatment when you issued the guidance in February? Or does it provide potential upside to the revenue guide of 3% to 5% decline, particularly as you come in at the very high end of that range in Q1? And then secondly, I just wondered if you could expand slightly on the O2 satellite news and your kind of level of excitement around that? How much customer interest are you anticipating? And more broadly, just what is your view on the role of satellite in telecoms as a complement or competitor going forward? Michael Fries: [indiscernible] go over to Lutz first, but let me just say that as we look at the satellite space generally, we think, of course, satellite broadband, Starlink broadband has a role to play on the planet. There will be plenty of people who will utilize that broadband service and need that broadband service. We believe the direct device mobile opportunity is far more limited by technology, by market access, but we do like the idea of having a satellite service attached to our mobile network. We think it adds just another level of service and commitment to customers. And of course, the U.K. is the first market to where we have done that. So Lutz, I'll turn it over to you for satellite and then someone -- Charlie, I guess, will answer the wholesale question. Lutz? Lutz Schuler: Yes. Carl, so we are very satisfied with the launch of O2 Satellite, not disclosing numbers. But the fact that we have, at the moment, not the iPhone available, we will have it available in a week from now, and we have already quite high demand is leading us to the assumption that this is really a reliable service, an interesting and attractive service for customers. And also in combination with our improved mobile network, our 5G stand-alone coverage, we are really creating the right perception for customers, which means we have the most reliable mobile network from everybody in terms of coverage and data speed. And so therefore, we are very happy with that. Michael Fries: Charlie, do you want to address the wholesale? Charles Bracken: Just on the wholesale revenue, I mean, I think it was basically in budget, and that is a very difficult business to forecast by its very nature because it's -- but I think it was a pretty strong quarter. Lutz, do you have anything to add on that? Lutz Schuler: I mean I can give some color, right? I mean this -- I think, Carl, you're right. It was not -- we didn't account it the same way before. The reason for that was not to beef up our service revenue. And as you see, right, we are coming currently more at the upper end of the guidance. The reason for that is, that will be a growing and a continuous service revenue stream because we will more and more connect customers either from other networks or from other ISPs. So therefore, when you look at that way, I think that change makes sense. But as you said yourself, right, we are coming in at the upper end of our guidance. And you could drag that number a little bit. It is [indiscernible] of it if you want to accrue for it, but it won't change anything in the guidance. And I mean, we wouldn't change it. It's only one quarter, but so far, we are happy with what we have. Operator: Our next question comes from the line of Polo Tang with UBS. Polo Tang: I have 2. The first one is just on U.K. competitive dynamics for Lutz. So could you maybe talk through how the recent price rises in April have landed because the percentage increase is quite large, and I think it's double digit for most subscribers. So I'm just wondering if there's been any change in terms of churn. Separately, your postpaid mobile losses are continuing. So how optimistic are you that this can stabilize through the year? Second question is just a broader question on use of cash going forward. So you've talked a lot in this -- in the prepared remarks about ventures and the focus on sports and media. I think press reports suggested you were considering buying a European NBA franchise. So are you pivoting the group more towards media and sports? Or is the plan still to break up the group and return cash to shareholders? So any color on that would be great. Michael Fries: Sure. I'll start with that, Polo. They're not mutually exclusive. That's point one. Point two is our primary commitment, and I think it should be clear, but I'll repeat it here, is to create value for shareholders. And we believe, as I've said a few different times, the biggest opportunity to do that is to highlight and find ways to illuminate value in our telecom business. So that is our priority. That is number one. And as I mentioned a moment ago in my remarks, when we look at the use of capital, that factors in squarely to that -- to the strategy. So as I said, we will use capital and rotate capital into growth opportunities should they be presented to us, but also into the telecom business if it helps to unlock value for shareholders. And then I think I went on to say that second one is an important point. So that's the first part of the answer. I'd say, secondly, we are opportunistically looking at and being presented with sources of opportunities. Sorry, somebody has got this -- somebody is ringing. Anyway, with opportunities in the sports space and in the media space generally. And there's a reason why the portfolio was $3.4 billion large because we have been very active as an investor. And maybe it's been quiet, and we don't spend as much time on our earnings calls doing it, but it's arguably the biggest component of our stock price today are the investments that we've assembled strategically and purposely over the last, let's say, 5 to 7 years. And we're divesting ourselves of a huge chunk of those investments and rightly so because we need cash to do the things we've been talking about today. And then we will opportunistically look at new investments if they make sense. But don't get me wrong, we are committed to the unlock strategy, and that is priority #1. Lutz, do you want to talk about competitive nature of U.K.? Lutz Schuler: Yes. Polo, so in mobile, you see in our numbers that we have been shrinking in service revenue around 3% but this is before the price rise. And right, a reason for the net losses in Q1 was the higher price rise we decided for. Now we are seeing this landing very well. We have the first month of the second quarter behind us, Polo. And our explanation for that is that those who didn't want to pay it less and -- before that has materialized. Now we don't see any spike in churn. And obviously, we also have to wait for May, but the findings here are so far so good. On the fixed side, the competitive situation is also unchanged, I would say. So all are very aggressive, as we all know, and also other competitors have to follow. But here, remember, I said at the last call, we have to optimize our prevention machine as we used to do it with the retention machine, which we have done now. So therefore, we are quite proud about the fact that we have almost stabilized -- managed to stabilize our fixed customer base in Q1, and we expect something like that in the future. And yes, it comes at the cost of some ARPU which is 1.6%. But in the scheme of things, that is a balanced approach. And let me finish with -- remind you when we've given the guidance, right, 70%, 80% of the service revenue decline is attributed to our expectation on the fixed consumer service revenue market. And that means that we are planning for a recovery in mobile service revenue, Polo, and we are going to see this as we speak from the price rise in Q2. Operator: Our next question comes from the line of Robert Grindle with Deutsche Bank. Robert Grindle: I see the progress on the long-form agreement with Proximus, but approval for the collaboration is still outstanding. What happens if you're delayed for another 6 to 9 months? Do you progress the build of planned? Or is the project pushed back? And I think Charlie said the Wyre revenues were impacted by a new pricing model. Could the Wyre Telenet ServCo financials change from here? Should there be a change in the wholesale rates associated with any approval? Or will this financial base you've given us now be effectively unchanged? Michael Fries: Thanks, Robert. We've got John Porter on the line, who's worked tirelessly on this Proximus transaction [indiscernible] outstanding result for Telenet and for us. Do you want to speak to the regulatory process from here, John? Unknown Executive: Sure. Well, we've been in lockstep with the Competition Authority and the BIPT over the last 2 years. They are right up to date on every aspect of the transaction between ourselves and Proximus. We have very positive inclination from them and believe that they will expedite the final review of the transaction. There is then a necessary 30-day review at the European Commission. That is not an approval process. It's just a chance for them to reflect on the transaction and see if it has broader implications. So we are cautiously optimistic that we will complete this transaction over the next, say, 6 to 8 weeks. And it's a virtual impossibility that it would go longer than that because I think we'd all down tools. But I think that we are -- the main critical path has been achieved between ourselves and Proximus and everybody is ready to get going. Charles Bracken: And let me just step in on the -- I'll just say, we're separating the 2 companies. There is a little bit of tweaking. For example, there is a bit of movement on the wholesale rate to Telenet, and there's also some management fees that are being reevaluated. So I think we'll get a more stable view on the numbers in Q2, but I would say it's pretty good news for the ServCo. I'd also say on the financing side, just a real shout out to our treasury team, the $4.35 billion of underwritten financing that's clearly in place and we could draw has -- now been fully syndicated, which is a great success, very successfully syndicated, and with the completion of the BCA approval, we'll be drawing that down and indeed paying some of the money that we decided it was more efficient to bridge from our balance sheet rather than draw revolvers to do so. So I think it's all around good news for the eventual Ziggo Group spin because I think the Telenet part of the equation is very much on track for the free cash flow target we set them in 2028. Operator: Our next question comes from the line of Joshua Mills with BNP Paribas. Joshua Mills: Two from my side. One was just going back to Slide 6, where you lay out the strategic plan for the new Ziggo Group. My question is around the leverage. So there's a lot of moving parts there. Can you just remind us what the pro forma leverage position of this business would be today if you put it together? And how much you're expecting to bring in the Wyre stake sale and then the other asset sales to make up the EUR 1.2 billion to EUR 1.4 billion. I just want to understand the assumptions underpinning that, what you're at today and then how you get down to the 4.5x. That would be the first question. And then the second question is just around the Dutch business. We've seen continued improvement in the broadband performance. Can you give a bit more color as to what's driving that on the customer side on perception? Is it people happier with price? Is it, that they have noticed a change in the network quality? Any detail you have would be great. And as a final add-on, your competitors have highlighted potential benefits from the data breach at Odido. I think in the Q1 and probably going into Q2, Q3 net add trends there. How much of an impact have you seen from that on your own business in Q1 and Q2? Michael Fries: Thanks, Joshua. Look, Stephen will prepare answers to the Dutch questions. On the asset sales, the EUR 1.2 billion to EUR 1.4 billion, those consist primarily of towers and technical facilities, et cetera. And we're not really providing a breakdown of those numbers today because we're in active sale process. So we're not going to provide expectations or estimates of what we think that is. But we think that's the range of total combined asset sales, which would be used to pay down debt. Charlie, do you want to address the pro forma leverage? It really depends on what point in time you look for that number and what's happened with the Wyre stake. Do you want to address that, Charlie? Charles Bracken: Yes. I mean it's actually a very complicated question because clearly, the Belgian assets that are going to go into the Ziggo Group do not include because there will be a full separation of the Wyre assets. With the $4.35 billion of underwritten and now syndicated debt, we will therefore be paying down debt at Telenet or Telenet ServCo, but Telenet will be what we'll call it going forward. And it remains because of the investment profile, Ziggo -- but Ziggo is relatively highly elevated. So there's a lot of moving parts in answering that question. I would just reconfirm what Mike said is we're very confident in a path to get down to the -- around 4.5x by 2028. It does depend on some asset sales, but we feel pretty good about those being delivered. And with those asset sales and indeed continuing organic EBITDA growth, particularly in Holland, I think we should be there or thereabouts on target. I'm very happy to take it offline to get some of the detail because there's a lot of moving parts about why... Michael Fries: And it's in the low to mid -- yes, the combined group is going to be in the low to mid-5s. Telenet itself will be in the mid-4s. VodafoneZiggo will be higher, and then we'll start layering in the various deleveraging steps, additional steps as well. So there's a clear path, but perhaps in next call, Joshua, we'll give you a little bit more detail. But that is the general trend. Joshua Mills: That's great. And this isn't assuming any injection of cash from the -- sorry, there's no assumption of... Charles Bracken: [indiscernible] no cash from corporate, but I think it is important to note that we are putting our money where our mouth is. There's no distributions to Liberty Global in terms of equity distributions. We're reinvesting the free cash flow of Holland back in the business this year and indeed in Belgium. So that is a commitment to our bondholders and also to the fact that we are very confident in this growth profile. Do you want to answer the question? Stephen van Rooyen: Yes. And in terms of the operational performance of the broadband business -- yes, can you hear me? Yes. So in terms of the operational performance of the broadband business over the last 12 months, if you follow the story, we've done a number of very clear interventions. The first is -- we got our pricing right for the broadband products that we're selling. We were mispriced in the marketplace. We fixed that a year ago. When we talk about the back book repricing, we're pleased with the progress we've made on that. You haven't seen that in the ARPU. So we've managed that, I think, pretty well. Second thing we've done is we've gotten top of churn. We've been much more proactive in how we manage our customer base, which I think has had an effect on bringing churn down. We're now down 3 points year-on-year. We've invested more in marketing, by repositioning the business. The business was underspending on marketing and was out of sync with how, in my view, connectivity should be sold. We've invested, as you saw, in upgrading the speeds of the network. So you've seen us launch with the only 2 -- we're the only national 2-gigabit service. So we've taken speed as a headwind off the table for us. And then more generally, I think we've done a pretty good job of just tightening how we take the business to market. And you've seen that flow through sequentially each quarter as each of these initiatives have landed. And we have a series of initiatives coming through the rest of 2026, which we anticipate to continue to help us with the momentum behind the story. Unknown Executive: The Odido question, Stephen? Stephen van Rooyen: I'm sorry, I missed the Odido question. Can you repeat that? Michael Fries: The question was, are you seeing any benefit from their cyber attack? Stephen van Rooyen: Yes. It happened late in the quarter. It happened around week 10. So we saw some impact from that, but it's -- we didn't see a lot of it in the quarter. Because of the size of the mobile base -- we felt a bit more of it in the mobile base. But nothing that I think is material in the Q1 results because it only represented a handful of weeks. Joshua Mills: Great. And -- I mean I was more talking about the Q2 results. Obviously, it happened later in the first quarter, but are you seeing any impact so far in Q2? Stephen van Rooyen: No, we're happy with our progress on Q2 so far, but it's quite early. I have to come back to you when we do the Q2 results in a couple of months. Operator: Our next question comes from the line of James Ratzer with New Street Research. James Ratzer: I had 2 really both around Belgium. So in Telenet, you obviously had a very good quarter in terms of broadband net adds. And I'd love you can just give a bit more color behind what's driving that? Is that now growth out of footprint in Wallonia? Is that coming on your kind of BASE brand within Flanders? Or is it something else? I'd be interested to kind of get just a bit more color on the drivers there of broadband subs growth. And then secondly, just going back to the point that was raised earlier about Wyre revenue growth, which was down year-on-year in Q1. Is that a kind of one-off for this quarter, Charlie, you were mentioning around pricing and it goes back to growth in the following quarters. I'd just love to understand a bit more about the kind of dynamics there between kind of P and Q because I've been thinking that with kind of pricing there, we should see Wyre as a top line growth company. Michael Fries: John, do you want to take the Belgium question? Unknown Executive: Yes, I can take it. So on the first -- on the broadband, the BAU has been strong, particularly in the BASE brand, and their growth is about 50-50 between the Telenet footprint and growth in the South. So we are steadily growing and that growth in the South is increasing incrementally. There is a, what will be a year-long enhancement of that growth as we migrate out of DVB-C and into full IP for our video distribution. So we are the last operator in the market to have DVB-C where you don't require Internet to get television, but we are shutting that down over the next year. So we're expecting to see continued strong growth. But as you can see, the last -- the quarter ending '25 and the quarter -- the first quarter of the year, very strong, and those are the main drivers. On the Wyre revenue, there, we implemented a wholesale deal, a new wholesale deal on the HFC, which is making -- essentially structuring the higher speed tiers to be more accessible. The wholesale price is going down a little bit, and that's what you're seeing flowing through. That is -- will be part of the overarching deal done with Proximus, and we'll be able to give you more detail on that down the road. But the drop will not continue to drop, but it is the new HFC wholesale pricing. James Ratzer: So from those new prices, do prices then rise with inflation from this slightly lower level looking into 2027, '28? Unknown Executive: There is an inflationary component to both the fiber wholesale and the HFC wholesale. Operator: Our next question comes from the line of Matthew Harrigan with StoneX. Matthew Harrigan: This is very much a contextual question rather than kind of blocking and tackling valuation anomalies. But you made a quick reference to more benign regulatory environment in your markets. But what's even more interesting on a macro basis is the emphasis on your industrial base and defense. And clearly, telecom is a vital pivot in defense. Is there any possibilities for your telecom business or I guess, particularly your venture portfolio in that end, I'm sure Charlie [indiscernible] to be manufacturing drones, but it still feels like something that could be an interesting tailwind, particularly since you're involved in so many areas of verticals? Michael Fries: Matthew, listen, the whole sovereignty debate, it's no longer a debate. It's a verifiable conviction. It's net positive for us in the telecom space. Now we won't all benefit equally, but every telecom player will benefit from the European Union and the countries within the European Union's focus with their own cybersecurity, their own data protection, their own data centers, their own AI infrastructure. So inevitably, whether it's AtlasEdge or our investments in EdgeConneX on the infrastructure side in our Liberty Growth portfolio, whether it's our OpCos themselves and their ability to provide services and B2B services and connectivity to governments and others, I think it's a net positive for telcos in Europe, which is why I mentioned it along with the loosening regulatory framework, which I think will also be a net positive. We may or may not be part of any of that consolidation, but we know that consolidation itself brings benefits to customers as well as operators and investors. So I think it's a real positive step. In terms of defense itself, we're not -- unlike perhaps some of our peers who are more closely aligned with the government, we are not involved in any specific defense type investment opportunities or infrastructure. But if we were approached, we would certainly consider it if it was consistent with our overall strategy. I don't see us veering off, if you will, into that. But -- does that answer your question, Matt? Matthew Harrigan: Absolutely. Operator: Out next question comes from the line of Ulrich Rathe with Bernstein Societe Generale Group. Ulrich Rathe: Two questions. First one is, Mike, you talked about the improving regulatory climate with regards to consolidation. Other management teams in the sector have flagged mixed signals they perceived to come out of Europe. So could you talk through what specifically you have in mind there, what insights or uses you have to share [indiscernible] more positive assessment? And the second question is on the EUR 1 billion synergies that you talked about in Ziggo. Can you talk about the sort of rough makeup of that in terms of operation and other source of synergies? Michael Fries: On the synergies point, I don't know if we've been specific, so I'm going to pause. But typically, you wouldn't be surprised to learn that it's consisting of 3 or 4 key line items. There's a financial synergy. That's more, I would say, a free cash flow type synergy from -- that we haven't -- well, from taxes essentially, there's operating costs that we think are achievable and we can create more efficiencies around. There's procurement and CapEx type synergies. So it's not going to be -- and when we get closer to legal day 1, we'll clearly provide more detail to you. Right now, we're still in the midst of closing the deal. But there's lots of things we can be doing and will be doing in those 2 operations and within and among them to create those synergies. And if I had to put my team on the spot right now, they'd say that's probably a low number. On the regulatory side, we did just get the EU merger guidelines released, and they are quite positive, at least in comparison to the kind of posture and position that the European Union would take previously when it came to in-market consolidation, right? I mean they're looking at a much more, I guess, moderate and pragmatic approach, and they're seeing that benefits could certainly accrue for mergers versus just always seeing the negative in those mergers. There's always been a structural bias against scale. And now they're seeing -- actually scale could increase investment, could increase innovation. And it's actually spelled out in the document that was released recently. So that to us is when it's in writing, if it's just a speech, I don't give that much credit. But when they put it in writing as they have with these new EU merger guidelines, that is a -- that is a positive step. Now it needs to be put to the test, and there will be plenty of deals that will put it to the test soon, I imagine. But never before have they written down in black and white, the sort of statements that we're reading today in terms of -- which are consistent with the arguments we've been making that consolidation in market is the first step to repair in European telecom space. Operator: Our last question comes from the