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Michael Green: Good morning, and welcome to this presentation of Handelsbanken's results for the first quarter of 2026. We can conclude that the bank reported yet another solid quarter. Operating profit increased by 9% compared to Q4 and the ROE amounted to 14%. The main income lines, NII and fee and commissions were stable. While the lending growth in Sweden was held back a bit by a general slow Swedish economic growth, it was again very encouraging to see that the lending growth trend in the U.K. and the Netherlands continued both on the household and on the corporate side. This has now been a consistent trend for more than a year. The savings business continued to perform well with market shares of net inflows into mutual funds far exceeding the market share in our books in both Sweden and in Norway. Cost efficiency is always a top priority in the bank. And again, we saw expenses declining. The net asset quality remained very strong with more or less insignificant credit losses once again. The capital remains robust. The anticipated dividends for the quarter earnings were increased a bit in order to calibrate the CET1 ratio to 17.2% or 250 basis points above the regulatory requirement compared to the 285 basis points in the previous quarter. The anticipated dividends amounted to SEK 2.93 per share or 91% of the earnings generated in the quarter. When we look at the longer-term value creation for our shareholders, this solid Q1 report fits well into the picture of the bank's resilient business model. As illustrated in this graph, the growth in equity per share plus dividends has not only been consistently stable over the past decade, but also growing with an average of 14% per year. And if zooming in on the past 5 years, the average growth rate has been even higher at 15%. And not to forget, this has been achieved in a decade, which includes everything from negative interest rates, Brexit, a pandemic, war then in the Ukraine, inflation and interest rate spikes, stresses in the real estate sectors, et cetera, et cetera. This is what we strive at always generating for our shareholders and also what the shareholders should expect from a bank like us. This stability is, of course, not achieved by coincidence and not just of our way of working. It's a result of the chosen markets and geographies. Our four home markets share the following common traits. They are all stable democracies with large economies, rule of law applies and the political and regulatory landscape are stable. It also helps if there are culture similarities and shares of values. Not only the assets, but also the cash flow from our customers are stemming from stable Western European economies. In such markets, the Handelsbanken model has a chance to stand out with a unique offering and a higher customer satisfaction than our peers. It is, of course, also essential that there are large bases of potential customers with the right risk profile and that we have a demand -- and have a demand for our offering, hence, offering material scope for long-term profitable growth at a suitable risk level in stable markets. And just to add a small remark, given the recent themes into the financial markets, we have no exposures to private credit. Before going into the financials for the first quarter, just some comments on the recent business development in these four home markets. Starting with Sweden, which accounts for 76% of the profits in our home markets. Handelsbanken is the largest lender in Sweden when summing up household and corporate lending. It's therefore fairly natural that the soft general economic growth in Sweden translates into fairly flat lending volumes in the past quarters. Deposits are growing somewhat, but the key growth is seen -- clearly seen in the savings business, where we consistently for the 1.5 decade, have seen market share of net inflows into our mutual funds far exceeding the market share of our outstanding volume by more than 2x. In the U.K., we had a long period after Brexit with declining lending volumes, mainly due to customer amortizations exceeding new lending. Since more than a year, the trend has clearly shifted to a consistent lending growth quarter-by-quarter on both the household and the corporate side. Also, deposits have increased over the past years as well as the savings business. The U.K. is a market where the customer satisfaction really stands out the most when comparing with our peers in the market. In Norway, we stated 2 years ago that we needed to see a better balance between lending, deposits and savings, and the situation has improved since. While lending volume have dropped over the past year, mainly due to intense competition, growth has been seen in deposits and in particular, in the savings business. Over the past 2 years, the market share of the net flows into mutual funds in Norway has been more than 2x the market share of the outstanding volumes. This means that we are deepening the relationships with existing customers and adding new customers, which bodes for improved profitability over time. And finally, the Netherlands. Just like in the U.K., the distance to peers in terms of customer satisfaction is particularly large. Lending growth has been very strong, as you can see in deposit -- and despite the drop in deposit last year, the longer trend has also been positive. And what is even more positive is that we now see also -- we now also register a sound growth in the savings business with steady growing assets under management. Now if we look closer at the financials of the fourth quarter compared to the previous quarter -- the first quarter, sorry. ROE amounted to 14% and the CE -- cost/income ratio was 39.5%. In Q1, a VAT refund of SEK 1.1 billion was booked. An adjusted basis, the ROE was 11.7% and the cost/income ratio 42.8%. Operating profit increased by 9%, but declined on an underlying basis by 3%. NII and fee and commission were marginally down, headwinds mainly related to day count effects and FX. Income increased by 3%, but declining by 3% on an underlying basis. Credit losses amounted to SEK 35 million or 1 basis point. Regulatory fees decreased as the previous quarter included a booking of a charge for the interest-free deposits at the Central Bank. Now if we switch over and look at the quarter compared to Q1 last year. NII declined by 13% and 10% adjusted for currency effects. The decline is related to lower margins in the wake of lower short-term market rates. Net fee and commission income, on the other hand, increased by 7% adjusted for FX effect. The key driver was again the savings business and strong inflows and positive market developments. All in all, total income dropped by 6% on an underlying basis. Underlying expenses dropped by 1% despite the annual salary revision that comes into force on January 1 each year and also the general cost inflation. Last year, we had a net credit loss reverses and the regulatory fees were flat year-on-year. All in all, the underlying operating profit was down by 12%. Now if we take a closer look at the NII development compared to the previous quarter, we see that NII dropped by 1%. Volume growth contributed with SEK 20 million in the quarter due to lagging effects on interest margins from lower short-term market rates in the previous quarter, the net of margins and funding contributed negatively by SEK 67 million. Deposit guarantee fees were lower this quarter, the decline being explained by fees being elevated last quarter as the final bill for that year was received and paid. The day count effect due to 2 less days in the quarter and the currency effects due to a stronger krona on average has created some headwind, as you can see. Net fee and commission income dropped slightly in the quarter. The bulk of fee and commissions related to the savings business, especially in the mutual funds business. The positive effect on fees from the strong net inflows were, however, offset in Q1 by a negative day count effect as well as negative mix effects with an increased share of the AUM asset under management in lower fee funds. Other fees were seasonally down. The high market share of net inflows into mutual funds have added significant customer asset under management under -- to the bank over time. As illustrated in this slide, the bank has now accumulated net inflows into Swedish mutual funds at almost 2x the run up over the past decade. This success comes not only from appreciated offering and strong performance in the funds over the years, but also the bank's distribution capacity where advisers are close to and have deep relationship with our customers parallel to an appreciated offering and distribution in our digital channels. Now over to the expenses. A trend of increased cost was broken in 2024. And since then, the expenses have trended down despite annual salary revisions and general cost inflation. The bank is now in a good position in regards to cost efficiency. As illustrated in Q1 when costs continued down on both quarter-on-quarter and year-on-year, it's deeply rooted in our culture and among our employees to always look at new ways of becoming even more efficient. Next slide show our asset quality and credit losses. Over the past decades, credit losses have been very low, which they should be in the bank with our risk appetite. Since the outbreak of the pandemic in 2020, the sum of all credit losses has been SEK 50 million or on an average, SEK 2 million per quarter. And that includes the period from the pandemic, sharp savings -- sharp swings in policy rates and inflation, the disruption of supply chains following years -- following the war in the Ukraine and Middle East, et cetera, et cetera. Still more or less no credit losses. If we compare the credit losses to our closest peers, the bank also stands out over the decade. In particular, in volatile times, difference in underlying asset quality has shown. In Q1, the credit loss ratio was 1 basis point. Perhaps needless to say, asset quality remains very strong. The bank is in a very solid financial position. Credit risks, funding risks, liquidity risks and market-related risks are prudently managed and the capital position is strong. The anticipated dividend in the quarter of SEK 2.93 per share equals to 91% of the earnings in Q1 and is yet another step to gradually adjust the capital position in the bank. The CET1 ratio now stands at 250 basis points above the regulatory minimum compared to the 285 basis points in the previous quarter. The bank should, however, always be considered one of the most trustworthy and stable counterparts in the industry. This is also the view by the lending rating agencies who rate the bank the highest among comparable rates globally. And this view was again confirmed and further enforced last evening by Moody's, who upgraded the bank's baseline credit assessment rating to A1 from A2. This put the bank in a very exclusive group of only a handful of privately owned banks globally with the highest BCA rating by Moody's. Finally, to wrap up, Q1 was a solid quarter with increased operating profit and ROE, although including a positive contribution from a one-off VAT refund. Q1 NII and fee and commissions were stable and costs declined. We see lending now growing consistently in the U.K. and the Netherlands and also in the savings business broadly over the markets. Our way of doing bank is appreciated by customers where they experience close relationship with us, and it's also seen in the external surveys in all of our well-chosen home -- stable home markets. Asset quality remains just as strong as it should for a bank with our risk appetite and the capital position is very strong, and we took another step down in the target range by anticipated dividend equaling to 91% of the earnings in the quarter. Finally, I'm also happy for our shareholders that has seen share price reached an all-time high during the quarter. And with those final remarks, we now take a short break before moving into the Q&A session. Thank you. [Break] Peter Grabe: Hello, everyone, and welcome back. This is Peter Grabe, Head of Investor Relations speaking. And with me, I have Michael Green, CEO; and Marten Bjurman, CFO. As always, we would like to emphasize that we appreciate that if you ask one question at a time in order to make sure that everyone gets a chance to ask their questions. With those words, operator, could we have the first question, please? Operator: [Operator Instructions] And your first question today comes from the line of Magnus Andersson from ABG Sundal Collier. Magnus Andersson: I was just wondering regarding the -- in total, SEK 6 billion in AT1 capital you issued late in Q1 '26, whether the main reason was to be able to go down further in your management buffer or if you expect the higher volume growth going forward or a combination of both? And related to that, also, if you could confirm that the coupon will be taken directly in other comprehensive income rather than in NII... Marten Bjurman: Magnus, this is Marten speaking. Yes, I had a little bit of a difficulty hearing your first part of your question, Magnus. But I assume that you talked about the AT1 that was issued late in the quarter and booked in Q2. And it's fair what you said, it's correct what you say that this is an equity instrument. It will be booked in the equity and the interest rate, if I may call it that, the coupon, that will be booked also in the equity, yes. Magnus Andersson: Okay. And also the reason for it that you have your next call in March 2027 of USD 500 million. What was the main reason for doing this now? Was it to be able to go down the management buffer volume growth? Or... Marten Bjurman: Well, there are various components into that equation, Magnus. But obviously, we didn't have a full box of the AT1, if I may call it that. This provides flexibility to the bank. And as you know, the 2 outstanding AT1s, they are in U.S. dollar. This one is in Swedish krona. So yes, it's -- and then we take it from there. We'll see. But the main reason is that it provides flexibility for the future. Operator: Your next question today comes from the line of Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: I was thinking about you, Michael, you mentioned that you're going down gradually in terms of capital buffers. Can you give some guidance on -- I know that the Board is deciding what you will pay out. But since you have gradually reduced this buffer in your accrual of dividends, where are we heading within the range, please? Michael Green: Yes. This is Michael speaking. I don't think you should read that much into the adjustment this quarter. But it's -- the bank is in a position where we are running the bank very operationally strong and we have a cost -- the cost in place and all that. So we have gradually come down in our target range. And when we look at the world outside and we compare what's going on there with how our customers behave in terms of risk, we don't see anything that really sticks out. So our customers, they are in very good shape. And the risk we allocate for is taken care of in our internal risk models. So I don't see the need for having SEK 285 million now. So we will -- we just take it down to SEK 250 million. And then as you just said, we decide where to go when we come into the -- what we anticipate now for the year, and then we take the decision in the Board for how we recommend the -- for the shareholders to -- on the dividend side when we come into the Q4 report. Markus Sandgren: Yes, so I understand. But what do you mean by that, you shouldn't read too much into that you change it because you do change it because you think it looks good. So there must be some message in that. Michael Green: Because it looks good. Marten Bjurman: So but let me underline a little bit also. Again, I think bear in mind where we're coming from. We have -- we're coming from SREP plus 5% or 6% and then we took it gradually down, as you know. And we felt the need to guide a little bit to say that reinforce that the message that, yes, we have this interval, it is set, and we are slowly moving into that. Now as we are within the interval, we don't feel the need to guide that much further on a quarterly basis. So you shouldn't expect us to draw the line anywhere within the range. Now we are in the range, it feels great. Operator: Your next question today comes from the line of Gulnara Saitkulova from Morgan Stanley. Gulnara Saitkulova: On your cost outlook, please, could you walk us through the key moving parts in your cost base for the next 3 quarters that we should be aware of, specifically, where do you see flexibility for further cost reductions versus what could be the areas of additional cost pressure? You previously mentioned that you have completed the centralized cost-cutting program, but do you expect more efficiencies to come through from elsewhere, for example, from the local branches? And if you look at your headcount, it's down 1% quarter-on-quarter. Do you expect any further reductions in the number of employees to come through? And how should we think about your Oktogonen contributions going forward? Marten Bjurman: Okay. Well, maybe my answer will be a little bit disappointing to you because we will not guide on the costs going forward. But it's very true what you say. We have that initiative behind us now. We have no plans of broadcasting yet another of those initiatives. But rather, we are staying very true to our culture, our model where every employee within the bank is extremely cost cautious and very sensitive to increases in costs. And this quarter was extremely successful when it comes to cost as well. It was even to me, a little bit surprising actually. But again, I think that you shouldn't expect it to go further down. We are at a level now where we are extremely confident that we can run the bank the way we want. We have resources to spend and invest where we want to spend and invest. And -- but this model is extremely decentralized. We will not interfere with our home markets. We will not interfere with our branch office managers. So ultimately, they decide. So therefore, we cannot guide any further. Gulnara Saitkulova: And what about the headcount? Marten Bjurman: Headcount number is basically the same, maybe a little bit boring answer. But still, if a home country wants to expand in terms of number of employees, they are free to do so if they have good reasons to do it. So I don't foresee any big shifts either upwards or downwards in terms of full-time employees. Michael Green: And just to add on, when Marten says we -- the decision-making for resources, both in headcounts and other cost initiatives that they could happen throughout branch networks and product or whatever. It's not that we don't guide and we don't steer, but we follow them closely. So it's a very sharp following up in terms of cost efficiency and the returns on the investment we do. So it's not do as you like. It's do what you think is necessary, and we will keep a very close track on what's going on. Operator: Your next question today comes from the line of Andreas Hakansson from SEB. Andreas Hakansson: So a little bit of a follow-up here on costs. I mean you've been reducing cost continuously now for, it feels like 8 quarters roughly. And I mean, when we speak to quite a few banks, they see that there's a lot of IT investments relating to AI and whatnot. And when we speak locally and we hear people gossiping or talking, it doesn't sound like you are clearly ahead of the pack in terms of those investments. So is it a risk that you have underinvested now over the last years because a lot of the savings have come from IT, if nothing else? Marten Bjurman: The short answer is no, I don't think so. I think it's more of a matter of how you're running your development within the IT space. We were heavily dependent on consultants for a very long time. We have now -- we are now at another place in terms of that mix between employees and consultants. So that's one thing. But the other thing is that we are running our IT development in another way now. We have much more control, generally speaking. In terms of AI, are we lagging behind? Are we the first mover? I don't think it's in our nature to be the first mover in terms of trying out different AI solutions. That being said, though, I'm extremely confident that we have navigated through these challenges and opportunities the right way so far. It's a broad area. It opens up a lot of opportunities, not only for the bank, but also for our customers. We're following it closely. We have quite a number of initiatives that are all the way from ideas to fully implemented and up and running successfully. So it's a broad range of initiatives. So I'm not worried for that matter. Andreas Hakansson: So as a CFO, it's not that you want more resources, but Michael thinks you need to slow it down still? Or what's the balance between you? Michael Green: No, no. We don't -- the balance is very good between my CFO and myself. So -- but just for the record, I totally embrace the technology and the development of that, and that's a very wide area, and we invest largely in things that we need -- that we see could fit well into our customers and also for ourselves in terms of efficiency reporting, whatever. So I'm very interested in that, and we have a quite good pace actually. So I don't really have the feeling that you described in your first question that we lag. I don't think we lag. I think we do it in a very balanced way in the way we see it from my perspective. Operator: Your next question comes from the line of Shrey Srivastava from Citi. Shrey Srivastava: My first is actually on the positive side, you've got the second consecutive strong quarter for loan volumes in the U.K. What is the profile of the new customers you're attracting versus the U.K. incumbent? Has it materially changed versus your existing customer profile? Marten Bjurman: Thank you. No, no, it hasn't changed. It's basically the same. It's the corporate lending growth that you see in U.K. is very pleasing and the trend is continuing. So very pleased with that, generally speaking. In terms of our customers, it's no new mix of customers. We are very true to our model in terms of providing financing to businesses that we understand that have strong cash flows, a strong repayment capacity and all that. So no, the short answer is no. We don't have any new features into our model in providing financing to our customers. Shrey Srivastava: Right. And my second one is, can you explain this 50 basis points negative impact on the CET1 ratio from other factors, including claims on investment banking settlements and rounding on? I don't believe it's ever been called out before explicitly. So I'm wondering why it was so large this quarter? Marten Bjurman: Well, it is large this quarter due to natural reasons because I think that, that business where this derives from is typically slowing down in Q4. So when you compare the 2 quarters, this looks quite hefty. But it's not. I think if you take this level, it could be a natural level for the coming quarters. And I think you touched upon it in your question where it comes from. This is coming from the market making in the capital market side of the bank. So this is really short-term claims. These are coming from market making and deals that are between settlement date and trade date basically. So very short-term claims on our customers, majority in the fixed income space. Shrey Srivastava: Okay. So this was a bit larger than you'd expect given the seasonality if you look versus the past few years? Marten Bjurman: No. I mean, this portion that I just explained is maybe 1/3. The other 2/3 are so many items in so many parts. So it must be considered a regular quarterly volatility, many, many smaller items in that. So I'm not surprised where we are. But again, you have to compare with a regular quarter. And in this case, Q4 might not be that one. Operator: Your next question comes from the line of Namita Samtani from Barclays. Namita Samtani: I just wondered, it's just another quarter where Nordea is growing its Swedish corporate lending by 4% quarter-on-quarter and Handelsbanken volumes are flattish. So I just wondered why you're allowing another bank to take market share from you so much so that you're not even growing the Swedish lending book in the quarter? And just a follow-up to that. I just also wondered why there's appetite to grow in commercial real estate in the U.K. and Norway, but not in Sweden just based on how you grew this quarter. Are the competitive dynamics different in Sweden versus Norway and the U.K. Michael Green: Yes. So the -- first of all, we don't allow competitors to take business from us. We compete every day and you win and you lose some. In our -- from my perspective, the volumes that we've seen leaving the bank has mainly -- or absolutely the vast majority is -- it goes to the capital market side. So it's not that any other bank is competing with us, and we do not have the capacity to compete that. So that's how it is. And I'm not going to comment on Nordea's growth. That's -- I don't know what they do there. But I think growing the lending book, it comes -- when you have market shares like we do in Sweden, you tend to grow, as we've said before, in line with the real economy growth in this country. If you want to grow more over time, you need to be very aware of pricing and risk, and we are conservative in that sense. So we follow our customers. If they invest, we will grow with them. And we will gladly compete and take business from our competitors. But in general, we grow in Sweden with our very, very strong corporates and private individuals. And if you look at the market right now when it comes to corporates, what we see from our perspective when we talk to our customers is that they are a bit reluctant now to invest both when it comes to investing in factories and production, but also invest in real estate right now. So it's a bit on a standstill due to the uncertainty in the surroundings. And when it comes to the private individuals in Sweden, we see a small pickup when it comes to buying new houses, and we have quite a strong inflow when it comes to that market, when it comes to the transition market when they buy houses. So we don't see a problem with this. We -- in Sweden, we follow our customers when they grow and when they're not growing. When it comes to the -- as you probably noticed in the U.K. and the Netherlands, we have the opposite. We have a quite strong growth there because the market share we have is quite low. And that's what you should expect, and that's what I'm expecting with high ambition in these countries. Namita Samtani: Sorry, could you just comment a bit on the differences in the commercial real estate U.K. and Norway versus Sweden? Is it more competitive in Sweden? Michael Green: No, I think there are competition everywhere we are because we're very strong and transparent countries with strong competitors. So I don't think any -- there is any difference there. Operator: Your next question today comes from the line of Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: Here is Sofie from Goldman Sachs. I was just wondering how we should think about the net interest income in the other division, given that it was up 41%, I think, quarter-on-quarter. Could you just comment on kind of what's the normalized run rate? Are there any headwinds or tailwinds we should kind of be mindful of? And also, I know you don't guide on rate sensitivity, but if you could just help us kind of think about how we should model potentially higher rates in Sweden and also elsewhere in Europe, what the kind of moving parts are? Marten Bjurman: Yes. A number of questions there. And the sensitivity to policy rates, yes, obviously, when we have -- as we had in this quarter, policy rates turned down late in the previous quarter, we will have an effect. And generally speaking, as you know, we benefit from higher rates rather than lower. So -- but in the meantime, we have lag effects that you know of when these rates are cut. And it varies a little bit between countries. But yes, generally speaking, we should expect now that, okay, policy rates were expected to go down further in U.K. and in Norway. Now we don't -- we're not so sure anymore. Some say flat, some say even a little bit of a pickup. Obviously, we will have an impact of that. It will take a little bit of time to bleed through that effect through the books as with all banks, I guess. So that's where we are, and we don't guide any further than that. Sofie Caroline Peterzens: But in terms of the other division, like -- yes, do you have any guidance on how we should think about the contribution from there because it's very difficult to model on a quarterly basis, plus 40%. So is there any way we could kind of think about how to think about the kind of volatility in this division going forward? Peter Grabe: Yes. This is Peter speaking. You can say that there are mainly two reasons. One is within the treasury department where actually both of these two items are within the treasury department. And it goes up and down in between quarters and it's connected to what's allocated to the different segments. On a group basis, everything, of course, nets out. But occasionally, you allocate out more from Central Treasury and sometimes you allocate out slightly less. And then furthermore, it's also a result of the -- of what you generate in our liquidity portfolio, i.e., the returns on the assets we have in the liquidity portfolio, which means that it can go up and down somewhat in between quarters. But I think overall, you should see it as more of relating to components that generally are sort of intertwined with the allocations out to the respective segments. Operator: Your next question comes from the line of Riccardo Rovere from Mediobanca . Riccardo Rovere: Sweden loss cut rate in September, so say, around 6 months ago, would you say that now the balance sheet on the assets and liability side has absorbed the loss cut made by the Riksbank 6 months ago? Or should we expect a little bit more tail in the coming months? Marten Bjurman: Yes. Generally speaking, yes. I think we have seen most of the effect, not all, but most of the effect for sure. So that's the short answer. Riccardo Rovere: And let's assume for a second that short-term rates remain where they are. I mean, STIBOR goes up a little bit in the quarter. That I suppose nothing of that is eventually visible in these set of numbers, I would say so. Am I right in saying so? Marten Bjurman: I'm very sorry, I didn't catch your question fully. Would you be able to repeat... Riccardo Rovere: Yes, yes, sure. The STIBOR month was a little bit higher in the -- especially in the month of March. Let's assume for a second that, that remains. I think it was 9 or 10 basis points higher in the month of March. Let's assume that, that stays for a while. Is it fair to assume that in set of numbers, we have not seen anything from this 9 or 10 basis points higher level on STIBOR 3 months. Michael Green: I think it's what we usually say. I mean the reason for us being with silent here is that it's difficult to give you a straight answer on that question. I mean, obviously, as we always say that there are tons of factors that play in when we talk about the development of net interest of funding and margins. STIBOR is, of course, one component. But how a particular STIBOR movement in between months or quarters directly will affect the NII is very difficult to guide on. And as you know, we prefer to stay away from guidance -- sorry, Marten, please go ahead. Operator: Your next question today comes from the line of Emre Prinzell from Nordea. Emre Prinzell: I know you touched upon this, but just to double check here, what do you need to see for Swedish lending growth to meaningfully pick up in the next few quarters? I mean we're expecting Swedish GDP to grow maybe 2.5%. Should we therefore see a read to you that you ought to grow 2.5% in Sweden? Or what's a reasonable way of looking at this going forward? Marten Bjurman: Yes. Great question. Yes, I would love to grow 2.5%. That would be perfect for us. And as Michael alluded to earlier, we have seen 1 or 2 tickets leaving the book in this quarter, not to other banks, but to the bond market. That happens, it can happen. And what will it take for us to really set off the corporate lending? Well, I think -- and we've been talking about this quite a bit also during previous quarters that generally speaking, we will need the economy to pick up speed in terms of the recovery phase that we are in. And everything that is disturbing that picture is obviously not good for business. So if we have globally, even if it's not evident in our books, but the appetite or the demand for credit needs to pick up speed. That's where we are. We are not growing on our own. We are growing with our customers. So if they have a need, then we support them, obviously, it's not more fancy than that. Operator: Your next question today comes from the line of Johan Ekblom from UBS. Johan Ekblom: I just wanted to pick up on some of the earlier comments you made around costs and AI, right? So I think in response to one question, you said, look, the staffing decisions are made at the branch level. And at the same time, you feel like you're doing kind of enough in terms of technology and AI. But when we think about that, I mean, surely, technology and AI are investment decisions that had to be made at a central level and the benefits of AI are expected to largely come through in the -- in the form of lower staff needs. So does that create a tension in your decentralized model? Do you think you are as well equipped to reap the benefits of AI as maybe some of your peers that run more centralized business models? Michael Green: So Johan, thank you for the question. I appreciate that because this is actually a very good point. When it comes to decentralized way of working and resources, that refers mostly to the branch business. And when it comes to decision-making in terms of infrastructure program, AI investments, which is obviously a larger ticket. that's been taken care of within the management of the different areas, but also, of course, with the Head of IT, sorry. And we discuss that both me and Marten when it comes to these large investment programs that we run to make sure that we don't have any problem with holding back on time when it comes to develop new facilities, new prospects for doing business or creating efficiencies. So this is not a decentralized way of working. The -- what we should do comes from business and from IT. And then Marten and I and Head of -- Anton Keller, Head of IT, makes decision when it comes to the more heavy investments in this. So there's not a decentralized way of doing what you like when it comes to IT investments. Johan Ekblom: But do you not need full buy-in from the organization on adoption to make the investments work. Michael Green: Yes. But that's not a problem because if the reason is correct and right and logic and good for the bank, everybody will buy in. That's up to us to really make sure that the people understand why we do this. And I don't have any -- not once have I felt or heard that there is going to be difficulties in explaining the rationale when it comes to IT investment and spending because that puts the bank in a strong kind of competition position, which will be necessary all the time for a company to grow. So I don't think there is any problem with that, actually. Operator: Your next question today comes from the line of Max Jacob Kruse from Bernstein. Jacob Kruse: Just one question then. So this quarter, you hiked your mortgage rates very late in the quarter and STIBOR moved earlier. Could you just talk a bit about what you saw in the quarter in terms of timing effects? And maybe you could touch on as well any kind of balance sheet hedge offset you have there? Marten Bjurman: We saw none of those effects is the short answer. So yes, that's it. Jacob Kruse: And sorry, how is that -- I thought your list price would be determining the kind of role of the negotiated rates or the rates on mortgages. And obviously, your STIBOR, any kind of swaps into STIBOR would have moved. So why would you not see any impact? Marten Bjurman: We reset the interest rate for mortgages the 1st of April to start with. So it's first every month is the cycle, if you will, where we reset these interest rates. Michael Green: I'll just add that the price we get from the business when we do business with our private customers when it comes to mortgages is not -- it's -- the discussion stems from the list price, but it's not where we do business. So the cost for our branches when it comes to -- the funding costs for our branches, that it's volatile. It comes from where the market rates are. And they will then push and they do business where they find there is a profitability. So this -- the list price is just the way we start with the list price. We never do business on list price. So the volatility in short rating -- short interest rates are taken care of in the day-to-day business on the branches. Jacob Kruse: So just to clarify then, so the STIBOR moves are -- the STIBOR moved in the quarter, you say your pricing on the list price changed on the 1st of April because I guess your list price changed at the end of March. But I understand that your front book is a negotiated rate. But surely, as people roll towards -- if I have negotiated the rate, that will move with the list price. I think it will not move, but that plus the discount will be the role. So I don't quite understand how you can have STIBOR moving up and list prices staying stable without having any impact in terms of... Michael Green: So when you roll your 3 months interest rate period, we have another discussion with the customers. And then we set the new price for the next coming 3 months. So I don't really understand your concern there. Jacob Kruse: Maybe I'll catch up with you. Yes. Operator: We will now take our final question for today. And the final question comes from the line of Andreas Hakansson from SEB. Andreas Hakansson: And sorry, some follow-ups since we could only ask one question. So a follow-up and a real question. And it's back to, I think it was Namita asked about the commercial real estate exposure. I mean you're one of the most commercial real estate heavy banks around. And if we look in this quarter, the only growth is coming from commercial real estate, I think, in all markets, while other corporate banking is declining. Is that a strategy that you're happy with given that, I mean, the profitability of a CRE loan is normally lower than other types of corporate banking given what you can do around it and so on. So are you steering the bank in this way? Or is it just happened to work out like this? Michael Green: So Andreas, we don't steer the bank in which customer to pick and choose. That's for the branches to do. If they find it suitable or they find the risk suits us well. We have products that could solve problems for a corporate or real estate company, we do that. So it's the steering from my side. This is the way the bank is run. We make sure that our branches are in a position to compete and then they choose which counterpart they want to do business with. And this is how the balance sheet will ends up in that case. So it's not a -- it's not a choice from my perspective on where to do business. We try to compete on all segments. We compete on industrials or we compete on commercial real estate business. It's up to the branches to do that, to choose. Andreas Hakansson: Yes, that's fine, but the branches is quite significantly steered by a cost/income ratio and want to keep costs low, as you discussed earlier. But if they would then go after some other types of corporates where the margin could potentially be thinner and the cost-income ratio would be higher and then the benefits of doing some other type of business could be taken in the markets division in Stockholm. So is the branch really the ones that would drive a higher profitability type of lending since they are driven by costs? Michael Green: Yes, I say they are because what we do when we do business on the ancillary business, for example, within FX or other parts of the Investment Bank, that's been taken care of by refund, if you put that way to the branches. So everything comes down to the branches P&L anyway. So that's just good. So we do... Andreas Hakansson: But eventually... Michael Green: Sorry. Andreas Hakansson: But eventually, but you might have to live 2 years with a low margin until you do that business because you have to be committed to the company and so on. Michael Green: No, no, that's not how it works. So you get instantly repaid from the investment bank when they do their trades or their interest rates derivatives or whatever. That comes the month after. So that's not the way it works when we steer the bank. Andreas Hakansson: Okay. Then finally, on your loan-to-deposit ratio in Norway at around 300%. If rates now start to go up in Norway, which seems to be expected, is that a positive or negative for you guys? Marten Bjurman: It will eventually be a positive thing, Andreas, but it will take a little bit of time to adjust, obviously. So yes, but it's positive long term, yes. Michael Green: We will immediately benefit from the deposit side, of course. So that will give a boost. But then it's all about adjusting the lending book as well to the new market rate. Andreas Hakansson: Yes, I was thinking that some of a very deposit-rich bank could afford to compete on the margin on the lending side, given that it makes so much more on the deposit side, will you guys have flipped the other way around. Michael Green: Yes. But that's the way it has been for many decades now when it comes to the business and how we compete in Norway. So that's nothing new. Operator: That was our final question for today. I will now hand the call back for closing remarks. Peter Grabe: All right. Thank you, everyone, for all the questions and for those of you who listened in. And as always, you know you can always reach out to the Investor Relations department for any further questions and follow-ups. With those words, we wish you all a very good day. Thank you very much.
Annukka Angeria: Good afternoon, and welcome to Nokian Tyres First Quarter 2026 Results Audiocast. I am Annukka Angeria from Nokian Tyres Investor Relations. And together with me in this call, I have our President and CEO, Paolo Pompei and our new CFO, Timo Koponen. As usual, Paolo and Timo will run through the presentation. And after that, we will open the line for questions. But before we start, I would like to ask you Timo a couple of questions. You have been with us only a few days. And first of all, welcome to the company. Timo Koponen: Thank you. Annukka Angeria: It's great to have you here. With the short but intense experience with the company, what are your first impressions? Timo Koponen: Yes. Well, it has been very, very busy start as everybody can anticipate that. First of all, I'm very excited to be on board finally. It's been a long wait and kind of looking back when we started discussions with Paolo and the other people in the company, I got really intrigued by the momentum and drive the Nokian has. And obviously, that intriguement remains. And you only need to look at the just ended first quarter, and you see many product launches and so on, and you can really see that we have a second gear on. It's good to be here. Annukka Angeria: Good to hear. Maybe if you can also briefly say a few words about your background. Timo Koponen: Sure, sure. Yes, as I think it was already mentioned in the announcement, I have a long background in a Finnish industrial equipment companies, Konecranes, Hackman, Metos, Wartsila and last couple of years at Normet and have been working in finance as well as in the line management roles both in Finland and overall, France, China and U.K. and now in Finland. Annukka Angeria: Thank you. And with that, I will now hand over to you, Paolo, for the first quarter results. Paolo Pompei: Excellent. Thank you very much, Annukka and also from my side, welcome on board, Timo. Let's start immediately with the headlines, where you can see that sales increased across all regions and operating profit improved significantly, driven by disciplined strategy execution. But let's move to the agenda. We will start with the quarterly highlights, moving to the financial performance, then Timo will come in the business unit performance as well as our cash flow and financial position and then we will close this call with assumption and guidance. And of course, at the end, there will be question and answer. Moving directly to Slide #4. Operating profit improved significantly. This was really supported by volume, price mix improvement and lower manufacturing and material costs. Operating profit improved by more than 50% and we had really good also price and mix improvement during this quarter. effective working capital management, lower CapEx has contributed to improve our cash flow by over EUR 50 million in quarter 1 and this is also important, an important achievement in this quarter. We keep working on our continuous improvement initiative that are really supporting strongly our strategic plan and our EUR 220 million EBITDA improvement by 2029. And this was also an exciting quarter when we talk about product innovation. We were able -- actually we were releasing 2 important flagship in our product range for the Nordics and the Central European market and also a new tire for EBITDA division, a new line for truck tires. Moving to Slide #5. As I said, this was an exciting quarter and it's worth really to spend a few words about our achievements because we were able to release once again the new disruptive technology, the Hakkapeliitta 01 with -- start with -- that is actually delivering a tire that is able to operate and to adapt to the change of temperature with start on or start off depending on the driving condition with different temperatures. This is really a great achievement. It's a disruptive innovation. And we're really proud about the achievement of our R&D team and what our company has been able to develop through intense R&D work as well as intense testing in the last few years. We're also releasing the Nokian Tyre Snowproof 3P. This is also an extremely high-performing product dedicated to the Central and South Europe -- Southern European markets that is beating actually the key competitors in many parameters. And of course, we are extremely excited about our strong improvement in the product performance in a strategic market, a growing market for all of us. We have invited to test our tires solution more than 500 customers during the month of March in our test center here in White Hell in Ivalo. And this is obviously the best way to promote our product to make sure that our customers can really experience the good performance and the good capabilities of our own facilities as well of our own products. Now let's move to the financial performance. So moving directly to Slide #7. When we look at the market, we see actually market declining, both in Europe and North America. This is making us even more satisfied with our existing journey because, obviously, in passenger car tire, we've been able to outperform the market in quarter 1. So the market is estimated to be at this stage, minus 3% in Europe in passenger car tire and minus 8%, so significantly down in North America. Truck tire business has been positive actually in quarter 1. And we can say that the agriculture and forestry business was flat, both in the OE and the replacement market in the same period. Moving to Slide #8. We see that net sales increased by 4.9% in quarter 1. I would like to highlight the strong performance of passenger car tire that was plus 9% in comparable currency. We were growing in all the regions, and this is also very important in our existing journey. We improved segment EBITDA to EUR 30.2 million, so plus almost EUR 18 million compared to previous year, and this is representing finally 2-digit EBITDA, 10.8% of net sales compared to 4.6% in 2025. We improved our segment operating profit by more than EUR 14 million. This is a growth of 70% moving to minus EUR 4.3 million, so very close to the breakeven coming from EUR 18.5 million in 2025. And finally, we improved our operating profit by 50% to minus to minus EUR 17.8 million versus almost minus EUR 36 million in 2025. So the numbers are improving according to plan, and we are really pleased about these developments. Moving to Slide #9. You will see, as we have anticipated that sales are growing in any region. Obviously, this in comparable currency, we see a growth of 1.4% in the Nordics, strong growth in Central and Southern Europe with 9.1% and also very good growth in comparable currency in North America with plus 7.8%. I remind you in a market that is declining by 8% in quarter 1. So passenger car tire was outperforming the market. Heavy tire, the sales were down by 1.6% and but it were improving -- the profit was improving significantly above 15%, 15.7%. And Vianor was slightly positive with 1.7%. Moving to Slide #10. This is a new slide that we are presenting in this deck that is giving you a better understanding of the mix development of the company. You will see that in quarter 1 we were growing in terms of a percentage of sales in the all-season and summer tire business, while we were declining from 37% to 30% in the winter tire business. Just a reminder, obviously, quarter 1 is not a winter tire quarter in our industry. And also second reminder is that obviously, we are leveraging this year the product launches that we did last year in 2025 in Central Europe for the all-season and summer tire business as well also in North America for the all-weather. We are also happy about the progress we are doing on 18 inches plus larger tire diameters when we are reaching -- they are reaching today 51% in value of our total sales. So I would say, from the mix development point of view, we are developing the business in line with the plan and in line with the strategic targets that we released in February 2026. Moving to Slide #11. Of course, we see more or less the same numbers, but I would like to focus your attention on 3 main KPIs: One, obviously, the reduction of the debt by approximately EUR 45 million, and Timo will tell you more about that, the reduction of the capital expenditure to EUR 7.3 million from EUR 52 million last year, obviously, we say that we were ending a very heavy investment period, and now we'll get back to normal. And then, of course, the cash flow from operating activities has been also improving by more than EUR 50 million. Moving to Slide #12, you will see that we are targeting this year an investment level more or less in line with the depreciation of approximately EUR 130 million at this stage. So we get back really to a normal investment level which is obviously supporting our strategic plan journey moving forward to 2029. Then I leave the stage to Timo for the business or comments. Timo Koponen: Okay. Thank you, Paolo. So as it has already been mentioned a couple of times, we are very pleased about the performance we had in Passenger Car Tyres. Net sales increasing by 9.1% on comparable currencies. At the same time, the pricing continued improving. And very importantly, we operated with the lower manufacturing and as well as material costs and this logically all resulted -- results in significantly improved segment operating profit. And as we can see, we moved from losses a year ago, EUR 6.2 million, up to EUR 10.2 million or 5.5%. Moving on to Page 15, when looking at different components in the Passenger Car Tyres in net sales, volume contributed EUR 10 million of that increase, plus 5.7% and price/mix, EUR 6 million plus 3.4%. Headwind we had related to currencies, minus 2.1% and that comes from mainly from the North American sales. In the lower part, in segment operating profit level, lower material cost was the biggest lever we had by EUR 11 million. Sales volume and price mix having also a significant positive effect of EUR 5 million and EUR 6 million respectively. And as we already anticipated in the Capital Markets Day during the period may have made significant investments in our brand and marketing. And that shows as a higher SG&A. And it's needless to say the growth always takes some money. Moving on then and looking at the -- also the picture that we are very happy about sales volume turned to growth after 2 declining coming quarters, growing by 5.7% on quarter 1. And regarding the price/mix we can see the price increase continuing also on the quarter this time by 3.4% and currencies we already commented earlier. Then moving to Heavy Tyres. There, the net sales decreased by 1.6%, and that was due to lower demand in forestry segment. And this part of the segment that -- despite of that, the segment operating profit improved by EUR 8.6 million, and that is thanks to good [ pit ] pricing disabling. Percentage-wise, as Paolo already mentioned, we are back above 15% level at 15.77%. And as it has been our target already in this business is to fix the profitability, and we are very happy to see that happening. And then finally, on the business units, the Vianor, there, we had a disappointing first quarter, as already mentioned, and this part of the increased net sales, it went up by 1.7%. The segment operating profit declined and was minus EUR 17.1 million and the main cost there was the 2 factors, basically, the cost inflation and then one-off inventory revaluation, which both had a negative effect. And then as a reminder, as most of you already know, Q1 is seasonally low for Vianor so nothing new there. And then moving to cash flow and financial positions. positive cash flow development was already mentioned, 2 main contributors there. First of all, thanks to very effective working capital management we were able to improve. And there, the factors are, as we have previously communicated, we have several initiatives ongoing. Improve our position, inventories, payables and so on. Another big improvement compared to a year ago was the lower CapEx. There are some seasonalities on that, but we also have to remember that we have very high scrutiny on new investments, what we are taking in and focusing on improving cash flow. And then Finally, on a debt position, as already I mentioned, net debt went down by EUR 45 million on the quarter on the liquidity at the moment or end of the quarter, it was EUR 441 million. consisting of cash and then the EUR 304 million undrawn cash credit facilities. And regarding the debt maturities on the right-hand side, as we already commented in the report, during the period, we executed an extension of 1 year for EUR 100 million loan, and that was the only event that we had on the quarter. Paolo Pompei: Excellent. Thank you very much, Timo. And let's move now to the assumption and guidance. So if we can move to Slide #23, you will see that we are actually not changing the assumption for this year. We believe the market will remain plus and minus 2% pretty stable, impacting car tire as well as in agri and forestry tires where we see actually the demand pretty stable and low level in the OE market and slightly positive in the aftermarket for the rest of the year. So moving to Slide #24 and looking at the guidance, there are no changes to our previous guidance. We believe that in 2026, the Nokian Tyres sales will grow compared to previous year. And obviously, operating profit as a percentage of net sales will be between 8% to 10%. The tire demand is expected to remain flat. Obviously, we are continuously watching the evolution of the existing conflict in Middle East. This is an important part of the assumption. But at the moment, we are able looking at the outlook and considering our continuous improvement plan, we are able to confirm that our guidance is pretty strong and stable. The profitability, obviously, will improve, supported by new products, but also by price and mix, as you can see also in quarter 1 and continuous efficiency in Poland. So I would like to close the -- this quarterly presentation reminding that our long-term objective, we remain focused, and we want to remain fully focused in our leading position in winter -- keeping our leading position in winter time, we are targeting to grow above market level in the old season or weather segment as well as in the agri and forestry tire business. Three different journeys in -- by geography in Nordic is about strengthening our first position while in Central Europe as well as in North America it's about growing above market average. We will do that always supporting value premium value positioning and mix enhancement. We will do that, expanding our B&L network in Europe and focusing more and more on B2B and B2C, in particular, consumers. We have a strong product innovation in the pipeline. Actually, we are counting the 2029, I remind you in the Passenger Car Tyres to release a new product in all the segments where we operate, 90% of those new products will be dedicated to winter tire and all-season and all-weather consumer focus to add investments in marketing, in particular, and then we will keep working on operational excellence where we see great opportunities to improve significantly our cost structure. Our local to local business model will enable us to be less vulnerable in front of geopolitical tensions and of course, we can count more and more in an experienced and engaged team, we will be able to achieve our financial target. So our long-term financial targets remain the same. EUR 1.8 billion to EUR 2 billion within 2029, segment EBITDA above 24% and segment operating profit above 15% reducing the debt level to a ratio between net debt and segment EBITDA below 2. We can now move on to the question and answer, and thank you for your attention. Operator: [Operator Instructions] The next question comes from Artem Beletski from SEB. Artem Beletski: Paolo and Timo, I actually have 3 to be asked. So the first one is relating to raw materials and Paolo, you also mentioned conflict and Middle East. Could you maybe comment whether you have been doing already some price increases due to this topic or have seen competitors acting. And maybe just in terms of time lag, when you need -- when this type of higher oil-related raw material costs will start to increase for you? Maybe I'll start with that one. Paolo Pompei: Yes. Thank you for the question. This is an important one, really relevant, of course. So when we talk about raw material, there is time gap, as you know very well, I mean, we are estimating to see the impact of the raw material changes more through the end of the year, meaning quarter -- end of quarter 3, beginning of quarter 4. Clearly, we are not concerned about compensating this effect that will come up. As you can see, our pricing are moving up despite we have a favorable trend at the moment of the raw material trends. So clearly, prices is the tool to compensate the raw material trend long term. Obviously, we don't comment about competitors. But I can only say in 30 years in our industry, the market is very disciplined in transferring this cost, obviously, when they are coming. Artem Beletski: Yes. This is very clear. And maybe the second question, what I would like to ask is relating to Heavy Tyres and indeed, you delivered quite nice profitability improvement in Q1. Do you see that this level is now sustainable and maybe you can update us with your view what comes to market recovery. Do you still expect it potentially to happen in second half of this year? Paolo Pompei: Yes. This is also a very good question actually. The Heavy Tyres business is improving because, obviously, good price discipline. As we said, it's keeping and, of course, some internal operational efficiency actions that we have activated. I think the Heavy Tyres business is now at the end of a very long negative cycle. So we expect the market, obviously, to move up. It's difficult for anyone to say, particularly today with existing crisis in Middle East to say really when the market. The OE market in particular will pick up because the replacement market I think, is already moving in a better direction. It's more about understanding when the OE market for us, as you know, is very important, the forestry market as well. So my original estimation was the market will improve in the second half of the year. But of course, this, at the moment, is not yet visible. At least we don't have any visibility about this potential improvement already in the second half of the year, but we will keep you updated by step. Artem Beletski: Yes, great. And then the last one that I had was relating to SG&A expenses and those went up EUR 6 million in Q1 year-over-year. And I fully understand that it has to relate to this very interesting new products, what you introduced to the market. Is it fair to say that the increase during the remainder of the year will be much smaller given the fact that those product introductions and presumably, big events are behind us. Paolo Pompei: Yes, of course. Don't forget in quarter 1, 2025, we were coming out from a very, very difficult 2024, building a company, stretching everything at minimum, not really investing too much in our future. And then now we are investing on our future with growing sales force and growing marketing investments and of course, a big product launches that we did in March 2026. Clearly, we will keep investing in growth, but it has to be a profitable growth. So as I said, of course, you should not expect a 12% SG&A increase every quarter, but otherwise, this will not be sustainable, but you should expect that, obviously, we will keep investing on our brand for the future. Operator: [Operator Instructions] The next question comes from Thomas Besson from Kepler Chevreux. Thomas Besson: Thank you very much. Good afternoon. I hope you can hear me. The quality of the line was disastrous during the previous question. So I may ask a question for almost the second time, but I'd like to make sure I understood correctly. I think, Paolo, you said that the industry has basically been raising prices to offset higher energy and input cost historically. But my question was really to try to have a view on what you're assuming in terms of energy and raw materials headwind for the year or Nokian in 2026. And when these energy and raw materials are going to turn from a tailwind into a headwind? And what kind of price hike you need to be able to offset this assumed headwind. That's my first question. I have more questions that I'll ask later. Paolo Pompei: I'm sorry if the line was not -- I hope it's better now, but that is an important question. As we said, I mean, the raw material effect of the current situation will probably be visible end of quarter 3, beginning of quarter 4. And of course, this is changing every day, as you know very well. I mean it's depending on different announcements that are happening every day. But let's say, in our assumptions, we consider the existing raw material level, the one that we will see moving forward. Then the -- obviously, we are expecting to see some impact end of quarter to beginning of quarter 4. I think the pricing action we have in place are able to compensate this raw material effect. I will keep repeating that the problem is not about transferring the cost, it's always about evaluating the consumer behavior at the end. So tire industry, we were always very disciplined in managing price and raw material we tried in the last -- actually in the last couple of years now, 1.5 years to improve also our positioning through new products and through price increases. But in general, I would say that I will not be concerned about the balance between prices and raw material. We need to see how the demand will evolve. But at the same time, we need to say that our journey is a little bit in particular, outside of the Nordic, it's a little bit independent, meaning that we come from a niche position, a small position. So we still have plenty of opportunity to manage our growth. Thomas Besson: Second question, your Q1 volumes in passenger cars were up 5.7%, while your reference markets in Europe and the U.S. were both done. And it comes against Q1 25, where you already had a strong jump in volumes. Can you elaborate on what has been allowing this? Where have you gained share? And whether you do expect to be able to continue to largely outperform your end markets in Q2 and the rest of '26. Paolo Pompei: Sure. We are growing in terms of market share, as we said in the 2, I would say, new market, we could not even say new because obviously, we were before the crisis in Russia, we were already pretty present in Central Europe. But we are regaining obviously market share in Central Europe, we are growing market share in North America. And this is driven by a combination of elements, as we know very well. First of all, we have a completely new manufacturing footprint that is giving the possibility to have dedicated factories for dedicating markets, meaning that we can really focus on the development of specific market with dedicated manufacturing capabilities. Secondly, a lot of new products. We are releasing a lot of new products that are giving also the possibility to our team to promote our innovation capabilities. And of course, we are enforcing the team as well at the same time, also exploring new channels, reinforcing our B2B and B2C channels. So it's a combination. Clearly, for us, it's a continuous journey. And -- but it's very important that this journey is going to be profitable. So in Q1 2025, you saw an important growth 22%, but you didn't see an improvement of profitability. Now if you notice, you see a different journey in the last few quarters, we focus more on profitability improvement at this stage of our life. And then, of course, we are happy to see, like in quarter 1, when profitability and growth are moving together in the same direction because this is really what any healthy company should provide to investors every quarter. Thomas Besson: Clear. Can you just say a few words about what you expect in the coming quarters about your share gains, do you think it can continue? Or this was the best outperformance you're going to show during the year? Paolo Pompei: The guidance is about growth. So what I mean is that we keep guiding single-digit growth, and that is really important. So we are not guiding 2-digit growth, but we are guiding single-digit growth. Thomas Besson: Understood. Last question for me, please. You -- I mean, I think it's fantastic, that you barely spent any money in Q1 on CapEx, EUR 7 million. So obviously, driving an unusually big decline in debt over the quarter. Can you explain why this is the case? Are you facing something very slowly? Or do you still think you're going to need to spend EUR 120 million, EUR 130 million for the year? Or did you get some of the Romanian state aid that you wanted? Paolo Pompei: Timo has already anticipated very well that clearly, when you look at CapEx, you need to see also a sort of seasonality. Normally, for reasons, we do maintenance during factory closing. So obviously, the CapEx level in quarter -- end of quarter 1, beginning of quarter 2 will increase because it's the maintenance period for many of our own operations. As I said, I would consider EUR 130 million, the maximum roof. Actually, we are targeting less than this EUR 130 million. For us, it's very important to be capital efficient, meaning to be able really to invest whatever is needed in terms of maintenance, but also wherever we see a clear and faster return. So I will not take quarter 1 as a reference. But in general, of course, we have projects, we have maintenance projects. We have a small operational project to complete the Oradea plant that is not fully completed yet. But of course, we are guiding, as I said, at this stage, EUR 130 million and probably a bit less, but we will guide you better in the second quarter. Operator: There are no more questions at this time, so I hand the conference back to the speakers. Annukka Angeria: If there are no further questions, this concludes today's call. Thank you, Paolo and Timo and all for joining this call. And we wish you a great rest of the day. Thank you very much. Timo Koponen: Thank you..
Operator: Welcome to the Corbion Q1 2026 Results Conference Call. [Operator Instructions] Please note that this call will be recorded. I would now like to hand over to Mr. Alex Sokolowski, Head of Investor Relations. Please go ahead, sir. Alex Sokolowski: Thank you, operator. Good morning, and welcome to Corbion's First Quarter 2026 Interim Management Statement Conference Call. This morning, we published our Q1 2026 results. The press release and presentation can be found on our website, www.corbion.com Investor Relations Financial Publications. Before we begin, please note that today's discussion will include forward-looking statements based on current expectations and assumptions. These statements involve risks and uncertainties that may cause actual results to differ materially from those expressed. Factors beyond our control, including market conditions, economic changes and regulatory actions can impact outcome. Corbion does not undertake any obligation to update statements made in this call or contained in today's press release and presentation. For more details on our assumptions and estimates, please refer to our annual reports. This is Alex Sokolowski, Head of IR. And with me on the call are Olivier Rigaud, Chief Executive Officer; and Peter Kazius, Chief Financial Officer. Now I would like to hand the call over to Olivier. Olivier? Olivier Rigaud: Thank you, Alex, and good morning, everyone, and thank you for joining us today for Corbion's First Quarter 2026 Earnings Call. Let me get straight to the point. As we outlined in February, the first quarter reflects phasing effects, primarily Nutrition, and the very strong comparison base in Functional Ingredients & Solutions. Against that backdrop, we delivered group sales of nearly EUR 294 million and an adjusted EBITDA of EUR 37.8 million with a margin of 12.9%. While this is below last year's exceptional start, it's fully in line with our expectations. And importantly, it doesn't change our confidence in the year end. In fact, what we are seeing now is encouraging. April trading confirms that momentum is building, and we expect a clear acceleration in both volume and earnings as we move through the year. Let me highlight what is driving that momentum. In Functional Ingredients & Solutions, we delivered stable sales of EUR 236 million against a very strong prior year. Underneath that, volume and mix were positive, supported by continued strong demand for natural preservation solutions and the solid growth in Biochemicals and Lactic Acid to PLA. While margins were temporarily impacted by mix, we expect a steady improvement from Q2 onwards. This will be supported by lower sugar costs and disciplined cost reduction execution. Growth will continue to be driven by structural demand for food safety solutions and increasing adoption of PLA, particularly in 3D printing and as dynamics in fossil-based plastics evolve. In Health & Nutrition, Q1 sales of nearly EUR 58 million reflects phasing into the remaining of the year. The fundamentals here are strong. Demand remained robust. Fish oil prices are going up. Our contract positions are intact, and we expect a normalization of sales and volume growth from the second quarter onwards. Our Biomaterials business continues to build momentum and delivered a second record quarter in a row delivering growth across orthopedics, drug delivery and aesthetics. On the TotalEnergies Corbion joint venture, we also achieved organic growth and our divestment process is progressing as planned. At the group level, margins were impacted by mix effects and temporarily lower operational leverage in Q1. These are timing-related factors, and we expect a clear improvement as volume ramp-up and cost measures take effect. This bring me to cost discipline. In a macroeconomic environment that remains volatile, particularly with well-known geopolitical tensions, we are acting decisively and have implemented a focused cost reduction program. Turning to cash flow. Q1 free cash flow was negative at EUR 15.7 million, and as expected, given seasonal patterns. We remain fully confident in delivering EUR 85 million to EUR 90 million for the full year. Looking ahead, we fully reaffirm our 2026 outlook. We continue to target 3% to 6% organic sales growth and adjusted EBITDA margin of around 17% and strong cash generation with performance weighted towards the second half. This will be driven by sustained demand in natural preservation, normalization in nutrition, improving PLA market conditions and disciplined execution of our cost reduction initiatives. While uncertainty in energy and input cost remains, we have robust mechanisms in place, and are actively managing volatility through pricing, hedging, sourcing and operational control. So let me close with this. Q1 reflects timing and conversion effects, not the strength of our underlying business. Our fundamentals are strong. Momentum is building, and we are executing with discipline and focus. We are confident in our ability to deliver on our commitment for 2026. With that, let us move now to questions. Alex Sokolowski: Thank you, Olivier. [Operator Instructions] Our first question this morning comes from Wim Hoste, KBC Securities. Wim Hoste: Yes. I have 3, please. The first one is on the raw materials versus pricing dynamics. I know there's significant hedging on sugar and energy and some of the other components. But can you maybe quantify or elaborate a little bit on the kind of headwinds you're seeing maybe also on transportation costs or logistics issues, et cetera? And then also, what kind of pricing initiatives you put against that? So that's the first question. The second one is on foods. Can you maybe elaborate on the contract wins that are mentioned in the press release? What kind of products, geographies are we talking about regarding these contract wins? And then third and last question would be on the progress with the PLA divestments. Can you maybe elaborate a little bit on the process, the number of interested parties, the alignment with Total on that? So those are the questions. Olivier Rigaud: Okay. Thank you, Wim. I will answer the food and the contract wins, and Peter, the points on the raw material pricing and the PLA. Let me start with your second question on contract wins. Basically, what we see in foods are twofold. One is related to our natural preservatives and primarily related to some specialties in there on clean label. You might remember, we discussed during our CMD about the new EU listeria regulation, that is getting implemented in July this year '26. So we've been actively working on this, and this is bringing very nice upside, primarily related to our natural vinegar systems. And we see that really already starting in Q1, but accelerating over Q2 as customers are preparing to switch to new preservation systems. Amongst others, we see strong momentum in seafood. That is one. The second one is more U.S.-related where back on the GLP-1 trend, we've had a couple of major wins on high-protein functional systems for our bakery business. And we have been able to build some inventory to prepare for the big launch in Q2 on that front as well. These are the -- amongst the two major drivers of these food ingredients contract wins, you know, that we discussed about in the press release. Now to you, Peter, for the 2 other questions. Peter Kazius: Yes. So if you look on a raw material perspective, Wim, then you are right that in sugar, we have kind of full visibility for the coming periods, and look fully hedged for this year and also hedged into 2027. I think the other key components, which I would like to call out, which relates to the Middle East is, of course, energy prices and therefore transport prices, as well as if you look to the Middle East, then sulfur is playing a role as well and we use sulfuric acid in the production of lactic acid. Now, if you look to the three components: energy, and you can find it in the annual report is around 7% of input cost, is well hedged. So for the remaining part of the year. So I would say minimal exposure on that one. In transport, we do see some exposure, and I think the exposure is mainly on the sulfuric acid part of the equation, which how we currently view and look to it, we were talking here on a number in this year of up to EUR 10 million. And we are indeed taking pricing actions and mechanisms in the market, and that's a combination of prices, surcharges and all the rest. So that's a bit the current outlook, Middle East impact, I would say, from a cost perspective. Then on your question on PLA, I would like to stay a bit higher level, but we are progressing nicely and on track. And I indicated in the Q4 call that we anticipate to bring more news by mid-2026 because I don't want to hamper or jeopardize the process itself. Alex Sokolowski: Our next call this morning comes from Robert Jan Vos from ABN AMRO. Robert Vos: I have a few questions as well. Based on what you said about pricing in FI&S in Q1, still slightly negative, but the mix plus phasing of input cost materials, should we anticipate positive pricing in the forthcoming quarters? That's first on FI&S. Second one is maybe elaborate a little bit on the softness in the North American market? Then moving to H&N. You say that you expect volume mix growth to return to positive in the next quarters compensating for Q1. So my question here is, do you expect -- because Q1 was pretty negative, do you expect positive volume mix growth for H&N in the full year? And related to this what about pricing in H&N in the coming quarters? And my final question, the cost savings. Can you elaborate a little bit on this? What is the amount that you expect for this year that you can take out of your model? How is it split per division? And are there upfront costs related to this? Olivier Rigaud: Thank you, Robert Jan. So I will discuss the answer on North American softness and the H&N. Whilst Peter, you can take pricing and cost savings, yes. So let me start over, Jan, with the softness on North American market. Indeed, we are exposed to some large categories as bakery and meat there. And we've seen, of course, the inflation impact and tariffs impact in the U.S. to some large customers, that impacted already Q4 last year. And we've seen some continuation of that in some of these categories. Although I have to say lately, when we look at retail numbers, you would say bakery is leveling off. So it's not declining anymore, whilst the meat sector is still declining in the U.S. Now as I said, it's unequal. We see, indeed some of these developments, as I just mentioned, in a very specific area being the natural preservation in the clean label. There is still underlying quite a lot going on related to MAHA on clean label development, primarily on preservation specialties. And nothing new, but the continuation of the fortified proteins compounds that we see. So yes, as you know, it's a big market for us. It's a mixed bag. On the meat side, it's more negative than in bakery where things are stabilizing. There is a new spot which is a bright spot for Corbion emerging in the U.S. being around culinary, where it was part of also our strategy to develop business in culinary. And I mentioned just before on the previous question that, indeed, we also spread around this Listeria antimicrobial systems now primarily based on vinegar. So we see really strong sales of vinegar-based preservatives across the board, not just in Europe, but also in North America. On the H&N expected return, there, as we said, indeed, we see already a much better momentum starting in Q2, and we have a very good visibility as we speak now on Q2. As you know, and we explained primarily going into aquaculture, this is a concentrated market with 5 large players, and it's really phasing to one of these customers that we knew upfront, that is now kicking in as from Q2 on one side. But the reason why -- I mean -- and to your question, we expect a positive volume mix growth for the year. And we see a few strong underlying drivers. First of all, as we said, we've been able to renew the expired longer-term contract. So we have a good contracted position for the year. That's one thing. We are developing nicely into adjacent market, being human nutrition, and also we have very nice development into the shrimp market as well as we speak in the Asian markets. So that's the second driver we see supporting our growth this year. And obviously, on pricing, we see also nice upcoming impact on -- later on this year, non-contracted part of our business, supported by a fish oil price increase. You might have seen now the final quota for Peru has been officialized and is 36% lower than last year. So that is obviously driving fish oil price up, which is a nice support going forward for a non-contracted part of the business. What also these lower quota do say, just to close that point, is basically that the famous fish oil gap we've discussed many times and also at CMD was anticipated to be around 50,000 tons shortfall for fish oil, is more likely going to be much higher than the 50,000 tons for this year. Again, we are tracking that every day, but so that -- what makes us feeling really comfortable on our H&N for this year. Peter? Peter Kazius: Yes. So your point on the pricing, Robert Jan, it was indeed negative in Q1, driven, by the way, by lactic acid pass-through mechanism to the joint venture, with a bit of positive even in some other areas. The price uptake, which I just discussed related to the Middle East, is not included in Q1 and will be only as of Q2, but mainly in the second part of the year. So I anticipate a mild negative in Q2 and then basically returning into positive. If you look in terms of the acceleration of our cost savings program and if I look a bit on the timing and the impact of that, then the saving program, together with the sugar basically, if I look to an impact Q2 already versus Q1, I anticipate an increase of around EUR 5 million. It will be mainly in Functional Ingredients & Solutions and a bit and Health & Nutrition. I want to make one additional comment because you did ask, sorry, I forgot. In terms of kind of additional costs, we did incur some additional costs in Q1 in anticipation basically of this program. Robert Vos: Okay. That's very helpful. One follow-up maybe. Now that you mentioned that there were some costs taken in Q1. I also saw that depreciation and amortization was EUR 23 million in the quarter, which appeared a bit high. Is that a proxy for the remaining quarters? Or did it include some impairments in Q1? Peter Kazius: No, it includes some small adjusted items related to two different elements. One is the divestment process of PLA, as you can imagine. And the other one, which is good news, which you will not see basically in our numbers, but only in -- sorry, H1 is that we had a positive tax outcome in a discussion with the Spanish authorities, which would have a positive impact of around EUR 5 million in terms of tax this year, and we incurred some costs, which are also included in that part. So if you look from a depreciation element specifically, it's around just above EUR 22 million, which is in line basically with kind of the trend in Q2, Q3, Q1 and Q4. Alex Sokolowski: Our next question this morning comes from Fernand de Boer from the Degroof Petercam. Fernand de Boer: Fernand de Boer, Degroof Petercam. Actually I had one question. If I look to the drop in EBITDA in FI&S, you can say, okay, part is because of ForEx, maybe the mix was negative, but still, there is an absolute decline of EUR 10 million. So could you help me out a little bit on the bridge because I can understand maybe that food sales were quite negative in that respect. Peter Kazius: So if you look to the absolute EBITDA, indeed, it is a drop. There indeed currency in it, as you know, because it was $1.05 basically in last year, and it is $1.17 in the U.S. dollar in the average of this year. Then if you look to the delta, there is indeed a kind of negative impact in the equation of mix, price and volume. There is, if you compare to last year, of course, a bit of inflation in that one. We did have some additional costs as I indicated. And the other one is, and it's maybe a bit technical accounting wise, but we do share the kind of bill of SG&A, across the different segments. So that means if you have a reduction of your overall sales, it's also impacting basically the absolute number in... Alex Sokolowski: Our next question this morning comes from Setu Sharda of Barclays. Setu Sharda: Yes. So one question on the volumes, given the soft Q1 start and the ongoing inflationary pressure on end market, on customers, has your base case assumption for the volume growth changed in either division and how sensitive is your FY '26 guidance to a slower-than-expected volume ramp-up in Health & Nutrition? And my second question is on the fish oil contracts. Could you clarify how much of your Nutrition business is currently sold on a spot basis versus under contracts? And when do the existing contracts typically come up for renegotiation? And could you provide like more color on how you are approaching contracting in context of volatile fish oil prices? And my third question is on if you can give more info on the trading, how has been the Q2 trading till date in both in FI&S and Health & Nutrition? And are you already seeing some sort of recovery that you are expecting? Olivier Rigaud: Yes. Thank you, Setu. So on taking your question on H&N and fish oil, basically, if you look to the way we are ramping up the H&N volume and primarily the omega-3, which is the large chunk there, what we see is that, again, across the year -- last year, if you remember, on customer phasing, we had a kind of U-curve and this year it's more a V-curve in terms of the contract. And this is, of course, the pattern -- the ordering pattern of this business, which is volatile quarter from a quarter to another, although we have this now firm contract position for the year, but we have a great visibility on this contracted part. And then, as you know, we are adding more stable sales and predictable sales in both pet nutrition and human nutrition that is now nicely ramping up. So we have -- and there, we have also very good visibility. So if I look to the fully contracted position, this year is very similar in H&N than last year, where we have around about 2/3 of our business and their longer-term contract and 1/3 that is open. To your pricing question, obviously, what is open going forward, we have already proof of evidence that we can pass on already some price increases over the next 3 quarters. And these are roughly double-digit price increase on the open contract related to fish oil. Now, where fish oil is going, as you know, we've seen fish oil prices going from the low $3,000 per ton, now around $4,500, $4,600 sometime. And this is what we are translating. On the long-term agreement, to your second question, we are really not looking to align our pricing on fish oil only. The aim of the game during this 2 to 3 years deal is to have visibility on margin because then we are hedging our sugar. And we do not want to play the commodity game that fish oil is about. So it's about giving really visibility and security of supply to fuel the supply gap to our key customers. And some of them, of course, do share that view, others less, but this is the way we approach it. Now, on the renewal, to your question, we had a contract that was ending by end '25 that we have renewed, and the others we are ending in '26. So it means that we would probably start next multiyear negotiation for the next years in the course of the summer to renew these type of contracts because they're all ending now by end of '26. So that's, I mean, again, what I could say on that. On the inflationary pressure, this is, I mean, a difficult one because, of course, I mean, we see our customers trying to push also price to retail and to their consumers. Now, with what Peter explained and what we are facing with the Middle East crisis and how we're going to push also our sulfuric cost and extra freight costs, these are really pricing we are implemented wherever now we have open contracts, but the vast majority will be implemented as from early H2. So this is what we have and what we are planning. But quite a lot of conversations are going on. I have to say that, on freight, it's different from FI&S than H&N. In H&N, on this large aquaculture contract, we have freight clause in all these contracts where we pass immediately any freight surcharge. It's a lot more limited in FI&S where you have this lag. There's going to be a 3-month lag to push these prices as from the end of July, early August. Setu Sharda: That was helpful. Just one question, like because -- do you see any -- like how is the trading update until now, like have you seen the recovery in Health & Nutrition? Olivier Rigaud: No, it's a pretty good. We have very good visibility on Q2, very good, and it's really a very strong start of Q2 there. So I'm feeling really good, feeling really confident what we see in both divisions actually already in April. Alex Sokolowski: Okay. Our next question this morning comes from Karel Zoete from Kepler Cheuvreux. Karel Zoete: I've had two questions actually in relation to the FI&S business unit because the margin has been, of course, a bit lower than expected in the quarter. But if we zoom out, it's been a couple of quarters in which profit margins are declining instead of going up towards the 14% to 15% ambition level. So in relation to that, what are the incremental savings efficiencies, et cetera, you try to capture now? And the more longer-term question then is the positioning of the business. Where are you losing market share? Or is it simply the exposure to more mature categories in the U.S. that have been under pressure? Peter Kazius: Okay. Let me do the first one in terms of the longer-term trajectory and then Olivier can take the market one from that perspective. And you are right, that you see basically a kind of negative momentum if you look quarter after quarter. And I don't want to be -- but there is always a bit of volatility around it, frankly speaking, a bit of phasing. And I don't want to basically go to all these details. But if you look to Q2, and let's start with that. Then I did mention we anticipate a kind of EUR 5 million impact of sugar and cost reduction savings, of which the majority will be in FI&S, and that will lead to a kind of sizable margin improvement as of Q2, following actually an improvement into Q3, Q4. So with that one, I think that in terms of Q1, we reached the bottom, Karel, from a longer term perspective. If you then say the ambition level is still there, I anticipate for the full year to be higher in terms of FI&S margin than last year, but not to the 15%. Olivier Rigaud: Karel, so on the cost positioning of the business, this is a very valid question. So if you look to the entire FI&S, basically, I'm taking it outside the lactic to PLA that is a longer-term formula contract to the other pieces, basically there is this natural preservation specialty that is where we invest in growth, which is high margin, high growth. And we see even a lot more options around the lactic derivatives, but also the vinegar, the antioxidant and a lot of food ferments that are growing the mold inhibitors. So this is the part we really want to grow and focus on. And this is where we are investing in resources, as well. There is the functional systems that basically is transitioning right now from a pure bakery-only play, where we want to specialize in something that has close synergies with preservation, meaning enzyme cocktail shelf-life extension, and this is a business we are now really simplifying as part of the cost program as well to really simplify SKUs and focus on the high end. So this is really one of the big angle of our cost optimization program that Peter mentioned. And then you have what I call the basic derivatives, lactic -- plain lactic acid that is commoditizing where we basically changed the governance, where we run this business now since January with a new team in a very lean base. And that's the business we also are looking to now restructure, leveraging basically where we have the lowest cost plant in Thailand and primarily the new lactic gypsum-free plant. And this is not where we're going to invest going forward. So the aim is really to have this gradual shift in portfolio to the preservation specialties and restructure the functional systems into the shelf life extension and less exposure to bakery-only business going forward. So that's, I mean, our mission there. Now, as you know, there is still a large chunk of these commoditized lactic acid or less differentiated, if I would say, which is where I think pricing discipline is important, but also cost management. And back a minute to the FI&S margin, as Peter alluded before, we started this program. We presented our new Chief Operating Officer ambition in the CMD as well, where as part of also the new ExCo governance, he kicked off a major program that we embarked on. And of course, in Q1, you see the cost of that program is not a benefit yet. But that's fine, we are planning to develop more around that during our H1 results. So that is to come. Alex Sokolowski: Our next call this morning comes from Sebastian Bray at Berenberg. Sebastian Bray: I have two, please. You have talked about, Olivier, the pieces of movement in terms of last expiry of long-term contracts in '26 for algal oils. If everything were to remain the same as it is today and spot prices for fish oil were to remain the same, assuming that the contracts expire and are then re-struck, is the pricing effect from algal oils for 2027, roughly flat? Or is it different to that? My second question is on the ongoing negotiations regarding PLA divestment. Are there any dissynergies to think of here? Because the current setup of contracting is that there is almost an over-the-fence style cost-plus agreement. Is a buyer interested in, let's say, renegotiating that? Or do the economics in all likelihood remain intact as they are for supply of lactic acid to the PLA JV post divestment? Olivier Rigaud: Thanks, Sebastian. So your H&N question is very relevant. Now, you know, what we said publicly in the past is that these long-term contracts were at that time negotiated between $4,000 and $5,000 equivalent, yes. So obviously, we need to understand the fish oil price dynamic in the coming months when we're going to be at the table of negotiation in the summertime. Now, having said that, if you compare the fish oil price volatility, we know it has been picking up to $8,000 or $9,000 and going down as low as $2,000 in the past. We believe this type of price level are the longer-term sustainable price at the margin we have and we need going forward, and you know this level. So I mean, again, it's a difficult answer because, indeed, obviously, as we are growing volume, we have better and better operational leverage and we should get better margin as we go at this price level between $4,000 and $5,000. And we believe these are the longer-term right level of prices. Now let's see where the fish oil price development going to be over the next month, but again, for these contracts, we want to disconnect from fish oil volatility. On the PLA dissynergies, obviously, you know, and this is not -- I'm not pitching that, of course, the sale of that business, but the combination of this PLA factory next to the largest lactic acid plant in the world and the lowest cost one is very powerful for any new owner of that business. Now, obviously, there is a long-term agreement to supply lactic acid that is in place until 2035 and that would survive any change of control of the PLA JV. And for Corbion, whether we own part of the JV or not, it's a very nice plant filler because this business is, as you know, in these huge lactic acid factories, operational leverage is very important and you really make -- and start to make a lot of money when you run above 80% to 85% capacity. And for us, this plant is a guarantee that we run at really very high capacity rate. So it's quite critical. We remain the supplier, and it's the way also to buffer our two lactic plant on sites, yes. So we see it as, I think, a very nice addition. And actually, it's a deal and a contract with very little, if any, cost. It's a pipeline. So yes, on the front face, the margin might look low, but it has such a huge operational leverage impact on the rest of the lactic that we sell to the preservation and other categories that it's very important. So there are no