line of David Wright with Bank of America. David Wright: Yes, last question. So a couple, please, guys. Just on the -- I guess it's for Ziggo, but DOCSIS 4.0, I think you may have said, Mike, that there are some trials ongoing. If we could just get some estimates of maybe the sort of trajectory of commercial launch for 4.0 in Holland. When do you expect the first sort of significant retail launch, et cetera? And is it something that you think you could even price a little as you move into the real sort of mega tiers of speed? And then the second question, maybe a little more conceptual. We're observing a lot of discussion around the kind of InfraCo, ServCo split, and you guys have obviously sort of embraced that. And there's obviously a clear sort of capital allocation justification and the ability to separate the 2 businesses that are quite structurally different. But I just wondered, does having a separate InfraCo make a more agile ServCo in terms of just day-to-day operations? Is the business just more able to respond and sort of change shape in the sort of digital age? It's a little more conceptual. Mike, if you have anything to add on that, I'd appreciate it. Michael Fries: Sure, sure. Stephen jump in here if I get it wrong, but I believe our 4- and 8-gig trials are the latter part of the year, maybe even late Q3, Q4. But what we did was get the field trials underway to demonstrate that it works. It works well, that the technology we're using is really state-of-the-art even in relation to the U.S. operators. But as we get closer to going public in the latter part of this year, then we'll have more information, but it's happening. And we think it's going to be a big positive for the market and for our business for sure. On the ServCo side. Look, I mean, Belgium is the test. What does it do when you end up taking the fixed network, you still own the mobile network, but taking the fixed network and putting it into a separate entity, I think, and John will agree, I'm sure it forces you to be more efficient, more agile and your margins change, all of a sudden, there's a wholesale fee in your P&L that you have to account for. In principle, Telenet will continue to be a very competitive brand and a very competitive B2C company and B2B company. It's -- with respect to its network, its fixed network, it will be renting instead of owning that network. But the relationship that's developed with Wyre is highly integrated, highly -- with mutual benefits, both directions. And so on balance, I think -- and this is the only place we've done it, it really is Belgium. I think on balance, and John can chime in, I think it does create a bit more energy in that ServCo, a bit more focus on margins and competition with a little less to worry about and a slightly better CapEx profile. And that CapEx profile frees up free cash. Telenet will generate significant free cash here shortly as it has, and we'll have to figure out how to reinvest that free cash, whether it's deleveraging or in actually new products and services. But anything more to add to that, John? Unknown Executive: Yes, a bit. I mean the CapEx we are spending, we are now concentrating on customer experience. I mean we pivoted our strategy, obviously, away from network and product differentiation because we have to, into customer experience. And the timing is right because, of course, with a lot of AI initiatives around the company and a new greenfield CRM platform, the focus is well and truly on straight-through digital journeys for our customers, which delivers better experience and a better bottom line. So it's been -- I think I -- certainly, your hypothesis is valid. Michael Fries: Listen, we appreciate everybody joining us on the call. It's been a good -- thanks, David. It's been a good start to the year. I hope you agree, and we're really encouraged by the progress that we're making. And trust me, we are laser-focused on value creation and value unlock, starting, of course, in the Benelux, where we're not only performing well, but the strategic road map. And as I point out, the building blocks are all in place. So we'll keep you abreast and updated on those things, and we'll speak to you soon. Thanks, everybody. Have a great weekend. Operator: Thank you. That will conclude today's conference call. Thank you for your participation. You may now disconnect your lines.
Operator: Good morning, and welcome to NatWest Group's Q1 2026 Results Management Presentation. Today's presentation will be hosted by CEO, Paul Thwaite; and CFO, Katie Murray. After the presentation, we will take questions. Paul Thwaite: Good morning, and thank you for joining us today. As usual, I'm here with Katie. I'll start with a brief introduction before Katie takes you through the numbers, and we'll then open it up for questions. We started the year with strong momentum across our 3 businesses and made good progress against each of our 3 strategic priorities. First, we continue to pursue disciplined growth. In Retail Banking, we increased our share of the mortgage market as we expand our offering and announced new partnerships such as becoming the exclusive mortgage provider for Rightmove. In Private Banking & Wealth Management, our acquisition of Evelyn Partners makes a strong addition to the group. The transaction is progressing well, and we expect it to complete in the second quarter, subject to the usual regulatory approval. In Commercial & Institutional, we are the leading bank for U.K. start-ups, and we grew our share this quarter as we onboarded 24,000 new start-ups, a 25% uplift on the same period last year, supported by easier agentic onboarding. Second, we are leveraging our investments in simplification and have delivered over GBP 100 million of additional cost savings in the first quarter. We employ over 12,000 software engineers, and we are complementing that talent with artificial intelligence. So over 40% of our code is now written by AI, and we are scaling agentic software development. Typically, our development process for new customer propositions requires 12 engineers and takes 6 weeks. But in some scenarios, with a team of 3 engineers and 7 agents, we can deliver in just 6 hours, making us more productive and delivering faster for our customers. Third, we continue to manage our balance sheet actively, helping to free up capacity for further growth and allocate capital dynamically in this fast-changing environment. So let's turn now to the financial headlines. Customer lending grew 6.6% year-on-year to GBP 400 billion, whilst customer deposits grew 2.6% to GBP 445 billion. Lending growth of GBP 7.3 billion in the first quarter was well balanced across our businesses, including GBP 3.3 billion in mortgages and GBP 3.8 billion in Commercial & Institutional. We also provided over GBP 10 billion of climate and transition finance, taking the total to GBP 29 billion since last July, making good progress towards our GBP 200 billion 2030 target. Deposits increased by GBP 3.1 billion in the first quarter with growth in Corporate & Institutional, partly offset by an expected decrease in Retail and Private Banking as customers use their savings to make annual tax payments. Assets under management and administration grew 16.9% year-on-year to GBP 57 billion. 23,000 people invested with us for the first time during the quarter, with net inflows to assets under management of GBP 900 million. Taken together, client assets and liabilities have increased to just over GBP 900 billion, up 5.2% year-on-year, in line with our 2028 annual growth rate target of more than 4%. Income grew 6.9% to GBP 4.2 billion, and costs were up 4.8% to GBP 2 billion as we increased our operating leverage and reduced our cost/income ratio by 2.1 percentage points to 46.5%. Our return on tangible equity was 18.2%, driving strong capital generation of 65 basis points in the first quarter. Earnings per share grew 15.5% year-on-year to 17.9p. Tangible net asset value per share was up 15.1% to GBP 4, and we continue to maintain a strong balance sheet with a CET1 ratio of 14.3%. Since we announced our full year results in February, conflict in the Middle East has clearly increased geopolitical uncertainty. While sentiment is now more considered, we have yet to see any material impact on our customers. Both households and corporates remain resilient with historically high levels of savings and low levels of debt and arrears. In light of this uncertainty, we have revised our economic scenarios and now expect higher inflation with interest rates remaining at 3.75% for the rest of the year, resulting in slower economic growth and a modest increase in unemployment. This means we have taken an additional provision in the first quarter of GBP 140 million, which reflects our macroeconomic assumptions, not our credit performance, which remains strong. With rates staying higher for longer, we now expect full year income to be at the top end of the GBP 17.2 billion to GBP 17.6 billion range we set out in February. So we remain confident about the outlook and our 2026 guidance. That confidence is underpinned by the knowledge that we have built a resilient business, which is well positioned for a broad range of macro environments. We have a clear strategic focus on growth that delivers good returns with a prime lending portfolio that's well diversified and largely secured. We have invested and simplified so that we are now the most efficient large U.K. bank with a cost-to-income ratio that continues to improve, and we are actively managing our balance sheet. For example, we have taken the opportunity of a sharp move upwards in the yield curve to accelerate the increase in our structural hedge, supporting income growth in the years ahead. We have also increased our capital efficiency significantly in recent years, driving high levels of capital generation. All these factors have contributed to our strong performance in the Bank of England stress tests, giving us confidence in our outlook and guidance not just this year, but over the medium term. With that, I'll hand over to Katie to take you through the numbers in more detail. Katie Murray: Thank you, Paul. My comments for the first quarter use the fourth quarter as a comparator. Income, excluding notable items, reduced 1.1% to GBP 4.2 billion, and total operating costs were 9.2% lower at GBP 2 billion, delivering 11.6% growth in operating profit before impairment to GBP 2.3 billion. The impairment charge was GBP 283 million, equivalent to 26 basis points of loans, including the charge for our updated economic scenarios that Paul mentioned. This resulted in operating profit of GBP 2 billion, with profit attributable to ordinary shareholders of GBP 1.4 billion, and return on tangible equity was 18.2%. Turning now to income. Income, excluding notable items, was GBP 4.2 billion. Excluding the impact of 2 fewer days in the quarter, income across the 3 businesses continued to grow, supported by both volumes and margin. Net interest margin was 247 basis points, up 2 basis points due to deposit margin expansion and a small benefit from funding and other, with lending margin declining by 2 basis points, mainly driven by mortgages. As you heard from Paul, our 2026 guidance now assumes that the Bank of England base rate remains at 3.75% this year rather than coming down to 3.25%. Together with our revised economic scenarios, this means we now expect income, excluding notable items, to be at the top end of our GBP 17.2 billion to GBP 17.6 billion range, excluding the impact of Evelyn Partners. Turning now to customer assets and liabilities, or CAL. You will recall we introduced our 2028 growth target for CAL in February. I am pleased we are entering another year with strong growth, continuing our track record. Our CAL increased by GBP 8.4 billion or 0.9% in the quarter to GBP 900 billion. This includes lending growth of GBP 7.3 billion, deposit growth of GBP 3.1 billion and a reduction in assets under management and administration of GBP 1.8 billion as strong AUM inflows were offset by market movements. I'll touch on each of these elements in turn. We are reporting another quarter of strong broad-based loan growth across the group with gross loans to customers up by GBP 7.3 billion. Retail Banking and Private Banking & Wealth Management balances grew GBP 3.5 billion or 1.5%. This comprises GBP 3.3 billion in mortgage lending and GBP 200 million in unsecured lending. Mortgage stock share increased marginally to 12.6%, and we have a robust pipeline following record applications in March. Commercial & Institutional lending increased by GBP 3.8 billion or 2.4%. This includes growth in corporate and institutions, driven by good demand across a broad range of sectors, including project finance, renewables and utilities and funds lending, together with increased lending in commercial mid-market, notably in commercial real estate and the housing sector. You will also see we have provided a detailed breakdown of our financial institution exposures, including private credit in the appendix of our presentation. Turning now to deposits. Customer deposits increased by GBP 3.1 billion despite the expected higher seasonal tax outflows. Commercial & Institutional deposits increased by GBP 5.1 billion. This was partly offset by a slight decline in Retail Banking and Private Banking & Wealth Management deposits as a result of higher customer tax payments of GBP 10.3 billion. Retail Banking outflows were partly offset by growth in current account and ISA balances. Overall, our deposit mix remained broadly stable. Turning now to assets under management. Assets under management and administration closed the quarter at GBP 56.7 billion. We are pleased with positive AUM net inflows of GBP 0.9 billion, which equates to 8.2% of opening AUM, demonstrating continued client confidence and strong momentum. There was a reduction in assets under administration of GBP 1.4 billion, driven by gilt redemptions to support client tax payments. Overall, balances were impacted by negative market movements of GBP 1.7 billion. However, these were reversed during April. Turning now to costs. Other operating expenses were GBP 2 billion, an increase of 4.8% year-on-year and a decrease of 8.3% compared with the fourth quarter. Our cost/income ratio in the quarter was 46.5%. We are pleased with the progress we've made on our transformation, and we made decisions to accelerate investment spend and incur higher restructuring costs in the first quarter, which drove the overall cost growth year-on-year. The reduction from the fourth quarter is mainly due to ongoing cost savings as well as lower bank levies. We remain confident in the delivery of our full year 2026 cost guidance of around GBP 8.2 billion, though our cost profile will be uneven throughout the year. Turning now to our updated macroeconomic assumptions. Following a period of global macro uncertainty, we have revised our economic assumptions. In our revised base case, we assumed inflation now means CPI will peak at 3.5% in 2026 rather than fall to 2% by the end of the year. This means interest rates stay higher for longer, and we assume the bank rate remains at 3.75% throughout the year. We expect lower GDP growth of 0.4% and a modest increase in unemployment to a peak of 5.7%, above our previous assumptions of 5.4%. This remains at levels we are comfortable with in terms of lending risk appetite and credit quality. We will continue to review our assumptions as the situation progresses. Our balance sheet remains well provisioned with an expected credit loss of GBP 3.7 billion and ECL coverage ratio of 84 basis points. Our latest scenarios also show that even if we were to give 100% weight to our new moderate downside scenario, this would increase Stage 1 and 2 ECL by GBP 99 million or 2 basis points. Turning now to the impairment charge. The impairment charge for the quarter was GBP 283 million, equivalent to 26 basis points of loans. This includes a charge of GBP 140 million as a result of changes in economic scenarios and total post-model adjustment releases of GBP 34 million as elements were effectively consumed by changes in our economic scenarios. Excluding these, our underlying impairment charge was 16 basis points. There were no new signs of stress across our 3 businesses, and the current credit performance of our book remains strong. We continue to expect a loan impairment rate below 25 basis points for 2026. So our guidance is unchanged. Turning now to capital. We ended the quarter with a common equity Tier 1 ratio of 14.3%, up 30 basis points since the end of the year. Capital generation before distributions was strong at 65 basis points. This includes 69 basis points from earnings. Other regulatory capital movements added 16 basis points. Growth in risk-weighted assets consumed 21 basis points of capital, and our usual accrual for ordinary dividend payments reduced capital by a further 37 basis points. Risk-weighted assets increased by GBP 2.7 billion. GBP 4.3 billion of business movements broadly reflects our lending growth and increased market risk. This was partly offset by a reduction of GBP 2.2 billion as a result of actively managing our RWAs to create capacity for further growth. Other movements included FX and immaterial CRD IV model updates. We remain confident in our ability to continue generating strong capital from earnings and to manage risk-weighted assets and expect around 200 basis points of capital generation before distributions this year, whilst operating at a CET1 ratio of around 13%. Turning now to guidance. We now expect income, excluding notable items, to be at the top end of our range of GBP 17.2 billion to GBP 17.6 billion, excluding the impact of the Evelyn Partners acquisition. All our other guidance and targets remain unchanged. And with that, I'll hand back to the operator for Q&A. Thank you. Operator: [Operator Instructions] We'll take our first question from Andrew Coombs of Citi. Andrew Coombs: If I could just have one on loan and deposit growth and then I guess the second on average interest-earning assets. On the loan and deposit growth, again, it's a strong performance Q-on-Q, again, led by C&I. If I speak to any investor, particularly those outside the U.K., they always struggle to link the economic performance in the U.K. with the strong loan growth and loan demand that you're seeing. So perhaps you can just touch upon what drove the loan and deposit growth, particularly in C&I, where is that demand coming from? How sustainable do you think it is throughout the remainder of the year and into next year? And then the second question, I mentioned that loans are up Q-on-Q, deposits up Q-on-Q, but your average interest-earning assets are down 0.2% Q-on-Q. And it seems to be due to a reduction in the liquid asset buffer. So perhaps you could just touch upon that as well and what's driving the disconnect between the average interest-earning assets and the movement in the loan balances. Paul Thwaite: Thanks, Andy. Okay. Katie, why don't I take lending and deposits and then you come back on AIEA. Katie Murray: Okay. Paul Thwaite: Good stuff. So Andy, as you say, good, strong growth on both sides of the balance sheet, pleased on lending and deposits, especially as you know the context of quarter 1 deposits is always higher outflows because of tax payments. Why don't I give an overview, and then I'll drop down into C&I because I'm conscious you wanted some specific color there. So lending overall, I'd say it's pretty broad-based. You can see growth in mortgages. You can see growth in C&I. You can see growth in unsecured within Retail as well. And within C&I, you can see it through different business lines. I'd also add that the pipeline remains pretty strong as well in both businesses. So we're encouraged by that. So not only is the activity good, the pipeline -- I was going through it yesterday and -- Wednesday actually, the pipeline of activity looks strong looking ahead into quarter 2 and quarter 3. And as you know, we've consistently grown above market, growth on the lending side. I'll come back to some of the reasons why I think that's true. On deposits, 2 sides to this. As I said, we've got the tax outflows in Retail and Private Banking. They were up 28% year-on-year. So it's a big number, GBP 10 billion of deposits. And that was offset by growth in C&I, which was from a combination of things. Some of that was operational deposits, some of that was interest-bearing deposits. I think there, when you think about the size of our corporate and commercial franchise, the reality is we benefit as deposits flow onto corporate balance sheets. If you look into Retail, actually, personal current accounts were up, which is good. That's obviously healthy from a number of factors. And we are starting to see the impact of our -- what we call our Boxed proposition where we're providing savings products to companies like AA, Saga at Sainsbury's, et cetera. So that's also supporting Retail deposits. So that hopefully gives you a kind of big picture view. On C&I specifically, demand has been strong. I think we're very well positioned on what I'd call some of the structural drivers. So project finance, infrastructure, transition finance, utilities, funds lending, energy transition, et cetera. And I think what you can see is the growth in those parts of the market is bigger than, let's call it, the U.K. systems growth. So I think that helps to explain why our C&I franchise captures the opportunities there, but also outperforms the market. As I said, the pipelines are strong. So to your point on sustainability, I think those trends are -- they're structural trends, not kind of short-term opportunistic trends. So I think the lending growth and the lending pipelines will continue to support sustainable growth. So net-net, good balance sheet performance. C&I, yes, but also on the Retail side of the business as well. So hopefully, that gives you a bit of color. Katie? Katie Murray: Sure. Thanks very much, Andy. So you're absolutely right. When you look at AIEAs, they were sort of stable in the quarter. They were down kind of 0.2%. A couple of things within there. So reduction reflects the optimization of our surplus liquidity. We repaid around GBP 4 billion of TFSME at the end of Q4, and we deployed surplus liquidity to meet our customer loan demand, which we've just been talking about, in a quarter of seasonally lower deposit growth. If you look at the kind of the Q1 loan growth of GBP 7.3 billion versus the GBP 3.1 billion of deposit growth, there's a natural kind of mismatch within there. What I would say is we're 3% higher than AIEAs a year ago, and we do expect them to grow from here going forward as our customer lending increases. Operator: Our next question comes from Alvaro Serrano of Morgan Stanley. Alvaro de Tejada: Hopefully, you can hear me okay. Paul Thwaite: We can hear you clearly. Alvaro de Tejada: I actually had 2 questions related to spreads. And the first one is on mortgages. At least I had the expectation of a step down in spread on mortgages in Q1, given the roll-off of the COVID ones. But actually, the spread has held up reasonably well versus my expectations, at least. I think they contributed [ 324 ]. Can you -- maybe this one is for Katie, but can you maybe talk to if there's still sort of headwinds ahead and talk to the mortgage front book spreads? And then similarly on commercial, the spreads there, compared to base rates, have been increasing steadily the last 8 quarters or so as you grow the book. What kind of business are you underwriting there? And what do you think it can -- should it continue to improve? Or how do you see the outlook on pricing on corporates as well, commercial? Paul Thwaite: Okay. Great, Alvaro. Katie, do you want to start with mortgage? Katie Murray: Yes, absolutely. Thanks very much. Alvaro, so if we look at Q1, we continue to write mortgages at front book spreads that were below the back book as we did through last year, which we talked about a lot, very much in line with our strategy of delivering steady growth at attractive returns. So I'd say our year-to-date margins are in line with expectations. We did see a bit of volatility in March. We repriced every 2 days, so that's 11 kind of changes in 22 days, which I think is a great testament to the flexibility we've built into the system. And we can even see that ability to handle that increased mortgage demand as a result of that investment in the platform and digitization, which has meant we've been able to execute new business at margins which are ahead of the back book in April, which is great to see. You're absolutely right to mention the COVID mortgages. We are seeing a little bit of the book margins being impacted by that churn of the 5-year COVID era mortgages, and they're rolling off at spreads that are higher than we're currently writing. I would expect that to have worked its way through during the rest of this year. So we expect a little bit of pressure from this on the book margin over the coming quarters. But I guess as I go to where we are today, where we're writing the mortgages at front book spreads, which are below the back book, what we're seeing is it's starting to bring that back book margin down. We're kind of writing now, you've heard me talk a lot about this kind of below 70 basis points over the last number of quarters. That's kind of continued. And as I look at that number, I think that we will see the book margin to reprice to around 60 basis points over the course of this year. Interestingly, April margins have been above the back book, and we're pleased we were able to capture that. So I talked to you, remember at the year-end, Alvaro, around 1 to 2 basis points impact on our NIM walk per quarter throughout this year. You absolutely saw that already in our walk. This quarter, you should expect to see that. What I'd also really encourage you is don't forget to see that you have the deposit margin expansion that's going to more than offset that negative. Hopefully, Alvaro, that gives you what you need. Paul, are you going to do the commercial spread or shall I... Paul Thwaite: Yes, happy to. Katie Murray: Okay. Perfect. Paul Thwaite: Thanks, Katie, and thanks, Alvaro. On commercial spreads, a couple of general points first. I would say, Alvaro, actually, commercial lending margins, I would see them as fairly stable on a product-by-product basis. So that's how I'd think about it. There's obviously always a mix effect depending on where you write the business. But there's been no material deltas, changes over the recent past nor would we expect it going forward. So that's, I guess, one positioning piece. Secondly, in our commercial book, a significant proportion of customers are paying variable rates. So you will see that -- you will see kind of rates reprice in line with short-term rates and how that changes. So hopefully, those 2 points just contextualize what you'll be looking at in terms of the commercial lending book. If you drop down into the individual businesses or asset classes within the commercial and institutional bank, there's different dynamics. Obviously, at the very small end, margins are much higher, but the total value of lending there is small relative to the overall commercial book. So whilst we're growing that business, and it's higher-margin business, from a weighted average perspective, the impacts are relatively limited. In the commercial mid-market, that's a competitive space across the field. But depending upon the asset class, the margins can vary quite a lot. So if it's social housing, lower margins, but very high risk-adjusted returns; commercial real estate, thinner margins, more of a commoditized product. And then at the large corporate side, obviously, you've got the kind of revolver aspect to that, but also where you've got kind of project financing and infrastructure finance, a bit of the same dynamics as my example on social housing. At a spread level, margins are relatively tight. But given the capital treatment, the risk-adjusted returns are very attractive. So they're all very good areas to deploy capital at good returns. So nothing major to call out, I'd say, on commercial spreads, but that hopefully gives you a bit of the contours of how that business works. Thanks, Alvaro. Operator: Our next question today comes from Benjamin Toms of RBC. Benjamin Toms: The first one is on your income guidance, which you've upgraded to the top end of your previously provided range. Just wanted to kind of get some color, your thoughts on whether you'd characterize this guidance as being conservative. I'm just noting that consensus is kind of still quite a way above that guidance and whether you're comfortable with that gap? And then secondly, there's been some pretty fairly intense competition in the ISA -- cash ISA deposit market, and NatWest Group competing but one of your large peers is not. Can you just talk a little bit about how you weigh up collecting deposit volumes versus margins at a group level at the moment? Paul Thwaite: Great. Thanks, Ben. I'll take the guidance and income, Katie, and then you can talk a little bit around Retail savings and ISAs. Okay. So yes, as you said, Ben, we've strengthened the income guidance. We're guiding to the top end of the range, of the GBP 17.2 billion to GBP 17.6 billion. We're doing that for a couple of reasons. One, you can see the momentum in quarter 1. So the underlying performance has been good, which is great. And then you've got the kind of net effect of the change in economics. Obviously, we've changed our rate assumptions. You've seen that from 2 cuts. Assumed 2 cuts now to 0. But we've also assumed -- you have to follow the logic through. You would assume if you have -- if you don't have rate reductions, it would be reasonable to expect some small softening in demand. So we've assumed that. But net-net, we see that as positive to income. So that's kind of how we're positioning at the top end. We haven't changed the guidance for RoTE. We're maintaining the greater than 17% there, but we're increasingly confident on that. As I said in February, and I'll say again, it's always a greater -- that's always been a greater than guidance, and we always aim to beat our target. So we haven't changed that, but we're increasingly confident because obviously, the conditions for that are supportive. I should point out, I think, it's obvious, but that all excludes Evelyn. But net-net, Ben, I would say it's a good start. We're confident around '26, hence, the nudge up in guidance. We haven't changed '28. But obviously, you can see from the trends that it's -- the conditions are supportive towards the medium term as well. Katie Murray: Thanks very much. Ben, so I guess if I look at our ISAs and the kind of recent activity, I think the first thing I would really say is we see really strong relationship value in our fixed term deposits. We have high retention rates, greater than 80%, and some of those are retained in the higher-margin instant-access products as well as us also having an opportunity in the future to engage with these customers on investment products, and we've seen good growth there as well this quarter with a lot of new investors coming in, but we also expect that ambition to kind of grow and that's supported by the acquisition of Evelyn Partners, obviously, in this last quarter. During Q1, with the volatility that we saw in the swap markets, we actively managed our hedging across both our assets and liabilities, which enabled us to really price effectively on the fixed rate deposits. Overall, you can see our deposit mix has been stable, both at the group level and in Retail. When I look at fixed rate ISA specifically, the balances are small in the context of the group, low single-digit percentages of deposits. And in terms of overall deposit dynamics and margins, really very happy with the progress, particularly around things like current account growth, and we expect to see ongoing group deposit margin expansion in the coming quarters. So overall, a real comment on balance across the portfolio. Thanks. Paul Thwaite: I'd add one small thing on that, actually, Ben, because I've got the pricing tables in front of me. It's quite interesting when you look through. And as Katie said, we've been very thoughtful about how we manage the volatility in swap rates and how we play that back into pricing to maintain margins. And you can see you've got 3 or 4 of the larger banks ahead of us on pricing. But as Katie alluded to, the volumes have been encouraging. So I think we've been very thoughtful in how we're playing in that market. Operator: Our next question comes from Guy Stebbings of BNP Paribas. Guy Stebbings: I think, I just have one sort of broad question on the income guidance for this year and the assumptions sort of underpinning it. It's clear in terms of what you're doing on policy rate. But in terms of the long end of the curve, when you're thinking about the hedge reinvestment, could you confirm what the assumption is there? Then in terms of volumes, I'm just trying to work out whether you're assuming slightly more sort of conservative macroeconomic assumptions as per the ECL models, but that would be going against sort of the positive comments you're saying in terms of what you're actually seeing on lending volumes, et cetera. So can you clarify what sort of expectations are on volumes? And then on mortgage spreads, just in light of the comment you made there, I'm just trying to understand whether anything has changed. So you've talked about the stock of the back book trending down towards 60. I presume that's kind of entirely consistent with what you were expecting a few months back. And actually, your comment on April being above the back book is slightly encouraging. So could you just confirm if those mortgage spread trends are sort of in line, better or worse than what you were thinking a month or 2 ago? Paul Thwaite: Great. Thanks, Guy. Very clear. Katie, you got any preference on order? We've got hedge, volume... Katie Murray: I'll start off with spreads and hedge, and then why don't you jump back in on volume, yes? Paul Thwaite: Yes. Katie Murray: Perfect. Thanks so much. If I look at the hedge, first of all, a few things just to kind of share with you on that. So first of all, when we talked about the hedge at the year-end, we said that we would increase our structural hedge this year above GBP 200 billion as -- and then you've seen it, as deposit balances have grown and equity base will increase given the business growth. What we did earlier in Q1 was as we saw those yield curves move really sharply higher in the quarter, we did take a decision to accelerate the increase of our product hedge. So we added about GBP 5 billion additional in Q1. So that means that we've locked in income for the outer years and, of course, modestly reduced our rate sensitivity as a result of that. When I look at the kind of first 3 months of the year overall, we're reinvesting our product hedge at about 3.8%. That's against guidance I've given you at the year-end of 3.5%. I would now expect that reinvestment rate on average for the whole year and given what we've seen also in April to be around 3.9% on the product hedge and 4.7% on the equity hedge, which is up from 4.5% as we go through there. So as I look at those kind of current assumptions of rates, the growth that we've seen, I do continue to expect total hedge income will grow annually through to 2030 as you see the improved levels that we spoke about in February. If I then look to your mortgage spreads, you've got it completely right. Mortgage margin is very much in line with our expectations. They are currently a little bit better. I would encourage you not to bank that forever, but we're very happy with how the team are managing the book at the moment. We can see the reduction in book margins absolutely being driven by refinancing. If you think a little bit of our mix, 30% of the book will reprice this year and the roll-off is a little over 90 basis points on a blended basis. So that really drives the stock margin lower over the course of the year, completely in line with our expectations and very much in line with the income guidance that we've given you throughout this year and upgrading this morning. Paul Thwaite: On volumes, Guy, so this -- as you say, this kind of tried to thread the needle a little bit between, I guess, the logic of the kind of mechanistic logic of the economic assumptions versus activity year-to-date and pipelines. And I think that's what we're trying to balance. If you take the logic of the economic assumptions through, i.e., higher for longer, slight tick up in unemployment and slower growth, then the logic of that would be, you would see some softening in, for example, the mortgage market vis-a-vis our original predictions and likewise, some softening in business lending. So that's what the economic assumptions drive. Then when you look at the activity, as you rightly point out, what we've said is quarter 1 has been very strong on the kind of lending side. The pipelines in the respective businesses look strong. So the activity is there. I guess what we're trying to do is strike the right balance between optimism on that side, but also, I guess, the reality of how the economics play out over the course of the next 9 months might impact demand. And we factored that into how we've guided toward the changed guidance to the top end of the range. So hopefully, that just unpacks a little bit how we're thinking about it. Operator: Our next question comes from Jonathan Pierce of Jefferies. Jonathan Richard Pierce: Good. I've got 2 questions, please. The first, the other C&I noninterest income, it's been running at about GBP 230 million to GBP 240 million a quarter for the last 6 quarters, dropped down to GBP 170 million in the first quarter. It does feel like there was a bit of a one-off in there. I don't know if you can quantify how big that was and whether you've seen anything else coming through since the end of March? Secondly, more broadly on this impairment sensitivity, just trying to get a feel as to how much confidence you have of -- I've asked you this before, Katie, actually, in the IFRS 9 ECL models. I mean you're telling us today that the weighted average assumption for GDP growth is about 0.3%, 0.4% a year next couple of years. The downside is minus 0.4% this year and minus 1.6% next year. It's also got unemployment going up to 6.2% next year, I think. But you're telling us your ECL in that scenario would only increase by about GBP 99 million. Now I get that that's a general provision measure. But by definition, the ECL on those Stage 1 and 2 is reflective of losses you expect in the future on the performing book. So are you genuinely confident? And if so, why more qualitatively in this idea that even if we saw a recession, even if we saw unemployment moving into the 6s, your impairment charge ex any initial ECL build would not move up very significantly at all? Paul Thwaite: Good. Thanks, Jonathan. I'll take the first one. Katie, you can take the second one. Katie Murray: Sure. Paul Thwaite: So Jonathan, your characterization is right. So actually pretty stable income line in the last 6 quarters, dropped off -- the C&I noninterest income dropped off in quarter 1 '26. If you look at that compared to '25, it's, I think, GBP 20 million versus GBP 64 million. Not exclusively, but almost exclusively, it's explained by sterling rates, as you say, so kind of one-off. You've seen that across lots of desks and lots of banks. So we have a relatively small rates business. It's obviously -- it's indexed to sterling, given what we are as NatWest. So that really explains the delta that you're seeing there. And you'll see yes, GBP 64 million in quarter 1 '25 and GBP 20 million in quarter 1 '26. That's a big part of the difference versus the previous quarters. A couple of things I'd say, it's obviously very small in the context of the overall revenue line. And also given the more subdued volatility, we'd expect improvements as we go through quarter 2 onwards, not just in that line, but overall on C&I noninterest income. So I think you're seeing it and reading it pretty accurately there. Okay, Katie? Katie Murray: Sure. On impairments, thanks, Jonathan. But as I look at it, I mean, these are models that we test extensively. They go through both our own verification and independent verification, and they're also kind of reviewed very closely by kind of external parties. So I am comfortable in them. And I think that the thing that I do like with IFRS 9 is this concept, which is in and around the kind of PMA. So that kind of enables me where there are moments of discomfort. And you can see that we sometimes have them when you can see in different classifications, it's wider than just the kind of the sort of economic uncertainty. So when you see other numbers in there, you can go actually, that's a bit of the model they're kind of working on. So completely comfortable on the models is what I would say first. And you're right, if I look to the ECL on kind of Stage 1 and 2, if I went 100% kind of to the downside, it suggests an extra GBP 99 million. But I would remind you that Stage 1 and Stage 2, so there would be some Stage 3 losses. They are impossible for us to quantify as to what they would be. So we don't seek to attempt that. So I would probably suggest to you that the actual charge could be a bit higher if that was the case. Obviously, that's not our base case just now. In terms of what we're looking at. We -- at this stage, we are happy with the base case. We're happy with the guidance that we've done. We've obviously added a bit on the mezz, 110 net, a little bit out of PMA. That's just kind of mechanics of the calculation, which has taken us to the 26 basis point charge this quarter. But if I take out that mezz, we've overlaid, it's kind of 16 basis points. So what we can see is a good, well-diversified, well-performing book to date. We've given you a good estimate if we were to move. But at the moment, obviously, we're comfortable and happy to have that little bit of extra buffer as we enter a little bit of greater uncertainty than we've seen recently. So comfortable at this stage, Jonathan. Thank you. Operator: Our next question comes from Benjamin Caven-Roberts of Goldman Sachs. Benjamin Caven-Roberts: Just 2 for me, please. First, a follow-up on the cost of risk. I see you mentioned about 60% of mortgage balances now with customer rates above 4%. How are you thinking about the refinancing profile for that remaining portion and the extent to which those customers are moving on to rates a fair bit higher than what they had expected when entering those mortgages? I know you do stress rate assumptions as well when issuing the mortgage originally, but clearly, a lot of volatility in swaps and rate expectations right now. So just keen to hear your thoughts on that. And then secondly, thanks a lot for the extra disclosure on the financial institutions. If we look at that business and private credit altogether, how are you thinking about the growth of that book? Is it something you expect to grow more quickly or more slowly relative to the recent past? And have you changed your strategy at all in terms of the underwriting there? Paul Thwaite: Great. Thank you, Ben. Katie, you go for first question. Katie Murray: Yes. In terms of cost of risk, Ben, so you're absolutely right. There's -- and you've obviously -- you've got far in the pack this morning. So Slide 32 kind of lays it out really nicely. So I guess a couple of things I would talk about as we look at our prime mortgage book. So obviously, the level of security gives us a lot of comfort. Our sort of greater than 3-month arrears are below the sector average and quite significantly so. So it's well underwritten. And I guess the guide on the financing of the remaining 40% that aren't on customer rates over 4%, we do kind of use what's happened in the last couple of years to kind of help guide us on that. So what you've seen in that time, obviously, there has been wage growth across the different areas. People who are coming up are very aware that they're coming up. They are -- what we see has been really interesting over the last couple of months is our kind of a greater increase on the use of the 2-year versus the 1 year. If you look at our -- sorry, versus the 5-year, forgive me, if we look at our kind of 5-year fixed as a percentage of our fixed book, it's about 66% 5-year. But actually, if I look just at what's even been happening in the last little while, that's kind of flipped almost completely to that we're writing about 77% 2-year at the moment. So customers, they understand what they're doing. They are understanding what they need to do in terms of managing their exposure. We do see them looking to lock in refinancing early so that they can get the benefit of the rate, and they've certainly been preparing for this. And as we talk to them as they go through those transitions. Obviously, it's a big change when you go from your COVID rate to the new rate, but it's something people have definitely been looking for, and we've seen them managing it really, really quite well, I would say. And Paul, on the... Paul Thwaite: Yes, yes. So Ben, so yes, so I'm glad you liked and have seen the new disclosure. We hope that's helpful to everybody. In terms of the kind of outlook for the -- obviously, it's a very broad business when you look at the breakdown there. But in terms of the areas that you referenced, we have been growing the business, I guess, over a number of years, but it's been in a very disciplined way. If you look at limits there, they haven't really moved since this time last year, so quarter 2 '25. Likewise, we haven't materially changed our risk appetite. We're always very focused on being senior lender, good protection from first loss, making sure that the risk-adjusted returns are supported. So our strategy really has been not around growing limits, but prioritizing risk-adjusted returns versus volume-driven growth. As you know, we haven't been involved in any of the recent public names. Looking forward, what I would expect actually is to see some of the spreads to widen, so i.e., the same business, the same risk, but actually better risk-adjusted returns. That would be my assumption because as you know, a lot of that business is relatively short term in nature, so you get to reprice. So that's how we're seeing. Hopefully, that gives you a sense of it in terms of limits, but also, I guess, business strategy, which is returns led rather than volume-led. Operator: Our next question comes from Chris Cant of Autonomous. Christopher Cant: Two, please. On corporate banking, commercial banking, in the context of what we've got going on in the Middle East, are there any areas of your book that you'd be more nervous on, please? And I'm not thinking specifically just about oil price as an input here. I guess there is the potential for product shortages or oil-related product shortages regardless of price if this persists. So are there any sectors that you're nervous on when you're speaking to your corporate customers, what are they worried about? And on the comment around refi of the mortgage book, my understanding there is that customers essentially have sort of a bit of a free option to lock in, but then change products if rates shift after they've preemptively locked in. Are there any risks to you and to kind of NII later in the year given swap volatility. Just conscious, I guess, the value of that option being given to customers is arguably higher right now. So any comments on how you manage that, how we should think about that would be appreciated. Paul Thwaite: Thanks, Chris. I'll take the first. Katie, you take the second. On the -- I guess, the kind of core mid-market commercial bank, Chris, obviously, we're staying very close to all the various sectors and also the different regions there. It's very consciously a very diversified book. We gave you quite a lot of breakdowns on the relative sectors and segments. In terms of -- to your specifics around sectors or subsectors that might see greater impacts. Probably similar to some of the previous kind of challenges, I would say, sectors like agriculture, aspects of hospitality and leisure. So where you see some of the -- not just what you call pure energy input prices, but you have fuel, fertilizer, food, et cetera, where you see exposure there would be areas that we are -- we will pay more attention to. And as we've done in the past, we work closely with those sectors if support packages are needed. We're not at that stage yet, and we're seeing no deterioration. I think generally, what I'd say, if you think back through what we're seeing in the Middle East, what we saw through the tariff period, a similar time last year through Ukraine and even through the pandemic, customers are -- I'd