specific dissynergies that we see from that deal. Alex Sokolowski: Our next question this morning comes from Reg Watson at ING. Reginald Watson: I'd like to come back to the cost cutting, if I may, Peter. Thank you for giving us the EUR 5 million delta between sort of Q1 and Q2. Could you break that down a bit, please? How much of that is the absence of the costs you had to take in Q1? And how much of that is the cost saving? And how much of that is the sugar? And a follow-on question from that is, how do you expect this to build through the quarters in the year? Is this a one-off cost-saving exercise? Or do you see further benefits to come in the coming quarters? Peter Kazius: Yes. No, thanks. So the EUR 5 million, by the way, relates to sugar and cost reduction activities. So it's not even reversing the other basically element. This is a kind of recurring benefit, and I actually think it will increase over the second half of the year as well. Reginald Watson: Okay. And then to that, in terms of the language and Olivier, Peter, feel free either of you to answer this. You mentioned that the sales strength in Q2 is expected to "more than compensate for Q1." As analysts, we're too hung up on quarterly volatility, if we look at first half in the round, do you expect them to deliver positive volume for -- sorry, positive sales with particular volume mix for the business as a whole? Peter Kazius: So if I look for, let's say, the business as a whole in terms of volume mix, then for the first half, I do anticipate indeed a kind of positive elements. If I look in the combination a bit, then Health & Nutrition, I see a recovery, but that is around kind of the same. If you look in terms of price, I think I alluded in terms of FI&S, I anticipate in Q2, still a mild year-on-year price reduction, driven by lactic acid to PLA and then basically reversing of that trend in the second half of the year, driven by the growth which we made on Middle East and partly pricing that's true. In terms of Health & Nutrition, if I pick pricing, then we had a kind of 4% pricing delta. I anticipate a mild kind of price erosion during the remainder part of the year. Reginald Watson: And then final question from me. How is the ramp-up of the gypsum-free lactic acid plant going? Where are you at on continuous capacity utilization? Olivier Rigaud: So Reg, so where we are, as you know, the plant is designed on 125,000 tons of lactic acid. We are now approaching really the 100,000 tons type of level on that plant, yes. And it's also important that -- because we've discussed that in the past as well. It's also because these are significant additional volume we put in the market that we -- it's important we also put that in the market wisely, also making sure that, yes, we do not come with large volume that would necessarily impact our margin anywhere. So there is a conscious ramp-up that we have as well on this. Obviously, the sooner we can fill it, the better, but we see a very nice upside on the remaining part of the year on basically PLA that is requiring a lot more globally. And that's, I would say, to me, quite an important statement because, as you know, the conversion ratio usually between lactic and PLA is 1.4. So you need 1.4x lactic to PLA. So when PLA grows, it's really accelerating massively the need of lactic acid. And we see that for our JV, but we see that also for Chinese players right now. And that's something that when we look to the whole balance of lactic market, it would be really helpful to see how Corbion can leverage on one side, the fact that we have a competitive position because we are gypsum-free. And we know our main competition is Chinese. The second is, if you look over the last 6 months, there is quite a positive trend in the favor of Corbion when we look to the carb cost, the sugar -- the Thai sugar cost versus Chinese cost and all our competitors in China are on corn. So the ratio is again back in favor of Thai sugar since September last year. So it's already 2 quarters. And that, I think, going to support also Corbion margin going forward. Reginald Watson: Okay. So I'm really pleased to view that you're running that plant at 80% capacity utilization because that must be driving efficiencies in terms of variable cost of production, et cetera. So that must make it probably the most cost-efficient plant in the world for lactic acid, Am I wrong with that? Olivier Rigaud: No. You're right. But primarily right now with the Middle East, this is the only plant in the world with no sulfuric acid because this -- the whole story about, of course, as you know, conventional lactic process is that you are using lime and then you need sulfuric to precipitate into gypsum. Reginald Watson: Yes. Olivier Rigaud: And the reason why we developed that process over the years is to have no gypsum, hence, you don't need sulfuric. So that's a big competitive advantage, primarily these days with what's happening in the Middle East. Reginald Watson: And then does that mean then that the cost benefit of the ramp-up is now already included in the numbers? Or should we continue to see more benefit to come from any further utilization, any further ramping of this, through the year? Olivier Rigaud: We have already factored in, in our outlook what we think we're going to achieve in terms of capacity this year. So the rest, we keep for '27. Alex Sokolowski: Very good. And our last question this morning comes from Eric Wilmer at Van Lanschot Kempen. Eric Wilmer: Yes, two remaining questions, brief questions, actually. Given that sugar prices or sugar costs actually have come down year-on-year, might this actually result in market dynamics and forcing lower product pricing for functional ingredients during the remainder of this year? And maybe on customer behavior, are there any signs of -- given the current disruptions, customers stocking up your product, you mentioned sulfuric acid supply chain issues. And maybe actually also a third one then on transportation costs. You talked about obviously increasing them. I was wondering to what extent are customers receptive, different from what they may read. Energy costs have actually started to come down a bit again. And I've been hearing that this is not always a very straightforward discussion. Olivier Rigaud: No, I think, Eric, so good point. So basically, I think, we have -- except -- I mean, again, in a few large U.S. contracts, and of course, the joint venture of PLA and sugar-related costs is not something we have really widely spread. So obviously, key customers do track, of course, input cost. But in terms of competitive dynamic, today, it's getting really about, as you know, our critical competitors in lactic are in China, and they are based on corn. So the important is to look to the Chinese corn versus New York 11, Thai sugar or Brazilian sugar. So that's one. And this is what plays in the competitive dynamic. On stocking, we -- I mean, we don't see that because -- of course, the situation has been heavily complexified with tariffs and still is. And what we see is that the advantage of Corbion being the only lucky producer having a plant in each geography is really helpful for us. So there are different dynamics if you look to the U.S., where we have our plant in Blair, Nebraska, in Brazil, in Campos dos Goytacazes, in Thailand. So we do not anticipate any extra customer stocking. On the opposite, we see people being so tight on working capital that we have a lot of rush orders, a lot of last minute which are creating other issues. So that's what we see. And on freight cost, yes, of course, as I said, Health & Nutrition is very different than FI&S. In Health & Nutrition, all the large contracts do have a freight clause that we review on a quarterly basis. So if freight costs are, let's say, improving or declining in the next quarter, we would apply it and vice versa. In FI&S, it's very different. And as you know, we have a big route that is impacting Corbion, where most of the European lactic acid is freight from Thailand to Europe. And this is a very large volume because this is the feedstock for all the derivatives we are making into our Spanish and Dutch operations. So that's an important one for us, where basically, we have more choices than to push these extra freight cost to the market. And this is what Peter explained what we are busy doing and what we have to do. Alex Sokolowski: Okay. This concludes our conference call this morning. Thank you all for your attendance and questions, and we look forward to discussions at upcoming conferences in the next weeks. Please note that we will hold our Annual General Shareholders Meeting on May 13, 2026, in Amsterdam, and our Q2 half year '26 results on July 31. Information on both meetings is available on the Investor Relations page of our website, and we look forward to engaging with you again. Operator, you may close the call. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Metro Inc. 2026 Second Quarter Results Conference Call. [Operator Instructions] Also note that this call is being recorded on April 22, 2026. And I would like to turn the conference over to Sharon Kadoche, Director, Investor Relations and Corporate Finance. Please go ahead. Sharon Kadoche: [Foreign Language] Good morning, everyone, and thank you for joining us today. Our comments will focus on the financial results of our second quarter, which ended on March 14. With me today is Mr. Eric La Fleche, President and CEO; Nicolas Amyot, Executive VP and CFO; Marc Giroux, Chief Operating Officer; and Jean-Michel Coutu, President of the Pharmacy division. During the call, we will present our second quarter results and comment on its highlights. We will then be happy to take your questions. Before we begin, I would like to remind you that we will use in today's discussion different statements that could be construed as forward-looking information. In general, any statement which does not constitute a historical fact may be deemed a forward-looking statement. Words or expressions such as expect, intend, are confident that, will and other similar words or expressions are generally indicative of forward-looking statements. The forward-looking statements are based upon certain assumptions regarding the Canadian food and pharmaceutical industries, the general economy, our annual budget and our 2026 action plan. These forward-looking statements do not provide any guarantees as to the future performance of the company and are subject to potential risks, known and unknown as well as uncertainties that could cause the outcome to differ materially. Risk factors that could cause actual results or events to differ materially from our expectations as expressed in or implied by our forward-looking statements are described under the Risk Management section in our 2025 annual report. We believe these forward-looking statements to be reasonable and pertinent at this time and represent our expectations. The company does not intend to update any forward-looking statements, except as required by applicable law. I will now turn the call over to Nicolas. Nicolas Amyot: All right. Thank you, Sharon, and good morning, everyone. I will go directly to our Q2 results as Eric will comment on the status of the current strike in our Quebec operations. Q2 sales reached $5.1 billion, an increase of 4.1% versus the second quarter last year. Sales were positively impacted by new store openings, same-store sales growth as well as the transfer of one significant pre-Christmas shopping day to the second quarter this year. Front store sales -- or food same-store sales grew by 1.8% in the quarter, up 1.5% when adjusting for the Christmas shift. On the pharmacy side, same-store sales grew by 5.1%, supported by a 6.1% growth in prescription sales and a 2.8% growth in front store sales. Similar to food, when adjusting for the Christmas shift, front store sales were up 2.3%. Our gross margin reached $1.03 billion or 20.1% of sales in the quarter. This compares to 20% in Q2 last year. Part of the increase is attributable to productivity gains recorded in our distribution centers. As mentioned on the last call, our operations are back to normal in our Toronto distribution center. Operating expenses were $538.9 million in the quarter, up 3.4% year-over-year. As a percentage of sales, operating expenses were 10.5% versus 10.6% in the second quarter last year, reflected continued cost discipline. The asset disposals recognized in the second quarter of 2026 generated net gains of $20.4 million, of which $20.1 million was attributable to the disposal of out-of-service warehouses. EBITDA for the quarter amounted to $508.6 million. That's up 10.3% year-over-year and represented 9.9% of sales. Excluding the gain on sale from the disposal of out-of-service warehouses of $20.1 million, adjusted EBITDA stood at $488.5 million, up 6% year-over-year, reaching 9.6% of sales, an increase of 16 basis points over the second quarter of 2025. Depreciation and amortization expense for the quarter was $144.3 million, up $8.2 million. The increase in depreciation and amortization is mainly due to the increase in retail network investments, including right-of-use assets as well as ongoing investments in technology. Net financial costs for the quarter were $37.3 million compared to $33.4 million last year. The increase is mainly due to higher interest expense on net debt. On February 25 this quarter, the company tapped the bond market and issued a 5-year $350 million note bearing interest at a rate of 3.469%. We used the proceeds of the offering to repay debt under our revolving credit facility and for general corporate purposes. Including this financing, our debt-to-EBITDA ratio stands at about 2.2x. Our effective tax rate of 24.6%, which continues to benefit from the Terrebonne DC tax holiday is similar to the effective tax rate of 24.5% in the second quarter last year. Adjusted net earnings were $236.5 million in the quarter compared to $226.6 million last year, an increase of 4.4%, while adjusted fully diluted net earnings per share amounted to $1.11 versus $1.02 last year, up 8.8% year-over-year. Our capital expenditures in Q2 totaled $85.3 million, consistent with last year. After 24 weeks on the food retail side, we opened or converted 6 stores and carried out 4 major renovation projects for a net increase of 141,000 square feet or 0.6% of our food retail network square footage. Under our normal course issuer bid program, as of April 2, we have repurchased 2.9 million shares for a total consideration of $279.8 million at an average share price of $96.47. In closing, we delivered solid Q2 results, supported by strong sales growth and good expense control. On this, I will now turn it over to Eric for additional color on our Q2 results. Thank you. Eric La Flèche: Thank you, Nicolas, and good morning, everyone. Before turning to the results, I will provide an update on the strike that started on March 30 in our Quebec operations and which is impacting produce distribution to our stores in Quebec. We are obviously disappointed by the strike now in its fourth week. We have been back at the bargaining table since April 8 and remain determined to reach an agreement that takes into account the needs of our employees and those of our customers while ensuring the long-term competitiveness of our company. As in any situation of this kind, the first days of the labor dispute required adjustments while our contingency plan was being fully implemented. Our contingency plan is now in place and our stores, although not in perfect condition, are generally well stocked. The strike has impacted our sales, especially given that it happened the week before Easter. We will be able to specify the financial impact once the dispute is settled. Turning to our second quarter results. We delivered solid results driven by strong revenue growth and good expense control as our teams continue to offer the best value possible to our customers in all of our banners. We are very pleased with our discount store expansion plan that is fueling our food sales growth and with the continued strong momentum in our pharmacy business. In Q2, sales grew by 4.1%, adjusted EBITDA by 6% and adjusted earnings per share by 8.8%. Total food sales were up 3.6% and food same-store sales were up 1.8%. In pharmacy, we had another strong quarter with 5.1% total same-store sales growth on top of 7% last year. Our discount banners continue to perform well with same-store sales growth exceeding that of Metro, together with the continued contribution of new store openings and conversions. Our internal food basket inflation was in line with the reported food CPI of 4.3%. We continue to see inflationary pressures on certain commodity prices, namely in the meat category, in addition to higher-than-usual CPG vendor cost increases. Our teams remain highly focused on cost mitigation initiatives through supplier negotiations and pricing discipline with the objective of offering the best value possible to our customers. During the quarter, comparable store customer traffic was slightly lower, offset by growth in the average basket. Absolute traffic across the network increased, supported by new store openings. Promotional activity remains elevated and private label sales continued to outperform national brand, contributing to our gross margin performance. Competitive environment remains intense but rational. Online sales grew by 19.8% in the quarter. Growth is being driven by third-party marketplaces, the ramp-up of click and collect services and delivery within our discount banners. We are pleased with the sales performance of our own services and third-party marketplaces, which are recording similar growth rates compared to last year. Turning to pharmacy. Prescription sales were up 6.1%, driven by continued organic growth, specialty medications and GLP-1s. Commercial sales grew by 2.8%, led by cosmetics and health and beauty categories, partly offset by a softer performance in OTC. The cough and cold season was compressed this year. It peaked earlier and was shorter in duration. Our retail CapEx plan is on track as we successfully opened 3 new stores in Q2, including 2 discount stores. Halfway through F '26, our food retail network square footage growth increased by 0.6%. And over the last 12 months, it increased by 1.9% as we execute our new store opening plan, mostly in discount and mostly in Ontario. On the pharmacy side, after 2 quarters, we have completed 15 out of the 35 renovation projects planned for F '26, including 7 pharmacies with our new concept. So to conclude, we're confident that our effective merchandising programs, strong private label offering, our Moi program, consistent execution at store level as well as our ongoing collaboration with our supply chain partners will allow us to continue to grow and deliver long-term shareholder value. Thank you, and we'll now be happy to take your questions. Operator: [Operator Instructions] And your first question will be from Mark Carden at UBS. Mark Carden: So to start, your food inflation was essentially in line with the 4% plus purchase from store CPI. Just as inflationary pressures persist, have you seen any sequential changes in customer behavior? Are they leaning even more heavily into discount? You called out the strength there in your release. Are you seeing any incremental uptick on trade down within your stores? Just any changes on that front? Eric La Flèche: No real changes, very consistent customer behavior as we've been reporting over the last several quarters that I tried to outline in my opening remarks. Yes, discount is growing faster. People are searching for value in all of our banners, not just discount. Private label is up, penetration remains elevated. So it's very consistent. Food inflation is driven a lot by the meat category. And as I said, CPG cost increases. I would sum it up that way. Mark Carden: Great. That's helpful. And then as a follow-up, just given where fuel prices are today, historically, have you guys seen any demand destruction or consumers taking units out of their baskets when prices at the pump cross a certain threshold or any broader shifts in food shopping behavior at your stores? Eric La Flèche: We don't have a specific number to report to you, but energy prices pressures, fuel price pressures contribute to affordability crisis and contributes to customers searching for value in everything that they buy, including food. So it's just one more element that puts pressure on the customer, and we're well positioned with our multiple store formats and growing discount formats to address those customer needs. Operator: The next question will be from Michael Van Aelst at TD Cowen. Michael Van Aelst: I just wanted to start by following up on the competitive question. So last quarter, you pointed to competitive -- the competitive nature of the industry has seemed to spook the stock a little bit. But you suggested that it's intense but rational. So that doesn't seem like anything different than what you've said in the past. But do you feel that the moderating trend of normalized same-store sales growth from Q1 to Q2 reflects an increasing competition or a consumer that's under more pressure and therefore, trending down more or cutting back on tonnage? Eric La Flèche: Tonnage in the whole market is flat to down. So clearly, there's pressure on the consumer side. So I think it's a general market dynamic of lower low consumption and people being careful. The competitive environment, as I said, it's intense. We are competing with large players. Everybody is looking for market share, and it's competitive out there, the way it's always been. Last quarter, I was perhaps referring more to the square footage growth and people opening stores. That creates some noise in the market, but nothing abnormal and nothing that we've not seen before. And we're, like I said, well positioned to compete. Michael Van Aelst: Okay. And then just on the fuel cost increases. I know you mentioned your comments relative to the consumer impact. But as far as your cost impact, I know you have a lot of third-party distribution. So are you seeing fuel cost surcharges already? And if so, are you able to pass those on? Or should we expect that to have some pressure on margins? Nicolas Amyot: Yes. Maybe I'll take this one, Michael. I would say that from a fuel cost increase perspective, two sides to the story. On the products that we buy from the supply chain, so far, we have not received that many price increase requests, only a few actually. And we're negotiating the conditions and trying to delay the impact that this might have on food pricing. Obviously, the situation, as everybody knows, is very volatile, and we don't know how long it's going to last and how it's going to unfold. So -- but at this point, nothing to say per se on cost of product. In terms on our own distribution side, the cost of fuel is impacting our activity to distribute food and drugs to stores and pharmacies, and that's pretty direct. So we've started feeling it, and that the current elevated pricing of fuel you could imagine a $5 million-ish per quarter impact if everything was to hold as the situation is today. So that's obviously, everything else being equal, more pressure that we need to manage. Michael Van Aelst: So in the past, I think you said you typically pass on these higher fuel costs in your distribution system. Is that something you're already working for? Or you're looking for other ways to offset? Eric La Flèche: Well, it's part of our cost structure, and we have to manage and keep our prices competitive in the market. Over time, we expect that higher costs like that will be reflected, but it hasn't started to happen yet. Operator: Next question will be from Mark Petrie at CIBC. Mark Petrie: I know you're not going to give specific numbers, but obviously, the strike impact is on people's minds. So hoping you can give us some qualitative comments just with regards to how Quebec or Ontario might be tracking differently in Q2 so far? And if you can give us some sense of the incremental costs that are incurred as a result of your mitigation strategies? Eric La Flèche: Like I said in my opening remarks, we're going to keep the impact for a later date in due course when we have the full tally. Like I said, we lost some sales. When you lose sales, you lose the bottom line. So clearly, it has had an impact. There are direct costs to set up a contingency plan. So we will communicate in full transparency when we're in a position to do so, but I don't want to give at this time any color. This is a strike that's affecting our Quebec business, not our Ontario business. So let's be clear on that. But it is having an impact. The contingency plan is better every day. Stores are looking better every day. And we are, I think, decent -- we're not perfect, like I said. There's maybe some small varieties missing from one store to another or from time to time. But generally, our stores are looking okay, looking good, and we can answer most of the customer needs in our Quebec stores. So hopefully, we'll settle the strike. But like I said, we need to be competitive. The demands at the table are not reasonable and can't be accepted. So we will we are patient, and we will preserve our long-term competitiveness. Nicolas Amyot: Maybe, Mark, just a quick comment. I think in your question, you referred to Q2, but it's really Q3 for us, right? The strike started on March 30. So it's going to be no impact in Q2. It's going to be impacting us in Q2. Eric La Flèche: In Q3. Mark Petrie: Yes. Yes. Understood. totally understand. I guess one other question. I'm just curious if you can share any trends or data with regards to the impact of buy Canadian and how some of the most affected products and categories last year have been performing as you lap sort of the biggest impact last year. Marc Giroux: Mark, it's Marc here. We said in the last few quarters that buying Canadian, there was still elevated sales on Canadian product, but it has softened over the last few quarters. So buying Canadian continues to be of interest for consumers, but we have not seen a significant increase of sales year-over-year on Canadian product right now. Mark Petrie: Yes. Okay. But as you're lapping the big sort of initial surge last year, are you seeing outright declines in any of those sort of most affected categories? Marc Giroux: No, I would say that it's pretty stable, Mark. Operator: Next question will be from John Zamparo at Scotiabank. John Zamparo: I wanted to ask about the pharmacy side of the business and prescriptions in particular, that saw same-store sales accelerate this quarter. I wonder if you could add more color on what you're seeing from your GLP-1 sales. I think you listed that third among the drivers of growth. Is that to say it was less of a driver this quarter against prior quarters? And does Coutu capture a similar level of market share on GLP-1s as it does on the rest of its pharmacy business? Nicolas Amyot: I'm sorry, I missed the last part around market share. John Zamparo: Yes. The second part of it is, is the market share on GLP-1 similar to the rest of the pharmacy business? Nicolas Amyot: Yes. Perfect. You are correct in saying when we listed it as organic specialty and GLP-1s. GLP-1s is a slightly less strong contributor to same-store sales growth as the other 2. Despite that, it is considerable and it's continuing to grow at a very strong pace, especially as new generations of GLP-1s are coming to market, and that's driving a lot of the growth right now in the GLP-1 sector. In terms of share, we are definitely holding our normal share and even for some molecules outperforming, I'd say. John Zamparo: Okay. Understood. And then back to the grocery business, the growth from e-commerce continues to be robust. I wonder if this sustains at or around these levels and if the e-commerce business continues to grow, does that eventually create a drag on gross margins? Or is profitability from these sales roughly in line with the overall consolidated number? Marc Giroux: That's a good question. We believe that e-com growth will normalize at some point as the market matures. But as you're pointing out, we continue to see strong growth on both food and pharma. E-com has a lower contribution -- e-com sales has a lower contribution as brick-and-mortar sales. However, we've been able with our e-com model to mitigate those -- that profitability gap with efficiency and multiple efficiency strategies, and we will continue to do so. That's what allowed us to continue to deliver the type of EBIT growth as a business as a total. So we'll continue to leverage our flexible model to meet customers where they are. More and more customers are moving to same-day delivery and our model and fulfillment model allows us to meet that demand from customers, and we'll continue to be focused on, as I say, efficiency, not only in e-com, but in our overall business. Hopefully, I've answered your question. Operator: [Operator Instructions] Next is Chris Li at Desjardins. Christopher Li: I was wondering if you can provide some sort of very high-level colors on how the food gross margin performed during the quarter. I know in the opening remarks, you referenced private label and some DC efficiency as being positive. But just at the overall level, like did the gross margin in food, was it largely stable? Or did it improve slightly? Eric La Flèche: We don't segregate between food and pharma on the gross margin. But like I said, private label contributes, lower shrink contributes, better forecasting contributes. So I think the teams did a good job to protect and slightly grow gross margin, and we're pleased with that performance. Christopher Li: Okay. That's helpful, Eric. And then maybe a follow-up just on the Moi loyalty program in Ontario. It's been, I think, in the market for 1.5 years now. Just where are you on your journey to leverage the enhanced data analytics to deliver more personalization and effective promotions in Ontario through the new program? Marc Giroux: Thanks for your question, Chris. It's Marc here. Moi continues to perform well and sales penetration continues to increase and digital customer engagement continues to increase as well. So we're satisfied with the progress we're making on Moi in Ontario and in Quebec, in food and pharma in Quebec. We've been leveraging data for a number of years even before the launch of Moi in Ontario with our partner, dunnhumby. We use that data in our merchandising team to optimize promotion, to optimize assortment and make sure that we have the right commercial strategy to meet the customers. We've been doing that before Moi and now are continuing to do it with Moi. On personalization, since our launch, as more and more customers engage digitally, we can have direct digital contact with them and deliver personalization directly to different channel. So as Moi progresses, our reach in terms of personalization increases. As for Quebec, the program has been in market now for a few years in both food and pharma. And with our multiple banners and high penetration of Quebec household, the extent of our reach and personalization is greater in Quebec and the cross-shopping and the impact of cross-shopping in Quebec is greater as well. While we see cross-shopping and the benefit of cross-shopping in Ontario as well, to give you an example, in Quebec, as consumers shop food and pharma, they spend 100% more with our business as a whole through all of our stores and different channels. So we'll continue to focus on increasing reach, increasing digital reach so we can continue to drive personalization. There's still opportunity for us in both markets, more in Ontario as the program continues to grow. Operator: And at this time, gentlemen, it appears we have no other questions registered. Please proceed. Sharon Kadoche: Thank you all for your interest in Metro, and please mark your calendars for our third quarter results on August 12. Thank you. Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. And at this time, we ask that you please disconnect your lines. Enjoy the rest of your day.
Per Brilioth: Okay. Hey, welcome, everybody. This is our -- as in we are VNV Global. This is our Q1 investor call. And I'll kick things off. We have like this usual summary page, which is the next one. Yes, NAV $462 million, which is down a bunch since the end of last year. And as we tried to sort of highlight in the narrative in the report, it's because of market and the peer group, the public sort of peer group from which we take multiples, they're down a lot. In some cases, there are names that we use that are down like 30%. And that's the main driver because the portfolio at large is doing really well. And as I wrote sort of -- if that sort of peer group multiple that we download and multiply with what we see at our companies, if that would have been flat this quarter, the NAV would have been up since the end of last year. So -- but this is how we value the portfolio. And it's no -- can sort of change that from quarter-to-quarter even if we don't think it sort of reflects the reality of the value here. And so we're subject to that volatility. And sort of if we -- if the second quarter were closed today, it would have been up. We'll see where it closes. But we're basically subject to that volatility. That volatility has taken the NAV down, but it's not reflective of what's going on in our portfolio. And I don't know if one sort of just has a go at trying to put the big sort of high-level reasons for why this peer group is down. I think it sort of falls into 2 main buckets. One is this fear, uncertainty, combination of those and what AI will do to a bunch of software companies. And as we've been on and on about before, we really don't see that as relevant even sort of -- it's the other way around for our portfolio companies is that we feel that these companies in our portfolio, they benefit from the emergence of AI platforms, models, that whole new toolbox in so many ways. I mean, the combination of hardware sort of proprietary data sets and sort of a customer base that sort of goes directly onto the platforms without any intermediaries. And just the ability sort of these sort of new ways of writing code and software, et cetera, is so beneficial basically for these companies. So -- and then the other one, of course, is I think you'll agree with me is this sort of are we heading to a recession, energy prices are up, inflation is up, interest rates are high because of inflation, that whole thing. And the point there is that we have sort of strong elements of countercyclicality in our portfolio. So in tough times, you use these products more. It's most intuitive around BlaBlaCar. We'll come back to that, but it's there basically. So yes, so with that sort of long-winding intro, I thought we'd sort of kick off this -- we'll take you through the numbers and touch a little bit upon the different names. So Bjorn, do you want to run us through the numbers? Björn von Sivers: Sure. So starting off sort of the overall portfolio. Here is a simplified sort of breakdown of the balance sheet. So as Per mentioned, NAV down to $462 million, down 15% over the quarter in dollars to $3.61 per share. In SEK, that's SEK 34.25 per share or down 12% over the quarter. Total investment portfolio amounted to $503 million, consisting of sort of $486 million of investments and $17 million worth of cash. Important to note that sort of we have an additional $30 million of cash and cash equivalents, but in liquidity management investments. So all in all, we're looking at sort of cash, cash equivalents and liquidity placings in the range of $47 million, borrowings down to $45.7 million as per quarter end. Continue to trade as a significant discount to NAV as of today, sort of 49% discount. And moving down to the sort of big drivers over this quarter is, of course, the larger constituents of the portfolio and just going through sort of the few largest ones here. So BlaBlaCar, obviously, the largest driver, down 27% or $44 million to $120 million for the holding, primarily driven by depreciating multiples over the quarter, both driven sort of from the overall rapid developments and uncertainty coming from the AI space, but then also, of course, from the geopolitical tension, whereas BlaBla sort of part of that peer group is in the OTA travel-related marketplaces that's been hit a lot. Same goes for Voi, that's also down over the quarter based on multiples. It's the order of sort of 16% or $20 million. HousingAnywhere here actually valued on a new transaction, we participated with EUR 1 million and then another sort of $1.5 million sort of converted from earlier convertible investments we held. Numan and Breadfast based value on transactions were relatively flat, a little bit of FX on Numan. And then Bokadirekt down roughly 10%, also driven by contracting multiples. All in all, these 6 names represent SEK 26 per share or sort of on an aggregate basis, 77% of the NAV. And again, sort of ended the quarter with $70 million of cash and cash equivalents and $30 million in liquidity management investments. Also sort of during the quarter, we bought back another close to 500,000 VNV shares and also a small amount of the outstanding bonds, which I'll come to now, which we also sort of announced today that we announced a partial buyback offer of the outstanding bond up to a transaction cap of SEK 275 million. This is to sort of effectively take down the gross debt and also lower the interest expense going forward. We launched this today and we'll hopefully have sort of the outcome sometime next week. With that, I thought I hand back to Per and we'll touch a little bit more deep in the larger portfolio holdings. Thanks. Per Brilioth: Yes. And yes, the structure of the portfolio looks very similar to what you've seen before. And so nothing really to comment here. But if we flip to the next page, this portfolio, as we've been on and on about, trades at sort of roughly half of the reported NAV. And as we -- as I think it's clear, we think it's -- we think that NAV is attractive, cheap. And hence, we've been buying back stock as we think that, that's the absolute best thing one can do with shareholder money. Our sort of aim is absolutely to continue doing that. And the reason being, as the next slide shows, as you've seen before, is that this is a portfolio that at large is positive, is earnings positive, is profitable. The slight downtick from a year ago is because of the absence of Gett, which is a profitable company. But at large, this company -- this portfolio is profitable and not sort of craving a lot of money to stay alive. And so that's not a reason for saving money to sort of put back into the portfolio names. We can use the money we have to buyback stock. And this profitability does not come at the expense of growth. We've made a new slide, which is the next one, just to -- which sort of you'll recognize it from earlier that this portfolio continues to grow over the past sort of is it 3 years, you've got a CAGR of nearly 30% across these 6 top names in terms of revenue growth, and it's turned from being slightly negative profitability to positive. So big change there. And as we try to highlight here also just as a reminder of how markets move around, these 6 names are -- those 6 names back in '23, this quarter, first quarter of '23, we had them in our NAV at $446 million and total NAV was like $800 million back then. And we now value them at $358 million. And so despite that sort of big shift in loss-making to profitable and very, very sort of steady growth. This last quarter, that portfolio grew by some 25%, still but marked lower. The overall NAV is, of course, lower also because we've sold some stuff to pay down debt. So I think that's a useful reminder of where we've come from and where we are today, both in terms of sort of quality of the portfolio, but also how we market. Yes. If we then go into the bulk of the portfolio, there's nothing really new around BlaBlaCar. This is a good summary, I think, around how they sort of closed 2025. EUR 2 billion of GMV is a sizable number. I know GMV is not revenue, but it's -- and as you remember, a bunch of their markets are unmonetized yet and some of them are really coming strong into monetization like Brazil now, but others remain unmonetized, waiting for liquidity to sort of further improve. But still GMV, that's a tool that many people use to sort of value these kind of sort of platforms, et cetera. And if you use that number and to where we're marking it today, it's 0.4x GMV, which I think is fair to sort of categorize as attractive. Certainly, in my mind, that is. And if you go to the next page, we also have a BlaBlaCar that's doing really well at the start of 2026. They have had a strong start. And -- and also of late, we've really seen this element of countercyclicality in the business model where oil prices go up, it's -- energy prices go up at large, driven by oil prices now. The activity of BlaBlaCar goes up because it's more expensive to drive a car and you're more prone to get other people into fill those seats. You do that through the BlaBla platform. So BlaBla gets more business and the graph on the right sort of highlights that. I think that's sort of all for BlaBlaCar. If we -- let's go and talk about Voi. Dennis, do you want to run us through Voi? Dennis Mohammad: So Voi closed a record 2025 with EUR 178 million of net revenue. This is up 34% year-over-year and adjusted EBITDA of EUR 29.3 million, which is up 70% year-over-year and adjusted EBIT of around EUR 3.2 million, up from essentially breakeven in 2024. So a very significant improvement across the board in the P&L. As we alluded to earlier, the company during the year also did a tap of EUR 40 million on the existing bond framework to fund the growth CapEx for 2026. And they also secured an RCF with Danske Bank and Swedbank here in the Nordics for EUR 25 million, which is still untapped, but provides additional financing flexibility should they need it. In Q1 of 2026, we've written down the value of our stake in Voi by 16%. This is primarily driven by peer multiples trading down as Per has already talked about earlier, but in part also driven by FX as the dollar has depreciated against the euro during the quarter. Operationally, Voi has had a strong start to the year. It continues to win tenders in Q1 alone. They won tenders in the Netherlands, in France, in Germany and in Norway. And they've started to roll out their new fleet of e-scooters, the V9 scooter and e-bikes, the E5 and EL2 across the streets of Europe. So putting to use the bond money that they raised at the end of last year. The company will issue their Q1 report on Monday next week, that's on April 27. So more information will be available then. I see we already jump to the next slide, which is good. As Per wrote about in the intro to the report, when Voi issued its bond in 2024, it pioneered the financing model that industry peers have since either replicated or attempted to replicate. We have now received the first public financials from one of those peers and the comparison truly reinforces our conviction in Voi's strategy and in their execution. As you can see in the numbers here on the graph, while Voi grew revenues by 34% year-over-year and generated reported EBITDA, different from adjusted EBITDA, but reported EBITDA of EUR 19 million and EUR 24 million of cash flow from operations, the European peer here saw a revenue decline of 16% year-over-year and on essentially the same revenue base generated negative EUR 13 million of EBITDA and negative EUR 20 million of cash flow from operations. We've excluded EBIT here as the peer change methodology on this metric during the year, so making a like-for-like comparison difficult, but that number was heavily negative as well for the peer. As I said, we are convinced that Voi strategy and execution is the best in the industry. And I think one additional data point that supports that is when looking at the revenue generation per vehicle end day on the right-hand side of this slide. So Voi generating EUR 3.94 per vehicle in a day in 2025 and the peer down at EUR 2.88 in revenue per vehicle per day. We can see here that, that's a 37% more revenue generation per vehicle at Voi. And I think this really shows how Voi's investments across the full platform, everything from hardware, where they have their own proprietary IT module, high-capacity swappable batteries to software where they use machine learning for fleet optimization. They have a very strong fleet and inventory tracking system. And lastly, operations where they have best-in-class fleet sourcing, fleet management, maintenance and eventually resell is truly paying off. With that, we go to the final slide, where there's really nothing new to report. They've seen continued growth on top line and improvements on profitability across the board, as I alluded to earlier. As also mentioned, their Q1 report is out on Monday. So we encourage you to keep an eye out on their IR website then. If we then jump to the next company being HousingAnywhere, HousingAnywhere has had a good first year under Antonio Intini, who joined as a CEO roughly a year ago after having senior roles at both Immobilare and before that, Amazon. Looking at their 2025 financials, the company closed the year with continued growth on top line and positive adjusted EBITDA, which is a big improvement on the year before. In Q1, as Bjorn mentioned, HousingAnywhere closed a financing round where VNV participated with EUR 1 million and where previously held convertible loan notes were converted to equity. With this new funding, we think that the conditions are in place to push growth harder from here, and we look forward to following that transaction, which was done around the VNV mark at year-end last year. If we then finally go to Numan. Numan closed a very strong 2025 with north of 125% growth on revenues and positive adjusted EBITDA. As we've spoken about in the past, their weight loss vertical has been a key driver of this growth over the past couple of years and 2025 was no exception. In Q1 2026, the company has continued to grow, albeit we have seen growth come down from the levels it's seen in past years, primarily driven by some price changes in the market for GLP-1 in the U.K. which initially led to some stockpiling behavior ahead of the increases and then some slightly lower activity following. But as I said, they're still growing year-over-year in Q1, and we value Numan on the back of a transaction that they closed last summer. However, should we have valued it on the back of a peer group model this quarter, it would have been roughly in line with the mark we currently carried at. Finally, this company continues to invest in its unified Numan 2.0 platform, which we believe is a key driver to long-term LTV growth and patient retention, and we look forward to seeing the results from those investments in the quarters to come. That's it on Numan. Handing it back to you, Bjorn. Björn von Sivers: Thank you. I'll finish off with sort of a short comment on Breadfast here, who continue to see strong growth in its core e-commerce business and also sort of initial promising dynamics in its fintech offering. During Q1, the company announced sort of the final tranche of their $50 million funding round, which they completed sort of majority of last year, but the final tranche sort of closed in Q1. So company is funded and continues to grow well, hence, sort of flat valuation still based on this transaction. And then finally, on the top 6 here, we have Bokadirekt, who is also sort of down during the quarter, primarily driven by multiples, but on sort of that side, continued strong performance, strong profitability. Bokadirekt also announced a small acquisition during the first quarter. They bought a company called Zoezi, which is sort of a niche SaaS player for gyms and personal trainers, which will add both sort of top line and profitability to the company. And with that, I think we're through the top 6 names, and we'll head to a Q&A. Björn von Sivers: And as a reminder here on the Zoom, please use the chat function or the Q&A function in Zoom and we'll try to address them. And I believe we have a few questions. We could start with this one for you, Per. Perhaps, once you do the partial bond redemption, what do you think is the remaining headroom to repurchase shares? Or put it differently, how do you weigh sort of the bond redemption versus share buybacks going forward? Per Brilioth: Yes. We -- our target is to sort of -- our goal for a long, long time, as you know, and which we sort of achieved now with the sale of Gett, this has sort of become debt-free and not to sort of be burdened by paying a coupon to -- because of the debt we have. So this is just a continuation of that. But at the same time, we absolutely aim to have liquidity to make use of this sort of gift that the market is giving us of valuing us where we are and put shareholder money to work at that. So -- and we've been active around that, and we do it in the way we do it, as I think you've all sort of seen, we try to -- or we do sort of highlight in press release what we bought the previous week. So I think it's fair to expect us to continue doing that and to sort of and also to fund that. Now this partial bond redemption sort of leaves a little bit of cash. We're still net cash, but -- or yes, barely, but we are -- but it leaves liquidity to continue to do that. So that's good. And when we get to the sort of the end of the duration of this bond, then we -- during that sort of period, we see that we will have completed several more exits. There's an ongoing sort of process, some driven by us, some driven by sort of things at large that will provide us with liquidity. So it's too early to talk about that because nothing is done until it's done. But I feel sort of assured that we will have sort of ample liquidity both to sort of retire this bond at full and then and to buy back stock. But nothing is done, unless it's done, but this redemption leaves us with, I think, a good balance of liquidity to sort of make use of what we want to do here in the market. Björn von Sivers: Another question here on BlaBlaCar. You mentioned profitability at BlaBla briefly. Could you give us some color on how this would scale if the higher activity levels from March were to persist during the year? Does the increased activity sort of translate into higher profitability as well? Per Brilioth: For sure, it does. And we're unfortunately not at liberty to share sort of any further details as much as we would like. We're not at liberty to do that. So -- but for sure, this drives sort of revenue -- business revenue and higher sort of earnings. So it is a positive for sure. Dennis Mohammad: Maybe I can add there, Per, without saying too much to your point, we're not at the liberty to do so. But the core carpooling business that they run operates at north of 90% gross margin. So any kind of revenue coming outside of what you have anticipated covers the fixed cost is already covered, so you get a pretty high contribution on the bottom line from that. So to Per's point, the answer is yes. Per Brilioth: Yes. No, well described, Dennis. So yes, I hope that answers that question. Björn von Sivers: And then sort of a follow-up question sort of on buybacks of shares and bonds sort of given the volatility in the markets and contracting multiples, aren't you sort of more eager to increase buyback levels of the share? And/or if not, are there other plans for sort of additional investments in the existing portfolio companies or new funding rounds? Per Brilioth: There's sort of just having a go at that question, the different parts of it. So there's nothing major. None of the large ones sort of have any large rounds going on. There's small bits and pieces that we have been -- where we've been active in the portfolio, but they're really sort of on the marginal side of things. So not a big sort of draw on liquidity. And yes, no, I mean, if we -- if we had liquidity to do more now, we -- I absolutely would be a strong advocate of doing more in terms of buybacks. I think it's very attractive. I really, really believe that our NAV will be able to deliver serious returns over these coming years. And so if we have sort of liquidity to do more, we'll do that. But sort of obviously need to balance that liquidity, but very eager to sort of participate in the way we're doing now. So it's that balance that you may feel is keeps us doing this at a frustratingly timid kind of level. But it's -- yes, it's necessary to do it that way. If we can accelerate some exits that are at NAV or around NAV, then of course, it makes a lot of sense to do those and then sell. But it's -- nothing is done unless it is done. I feel very strongly that we will be able to sort of complete some further exits and hence, we'll have liquidity to do more, but got to keep an eye on that balance. Björn von Sivers: Another question here, specifically sort of on the Voi valuation, maybe for you, Dennis, other than sort of contracting multiples, what has sort of -- what levers have been moving around on that in the model? Dennis Mohammad: So the multiples are the -- is the primary driver. As you know, we value in the next 12 months. So we've moved 1 quarter forward. So the NTM outlook is obviously higher than it was in the previous quarter since the company is growing. But you also have FX, as I alluded to earlier, the dollar has depreciated against euro. So that's one negative contributor. And also net debt. And in the case of Voi, we don't simply take cash minus debt. We look at what obligations the company has with the existing cash. In this case, it's CapEx investments for 2026, where they've improved the kind of -- they've improved payment terms significantly over the past couple of years. So cash outflows happen during the year to a larger degree than everything going out when you place orders. So it's a combination of FX, net debt, but primarily, as said, multiples. Björn von Sivers: Thank you. With that, I don't think we have any further questions at this point in time. But as always, feel free to reach out over e-mail, and we'll try to be helpful. And other than that, I'll leave it to you, Per, for any final words. Per Brilioth: Nothing more to add, frustrating quarter because of all the stuff that we've talked about, but we feel really positive about the portfolio and the opportunities that we have here. . So yes, when is our next report Bjorn, it's -- we're looking at July 14, the National Day in France. So that's when we will speak next. Thank you, everyone. Dennis Mohammad: Thank you. Björn von Sivers: Thank you.