say business customers are a lot more adaptable and resilient than maybe they were prior to the pandemic. Their ability to change their cost base and/or pass on costs, the kind of the way in which they've engineered their business models over time have given them more flexibility. So what we see is a faster response, but also greater adaptability, which ironically, I think is down to the fact that a lot of these businesses and sectors have had to face a lot over the course of the last 4 or 5 years. So that's how we see it. But there are probably 2 sectors that are kind of on our minds. Katie? Katie Murray: Sure. Thanks very much. And then your great question, Chris, we've kind of watched this happen historically, we've seen other peaks. But look, it's something that we manage incredibly tightly on this. We've got very sophisticated modeling that we have in play. We based on it looking very much at the kind of individual kind of customer behavior, looking at what happened in other periods of interest rate volatility, who would move, who would kind of stick. You heard me mention earlier today as well that what we've done and the investment that we've done within our mortgage system has allowed us to kind of be able to react really, really quickly. I mentioned that we repriced 11x over the course of 22 days during March. I mean that is a significant change from where we were a number of years ago. So very comfortable with the dynamic overall. What I would kind of add is that we do see that most people who do refinance with us do ultimately kind of stick with us as well. So there's that good kind of customer engagement, which is just -- is really, really critical. We're also kind of largely locked in already for our forthcoming roll-offs. But I would say all of these things are embedded in the guidance that I've talked about today about the book actively kind of repricing to 60 bps over the course of the year. And so while we manage it actively, but I don't see it will be something that would change what I've said to you this morning already on that number. Operator: Our next question comes from Sheel Shah of JPMorgan. Sheel Shah: First question on corporate deposits, please, because this is a line item that has remained under GBP 200 billion or so for the last 2 years, and we're finally seeing a lot of growth come through the business. And not only the growth, but also the rates that you're paying on these corporate deposits, looking at your other disclosure looks to be declining as well. So I'd be interested to get some insight as to what's happening there? And then secondly, on the cost base, I know the first quarter had some increased investment in restructuring costs, but you also mentioned on the call earlier that the cost profile will be uneven through the year. So just wondering how you're thinking about that across the remainder of the quarters? Paul Thwaite: Thanks, Sheel. I'll take deposits. Katie, cost, yes? So I'm pleased you've noticed the trajectory there, Sheel. Deposits in the commercial bank is a big area of strategic focus for the team and has been, I would say, increasingly over the course of the last 18 months. So part of the performance momentum there is around focus. Given also the growth we've seen in lending, there's been a natural need to increase deposits in the commercial bank. So focus has played a part. But we've also broadened the product range. We've also digitized parts of the product range as well. So we've got business focus. We've got enhanced proposition for different segments within the commercial and corporate bank. And as you'd expect us to have, we also have a much broader focus on transaction banking, which obviously brings high-value operational deposits. And to your point, depending on the nature of those deposits, high liquidity value, but also in relative terms versus interest-bearing deposits, good cost of funding. So it's a strategic focus supported by a number of operational and tactical activities that support our client base but also help the LDR. Katie? Katie Murray: Costs, sure, absolutely. So you're absolutely right. Q1 is a little bit higher than normal, reflecting some of our decisions to front-load investments and restructuring costs alongside staff and inflation-related increases from 2025. But you'd expect me to say this, it's our history. It's what we deliver every single year. We are really confident in hitting our cost guidance of around GBP 8.2 billion. That excludes the impact of Evelyn. I'm just going to take the opportunity just to talk a little bit about Evelyn costs. We'll share more about that as well when we kind of -- once we've kind of finished the acquisition and things like that, which is going well. But there are a few things that you need to be thinking about that will impact some of those Evelyn costs as they come through. Obviously, first, we've got day 1 transaction costs. That was included in our guidance of the 130 basis points of capital. We've obviously got the operating costs that will come through from the point of consolidation in terms of Evelyn's own costs. We're then familiar, we talked a lot about the cost to achieve in terms of the GBP 150 million total cost to achieve to drive the GBP 100 million of cost synergies. And finally, we are going to have ongoing amortization of the intangibles that will be created upon completion. That doesn't impact our capital generation going forward as we've incurred that as part of the capital impact of the 130 basis points. Obviously, I'll give you more detail when we get to the point of completion. But when you think of lumpiness, think of -- they're absolutely rock solid on their 8.2. That's where they'll land because they always do. But there will be a little bit as Evelyn comes in. So think about that in your models of those 4 different kind of categories. Hopefully, that's helpful to you, Sheel, as well. Operator: Our next question comes from Aman Rakkar of Barclays. Aman Rakkar: Hopefully you can hear me okay, sorry. Paul Thwaite: We can. Yes. Aman Rakkar: I had 2 questions then. So could I just trouble you on the deposit margin, please? I think that 2 bps deposit margin Q-on-Q contribution, I think it's the softest uplift Q-on-Q. And obviously, you've got multiple moving parts in that, notably a massive structural hedge tailwind, but presumably offset by compression on kind of actual deposit spreads in the quarter. So I was interested in your sense of the deposit margin contribution on a sequential basis in coming quarters, please? And to what extent do you think this kind of intense deposit competition dynamic, particularly for term deposits, I mean, lots of people writing term deposits at negative spread kind of feeds into that would be really helpful. And then the second question was a broader question just around actually the income dynamic beyond this year because it feels like there's a building confidence around the income profile beyond this year, principally because of the interest rate environment. It's not really materially moving the needle on this year's guide as much as it perhaps will do on the forward look, not least because of the structural hedge. But I'm thinking about the cadence for net interest income through the course of this year is presumably going to be quite robust, right, in terms of what it means for next year. So is that the right characterization? And kind of what do you as a management team do with that, the kind of building confidence on the income outlook in the medium term versus what is quite an uncertain near-term dynamic in the Middle East? Katie Murray: Perfect. So deposit margin, 2 basis points in this quarter. I think you need to just think a little bit about the overall movement in balances in the quarter. So you've got tax outflows, GBP 10.3 billion. They are predominantly in January. Some do dribble into February, but they are predominantly there. We're confident around the deposit margin expansion will be greater in the coming months as we move forward from here. If we then look at kind of income beyond 2026, we expect annual income growth through 2026 to 2028. We're confident in that growth trajectory. Obviously, disciplined growth across lending, deposits and AUMAs continue in line with our CAL target of greater than 4%. That will obviously be boosted by the Evelyn Partners acquisition when it comes online. The higher for longer interest rate environment, we've got -- now got the terminal bank rate of 3.75% alongside the actions that we took in -- already taken in Q1 to move higher in the yield curve, meaning that we are increasingly confident on the income tailwind from the structural hedge, supporting income all the way through to 2030. You've got other variables like customer behavior, competitor behavior around pricing and macroeconomics. We'll see how these develop. But again, you can see what we've got in terms of our economics in there. And given that kind of interest rate sensitivity that we have, we do see that as a net positive for income beyond 2026. So overall, confident and building on our confidence that we had when we spoke to you in February as well. Thanks very much, Aman. Paul Thwaite: Yes. And as to your final point, Aman, how do management characterize that? I think as Katie finished there, net-net, it feels like we're in a stronger position on income and returns, both '26, but also looking out to '28. Operator: Our next question comes from Amit Goel of Mediobanca. Amit Goel: Hopefully, you can hear me okay. Paul Thwaite: Yes, we've got you crystal clear. Amit Goel: So one, just kind of following up. I suppose just on Slide 30, just on that deposit margin and contribution, just trying to reconcile on each of the divisions, it seems like the cost is coming down, but on the group, it's flattish. So I just wanted to check what's driving that? And then secondly, just on Evelyn, just curious how the business -- I mean, if you've got any color in terms of how the business has been developing since the acquisition announcement and I guess, during the first quarter and beyond in terms of AUA. So just anything on that would be helpful. Paul Thwaite: You go first. Katie Murray: The first one, absolutely. So if you look at the businesses, what that is, is that's representing the customer rate on deposits or loans, whereas if I look at the group number, it's the overall cost, including hedging. So it's not perfectly like-for-like as you look across those 2 lines. Paul, Evelyn? Paul Thwaite: Yes. So Amit, obviously, I can't comment on a business that we don't yet own. So that wouldn't be appropriate. What I would say is in terms of the planning to closure is going very well. We're moving at pace. We hope to announce that in the coming months. The work on -- the appropriate work on integration is progressing really well. You can see from our AUMA performance as in NatWest, the AUM performance, the strength, net new money above 8%, again, despite the market movements, top quartile investment performance. The -- going back to the AUM, kind of 10% up on year-on-year, which is great. So there's a limit. There's obvious limits to what I can say. But in the work that we're doing so far, we're very encouraged. I've spoken at length around the scale and the capabilities that Evelyn will bring. I think if you look at the success we're starting to have around retail investments and premier investment in the NatWest space, the acquisition of Evelyn is only going to accelerate that. So to me, the demand signals and the performance signals are good. Once we've closed, as Katie alluded to earlier in relation to the cost question, once we've closed, we'll obviously share a lot more detail in terms of the overall numbers and the plans, and we are eager to do that as soon as we can. Thanks, Amit. Operator: Our final questions come from Ed Firth of KBW. Edward Hugo Firth: I just have 2. The first one is just on detail. I think at the time of Evelyn, we were talking about GBP 300 million of revenue and GBP 300 million of costs in the first year. Is that still the right number we should be getting? So that was just my first question. Paul Thwaite: Yes, nothing has changed since the original disclosures, Ed. That's the best way to think about it. Edward Hugo Firth: Perfect. Okay. And then the second question was related to Jonathan's question really about risk because I've just struck that in your sort of worst-case scenario, you're talking about a low few hundred millions of credit losses, I guess, something like that. I know it's more than GBP 99 million, but it's not huge. And that's on a GBP 30 billion tangible equity invest, and you're making pre-provision profits of GBP 10 billion a year. And so I'm just wondering, how do you think about appetite to risk? I mean, do you really feel confident that you're taking enough risk? Because it feels to me that potentially there's quite a gap there for you to be doing quite a lot more and growing revenue quite a lot faster than you are. And I guess related to that, can I just ask about Slide 33 again? I mean it's a great slide, and thank you very much indeed for giving it to us. And I wish all the other banks would as well. But it does strike me that particularly your funds lending looks quite a lot bigger than I would ever have imagined. And is that -- I mean, I don't know the market that well, but I guess you do. You're a market leader in that space. Is that -- would you imagine that you are sort of bigger than most people? Or would you think that you're just a player and that's pretty standing? Because unfortunately, other people don't give us that type of a disclosure. Paul Thwaite: Great. Okay. Thanks, Ed. Good to hear from you. Quite a few different questions there. So we've got the kind of the extreme downside kind of credit piece. Katie, why don't you have a shot at that. I'll cover funds. And then there's a bit, I guess, linked to the -- just on lending risk appetite as well. Katie Murray: Yes, I'll crack on impairment, and you can jump in after that. So Ed, what I'd probably do is guide you a little bit. If you go after the call, on Page 27 of our IMS today, we gave you, I think, helpfully as a nonstandard Q1 disclosure, the -- what the -- our new change in our scenarios would be. And you can see that on the downside scenario for Stage 1 and Stage 2, it's GBP 99 million additional. But if you went to the extreme downside, that's a GBP 1.7 billion hit. So really very different in terms of numbers. And you can also see that, that's obviously greater than the hit we would have had at the year-end in that space. So I would just -- I'd probably just rebalance your numbers a little bit on that. That's obviously just Stage 1 and Stage 2. We would -- I would kind of point out that, that extreme downside is really quite far away from our base case. But obviously, it's blended into the number. I think we gave about 14% probability kind of weighting. So quite far out there, but it is something to kind of consider as you look at the numbers. And Paul, shall I come to you for the other? Paul Thwaite: Yes, yes, fine. Thank you, Katie. So on funds lending, I'm glad you liked the disclosure, right, I would say. On funds lending, that's a really long-standing business for us in excess of 20 years. A large part of that business is in our RBSI, which is our Channel Islands business, been in our disclosures for all that period of time. Probably worth diving in into a little bit of the detail. I wouldn't say we were a leader in that business. I'd say we're a strong player where we choose to participate. It's worth bearing in mind of that funds lending business, 80% of it is, I guess, what you know as subscription lines or capital call facilities. So that's where you kind of got exposure to LPs, and we take security charge over the LPs. Typically, that's pretty short dated as well, just to give you a bit more context, 1 to 3 years. So when you look at that line, the best part of GBP 17 billion is sublines. The other part is NAV, which is a smaller part, kind of GBP 3 billion, GBP 4 billion. And that's where you're seeing it, in effect, in a senior creditor when you're lending on to a particular asset. Average LTVs, again, just to help you there, around 30%, and you've got an institutional investor base. So very long-standing business. It's been predominantly led out of our Channel Islands business, no historical losses. So a good business, but there'll be -- as you look across European U.S. banks, you'll see different levels of exposure. I'd say we're strong, but certainly not a leader. Katie Murray: And in terms of risk, do we feel we've got the balance very much we're taking to get to his last question? Paul Thwaite: Yes. I think I hear both -- I guess, Ed, I hear both sides of the story. From some investors, I hear they really value the low-risk business model, well-diversified credit base, high risk-adjusted returns that you see. And then you hear the other side is, could you take more risk. I think the way we've approached our different asset portfolios, both in retail and commercial, has stood us in good stead. It allows us to perform well with a low cost of risk. We generate a high cost -- a high amount of capital. Our RoTEs are obviously sector-leading. So it feels like that -- we've got the balance right. We do at times, increase our risk appetite. You go back over the course of the last couple of years, you can see some of the moves we've made in retail. We've broadened our addressable markets in mortgages and credit cards. But I kind of feel that a U.K.-centric low-risk business model, high capital generation serves us well. So it feels like we're in the right space. Hopefully, that gives you a bit of insight into how management think about it, Ed. Thanks. Operator: Thank you for all your questions today. I will now hand over to Paul for closing comments. Paul Thwaite: Yes. Thanks, Oliver. So I just want to close with, I think, a couple of key points, which I think are particularly important given the context we're in and I think demonstrate why we think we're very well positioned as a bank. The first one is our deposit franchise and the gearing that gives us to rates. Obviously, that's driven by our corporate franchise. It supports our revenue growth, especially in a higher for longer environment. The second thing I would point to is the growth track record that we've built and continue to build and the targets that we've put out there. We think we've got a good track record and further opportunities across our 3 businesses. You can see also the progress we're making around cost management and our cost/income ratio and continuing benefits of operating leverage. And then to link it to Ed's question, if you look at the loan book and you look at the Bank of England stress tests, we are the most resilient bank under stress. I think that's as a consequence of our diversified business mix. So the lowest stress drawdown of any U.K. bank. So you add all that up together, superior returns, high capital generation, which can drive stronger distributions. So from my perspective, we feel very well placed as we look into the circumstances that face us. Thanks for your time. I hope you have a good weekend. Cheers. Katie Murray: Thank you. Operator: That concludes today's presentation. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to the NextDecade Corporation First Quarter 2026 Investor Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. And now I would like to turn the call over to Megan Light, NextDecade's Vice President of Investor Relations. Megan Light: Thank you, and good morning, everyone. Welcome to NextDecade's First Quarter 2026 Investor Update Call and Webcast. The slide presentation and access to the webcast for today's call are available on our website at www.next-decade.com. Today, I am joined by Matt Schatzman, NextDecade's Chairman and Chief Executive Officer; and Mike Mott, NextDecade's Interim Chief Financial Officer. Before we begin, I would like to remind listeners that discussion on this call, including answers to your questions, contain forward-looking statements within the meaning of U.S. federal securities laws. These statements have been based on assumptions and analysis made by NextDecade in light of current expectations, perceptions of historical trends, current conditions and projections about future events and trends. Although NextDecade believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that the expectations will prove to be correct. NextDecade's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in NextDecade's periodic reports that are filed with and available from the Securities and Exchange Commission. In addition, discussion on this call includes references to certain non-GAAP financial measures such as adjusted EBITDA and distributable cash flow. A definition of an additional information regarding these measures can be found in the appendix to our presentation. And now I will turn the call over to Matt Schatzman, NextDecade's Chairman and Chief Executive Officer. Matthew Schatzman: Thank you, Megan, and good morning, everyone. Thank you for joining us today. First quarter was productive across the NextDecade organization, and we're making solid progress on the key 2026 priorities that we introduced on our fourth quarter call. First, one of our highest priorities continues to be progressing construction at the Rio Grande LNG facility safely, on budget and ahead of schedule. Safety is ingrained in our culture and our work. And in the first quarter, we achieved a low total recordable incident rate or TRIR of less than 0.1. I'm proud of both our team and the Bechtel team for continuing to progress construction at a rapid pace while maintaining high safety standards. We also continue to be within budget across all 5 trains under construction. Train 1 early electrical commissioning is underway. Phase 1 continues to track ahead of the guaranteed substantial completion dates for the EPC contracts, and we're making excellent early progress on Trains 4 and 5 at the site. Based on our current progress, Phase 1 is tracking ahead of the schedule reflected in our early volume guidance, providing a buffer to achieve the numbers we have provided. Our second key priority for 2026 is continuing to prepare our organization for commissioning, first LNG and the transition to operations. We've been advancing hiring, system implementations and process development ahead of first LNG. We've been rapidly hiring and expanding our team, and we currently have over 400 employees with the majority based in Brownsville. As part of our enterprise readiness efforts, we've made significant progress building the digital and operational foundation required for first LNG. Core enterprise platforms are starting to go live, and we've created a robust in-house integration capability that allows systems to exchange data and supports end-to-end business processes. This work positions us to scale efficiently, reduce operational risk and enter operations with strong governance, visibility and control across the enterprise. We're laser-focused on ensuring that the organization is prepared for introducing first gas into the facility in the second half of this year and producing the first LNG from Train 1 in the first half of next year. Our third key priority is to manage near-term exposure to LNG market margins through the sale of projected early LNG cargoes. As we mentioned on the fourth quarter call, early this year, we began marketing early cargoes that we expect to produce in Phase I prior to the commencement of our long-term SPAs for Train 3. In February, we sold over 175 TBtu on a free-on-board or FOB basis with fixed liquefaction fees that are expected to achieve margins calculated as the FOB sales price less our expected cost of natural gas feedstock and fuel of over $3 per MMBtu. These sales reduced the Phase 1 early LNG production exposed to LNG market price fluctuations by 33%. Market margins have increased since the Iran conflict began. And as we increase our visibility into expected early LNG production and gain additional assurance on the timing from Bechtel later this year and early next year, we expect to sell additional early volumes to further reduce our market exposure during our ramp-up period. Our final key priority for this year is advancing the development and permitting of Trains 6 through 8. Bechtel is in the process of performing a front-end engineering and design or FEED study for the