Michael Green: Good morning, and welcome to this presentation of Handelsbanken's results for the first quarter of 2026. We can conclude that the bank reported yet another solid quarter. Operating profit increased by 9% compared to Q4 and the ROE amounted to 14%. The main income lines, NII and fee and commissions were stable. While the lending growth in Sweden was held back a bit by a general slow Swedish economic growth, it was again very encouraging to see that the lending growth trend in the U.K. and the Netherlands continued both on the household and on the corporate side. This has now been a consistent trend for more than a year. The savings business continued to perform well with market shares of net inflows into mutual funds far exceeding the market share in our books in both Sweden and in Norway. Cost efficiency is always a top priority in the bank. And again, we saw expenses declining. The net asset quality remained very strong with more or less insignificant credit losses once again. The capital remains robust. The anticipated dividends for the quarter earnings were increased a bit in order to calibrate the CET1 ratio to 17.2% or 250 basis points above the regulatory requirement compared to the 285 basis points in the previous quarter. The anticipated dividends amounted to SEK 2.93 per share or 91% of the earnings generated in the quarter. When we look at the longer-term value creation for our shareholders, this solid Q1 report fits well into the picture of the bank's resilient business model. As illustrated in this graph, the growth in equity per share plus dividends has not only been consistently stable over the past decade, but also growing with an average of 14% per year. And if zooming in on the past 5 years, the average growth rate has been even higher at 15%. And not to forget, this has been achieved in a decade, which includes everything from negative interest rates, Brexit, a pandemic, war then in the Ukraine, inflation and interest rate spikes, stresses in the real estate sectors, et cetera, et cetera. This is what we strive at always generating for our shareholders and also what the shareholders should expect from a bank like us. This stability is, of course, not achieved by coincidence and not just of our way of working. It's a result of the chosen markets and geographies. Our four home markets share the following common traits. They are all stable democracies with large economies, rule of law applies and the political and regulatory landscape are stable. It also helps if there are culture similarities and shares of values. Not only the assets, but also the cash flow from our customers are stemming from stable Western European economies. In such markets, the Handelsbanken model has a chance to stand out with a unique offering and a higher customer satisfaction than our peers. It is, of course, also essential that there are large bases of potential customers with the right risk profile and that we have a demand -- and have a demand for our offering, hence, offering material scope for long-term profitable growth at a suitable risk level in stable markets. And just to add a small remark, given the recent themes into the financial markets, we have no exposures to private credit. Before going into the financials for the first quarter, just some comments on the recent business development in these four home markets. Starting with Sweden, which accounts for 76% of the profits in our home markets. Handelsbanken is the largest lender in Sweden when summing up household and corporate lending. It's therefore fairly natural that the soft general economic growth in Sweden translates into fairly flat lending volumes in the past quarters. Deposits are growing somewhat, but the key growth is seen -- clearly seen in the savings business, where we consistently for the 1.5 decade, have seen market share of net inflows into our mutual funds far exceeding the market share of our outstanding volume by more than 2x. In the U.K., we had a long period after Brexit with declining lending volumes, mainly due to customer amortizations exceeding new lending. Since more than a year, the trend has clearly shifted to a consistent lending growth quarter-by-quarter on both the household and the corporate side. Also, deposits have increased over the past years as well as the savings business. The U.K. is a market where the customer satisfaction really stands out the most when comparing with our peers in the market. In Norway, we stated 2 years ago that we needed to see a better balance between lending, deposits and savings, and the situation has improved since. While lending volume have dropped over the past year, mainly due to intense competition, growth has been seen in deposits and in particular, in the savings business. Over the past 2 years, the market share of the net flows into mutual funds in Norway has been more than 2x the market share of the outstanding volumes. This means that we are deepening the relationships with existing customers and adding new customers, which bodes for improved profitability over time. And finally, the Netherlands. Just like in the U.K., the distance to peers in terms of customer satisfaction is particularly large. Lending growth has been very strong, as you can see in deposit -- and despite the drop in deposit last year, the longer trend has also been positive. And what is even more positive is that we now see also -- we now also register a sound growth in the savings business with steady growing assets under management. Now if we look closer at the financials of the fourth quarter compared to the previous quarter -- the first quarter, sorry. ROE amounted to 14% and the CE -- cost/income ratio was 39.5%. In Q1, a VAT refund of SEK 1.1 billion was booked. An adjusted basis, the ROE was 11.7% and the cost/income ratio 42.8%. Operating profit increased by 9%, but declined on an underlying basis by 3%. NII and fee and commission were marginally down, headwinds mainly related to day count effects and FX. Income increased by 3%, but declining by 3% on an underlying basis. Credit losses amounted to SEK 35 million or 1 basis point. Regulatory fees decreased as the previous quarter included a booking of a charge for the interest-free deposits at the Central Bank. Now if we switch over and look at the quarter compared to Q1 last year. NII declined by 13% and 10% adjusted for currency effects. The decline is related to lower margins in the wake of lower short-term market rates. Net fee and commission income, on the other hand, increased by 7% adjusted for FX effect. The key driver was again the savings business and strong inflows and positive market developments. All in all, total income dropped by 6% on an underlying basis. Underlying expenses dropped by 1% despite the annual salary revision that comes into force on January 1 each year and also the general cost inflation. Last year, we had a net credit loss reverses and the regulatory fees were flat year-on-year. All in all, the underlying operating profit was down by 12%. Now if we take a closer look at the NII development compared to the previous quarter, we see that NII dropped by 1%. Volume growth contributed with SEK 20 million in the quarter due to lagging effects on interest margins from lower short-term market rates in the previous quarter, the net of margins and funding contributed negatively by SEK 67 million. Deposit guarantee fees were lower this quarter, the decline being explained by fees being elevated last quarter as the final bill for that year was received and paid. The day count effect due to 2 less days in the quarter and the currency effects due to a stronger krona on average has created some headwind, as you can see. Net fee and commission income dropped slightly in the quarter. The bulk of fee and commissions related to the savings business, especially in the mutual funds business. The positive effect on fees from the strong net inflows were, however, offset in Q1 by a negative day count effect as well as negative mix effects with an increased share of the AUM asset under management in lower fee funds. Other fees were seasonally down. The high market share of net inflows into mutual funds have added significant customer asset under management under -- to the bank over time. As illustrated in this slide, the bank has now accumulated net inflows into Swedish mutual funds at almost 2x the run up over the past decade. This success comes not only from appreciated offering and strong performance in the funds over the years, but also the bank's distribution capacity where advisers are close to and have deep relationship with our customers parallel to an appreciated offering and distribution in our digital channels. Now over to the expenses. A trend of increased cost was broken in 2024. And since then, the expenses have trended down despite annual salary revisions and general cost inflation. The bank is now in a good position in regards to cost efficiency. As illustrated in Q1 when costs continued down on both quarter-on-quarter and year-on-year, it's deeply rooted in our culture and among our employees to always look at new ways of becoming even more efficient. Next slide show our asset quality and credit losses. Over the past decades, credit losses have been very low, which they should be in the bank with our risk appetite. Since the outbreak of the pandemic in 2020, the sum of all credit losses has been SEK 50 million or on an average, SEK 2 million per quarter. And that includes the period from the pandemic, sharp savings -- sharp swings in policy rates and inflation, the disruption of supply chains following years -- following the war in the Ukraine and Middle East, et cetera, et cetera. Still more or less no credit losses. If we compare the credit losses to our closest peers, the bank also stands out over the decade. In particular, in volatile times, difference in underlying asset quality has shown. In Q1, the credit loss ratio was 1 basis point. Perhaps needless to say, asset quality remains very strong. The bank is in a very solid financial position. Credit risks, funding risks, liquidity risks and market-related risks are prudently managed and the capital position is strong. The anticipated dividend in the quarter of SEK 2.93 per share equals to 91% of the earnings in Q1 and is yet another step to gradually adjust the capital position in the bank. The CET1 ratio now stands at 250 basis points above the regulatory minimum compared to the 285 basis points in the previous quarter. The bank should, however, always be considered one of the most trustworthy and stable counterparts in the industry. This is also the view by the lending rating agencies who rate the bank the highest among comparable rates globally. And this view was again confirmed and further enforced last evening by Moody's, who upgraded the bank's baseline credit assessment rating to A1 from A2. This put the bank in a very exclusive group of only a handful of privately owned banks globally with the highest BCA rating by Moody's. Finally, to wrap up, Q1 was a solid quarter with increased operating profit and ROE, although including a positive contribution from a one-off VAT refund. Q1 NII and fee and commissions were stable and costs declined. We see lending now growing consistently in the U.K. and the Netherlands and also in the savings business broadly over the markets. Our way of doing bank is appreciated by customers where they experience close relationship with us, and it's also seen in the external surveys in all of our well-chosen home -- stable home markets. Asset quality remains just as strong as it should for a bank with our risk appetite and the capital position is very strong, and we took another step down in the target range by anticipated dividend equaling to 91% of the earnings in the quarter. Finally, I'm also happy for our shareholders that has seen share price reached an all-time high during the quarter. And with those final remarks, we now take a short break before moving into the Q&A session. Thank you. [Break] Peter Grabe: Hello, everyone, and welcome back. This is Peter Grabe, Head of Investor Relations speaking. And with me, I have Michael Green, CEO; and Marten Bjurman, CFO. As always, we would like to emphasize that we appreciate that if you ask one question at a time in order to make sure that everyone gets a chance to ask their questions. With those words, operator, could we have the first question, please? Operator: [Operator Instructions] And your first question today comes from the line of Magnus Andersson from ABG Sundal Collier. Magnus Andersson: I was just wondering regarding the -- in total, SEK 6 billion in AT1 capital you issued late in Q1 '26, whether the main reason was to be able to go down further in your management buffer or if you expect the higher volume growth going forward or a combination of both? And related to that, also, if you could confirm that the coupon will be taken directly in other comprehensive income rather than in NII... Marten Bjurman: Magnus, this is Marten speaking. Yes, I had a little bit of a difficulty hearing your first part of your question, Magnus. But I assume that you talked about the AT1 that was issued late in the quarter and booked in Q2. And it's fair what you said, it's correct what you say that this is an equity instrument. It will be booked in the equity and the interest rate, if I may call it that, the coupon, that will be booked also in the equity, yes. Magnus Andersson: Okay. And also the reason for it that you have your next call in March 2027 of USD 500 million. What was the main reason for doing this now? Was it to be able to go down the management buffer volume growth? Or... Marten Bjurman: Well, there are various components into that equation, Magnus. But obviously, we didn't have a full box of the AT1, if I may call it that. This provides flexibility to the bank. And as you know, the 2 outstanding AT1s, they are in U.S. dollar. This one is in Swedish krona. So yes, it's -- and then we take it from there. We'll see. But the main reason is that it provides flexibility for the future. Operator: Your next question today comes from the line of Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: I was thinking about you, Michael, you mentioned that you're going down gradually in terms of capital buffers. Can you give some guidance on -- I know that the Board is deciding what you will pay out. But since you have gradually reduced this buffer in your accrual of dividends, where are we heading within the range, please? Michael Green: Yes. This is Michael speaking. I don't think you should read that much into the adjustment this quarter. But it's -- the bank is in a position where we are running the bank very operationally strong and we have a cost -- the cost in place and all that. So we have gradually come down in our target range. And when we look at the world outside and we compare what's going on there with how our customers behave in terms of risk, we don't see anything that really sticks out. So our customers, they are in very good shape. And the risk we allocate for is taken care of in our internal risk models. So I don't see the need for having SEK 285 million now. So we will -- we just take it down to SEK 250 million. And then as you just said, we decide where to go when we come into the -- what we anticipate now for the year, and then we take the decision in the Board for how we recommend the -- for the shareholders to -- on the dividend side when we come into the Q4 report. Markus Sandgren: Yes, so I understand. But what do you mean by that, you shouldn't read too much into that you change it because you do change it because you think it looks good. So there must be some message in that. Michael Green: Because it looks good. Marten Bjurman: So but let me underline a little bit also. Again, I think bear in mind where we're coming from. We have -- we're coming from SREP plus 5% or 6% and then we took it gradually down, as you know. And we felt the need to guide a little bit to say that reinforce that the message that, yes, we have this interval, it is set, and we are slowly moving into that. Now as we are within the interval, we don't feel the need to guide that much further on a quarterly basis. So you shouldn't expect us to draw the line anywhere within the range. Now we are in the range, it feels great. Operator: Your next question today comes from the line of Gulnara Saitkulova from Morgan Stanley. Gulnara Saitkulova: On your cost outlook, please, could you walk us through the key moving parts in your cost base for the next 3 quarters that we should be aware of, specifically, where do you see flexibility for further cost reductions versus what could be the areas of additional cost pressure? You previously mentioned that you have completed the centralized cost-cutting program, but do you expect more efficiencies to come through from elsewhere, for example, from the local branches? And if you look at your headcount, it's down 1% quarter-on-quarter. Do you expect any further reductions in the number of employees to come through? And how should we think about your Oktogonen contributions going forward? Marten Bjurman: Okay. Well, maybe my answer will be a little bit disappointing to you because we will not guide on the costs going forward. But it's very true what you say. We have that initiative behind us now. We have no plans of broadcasting yet another of those initiatives. But rather, we are staying very true to our culture, our model where every employee within the bank is extremely cost cautious and very sensitive to increases in costs. And this quarter was extremely successful when it comes to cost as well. It was even to me, a little bit surprising actually. But again, I think that you shouldn't expect it to go further down. We are at a level now where we are extremely confident that we can run the bank the way we want. We have resources to spend and invest where we want to spend and invest. And -- but this model is extremely decentralized. We will not interfere with our home markets. We will not interfere with our branch office managers. So ultimately, they decide. So therefore, we cannot guide any further. Gulnara Saitkulova: And what about the headcount? Marten Bjurman: Headcount number is basically the same, maybe a little bit boring answer. But still, if a home country wants to expand in terms of number of employees, they are free to do so if they have good reasons to do it. So I don't foresee any big shifts either upwards or downwards in terms of full-time employees. Michael Green: And just to add on, when Marten says we -- the decision-making for resources, both in headcounts and other cost initiatives that they could happen throughout branch networks and product or whatever. It's not that we don't guide and we don't steer, but we follow them closely. So it's a very sharp following up in terms of cost efficiency and the returns on the investment we do. So it's not do as you like. It's do what you think is necessary, and we will keep a very close track on what's going on. Operator: Your next question today comes from the line of Andreas Hakansson from SEB. Andreas Hakansson: So a little bit of a follow-up here on costs. I mean you've been reducing cost continuously now for, it feels like 8 quarters roughly. And I mean, when we speak to quite a few banks, they see that there's a lot of IT investments relating to AI and whatnot. And when we speak locally and we hear people gossiping or talking, it doesn't sound like you are clearly ahead of the pack in terms of those investments. So is it a risk that you have underinvested now over the last years because a lot of the savings have come from IT, if nothing else? Marten Bjurman: The short answer is no, I don't think so. I think it's more of a matter of how you're running your development within the IT space. We were heavily dependent on consultants for a very long time. We have now -- we are now at another place in terms of that mix between employees and consultants. So that's one thing. But the other thing is that we are running our IT development in another way now. We have much more control, generally speaking. In terms of AI, are we lagging behind? Are we the first mover? I don't think it's in our nature to be the first mover in terms of trying out different AI solutions. That being said, though, I'm extremely confident that we have navigated through these challenges and opportunities the right way so far. It's a broad area. It opens up a lot of opportunities, not only for the bank, but also for our customers. We're following it closely. We have quite a number of initiatives that are all the way from ideas to fully implemented and up and running successfully. So it's a broad range of initiatives. So I'm not worried for that matter. Andreas Hakansson: So as a CFO, it's not that you want more resources, but Michael thinks you need to slow it down still? Or what's the balance between you? Michael Green: No, no. We don't -- the balance is very good between my CFO and myself. So -- but just for the record, I totally embrace the technology and the development of that, and that's a very wide area, and we invest largely in things that we need -- that we see could fit well into our customers and also for ourselves in terms of efficiency reporting, whatever. So I'm very interested in that, and we have a quite good pace actually. So I don't really have the feeling that you described in your first question that we lag. I don't think we lag. I think we do it in a very balanced way in the way we see it from my perspective. Operator: Your next question comes from the line of Shrey Srivastava from Citi. Shrey Srivastava: My first is actually on the positive side, you've got the second consecutive strong quarter for loan volumes in the U.K. What is the profile of the new customers you're attracting versus the U.K. incumbent? Has it materially changed versus your existing customer profile? Marten Bjurman: Thank you. No, no, it hasn't changed. It's basically the same. It's the corporate lending growth that you see in U.K. is very pleasing and the trend is continuing. So very pleased with that, generally speaking. In terms of our customers, it's no new mix of customers. We are very true to our model in terms of providing financing to businesses that we understand that have strong cash flows, a strong repayment capacity and all that. So no, the short answer is no. We don't have any new features into our model in providing financing to our customers. Shrey Srivastava: Right. And my second one is, can you explain this 50 basis points negative impact on the CET1 ratio from other factors, including claims on investment banking settlements and rounding on? I don't believe it's ever been called out before explicitly. So I'm wondering why it was so large this quarter? Marten Bjurman: Well, it is large this quarter due to natural reasons because I think that, that business where this derives from is typically slowing down in Q4. So when you compare the 2 quarters, this looks quite hefty. But it's not. I think if you take this level, it could be a natural level for the coming quarters. And I think you touched upon it in your question where it comes from. This is coming from the market making in the capital market side of the bank. So this is really short-term claims. These are coming from market making and deals that are between settlement date and trade date basically. So very short-term claims on our customers, majority in the fixed income space. Shrey Srivastava: Okay. So this was a bit larger than you'd expect given the seasonality if you look versus the past few years? Marten Bjurman: No. I mean, this portion that I just explained is maybe 1/3. The other 2/3 are so many items in so many parts. So it must be considered a regular quarterly volatility, many, many smaller items in that. So I'm not surprised where we are. But again, you have to compare with a regular quarter. And in this case, Q4 might not be that one. Operator: Your next question comes from the line of Namita Samtani from Barclays. Namita Samtani: I just wondered, it's just another quarter where Nordea is growing its Swedish corporate lending by 4% quarter-on-quarter and Handelsbanken volumes are flattish. So I just wondered why you're allowing another bank to take market share from you so much so that you're not even growing the Swedish lending book in the quarter? And just a follow-up to that. I just also wondered why there's appetite to grow in commercial real estate in the U.K. and Norway, but not in Sweden just based on how you grew this quarter. Are the competitive dynamics different in Sweden versus Norway and the U.K. Michael Green: Yes. So the -- first of all, we don't allow competitors to take business from us. We compete every day and you win and you lose some. In our -- from my perspective, the volumes that we've seen leaving the bank has mainly -- or absolutely the vast majority is -- it goes to the capital market side. So it's not that any other bank is competing with us, and we do not have the capacity to compete that. So that's how it is. And I'm not going to comment on Nordea's growth. That's -- I don't know what they do there. But I think growing the lending book, it comes -- when you have market shares like we do in Sweden, you tend to grow, as we've said before, in line with the real economy growth in this country. If you want to grow more over time, you need to be very aware of pricing and risk, and we are conservative in that sense. So we follow our customers. If they invest, we will grow with them. And we will gladly compete and take business from our competitors. But in general, we grow in Sweden with our very, very strong corporates and private individuals. And if you look at the market right now when it comes to corporates, what we see from our perspective when we talk to our customers is that they are a bit reluctant now to invest both when it comes to investing in factories and production, but also invest in real estate right now. So it's a bit on a standstill due to the uncertainty in the surroundings. And when it comes to the private individuals in Sweden, we see a small pickup when it comes to buying new houses, and we have quite a strong inflow when it comes to that market, when it comes to the transition market when they buy houses. So we don't see a problem with this. We -- in Sweden, we follow our customers when they grow and when they're not growing. When it comes to the -- as you probably noticed in the U.K. and the Netherlands, we have the opposite. We have a quite strong growth there because the market share we have is quite low. And that's what you should expect, and that's what I'm expecting with high ambition in these countries. Namita Samtani: Sorry, could you just comment a bit on the differences in the commercial real estate U.K. and Norway versus Sweden? Is it more competitive in Sweden? Michael Green: No, I think there are competition everywhere we are because we're very strong and transparent countries with strong competitors. So I don't think any -- there is any difference there. Operator: Your next question today comes from the line of Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: Here is Sofie from Goldman Sachs. I was just wondering how we should think about the net interest income in the other division, given that it was up 41%, I think, quarter-on-quarter. Could you just comment on kind of what's the normalized run rate? Are there any headwinds or tailwinds we should kind of be mindful of? And also, I know you don't guide on rate sensitivity, but if you could just help us kind of think about how we should model potentially higher rates in Sweden and also elsewhere in Europe, what the kind of moving parts are? Marten Bjurman: Yes. A number of questions there. And the sensitivity to policy rates, yes, obviously, when we have -- as we had in this quarter, policy rates turned down late in the previous quarter, we will have an effect. And generally speaking, as you know, we benefit from higher rates rather than lower. So -- but in the meantime, we have lag effects that you know of when these rates are cut. And it varies a little bit between countries. But yes, generally speaking, we should expect now that, okay, policy rates were expected to go down further in U.K. and in Norway. Now we don't -- we're not so sure anymore. Some say flat, some say even a little bit of a pickup. Obviously, we will have an impact of that. It will take a little bit of time to bleed through that effect through the books as with all banks, I guess. So that's where we are, and we don't guide any further than that. Sofie Caroline Peterzens: But in terms of the other division, like -- yes, do you have any guidance on how we should think about the contribution from there because it's very difficult to model on a quarterly basis, plus 40%. So is there any way we could kind of think about how to think about the kind of volatility in this division going forward? Peter Grabe: Yes. This is Peter speaking. You can say that there are mainly two reasons. One is within the treasury department where actually both of these two items are within the treasury department. And it goes up and down in between quarters and it's connected to what's allocated to the different segments. On a group basis, everything, of course, nets out. But occasionally, you allocate out more from Central Treasury and sometimes you allocate out slightly less. And then furthermore, it's also a result of the -- of what you generate in our liquidity portfolio, i.e., the returns on the assets we have in the liquidity portfolio, which means that it can go up and down somewhat in between quarters. But I think overall, you should see it as more of relating to components that generally are sort of intertwined with the allocations out to the respective segments. Operator: Your next question comes from the line of Riccardo Rovere from Mediobanca . Riccardo Rovere: Sweden loss cut rate in September, so say, around 6 months ago, would you say that now the balance sheet on the assets and liability side has absorbed the loss cut made by the Riksbank 6 months ago? Or should we expect a little bit more tail in the coming months? Marten Bjurman: Yes. Generally speaking, yes. I think we have seen most of the effect, not all, but most of the effect for sure. So that's the short answer. Riccardo Rovere: And let's assume for a second that short-term rates remain where they are. I mean, STIBOR goes up a little bit in the quarter. That I suppose nothing of that is eventually visible in these set of numbers, I would say so. Am I right in saying so? Marten Bjurman: I'm very sorry, I didn't catch your question fully. Would you be able to repeat... Riccardo Rovere: Yes, yes, sure. The STIBOR month was a little bit higher in the -- especially in the month of March. Let's assume for a second that, that remains. I think it was 9 or 10 basis points higher in the month of March. Let's assume that, that stays for a while. Is it fair to assume that in set of numbers, we have not seen anything from this 9 or 10 basis points higher level on STIBOR 3 months. Michael Green: I think it's what we usually say. I mean the reason for us being with silent here is that it's difficult to give you a straight answer on that question. I mean, obviously, as we always say that there are tons of factors that play in when we talk about the development of net interest of funding and margins. STIBOR is, of course, one component. But how a particular STIBOR movement in between months or quarters directly will affect the NII is very difficult to guide on. And as you know, we prefer to stay away from guidance -- sorry, Marten, please go ahead. Operator: Your next question today comes from the line of Emre Prinzell from Nordea. Emre Prinzell: I know you touched upon this, but just to double check here, what do you need to see for Swedish lending growth to meaningfully pick up in the next few quarters? I mean we're expecting Swedish GDP to grow maybe 2.5%. Should we therefore see a read to you that you ought to grow 2.5% in Sweden? Or what's a reasonable way of looking at this going forward? Marten Bjurman: Yes. Great question. Yes, I would love to grow 2.5%. That would be perfect for us. And as Michael alluded to earlier, we have seen 1 or 2 tickets leaving the book in this quarter, not to other banks, but to the bond market. That happens, it can happen. And what will it take for us to really set off the corporate lending? Well, I think -- and we've been talking about this quite a bit also during previous quarters that generally speaking, we will need the economy to pick up speed in terms of the recovery phase that we are in. And everything that is disturbing that picture is obviously not good for business. So if we have globally, even if it's not evident in our books, but the appetite or the demand for credit needs to pick up speed. That's where we are. We are not growing on our own. We are growing with our customers. So if they have a need, then we support them, obviously, it's not more fancy than that. Operator: Your next question today comes from the line of Johan Ekblom from UBS. Johan Ekblom: I just wanted to pick up on some of the earlier comments you made around costs and AI, right? So I think in response to one question, you said, look, the staffing decisions are made at the branch level. And at the same time, you feel like you're doing kind of enough in terms of technology and AI. But when we think about that, I mean, surely, technology and AI are investment decisions that had to be made at a central level and the benefits of AI are expected to largely come through in the -- in the form of lower staff needs. So does that create a tension in your decentralized model? Do you think you are as well equipped to reap the benefits of AI as maybe some of your peers that run more centralized business models? Michael Green: So Johan, thank you for the question. I appreciate that because this is actually a very good point. When it comes to decentralized way of working and resources, that refers mostly to the branch business. And when it comes to decision-making in terms of infrastructure program, AI investments, which is obviously a larger ticket. that's been taken care of within the management of the different areas, but also, of course, with the Head of IT, sorry. And we discuss that both me and Marten when it comes to these large investment programs that we run to make sure that we don't have any problem with holding back on time when it comes to develop new facilities, new prospects for doing business or creating efficiencies. So this is not a decentralized way of working. The -- what we should do comes from business and from IT. And then Marten and I and Head of -- Anton Keller, Head of IT, makes decision when it comes to the more heavy investments in this. So there's not a decentralized way of doing what you like when it comes to IT investments. Johan Ekblom: But do you not need full buy-in from the organization on adoption to make the investments work. Michael Green: Yes. But that's not a problem because if the reason is correct and right and logic and good for the bank, everybody will buy in. That's up to us to really make sure that the people understand why we do this. And I don't have any -- not once have I felt or heard that there is going to be difficulties in explaining the rationale when it comes to IT investment and spending because that puts the bank in a strong kind of competition position, which will be necessary all the time for a company to grow. So I don't think there is any problem with that, actually. Operator: Your next question today comes from the line of Max Jacob Kruse from Bernstein. Jacob Kruse: Just one question then. So this quarter, you hiked your mortgage rates very late in the quarter and STIBOR moved earlier. Could you just talk a bit about what you saw in the quarter in terms of timing effects? And maybe you could touch on as well any kind of balance sheet hedge offset you have there? Marten Bjurman: We saw none of those effects is the short answer. So yes, that's it. Jacob Kruse: And sorry, how is that -- I thought your list price would be determining the kind of role of the negotiated rates or the rates on mortgages. And obviously, your STIBOR, any kind of swaps into STIBOR would have moved. So why would you not see any impact? Marten Bjurman: We reset the interest rate for mortgages the 1st of April to start with. So it's first every month is the cycle, if you will, where we reset these interest rates. Michael Green: I'll just add that the price we get from the business when we do business with our private customers when it comes to mortgages is not -- it's -- the discussion stems from the list price, but it's not where we do business. So the cost for our branches when it comes to -- the funding costs for our branches, that it's volatile. It comes from where the market rates are. And they will then push and they do business where they find there is a profitability. So this -- the list price is just the way we start with the list price. We never do business on list price. So the volatility in short rating -- short interest rates are taken care of in the day-to-day business on the branches. Jacob Kruse: So just to clarify then, so the STIBOR moves are -- the STIBOR moved in the quarter, you say your pricing on the list price changed on the 1st of April because I guess your list price changed at the end of March. But I understand that your front book is a negotiated rate. But surely, as people roll towards -- if I have negotiated the rate, that will move with the list price. I think it will not move, but that plus the discount will be the role. So I don't quite understand how you can have STIBOR moving up and list prices staying stable without having any impact in terms of... Michael Green: So when you roll your 3 months interest rate period, we have another discussion with the customers. And then we set the new price for the next coming 3 months. So I don't really understand your concern there. Jacob Kruse: Maybe I'll catch up with you. Yes. Operator: We will now take our final question for today. And the final question comes from the line of Andreas Hakansson from SEB. Andreas Hakansson: And sorry, some follow-ups since we could only ask one question. So a follow-up and a real question. And it's back to, I think it was Namita asked about the commercial real estate exposure. I mean you're one of the most commercial real estate heavy banks around. And if we look in this quarter, the only growth is coming from commercial real estate, I think, in all markets, while other corporate banking is declining. Is that a strategy that you're happy with given that, I mean, the profitability of a CRE loan is normally lower than other types of corporate banking given what you can do around it and so on. So are you steering the bank in this way? Or is it just happened to work out like this? Michael Green: So Andreas, we don't steer the bank in which customer to pick and choose. That's for the branches to do. If they find it suitable or they find the risk suits us well. We have products that could solve problems for a corporate or real estate company, we do that. So it's the steering from my side. This is the way the bank is run. We make sure that our branches are in a position to compete and then they choose which counterpart they want to do business with. And this is how the balance sheet will ends up in that case. So it's not a -- it's not a choice from my perspective on where to do business. We try to compete on all segments. We compete on industrials or we compete on commercial real estate business. It's up to the branches to do that, to choose. Andreas Hakansson: Yes, that's fine, but the branches is quite significantly steered by a cost/income ratio and want to keep costs low, as you discussed earlier. But if they would then go after some other types of corporates where the margin could potentially be thinner and the cost-income ratio would be higher and then the benefits of doing some other type of business could be taken in the markets division in Stockholm. So is the branch really the ones that would drive a higher profitability type of lending since they are driven by costs? Michael Green: Yes, I say they are because what we do when we do business on the ancillary business, for example, within FX or other parts of the Investment Bank, that's been taken care of by refund, if you put that way to the branches. So everything comes down to the branches P&L anyway. So that's just good. So we do... Andreas Hakansson: But eventually... Michael Green: Sorry. Andreas Hakansson: But eventually, but you might have to live 2 years with a low margin until you do that business because you have to be committed to the company and so on. Michael Green: No, no, that's not how it works. So you get instantly repaid from the investment bank when they do their trades or their interest rates derivatives or whatever. That comes the month after. So that's not the way it works when we steer the bank. Andreas Hakansson: Okay. Then finally, on your loan-to-deposit ratio in Norway at around 300%. If rates now start to go up in Norway, which seems to be expected, is that a positive or negative for you guys? Marten Bjurman: It will eventually be a positive thing, Andreas, but it will take a little bit of time to adjust, obviously. So yes, but it's positive long term, yes. Michael Green: We will immediately benefit from the deposit side, of course. So that will give a boost. But then it's all about adjusting the lending book as well to the new market rate. Andreas Hakansson: Yes, I was thinking that some of a very deposit-rich bank could afford to compete on the margin on the lending side, given that it makes so much more on the deposit side, will you guys have flipped the other way around. Michael Green: Yes. But that's the way it has been for many decades now when it comes to the business and how we compete in Norway. So that's nothing new. Operator: That was our final question for today. I will now hand the call back for closing remarks. Peter Grabe: All right. Thank you, everyone, for all the questions and for those of you who listened in. And as always, you know you can always reach out to the Investor Relations department for any further questions and follow-ups. With those words, we wish you all a very good day. Thank you very much.
Operator: Hello, and welcome to the Royal Vopak First Quarter 2026 Results Update. [Operator Instructions] This call is being recorded. I'm pleased to present, Fatjona Topciu, Head of Investor Relations. Please go ahead with your meeting. Fatjona Topciu: Good morning, everyone, and welcome to our Q1 2026 Results Analyst Call. My name is Fatjona Topciu, Head of IR. Our CEO, Dick Richelle; and CFO, Michiel Gilsing, will guide you through our latest results. We will refer to the Q1 2026 analyst presentation, which you can follow on screen and download from our website. After the presentation, we will have the opportunity for Q&A. A replay of the webcast will be made available on our website as well. Before we start, I would like to refer you to the disclaimer content of the forward-looking statements, which you are familiar with. I would like to remind you that we may make forward-looking statements during the presentation, which involve certain risks and uncertainties. Accordingly, this is applicable to the entire call, including the answers provided to questions during the Q&A. And with that, I would like to hand over the call to Dick. D.J.M. Richelle: Thank you very much, Fatjona, and good morning to all of you joining us in the call this morning. I would like to start with the key highlights of the year so far. We've had a strong start of the year, where we saw a healthy demand for our services, which is reflected by our continuously high occupancy rate of 91%. Our financial performance remains strong. Proportional EBITDA grew by 4.1% compared to Q1 2025, and that is the result adjusted for negative currency translation and divestment impact. Importantly, we were able to convert 76% of this EBITDA into operating free cash flow, resulting in an operating cash return of 16.6%. We also made good progress on executing our growth strategy. In West Canada, the construction of our REEF LPG project export terminal is progressing well. And in the Netherlands, approximately 90% of the 4th tank construction at Gate terminal has been completed. The project is on track to be commissioned within budget and on time at the end of Q3 2026. In addition, we took an investment decision in the Netherlands to repurpose capacity at our Europoort terminal for the storage of pyrolysis oil and another FID in Spain to expand the capacity in Tarragona. Finally, despite the increased volatility in the market related to the Middle East conflict, we are confirming our full year 2026 outlook, subject to ongoing market uncertainties and currency exchange movements. As per our current assessment, we anticipate the financial impact of the ongoing conflict will be absorbed by our strong underlying business performance and is within the range of our full year 2026 outlook. However, we do see that the uncertainty has increased, which is what I will talk about in more detail in the following slides. First, look at the market dynamics. Before diving into the results, I'd like to provide some context on the conflict in the Middle East. It has caused a historic supply side shock across global energy and manufacturing markets. This presents a major challenge for some of our customers. Broadly speaking, supply-side substitution has not been sufficient to offset the loss of physical products normally sourced from the Gulf countries. This has triggered significant commodity price volatility and forced a redirection of energy flows, domestic and -- towards domestic and transportation sectors, further impacting industrial demand. As a result, we see cautious customer sentiment and increased uncertainty. Let's take a closer look at how this impacts our business, starting off with our exposure to the region. We own and operate 4 storage terminals across the Middle East, with strategic locations in Saudi Arabia and the United Arab Emirates. In terms of financial exposure, around 5% of our proportional EBITDA is generated by these terminals, and they represent around 4% of our capital employed. Our terminals in Saudi Arabia are linked to industrial clusters, while our Fujairah terminal in the Emirates located outside the Strait of Hormuz, functions as an oil hub. The conflict has had severe impact on the industrial activity in the Gulf countries because of physical damage to the production facility and production halts. As a result of the closure of the Strait of Hormuz, Fujairah, despite its strategic location, faces reduced product flows. In terms of indirect exposure, to substitute for the loss of product volume from the Middle East, we see a rebalancing of trade routes emerging. While our infrastructure facilities facilitate the rebalancing of global trade flows, throughput levels are impacted by reduced products in the market. We do see that this presents a major challenge for some of our customers impacting their business continuity. While with our well-diversified portfolio of terminals, we've proven to be resilient against geopolitical tensions as well as energy market volatility and disruptions in the past. Our diversification is a structural strength, allowing our network to serve the evolving supply chain and energy security needs of our customers and partners. In addition, with the shift of our portfolio towards gas and industrial terminals, the duration of our contracts has increased significantly, reducing our exposure to short-term volatility. However, we are resilient, but we're not immune. The conflict in the Middle East introduces variables from shifts in global trade routes to heightened security risks and regional price shocks that we are not insulated from. We continue to monitor these developments to protect our operations and our customers' interest. Now let's take a closer look at our results for the different terminal types we operate. We see an overall strong performance with higher results compared to Q1 of last year when adjusting for the impact of currency translation and divestments. It's important to highlight that Q1 results had limited impact from the Middle East conflict. We saw a strong performance of our chemicals and oil terminals, which was primarily driven by increased throughput combined with strong contribution from growth projects. Our industrial terminals performed broadly stable year-on-year. However, due to the contribution of growth projects, we saw a slight increase compared to Q1 2025. For our gas terminals, we saw a slight decline year-over-year, which is primarily related to disruptive gas supply from the Middle East conflict. All in all, this has led to a proportional EBITDA of EUR 295 million and a strong operating cash return of 16.6%. Notwithstanding the volatility and uncertainty on the market during Q1, we continued to execute on our growth strategy. In the United States, at our Deer Park terminal, we commissioned repurposed capacity for biofuels. And in Spain, our Terquimsa joint venture with FID to expand its capacity to address market needs as well as further solidify its leadership position. Last but not least, we've taken a final investment decision to repurpose capacity at our Europoort terminal in the Netherlands for the storage of pyrolysis oil. This is an important step in our continued commitment to the energy transition and is strengthening and further integrating our industrial partnership at the Europoort. Since 2022, we've committed around EUR 1.9 billion to grow our base in gas and industrial terminals and to accelerate the energy transition. Around EUR 650 million of this is already commissioned and is contributing to the financial results. Around EUR 1.3 billion is still under construction. We expect to commission around EUR 775 million near year-end related to mainly Gate, the 4th tank and the LPG export terminal in Canada. In the period 2027, 2028, we expect to commission around EUR 325 million and around EUR 175 million in 2029 and beyond. This is based on the FIDs that we've taken so far. The already commissioned growth projects as well as the growth CapEx under construction will further reinforce our long-term stable return profile and diversify our revenues. Looking ahead, we remain well positioned to achieve our long-term ambitions. We've shown strong business performance in recent years and the market indicators for storage demand remain firm, supporting the delivery of growth projects and the resilient performance of our existing business. This is reflected in our long-term ambition. We have an operating cash return ambition for an annual range of between 13% to 17% and are well on track to invest EUR 4 billion growth CapEx through 2030. Also, as announced during our full year 2025 results, we are distributing around EUR 1.7 billion to our shareholders through year-end 2030 via a progressive dividend and a multiyear share buyback program. With that, I'd like to hand it over to Michiel to give more details on the Q1 2026 results. Michiel Gilsing: Thank you, Dick, and also from my side, good morning to all of you. As Dick mentioned already, we have had a very strong start of the year. We reported a healthy occupancy rate, increased our EBITDA and further improved our free cash flow generation. These results highlight the strength of our well-diversified portfolio, particularly in times of increased uncertainty and volatility. Simultaneously, we continue to invest in attractive and accretive growth projects while returning value to our shareholders. Let's take a closer look at the performance of the portfolio. Our operating cash return was broadly stable at 16.6%, compared to the 16.8% in Q1 2025, driven primarily by the negative effect of currency translation in our free cash flow. On an autonomous basis, excluding currency and divestments, our proportional operating free cash flow per share increased 7.1% versus Q1 2025. Demand for our services remained healthy, reflected in a proportional occupancy rate of 91%. Adjusted for currency movements and divestments, proportional EBITDA increased by 4.2% which we will detail further in the next slide. Moving on to our business unit performance overview. Excluding negative currency exchange effects of EUR 15 million and EUR 2 million divestment impact, our proportional EBITDA increased by 4.2% compared to Q1 2025. A large part of this growth can be explained by the strong EBITDA contribution of EUR 9 million from our growth projects, particularly in the U.S. and India. The performance across the network was relatively stable as regional headwinds are balanced by robust activities at our major oil hubs in the Netherlands and Singapore. We are continuously focused on generating predictable growing cash flows to create value for our shareholders. Compared to Q1 2025, we have seen our proportional operating free cash flow grow by 7.1%, adjusted for currency translation and divestment impact. This is primarily driven by the autonomous improvement of our proportional EBITDA and the reduced share count following our share buyback programs. Moving from the cash flows to our financial position. Our proportional leverage, which reflects the economic share of our joint venture debt remained stable at 2.6x. If we exclude the impact of assets under construction, which do not contribute yet to the EBITDA, the proportional leverage is at 1.99x, which is the lowest level in over 5 years. Our ambition for the proportional leverage range is between 2.5 and 3x. To facilitate the development of growth opportunities that enhance our operating cash return, Vopak's proportional leverage may temporarily fluctuate between 3 and 3.5 during the construction period, which can last 2 to 3 years. This is all in line with our disciplined capital allocation framework. Our capital allocation framework consists of 4 distinct pillars aiming to maintain a robust balance sheet, distribute value to shareholders, invest in attractive growth projects and yearly evaluate the share buyback program. As announced during our full year results, we are distributing around EUR 1.7 billion to our shareholders through year-end 2030 via a progressive dividend and a multiyear share buyback program. In addition, we have the ambition to invest EUR 4 billion on a proportional basis by 2030 to grow our base in gas and industrial terminals and to accelerate towards energy transition infrastructure. That brings me to the outlook for full year 2026. As mentioned by Dick, the market indicators for storage demand remain firm, supporting the delivery of growth projects and the resilient performance of our existing business. However, we do acknowledge that the market has become significantly more volatile following the conflict in the Middle East. For now, we expect that the financial impact of the ongoing situation is absorbed by our strong underlying business performance and growth project contribution. This gives us the confidence to reaffirm our full year 2026 outlook with the proportional operating free cash flow projected at around EUR 800 million and a proportional EBITDA expected to range between EUR 1.15 billion and EUR 1.2 billion. Bringing it all together in this slide, we are off to a strong start of the year with solid cash generation. Our portfolio remains well positioned to cater for increased volatility in the market. And last but not least, we continue investing in attractive growth opportunities while returning value to our shareholders. And with that, I hand over back to you, Dick. D.J.M. Richelle: Thank you, Michiel. And with that, I'd like to ask the operator to please open the line for questions and answers. Operator: [Operator Instructions] And now we're going to take our first question, and that question comes from the line of Kristof Samoy from KBC Securities. Kristof Samoy: First of all, congratulations with the results. I have 2 questions to start with. If we look at the ongoing conflict in the Middle East, there are, let's say, 2 factors at play there, which impact your business. First of all, positively, you have the rush for energy molecules, so energy security. On the other hand, you have uncertainty, which impacts the FID process that you are undergoing for certain projects. So my first question would be, how is the process looking for Australia right now? Has FID become less likely? Or although more likely given the fact that Australia can simply import oil from its own -- from another region in their country. And secondly, if you could comment on EemsEnergyTerminal and the potential extension there because we have seen the news that Exmar is progressing with the vessel conversion. And then the second question, we know that throughput rather than guaranteed offtake is more of a key driver for revenues in India. If we look at the drop in proportional occupancy rates in the Middle East and India, could we say that this drop is still mainly linked to the Middle East and that the drop linked to throughput in India has yet to be reflected in the numbers? D.J.M. Richelle: Kristof, thanks for the questions. Yes, maybe on your first question related to Australia and EET and then specifically on the timing of them, I think for Australia LNG project, the way we would look at it is and what we can see at this point in time, the need for that project is set by the local Victoria state for gas, and that's just for electricity generation. So that is a need that is almost independent of what happens in the rest of the world. They have a very strong need to find substitution for current gas supply offshore that is depleting. So there's no indication at this point in time that there is a fundamental change in -- that there is a fundamental change in the time line of that project. So we still expect to get back with more information towards the end of this year. I think that's around VVET. So that's the Australia energy project and maybe to EET. So EemsEnergy, the extension over there process is still ongoing. Yes, we've seen Exmar making the announcement. We are not there yet to make any announcement. As you know, we run an open season on the recontracting of the capacity post the end of the current contract by fourth quarter next year. And that is a moment that we are still working through or a process that we are still working through. And once we have news to share, we will come back to the market and share that. I think then maybe to the lower occupancy rate, it has more to do with the fact that the Fujairah capacity in the first quarter was lower in terms of also out-of-service capacity. Then had a direct impact of what's happening in India. I think still, if you look at Q1, it's a bit early to see the effect of any of the disruptions from the Middle East directly in our business in India. But indeed, the flows of LPG that flow to India have a lot to do with the source of origin, and that's the Middle East. Kristof Samoy: Okay. But for EemsEnergy, you do not experience a change of attitude with your partners in terms of the run-up to the FID being taken given everything that's going on in the Middle East. D.J.M. Richelle: No, I think many parties take for processing like this, a long-term approach. They know that the capacity is available in 2028. As you know, a lot of the flow that was coming from Qatar is taken out. That has a massive impact, but it is also expected to have a massive impact for, as they call it, a bit of extra supply that was expected to come in towards the end of this decade. So you could almost argue that with all the repair and restoration that is going on, it pushes out that supply -- extra supply a little bit further out in time, and it doesn't necessarily have an immediate impact on, for instance, product that needs to leave the U.S. and needs to find a home in Europe. So I think it's a bit of a long answer to say, for now, we do not see a material different approach of potential customers towards EemsEnergy. Operator: Now we're going to take our next question. And the question comes from the line of Thijs Berkelder from ODDO. Thijs Berkelder: Congrats with the strong Q1 performance, especially in chemicals. Can you maybe further explain why chemicals was so strong? And related to that, can you explain what you now see happening in your Deer Park and European chemical operations given recent Middle East events? Second question relates to the strong performance in Rest of World. Can you explain where that is coming from? D.J.M. Richelle: Thanks for that. I think on the Chemical side, I would say, overall, Deer Park has done quite well in the first quarter, and the same goes for Vlaardingen specifically that actually participated and contributed quite strongly to the results in the first quarter. When it gets to the conflict and the impact of chemicals as such for our network, I think Deer Park, although we do not see it yet fundamentally, but Deer Park or the U.S. in general, you would expect that they will benefit a bit from the fact that the U.S. as a chemical producer has quite a competitive -- a strong competitive position in the current global landscape. So we expect that, that will result in at least continued healthy demand for our services, especially Deer Park. I think that's one. So I would say strong performance there. I would say if you change that to Europe, particularly, I would say, Belgium, it's still hard to see, but quite a lot of the flows that are moving into Belgium are flows that come from the Middle East. It's a very strong market for Middle Eastern producers to sell product in Europe. That is subject to the disruptions as a result of the conflict. And what you see over there is, obviously, there's a lot of people that are trying to take positions, traders that try to take positions in that market to try to supply the demand for the end product that continues to be there. So it remains to be seen how that effect is going to balance out. Too early to tell in that sense for Belgium. If you look at it overall for the rest of the portfolio, I think what we said, it's still healthy demand on the main oil hubs, in the first quarter, Singapore Strait, strong, Rotterdam, high occupancy, high activity, so pretty strong over there and fuel distribution, quite healthy across the board in the first quarter. So I think we are pleased if we look back at the first quarter. And I think as we said, the outlook for the rest of the year given everything that's going on is within the range of what we said already in the first -- in February when we announced the 2025 results. Michiel Gilsing: We also had a few growth project contributions in the U.S. and India, which also helped on the Chemical side. So that has led to an increase versus Q4 2025 as well. Thijs Berkelder: Yes. And rest of the world primarily driven by Belgium then? D.J.M. Richelle: Not necessarily. No, not Belgium, I would say. I think if any, Belgium is a bit under pressure first quarter. I think rest of the world, just healthy across the board, not a particular region, I would say that jumps out. As I said, oil stable and relatively strong and just a positive good start of the year. China, quite well. So nothing particular that jumps out, Thijs, in a extreme way. Operator: Now, we're going to take our next question. And the question comes from the line of Philip Ngotho from Kepler Cheuvreux. Philip Ngotho: I have 3 questions, if I may. The first question is on China and North Asia. If I look at the consolidated numbers, I see the occupancy rates. It was already low last year, but it actually dropped further to 55%. So I assume it has to do with the Chinese terminals that are just generating or have low occupancy rate. I was wondering if you could share any -- because in the past, I think you also mentioned that the chemical market in China has been weak, and it seems that occupancy rate continues to drop further there. Do you have any -- what are the projections for those assets there? And could we be thinking of anything if it remains structurally weak to -- that you might take some portfolio actions there? The other thing that I'm wondering about is what portions of earnings is really dependent on throughput levels rather than really take-or-pay contracts? And the last question I have is if a client would declare force majeure and you have a take-or-pay contract with that client or client is impacted by force majeure and with the take-or-pay contract, what happens to that take-or-pay contract? Do you actually -- can you still incur revenues on that? Those are my 3 questions. Michiel Gilsing: Philip, maybe start on the China side. Yes, if you look at the consolidated occupancy, effectively, that's only one terminal. So we have a portfolio of 8 terminals in China. So that doesn't give you a very representative picture of China. Dick already mentioned, the China results were actually quite good and slightly above our own expectations. Indeed, that terminal is the Zhangjiagang terminal, which then has a relatively low occupancy because it's in a very competitive market, and it's one of the distribution terminals. Most of the terminals we have in China are industrial terminals. So basically backed by long-term take-or-pay type of contracts. So you see that the overall portfolio is quite healthy. We don't have any immediate portfolio actions, we're going to take in China. To the contrary, we commissioned last year a new terminal in China. So that is an add-on to our portfolio. We still see quite a few growth opportunities in industrial terminal locations. And overall, the returns in China, if you compare it to the rest of the portfolio is quite healthy, and we're quite capable of distributing our dividends from China back to the Netherlands. So that's maybe on the China side. On the earnings side, yes, there is always a component of throughput income. So even in contracts which -- where people buy, let's say, effectively the capacity, we still have an opportunity that if throughputs are at a higher level than expected that we will charge additionally for excess throughputs. So approximately 10% of the earnings are throughput related in some locations, more throughput related than in others. For example, location like Belgium is much more activity related than in another location. And some of the locations like I just mentioned, some of the industrial or some of the gas contracts are very low in terms of throughput dynamics. So that's maybe only a portion of the earnings, which is throughput related. And Dick, on the first, force majeure? D.J.M. Richelle: Yes. So force majeure, Philip, what we see happening is that some of our customers are declaring force majeure, but they are declaring it in all those cases towards their customers. So an inability sometimes to get product out of a region in order to deliver it to a customer that is further away that is not necessarily related to the type of services that they -- or obligations that they have towards us in the storage contract and arrangements that we have. So we obviously have to follow this case by case and understand very clearly what some of the situations of our customers are in this respect. And as was indicated, I think, in the presentation already before, we need to kind of like be prepared for those discussions because if that customers are under serious stress and under duress, we have to sit down and understand what we can do to support them. But legally speaking, the force majeure, there's very clear guidelines of what and how that applies in the contract obligations and responsibilities between the storage provider and our customers. Philip Ngotho: Okay. Very clear. Just one follow-up. So far, have you had any clients where you already had to sit down and renegotiate terms? Or given that they were just faced with difficulties or challenges? D.J.M. Richelle: It's no comment on that. And the reason for saying it, I don't want to go into individual discussions and official, it's -- I think it's a bit of a gray area where there is -- obviously, there are customers that say we're under a lot of stress, can we talk versus how official that is and how official those negotiations are. I think this is part and partial of what we've seen in previous crises. We are confident that we can manage through that. We're close to our customers and see where and when we can support them while at the same time, respecting and safeguarding the interest of Vopak, which is we made investment in certain infrastructure to support our customers in good times and in bad times. So no details. Operator: Now we'll go and take our next question. And the next question comes from the line of Quirijn Mulder from ING. Quirijn Mulder: On the whole situation in the Middle East. Can you give me an idea about, let me say, the first panic in the first week of March compared to what the situation is now? Are the customers still scrambling for products and has its impact on your throughput in, let me say, mainly in the Far East? So can you give me a view on what's in reality happening and what is -- you take a cautious stance on the second quarter. And it looks like that, okay, the March was not the issue, but maybe April is more an issue than March. Can you give any feeling on what's the current situation for many customers and also the impact on your business? D.J.M. Richelle: Yes. Quirijn, thank you for that question. I think first and foremost, as we already said, key priority for us is to make sure that people are safe and have been safe throughout the course of the conflict. The noncritical staff we leave away from the facility. We take noncritical staff not with a permanent resident in that region, take them out and move them back to their countries of origin. That has all been done. We monitor obviously the situation very closely, purely from a safety and security point of view and do whatever we can to support our partners and our people over there. I think that's in the first -- that's the first instance and first priority. If you look at it, what's happening at the moment, I think a few things to mention here. The amount of information that comes out of the region is limited. That's -- so what the exact damage is outside and far outside of the perimeter of the facilities that we operate is not publicly known, and it's also not always known to us. I think the second element is if you look at it physically what's going on, people would like to remove product in a safe manner, if that's possible as soon as possible in some instances, as we particularly have seen in Fujairah, while at the same time, making sure that now that the cease fire is in place, increased activities are happening to make sure that as much as possible, business continues as possible, as usual, with demand for fuel oil, demand for some of the products that need to be moved in and out, and that is, I wouldn't say all back to normal of how it was before because that would be too strong a statement simply because the product is not always available. The product that comes out of the region is hampered and is limited and restricted. But slowly but surely, as we speak now, things are -- people are trying to get back to normal and resume as much as possible, normal operations with a cautious view and a clear view on the uncertainty that's happening in the region, as you can imagine. Quirijn Mulder: Yes. And that's in the region, but there's a ripple effect, let me say, elsewhere in the Far East. So let me say, the situation in Australia and Sydney, et cetera. And let me say, for example, in South Africa, as you mentioned, in Pakistan. Is there anything you can update us on that -- on the development there? D.J.M. Richelle: Yes. So we continue -- what you see, Quirijn, is that things literally move quite volatile and hectically kind of like almost from week to week. So let's take South Africa, maybe as an example, dependent very much on imports from the Middle East. So in the first weeks of the conflict, you see product on the water still finding a home in South Africa. So first 2 weeks, it was almost business as usual. Then you have a period where there's no new supply coming simply because the supply was choked coming out of the Middle East. So then there's actually a bit of panic in the local market, what's happening and how can we supply new product. And then after a week, 2 weeks, you see that there's alternative supply coming into the market from different parts of the world. And for instance, West Africa is then becoming one of the suppliers of South Africa, which is then supporting. Over time, it obviously needs to work out what it does to total volumes once things start to settle down. But the challenge is it's never clear of when things really start to settle down. And I think that's what we are working through. So it's -- I think that's the best way to characterize it. And I realize you maybe want to have maybe sustainable longer-term view of where this is trending to. That's simply too hard to say at this point in time, and we continue to support where possible. And I think if I can take it one notch up, the general confidence that we have in the fact that we operate these critical assets at strategic locations that support the primary needs in local economies continues to give us a lot of confidence on the medium- to longer-term outlook for our network, but we have to navigate through the current circumstances. Quirijn Mulder: But I understand, let me say, if I look at the second quarter and especially in the month of April, then thus far -- okay, there's a lot of uncertainty, but it's not very concrete impact there, if I understand. There's not that you see, let me say, really impact from, let me say, the business happening on your -- the business happening on your business, in fact. Is that correct? D.J.M. Richelle: I think it's -- what we are saying is that with a lot of uncertainty and volatility in the market, we are certainly not immune for the supply shocks that are currently happening, Quirijn. This is not a relative easy exercise between brackets, easy exercise of rebalancing the remainder of the flows to the world. There's simply also a shortage of product in some regions, and that will have effect on the flows that are coming through some of our terminals, while at the same time, there's, in some instances, a rush for a particular storage position for a particular product because product is trapped and you need to find an intermediate source of storage. So I think it's too early still to tell. We haven't closed April yet. It's way too early to tell what the impact then will be. The assessment that we made is the assessment for the full year 2026, which is reflected in our outlook. And there, we think that we are capable of absorbing the negative impact of the conflict in the outlook that we've already presented. Michiel Gilsing: Yes. Because on outlook -- you may assume on the outlook that obviously -- well, the first quarter was relatively strong. So if you compare it to the outlook we have given, it's at the higher end of the outlook, if you would have 4 of these quarters, but then we still have some growth coming on stream and some positive currency exchange compared to Q1. So yes -- and that will compensate for the potential impact of the conflict, what we feel could be the potential impact of the conflict today because it's very hard to make an assessment. We don't know, let's say, how long this is going to last, how severe this is going to be. But we feel that where we are today and what we know today, that those compensating factors are sufficient to absorb, let's say, the impact of the Middle East. Operator: Now we're going to take our next question. And the question comes from the line of David Kerstens from Jefferies. David Kerstens: I have 2 questions also about the conflict in the Middle East. And maybe specifically on Fujairah, can you give an indication how occupancy trended in the month of March? And given that this is a hub location, do you see any impact from reduced product flows in Fujairah elsewhere, for example, going to Asia into Singapore, will there be a knock-on effect on occupancy levels there as well? And Dick, I heard you say you will see global trade flows rebalancing, I think in response to the former question, you talked about new supply coming out of West Africa. And also, you have a very well-balanced portfolio. Does that mean that you also see terminals that are seeing positive effects from the current conflict in the Middle East? D.J.M. Richelle: Yes. So I think individual occupancy level for particular months, let's refrain a little bit from that or we want to refrain from that. I think VHFL, as we said, total occupancy has gone down quite a bit in -- towards the end of the first quarter. And we see that around 8% of that capacity in Fujairah is out of service simply as a result of some of the damage that we've seen in Fujairah. So that is something that we have to repair and get back into service. The impact that, that has for the rest of the network, it's not necessarily that the immediate flows from Fujairah are moving to all other terminals throughout the network. So I think Singapore has its own dynamic, and it is impacted by the fact that there's products not flowing from the Middle East to Singapore, but that has different sources than to potentially repair that with. And we haven't seen up until now a big impact in, for instance, Singapore for the demand for oil storage. If there are positive elements in the outlook for some of our terminals, I think we mentioned already the effect in Deer Park. We see increased -- quite some increased activity in the Europoort as well. But I think you have to also understand this particular case, it's very relatively straightforward sometimes to assess what is not going well and what the direct impact is, it will take time for us to assess where we see some of the upsides coming from. I think it's simply also harder to predict that at this point in time. Operator: Now we'll go and take our next question. And the question comes from the line of Jeremy Kincaid from Van Lanschot Kempen. Jeremy Kincaid: I just have one question on your guidance. You obviously reconfirmed it today. But within that, there was -- it seems like there's some positives and negatives. On the negative side, clearly, there's the disruption from Strait of Hormuz. But on the positive side, you talked to FX. And I think the other key thing was some growth projects coming in. I assume this doesn't refer to the Europoort terminal or the Spanish development that you're working on because those seem to be -- will be operational in 2027. So can you just talk to what those growth projects are and what's changed from when you last gave the guidance? Michiel Gilsing: Well, definitely that, in the growth projects are not these projects you mentioned indeed. So the growth project, the major one, which will come on stream this year is tank #4 here of the LNG import facility, the Gate terminal here in Rotterdam. So that is still within budget, but also within its original schedule. So we would be able to commission it on time. That is the latest outlook we can give. So that's going to be the major positive contribution. There's a few other projects, but these are relatively smaller compared to the tank #4. Indeed, foreign exchange is a positive element. And then, effectively, what happened is the underlying business performed a bit better in Q1 than we expected. So as a result, if we wouldn't have had the Middle East impact, then obviously, there was -- there could have been a likelihood to basically adjust the outlook upward. But yes, the Middle East conflict basically brings the outlook to the level we have given to the market for both free cash flow as well as the EBITDA. Free cash flow is still healthy. So if you look at where we were last year and where we anticipate to be this year, we should still be able to report a strong cash flow, and that's obviously the main driver for value creation. So yes, basically, I hope that answers the question, Jeremy. Operator: Dear speakers, there are no further questions for today. Dear analysts, thank you very much for all your questions. And that does conclude our conference for today, and have a nice day. Fatjona Topciu: Thank you. D.J.M. Richelle: Thank you very much. Good day. Bye-bye.