Train 6 and third berth, and we expect to file the formal FERC application for Train 6 before the end of this quarter. Additionally, we've begun early commercialization efforts for Train 6, and we're seeing strong demand from potential customers for long-term volumes. I'd like to remind everyone that additional LNG supplies were needed in the early 2030s before the Iran conflict began and demand from long-term SPAs is even stronger today. Construction at the Rio Grande LNG Facility continues to progress safely, on budget and ahead of schedule. As of March 2026, Trains 1 and 2 are 67.8% complete. Train 3 is 44.2% complete and Trains 4 and 5 are 10.6% and 6.8% complete, respectively. During the overall -- within these overall completion numbers, Trains 1 and 2 are functionally complete on the engineering and procurement front with the engineering of Trains 1 and 2, just over 98% complete and the procurement just over 94% complete. Train 3 is not far behind Trains 1 and 2 with engineering over 90% complete, and procurement over 80% complete. Since our last update, Bechtel has continued to make strong progress in construction of Phase 1 with work on Train 1 focused on piping, equipment installation, cable pulling, testing and system completions. The main cryogenic heat exchanger for Train 1 has also been successfully installed. Trains 2 and 3 made notable progress on civil works, piping, structural steel and equipment installation and placement of the Train 2 compressor packages is underway. For Tanks 1 and 2, welding of the inner tanks is progressing and concrete roof placement has been completed for both tanks. Early civil works are progressing for Train 4. Site preparation activities are underway for Train 5 and production piling has commenced for Tank 3. Across the site, construction of permanent buildings is advancing, construction activities of the gas inlet area are ongoing, dredging activities for the berths and turning basin are substantially complete, and channel deepening is nearing completion. The Bay Runner pipeline has been under construction since last fall and is expected to reach in service in the third quarter of this year. Bay Runner is being constructed by Whistler LLC, a joint venture between WhiteWater Midstream, Enbridge and MPLX and will be our primary pipeline capacity into the terminal for Trains 1 through 3. Early electrical commissioning of Train 1 continues, and we continue to expect first gas into the facility in the second half of this year and first LNG production from Train 1 in the first half of 2027. In early April, FERC approved our request to shift to a 24/7 construction schedule at the site, a transition that has been contemplated in the EPC contracts and will not increase our EPC or total project cost. 24/7 format should facilitate Bechtel making continued progress ahead of schedule. We're currently tracking ahead of the schedule reflected in our early volumes and cash flow guidance, giving us some buffer for the unexpected events during commissioning and start-up of the trains while still achieving the production guidance we have provided. We're supporting our goal of increasing our capacity at the Rio Grande LNG facility up to 60 million tonnes per annum by advancing the development and permitting of Train 6 through 8. As we mentioned on our highlight slide, the FEED study for Train 6 is underway with Bechtel. Train 6 will have the same design as Trains 1 through 5, and the FEED study will support our regulatory filings with FERC and give us a general idea of where we expect to land on cost for Train 6. We currently expect Train 6 to look a lot like Train 5 from a project cost perspective, adjusted for inflation. We are also preparing to file a formal application with FERC for Train 6 and a third berth before the end of the second quarter of this year. The current administration's emphasis on U.S. energy dominance as a national security issue, including last week's determination that expanding LNG capacity is necessary under the Defense Production Act is expected to be helpful for the development of U.S. LNG, and we expect permitting new capacity to be smoother and faster under the current administration than prior ones. Additionally, the D.C. Circuit Court's reversal in our case in March 2025 and the Supreme Court Seven County case later last year have set precedents that will go a long way in limiting the ability of certain groups tie-up permits in court over matters that have been appropriately analyzed by FERC in its environmental reviews. The permitting and regulatory framework for LNG infrastructure during the current administration appears to be taking less time, which is very encouraging. It gives us confidence that our future trains will receive approval faster than our first 5 trains. We believe it is possible that we could receive our FERC permit for Train 6 as early as mid-2027, which could set us up for an FID in the second half of 2027, if we can also sufficiently commercialize and finance Train 6 during that time frame. We expect that FID in the second half of 2027 would result in Train 6 coming online as early as 2032. As I mentioned earlier, we began commercializing efforts for Train 6 and we're seeing very strong demand from potential SPA counterparties. We believe that one of the main outcomes of the Iran conflict will be increased attractiveness of long-term U.S. LNG volumes, and we'll discuss that more in a few minutes. The potential demand we are currently seeing for Train 6 provides us with a sales pipeline that is larger than the capacity of Train 6 and places us in a strong position for the subsequent commercialization of Train 7 and 8. We're advancing development of Train 7 and 8 with a focus on determining the supporting infrastructure they will require and finalizing their location on the site. Train 7 and 8 will need a flood control mechanisms such as levee wall as they'll be outside the main levee around the site, and we're also evaluating potential tank and berth requirements. We continue to have the goals of permitting these trains during the current administration and commercializing them while they are in the permitting process. We currently have full ownership of Train 6 through 8, and we believe these trains could contribute significantly to future NextDecade distributable cash flow across a wide range of financing scenarios. This year, as we advance permitting and commercialization of Train 6, we're working on potential financing options with the goal of maximizing distributable cash flow on a per share basis. Since our last call, global LNG market dynamics have shifted significantly as a result of the Iran conflict. Closure of the Strait of Hormuz during March and April pulled approximately [ 14 million ] tons of LNG supply out of the market with capacity at Ras Laffan and Das Island shut in. Each month of continued shut-in will result in a loss of an additional approximately 7 million tons, and we expect the production ramp-up at Ras Laffan will take weeks, if not months. Based on public announcements, the 2 damaged trains at Ras Laffan totaling almost 13 million tons per annum of capacity are estimated to require between 3 and 5 years to repair. Also, it's estimated that expansion capacity in Qatar could be delayed by up to a year due to recent events. In total, a significant amount of LNG supply has been pulled out of the market between now and 2030, which we expect will tighten global balances. There's a lot we don't know today, including the full extent of the damage of Ras Laffan exact timing for production to return to the market and the ultimate impact of short-term demand destruction in price-sensitive markets, particularly in Southeast Asia. Before the conflict began, we expected the impending supply wave of LNG to spur extra normal gas demand growth and additional gas infrastructure investments in developing markets over the next few years. Clearly, with less supply in the market currently, this will slow down. Longer term, we do not see a slowdown in demand for natural gas and in particular, LNG. One very effective way for buyers around the world to acquire LNG at attractive prices is through long-term supply -- is through long-term supply and U.S. LNG SPAs indexed to Henry Hub, are particularly attractive due to the diversified prolific natural gas resource base in the U.S., which effectively shelters buyers from the spikes in the price of LNG and natural gas in other parts of the world. Henry Hub pricing has decreased since the Iran conflict began and customers with long-term contracts out of the U.S. that are indexed to Henry Hub are currently able to deliver into Europe and Asia at levels below $8 per MMBtu. Long-term LNG supplies out of the U.S. have been a buffer against market price shocks, not only during the current conflict but also during the prior market spikes associated with the Russia-Ukraine war and weather-related seasonal demand spikes. Long-term U.S. LNG supplies have also been attractively priced relative to short-term supplies in tight market conditions like -- like we have seen in the past 2 to 3 years. Since 2021, an example, U.S. long-term SPA calculated at 115% of Henry Hub plus a fixed fee of $2.50 and shipping costs of approximately $2 would have delivered into Asia at an average of $8.83 per MMBtu. The JKM spot price over the same period was over $17.50, around double the long-term price. Excluding the market spikes related to Russia-Ukraine in 2022. From 2023 to present, the example U.S. long-term SPA price averaged approximately $5 per MMBtu, lower than the short-term LNG price. Long-term Henry Hub-linked SPAs have also compared favorably to long-term LNG contracts linked to oil. Since 2021, long-term LNG contracts linked to Brent would have needed slopes below 11%, inclusive of any fixed adder to beat the pricing of the most recent wave of long-term Henry Hub-linked LNG contracts out of the U.S. Historically, these Brent-linked LNG contracts have had slopes between 11% and 15% plus a fixed adder. Before the conflict began, we received strong indications of demand for long-term supplies out of Train 6. And demand for long-term contracts is even higher today. With a prolific and diversified natural gas resource in the U.S., and the favorable geopolitical environment, buyers can have confidence in U.S. supplies from reliability, energy security and economic standpoint. We expect buyers to increasingly value long-term contracts out of the U.S., which will spur additional capacity growth in the market. And with Train 6 through 8 under development, we're in a very good position to provide a meaningful amount of additional capacity to meet that demand. Now I'd like to turn it over to Mike to talk about our financial priorities. Mike? Michael Mott: Thanks, Matt, and thanks to everyone for joining us today. Matt has just walked you through key construction, operational and strategic priorities for 2026. Now I will spend a few minutes on our financial priorities for the year. First, we are focused on actively managing debt at the project level. Specifically, we plan to continue opportunistically refinancing portions of our project level credit facilities in the debt capital markets. Today, we have over $9 billion of credit facility commitments for Phase 1, about $3.8 billion for Train 4 and roughly $3.6 billion for Train 5. Over time, we expect to refinance each of these bank facilities into a mix of bullet and amortizing debt securities. We expect to refinance the full term loan balances before the commercial operation dates for Trains 3, 4 and 5, respectively. Since Phase 1 FID, we have refinanced more than $1.85 billion of Phase 1 bank debt, and we expect to continue taking advantage of market opportunities this year. Importantly, this approach allows us to better manage project level maturities by spreading them out over time and thoughtfully balancing bullet and amortizing structures. Our second financial priority is evaluating equity financing options for Train 6. As Matt mentioned, we are targeting an FID in the second half of 2027, subject to achieving permitting, commercialization and financing prerequisites. This timing comes before we expect to be generating meaningful operating cash flows that could fund our equity requirements for Train 6, requiring us to look to other financing alternatives for this capital. We expect to contract a high percentage of Train 6 capacity, which could support project-level bank facilities covering up to approximately 75% of total project costs. Maximizing project level debt lowers the overall cost of capital and meaningfully reduces our equity requirements. Based on current SPA pricing, early estimates of Train 6 costs and the current interest rate environment, we expect the project to be highly accretive to NextDecade's distributable cash flow. As a result, all else equal, we will seek to both preserve our high economic interest in Train 6 and select the equity funding options that are most accretive to our distributable cash flow on a per share basis to maximize value for our shareholders. The FinCo bank facility that will be used to fund a portion of our equity commitments for Trains 4 and 5 remains a very attractive source of capital. It is priced at only about 150 basis points over our project level bank facilities and provides significant flexibility through delayed draws and penalty-free prepayments. We believe additional FinCo capacity will be available to help fund a portion of Train 6's equity needs. Beyond that, we are actively evaluating a range of alternatives to fund the remaining Train 6 equity requirements. We will continue working through these alternatives over the course of the year with a focus on finding the most accretive outcomes, and we expect to share more detail with you later this year as these options take shape. Today, we are reaffirming our early volume and cash flow guidance, along with our steady-state outlook. This slide provides a high-level summary highlighting the key points. You can find more detailed assumptions and supporting slides in the investor presentation we posted earlier today. Let me start with a discussion of early volumes. We continue to project total LNG production of approximately 3,800 TBtu from early cargoes beginning with start-up of Train 1 in 2027 and extending through first commercial delivery to our long-term SPA customers under Train 5. Importantly, that total includes about 1,275 TBtu of LNG production in excess of what's currently contracted under long-term SPAs. As we discussed on our fourth quarter call, earlier this year, we sold forward more than 175 TBtu of those early volumes on an FOB basis. These sales carry fixed liquefaction fees and are expected to achieve cargo margins of more than $3 per MMBtu calculated as the FOB LNG sales price less our expected feed gas and fuel costs. As a result, we have reduced our exposure to LNG market pricing on early Phase 1 volumes by roughly 1/3. As Matt mentioned earlier, we expect Bechtel to deliver our trains ahead of the guaranteed substantial completion dates. As a result, the majority of the uncontracted volumes reflected in our early production guidance are expected to be produced after substantial completion and prior to DFCD under the SPAs for each train. As construction continues to progress, our confidence in these projections remains very strong. In fact, Bechtel is currently tracking modestly ahead of the schedule assumed in our guidance, which provides additional buffer and creates potential upside for early volumes that are not currently reflected in our projections. We expect the cash flow generated from sales of these early volumes to be used primarily to pay down a portion of FinCo and SuperFinCo loans that support our equity commitments for Trains 4 and 5. Our early cash flow outlook guidance remains unchanged. Under an assumed margin of $5 per MMBtu on volumes in excess of our contracted SPAs, we project early production could generate approximately $2 billion in NextDecade share of distributable cash flow at the Rio Grande LNG project level. At a $3 per MMBtu margin, we project approximately $1.2 billion of distributable cash flow. There is potential upside to both scenarios driven by continued schedule strength, the pace of ramp-up to full production, the potential for production above nameplate capacity and possible additional market price upside. Turning to leverage and capital structure. On our last call, we introduced a steady-state leverage target of 3 to 3.5x NextDecade level debt to adjusted EBITDA. We believe this target is appropriate given the long-dated, highly visible cash flows created by our highly contracted portfolio with high-quality creditworthy customers. In the $5 per MMBtu early volume margin scenario, we expect NextDecade level debt to fall within that target range as we move into steady-state operations. In the $3 per MMBtu scenario, we would expect to pursue additional balance sheet optimization. In that case, we would consider contracting approximately an additional 2 million tons per annum under long-term SPAs across Trains 4 and 5. That would increase our 5-train portfolio to roughly 90% contracted, allow us to maximize project level debt, reduce overall equity requirements for both NextDecade and our partners and ultimately reduce the amount we expect to draw under the FinCo loan, bringing NextDecade level debt back into our target range for steady-state operations. Because we contributed the net proceeds from the SuperFinCo term loan into Trains 4 and 5 at FID, we do not expect any additional NextDecade equity funding obligations through draws on the FinCo loan for those trains for at least the next 2 to 3 years. This gives us a long runway to determine the optimal level of long-term contracting. And as Matt mentioned, we are seeing very strong demand in the long-term contracting market today. Moving our discussion to steady-state operations. We are also reaffirming our steady-state guidance today. In our base case scenario, assuming $5 per MMBtu market margins, both for early volumes and during steady state, we project annual NextDecade distributable cash flow of approximately $500 million following DFCD for the Train 5 SPAs and prior to our economic interest flip for Trains 4 and 5 in the mid-2030s. After the flip, beginning in the mid-2030s, we project annual distributable cash flow of approximately $800 million. In our additional pricing scenario, assuming $3 per MMBtu margins on early volumes, $5 per MMBtu margins on steady-state volumes and an incremental 2 MTPA of long-term SPAs across Trains 4 and 5, we project annual distributable cash flow of approximately $400 million prior to the economic interest flip for Trains 4 and 5, which we would expect to occur a couple of years later than in our base case. In this scenario, we project post-flip distributable cash flow of approximately $500 million annually. As with our early volume outlook, there are potential upsides to our steady-state guidance, including continued schedule improvement, ramp-up timing, production above nameplate capacity and ongoing operational efficiencies. Thank you again for joining us today. With that, we'll open the call up for questions. Operator: [Operator Instructions] The first question is from Sunil Sibal from Seaport Global Securities. Sunil Sibal: So I wanted to start off on your request for additional work hours at the site. I was curious, is that kind of based or baked into your base construction schedule? Or does that kind of accelerate that from the base schedule? Matthew Schatzman: Thanks for the question. The 24/7 contemplated in the original EPC. It was an option and it's something that Bechtel could call on if they wanted to use it. And I think that's what they're doing. They want to maintain the current schedule, and they want the flexibility to utilize 24/7, and that's what we requested at FERC. How they end up utilizing it and how many people they actually use is up to them. But I wanted to make sure it was clear to the market that this is not an incremental cost to us. This is something that was already baked into the EPC. And I think it's a positive sign that shows we have -- although we are already ahead of schedule, we haven't even utilized all the potential capabilities of the 24/7 schedule to further accelerate. I'm very optimistic that Bechtel is going to remain ahead of schedule at this point. And I think by adding the 24/7 optionality, that gives us even more confidence. Sunil Sibal: Okay. And I think you mentioned DPA in your prepared comments. So I was curious what seems like that's primarily related to accelerated permitting or there are other kind of potential levers that gives you or other LNG developers in your view? Matthew Schatzman: Sorry, I missed the first part of that, referencing what... Sunil Sibal: The Defense Production Act, the invocation? Matthew Schatzman: Yes. Yes. I think we'll have to see exactly how this impacts the timing. But clearly, what we've seen recently are some changes in the way FERC has handled some of the current requirements such as the prefiling waiver for VV, which I view as very positive. That may only apply in certain circumstances. It's something that we're currently in discussions with FERC on, and we're waiting to hear additional guidance. But clearly, the Trump's memorandum regarding the importance of LNG, along with other energy infrastructure in the U.S. to energy security during this period of time, especially with LNG for our allies, I think is a very positive sign and suggests that we're going to see these things move very rapidly relative to even what we've seen in the past couple of years under the first couple of years of the Trump administration. Sunil Sibal: Got it. And then just a clarification on some of your comments. So I think you mentioned that as far as Train 6 is concerned, construction cost is kind of in line with Train 5 plus inflation. And then you also commented that based on where the supply/demand for long-term contracts is that, that market has strengthened. So I'm kind of curious when you think about your project, say, Train 6, between these 2 factors kind of interplaying, do you see improving returns on investment on the project versus where things were Train 5 -- for Train 5 last year? And then how are you seeing in terms of the demand for additional cargoes, is that primarily Europe, Asia? Any color on that in terms of your discussion so far? Matthew Schatzman: Yes. On the second part, you're talking about the long-term demand? Are you talking about for the excess cargo? You said additional cargoes. You mean for long-term SPAs? Or are you talking about for the short-term cargo sales? Sunil Sibal: Actually, both. Matthew Schatzman: Okay. All right. So first off, the economics for Train 5 were extremely good, and we expect the economics for Train 6 to track closely to the economic outcome for Train 5, again, adjusted for inflation. And we still have to price up the EPC contract. And we likely won't do that until we're confident that FID is within months of that. And it's all dependent on how long we can get price validity, but it's tended to be about 90 days or so at most. But inflation, we have to monitor it. It's inflation, it's interest rates are the 2 main factors that are going to impact the project cost, inflation on the EPC, obviously, interest rates on the financing costs and interest during construction. Both of those appear to be okay right now, but we'll have to see. We've had some early discussions with equipment providers for the main equipment. I've been very pleased, very optimistic that we're not currently seeing the same sort of constraints that we saw back last year as far as timing. But we're not planning to FID until second half of next year. So a lot of things can happen between now and then. But at least in the interim, what we're seeing right now, I should say, things are tracking, I think, very positively. As far as the demand for the LNG, I think it's the same group that we saw for 4 and 5. It's Asia, Middle East, not seen as much out of Europe as far as long-term contracting, but still a lot of interest from major intermediaries that sell into Europe and have markets into Europe. But Asia and I think Middle East, especially look like they're going to be players in the next phase of RGLNG's expansion. In the shorter term, I'd say it's a combination of Europe and Asia. Operator: The next question is from Wade Suki from Capital One. Wade Suki: Just thought maybe just dovetail a little bit on Sunil's question, maybe expand a little bit on kind of cost inflation. I know we're not going to maybe get word until next year. But labor running a little hot, maybe you could speak a little bit to kind of the various equipment components, electrical, kind of just thinking about other Gulf Coast projects progressing. Now we have rebuilding, reconstruction going -- well, hopefully going abroad with all the damaged facilities. Just wondering if you can kind of speak to those items as you see them today. Matthew Schatzman: Yes. Inflation appear -- you've seen the most recent numbers that came out. Inflation appears to be heating up a little bit, but over time has been relatively modest. Again, we would expect the EPC cost to go up by at least inflation. A large part of our EPC since we're stick built in the U.S. is going to be labor. Labor does tend to be a little bit higher than inflation, although this past year, it wasn't much above inflation. We all monitor this closely, not only for the EPC, but for every year, we have to look at our own employees' costs, and we want to be fair. So I think at least right now, it's not a worry, a major worry, but we'll see how things progress over the year. As far as equipment, again, as I said, I've been pleasantly surprised at this point with the feedback we've received from our major suppliers as far as the expected availability for equipment for Train 6, 7 and 8 and the timing of when we'll be able to receive that equipment. As far as the cost, that will be determined once we price everything up for the EPC contract. I do expect electrical equipment to continue to be in high demand, not just for LNG, but obviously for data center build-out and power generation. So we'll see how that comes in. But I would expect that any sort of cost inflation that we're going to see will likely be offset by contracting -- price contracting. And again, we're not seeing any sort of -- we're not seeing the same sort of price increases that we saw after the pandemic prior to Phase which was fairly substantial. And then as you recall, between Phase 1 and Train 4 and 5, we had about a 10% increase, and there was a 2-year spread there. So it was running closer to 5% per annum as opposed to the current inflation. But that tracks pretty closely with what we were seeing in inflation. And obviously, some of the equipment stuff got really, really hot, especially around turbine orders, et cetera, that became the constraints as far as schedule and delivery of the project. Wade Suki: Great. Appreciate the color there. You kind of walked right into my next question, Matt, just to what extent these might kind of influence, if at all, long-term SPA pricing. And always appreciate your broader thoughts or insight -- whatever insight you could give us on what you're seeing out there with regard to kind of leading-edge rates. That would be great. Any color would be awesome. Matthew Schatzman: Yes. Look, I think the market for LNG is between $2.50 and $3 on a fixed fee basis, 150% Henry Hub in that range. And I think it depends on the returns you're going to receive are going to be dependent on whether or not you're running a brownfield project or a greenfield project. The greenfield projects, I think, need higher contracting prices in order to get off the ground. If they go lower than and compete with the brownfields like us, I think they're going to have to get their upside through expansion. If they don't have a lot of expansion capability, I think it's a challenging market from an equity return perspective. Clearly, as you guys have seen for our Train 4 and 5, we are -- we tend to not be on the lower end of the market. We tend to be, I think, in the mid-range of the market, kind of the true market price if you look at it from a bid offer perspective. And that's where I expect we will be or close to that for Train 6, 7 and 8. Operator: The next question is from Craig Shere from Tuohy Brothers. Craig Shere: Is your nat gas sourcing team fully in place now? And you've talked about hedging out some of the initial commissioning cargoes and that you expect $3 plus netbacks net of your feedstock costs. Could you, by the end of the year, make any more formal announcements, not just on the sales side, but on the purchase side and what you're doing there? Matthew Schatzman: Yes, that's something we'll take into consideration. We've been active on the supply side for a long term, and been working on that, and I expect that we should be able to give an update as to what we've done on a long-term basis. In addition, some of our customers have to give us notice before the end of the year as to their willingness to sell us gas under long-term contract prices. So either later this year into the year, maybe in the first quarter, Craig, we can provide some guidance as to what we -- on a basis, a year or greater. I think that will be a good update. So thanks for the steer. As far as the team, together nicely. So we already had a gas supply team in place, but we're building out the short term, what I'll call the trading and optimization team. They'll be managing our gas supply for us, and we expect to have them definitely in-house completed before we have to start introducing gas into the facility, which will be later this year. Craig Shere: Great. And you mentioned about this 24/7 construction that Bechtel officially kind of was the one who asked for it, and it's their discretion how to use it. Maybe you could just speak to their incentives by individual train or by individual FID, they may -- depending on how well things are going overall, may not necessarily make more money or incentives to accelerate further versus where they're already tracking. But when you think about a -- well, now already 5-train project moving on to 6 and more that perhaps even if they slightly increase their costs that you don't have to pay for, that their NPV building out 6 to 8 trains over time could be higher and that they're still incentivized to maximize this under most conditions. Could you opine on that? Matthew Schatzman: I think what I'd say simply, Craig, is that without getting into the details of the commercial arrangement, which I don't believe we have disclosed, what I would say is that Bechtel is highly incented to deliver substantial completion of each train prior to the guaranteed substantial completion date and that there is value there that I think can more than compensate them for an increased labor cost if they choose to use it. There's also, as you know, guarantees. I mean, we're nowhere -- at this point, we've already said and guided that we're nowhere near that guaranteed substantial completion date as far as the delivery of the trains. But they want to make sure that they achieve prior to guaranteed substantial completion because if they went past it, which, again, we're nowhere in this realm, there are key pole mechanisms and damages associated with that. So there's a bunch of different incentives for them to ensure that they deliver the trains on schedule, and there are more incentives for them to deliver them ahead of schedule. Operator: The last question is from Alexander Bidwell from Webber Research. Alexander Bidwell: Just wanted to, I guess, piggyback off some of the prior questions around Phase 1 construction. With the projects tracking ahead of schedule, could you walk us through the path to maintaining that momentum as well as any avenues that could further accelerate the project schedule? Matthew Schatzman: Yes. I think it's -- importantly, it's execution. We don't currently have any concerns about equipment and supply chain. That appears to be going very well. So we haven't seen any major impact associated with the conflict in Iran impacting that, which is good to see. I think the key here is we'll continue to provide you updates each quarter. You will see the progress from the standpoint of the construction. You note that where engineering is effectively complete. Procurement is effectively complete for Phase 1 or close to it. So it really boils down to execution at the site and building it. 4 and 5, again, further out in the future, but you should expect to start seeing steel foundations being finished up this year and hopefully steel erecting at the trains. We've already talked about the pilings for Tank 3. I hope to see that progress for Train 4 as well this year. But I think it really boils down to execution. There's really -- there's not one thing that we're specifically looking for. As far as the construction, it's just ongoing, continuing to do and execute what Bechtel has been able to do so far. The next phase, though, I think, is of equal importance, and that is the commissioning phase. You'll see gas being introduced in the facility this year. You should expect to see that. We'll be working on the warm side of the facility there. We're working on the flares, and we'll be working on the gas processing side of it. The cold side, you're going to -- you shouldn't expect to see that until next year when we start to start running compressors and start testing. And then start hopefully producing LNG, as we said, in the first half of 2027. We haven't provided any specificity on which month that's going to be. I hope to be able to provide some additional guidance on that later this year as we continue to progress with Bechtel and we get a better indication of when that's going to occur. And then, of course, once we get through the commissioning process, which I think I've told the market that we're doing with Bechtel, our operations team is seconded into Bechtel for the commissioning so that we have a seamless handover at substantial completion. Our team will have already worked on operating the facility during the commissioning with Bechtel, which we think is best practice. That should happen -- that will happen at substantial completion, which again is tracking ahead of guaranteed substantial completion which currently, I think we've guided is the fourth quarter of next year. So those are the key components. We've been very -- we believe and continue to try to be conservative in our guidance to the market because this is our first train. We are -- we've been around the block on this and other projects. We know how these things work. So far, everything has gone extremely well. We would anticipate based on how well Bechtel has done building the facility that we expect the commissioning and handover to go extremely well also. But we're not planning for the best, hoping for the best. We're going to plan for expected disruptions as you typically see when you're starting a facility, especially a new one. We will learn lessons from that. And then we would expect Trains 2 and 3 to go even smoother because we'll learn from Train 1 commissioning and startup. So I think these are the key components. And again, we will continue to update the market as we can with more details on when that facility is going to -- when Train 1 is going to start up, when we expect to produce first LNG and when we expect to load our first cargo. And then the spread of timing between Train 1 and Train 2, Train 2 and Train 3. Alexander Bidwell: All right. Appreciate the color. And then just, I guess, real quick on the shipping side. I was wondering if you could provide any additional color on your plans around shipping capacity. I understand you guys have some vessels set to be chartered in, but is there any plans to expand or add additional vessels to handle the merchant book? Matthew Schatzman: Yes. We have 5 vessels under charter, 3 long-term charters that are utilized for our Guangdong DES deal. We've chartered those from Dynagas. There are 3 new vessels. In fact, the first one just sailed yesterday from the Hyundai shipyard. I was there on Tuesday and took a tour of the vessel. It's a phenomenal piece of kit that Hyundai has built for Dynagas and Dynagas has designed. We have 2 more of those coming this year. And then we have 2 more vessels that we've subchartered. All of these will be used for our commissioning process for Train 1, and then we'll start utilizing those larger ships that we have -- that are being built for us to deliver to our long-term market in China. We will likely run a DES-type business for our excess cargoes. We believe that being able to do a delivered-ex-ship business for our excess volumes provides additional flexibility and optionality and should increase the value. So we do anticipate chartering more ships on a short-term basis for Phase 1 volumes above the firm volumes that we've already sold. And then for Train 4 and 5, we are looking at additional capacity potentially on a longer-term basis due to the fact that we currently, as you know, haven't sold all of our firm capacity out of those trains. However, as Mike mentioned in his comments, should we decide to sell more of that capacity a year or 2 from now, depending on how the short-term market goes, that may reduce how much capacity we would need under a longer-term basis. So we're going to be very mindful of that and make sure that we don't overcontract capacity before we need it. But we will be chartering more ships, simply put. Operator: That concludes our call today. Thank you for joining and for your interest in NextDecade.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0 and a member of our team will be happy to help. Please standby, your meeting is about to begin. Good morning, everyone. Welcome to the Ares Management Corporation First Quarter 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. As a reminder, this conference call is being recorded on Friday, May 1, 2026. I would now like to turn the call over to Greg Mason, Co-Head of Public Markets and Investor Relations for Ares Management Corporation. Please go ahead, sir. Greg Mason: Good morning, and thank you for joining us today for our first quarter 2026 conference call. I am joined today by Michael J. Arougheti, our Chief Executive Officer, and Jarrod Morgan Phillips, our Chief Financial Officer. We also have a number of executives with us today who will be available during Q&A. Before we begin, I want to remind you that comments made during this call contain forward-looking statements and are subject to risks and uncertainties, including those identified in our risk factors in our SEC filings. Our actual results could differ materially, and we undertake no obligation to update any such forward-looking statements. Please also note that past performance is not a guarantee of future results, and nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in Ares Management Corporation or any Ares Management Corporation fund. During this call, we will refer to certain non-GAAP financial measures which should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. Please refer to our first quarter earnings presentation available on the Investor Resources section of our website for reconciliations of these non-GAAP measures to the most directly comparable GAAP measure. Note that we plan to file our Form 10-Q later this month. This morning, we announced that we declared a quarterly dividend of 1.35 dollars per share on the Company’s Class A and non-voting common stock, representing an increase of over 20% from the same quarter a year ago. The dividend will be paid on June 30, 2026, to holders of record on June 16. Now I will turn the call over to Mike, who will start with some comments on the current market environment and our first quarter financial results. Michael J. Arougheti: Thank you, Greg, and good morning. We hope everybody is doing well. In the first quarter, we continued to generate strong financial results and significant growth across our key financial metrics, and we are excited and confident about the opportunities ahead for our business. Our AUM increased 18% year-over-year to 644 billion dollars, and our fee-paying AUM increased 19% to 400 billion dollars. This is translating into strong top line growth and profitability, as management fees increased 22% year-over-year, FRE grew 26%, and realized income increased 24%. We also continued to generate strong fund performance for our investors across an expanding array of investment strategies, which is helping to drive increased and more diversified investor demand across our firm. In fact, we are on track for another record year of fundraising as we raised 30 billion dollars of gross capital in Q1, which is our highest ever first quarter, and that is up 46% compared to last year’s record first quarter. Our pipeline of new institutional funds remains robust for this year and next year, with three of our largest institutional private credit funds in the market over the next twelve months, two of which have already launched with significant momentum. Our institutional franchise remains strong. Three-quarters of our 644 billion dollars of AUM is comprised of institutional capital with 14% from publicly traded closed-end funds and other sources and just over 10% from evergreen wealth products. With nearly 1,700 investment professionals across more than 55 global offices, we operate one of the largest and most diversified origination platforms in the private markets. This platform enables us to source differentiated investments throughout market cycles and to capture market share during periods of volatility. Even with the typical seasonal slowdown in the first quarter, which was further amplified by heightened geopolitical issues, our deployment was still over 32 billion dollars across the firm, which was higher than the first quarter of last year. As sponsors and business owners gain increasing comfort with the market backdrop, we are seeing our forward investment pipeline increase to a new record level with notable strength across European and U.S. Direct Lending, Alternative Credit and Infrastructure. The expansion of our platform is also driving new investment opportunities. For example, over the past two years, we have added 14 new investment products and strategies, which now total 68 billion dollars in AUM. These new additions to the platform enable us to continue to expand our global origination capabilities and help us to find supply-demand imbalances and scenarios. Our available capital continues to expand on the back of our strong fundraising, and it now stands at over 158 billion dollars. As one of the largest institutionally backed private credit providers globally, we believe that we have the most credit dry powder of any public player in the market, totaling more than 100 billion dollars. This sets us up well for continued growth in FPAUM as we invest in today’s increasingly attractive market. Now let me dive into a few key drivers of our business, starting with fundraising. In short, we continue to see strong demand from institutional investors as many are seeking to take advantage of improving market conditions across private credit, real assets and secondaries. Institutional demand is broad-based; we continue to see investors consolidating relationships with scaled platforms like Ares Management Corporation that can generate consistent performance across cycles. Within our Credit Group, we raised over 20 billion dollars in Q1, driven by strong demand across both drawdown funds and perpetual capital vehicles. In the first quarter, we held the final close for ASOF III, our latest opportunistic credit fund, raising over 8.3 billion dollars of equity commitments and nearly 10 billion dollars including related transaction vehicles. ASOF III significantly exceeded its target and the size of the prior vintage. We believe that the timing of this raise is particularly compelling as the team is seeing a large pipeline of investment opportunities. In January, we launched the third vintage of our Alternative Credit fund with a target of 6.5 billion dollars. Our Alternative Credit strategy is where we invest across the multi-trillion dollar addressable market in global asset-backed finance. Our prior Alternative Credit fund totaled 6.6 billion dollars in capital, and the current fund is experiencing strong demand from existing and new institutional investors well in excess of the target. We expect to complete the fundraise in the second quarter at its hard cap as the fund is already meaningfully oversubscribed. In U.S. Direct Lending, we are accelerating the launch of our fourth senior direct lending fund due to improving market conditions, which are offering enhanced economics, lower leverage and improved deal terms in U.S. Direct Lending investments. We anticipate a first close in late third quarter or early fourth quarter of this year. We also have some exciting structural enhancements to our main fund series, which we believe will benefit investors and enhance our fundraising capabilities in the strategy. In our third U.S. senior direct lending fund, SDL 3, we raised approximately 15.3 billion dollars in equity commitments across both levered and unlevered sleeves in the fund against a 10 billion dollar cover. The fourth vintage in the series will be a fully levered fund, and we plan to launch a new unlevered evergreen U.S. senior direct lending core product. The two products will continue to invest together just like previous vintages, but will now provide investors with both a commingled and an evergreen opportunity. Like our third fund, we would expect this fourth fund series to also exceed its 10 billion dollar cover. In Digital Infrastructure, we are raising a global data center equity fund to take advantage of the multi-decade supply-demand imbalance, as the hyperscalers drive demand for trillions of dollars of cloud and AI computing over the next five years, a significant portion of which will need to be solved by private equity and private credit. Our Digital Infrastructure group, which includes our own vertically integrated operating platform, Ada Infrastructure, has a differentiated position in the market characterized by long-standing hyperscaler relationships, significant investment and development expertise, and multiple seed projects in the pipeline in top-tier markets. We expect to hold a significant first close for our global data center fund this summer. As many of you know, we operate one of the largest real estate platforms globally, and our scale continues to drive accelerating demand across our real estate funds. In the first quarter, our eleventh U.S. Value-Add fund closed at its increased hard cap of 3.1 billion dollars in fund commitments and approximately 3 billion dollars of total capital. Similarly, our fifth Japan Logistics Development Fund is seeing very strong demand following the excellent performance of prior vintages. We expect to hold a first close this spring and ultimately reach the hard cap later this year. And in Secondaries, we are back in the market with our third real estate secondary fund and expect a first close in the back half of the year. Within our Wealth business, we had another strong quarter driven by accelerating demand in our six products outside of U.S. private credit. In fact, we raised the same amount of gross and net equity capital of 4 billion dollars and 3 billion dollars, respectively, in the first quarter as we did in the fourth quarter of last year. On a year-over-year basis, our Wealth AUM increased 54% to 68 billion dollars. We believe that our diversified product offering is enabling us to gain market share as advisors broaden their focus away from U.S. private credit toward other alternative products like infrastructure, real estate and private equity. For example, during the first quarter, our core infrastructure fund raised 1 billion dollars in equity subscriptions and now has over 3 billion dollars of AUM, and the fund just launched on its first major platform with its first capital raise on that platform closing today. We are also seeing improving flows across our two non-traded REITs, with more than 640 million dollars of inflows in the quarter, and our European direct lending wealth products had equity flows of nearly 1.2 billion dollars. Within U.S. Direct Lending, equity flows into our non-traded BDC have moderated relative to prior periods, while fund performance and underlying credit fundamentals remain strong. Since inception, the non-traded BDC has generated an annualized return of over 10% for Class I shares. Notably, the majority of repurchase requests during the most recent quarter came from a limited number of family offices and smaller institutions in select