Tom Erixon: Hello, and welcome to Alfa Laval's first quarter report. Fredrik and I will share some time going through the details. Because of today, we also have an AGM starting relatively soon, we need to limit this call to 45 minutes. So our apologies if our Q&A session is slightly short. With that, let me, as always, go to some first introductory comments before moving on to the presentation. So first, overall, we felt we had a stable quarter, well in line with our expectations. The pattern of a strong transactional business and a hesitant project business continued in the quarter. Second, the implementation of the new operating model continued in a high pace with adjustments to the financial reporting, management appointments and consolidation in various areas. The financial weight of the changes during this process was limited in the quarter. And then finally, with the war in the Middle East, our main priority has been employee safety in the region and appropriate customer support in difficult times. The financial impact on Alfa Laval was limited in the first quarter and medium term, the energy crisis may provide both some downsides and some upsides across the world in terms of our customer base. So with that, let me go to the key figures. We started '26 well with order intake growing sequentially and with a 6% organic growth compared to last year. Sales was on the low side, partly because of a very high invoicing towards the end of 2025. Despite the lower invoicing and big currency movements, the margin improved slightly to above 18%, mainly due to a positive mix. Moving on to the Energy division. Demand was as expected on a very high level across many end segments, and with a continued recovery of volumes in HVAC, including the heat pump market. The data center business was as expected, strong and continued to grow in the quarter. Going forward, we are now starting to build the data center order book for 2027. We are, of course, concerned for our customers in the Middle East with the damage inflicted on critical infrastructure. The rebuilding process in the region is not clear to us at this point, but we are ready to put all available resources to support the regional needs in the years to come in this very critical situation. Then to the Food & Pharma division. Demand was firm with a 9% organic growth in the quarter. While the transactional business was on a new record level, it was gratifying to finally book sizable oils and fats projects in Brazil, including biofuel components. The outlook for biofuel projects is improving gradually with a viable project pipeline going forward. The consolidation of the BU structure continued in the quarter and in addition to building the future growth platform for the Pharma business. In the Ocean division, we remained as expected on a lower order intake pace compared to the record last year. But at the minus 12% organic decline, it was still a good quarter and better than expected. Ship contracting at the yards was very active due to high freight rates and longer shipping routes. It had a positive effect on orders in general and for cargo pumping specifically. In this application, we are now starting to build the order book for 2028. The energy crisis may trigger additional offshore projects outside of the Gulf to gradually compensate somewhat for the shortfall of volumes. It may impact our offshore business in a positive way going forward. The margin remained stable at around 22% based on the solid order book, which will continue during 2026. Then on to Service. On group level, we remained at about 30% of orders in Service for the Ocean division higher due to the slightly lower capital sales and for the Energy division, the opposite at 25% of total orders due to significant growth in capital sales, especially on the data center side. Volumes were perhaps a little bit on the low side overall and flat compared to last year. We expect to regain the growth path in service going forward. In the Ocean division, there is a negative effect though from sanctioned ships that we cannot serve amounting to about 5% of the global fleet at this point. In addition, there is significant stress on ships and crews in the current crisis, which may delay some service work further. In general, though, as I said, we expect to return to growth in the year. A couple of comments on the top markets and regions. As you know, China and the U.S. are 2 top markets in some time, and both developed well in the quarter with the U.S. on a new all-time high. Our expansion plans in both markets continued with full speed with several site investments in both countries. We also added a smaller Chinese heat exchange companies to the group, supporting their growth plans as well as creating a better coverage of the Chinese market for Alfa Laval as a whole. In terms of the regions, please note that the numbers includes currencies, so they're not the organic. They are the overall growth numbers. And as mentioned, North America and Latin America had a very strong quarter with significant growth, especially in the North America. Europe was flattish with the exception of Eastern Europe that grew well in the quarter. Middle East and India, both faced headwinds due to the ongoing crisis and the energy crisis, and that was reflected in the order intake at this point. And in fact, both India and Southeast Asia are the 2 regions with the biggest short-term exposure to the energy crisis at this moment. Finally, Northeast Asia had a good quarter overall. But of course, they are impacted by the very high marine orders from Q1 last year. Other than that, China and Northeast Asia developed well in the quarter. So that's a summary where we are on that. And I'd like to hand over to Fredrik for some further details. Fredrik Ekstrom: And thank you, Tom. So moving on then to some comments around orders received. But before I start I have some additional comments on order intake and a quick word on the change. We have adopted an order intake approach that reflects new orders in the quarter only, meaning revaluations of the order book are not deducted from the order intake. This is highlighted and explained in more detail in Note 1 referring to accounting policies in the quarter 1 report. And now to some additional comments on order intake. A clear impact on the comparability of figures is currency rates, where the SEK has appreciated against both the euro and the U.S. dollar over the last 12 months. This impacts the comparability with almost 10%. The structural component is related to acquisitions and mainly due to volumes of the acquired Cryogenics business. Organic growth in the quarter exceeded 6% with the Energy division accounting for a good part of that increase with growing data center volumes and a recovery in the HVAC end markets. Food & Pharma also noted a strong organic growth intake in its 2 largest markets, oils and fats and dairy while the Ocean division remained stable with a normalized marine pumping systems order intake. The order book closed in the quarter at SEK 48.7 billion compared to the SEK 48.3 billion at the year-end 2025. SEK 32.1 billion of this is scheduled for invoicing this year. The current order book supports a continued good invoicing level and the order book is assessed to be in line with current input cost levels and the book-to-bill in the quarter was 1.11. On to sales. Currently, we are only experiencing minor disruptions to our supply chain related to the escalated geopolitical tensions, primarily the conflict in the Middle East. Once again, we are impacted by currency with almost 9% negative comparability. Organic growth at almost 2% with a structural contribution of 3.8%. The aggregate impact is negative with 3.3% with a quarter sales level of SEK 15.9 billion. This level, which is somewhat lower than expected, is affected by delaying -- delayed invoicing of projects to a minor extent, transportation disruptions, particularly related to the Middle East and normal seasonality from quarter 4 to quarter 1. Our gross profit margin was on a high level of 39.9% compared to 37.5% in quarter 1 2025. The positive data can be traced to an accretive invoicing mix of transactional business and service, a strong factory in engineering result and good purchase price variances from cost levels set in our standard costing. On the cost side, S&A increased with 1.9% in the quarter and R&D with 4.2%. Approximately SEK 75 million cost increase in the quarter was related to the new divisional structure. Amortization of step-up values increased to SEK 174 million, reflecting the acquisitions made during 2025 with majority related to the Cryogenics business. Taxes also landed within guidance range and operating income in the quarter landed at SEK 2.7 billion. And finally, an EPS of SEK 4.59 with the majority of the deviation stemming from lower invoicing and currency impact. Adjusted EBITDA of almost SEK 2.9 million was, as previously mentioned, supported by a strong factor in engineering result, positive purchasing price variances and an accretive invoicing mix of transactional business and service, negatively impacted by currency with SEK 264 million and SEK 75 million related to the new divisional structures and strategy initiatives. 18.1% adjusted EBITDA margin in the quarter exceeded the 17.7% in quarter 1 of 2025 and is well above our target level of 17% over a business cycle. On debt levels, they have increased from quarter 1 last year, reflecting the financing of the Cryogenic acquisition. In the quarter, we have an MTN bond of EUR 300 million that has matured and been repaid. SEK 1.2 billion in commercial papers was issued, and we expect to issue a further amount of commercial papers during the coming quarter to cover the upcoming proposed dividend of SEK 3.7 billion. Net debt in relation to the last 12 months EBITDA was just shy of 0.7. The increase in lease liabilities reflects the balance sheet impact of renewed long-time leases for some of our operating footprint. Cash flow in the quarter saw a strong EBITDA contribution of SEK 3.7 billion. Working capital change had a negative impact of SEK 1.5 billion, where the majority comes from the building up of work-in-progress inventory and a strategic buildup of buffer inventories for some commodities that we believe are at risk of disturbance from the disruptions that are caused by the conflict in the Middle East. Capital expenditures were somewhat below guidance at SEK 529 million and yielded a free cash flow before acquisitions of SEK 708 million. Acquisitions in the quarter accounted for a cash flow impact of SEK 565 million, stemming from the majority share acquisition of the Chinese heat exchanger manufacturer and a SEK 50 million share in Industrikraft. Finally, the contribution of financing activities is related to the repayment of the EMTN bond of EUR 300 million and the issuance of commercial papers of SEK 1.2 billion. Finally, some financial guidance going forward. We expect CapEx to remain high but stable within a range of SEK 0.6 billion to SEK 0.8 billion in the next quarter and a whole year level within the range of SEK 2.5 billion to SEK 3 billion. Amortization on about the same level of quarter 1 with SEK 175 million and in the next quarter and SEK 600 million for the entire year. And finally, a tax interval of 24% to 26% for both quarter 2 and the entire year. And with that, I hand back to Tom for some forward-look commentary. Tom Erixon: Thank you, Fredrik. And while history is clear, obviously, forecasting in today's environment is somewhat complicated. We don't consider that the looming energy crisis and the war in the Middle East is having any major impact on our outlook in this moment in time. In general, we are somewhat more optimistic about the year now than when the year started about a quarter ago. And demand specifically sequentially for this year in the second quarter is expected to be on a group level, somewhat higher than the first quarter. And on a divisional level, we expect the Energy division to remain on the current all-time high level in the second quarter. We expect demand in the Ocean division to be higher than in the first quarter and we expect the Food & Pharma division to remain at approximately this level with both some upside and perhaps downside depending on how larger projects are materializing in the quarter. So that's where we are in terms of our forecasting in a crystal ball. And with that, I'd like to open up for questions. Operator: [Operator Instructions] The first question comes from the line of Daniela Costa from Goldman Sachs. Meihan Yang: It's actually Meihan here. I just want to have 1 question on data center business. What is the percentage of the energy businesses is data center now? And do you see a difference on the order intake trend on liquid cooling versus air cooling? And what's the ASP difference on those 2 products for you? Tom Erixon: If we move back 1 quarter, we then stated that the 12-month rolling order intake on the data center side amounted to approximately SEK 2 billion. If we move up to this quarter, now 1 quarter later, the ongoing rolling 12 months is at around SEK 2.5 billion. Obviously a bit higher in this quarter specifically, but over the last 12 months, that's what it is. So it's a clear growth trajectory as we have indicated earlier. We remain on that growth territory right now. I don't have in my head the split between air and liquid cooling, but what we have in the plans, and it's pretty clear is that we will have fairly slow, but still a meaningful gradual shift towards water cooling in the incoming orders. But I believe we are still clearly in the majority of the air cooling if I take it from the hip. We can confirm to you later on. But I think that's where we are. Operator: The next question comes from the line of Kim John from Deutsche Bank. John-B Kim: I'm wondering if you can help us kind of square the circle here. If you look at Clarksons data, I think you had some pretty good activity in tanker contracting. I'm trying to think about that and the cadence of your order intake, not just for Q1, but potentially through the rest of this year. Is that something that would have shown in your numbers at some point in time? Or is this still to come or am I misinterpreting here? Tom Erixon: No, I think we came in a bit stronger on the order book for new contracting in this quarter than we had expected when we started. As you know, the outlook -- your outlook was a little bit gloomy when the year started. I think right now, we are at the -- the count is at around 500 ships this year so far, which is significantly higher than last year at the same date. And so it looks like we are coming into a decent year of contracting and we saw a little bit of those effects and a little bit higher product tanker contracting than expected in the beginning of the year. And in March, we had a bit of effect on that, and we may very well have something on that kind also in Q2. Operator: The next question comes from the line of Gustaf Schwerin from Handelsbanken. Gustaf Schwerin: I have a few. Maybe starting with the invoicing level in Q1. Can you give us a sense of the magnitude of sales delay here? And also if this is an effect of customer decisions or something else? That's the first one. Tom Erixon: I'd be a little bit careful in sort of using the delay. What you should be aware of is that after the SEK 19 billion in invoicing in Q4, obviously, sort of we went a bit all in on the invoicing side towards the end of the year, and that had some spillover effect into Q1. We are shipping products on normal delivery times a normal delivery commitments without any major disruptions on our side. I think the difficulty we sometimes have is to predict exactly the percentage of completion. And so those payment schedules, typically they don't get accelerated. But for various reasons, in larger projects, the execution of those projects, they moved the time line a little bit here and there in terms of commissioning and final payments. And so I don't want to -- it's not an -- we're not looking at an operational problem. It's just a bit of seasonality between Q4, Q1, and perhaps not a perfect bridge to the timing of invoicing in the number of projects. Gustaf Schwerin: Okay. Secondly, on energy orders, clearly stronger than we had expected and also better than the comments you had back in Q4. I mean the main positive delta there is data center. Is there something else that's stacking out? Tom Erixon: I think there was a lot of things sticking out actually. I think the transactional business in Food & Pharma went to a new all-time high after a fairly strong Q4. That was not exactly in our mind at the time. The slight improvement on the ship contracting side was not exactly in our mind at the time. And maybe even the HVAC side, although we saw a turn already in Q4 last year. We picked up a bit better on that as well. So I think that there have been a number of contributing factors. So it sounds like I'm all super happy with all of the order intake. It's not -- that's exactly true. If we have 1 miss in the quarter, I think that is related to the service side, which is flattish compared to last year. There are some maybe small structural temporary reasons around that. So we feel fairly committed that we're going to return to a growth path for the rest of the year. But as an individual quarter, we didn't quite see the organic growth in service that we've been used to for the last 6, 7 years. Gustaf Schwerin: Perfect. Just lastly, the comment in the CEO letter around escalating cost inflation and you potentially considering price increases by midyear. I mean, how should we read that? As we stand now, do you foresee a material change in your cost base Q2 versus Q1? Tom Erixon: It is a reflection that the energy crisis we are going into is clearly, macroeconomic-wise continuing to drive an inflationary environment that has been higher than we've been used to for a long period of time, and we haven't got the grips with it. And this process that we have of escalating energy prices is not helpful in the current inflationary environment. We see specifically issues in part of our bill of materials. We see a bit of challenge on the logistical cost, and we are just not prepared to passively watch that escalation go on. And we are, by the way, not sure that this problem is over. And we are now returning back to some sort of normality on the energy side. So I think we created a bit of inflationary way ahead of us. And as we did last time when we had this problem, we will prefer to deal with it proactively rather than afterwards. But it's no -- it's nothing specific on Alfa Laval's sourcing mix or exposure that puts us in a different position than anybody else. I think you will see a number of companies doing the same thing. Operator: The next question comes from the line of Andreas Koski from BNP Paribas. Andreas Koski: Two questions. First on HVAC, where you're seeing the recovery continuing. Can you -- do you have a good feeling of how the distributors' inventory levels are today? Is there a possibility that we will see both end market demand improving at the same time as the distributors have to restock a lot after the destocking that we have seen over the many years? Tom Erixon: I'm looking at Frederik. Listen, I think I think we are -- when we look at the... Andreas Koski: I can ask it this way instead, if you want. I mean when we look at HVAC in the past, we were at a quite high level. And I think the heat pump business was at a total of around SEK 3 billion, and now we've been below SEK 1 billion when it comes to the heat pump business. So is there a possibility that we will reach the previous peak that we saw a few years ago in the... Tom Erixon: I think -- all right, let's take it from there. I think we actually peaked at around SEK 2 billion, if I remember correctly. And we've been partly down in the pace that has been below SEK 500 million. So this has been a really significant destocking. And we've seen now for a couple of quarters that the volumes are picking slowly up, and they were picking up a little bit faster in Q1 than before. But I don't think there's a lot of inventory, certainly not excess inventory in the systems right now. I think we are looking at -- we're looking -- we are still on less than half of the peak. So I think we are balanced with the market. I think the big question for us is how much? There's a number of questions as to the current energy crisis, how will it affect our business in offshore? How will it affect the electrification, the move to heat pump and a number of other areas. And so there are some upside coming from the current energy crisis in terms of energy resilience and diversification that may put some extra volume growth into the market. But otherwise, we expect a fairly slow growing heat pump market in Europe. And we expect to be maybe back towards the -- the then record levels early as 2030 or so. So it is -- that's our main business case. But of course, we may see increased subsidies and increased push again, higher gas prices and so on, that is again favoring the heat pump market. So it is kind of an upside, but I would not look at that upside as more than maximum SEK 1 billion or so, if I were you. Andreas Koski: Okay. Great. And then coming back to Gustaf's questions about potential price increases. And you mentioned that you're seeing inflation picking up. But can you just remind us how you are impacted by the tariffs? And if there will be an incremental impact for you because of the updated Section 232 tariffs? Fredrik Ekstrom: Yes. So as Tom expressed, I mean, the inflation that we're seeing is probably ahead of us, and it comes in the form of being -- staying close to our suppliers, and there's a signaling that for a lot of the energy-intensive inputs that we have into our products that, of course, that's being driven up by the current energy prices. That's one part of your question. And to the second part of your question, yes, there has been a shift in the so-called Section 232 or an update of it. I believe it was the second of April that the update went through. Our assessment when we look at it and we look at it from the different product groups and the different supply chains that we have is that it's fairly neutral for us. We don't see that we have a big impact neither negatively nor positively. There are some negatives and some positives, and they weigh out in the end. But of course, we keep a close eye on this. And you have to remember that when I say different supply chains. We have everything from delivering finished units to delivering components for assembly in the U.S. to spare parts and then there's whole host of supply networks around there that come from Mexico, Europe, China and so forth, it's a little bit different, but our assessment as it stands today is that it doesn't imply any major changes to the cost of tariffs as we have it today. And to be clear, from the new level that was set after the previous round of tariffs was deemed illegal. Andreas Koski: Understood. And then lastly, on the updated way of how you will present your order intake and that you will not include cancellations and revaluations. When you write about the order book in the text, in the report, will you there mention if you have had revaluations and cancellations? Or will we just see the order book development basically? Fredrik Ekstrom: Yes. No, you will see the order book development for certain. And referring to that change, I will remind you that when we went into quarter 1 last year and we had the big movements of the NOK and the U.S. dollar, in particular, to pumping systems where we had a revaluation of backlog that was reflected in our order intake at that point in time of almost SEK 800 million. And so the critique or the feedback that we got from the market was you're not really reflecting the demand and the new orders as you get them on the market if you're actually netting out revaluation. So this was a little bit a response from our side to say, let's align ourselves with the way the market is getting this information from other peer companies. So it was a little bit in response to that. So we don't see it as anything dramatic. I think the new number clearly reflects what the real demand is on the market and what the new orders in the quarter are. And I take on board your feedback on whether we should include it into the backlog in the report. Andreas Koski: No, because there is -- when I look at it now, there is a possibility that you have had some cancellations, which would also be interesting to know about, actually, because the order intake was SEK 1.6 billion higher than sales, but your order book only increased by SEK 400 million in the quarter. And that's why I was wondering if you would have mentioned in the text if you had cancellations or revaluations, but I understand that you... Fredrik Ekstrom: But I take it with me and just to answer the question, the lion part of that change is revaluation due to currency. Operator: The next question comes from the line of Klas Bergelind from Citi. Klas Bergelind: Sorry, I joined a bit late, maybe you covered some of this. So first, on Ocean, the higher demand you see into the second quarter. I'm trying to understand the dynamics between cargo pumping versus offshore and then rest of Ocean. Is this a step-up you see in cargo pumping or in the other categories, i.e., ex Framo? The reason for asking is that it typically take some time from contracting improvement until you see improved orders outside Framo. So that dynamic would be interesting. Tom Erixon: Yes. You're asking for a lot of granularity here. So I'm a little bit hesitant to meet your question too much. But as I indicated before, part of a slightly stronger order intake in the ocean than we perhaps expected for Q1 was related to higher product tanker contracting that had some effects at Framo. And it's possible that, that, to some degree, will continue. But don't keep me hostage for doing product-by-product prophesies. All in all, we see a slightly more favorable environment on it, and then you have to do a little bit of your own risk assessments there. Klas Bergelind: All right. Fair enough. My second was on the heat pump side. Did you say that there is a quarter-on-quarter improvement already in your orders now within HVAC? Or is this a sentiment improving? It feels a bit early that we would have a broad-based improvement in heat pump orders. I mean maybe in certain countries, but I'm just interested in what you said there. And sorry, I was late on the call, maybe you talked about this. Tom Erixon: Yes, we did but no problem. But there has been, over the last couple of quarters, a clear improvement in the volumes. Now I would say that the big part of that has been the completion of the destocking process, which was getting completed towards the end of last year as far as we could judge. And if we were correct in the depletion of excess stock towards the end of this year, then the first quarter order intake on heat pumps were reflecting a better production plan and a stronger production plan at our customer site in terms of their expectations into Q2, Q3. So we had a pretty clear growth at that point in time. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Tom Erixon for any closing remarks. Tom Erixon: Thank you very much. Thanks for being. It's a very busy day for all of you guys. So we appreciate taking the time and we're going to be off to AGM. And so hopefully meet some of our investors there. So thank you very much for your attention, and see you next quarter. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your line. Goodbye.
Operator: Hello, and welcome to the Royal Vopak First Quarter 2026 Results Update. [Operator Instructions] This call is being recorded. I'm pleased to present, Fatjona Topciu, Head of Investor Relations. Please go ahead with your meeting. Fatjona Topciu: Good morning, everyone, and welcome to our Q1 2026 Results Analyst Call. My name is Fatjona Topciu, Head of IR. Our CEO, Dick Richelle; and CFO, Michiel Gilsing, will guide you through our latest results. We will refer to the Q1 2026 analyst presentation, which you can follow on screen and download from our website. After the presentation, we will have the opportunity for Q&A. A replay of the webcast will be made available on our website as well. Before we start, I would like to refer you to the disclaimer content of the forward-looking statements, which you are familiar with. I would like to remind you that we may make forward-looking statements during the presentation, which involve certain risks and uncertainties. Accordingly, this is applicable to the entire call, including the answers provided to questions during the Q&A. And with that, I would like to hand over the call to Dick. D.J.M. Richelle: Thank you very much, Fatjona, and good morning to all of you joining us in the call this morning. I would like to start with the key highlights of the year so far. We've had a strong start of the year, where we saw a healthy demand for our services, which is reflected by our continuously high occupancy rate of 91%. Our financial performance remains strong. Proportional EBITDA grew by 4.1% compared to Q1 2025, and that is the result adjusted for negative currency translation and divestment impact. Importantly, we were able to convert 76% of this EBITDA into operating free cash flow, resulting in an operating cash return of 16.6%. We also made good progress on executing our growth strategy. In West Canada, the construction of our REEF LPG project export terminal is progressing well. And in the Netherlands, approximately 90% of the 4th tank construction at Gate terminal has been completed. The project is on track to be commissioned within budget and on time at the end of Q3 2026. In addition, we took an investment decision in the Netherlands to repurpose capacity at our Europoort terminal for the storage of pyrolysis oil and another FID in Spain to expand the capacity in Tarragona. Finally, despite the increased volatility in the market related to the Middle East conflict, we are confirming our full year 2026 outlook, subject to ongoing market uncertainties and currency exchange movements. As per our current assessment, we anticipate the financial impact of the ongoing conflict will be absorbed by our strong underlying business performance and is within the range of our full year 2026 outlook. However, we do see that the uncertainty has increased, which is what I will talk about in more detail in the following slides. First, look at the market dynamics. Before diving into the results, I'd like to provide some context on the conflict in the Middle East. It has caused a historic supply side shock across global energy and manufacturing markets. This presents a major challenge for some of our customers. Broadly speaking, supply-side substitution has not been sufficient to offset the loss of physical products normally sourced from the Gulf countries. This has triggered significant commodity price volatility and forced a redirection of energy flows, domestic and -- towards domestic and transportation sectors, further impacting industrial demand. As a result, we see cautious customer sentiment and increased uncertainty. Let's take a closer look at how this impacts our business, starting off with our exposure to the region. We own and operate 4 storage terminals across the Middle East, with strategic locations in Saudi Arabia and the United Arab Emirates. In terms of financial exposure, around 5% of our proportional EBITDA is generated by these terminals, and they represent around 4% of our capital employed. Our terminals in Saudi Arabia are linked to industrial clusters, while our Fujairah terminal in the Emirates located outside the Strait of Hormuz, functions as an oil hub. The conflict has had severe impact on the industrial activity in the Gulf countries because of physical damage to the production facility and production halts. As a result of the closure of the Strait of Hormuz, Fujairah, despite its strategic location, faces reduced product flows. In terms of indirect exposure, to substitute for the loss of product volume from the Middle East, we see a rebalancing of trade routes emerging. While our infrastructure facilities facilitate the rebalancing of global trade flows, throughput levels are impacted by reduced products in the market. We do see that this presents a major challenge for some of our customers impacting their business continuity. While with our well-diversified portfolio of terminals, we've proven to be resilient against geopolitical tensions as well as energy market volatility and disruptions in the past. Our diversification is a structural strength, allowing our network to serve the evolving supply chain and energy security needs of our customers and partners. In addition, with the shift of our portfolio towards gas and industrial terminals, the duration of our contracts has increased significantly, reducing our exposure to short-term volatility. However, we are resilient, but we're not immune. The conflict in the Middle East introduces variables from shifts in global trade routes to heightened security risks and regional price shocks that we are not insulated from. We continue to monitor these developments to protect our operations and our customers' interest. Now let's take a closer look at our results for the different terminal types we operate. We see an overall strong performance with higher results compared to Q1 of last year when adjusting for the impact of currency translation and divestments. It's important to highlight that Q1 results had limited impact from the Middle East conflict. We saw a strong performance of our chemicals and oil terminals, which was primarily driven by increased throughput combined with strong contribution from growth projects. Our industrial terminals performed broadly stable year-on-year. However, due to the contribution of growth projects, we saw a slight increase compared to Q1 2025. For our gas terminals, we saw a slight decline year-over-year, which is primarily related to disruptive gas supply from the Middle East conflict. All in all, this has led to a proportional EBITDA of EUR 295 million and a strong operating cash return of 16.6%. Notwithstanding the volatility and uncertainty on the market during Q1, we continued to execute on our growth strategy. In the United States, at our Deer Park terminal, we commissioned repurposed capacity for biofuels. And in Spain, our Terquimsa joint venture with FID to expand its capacity to address market needs as well as further solidify its leadership position. Last but not least, we've taken a final investment decision to repurpose capacity at our Europoort terminal in the Netherlands for the storage of pyrolysis oil. This is an important step in our continued commitment to the energy transition and is strengthening and further integrating our industrial partnership at the Europoort. Since 2022, we've committed around EUR 1.9 billion to grow our base in gas and industrial terminals and to accelerate the energy transition. Around EUR 650 million of this is already commissioned and is contributing to the financial results. Around EUR 1.3 billion is still under construction. We expect to commission around EUR 775 million near year-end related to mainly Gate, the 4th tank and the LPG export terminal in Canada. In the period 2027, 2028, we expect to commission around EUR 325 million and around EUR 175 million in 2029 and beyond. This is based on the FIDs that we've taken so far. The already commissioned growth projects as well as the growth CapEx under construction will further reinforce our long-term stable return profile and diversify our revenues. Looking ahead, we remain well positioned to achieve our long-term ambitions. We've shown strong business performance in recent years and the market indicators for storage demand remain firm, supporting the delivery of growth projects and the resilient performance of our existing business. This is reflected in our long-term ambition. We have an operating cash return ambition for an annual range of between 13% to 17% and are well on track to invest EUR 4 billion growth CapEx through 2030. Also, as announced during our full year 2025 results, we are distributing around EUR 1.7 billion to our shareholders through year-end 2030 via a progressive dividend and a multiyear share buyback program. With that, I'd like to hand it over to Michiel to give more details on the Q1 2026 results. Michiel Gilsing: Thank you, Dick, and also from my side, good morning to all of you. As Dick mentioned already, we have had a very strong start of the year. We reported a healthy occupancy rate, increased our EBITDA and further improved our free cash flow generation. These results highlight the strength of our well-diversified portfolio, particularly in times of increased uncertainty and volatility. Simultaneously, we continue to invest in attractive and accretive growth projects while returning value to our shareholders. Let's take a closer look at the performance of the portfolio. Our operating cash return was broadly stable at 16.6%, compared to the 16.8% in Q1 2025, driven primarily by the negative effect of currency translation in our free cash flow. On an autonomous basis, excluding currency and divestments, our proportional operating free cash flow per share increased 7.1% versus Q1 2025. Demand for our services remained healthy, reflected in a proportional occupancy rate of 91%. Adjusted for currency movements and divestments, proportional EBITDA increased by 4.2% which we will detail further in the next slide. Moving on to our business unit performance overview. Excluding negative currency exchange effects of EUR 15 million and EUR 2 million divestment impact, our proportional EBITDA increased by 4.2% compared to Q1 2025. A large part of this growth can be explained by the strong EBITDA contribution of EUR 9 million from our growth projects, particularly in the U.S. and India. The performance across the network was relatively stable as regional headwinds are balanced by robust activities at our major oil hubs in the Netherlands and Singapore. We are continuously focused on generating predictable growing cash flows to create value for our shareholders. Compared to Q1 2025, we have seen our proportional operating free cash flow grow by 7.1%, adjusted for currency translation and divestment impact. This is primarily driven by the autonomous improvement of our proportional EBITDA and the reduced share count following our share buyback programs. Moving from the cash flows to our financial position. Our proportional leverage, which reflects the economic share of our joint venture debt remained stable at 2.6x. If we exclude the impact of assets under construction, which do not contribute yet to the EBITDA, the proportional leverage is at 1.99x, which is the lowest level in over 5 years. Our ambition for the proportional leverage range is between 2.5 and 3x. To facilitate the development of growth opportunities that enhance our operating cash return, Vopak's proportional leverage may temporarily fluctuate between 3 and 3.5 during the construction period, which can last 2 to 3 years. This is all in line with our disciplined capital allocation framework. Our capital allocation framework consists of 4 distinct pillars aiming to maintain a robust balance sheet, distribute value to shareholders, invest in attractive growth projects and yearly evaluate the share buyback program. As announced during our full year results, we are distributing around EUR 1.7 billion to our shareholders through year-end 2030 via a progressive dividend and a multiyear share buyback program. In addition, we have the ambition to invest EUR 4 billion on a proportional basis by 2030 to grow our base in gas and industrial terminals and to accelerate towards energy transition infrastructure. That brings me to the outlook for full year 2026. As mentioned by Dick, the market indicators for storage demand remain firm, supporting the delivery of growth projects and the resilient performance of our existing business. However, we do acknowledge that the market has become significantly more volatile following the conflict in the Middle East. For now, we expect that the financial impact of the ongoing situation is absorbed by our strong underlying business performance and growth project contribution. This gives us the confidence to reaffirm our full year 2026 outlook with the proportional operating free cash flow projected at around EUR 800 million and a proportional EBITDA expected to range between EUR 1.15 billion and EUR 1.2 billion. Bringing it all together in this slide, we are off to a strong start of the year with solid cash generation. Our portfolio remains well positioned to cater for increased volatility in the market. And last but not least, we continue investing in attractive growth opportunities while returning value to our shareholders. And with that, I hand over back to you, Dick. D.J.M. Richelle: Thank you, Michiel. And with that, I'd like to ask the operator to please open the line for questions and answers. Operator: [Operator Instructions] And now we're going to take our first question, and that question comes from the line of Kristof Samoy from KBC Securities. Kristof Samoy: First of all, congratulations with the results. I have 2 questions to start with. If we look at the ongoing conflict in the Middle East, there are, let's say, 2 factors at play there, which impact your business. First of all, positively, you have the rush for energy molecules, so energy security. On the other hand, you have uncertainty, which impacts the FID process that you are undergoing for certain projects. So my first question would be, how is the process looking for Australia right now? Has FID become less likely? Or although more likely given the fact that Australia can simply import oil from its own -- from another region in their country. And secondly, if you could comment on EemsEnergyTerminal and the potential extension there because we have seen the news that Exmar is progressing with the vessel conversion. And then the second question, we know that throughput rather than guaranteed offtake is more of a key driver for revenues in India. If we look at the drop in proportional occupancy rates in the Middle East and India, could we say that this drop is still mainly linked to the Middle East and that the drop linked to throughput in India has yet to be reflected in the numbers? D.J.M. Richelle: Kristof, thanks for the questions. Yes, maybe on your first question related to Australia and EET and then specifically on the timing of them, I think for Australia LNG project, the way we would look at it is and what we can see at this point in time, the need for that project is set by the local Victoria state for gas, and that's just for electricity generation. So that is a need that is almost independent of what happens in the rest of the world. They have a very strong need to find substitution for current gas supply offshore that is depleting. So there's no indication at this point in time that there is a fundamental change in -- that there is a fundamental change in the time line of that project. So we still expect to get back with more information towards the end of this year. I think that's around VVET. So that's the Australia energy project and maybe to EET. So EemsEnergy, the extension over there process is still ongoing. Yes, we've seen Exmar making the announcement. We are not there yet to make any announcement. As you know, we run an open season on the recontracting of the capacity post the end of the current contract by fourth quarter next year. And that is a moment that we are still working through or a process that we are still working through. And once we have news to share, we will come back to the market and share that. I think then maybe to the lower occupancy rate, it has more to do with the fact that the Fujairah capacity in the first quarter was lower in terms of also out-of-service capacity. Then had a direct impact of what's happening in India. I think still, if you look at Q1, it's a bit early to see the effect of any of the disruptions from the Middle East directly in our business in India. But indeed, the flows of LPG that flow to India have a lot to do with the source of origin, and that's the Middle East. Kristof Samoy: Okay. But for EemsEnergy, you do not experience a change of attitude with your partners in terms of the run-up to the FID being taken given everything that's going on in the Middle East. D.J.M. Richelle: No, I think many parties take for processing like this, a long-term approach. They know that the capacity is available in 2028. As you know, a lot of the flow that was coming from Qatar is taken out. That has a massive impact, but it is also expected to have a massive impact for, as they call it, a bit of extra supply that was expected to come in towards the end of this decade. So you could almost argue that with all the repair and restoration that is going on, it pushes out that supply -- extra supply a little bit further out in time, and it doesn't necessarily have an immediate impact on, for instance, product that needs to leave the U.S. and needs to find a home in Europe. So I think it's a bit of a long answer to say, for now, we do not see a material different approach of potential customers towards EemsEnergy. Operator: Now we're going to take our next question. And the question comes from the line of Thijs Berkelder from ODDO. Thijs Berkelder: Congrats with the strong Q1 performance, especially in chemicals. Can you maybe further explain why chemicals was so strong? And related to that, can you explain what you now see happening in your Deer Park and European chemical operations given recent Middle East events? Second question relates to the strong performance in Rest of World. Can you explain where that is coming from? D.J.M. Richelle: Thanks for that. I think on the Chemical side, I would say, overall, Deer Park has done quite well in the first quarter, and the same goes for Vlaardingen specifically that actually participated and contributed quite strongly to the results in the first quarter. When it gets to the conflict and the impact of chemicals as such for our network, I think Deer Park, although we do not see it yet fundamentally, but Deer Park or the U.S. in general, you would expect that they will benefit a bit from the fact that the U.S. as a chemical producer has quite a competitive -- a strong competitive position in the current global landscape. So we expect that, that will result in at least continued healthy demand for our services, especially Deer Park. I think that's one. So I would say strong performance there. I would say if you change that to Europe, particularly, I would say, Belgium, it's still hard to see, but quite a lot of the flows that are moving into Belgium are flows that come from the Middle East. It's a very strong market for Middle Eastern producers to sell product in Europe. That is subject to the disruptions as a result of the conflict. And what you see over there is, obviously, there's a lot of people that are trying to take positions, traders that try to take positions in that market to try to supply the demand for the end product that continues to be there. So it remains to be seen how that effect is going to balance out. Too early to tell in that sense for Belgium. If you look at it overall for the rest of the portfolio, I think what we said, it's still healthy demand on the main oil hubs, in the first quarter, Singapore Strait, strong, Rotterdam, high occupancy, high activity, so pretty strong over there and fuel distribution, quite healthy across the board in the first quarter. So I think we are pleased if we look back at the first quarter. And I think as we said, the outlook for the rest of the year given everything that's going on is within the range of what we said already in the first -- in February when we announced the 2025 results. Michiel Gilsing: We also had a few growth project contributions in the U.S. and India, which also helped on the Chemical side. So that has led to an increase versus Q4 2025 as well. Thijs Berkelder: Yes. And rest of the world primarily driven by Belgium then? D.J.M. Richelle: Not necessarily. No, not Belgium, I would say. I think if any, Belgium is a bit under pressure first quarter. I think rest of the world, just healthy across the board, not a particular region, I would say that jumps out. As I said, oil stable and relatively strong and just a positive good start of the year. China, quite well. So nothing particular that jumps out, Thijs, in a extreme way. Operator: Now, we're going to take our next question. And the question comes from the line of Philip Ngotho from Kepler Cheuvreux. Philip Ngotho: I have 3 questions, if I may. The first question is on China and North Asia. If I look at the consolidated numbers, I see the occupancy rates. It was already low last year, but it actually dropped further to 55%. So I assume it has to do with the Chinese terminals that are just generating or have low occupancy rate. I was wondering if you could share any -- because in the past, I think you also mentioned that the chemical market in China has been weak, and it seems that occupancy rate continues to drop further there. Do you have any -- what are the projections for those assets there? And could we be thinking of anything if it remains structurally weak to -- that you might take some portfolio actions there? The other thing that I'm wondering about is what portions of earnings is really dependent on throughput levels rather than really take-or-pay contracts? And the last question I have is if a client would declare force majeure and you have a take-or-pay contract with that client or client is impacted by force majeure and with the take-or-pay contract, what happens to that take-or-pay contract? Do you actually -- can you still incur revenues on that? Those are my 3 questions. Michiel Gilsing: Philip, maybe start on the China side. Yes, if you look at the consolidated occupancy, effectively, that's only one terminal. So we have a portfolio of 8 terminals in China. So that doesn't give you a very representative picture of China. Dick already mentioned, the China results were actually quite good and slightly above our own expectations. Indeed, that terminal is the Zhangjiagang terminal, which then has a relatively low occupancy because it's in a very competitive market, and it's one of the distribution terminals. Most of the terminals we have in China are industrial terminals. So basically backed by long-term take-or-pay type of contracts. So you see that the overall portfolio is quite healthy. We don't have any immediate portfolio actions, we're going to take in China. To the contrary, we commissioned last year a new terminal in China. So that is an add-on to our portfolio. We still see quite a few growth opportunities in industrial terminal locations. And overall, the returns in China, if you compare it to the rest of the portfolio is quite healthy, and we're quite capable of distributing our dividends from China back to the Netherlands. So that's maybe on the China side. On the earnings side, yes, there is always a component of throughput income. So even in contracts which -- where people buy, let's say, effectively the capacity, we still have an opportunity that if throughputs are at a higher level than expected that we will charge additionally for excess throughputs. So approximately 10% of the earnings are throughput related in some locations, more throughput related than in others. For example, location like Belgium is much more activity related than in another location. And some of the locations like I just mentioned, some of the industrial or some of the gas contracts are very low in terms of throughput dynamics. So that's maybe only a portion of the earnings, which is throughput related. And Dick, on the first, force majeure? D.J.M. Richelle: Yes. So force majeure, Philip, what we see happening is that some of our customers are declaring force majeure, but they are declaring it in all those cases towards their customers. So an inability sometimes to get product out of a region in order to deliver it to a customer that is further away that is not necessarily related to the type of services that they -- or obligations that they have towards us in the storage contract and arrangements that we have. So we obviously have to follow this case by case and understand very clearly what some of the situations of our customers are in this respect. And as was indicated, I think, in the presentation already before, we need to kind of like be prepared for those discussions because if that customers are under serious stress and under duress, we have to sit down and understand what we can do to support them. But legally speaking, the force majeure, there's very clear guidelines of what and how that applies in the contract obligations and responsibilities between the storage provider and our customers. Philip Ngotho: Okay. Very clear. Just one follow-up. So far, have you had any clients where you already had to sit down and renegotiate terms? Or given that they were just faced with difficulties or challenges? D.J.M. Richelle: It's no comment on that. And the reason for saying it, I don't want to go into individual discussions and official, it's -- I think it's a bit of a gray area where there is -- obviously, there are customers that say we're under a lot of stress, can we talk versus how official that is and how official those negotiations are. I think this is part and partial of what we've seen in previous crises. We are confident that we can manage through that. We're close to our customers and see where and when we can support them while at the same time, respecting and safeguarding the interest of Vopak, which is we made investment in certain infrastructure to support our customers in good times and in bad times. So no details. Operator: Now we'll go and take our next question. And the next question comes from the line of Quirijn Mulder from ING. Quirijn Mulder: On the whole situation in the Middle East. Can you give me an idea about, let me say, the first panic in the first week of March compared to what the situation is now? Are the customers still scrambling for products and has its impact on your throughput in, let me say, mainly in the Far East? So can you give me a view on what's in reality happening and what is -- you take a cautious stance on the second quarter. And it looks like that, okay, the March was not the issue, but maybe April is more an issue than March. Can you give any feeling on what's the current situation for many customers and also the impact on your business? D.J.M. Richelle: Yes. Quirijn, thank you for that question. I think first and foremost, as we already said, key priority for us is to make sure that people are safe and have been safe throughout the course of the conflict. The noncritical staff we leave away from the facility. We take noncritical staff not with a permanent resident in that region, take them out and move them back to their countries of origin. That has all been done. We monitor obviously the situation very closely, purely from a safety and security point of view and do whatever we can to support our partners and our people over there. I think that's in the first -- that's the first instance and first priority. If you look at it, what's happening at the moment, I think a few things to mention here. The amount of information that comes out of the region is limited. That's -- so what the exact damage is outside and far outside of the perimeter of the facilities that we operate is not publicly known, and it's also not always known to us. I think the second element is if you look at it physically what's going on, people would like to remove product in a safe manner, if that's possible as soon as possible in some instances, as we particularly have seen in Fujairah, while at the same time, making sure that now that the cease fire is in place, increased activities are happening to make sure that as much as possible, business continues as possible, as usual, with demand for fuel oil, demand for some of the products that need to be moved in and out, and that is, I wouldn't say all back to normal of how it was before because that would be too strong a statement simply because the product is not always available. The product that comes out of the region is hampered and is limited and restricted. But slowly but surely, as we speak now, things are -- people are trying to get back to normal and resume as much as possible, normal operations with a cautious view and a clear view on the uncertainty that's happening in the region, as you can imagine. Quirijn Mulder: Yes. And that's in the region, but there's a ripple effect, let me say, elsewhere in the Far East. So let me say, the situation in Australia and Sydney, et cetera. And let me say, for example, in South Africa, as you mentioned, in Pakistan. Is there anything you can update us on that -- on the development there? D.J.M. Richelle: Yes. So we continue -- what you see, Quirijn, is that things literally move quite volatile and hectically kind of like almost from week to week. So let's take South Africa, maybe as an example, dependent very much on imports from the Middle East. So in the first weeks of the conflict, you see product on the water still finding a home in South Africa. So first 2 weeks, it was almost business as usual. Then you have a period where there's no new supply coming simply because the supply was choked coming out of the Middle East. So then there's actually a bit of panic in the local market, what's happening and how can we supply new product. And then after a week, 2 weeks, you see that there's alternative supply coming into the market from different parts of the world. And for instance, West Africa is then becoming one of the suppliers of South Africa, which is then supporting. Over time, it obviously needs to work out what it does to total volumes once things start to settle down. But the challenge is it's never clear of when things really start to settle down. And I think that's what we are working through. So it's -- I think that's the best way to characterize it. And I realize you maybe want to have maybe sustainable longer-term view of where this is trending to. That's simply too hard to say at this point in time, and we continue to support where possible. And I think if I can take it one notch up, the general confidence that we have in the fact that we operate these critical assets at strategic locations that support the primary needs in local economies continues to give us a lot of confidence on the medium- to longer-term outlook for our network, but we have to navigate through the current circumstances. Quirijn Mulder: But I understand, let me say, if I look at the second quarter and especially in the month of April, then thus far -- okay, there's a lot of uncertainty, but it's not very concrete impact there, if I understand. There's not that you see, let me say, really impact from, let me say, the business happening on your -- the business happening on your business, in fact. Is that correct? D.J.M. Richelle: I think it's -- what we are saying is that with a lot of uncertainty and volatility in the market, we are certainly not immune for the supply shocks that are currently happening, Quirijn. This is not a relative easy exercise between brackets, easy exercise of rebalancing the remainder of the flows to the world. There's simply also a shortage of product in some regions, and that will have effect on the flows that are coming through some of our terminals, while at the same time, there's, in some instances, a rush for a particular storage position for a particular product because product is trapped and you need to find an intermediate source of storage. So I think it's too early still to tell. We haven't closed April yet. It's way too early to tell what the impact then will be. The assessment that we made is the assessment for the full year 2026, which is reflected in our outlook. And there, we think that we are capable of absorbing the negative impact of the conflict in the outlook that we've already presented. Michiel Gilsing: Yes. Because on outlook -- you may assume on the outlook that obviously -- well, the first quarter was relatively strong. So if you compare it to the outlook we have given, it's at the higher end of the outlook, if you would have 4 of these quarters, but then we still have some growth coming on stream and some positive currency exchange compared to Q1. So yes -- and that will compensate for the potential impact of the conflict, what we feel could be the potential impact of the conflict today because it's very hard to make an assessment. We don't know, let's say, how long this is going to last, how severe this is going to be. But we feel that where we are today and what we know today, that those compensating factors are sufficient to absorb, let's say, the impact of the Middle East. Operator: Now we're going to take our next question. And the question comes from the line of David Kerstens from Jefferies. David Kerstens: I have 2 questions also about the conflict in the Middle East. And maybe specifically on Fujairah, can you give an indication how occupancy trended in the month of March? And given that this is a hub location, do you see any impact from reduced product flows in Fujairah elsewhere, for example, going to Asia into Singapore, will there be a knock-on effect on occupancy levels there as well? And Dick, I heard you say you will see global trade flows rebalancing, I think in response to the former question, you talked about new supply coming out of West Africa. And also, you have a very well-balanced portfolio. Does that mean that you also see terminals that are seeing positive effects from the current conflict in the Middle East? D.J.M. Richelle: Yes. So I think individual occupancy level for particular months, let's refrain a little bit from that or we want to refrain from that. I think VHFL, as we said, total occupancy has gone down quite a bit in -- towards the end of the first quarter. And we see that around 8% of that capacity in Fujairah is out of service simply as a result of some of the damage that we've seen in Fujairah. So that is something that we have to repair and get back into service. The impact that, that has for the rest of the network, it's not necessarily that the immediate flows from Fujairah are moving to all other terminals throughout the network. So I think Singapore has its own dynamic, and it is impacted by the fact that there's products not flowing from the Middle East to Singapore, but that has different sources than to potentially repair that with. And we haven't seen up until now a big impact in, for instance, Singapore for the demand for oil storage. If there are positive elements in the outlook for some of our terminals, I think we mentioned already the effect in Deer Park. We see increased -- quite some increased activity in the Europoort as well. But I think you have to also understand this particular case, it's very relatively straightforward sometimes to assess what is not going well and what the direct impact is, it will take time for us to assess where we see some of the upsides coming from. I think it's simply also harder to predict that at this point in time. Operator: Now we'll go and take our next question. And the question comes from the line of Jeremy Kincaid from Van Lanschot Kempen. Jeremy Kincaid: I just have one question on your guidance. You obviously reconfirmed it today. But within that, there was -- it seems like there's some positives and negatives. On the negative side, clearly, there's the disruption from Strait of Hormuz. But on the positive side, you talked to FX. And I think the other key thing was some growth projects coming in. I assume this doesn't refer to the Europoort terminal or the Spanish development that you're working on because those seem to be -- will be operational in 2027. So can you just talk to what those growth projects are and what's changed from when you last gave the guidance? Michiel Gilsing: Well, definitely that, in the growth projects are not these projects you mentioned indeed. So the growth project, the major one, which will come on stream this year is tank #4 here of the LNG import facility, the Gate terminal here in Rotterdam. So that is still within budget, but also within its original schedule. So we would be able to commission it on time. That is the latest outlook we can give. So that's going to be the major positive contribution. There's a few other projects, but these are relatively smaller compared to the tank #4. Indeed, foreign exchange is a positive element. And then, effectively, what happened is the underlying business performed a bit better in Q1 than we expected. So as a result, if we wouldn't have had the Middle East impact, then obviously, there was -- there could have been a likelihood to basically adjust the outlook upward. But yes, the Middle East conflict basically brings the outlook to the level we have given to the market for both free cash flow as well as the EBITDA. Free cash flow is still healthy. So if you look at where we were last year and where we anticipate to be this year, we should still be able to report a strong cash flow, and that's obviously the main driver for value creation. So yes, basically, I hope that answers the question, Jeremy. Operator: Dear speakers, there are no further questions for today. Dear analysts, thank you very much for all your questions. And that does conclude our conference for today, and have a nice day. Fatjona Topciu: Thank you. D.J.M. Richelle: Thank you very much. Good day. Bye-bye.