regions, and over 95% of our investors did not request redemptions. It is important to remember that these vehicles are specifically designed to align liquidity with the underlying assets. For example, the non-traded BDC’s 5% quarterly repurchase framework approximates the natural repayments of a typical U.S. direct lending portfolio. This repurchase framework is intended to provide access to attractively yielding illiquid assets while also mitigating against the risk of forced asset sales amid heightened redemption requests. Finally, we believe that we are well positioned to continue to drive strong growth regardless of redemption activity in our U.S. private credit vehicles. These two private credit wealth products account for approximately 4.5% of our overall fee-paying AUM. While we believe it is a very unlikely scenario, if these two funds were to experience 5% quarterly redemptions for a full year with no gross inflows, we estimate that, based on existing fund structures and redemption mechanics, it could impact our FPAUM by approximately 1% annually. Considering that our FPAUM increased by over 19% in the past twelve months, and our current AUM-not-yet-paying-fees available for deployment represents another 19% of future growth in FPAUM, we would expect the impact of any redemption activity to be minimal. In reality, any deployment that would have gone to these non-traded vehicles will likely be taken up by other traded and institutional funds and SMAs with limited to no impact to our current year profitability. On the investing side, overall deployment activity increased modestly compared to 2025, driven by real estate, alternative credit, European direct lending and private equity. The transaction market environment for U.S. Direct Lending was slower in the first quarter as industry-wide deal count and middle market M&A declined by 41% in Q1 2026 versus Q1 2025 due to impacts from the Iran war and changing inflation and rate expectations. During slower periods, we often gain considerable market share due to our certainty of capital and broad sourcing capabilities, and the first quarter was no exception. Over the past several weeks, we are beginning to see a pickup in new U.S. Direct Lending transaction activity as market participants adjust to changing market conditions. As Jarrod will discuss later in the call, our investment portfolios are performing well and credit fundamentals remain positive. Of course, the broader market will see defaults which will inevitably garner attention, but we are not seeing signs of an impending default cycle, and we believe that private credit players are getting well compensated for the risks with enhanced economics. We have operated our U.S. Direct Lending strategy for over 20 years, and looking at Ares’ BDC, Ares Capital Corporation, we have deployed and exited more than 70 billion dollars in capital with an asset-level realized gross IRR of 13% on all exited investments. In our view, the growth of the private credit asset class is part of a multi-decade structural evolution supported first by continued expansion of the private markets relative to the public markets; secondly, it is driven by bank consolidation, the need for tight bank regulation given the dependence on federally insured deposits and the inherent asset-liability mismatch and leverage in the banking system; and lastly, the syndicated bank loan and high yield markets have been focused on larger companies for decades, which has left a growing void for middle market companies, which comprise about one-third of our economy. The U.S. private credit market, which is funded 75% or more by institutional investors, serves as a stabilizing force in the economy when bank lending contracts or when the capital markets become constrained. For example, if you look over the last 25 years, U.S. private credit has contracted once, which was over 10 years ago, versus the banking sector, which has contracted eight times over the same period. Today, Ares Management Corporation has over 100 billion dollars in available capital to invest in credit, and we estimate that the industry has over 500 billion dollars of available capital, which is larger than the size of the entire non-traded BDC industry. While private credit has expanded at low double-digit rates over the past decade, this growth tracks in line with the growth of the 5 trillion dollar private equity sector and other private market asset classes. Also, the percentage of our economy’s GDP funded by corporate credit, including private credit, bank C&I loans, syndicated bank loans and high yield bonds, has not changed over the past decade. This indicates that the growth of private credit is not increasing the amount of leverage or credit in the economy, and is providing more consistent funding throughout business cycles. Every loan funded by private credit with comparatively less fund or balance sheet leverage should reduce risk of volatility. Software is a topic that is rightfully drawing a lot of attention, but there seems to be confusion on how to distinguish between software exposures and different software companies. Senior debt is much more protected from downside risks than equity in the capital structure and individual software companies have varying degrees of potential AI disruption risks and opportunities. In the traded loan markets, we are seeing a bifurcation in the prices of software loans between the potentially less and more impacted companies. For example, we have tracked a basket of companies focused on core operational software, systems of record and highly regulated markets where their loans have traded down 2% on average year-to-date to 98–99 dollars, versus another basket of software companies primarily focused on content generation, data analysis or productivity tools where their loans have declined 24% on average year-to-date and now trade below 65 dollars. As we have discussed in the past, Ares’ software exposure, which is 6% of overall AUM and less than 8% of our AUM in private credit, is focused on senior lending, primarily to software companies in the former basket serving the core operations of complex businesses in regulated industries with proprietary data. As you may have heard from the Ares Capital call earlier this week, we engaged one of the top three global management consulting firms to supplement our own internal analysis of our software-oriented portfolio. They conducted a nine-week independent and detailed review of the potential forward-looking AI risk in our software-oriented portfolio companies, and the study also included our relatively lower software exposure in our European direct lending portfolio. The study graded each company on a spectrum based on risk characteristics and concluded that our software-oriented portfolio is very well positioned with 86% of the portfolio with low risk of potential AI disruption. Approximately 13% of the portfolio was classified as medium risk—these companies are performing well today but have a greater need and an opportunity to adapt to AI risks to their business—and only 1% of the portfolio was categorized as having high risk of AI disruption. If the consultant’s framework, which aligns with our own rigorous underwriting views, proves directionally correct, the portion of our software exposure that is medium to high risk represents less than 2% of our U.S. and European direct lending AUM and well under 1% of our total firmwide AUM. And lastly, before turning the call over to Jarrod, I wanted to highlight the successful IPO last week of X-energy, which is a small modular nuclear reactor company. In 2022, we identified X-energy as a revolutionary company through our first SPAC, Ares Acquisition Corp. I. As we approached the de-SPAC process in 2023, high inflation and rapidly rising interest rates impacted market conditions for the transaction. We chose to support X-energy in a private transaction and the company continued to execute its strategy, including receiving support from strategic investors like Amazon. Last week, X-energy completed its IPO that was meaningfully oversubscribed, raising over 1 billion dollars at a 20% premium to the high end of the proposed range, and represented the largest equity offering ever for a nuclear company. The cost basis of our balance sheet investment is a little over 100 million dollars and, based on the recent trading price of the stock, our current fair value net of employee compensation is close to 700 million dollars. We are excited to celebrate this significant milestone with our partners at X-energy. And with that, I will turn the call over to Jarrod to provide additional details on our financial results. Jarrod? Jarrod Morgan Phillips: Thanks, Mike. Our financial results in the first quarter demonstrate the strength, durability and diversification of our platform, with continued strong growth across our key financial metrics. Importantly, these results reinforce what we believe is one of the defining characteristics of our business model, which is our ability to continue growing, often faster, through periods of market dislocation given our FRE-rich earnings profile, balance sheet-light strategy, diversity of our AUM and investment strategies, and the scale of our global platform. As we look ahead, we remain confident that we are on track to meet our financial objectives for the year. We continue to benefit from a large base of AUM that is not yet paying fees, strong fundraising momentum—especially in the institutional channel—and improving conditions for our deployment across a broader set of strategies. We believe the combination of long-duration capital, flexible investment mandates, significant dry powder, an asset-light balance sheet and a management-fee-centric model positions us well to navigate through a range of market environments while continuing to drive growth in earnings over time. Turning to our results, quarterly management fees exceeded 1 billion dollars for the first time in our firm’s history and increased 22% compared to the prior-year period. This growth continues to be driven by expansion in FPAUM, which increased 19% year-over-year due to strong underlying fundraising and deployment activity across the platform. Fee related performance revenues totaled 20 million dollars in the quarter, which were driven by APMF. As a reminder, the timing of FRPR varies by fund and investment strategy. Within Credit, we typically recognize FRPR from our Alternative Credit strategy in the third quarter, with most of the remaining credit strategies recognized in the fourth quarter. In Real Estate, FRPR is concentrated in the fourth quarter, while APMF and certain other perpetual vehicles generate FRPR on a more recurring quarterly basis. Fee-related earnings were 454 million dollars in the quarter, increasing 26% year-over-year. Our FRE margin expanded 90 basis points year-over-year to 42.4%. We continue to have good visibility into margin expansion for the full year towards the high end of our targeted range, driven by a number of factors including continued efficiencies from the GCP integration, the data center business shifting from a negative to a positive FRE contributor with the new global digital infrastructure fund paying on committed capital, and our expectations for continued strong growth in AUM and FPAUM from deployment. Turning to performance income, we generated 75 million dollars in realized net performance income, an 84% increase over the year-ago period. Interest expense increased to 51 million dollars due to normal increased Q1 seasonality. Additionally, interest income should remain around the Q1 level going forward. Realized income for the quarter was 503 million dollars, representing growth of 24% year-over-year, and after-tax realized income per share was 1.24 dollars, up 14% compared to the prior-year period. Our tax rate in the quarter totaled 13.5%, just above the midpoint of our 11% to 15% expected range for the year, in line with where we would expect the rate to be for the remainder of the year. As Mike stated, our fund performance remains strong across the platform. Over the last twelve months, we generated time-weighted returns of approximately 12% to 15% in our U.S. Direct Lending strategies, 15% in Alternative Credit, 12% in Opportunistic Credit, 9% in European Direct Lending and over 20% in APAC Credit. We continue to see strong fundamental performance in our funds, and when we look across private and public credit markets, nothing we are observing suggests we are at or near a turn in the credit cycle. Across our direct lending portfolios, we are seeing continued near 10% EBITDA growth, loan-to-value ratios in the mid-40% range, private equity funds continue to fund new transactions with majority-in-equity and improving interest coverage ratios of 2.2x. Non-accrual ratios are well below historical norms and we are generally financing much larger, more resilient businesses today versus past vintages. The relatively small number of credit issues we see are company-specific rather than indicative of broader trends. We are not seeing any credit deterioration broadly within software, as we have only one software company on non-accrual. Within Real Assets, our diversified non-traded REIT has generated a total return of approximately 12% over the last twelve months. Our infrastructure debt strategy produced gross returns of approximately 9% over the last twelve months. In Secondaries, APMF has generated a since-inception net return of over 14%, while our primary private equity strategies continue to deliver strong performance with net returns of approximately 15% in ACOF VI. Overall, these results reflect the breadth and consistency of our investment performance across strategies and continue to be a key differentiator for Ares Management Corporation as we look to drive long-term growth in AUM and earnings. In conclusion, for the year 2026, we are on track with our longer-term goals of generating compound annual growth of 16% to 20% in FRE, 20% to 25% in realized income and 20% in dividends. We anticipate continued FRE margin expansion and we expect to be within the upper end of our 0 to 150 basis points annual target this year. We are on track for another record year of fundraising, and our expansive origination platform, record levels of dry powder and flexible capital position us for strong deployment even in uncertain markets. I will now turn the call back over to Mike for his concluding remarks. Michael J. Arougheti: Thanks, Jarrod. As we step back and reflect on the events of the first quarter, we believe one of the most important takeaways is the continued strength and resilience of our institutional fundraising franchise. Last week, we held our global annual meeting for our institutional investors. We welcomed over 1,100 attendees from across the world to both highlight the breadth and depth of Ares Management Corporation’s investment platform and to expand and deepen relationships with our largest investors. We continue to see enthusiastic engagement from large, sophisticated investors who are allocating capital with a long-term perspective and are increasingly consolidating relationships with scale managers that can deliver across strategies and cycles. That demand has remained consistent despite the recent market noise, and in many cases, we are seeing investors lean in given the improving opportunity set. I think it is noteworthy that we continue to exceed our fundraising targets in most of our flagship fundraises, and in many cases, we are getting to the hard cap in a shorter amount of time than in prior vintages. We also believe that the current environment is setting up very well for enhanced deployment. Periods of uncertainty tend to create more attractive investment terms and risk-adjusted returns, and we are already seeing a broader set of opportunities across Credit, Real Assets and Secondaries. Given the ongoing impacts from geopolitical issues and certain redemptions in retail-focused funds, the current environment is offering wider spreads, higher fees and better terms. With over 150 billion dollars of available capital and a highly diversified platform, we are well positioned to take advantage of these conditions and deploy capital at more attractive risk-adjusted returns. Importantly, our business model continues to provide us with a degree of diversification, stability and flexibility. We operate leading businesses across an array of global Credit, Real Estate, Infrastructure, Secondaries and PE strategies. Our earnings are driven by management fees supported by long-duration capital and complemented by performance income that we believe will continue to grow over time. This combination enables us to remain patient and opportunistic while continuing to generate durable growth in earnings. We are excited about the many levers that we have for profitable growth and our ability to continue driving long-term shareholder value. I will remind everyone that Ares Management Corporation experienced its two fastest periods of growth during the GFC and COVID, as we were able to leverage our competitive advantages to consolidate share and as our institutional investors increased their allocations to us to take advantage of improving returns in choppy markets. As always, I want to thank our employees around the world for their continued hard work and dedication, and I want to thank our investors for their ongoing support and confidence in our platform. We will now open the call for questions. Operator: Thank you. We will go first today to Craig Siegenthaler with Bank of America. Craig Siegenthaler: Good morning, Mike and team. Hope everyone is doing well. Michael J. Arougheti: Thanks. You too, Craig. Craig Siegenthaler: You had a strong fundraising quarter in the Credit platform, and that is despite a deceleration in two of your newer retail funds that, as you said, only represent 5% of your AUM. Can you provide some perspective on the evolving demand dynamics between the institutional channel, the insurance channel, and also the retail channel within private credit? Michael J. Arougheti: Sure. Thanks for the question, Craig. I am going to step back and contextualize the answer with some things that I know I have talked to you about and others on the line. When you think about how the private credit market has been evolving and how Ares Management Corporation has chosen to participate in it, remember we actually started in private credit with Ares Capital Corporation, a traded BDC, and as we referenced on the call, that entity has a substantial public track record through cycles. If you look at the 21-plus year track record there, the return coming out of ARCC has beaten the S&P 500, the syndicated bank loan market, the high yield bond market and probably most anything else that people have invested in. It is a wonderful company and a wonderful structure. But what we learned was that because of the ebbs and flows, particularly within the retail market, it was challenging to take full advantage of cycles when they developed only in that traded BDC fund structure. And so we launched in earnest our institutional fund platform with the SDL and ACE series, which have obviously scaled with similarly strong performance. Watching those two work together, what you learn is diversification of funding is critically important to navigate cycles and drive outperformance, but also the ability to have those funds working hand in hand is performance-enhancing for both funds given our ability to continue to invest into the franchise, drive new originations, have the dry powder to support our best performing companies, etc. So you need both. Then we entered the wealth channel; we were actually last in our space to come into the market in earnest given some of the learnings we had about the procyclicality of flows sometimes within that channel, both good and bad. We have been very measured as we have thought about how to build the fund complex to capture the full complement of opportunities across the cycle within traded, non-traded and institutional. But what we have always tried to articulate is the assets are the same. As I said in the prepared remarks, if we originate a senior secured loan and we have availability of capital in each of those three pools, each of those three pools will get to participate. Not surprisingly, if you are beginning to see slowing inflows or increased redemptions in the non-traded part of our business, that does not detract from our global deployment opportunity, and those assets will find their way into other funds and therefore will not have an impact on our profitability. Insurance is something slightly different. It is important to talk about it separately because 90% plus of insurance companies’ balance sheets are investment-grade rated and high-grade. It is exciting to talk about the growth of the private high-grade market, but it is a different asset class in many respects from the traditional private credit and sub-investment-grade credit market. So when you think about the demand, you have to think about it in terms of not just the channels, Craig, but also high-grade versus sub-investment-grade. If you look at our 20 billion dollars of capital raised in our credit strategies in the quarter, I think it is indicative of what is happening in the market. We raised 20 billion dollars of capital in our credit strategies in the quarter, 5 billion dollars of which was in wealth. If you break down that 5 billion dollars in wealth further, 3 billion dollars was in our two U.S. Direct Lending funds, and about 2 billion dollars was in our European Direct Lending fund and our Sports, Media and Entertainment fund, which we would characterize as a quasi-private-credit product. Those two—Europe and SME—are actually enjoying very strong gross and net inflows as well despite the noise in U.S. Private Credit. As I referenced on the call, we are seeing our third vintage of the Opportunistic Credit fund, ASOF, hit its hard cap; we are seeing our third vintage of our ABF fund hit its hard cap and be meaningfully oversubscribed; and we talked about the early momentum that we see in the next senior direct lending vintage. Everything we are seeing on the ground is that the institutional investor is not anxious, they are not allocating away from private credit, and in fact, they are looking at this as a huge opportunity to take advantage of a dislocation and bring liquidity into the market to capture excess return. Thanks for the question. Operator: Thank you. We will go next to Alexander Blostein with Goldman Sachs. Alexander Blostein: Hey, Mike. Good morning, everybody. I was hoping we could dig a bit more into your comments around the deployment pipelines. You made a point that they are currently at a record in the Credit business. Can you expand on which parts of the Credit business you have seen the biggest incremental pickup in deployment opportunities, how the market has evolved in the last several months, especially considering that the non-traded BDCs and the evergreen vehicles for the most part have been the incremental buyer in the last few years, and how that might change the market structure and the spreads you currently see available in the States? Michael J. Arougheti: Thanks for the question, Alex. I would just comment that I do not know that they are the incremental buyer. If you look at the market structure, whether you include certain portions of high-grade private credit or not, you will see that the non-traded BDCs in aggregate—AUM, not new flows—are somewhere between 15%–20% of the overall private credit market. Because they do not operate with a significant amount of dry powder, when you look at the net flows into non-traded BDCs relative to aggregate dry powder in the institutional market, I do not think they were the incremental buyer. That goes back to our point earlier about the deployment opportunity this creates. In terms of the pipelines, the diversification of the platform really shines through in the quarter. We saw really strong deployment in our Infrastructure and Real Estate businesses; our European Direct Lending business had very strong deployment; Secondaries and Structured Solutions were very strong; ABF saw a little bit of a slowdown in the U.S. Direct Lending part of the business. I think that slowdown is more about what is happening in middle market M&A and the private equity market as they digest the war in Iran and the implications for inflation and the rate backdrop. But, as was said on the ARCC call, over the last number of weeks we have seen people pick their pencils back up and the pipeline has re-engaged. As we saw last year, there is a strong possibility that deployment will pick up in that part of the market pretty aggressively as we head into the back half of the year. It has been broad-based, which is part of the value of having the global diversification that we have. If there was one theme that I would point out that is accelerating, it is liquidity-generated opportunity—there are a lot of companies in the public and private markets that, because of the rate environment or flows, are going to need to seek creative liquidity solutions through opportunistic credit, secondaries and even direct lending and recap solutions that I think are going to drive significant deployment. We are excited about the setup, and pretty much every investment team is incredibly active right now. Operator: We will go next to Steven Chubak with Wolfe Research. Steven Chubak: Hi, good morning and thanks for taking my question. I wanted to double click into some of the comments on retail. While non-traded BDC flows have come under pressure, flows in other products you alluded to, Mike—such as infrastructure and secondaries—have been much more resilient, and some of the flows are even beginning to accelerate. What are you hearing from advisers and gatekeepers as it relates to retail appetite for strategies outside of credit? And given the fundraising pressures on the private credit side, do you still see a credible path to hitting the recently revised 2028 fundraising target of 125 billion dollars? Michael J. Arougheti: Thanks for the question. Zooming out, it is important to appreciate that development in the wealth channel is about investor access and bringing differentiated solutions to a part of the market that heretofore did not have the opportunity to invest. The large wealth platforms and large RIA and advisory platforms would tell you that their clients are meaningfully underinvested in the types of solutions that we and others like us are offering—around differentiated equity exposure, differentiated yield exposure, and tax-advantaged access to real assets. There is a major secular trend at play that will overwhelm, in my opinion, whatever periodic noise we see—whether it was the periodic noise we had in real estate a couple of years ago or the periodic noise we are seeing now in U.S. Direct Lending. As I mentioned in the prepared remarks, we have eight products in the channel—you could maybe add two more because we have two 1031 exchange platforms—that continue to see demand pull-through. While the U.S. Private Credit funds are seeing slowing demand, we are seeing increasing demand elsewhere because of the secular momentum I talked about. I would also remind people, because we put this out when we talked about our redemptions, if you look at our non-traded BDC, which is generating top-market performance, and see where redemptions were coming from, it was smaller family offices and some smaller institutions in non-U.S. regions. It was not what I would call the well-advised high net worth investor that tends to be the consumer of this product. From another angle, 95% of our investor base in the BDC did not want to redeem, and that was in addition to meaningful inflows in the period. I am not sure the redemption narrative is right, because it is not a broad-based repudiation of alts in the wealth channel. It seems to be something different. The adviser community—we spend a lot of time on education and support with individual advisers and their investors—and that is why you are not seeing broad-based requests for redemptions. It tends to be more isolated. On the 125 billion dollars, yes, we have not changed our guidance. Operator: We will go next to Patrick Davitt with Autonomous Research. Patrick Davitt: Good morning, everyone. I hear the more constructive direct lending pipeline commentary, but you cannot really see that in the hard numbers that have been put out there yet. Can you put a bit more meat around how that shadow pipeline compares to historical periods and when you think it could start converting into real announcements? Michael J. Arougheti: There is a lag, obviously. The deals that we are closing now have been in process with visibility for months. As you would expect, we have a top-down view of all of the transaction flow that is working its way through the business, including the Direct Lending business. The aggregate pipeline across the firm is at a record level, and the Direct Lending pipeline is increasing in momentum. We would hope that pulls through. A lot of times when you see things like the conflict in Iran, you get a pause as everybody evaluates, and then once people understand what we are working with, the pipeline will pick up. The longer-term catalysts are still in place—you have a significant amount of private equity invested that is aging and needs resolution through a sale transaction, refinancing or other capital structure solutions; you have an administration that is pro-business and a regulatory backdrop that is pro-M&A; and with rates stabilized, even if they are not coming down as the market anticipated a few months ago, a stable rate backdrop should be constructive for transaction activity. Last year, with the tariffs in April, you saw a similar pause—meaningful pipeline build through January–February, tariffs hit, pause, then reacceleration and it turned out to be a record deployment year. I cannot guarantee that is the case, but you do see these periodic pauses. The catalysts are intact, and the weight of money that needs to get resolved is going to drive people to the deal table. Operator: We will go next to William Raymond Katz with TD Cowen. William Raymond Katz: Thank you very much for taking the questions. Maybe one for Jarrod. On the realization side, Q1 came out a little lighter than many of us anticipated. It sounds like there is momentum not only for you but the industry at large. Can you give us a general sense of how you are thinking about the year playing through? And second, given the momentum on the FRE margins for this year, how should we think about 2027 given the significant scaling across the platform? Jarrod Morgan Phillips: Thanks, Bill. On realizations, it is similar to what Mike said. The more active the transactional backdrop, the more ability you have to pull realizations forward; the less active, you may have some extended durations. The nice thing about our European waterfalls that we have talked about in the past is they are predominantly from our credit funds. That means if the duration is extended, you are continuing to earn interest back on those, which increases your accrued balance to be recaptured later as part of the European waterfall. We just put out an 8-K when we were explaining what we thought would happen for this quarter and reiterated the same guidance we had provided for the year. Looking into next year, there is really no change there. The hardest thing for us is to peg the exact quarter, because we do not control whether a deal is refinanced or whether transaction activity results in a lot of deal turnover. The good thing is, because of the nature of these assets, you are not dependent on a market price coming to fruition through a transaction. That is one of our favorite parts about the waterfall. We are excited to have our first harvest from our first U.S. senior direct lending fund here in the first quarter. In terms of margin, we give that 0 to 150 basis points guidance on purpose as we get closer to the year. Our business is built so that as we deploy, it creates natural scale. But we do not want to take away from investment opportunity to do something like invest in the data center business, which we knew would be FRE-negative for a period of time until we launched a fund; then it will be very accretive to the firm overall and margin accretive. We want to keep flexibility for those opportunities. We expect to be well within that 0 to 150 basis points guidance and will look at opportunities through the current volatility and into the back half of the year. Operator: Thank you. We will go next to Analyst with RBC Capital Markets. Analyst: Great. Thanks and good morning everyone. Wanted to ask about the secondaries market opportunity. It sounds like we are seeing an acceleration this year versus last, and you have secondaries across four asset classes, so it is pretty built out. Can you give us an update on what you are seeing on the ground with regards to the secondary opportunity accelerating? Michael J. Arougheti: Sure. I will give context. We came into the secondaries business in earnest through the acquisition of Landmark almost six years ago. The thesis was that transformation was happening along three axes. One, a shift from LP-led to GP-led—not just sale of portfolios by LPs, but GPs using the secondary market for creative liquidity solutions, everything from NAV loans to GP prefs to minority stake sales. That evolution was going to transform the industry. Two, the installed base or primary market for other parts of the alternatives landscape—real estate, infrastructure and credit—was growing to a level that would require more robust secondary solutions. Three, we were beginning to see growth in wealth and retail that wanted to access more diversified broad-based private equity exposures than we could deliver from our core buyout business. We made that acquisition, launched into the wealth channel, scaled the product set to attack the GP-led market, and pioneered the credit secondaries business, which we have grown into a meaningful growth engine for the firm. The reason for that context is because that is exactly what is happening. Primary markets have grown and evolved; LPs and GPs alike are looking for creative liquidity; the GP-led part of the market represents half, if not more, of the current deployment opportunity and is here to stay. The combination of those trends is why you are seeing so much opportunity. Most interestingly, if you look at annual deployment in secondaries against industry dry powder, it is about a 1:1 relationship, which probably makes it the least well-capitalized segment of the alternative asset space. We like that because you tend to generate excess return where there is a supply-demand imbalance. Not only is the market opportunity growing, but fundraising has not kept pace with demand, which is one reason we are scaling nicely. Operator: We will go next to Kenneth Brooks Worthington with JPMorgan. Kenneth Brooks Worthington: Hi, good morning. Can you talk about the deployment opportunity for direct lending in Europe? I know the M&A backdrop is a little different there than in the U.S., but you have a record-size fund. What are you seeing there? Michael J. Arougheti: Europe has many of the same dynamics as the U.S. We have fully developed businesses in Credit across Europe—opportunistic, direct lending, real estate, infrastructure and more. Deployment there has been quite robust. I was pleasantly surprised with deployment in Q1 in the European market. Going into this year, some may have expected slower transaction activity, but some of the geopolitical reorganization around the world has brought more attention to investing in the Eurozone. The market opportunity is probably better than we would have expected. If the first quarter is an indication, the European Direct Lending business is in a good spot. The benefit of diversification: last year Europe had a slower year than the U.S. as the U.S. accelerated in the back half; this quarter U.S. Direct Lending is a little slower and European Direct Lending surprised to the upside. Looking top-down across the credit business, we are happy with the pace of deployment, and the pipelines in Europe are as healthy as they are here. Operator: We will go next to Michael Brown with UBS. Michael Brown: Hey, good morning—almost good afternoon. Mike, a question on software. You emphasized low LTV, near-zero non-accruals, and talked about this on the ARCC call, but much of this is a bit backward looking. Can you give color on the forward look, how you stress test the portfolio, what you see in underlying fundamentals that give you confidence that these companies will continue to operate successfully? And how are you approaching software now—leaning in or leaning back within direct lending? Any interesting opportunities in credit ops or even secondaries? Michael J. Arougheti: The most important thing is that, at least in terms of our exposure, the software portfolio is incredibly well diversified in terms of number of names; it is sponsor-backed; and it sits at roughly a 40% loan-to-value. If you look at ARCC’s current quarter as a proxy, you will see that we marked down the equity value within the software portfolio commensurate with broader markets, so the LTV in portfolio actually went up slightly. But when you are sitting at the top of the capital structure at 40% with 60% equity value below you, you have to eat through all of that equity before taking losses in your credit book. That is the most significant mitigant to loss as this plays out. The weighted average remaining maturity in our software portfolio—probably similar to the general market—is about three years, which means there will be a moment over the next couple of years where owners and lenders evaluate where each company sits, how disrupted it has been, whether it will benefit into the future, and how it gets resolved—transfer of ownership, a debt paydown, a debt repricing, etc. This will play out slowly over time. In our book now, contractual revenues are actually growing, and we are seeing EBITDA growth in the 10% range, reflecting new customer adds. As you add customers, contract length is probably outside the maturity date, so in many businesses the financial picture will not erode even if there is a view that the business model needs to adapt. We are very confident in the quality of the software book. We think we are getting well paid for the risk. As new software deals come in, there are deals getting done because people understand there are competitive moats and you can get paid incremental return because of anxiety around software. We are also using the opportunity to exit some names where we have less conviction. One reason you saw the gross-to-net number that you did in the direct lending portfolio this quarter is we took the opportunity to get out of a couple of names where we had less confidence. To oversimplify: as CEO of Ares Management Corporation, we have over 500 core systems that run our company—financial systems, cybersecurity, order and trade management systems. We are not ripping those systems out. We are putting an AI layer in to get the most efficient output from those systems and the data that sits within them. Those system providers are using AI to deliver a better product to us. Personalize it: you are probably not ripping Excel out of your computer—you are using AI to supplement a core system. Many AI opportunities will enhance rather than displace core systems. Those are the types of things we have focused on investing in. Operator: We will go next to Benjamin Elliot Budish with Barclays. Benjamin Elliot Budish: Hi. Good afternoon, and thanks for taking the question. Maybe another one for Jarrod. Typically, you give a few more guidance tidbits. Is there anything you can share around expectations for the European-style realization revenues for the year, G&A growth, and any help with expectations for FRPR? I know FRPR is a Q4 thing, but anything else to fine tune would be helpful. It sounds like margin expansion may be a bit predicated on cadence of deployment quarter to quarter, but anything else helpful? Jarrod Morgan Phillips: Thanks, Ben. I feel like I covered most of the main ones we normally give through Investor Day, etc. On G&A, that is encompassed within the margin guidance. One thing to highlight—Mike mentioned it earlier—we had an amazing AGM with over 1,100 attendees. Normally we have AGMs throughout the year. In terms of G&A, you will probably see a bit more of an increase next quarter, but that means we have that travel and AGM expense for the different strategies largely out of the third and fourth quarters. There will be a little imbalance in the trend. You can look back to 2024 as a similar time. It will be somewhere in the high single digits to low double digits type of increase in G&A for the travel and related expense. Otherwise, everything is pretty well in line with guidance we have given prior. As Mike said in prepared remarks, we feel well positioned in the current market with the breadth of the platform—there are a lot of things that are extremely active right now that will help drive us toward those goals. Operator: We will go next to Brennan Hawken with BMO Capital Markets. Mr. Hawken, your line is open. Brennan Hawken: Yes, I was—sorry about that. Mike, you spoke to credit selection impacting recent gross-to-net trends. Based on your expectations today, where do you see those trends shifting and what primary factors are going to drive that? Michael J. Arougheti: I do not think we are changing anything in the playbook, Brennan. If you look at the history of our direct lending business—we have been doing this for over 30 years, over 20 here—the model is the same: originate the broadest possible funnel and apply rigorous diligence and portfolio management to drive return. Two hallmarks of our outperformance may be underappreciated. One is our selectivity rate. In private credit portfolios across the board, we typically have a yes rate of about 5%, meaning we only do 5% of the deals we see. That is a function of high conviction on the types of things we like to invest in and those we do not. Second, in core direct lending, roughly half of deployment tends to come from incumbent relationships within the portfolio, which makes for much easier, high-conviction underwriting—companies we have lived with for years, deep relationships with management, understanding risks and opportunities, and observed performance. Those two—low selectivity and the compounding effect of incumbent relationships—are reasons for our performance. If you look at loss rates across private credit, they have all been trending close to zero. That is not by accident. We are not doing anything different now. You are probably a little more selective given market anxieties and keeping liquidity a little drier because we are heading into a spread-widening environment where we will get better economics next month than this month. That is probably driving some of it. But core underwriting tenets and how we think about outperformance have not changed. Operator: We will go next to Brian J. Mckenna with Citizens. Brian J. Mckenna: Thanks for squeezing me in. In the past, you have talked about the benefits of managing flexible pools of capital across the public and private markets. Given the first quarter volatility, did you take advantage of any dislocation across your funds? And can you remind us why having this type of AUM base is so important in delivering outperformance for your clients through cycles? Michael J. Arougheti: That is another hallmark of how we set the business up. Beyond diversification and access points, within individual fund strategies we also have flexible mandates. Our Opportunistic Credit business—where we just had that meaningful ~10 billion dollar capital raise—is a pool that can invest private and public. The closing is coming at an opportune moment as there are dislocations beginning to form in both markets. Having the ability to look at relative value in both and drive to the better risk-adjusted return is good for performance. It is not just public vs. private; it could be senior vs. junior or debt vs. equity. You are constantly looking at relative value across markets, geographies and capital structure. If you are a single-asset, single-point-in-the-capital-structure investor, everything you look at will be squeezed into that framework, which means in certain parts of the cycle you will misprice risk. We have developed with high conviction around flexibility in asset class, position and market, which has created an investment culture around relative value and risk-adjusted return that is pretty unique. Specifically to your question—yes, in parts of the public and traded credit markets, there are increasing opportunities to pivot, and I would not be surprised if we see that pick up in the next couple of months. Operator: We will go next to Analyst with Raymond James. Analyst: Hey, good afternoon. Could you go into a bit more detail on your data center business? Do you have data center AUM outside the Digital Infrastructure business? And what do you think the total market size could be for data centers in the intermediate term? Unknown Speaker: I will take that one. We have been investing in the digital space broadly for the past 10 to 15 years—everything from towers to networks to data centers—across several areas within the firm, including Real Estate, Infrastructure, Asset-Backed, as well as our Direct Lending business and Secondaries in both Real Estate and Infrastructure. This has been a longstanding investment focus for us, with over 10 billion dollars invested historically in the space. One exciting development with the GCP acquisition last year was adding the Ada digital development capability that Mike mentioned, which came with a very attractive seed portfolio for which we raised about 2.5 billion dollars last summer for initial assets in Japan, and we are currently going out with a broader fundraise to address not only the seed assets but the significant pipeline behind it. So yes, we have data center exposure elsewhere, but adding this development capability is very powerful for our future. In terms of market size, it is absolutely massive—a multi-trillion dollar market opportunity. Some of that will be in the domain of the hyperscalers themselves; however, we have sized the third-party market at around 900 billion dollars. When you look at the supply-demand imbalance in terms of capital being raised to address it, it is meaningful. We are really excited about the market opportunity ahead, and the interest in what we are doing is very strong. Michael J. Arougheti: I would add one overlay. When you are talking about data centers, it is not just data centers—it is GPUs, power and energy. We are also one of the leaders in the renewable energy and energy transition space, and you saw what we were able to do with our X-energy IPO. The digital infrastructure opportunity is pulling together all of these teams at scale to address the market opportunity. We also have a large infrastructure debt business and are one of the larger lenders to other platforms and portfolios in the institutional market. Operator: We will go next to Analyst with Jefferies. Analyst: Thanks. I wanted to follow up on your comments around the strength in institutional market demand. Is there any differentiation among that subset—Middle East or sovereign wealth—given global dynamics, or is it truly broad-based? Michael J. Arougheti: It is pretty broad-based. We are not seeing major shifts by geography or by channel. Consistent with what I said earlier, there is a consolidation theme—larger institutions doing more with fewer GP partners—so the larger platforms are net beneficiaries. When you look at gross dollars raised in the market, you are likely to see a disproportionate share going to the larger incumbent platforms in many asset classes we play in. That is the predominant takeaway. It is also important, as we talk about diversification, that you have businesses in all regions—Europe, U.S., Middle East, Asia—because from time to time those investors want to increase allocation in their home region. Being able to meet them there, not just on the fundraising side but also on the investment side, is increasingly important. Operator: Thank you. That is all the time we have for questions today. If you missed any part of today’s call, an archived replay of the conference will be available through June 1, 2026, to domestic callers by dialing 302-393 and to international callers by dialing +1 (402) 220-7206. An archived replay will also be available on the webcast link located on the homepage of the Investor Resources section of our website. Again, thanks so much for joining us, and we wish you all a great day. Goodbye. Michael J. Arougheti: Goodbye.