Annukka Angeria: Good afternoon, and welcome to Nokian Tyres First Quarter 2026 Results Audiocast. I am Annukka Angeria from Nokian Tyres Investor Relations. And together with me in this call, I have our President and CEO, Paolo Pompei and our new CFO, Timo Koponen. As usual, Paolo and Timo will run through the presentation. And after that, we will open the line for questions. But before we start, I would like to ask you Timo a couple of questions. You have been with us only a few days. And first of all, welcome to the company. Timo Koponen: Thank you. Annukka Angeria: It's great to have you here. With the short but intense experience with the company, what are your first impressions? Timo Koponen: Yes. Well, it has been very, very busy start as everybody can anticipate that. First of all, I'm very excited to be on board finally. It's been a long wait and kind of looking back when we started discussions with Paolo and the other people in the company, I got really intrigued by the momentum and drive the Nokian has. And obviously, that intriguement remains. And you only need to look at the just ended first quarter, and you see many product launches and so on, and you can really see that we have a second gear on. It's good to be here. Annukka Angeria: Good to hear. Maybe if you can also briefly say a few words about your background. Timo Koponen: Sure, sure. Yes, as I think it was already mentioned in the announcement, I have a long background in a Finnish industrial equipment companies, Konecranes, Hackman, Metos, Wartsila and last couple of years at Normet and have been working in finance as well as in the line management roles both in Finland and overall, France, China and U.K. and now in Finland. Annukka Angeria: Thank you. And with that, I will now hand over to you, Paolo, for the first quarter results. Paolo Pompei: Excellent. Thank you very much, Annukka and also from my side, welcome on board, Timo. Let's start immediately with the headlines, where you can see that sales increased across all regions and operating profit improved significantly, driven by disciplined strategy execution. But let's move to the agenda. We will start with the quarterly highlights, moving to the financial performance, then Timo will come in the business unit performance as well as our cash flow and financial position and then we will close this call with assumption and guidance. And of course, at the end, there will be question and answer. Moving directly to Slide #4. Operating profit improved significantly. This was really supported by volume, price mix improvement and lower manufacturing and material costs. Operating profit improved by more than 50% and we had really good also price and mix improvement during this quarter. effective working capital management, lower CapEx has contributed to improve our cash flow by over EUR 50 million in quarter 1 and this is also important, an important achievement in this quarter. We keep working on our continuous improvement initiative that are really supporting strongly our strategic plan and our EUR 220 million EBITDA improvement by 2029. And this was also an exciting quarter when we talk about product innovation. We were able -- actually we were releasing 2 important flagship in our product range for the Nordics and the Central European market and also a new tire for EBITDA division, a new line for truck tires. Moving to Slide #5. As I said, this was an exciting quarter and it's worth really to spend a few words about our achievements because we were able to release once again the new disruptive technology, the Hakkapeliitta 01 with -- start with -- that is actually delivering a tire that is able to operate and to adapt to the change of temperature with start on or start off depending on the driving condition with different temperatures. This is really a great achievement. It's a disruptive innovation. And we're really proud about the achievement of our R&D team and what our company has been able to develop through intense R&D work as well as intense testing in the last few years. We're also releasing the Nokian Tyre Snowproof 3P. This is also an extremely high-performing product dedicated to the Central and South Europe -- Southern European markets that is beating actually the key competitors in many parameters. And of course, we are extremely excited about our strong improvement in the product performance in a strategic market, a growing market for all of us. We have invited to test our tires solution more than 500 customers during the month of March in our test center here in White Hell in Ivalo. And this is obviously the best way to promote our product to make sure that our customers can really experience the good performance and the good capabilities of our own facilities as well of our own products. Now let's move to the financial performance. So moving directly to Slide #7. When we look at the market, we see actually market declining, both in Europe and North America. This is making us even more satisfied with our existing journey because, obviously, in passenger car tire, we've been able to outperform the market in quarter 1. So the market is estimated to be at this stage, minus 3% in Europe in passenger car tire and minus 8%, so significantly down in North America. Truck tire business has been positive actually in quarter 1. And we can say that the agriculture and forestry business was flat, both in the OE and the replacement market in the same period. Moving to Slide #8. We see that net sales increased by 4.9% in quarter 1. I would like to highlight the strong performance of passenger car tire that was plus 9% in comparable currency. We were growing in all the regions, and this is also very important in our existing journey. We improved segment EBITDA to EUR 30.2 million, so plus almost EUR 18 million compared to previous year, and this is representing finally 2-digit EBITDA, 10.8% of net sales compared to 4.6% in 2025. We improved our segment operating profit by more than EUR 14 million. This is a growth of 70% moving to minus EUR 4.3 million, so very close to the breakeven coming from EUR 18.5 million in 2025. And finally, we improved our operating profit by 50% to minus to minus EUR 17.8 million versus almost minus EUR 36 million in 2025. So the numbers are improving according to plan, and we are really pleased about these developments. Moving to Slide #9. You will see, as we have anticipated that sales are growing in any region. Obviously, this in comparable currency, we see a growth of 1.4% in the Nordics, strong growth in Central and Southern Europe with 9.1% and also very good growth in comparable currency in North America with plus 7.8%. I remind you in a market that is declining by 8% in quarter 1. So passenger car tire was outperforming the market. Heavy tire, the sales were down by 1.6% and but it were improving -- the profit was improving significantly above 15%, 15.7%. And Vianor was slightly positive with 1.7%. Moving to Slide #10. This is a new slide that we are presenting in this deck that is giving you a better understanding of the mix development of the company. You will see that in quarter 1 we were growing in terms of a percentage of sales in the all-season and summer tire business, while we were declining from 37% to 30% in the winter tire business. Just a reminder, obviously, quarter 1 is not a winter tire quarter in our industry. And also second reminder is that obviously, we are leveraging this year the product launches that we did last year in 2025 in Central Europe for the all-season and summer tire business as well also in North America for the all-weather. We are also happy about the progress we are doing on 18 inches plus larger tire diameters when we are reaching -- they are reaching today 51% in value of our total sales. So I would say, from the mix development point of view, we are developing the business in line with the plan and in line with the strategic targets that we released in February 2026. Moving to Slide #11. Of course, we see more or less the same numbers, but I would like to focus your attention on 3 main KPIs: One, obviously, the reduction of the debt by approximately EUR 45 million, and Timo will tell you more about that, the reduction of the capital expenditure to EUR 7.3 million from EUR 52 million last year, obviously, we say that we were ending a very heavy investment period, and now we'll get back to normal. And then, of course, the cash flow from operating activities has been also improving by more than EUR 50 million. Moving to Slide #12, you will see that we are targeting this year an investment level more or less in line with the depreciation of approximately EUR 130 million at this stage. So we get back really to a normal investment level which is obviously supporting our strategic plan journey moving forward to 2029. Then I leave the stage to Timo for the business or comments. Timo Koponen: Okay. Thank you, Paolo. So as it has already been mentioned a couple of times, we are very pleased about the performance we had in Passenger Car Tyres. Net sales increasing by 9.1% on comparable currencies. At the same time, the pricing continued improving. And very importantly, we operated with the lower manufacturing and as well as material costs and this logically all resulted -- results in significantly improved segment operating profit. And as we can see, we moved from losses a year ago, EUR 6.2 million, up to EUR 10.2 million or 5.5%. Moving on to Page 15, when looking at different components in the Passenger Car Tyres in net sales, volume contributed EUR 10 million of that increase, plus 5.7% and price/mix, EUR 6 million plus 3.4%. Headwind we had related to currencies, minus 2.1% and that comes from mainly from the North American sales. In the lower part, in segment operating profit level, lower material cost was the biggest lever we had by EUR 11 million. Sales volume and price mix having also a significant positive effect of EUR 5 million and EUR 6 million respectively. And as we already anticipated in the Capital Markets Day during the period may have made significant investments in our brand and marketing. And that shows as a higher SG&A. And it's needless to say the growth always takes some money. Moving on then and looking at the -- also the picture that we are very happy about sales volume turned to growth after 2 declining coming quarters, growing by 5.7% on quarter 1. And regarding the price/mix we can see the price increase continuing also on the quarter this time by 3.4% and currencies we already commented earlier. Then moving to Heavy Tyres. There, the net sales decreased by 1.6%, and that was due to lower demand in forestry segment. And this part of the segment that -- despite of that, the segment operating profit improved by EUR 8.6 million, and that is thanks to good [ pit ] pricing disabling. Percentage-wise, as Paolo already mentioned, we are back above 15% level at 15.77%. And as it has been our target already in this business is to fix the profitability, and we are very happy to see that happening. And then finally, on the business units, the Vianor, there, we had a disappointing first quarter, as already mentioned, and this part of the increased net sales, it went up by 1.7%. The segment operating profit declined and was minus EUR 17.1 million and the main cost there was the 2 factors, basically, the cost inflation and then one-off inventory revaluation, which both had a negative effect. And then as a reminder, as most of you already know, Q1 is seasonally low for Vianor so nothing new there. And then moving to cash flow and financial positions. positive cash flow development was already mentioned, 2 main contributors there. First of all, thanks to very effective working capital management we were able to improve. And there, the factors are, as we have previously communicated, we have several initiatives ongoing. Improve our position, inventories, payables and so on. Another big improvement compared to a year ago was the lower CapEx. There are some seasonalities on that, but we also have to remember that we have very high scrutiny on new investments, what we are taking in and focusing on improving cash flow. And then Finally, on a debt position, as already I mentioned, net debt went down by EUR 45 million on the quarter on the liquidity at the moment or end of the quarter, it was EUR 441 million. consisting of cash and then the EUR 304 million undrawn cash credit facilities. And regarding the debt maturities on the right-hand side, as we already commented in the report, during the period, we executed an extension of 1 year for EUR 100 million loan, and that was the only event that we had on the quarter. Paolo Pompei: Excellent. Thank you very much, Timo. And let's move now to the assumption and guidance. So if we can move to Slide #23, you will see that we are actually not changing the assumption for this year. We believe the market will remain plus and minus 2% pretty stable, impacting car tire as well as in agri and forestry tires where we see actually the demand pretty stable and low level in the OE market and slightly positive in the aftermarket for the rest of the year. So moving to Slide #24 and looking at the guidance, there are no changes to our previous guidance. We believe that in 2026, the Nokian Tyres sales will grow compared to previous year. And obviously, operating profit as a percentage of net sales will be between 8% to 10%. The tire demand is expected to remain flat. Obviously, we are continuously watching the evolution of the existing conflict in Middle East. This is an important part of the assumption. But at the moment, we are able looking at the outlook and considering our continuous improvement plan, we are able to confirm that our guidance is pretty strong and stable. The profitability, obviously, will improve, supported by new products, but also by price and mix, as you can see also in quarter 1 and continuous efficiency in Poland. So I would like to close the -- this quarterly presentation reminding that our long-term objective, we remain focused, and we want to remain fully focused in our leading position in winter -- keeping our leading position in winter time, we are targeting to grow above market level in the old season or weather segment as well as in the agri and forestry tire business. Three different journeys in -- by geography in Nordic is about strengthening our first position while in Central Europe as well as in North America it's about growing above market average. We will do that always supporting value premium value positioning and mix enhancement. We will do that, expanding our B&L network in Europe and focusing more and more on B2B and B2C, in particular, consumers. We have a strong product innovation in the pipeline. Actually, we are counting the 2029, I remind you in the Passenger Car Tyres to release a new product in all the segments where we operate, 90% of those new products will be dedicated to winter tire and all-season and all-weather consumer focus to add investments in marketing, in particular, and then we will keep working on operational excellence where we see great opportunities to improve significantly our cost structure. Our local to local business model will enable us to be less vulnerable in front of geopolitical tensions and of course, we can count more and more in an experienced and engaged team, we will be able to achieve our financial target. So our long-term financial targets remain the same. EUR 1.8 billion to EUR 2 billion within 2029, segment EBITDA above 24% and segment operating profit above 15% reducing the debt level to a ratio between net debt and segment EBITDA below 2. We can now move on to the question and answer, and thank you for your attention. Operator: [Operator Instructions] The next question comes from Artem Beletski from SEB. Artem Beletski: Paolo and Timo, I actually have 3 to be asked. So the first one is relating to raw materials and Paolo, you also mentioned conflict and Middle East. Could you maybe comment whether you have been doing already some price increases due to this topic or have seen competitors acting. And maybe just in terms of time lag, when you need -- when this type of higher oil-related raw material costs will start to increase for you? Maybe I'll start with that one. Paolo Pompei: Yes. Thank you for the question. This is an important one, really relevant, of course. So when we talk about raw material, there is time gap, as you know very well, I mean, we are estimating to see the impact of the raw material changes more through the end of the year, meaning quarter -- end of quarter 3, beginning of quarter 4. Clearly, we are not concerned about compensating this effect that will come up. As you can see, our pricing are moving up despite we have a favorable trend at the moment of the raw material trends. So clearly, prices is the tool to compensate the raw material trend long term. Obviously, we don't comment about competitors. But I can only say in 30 years in our industry, the market is very disciplined in transferring this cost, obviously, when they are coming. Artem Beletski: Yes. This is very clear. And maybe the second question, what I would like to ask is relating to Heavy Tyres and indeed, you delivered quite nice profitability improvement in Q1. Do you see that this level is now sustainable and maybe you can update us with your view what comes to market recovery. Do you still expect it potentially to happen in second half of this year? Paolo Pompei: Yes. This is also a very good question actually. The Heavy Tyres business is improving because, obviously, good price discipline. As we said, it's keeping and, of course, some internal operational efficiency actions that we have activated. I think the Heavy Tyres business is now at the end of a very long negative cycle. So we expect the market, obviously, to move up. It's difficult for anyone to say, particularly today with existing crisis in Middle East to say really when the market. The OE market in particular will pick up because the replacement market I think, is already moving in a better direction. It's more about understanding when the OE market for us, as you know, is very important, the forestry market as well. So my original estimation was the market will improve in the second half of the year. But of course, this, at the moment, is not yet visible. At least we don't have any visibility about this potential improvement already in the second half of the year, but we will keep you updated by step. Artem Beletski: Yes, great. And then the last one that I had was relating to SG&A expenses and those went up EUR 6 million in Q1 year-over-year. And I fully understand that it has to relate to this very interesting new products, what you introduced to the market. Is it fair to say that the increase during the remainder of the year will be much smaller given the fact that those product introductions and presumably, big events are behind us. Paolo Pompei: Yes, of course. Don't forget in quarter 1, 2025, we were coming out from a very, very difficult 2024, building a company, stretching everything at minimum, not really investing too much in our future. And then now we are investing on our future with growing sales force and growing marketing investments and of course, a big product launches that we did in March 2026. Clearly, we will keep investing in growth, but it has to be a profitable growth. So as I said, of course, you should not expect a 12% SG&A increase every quarter, but otherwise, this will not be sustainable, but you should expect that, obviously, we will keep investing on our brand for the future. Operator: [Operator Instructions] The next question comes from Thomas Besson from Kepler Chevreux. Thomas Besson: Thank you very much. Good afternoon. I hope you can hear me. The quality of the line was disastrous during the previous question. So I may ask a question for almost the second time, but I'd like to make sure I understood correctly. I think, Paolo, you said that the industry has basically been raising prices to offset higher energy and input cost historically. But my question was really to try to have a view on what you're assuming in terms of energy and raw materials headwind for the year or Nokian in 2026. And when these energy and raw materials are going to turn from a tailwind into a headwind? And what kind of price hike you need to be able to offset this assumed headwind. That's my first question. I have more questions that I'll ask later. Paolo Pompei: I'm sorry if the line was not -- I hope it's better now, but that is an important question. As we said, I mean, the raw material effect of the current situation will probably be visible end of quarter 3, beginning of quarter 4. And of course, this is changing every day, as you know very well. I mean it's depending on different announcements that are happening every day. But let's say, in our assumptions, we consider the existing raw material level, the one that we will see moving forward. Then the -- obviously, we are expecting to see some impact end of quarter to beginning of quarter 4. I think the pricing action we have in place are able to compensate this raw material effect. I will keep repeating that the problem is not about transferring the cost, it's always about evaluating the consumer behavior at the end. So tire industry, we were always very disciplined in managing price and raw material we tried in the last -- actually in the last couple of years now, 1.5 years to improve also our positioning through new products and through price increases. But in general, I would say that I will not be concerned about the balance between prices and raw material. We need to see how the demand will evolve. But at the same time, we need to say that our journey is a little bit in particular, outside of the Nordic, it's a little bit independent, meaning that we come from a niche position, a small position. So we still have plenty of opportunity to manage our growth. Thomas Besson: Second question, your Q1 volumes in passenger cars were up 5.7%, while your reference markets in Europe and the U.S. were both done. And it comes against Q1 25, where you already had a strong jump in volumes. Can you elaborate on what has been allowing this? Where have you gained share? And whether you do expect to be able to continue to largely outperform your end markets in Q2 and the rest of '26. Paolo Pompei: Sure. We are growing in terms of market share, as we said in the 2, I would say, new market, we could not even say new because obviously, we were before the crisis in Russia, we were already pretty present in Central Europe. But we are regaining obviously market share in Central Europe, we are growing market share in North America. And this is driven by a combination of elements, as we know very well. First of all, we have a completely new manufacturing footprint that is giving the possibility to have dedicated factories for dedicating markets, meaning that we can really focus on the development of specific market with dedicated manufacturing capabilities. Secondly, a lot of new products. We are releasing a lot of new products that are giving also the possibility to our team to promote our innovation capabilities. And of course, we are enforcing the team as well at the same time, also exploring new channels, reinforcing our B2B and B2C channels. So it's a combination. Clearly, for us, it's a continuous journey. And -- but it's very important that this journey is going to be profitable. So in Q1 2025, you saw an important growth 22%, but you didn't see an improvement of profitability. Now if you notice, you see a different journey in the last few quarters, we focus more on profitability improvement at this stage of our life. And then, of course, we are happy to see, like in quarter 1, when profitability and growth are moving together in the same direction because this is really what any healthy company should provide to investors every quarter. Thomas Besson: Clear. Can you just say a few words about what you expect in the coming quarters about your share gains, do you think it can continue? Or this was the best outperformance you're going to show during the year? Paolo Pompei: The guidance is about growth. So what I mean is that we keep guiding single-digit growth, and that is really important. So we are not guiding 2-digit growth, but we are guiding single-digit growth. Thomas Besson: Understood. Last question for me, please. You -- I mean, I think it's fantastic, that you barely spent any money in Q1 on CapEx, EUR 7 million. So obviously, driving an unusually big decline in debt over the quarter. Can you explain why this is the case? Are you facing something very slowly? Or do you still think you're going to need to spend EUR 120 million, EUR 130 million for the year? Or did you get some of the Romanian state aid that you wanted? Paolo Pompei: Timo has already anticipated very well that clearly, when you look at CapEx, you need to see also a sort of seasonality. Normally, for reasons, we do maintenance during factory closing. So obviously, the CapEx level in quarter -- end of quarter 1, beginning of quarter 2 will increase because it's the maintenance period for many of our own operations. As I said, I would consider EUR 130 million, the maximum roof. Actually, we are targeting less than this EUR 130 million. For us, it's very important to be capital efficient, meaning to be able really to invest whatever is needed in terms of maintenance, but also wherever we see a clear and faster return. So I will not take quarter 1 as a reference. But in general, of course, we have projects, we have maintenance projects. We have a small operational project to complete the Oradea plant that is not fully completed yet. But of course, we are guiding, as I said, at this stage, EUR 130 million and probably a bit less, but we will guide you better in the second quarter. Operator: There are no more questions at this time, so I hand the conference back to the speakers. Annukka Angeria: If there are no further questions, this concludes today's call. Thank you, Paolo and Timo and all for joining this call. And we wish you a great rest of the day. Thank you very much. Timo Koponen: Thank you..
Operator: Greetings. Welcome to the China Automotive Systems Fourth Quarter and Fiscal Year 2025 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Kevin Theiss, Investor Relations. You may begin. Kevin Theiss: Thank you, everyone, for joining us today. Welcome to China Automotive Systems 2025 Fourth Quarter and 2025 Annual Results Conference Call. Joining us today are Mr. Jie Li, Chief Financial Officer of China Automotive Systems. He will be available to answer questions later in the conference call with the assistance of translation. Before we begin, I will remind all listeners that throughout this call, we may make statements that may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent the company's estimates and assumptions only as of the date of this call. As a result, the company's actual results could differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the heading of Risk Factors and Results of Operations in the company's Form 20-F annual report for the year ended December 31, 2025, as filed with the Securities and Exchange Commission and in other documents filed by the company from time to time with the Securities and Exchange Commission. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment and cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and materially adversely impact our business, financial condition and results of operations. A prolonged disruption or any unforeseen delay in our operations of the manufacturing, delivery and assembly processes with any of our production facilities could result in delay in the shipment of products to our customers, increased costs and reduce revenue. The company expressly disclaims any duty to provide updates to any forward-looking statements made in this call with a result of new information, future events or otherwise. On this call, I will provide a brief overview and summary of the fourth quarter 2025 unaudited results and the 2025 annual audited results for the period ended December 31, 2025. The 2025 fourth quarter results and the 2025 annual results are reported using U.S. GAAP accounting. Management will conduct a question-and-answer session. For the purposes of the call today, I'll review the financial results in U.S. dollars. We will begin with a review of some of the quarterly business highlights, recent dynamics of the Chinese economy, automobile industry and our market position. China's automotive industry in 2025 set another new record with vehicle production reaching 34.5 million units and sales totaling 34.4 million units. These numbers reflect growth of 10.4% and 9.4% year-over-year according to data from the China Association of Automobile Manufacturers, CAAM. Commercial vehicle production and sales reached 4.3 million units and 4.3 vehicles sales, respectively. China's domestic auto market rose by approximately 6.7% with total vehicle sales reaching 27.3 million vehicles. Among the industry trends were greater sales of new energy vehicles and Chinese branded vehicle capturing a larger portion of the total vehicle sales. Auto-related exports were another strong sales growth avenue for Chinese vehicle manufacturers. In 2025, government incentives for the automobile industry included tax incentives, subsidies for scrapping older vehicles and lower interest financing. Additionally, local government and private incentives may also have aided buyers. Chinese branded vehicle OEMs introduced a significant number of new models to attract consumers. Our sales increased by 21.4% year-over-year to $229.2 million in the fourth quarter of 2025 compared to $188.7 million in the fourth quarter of 2024 and $193.2 million in the third quarter of 2025. Net sales increased due to higher demand for passenger and commercial vehicles in China as well as increased export sales in the quarter. Gross margin in the fourth quarter of 2025 rose to 23.1% compared to 15.6% in the fourth quarter of 2024. Research and development expenses, R&D expenses rose to $17.8 million compared with $7.8 million in the fourth quarter of 2024. Technology is playing an increasing role with steering performance and quality and customers are buying more advanced products. Operating income grew to $18.1 million in the fourth quarter of 2025, primarily due to higher gross profit. Net income attributable to parent company's common shareholders increased by 103.2% to $18.4 million with diluted income per share of $0.61 in the fourth quarter of 2025 compared to $0.30 in the fourth quarter of 2024. For the 2025 year, record net sales increased by 17.6% to $765.7 million. Total sales of the company's EPS systems increased by 25.5% year-over-year to sales of the traditional steering products increased by 12.6% year-over-year. EPS sales represented 41.5% of total revenue in 2025 compared to 38.9% in 2024. Our Henglong subsidiary sales of passenger vehicle steering systems rose by 12.1% year-over-year to $65.3 million in 2025. Jiulong sales of commercial vehicle steering systems increased by 28.9% year-over-year to $92.3 million. Brazil Henglong net sales grew by 34.7% year-over-year to $68.7 million, and net sales to North American customers rose by 15.3% year-over-year to $121.6 million in 2025. Sales to Stellantis worldwide network helped propel our steering product sales growth in North and South American markets as well as Europe. Gross profit in 2025 increased by 33.2% year-over-year to $145.5 million with the gross margin increasing to 19%. The gross margin increased mainly due to a change in the product mix and lower material costs compared with last year. Operating income increased by 33.2% year-over-year to $53.6 million in 2025. Net income attributable to parent company's common shareholders was a record $42.8 million in 2025 with diluted net income per share 43.4% higher to a record $1.42 per share. R&D expenses increased by 63% year-over-year to $45.1 million in 2025. We had a number of product and technology innovations in 2025. Our second-generation iRCB intelligent electro-hydraulic circulating ball power steering began production for use in heavy-duty vehicles that use both hydraulic power and electric controls. As China's first iRCB compatible with L2+ assisted driving, this system utilizes cutting-edge electro-hydraulic control technology to achieve remarkable steering accuracy and response. And through higher efficiency, operating costs will be significantly reduced. Our Jingzhou Henglong subsidiary launched its Active Rear-Wheel Steering in 2025. Once reserved only for luxury cars, CAAS' Active Rear-Wheel Steering provides superior steering characteristics and is now entering into the upper mass market for new energy vehicles in China. Our R-EPS steering product developed for Nanjing Iveco entered production in 2025, providing advancements in performing autonomous driving functions such as automatic parking, lane keep assist and lane follow assist. Our R-EPS uses our proprietary ball screw assembly, which has become an essential steering configuration for mid- to high-end vehicle models, demanding high reliability and efficiency and quick responsiveness. Another subsidiary, Hyoseong (Wuhan) began production of its new 115 platform steering motor production line at the end of 2025. This high torque 115 platform electric motor supports our ERCB commercial vehicle program. ERCB is advanced electronic recirculating ball steering systems. This new motor is a significant innovation in our advanced intelligence steering strategy. We also made strategic moves to expand our geographic expansion. Our Henglong subsidiary entered into a strategic cooperation agreement with [ KYB/UMW ] in Malaysia. Through this cooperation, a new regional manufacturing and supply system is being entered in Malaysia. This joint venture between KYB, a globally renowned automotive component company and UMW, a Malaysian industrial conglomerate with core businesses covering automobiles and other equipment. UMW holds a 38% stake in Perodua, Malaysia's largest car manufacturer and UMW also has a joint venture with Toyota in Malaysia. For our agreement with KYB/UMW, our products will be initially supplied to Perodua in Malaysia. In the future, additional opportunities in the OEM and aftermarkets will be explored in the broader Asian region. To support this strategic partnership, KYB/UMW's new advanced manufacturing plant became operational in 2026. Our Jingzhou Henglong subsidiary also won its first R-EPS product order from a large well-known European automobile producer. This order with annual sales expectations exceeding $100 million covers multiple vehicle models and mass production is expected to begin by 2027. Also, our affiliated company in Sweden, Sentient AB, achieved considerable sales to a major European OEM 2025 for its leading steering technology integrating hardware and software. As of December 31, 2025, total cash, cash equivalents, pledged cash and short-term investments and long-term time deposits were $256.7 million. Net cash flow from operating activities increased to $111.3 million in 2025 compared to $9.8 million in 2024. Free cash flow exceeded $74 million in 2025. Our net cash position reached $169.7 million at year-end. With our increasing global presence, the Board of Directors decided to change our corporate registration to the Cayman Islands. This change will save significant administrative costs and pave the way for us to become a true multinational supplier to global OEMs. Management is refocusing some of those resources to improve operations, sales and to increase penetration of our growing international markets. Beginning in 2026, we will report our financial results on a 6-month basis. So our next report will be for the 6 months ended June 30, 2026. Also in 2025, we changed our independent registered public accounting firm to Grant Thornton Zhitong Certified Public Accountants LLP with headquarters in Beijing. With the organizational changes and introduction of more advanced steering products, we are now better positioned to pursue steering sales opportunities on a global basis. We look forward to our R&D providing upgrades to further advance current product portfolio and introduce new technologies and products in the future. Now let me review the financial results in the fourth quarter of 2025. Our net sales increased by 21.4% to $229.2 million compared to $188.7 million in the same quarter of 2024. The net sales increase was mainly due to a change in the product mix and higher demand for passenger automobiles and commercial vehicles in the fourth quarter of 2025 compared to the fourth quarter of 2024. Additionally, export sales increased during the 2025 quarter. Our gross profit increased by 79.8% to $53 million from $29.5 million in the fourth quarter of 2024. Gross margin in the fourth quarter of 2025 was 23.1% compared to 15.6% in the fourth quarter of 2024, primarily due to a change in product mix. Selling expenses were $5 million in the fourth quarter of 2025 compared with $4.8 million in the fourth quarter of 2024. Selling expenses represented 2.2% of net sales in the fourth quarter of 2025 compared to 2.5% in the fourth quarter of 2024. General and administrative expenses were $12.2 million in the fourth quarter of 2025 compared to $9.7 million in the same period in 2024. G&A expenses represented 5.3% of net sales in the fourth quarter of 2025 compared to 5.1% of net sales in the fourth quarter of 2024. Research and development expenses were $17.8 million compared with $7.8 million in the fourth quarter of 2024. R&D expenses represented 7.8% of net sales in the fourth quarter of 2025 compared to 4.1% in the fourth quarter of 2024. Operating expenses was $18.1 million -- I'm sorry, operating income was $18.1 million in the fourth quarter of 2025 compared to $8.7 million in the fourth quarter of 2024. Higher gross profit compared with the same period last year was the main driver. Interest expense was $0.5 million in the fourth quarter of 2025 compared to $1.1 million in the fourth quarter of 2024. Financial expense was $1.1 million in the fourth quarter of 2025 compared with financial income of $0.8 million in the fourth quarter of 2024. Income before income tax expenses and equity and earnings of affiliated companies increased by 121% to $19.4 million in the fourth quarter of 2025 compared to $8.8 million in the fourth quarter of 2024. Income tax expense was $1.4 million in the fourth quarter of 2025 compared to income tax benefit of $2 million in the fourth quarter of 2024. Net income attributable to parent company's common shareholders increased by 103.2% to $18.4 million in the fourth quarter of 2025 compared to net income attributable to parent company's common shareholders of $9.1 million in the fourth quarter of 2024. Diluted income per share was $0.61 in the fourth quarter of 2025 compared to diluted income per share of $0.30 in the fourth quarter of 2024. The weighted average number of diluted shares outstanding was 30,170,702 compared to 30,180,947 in the fourth quarter of 2024. For the 2025 year, net sales increased by 17.6% to an annual record $765.7 million in 2025 compared to $650.9 million in 2024. This increase was mainly due to higher sales and production of passenger vehicles in China, increased vehicle export sales and commercial vehicle sales in China increasing by approximately 10.9% year-over-year in 2025. Total sales of the company's EPS systems increased by 25.5% year-over-year and sales of the traditional products increased by 12.6% year-over-year. Henglong sales of passenger vehicle systems steering systems rose by 12.1% year-over-year to $365.3 million in 2025. Jiulong sales of commercial vehicle steering systems increased by 28.9% year-over-year to $92.3 million. Brazil Henglong's net sales grew by 34.7% year-over-year to $68.7 million in 2025. Net sales of North American customers rose by 15.3% year-over-year in 2025 to $121.6 million. EPS sales represented 41.5% of total revenue in 2025 compared to 38.9% in 2024. Gross profit in 2025 increased by 33.2% year-over-year to $145.5 million compared to $109.2 million in 2024. The gross margin was 19% compared with 16.8% in 2024, mainly due to a change in product mix. Net sales on other sales in 2025 was $3.6 million compared to $4.3 million in 2024. Selling expenses rose by 15.9% year-over-year to $20.7 million in 2025 from $17.9 million in 2024, mainly due to an increase in marketing and office expenses, offsetting lower other expenses. Selling expenses continue to represent 2.7% of net sales in 2025 as well as 2024. G&A expenses increased by 7% year-over-year to $29.7 million in 2025 compared to $27.7 million in 2024. G&A expenses represented 3.9% of net sales in 2025 compared to 4.3% of net sales in 2024. This expense was mainly due to higher personnel and other expenses. R&D expenses increased by 63% year-over-year to $45.1 million in 2025 compared to $27.6 million in 2024. Higher R&D expenses reflected increased personnel expenses due to acceleration in R&D activities, including more investment in traditional product upgrades, advancing EPS technologies and miscellaneous research expenses. R&D expenses were 5.9% of net sales in 2025 compared to 4.2% of net sales in 2024. Operating income increased by 33.2% year-over-year to $53.6 million in 2025 compared to $40.3 million in 2024. The increase in operating income was mainly due to higher sales and gross profit. Interest expense was $1.7 million in 2025 compared to $1.8 million in 2024. Financial income was $2.4 million in 2025 compared to net financial expense of $0.09 million in 2024. This increase in financial income of $2.4 million was primarily due to an increase in foreign exchange gains due to the foreign exchange volatility. Income before income tax expenses and equity and earnings of affiliated companies increased by 39.1% year-over-year to $61.4 million in 2025 compared with $44.1 million in 2024. The change is primarily due to higher operating income in 2025. Income tax expense was $11.6 million in 2025 compared to $5.9 million in '24. This increase was primarily due to higher income before income tax expenses and equity and earnings of affiliated companies and the effective tax rate in 2025. Net income attributable to parent company common shareholders was a record $42.8 million in 2025 compared to $30 million in 2024. Diluted net income per share increased by 43.4% to $1.42 in 2025 compared to $0.99 in 2024. The weighted average number of diluted common shares outstanding was 30,170,702 in 2025 compared with $30,184,513 in 2024. Now we'll provide some balance sheet and other financial highlights. As of December 31, 2025, total cash, cash equivalents, pledged cash, short-term investments and long-term time deposits were $256.7 million. Total accounts receivable, including notes receivable, were $361.8 million. Accounts payable, including notes payable, were $350.3 million. Short-term bank loans were $81.3 million and long-term loans were $5.7 million. Total parent company stockholders' equity was $401.3 million as of December 31, 2025, compared to $349.6 million as of December 31, 2024. Net cash flow from operating activities was $111.3 million in 2025 compared to $9.8 million in 2024. Cash paid to acquire property, plant and equipment and land use rights was $37.2 million in 2025 compared to $43.7 million in 2024. The business outlook. Management expects revenue for the full fiscal year 2026 to be $108 -- I'm sorry, $810 million. This target is based on the company's current view on operating and market conditions, which are subject to change. With that, operator, we are about to begin the Q&A session. Operator: [Operator Instructions] Your first question for today is from [ Jim Fallon with Esousa Holdings. ] Unknown Analyst: [ Jim Fallon from Esousa ]. I was just wondering how will the U.S. Supreme Court tariff decision affect the company's exports into the United States? Jie Li: [Foreign Language] [Interpreted] Thank you for the question. So the short answer is the Supreme Court ruling does have a positive impact to our export-related business to the U.S. market. Specifically, the tariff the Section 301, Section 232 and Section 122, those 3 areas, the ruling by the Supreme Court enabled the total tariff reduced from 70% to now 60%. Operator: Your next question for today is from [ Gary Nash ] a private investor. Unknown Attendee: Mr. LI, why did Q4 gross margin spike? And is Q4 gross margin sustainable for 2026? Jie Li: [Foreign Language] [Interpreted] Yes, you are right. We did experience a significant improvement in the gross margin category in the Q4 2025. The gross margin reached 23% in Q4, mainly attributable to a couple of factors. One is our product mix has dramatically improved. We have -- we have increased our higher-margin products such as our EPS product and brushless powered electric power steering, we would call EPS product. And we also had some onetime event also took place in Q4. They are the tariff-related refunds as well as depreciation policy change. And so combining these 2 factors -- those 3 factors, we believe the gross margin in 2025 -- 2026 is we're going to be continued -- going to be at a very healthy level, but it's not going to be as high as Q4 2025. Operator: Your next question is from [ Jonathan Nieves, ] a private investor. Unknown Attendee: My question is on a dollar basis, how much does China Automotive expect to save on an annual basis by changing the company registration to the Cayman Islands? Jie Li: [Foreign Language] [Interpreted] So immediate impact [indiscernible] to Cayman Island. We immediately save about USD 500,000. That's the listing-related expenses. Then we are -- in terms of international business expansion, we will see more benefit coming even it's still a little bit early to give the detailed number. And also in terms of taxes, we're also seeing -- it will be a very notable saving as well. So combining all these, we believe it's going to be a very meaningful saving for our shareholders. Kevin Theiss: Okay. I have a question that's been e-mailed to me by one of the shareholders who could not be on. And the question is, with the current cash position, what's the outlook for either a stock buyback or cash dividends in 2026? Jie Li: [Foreign Language] [Interpreted] In terms of share buyback, we definitely are considering, previously, we do have a buyback plan in place due to the redomicile to the Cayman Island process, we have to meet a lot of compliance. So we put that buyback plan on hold. Now with that procedure completed, me and the CFO definitely will recommend to the Board and to reinitiate share buyback program. We'll make a -- do announcement when that's in progress. [Foreign Language] [Interpreted] As far as dividend, we don't have a plan at the moment, but we're going to make -- also make a suggestion to the Board of Directors. Operator: [Operator Instructions] we have reached the end of the question-and-answer session, and I will now turn the call over to Kevin Theiss for closing remarks. Kevin Theiss: We thank you all for joining us today in the conference call. We wish you to be safe, and we look forward to speaking with you in the future after we report the 6-month results. Thank you. Operator: This concludes today's conference. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Welcome to Evolution Q1 Report 2026 Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Martin Carlesund; and CFO, Joakim Andersson. Please go ahead. Martin Carlesund: Good morning, everyone. Welcome to the presentation of interim report for the first quarter of 2026. My name is Martin Carlesund, and I'm the CEO of Evolution. With me, I have our CFO, Joakim Andersson. As always, I will start with some comments on our performance and then hand over to Joakim for a closer look at our financials. After that, I will conclude an outlook, and then we will open up for your questions. Next slide, please. So let's start with the financial and operational highlights in the quarter. Net revenues were EUR 513 million, corresponding to a year-on-year decline of 1.5%. EBITDA came in at EUR 335.3 million, corresponding to a margin of 65.4%. The regional development was somewhat mixed in the quarter. Europe is not performing well at the moment, whereas LatAm is having a great momentum. North America continues its steady growth at a slightly higher pace than in Q4. In Asia, we made some further progress on combating cybercrime. Live revenue was hurt by the development in Europe and declined 3.1% on a year-on-year basis. RNG took a step forward with higher growth than what we have seen in the past quarters, up 8.1% year-on-year. During the quarter, we have continued to expand our studio network with new additions in Latvia, the U.S. and Argentina. We have also started to deliver on our amazing product road map for 2026. I will talk more about that later in the presentation. Next slide, please. If we then move to our operational KPIs, first, consisting of Headcount and then Game Rounds index. On Headcount, we are growing by 2.9% year-on-year and 1.7% on a quarter-on-quarter basis. We are on a good path with expansion, and we will continue to optimize the distribution and cost mix throughout 2026. The Game Rounds index can be seen as a general indicator of activity throughout our network over time. For an individual quarter, it can vary quite a lot and does not always correlate with revenue development. The long-term trend should be an increase in Game Rounds as game sessions in general gets faster and with smaller bets. I'm satisfied with the development in Q1, especially with the backdrop of the development in Europe. Next slide, please. In the last report, we introduced a real breakdown of revenues based on our customers location where Europe is dominant. Compared to the fourth quarter, North America and Latin America have grown their respective share of the total revenue, which reflects the overall development in the first quarter. As we require all our customers to carry a license in regulated jurisdictions, all our revenues are regulated. You also see a revenue split based on our customers and their players, our customers' customer, which is an estimation based on the IP number of players received from our customers and purchased by a third-party geo information. This is the breakdown of the revenues we have included for several years. See from that perspective that all our customers are regulated, our revenue is regulated to 100%. If instead looking at the estimation of the geo position and approximation of revenue based on our customers', customers' players' IP address, about 48% of the estimated revenue is regulated. Next slide, please. I will now give you a few comments on each of the major regions based on the estimation of revenue based on our customers' customers' IP number. As already mentioned, Europe did not do well and continued to decline quarter-on-quarter, largely due to regulatory volatility and subjectivity, which hurt our player activity. It has now also been almost a year since we introduced our extensive ring-fencing measures, which ensure that the players can only reach Evolution content from licensed operators within their respective markets. It was the right thing to do. And in the world of perfect regulation, it would not have caused any issues. However, due to that regulation in some markets fails to strike the right balance between player protection and entertainment, players continue to access unregulated operators and channelization is decreasing fast and significantly. This harms the total business and the most vulnerable players lose the player protection of playing of regulated operators and search by products from Evolution. Looking at the operational side, we have opened a second studio in Riga in the quarter. It is currently the home of our Always 6 Blackjack tables. But later this year, it will host both game shows, Game Night and Monopoly Filthy Rich. Looking at Asia, this is now the second quarter in a row with a quarter-on-quarter growth. This is, of course, a positive signal. We are in a better place right now than a year ago. However, as the challenge has been somewhat of a cat and mouse game, we remain cautious. Next slide, please. Both North America and LatAm reported yet another all-time high revenues. Growth rate in North America improved compared to the fourth quarter. It looks somewhat soft in our reporting currency, euro, but in U.S. dollars, year-on-year growth was roughly 21% compared to 19% in Q4. In the quarter, we launched several Monopoly theme titles, which have been off to a great start. Last week, we also launched Monopoly Live in Connecticut, which is an important milestone as we know that the Monopoly franchise is particularly strong in the U.S. market. It will be rolled out in additional states going forward. We have also completed the construction of the second studio in Michigan, located in Grand Rapids. It's a milestone as well. It's now going through inspections and regulatory approvals, and we are expecting to launch it in the next few months, hopefully earlier. Looking at the regulation, we note 2 positive developments. In the U.S., the main governor has now signed the iGaming bill into law. In Canada, Alberta will regulate its iGaming market in July. We have had presence in the program since 2021, serving the only available online gaming service run by the local government with live casino games. Now the market will open up for more operators. Last note on North America is the ongoing process to acquire Galaxy Gaming, where we are still working on the necessary approvals before the 17th of July deadline. We don't have any new information to share today more than that the process is ongoing. Latin America is doing really well at the moment. A highlight from the quarter is that we have completed the acquisition of a live studio in Argentina from a competitor who has decided to withdraw from the market. The studio will form the base for further growth in Argentina, and we are now adapting to evolution standard. In Brazil, we continue to perform well after regulation, which was about a year ago. We have launched a localized version of Crazy Time that is sure to attract a lot of new players in Brazil. LatAm truly is exciting. We're in full expansion mode. In addition to Argentina, we continue to expand our presence in Brazil and in Colombia to fully leverage the big market potential. With that, we don't have a specific chart for other markets, which mainly comprise of Africa. It continues to grow from a small base. Fresh games are widely popular in the region, and our recently launched Red Baron has so far exceeded expectations. Also, our RMG offering is starting to gain traction. To conclude this slide, the U.S. and LatAm are where we will invest the most in 2026. Both regions have high potential with life still being in early days. Next slide, please. As you are aware of, we have a spectacular road map for 2026, where we will take fun and entertainment to yet another level. Over the past month, we have made some initial releases like Always 6 Blackjack and Dragon Dragon, but the big splash is still ahead of us. Based on our exclusive partnership with Hasbro, we will continue to expand our portfolio of Monopoly games and closest in time for release of Monopoly Roulette and Monopoly Roll 'Em. Monopoly is an extremely strong franchise that is continuously gaining more popularity. And I think that it will be an important piece of the puzzle one -- continue to push the boundaries for entertainment. Another exciting development is the introduction of a new feature that we call SciPlay. It will allow players to enjoy slots alongside the live game attraction. With just a click, you will be able to activate selected slots from our RNG brands such as Nolimit City and NetEnt. Within the live interface, a mini lobby will make personalized recommendation to keep content relevant and engaging. I think this is a great feature as it brings together live casino and slots in one streamlined view, the best of 2 worlds and yet another feature and advantage of OSS, One Stop Shop. Since Evolution was founded 20 years ago, we've been obsessed with the end user satisfaction and the entertainment factor. And delivering the satisfaction is not just about innovation, it's about getting the fundaments right, every single day, top-notch gameplay, a flawless lobby, world-class studios, a game integrity that set the global benchmark. We often highlight what's new each quarter because innovation is exciting, but I want to be crystal clear. These basics are absolutely crystal -- critical for the experience because if the fundament slips, end user notice immediately. So with that said, 2026 is going to be another great year of innovation, while we also continue to enhance overall experience with playing our games. The combination of the two will ensure that we will bring the most entertaining experiences to the players and increase the gap to competition more than ever before. With that, I will hand over to Joakim for a closer look at our financials. Next slide, please. Joakim Andersson: Thank you, Martin. As usual, I have a few slides that will focus on the key highlights as we go through them. Starting with this slide, Slide 8, which shows our revenue and EBITDA development over time. If you look at the data on the far right, we can again see the Q1 revenue of EUR 513 million, represented by the blue bar, EBITDA of EUR 335.3 million in the gray bar and our EBITDA margin of 65.4% shown by the line above. Let's go to the next slide. And here we have a more detailed look of our profit and loss statement. As before, I have highlighted the key takeaways on this slide, and I will talk you through them one by one. First, the net revenues, of course, amounted to EUR 513 million, which is down 1.5% year-on-year, but practically flat quarter-on-quarter. Second, total operating expenses were EUR 220 million, which is 1.3% higher than Q1 last year and up 2.5% quarter-on-quarter. Personnel expenses increased by 4% quarter-on-quarter. However, on a rolling 12-month basis, we continue to see a deceleration in the growth rate each quarter. Third, profit for the period amounted to EUR 251.9 million. And as the fourth highlight, our earnings per share after dilution amounted to EUR 1.26. Let's move on to the next slide, where I show you the development of our cash flow. First, on the left-hand side, we show our operating cash flow after investments. This amounted to EUR 311 million for the quarter, representing a solid improvement compared with Q4, partly driven by a recovery in working capital. The last 12 months cash conversion remains strong and stays around the long-term trend with 81% in the quarter. Turning to the chart on the right, which shows our capital expenditures. Total CapEx related to tangible and intangible assets amounted to EUR 34.6 million for the quarter. This remains stable as a share of net revenues as illustrated by the black line. Next slide, please. Turning to our financial position. And as you can see on this slide, there are no major changes compared to recent quarters. We continue to be in a very strong position with total cash of EUR 1.2 billion, including our bond portfolio and total equity of EUR 4.3 billion. With that, I'll conclude my remarks for this quarter. And overall, it was a fairly uneventful quarter from a financial standpoint. I'll now hand it back to you, Martin, to wrap things up. Martin Carlesund: Thank you very much. So let's summarize and then move to the Q&A. If we look beyond Europe, 2026 has started really good. We grow across all regions. We maintain the margin, and we have started to deliver on the amazing product road map. I'm a little bit frustrated that the majority of our showcase games will be launched during the second half of the year, but they will be worth the wait. Europe is the main headache right now, but the long-term positive view is intact. I've talked about it many times before. Regulation changes over time. And right now, the balance is not where it should be. But as channelization continues to decrease, regulators will eventually have to adopt -- adapt to protect the players and not by force, but by some regulation, get them back into the regulated part of the market. We're doing what we can to mitigate the current development, working smarter and harder, releasing the best games, pulling the players back. As highlighted, we will continue to invest mostly in U.S.A. and LatAm alongside our internal focus on product innovation. Some further expansion in Europe will also be needed, but we are naturally more cautious in the short term. I don't want the U.S. litigation against a competitor to take focus from the results, but when a competitor sets aside all rules and deliberately try to hurt us, we must take action to protect our shareholder value. They have stated that they stand behind the defamatory report. But please remember that they paid enormous amounts of money during 4 years to not be exposed as the commissioner of that said report. Please also remember that the report was based on a success fee structure where the report producer was being paid based on how severely they could hurt our shareholder value. Evolution works hard. We are methodic. We are patient, and we are very disciplined. We believe in right and have strong and good culture based on morale and solid ethics. And as a last note in the quarter, the Board has proposed that no dividend will be distributed for 2025 as it has assessed that the cash dividend currently is not the best way to create long-term shareholder value. The Board has not made further decisions on the capital allocation for 2026 yet. It's not dramatic, rather refreshing. When further decisions are made, we will let you know about it. So with that, we thank you for listening so far, and now we open up for questions. Operator: [Operator Instructions] The next question comes from Pravin Gondhale from Barclays. Pravin Gondhale: Firstly, on capital allocation, I appreciate that Board of Directors have not decided to propose any dividends. Could you explain what are the reasons behind those decisions? And when can we expect any further communication in this regards? And secondly, on Europe, what are the key countries in Europe where you flagged that channelization is decreasing at faster pace? Has that materially accelerated in Q1? And when do you expect that to stabilize? Martin Carlesund: On the capital allocation, the Board is responsible for that, and they will take a decision that is creating the most shareholder value, and they are thoroughly and taking this question serious and looking at it. And as a result, they cancel the dividend for 2026. As soon as they have made their analyze, taking the decisions, they will get back and we will communicate what to do with our excess cash. I cannot, at the moment, give any more clarification on that. When it comes to channelization in Europe, and if we split this in two, channelization in Europe in a number of countries are not really known. The ones that make some of the investigations and estimations of that could be U.K. They have a low channelization. It's dropped significantly over the years. Netherlands, the same, but there are also others such as maybe even Sweden. It's quite hard to get those figures in total as the market -- the unregulated market is growing and not clear. So that's the comment on that. There are also other countries taking other regulatory measures or governmental measures that affect the situation in Europe as well. So that's the background or backdrop to Europe. Pravin Gondhale: And if I sort of follow up on that, could you just elaborate on what is the subjectivity part of the impact, which is impacting the player activity in Europe and in which countries? Martin Carlesund: I think that -- I will briefly comment on it, but I think that the regulation in many countries stays the same, but the subjective evaluation or the implementation of the regulations have changed. So even though the regulatory framework stays the same, suddenly, it's applied in a different way. That's what I mean with subjectivity. Operator: The next question comes from Georg Attling from Pareto Securities. Georg Attling: Martin and Joakim, I have a couple of questions, starting with Asia. So another quarter of sequential growth. And also when I look at the player data here in April, it looks very strong for Baccarat. So I'm just wondering what makes you reluctant to calling the trend shift here in Asia for the rest of the year. Martin Carlesund: I think that we need to be cautious. We need to be also prepared for that as I write in that it's a little bit of a cat and mouse game. And we methodically, systematically work on the situation, as you can see, and we're very happy with the 2 quarters in a row where we grow, but we're just a little bit cautious in our communication. Georg Attling: On Europe, another question. You alluded to it earlier, but just wondering, is this a broad-based decline across most countries or focused on a few countries where large declines? Martin Carlesund: I think you would say that it's a little bit of both. I mean there are war, oil price situation in the world, and it affects, I think, Europe quite a lot. You can also see that it affects the dollar and other. And there are specific countries taking measures and it's a little bit of mix. Georg Attling: Okay. Just a follow-up on that. What do you view is really in your hands when it comes to Europe because there's only so much you can do with the channelization and I assume you're quite keen to stop this negative trend in the region. Martin Carlesund: End user satisfaction, desire to play Evolution games, strengthen and higher entertainment value. That's the key for us. We are even looking at it like if we do even better games, higher entertainment, we will pull players back into the regulated environment, even though the hurdle has been created, which make them go away. So our core focus, as always, see to that we deliver the best games that the players desire, position them with the operator or the future operators, see to that we always are on top. That's the only thing that will matter in the long run. Georg Attling: That's clear. Just a final question on LatAm, where growth is accelerating quite nicely. Just wondering what do you view as the drivers to this acceleration? Is it market growth, studio expansion, larger game portfolio or something else? Martin Carlesund: Great games again, end user desire to play our games, studio expansion, market growth situation and so on. It's a good environment to be in. But if we didn't have the games to supply to the market, we would be nothing. So it's a combination. Operator: The next question comes from Nikola Kalanoski from ABG Sundal Collier. Nikola Kalanoski: I'm a bit curious on game shows. And so from an outside-in perspective, game shows seem to be growing quite nicely with respect to player count and the category seems to be becoming a larger and larger share of the player count. Are you generally seeing a less volatile revenue profile from game shows compared to some of the other game categories? Martin Carlesund: No. Nikola Kalanoski: Short and sweet. And then a short question on Ice Fishing. Are there any regions in which this game is particularly popular? Or would you say it's equally popular all over the world? Martin Carlesund: Ice Fishing is a super success, a great game, gaining traction all over the world. Actually, a loved game, one of the best we've made. Operator: The next question comes from Ben Shelley from UBS. Benjamin Shelley: I've got 3 questions. Question one, do you think margins can remain stable year-on-year given Europe and Asia are still declining and you are expanding capacity in Latin America? Martin Carlesund: I think that the incremental margin and the scalability of our business model is for sure proven this quarter. I think that in spite of the situation in Europe, we delivered good cash flow, fantastic margins, and it shows that the investments that we do are really, really well placed. So my view is yes. Benjamin Shelley: And given channelization issues in Europe, how do you see the outlook for the U.K. amid material iGaming tax hikes? And is there anything interesting you are seeing from operators in the market already? Martin Carlesund: I think that -- I will answer it in general terms. Everyone in the online gaming sector in one way or the other, if you're an operator or a supplier or even something else, you would know that if you have a tax level that is like somewhere around 25%, 20%, but even 15% is great and 20% works and 25%. But as soon as you hit like the 30% bracket, it starts to be really difficult and you open up for lowering channelization and unregulated play. When you put taxes on 40% level and a lot of other hurdles, you make it so difficult and not nice for the player experience that players in quite a large amount seeks play -- gameplay outside. I think that, that will slowly come into play. Right now, regulators talk only about what they do as repressive measures, but they don't talk about what happens to the players that are outside the regulated remit. And I think that, that needs to come into focus and you need to find that balance. I look forward to see that balance coming back. Benjamin Shelley: And then just lastly, on competitive intensity in the live casino industry. Are you experiencing any pricing pressures, any loss of share? Martin Carlesund: We have experienced that all along. I mean, I've been in the company for quite a long time. I think that the only difference is that there are different names related to the competitors. Some during one period it's one name and the second period is another name and so on. The pricing pressure from competition, not able to cover the gaps that we increase all along with the innovation and the game shows we do is always compact. It's always there. Operator: The next question comes from Martin Arnell from DNB Carnegie. Martin Arnell: My first question is on Europe and this discussion what's in your own hands and what you can do to improve. How important do you think the new game releases will be for Europe in order to come back to growth? Martin Carlesund: I have a positive view on Europe going forward. And I think the game releases that we are going to do and also even the games that we already have will have an impact and is super important. I think that some of the games that we do are the creator of gameplay and entertainment and people, persons and end users search those games. So the more of those games that we have, the more pull into the regulated environment we will have. Martin Arnell: And many of them are tilted to second half, but you have a few -- is it correct that you have 2 new Monopoly games scheduled for Q2? Correct. Martin Carlesund: Yes, that's correct. Yes. But the major ones are in the second half. And that's -- I always said it's a little bit frustrating for me, but it takes time. The big game, Game Night, it's a huge game, hundreds and hundreds of square meters of game show and different environment, studios, you go in and you follow the player in those, and it takes time to build. It's not -- it's a really, really complex world that we are creating. Martin Arnell: Interesting to look forward to that. And on the -- just also a question on like orders from your clients on new dedicated tables. Has that changed anything dramatically? Or is it stable? Or how do you... Martin Carlesund: We don't guide on that. I would say that we are continuously doing well. Martin Arnell: On dedicated tables orders, okay. And final question would be on this game show discussion, the product mix when it comes to game shows, are the new game shows more lucrative for you than the old ones in terms of like player activity, bet size, et cetera? Martin Carlesund: I don't -- I'm sorry, I don't guide on profitability per game or new game or old games. I think that the type of games that we do now with the type of Monopoly and Hasbro content is, of course, highly valuable for everyone, us and the operator and the player. Operator: The next question comes from Ed Young from Morgan Stanley. Edward Young: My first question on Europe, please. You've talked through the channelization angle and the subjectivity part of it. But if I look at your disclosure, the regulated mix is up despite the European decline and some Asia growth. So is it fair to say that this is primarily a decline in your European jurisdictions that are not locally regulated in the quarter rather than the channelization issue, which has obviously been ongoing. The second question... Joakim Andersson: Okay, let's take one question at a time... Edward Young: Sorry, let's -- sure. Martin Carlesund: Otherwise, I will -- due to my lack of memory, probably not answer. You have to look at -- we're growing nicely. everything more or less in LatAm is regulated. We're growing nicely in U.S., adding money there as well, adding a little bit of money in Asia. There is a percentage point here and there and there are decimals to that. So I wouldn't necessarily draw that conclusion to a point. There are other regulations in Europe that are not regulated that are suffering and there are regulated jurisdiction in Europe that are suffering. Edward Young: Second, you obviously added Playtech to your legal complaint. Can you just maybe give your reflection on where you are now in terms of what you're aiming for through the legal process and on what time line we should expect to get an idea of damages, including punitive damages that you're seeking? Martin Carlesund: We have had an opponent in this legal debacle that has been ongoing for 4 years, and we have systematically been progressing and winning in court. That's taken 4 years. It will take a very long time. And the opponent that we have is also taking a lot of measures to delay everything, which we have seen in the past, and we expect that in the future as well. So think about years, probably many years. Edward Young: And then finally, there's been some confusion in some of the questions we've had this morning. So perhaps you could help clear this up. In terms of the Argentina studio acquisition, just to be clear, you've acquired the studio, i.e., the building of a competitor's departed? Or have you acquired a competitor in some of their revenues in Argentina that have contributed to the quarter? Martin Carlesund: Studio. Operator: The next question comes from Karan Puri from JPMorgan. Karan Puri: Thank you for taking my questions, most of them. Martin Carlesund: Good morning. Karan Puri: Most of them have already been answered, but just quickly on the Argentina point, I just want to clarify, is there any inorganic revenue contribution coming from that acquisition for LatAm or not? That's... Martin Carlesund: No, no. Karan Puri: That's -- got it. And the second question, actually, I just wanted to check on the U.K., do you see any further discussions with the regulator on this front? Any idea when this might be resolved? Martin Carlesund: I have no idea when it will be resolved. Nothing -- no progress to report. Karan Puri: Just one quick one, if I can squeeze that one in. One on the RNG performance. It seems like it came in much stronger than anticipated, at least on a year-over-year basis. Maybe can you provide some incremental color on this, please? Martin Carlesund: I think we're doing great in RNG right now, fantastic games on Nolimit. We're gaining traction. We are on our way. We systematically methodically work with it, and I think that we're doing better and better. Operator: The next question comes from Andrew Tam from Rothschild & Co Redburn. Andrew Tam: Just one for me. We just heard from some of the operators out there about some of the headwinds in terms of the Turkish market. To what extent, just curious, did Turkish weakness contribute to the weak European result? Martin Carlesund: I won't quantify market specifics in Europe, but that also contributes to the decline in Europe, yes. Operator: The next question comes from Rasmus Engberg from Kepler Cheuvreux. Rasmus Engberg: Good morning. Joakim Andersson: Good morning. Martin Carlesund: I took a sleep of comfort, that's why I was a bit slow. That's why I was a bit slow. Rasmus Engberg: In the Americas, both North and LatAm, which business is growing faster? Is it RNG or is it live? Martin Carlesund: Live is growing faster. Rasmus Engberg: In both? Martin Carlesund: In LatAm in total, I don't want to go down to a specific number. We're doing a little bit better and better on RNG in total. And it's -- yes, but live is the main show. Rasmus Engberg: Okay. And second question, your rate of expansion with new studios this year compared to last year? Is it higher or lower or roughly the same? Martin Carlesund: Good question. The decisions we will take during 2026 will be a little bit more forward leaning and expansion will be maybe in actual terms about the same, but we are doing more for 2026, 2027, 2028 this year than we actually did 2025. I look forward to that. Rasmus Engberg: And I don't know if you can answer this, but are you -- is Evolution going to have a Board meeting after the AGM or in conjunction with the AGM? Martin Carlesund: I actually don't want to answer that to avoid any speculation. Joakim Andersson: So it's a constituent Board meeting in connection with the AGM. That's correct. Yes. Rasmus Engberg: Thank you. Martin Carlesund: Thank you, interesting question. Operator: The next question comes from Ben Shelley from UBS. Benjamin Shelley: I just wanted to ask on accounts receivables and compared to your quarterly revenues, they remain elevated year-on-year and broadly stable quarter-on-quarter. Are there any comments or any updates on your Q4 comments here? Joakim Andersson: Yes, I can pick that up. No, I mean, yes, you said any updates from Q4. Yes, Q4 was definitely on an elevated basis, and we are constantly looking into it, constantly reminding customers, constantly chasing overdues. When we review, there's nothing alarming in there. So we are now kind of more methodological -- whatever that word is, thoroughly doing this work and with a higher discipline than before. So we saw a roughly EUR 10 million reduction during this quarter, and I expect that to continue. Operator: The next question comes from Jamie Bass from Citi. James Bass: Just one question from me or 2 parts to one question, I guess. So firstly, are you feeling relatively confident that a solution will be found for Galaxy Gaming before the deadline? And if not, is the deadline you've got now, is that a hard deadline? Or can that be extended again? Martin Carlesund: I can't -- I don't want to guide on it. Of course, we are working hard to solve everything outstanding, and it's progressing. And right now, the deadline is hard. So then that comes down to, is there any possibility with some to postpone it. Right now, the deadline is hard. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Martin Carlesund: Thank you very much for participating, listening to us here today and looking forward to see you in a quarter again. Thank you. Bye-bye.
Operator: Welcome to the Corbion Q1 2026 Results Conference Call. [Operator Instructions] Please note that this call will be recorded. I would now like to hand over to Mr. Alex Sokolowski, Head of Investor Relations. Please go ahead, sir. Alex Sokolowski: Thank you, operator. Good morning, and welcome to Corbion's First Quarter 2026 Interim Management Statement Conference Call. This morning, we published our Q1 2026 results. The press release and presentation can be found on our website, www.corbion.com Investor Relations Financial Publications. Before we begin, please note that today's discussion will include forward-looking statements based on current expectations and assumptions. These statements involve risks and uncertainties that may cause actual results to differ materially from those expressed. Factors beyond our control, including market conditions, economic changes and regulatory actions can impact outcome. Corbion does not undertake any obligation to update statements made in this call or contained in today's press release and presentation. For more details on our assumptions and estimates, please refer to our annual reports. This is Alex Sokolowski, Head of IR. And with me on the call are Olivier Rigaud, Chief Executive Officer; and Peter Kazius, Chief Financial Officer. Now I would like to hand the call over to Olivier. Olivier? Olivier Rigaud: Thank you, Alex, and good morning, everyone, and thank you for joining us today for Corbion's First Quarter 2026 Earnings Call. Let me get straight to the point. As we outlined in February, the first quarter reflects phasing effects, primarily Nutrition, and the very strong comparison base in Functional Ingredients & Solutions. Against that backdrop, we delivered group sales of nearly EUR 294 million and an adjusted EBITDA of EUR 37.8 million with a margin of 12.9%. While this is below last year's exceptional start, it's fully in line with our expectations. And importantly, it doesn't change our confidence in the year end. In fact, what we are seeing now is encouraging. April trading confirms that momentum is building, and we expect a clear acceleration in both volume and earnings as we move through the year. Let me highlight what is driving that momentum. In Functional Ingredients & Solutions, we delivered stable sales of EUR 236 million against a very strong prior year. Underneath that, volume and mix were positive, supported by continued strong demand for natural preservation solutions and the solid growth in Biochemicals and Lactic Acid to PLA. While margins were temporarily impacted by mix, we expect a steady improvement from Q2 onwards. This will be supported by lower sugar costs and disciplined cost reduction execution. Growth will continue to be driven by structural demand for food safety solutions and increasing adoption of PLA, particularly in 3D printing and as dynamics in fossil-based plastics evolve. In Health & Nutrition, Q1 sales of nearly EUR 58 million reflects phasing into the remaining of the year. The fundamentals here are strong. Demand remained robust. Fish oil prices are going up. Our contract positions are intact, and we expect a normalization of sales and volume growth from the second quarter onwards. Our Biomaterials business continues to build momentum and delivered a second record quarter in a row delivering growth across orthopedics, drug delivery and aesthetics. On the TotalEnergies Corbion joint venture, we also achieved organic growth and our divestment process is progressing as planned. At the group level, margins were impacted by mix effects and temporarily lower operational leverage in Q1. These are timing-related factors, and we expect a clear improvement as volume ramp-up and cost measures take effect. This bring me to cost discipline. In a macroeconomic environment that remains volatile, particularly with well-known geopolitical tensions, we are acting decisively and have implemented a focused cost reduction program. Turning to cash flow. Q1 free cash flow was negative at EUR 15.7 million, and as expected, given seasonal patterns. We remain fully confident in delivering EUR 85 million to EUR 90 million for the full year. Looking ahead, we fully reaffirm our 2026 outlook. We continue to target 3% to 6% organic sales growth and adjusted EBITDA margin of around 17% and strong cash generation with performance weighted towards the second half. This will be driven by sustained demand in natural preservation, normalization in nutrition, improving PLA market conditions and disciplined execution of our cost reduction initiatives. While uncertainty in energy and input cost remains, we have robust mechanisms in place, and are actively managing volatility through pricing, hedging, sourcing and operational control. So let me close with this. Q1 reflects timing and conversion effects, not the strength of our underlying business. Our fundamentals are strong. Momentum is building, and we are executing with discipline and focus. We are confident in our ability to deliver on our commitment for 2026. With that, let us move now to questions. Alex Sokolowski: Thank you, Olivier. [Operator Instructions] Our first question this morning comes from Wim Hoste, KBC Securities. Wim Hoste: Yes. I have 3, please. The first one is on the raw materials versus pricing dynamics. I know there's significant hedging on sugar and energy and some of the other components. But can you maybe quantify or elaborate a little bit on the kind of headwinds you're seeing maybe also on transportation costs or logistics issues, et cetera? And then also, what kind of pricing initiatives you put against that? So that's the first question. The second one is on foods. Can you maybe elaborate on the contract wins that are mentioned in the press release? What kind of products, geographies are we talking about regarding these contract wins? And then third and last question would be on the progress with the PLA divestments. Can you maybe elaborate a little bit on the process, the number of interested parties, the alignment with Total on that? So those are the questions. Olivier Rigaud: Okay. Thank you, Wim. I will answer the food and the contract wins, and Peter, the points on the raw material pricing and the PLA. Let me start with your second question on contract wins. Basically, what we see in foods are twofold. One is related to our natural preservatives and primarily related to some specialties in there on clean label. You might remember, we discussed during our CMD about the new EU listeria regulation, that is getting implemented in July this year '26. So we've been actively working on this, and this is bringing very nice upside, primarily related to our natural vinegar systems. And we see that really already starting in Q1, but accelerating over Q2 as customers are preparing to switch to new preservation systems. Amongst others, we see strong momentum in seafood. That is one. The second one is more U.S.-related where back on the GLP-1 trend, we've had a couple of major wins on high-protein functional systems for our bakery business. And we have been able to build some inventory to prepare for the big launch in Q2 on that front as well. These are the -- amongst the two major drivers of these food ingredients contract wins, you know, that we discussed about in the press release. Now to you, Peter, for the 2 other questions. Peter Kazius: Yes. So if you look on a raw material perspective, Wim, then you are right that in sugar, we have kind of full visibility for the coming periods, and look fully hedged for this year and also hedged into 2027. I think the other key components, which I would like to call out, which relates to the Middle East is, of course, energy prices and therefore transport prices, as well as if you look to the Middle East, then sulfur is playing a role as well and we use sulfuric acid in the production of lactic acid. Now, if you look to the three components: energy, and you can find it in the annual report is around 7% of input cost, is well hedged. So for the remaining part of the year. So I would say minimal exposure on that one. In transport, we do see some exposure, and I think the exposure is mainly on the sulfuric acid part of the equation, which how we currently view and look to it, we were talking here on a number in this year of up to EUR 10 million. And we are indeed taking pricing actions and mechanisms in the market, and that's a combination of prices, surcharges and all the rest. So that's a bit the current outlook, Middle East impact, I would say, from a cost perspective. Then on your question on PLA, I would like to stay a bit higher level, but we are progressing nicely and on track. And I indicated in the Q4 call that we anticipate to bring more news by mid-2026 because I don't want to hamper or jeopardize the process itself. Alex Sokolowski: Our next call this morning comes from Robert Jan Vos from ABN AMRO. Robert Vos: I have a few questions as well. Based on what you said about pricing in FI&S in Q1, still slightly negative, but the mix plus phasing of input cost materials, should we anticipate positive pricing in the forthcoming quarters? That's first on FI&S. Second one is maybe elaborate a little bit on the softness in the North American market? Then moving to H&N. You say that you expect volume mix growth to return to positive in the next quarters compensating for Q1. So my question here is, do you expect -- because Q1 was pretty negative, do you expect positive volume mix growth for H&N in the full year? And related to this what about pricing in H&N in the coming quarters? And my final question, the cost savings. Can you elaborate a little bit on this? What is the amount that you expect for this year that you can take out of your model? How is it split per division? And are there upfront costs related to this? Olivier Rigaud: Thank you, Robert Jan. So I will discuss the answer on North American softness and the H&N. Whilst Peter, you can take pricing and cost savings, yes. So let me start over, Jan, with the softness on North American market. Indeed, we are exposed to some large categories as bakery and meat there. And we've seen, of course, the inflation impact and tariffs impact in the U.S. to some large customers, that impacted already Q4 last year. And we've seen some continuation of that in some of these categories. Although I have to say lately, when we look at retail numbers, you would say bakery is leveling off. So it's not declining anymore, whilst the meat sector is still declining in the U.S. Now as I said, it's unequal. We see, indeed some of these developments, as I just mentioned, in a very specific area being the natural preservation in the clean label. There is still underlying quite a lot going on related to MAHA on clean label development, primarily on preservation specialties. And nothing new, but the continuation of the fortified proteins compounds that we see. So yes, as you know, it's a big market for us. It's a mixed bag. On the meat side, it's more negative than in bakery where things are stabilizing. There is a new spot which is a bright spot for Corbion emerging in the U.S. being around culinary, where it was part of also our strategy to develop business in culinary. And I mentioned just before on the previous question that, indeed, we also spread around this Listeria antimicrobial systems now primarily based on vinegar. So we see really strong sales of vinegar-based preservatives across the board, not just in Europe, but also in North America. On the H&N expected return, there, as we said, indeed, we see already a much better momentum starting in Q2, and we have a very good visibility as we speak now on Q2. As you know, and we explained primarily going into aquaculture, this is a concentrated market with 5 large players, and it's really phasing to one of these customers that we knew upfront, that is now kicking in as from Q2 on one side. But the reason why -- I mean -- and to your question, we expect a positive volume mix growth for the year. And we see a few strong underlying drivers. First of all, as we said, we've been able to renew the expired longer-term contract. So we have a good contracted position for the year. That's one thing. We are developing nicely into adjacent market, being human nutrition, and also we have very nice development into the shrimp market as well as we speak in the Asian markets. So that's the second driver we see supporting our growth this year. And obviously, on pricing, we see also nice upcoming impact on -- later on this year, non-contracted part of our business, supported by a fish oil price increase. You might have seen now the final quota for Peru has been officialized and is 36% lower than last year. So that is obviously driving fish oil price up, which is a nice support going forward for a non-contracted part of the business. What also these lower quota do say, just to close that point, is basically that the famous fish oil gap we've discussed many times and also at CMD was anticipated to be around 50,000 tons shortfall for fish oil, is more likely going to be much higher than the 50,000 tons for this year. Again, we are tracking that every day, but so that -- what makes us feeling really comfortable on our H&N for this year. Peter? Peter Kazius: Yes. So your point on the pricing, Robert Jan, it was indeed negative in Q1, driven, by the way, by lactic acid pass-through mechanism to the joint venture, with a bit of positive even in some other areas. The price uptake, which I just discussed related to the Middle East, is not included in Q1 and will be only as of Q2, but mainly in the second part of the year. So I anticipate a mild negative in Q2 and then basically returning into positive. If you look in terms of the acceleration of our cost savings program and if I look a bit on the timing and the impact of that, then the saving program, together with the sugar basically, if I look to an impact Q2 already versus Q1, I anticipate an increase of around EUR 5 million. It will be mainly in Functional Ingredients & Solutions and a bit and Health & Nutrition. I want to make one additional comment because you did ask, sorry, I forgot. In terms of kind of additional costs, we did incur some additional costs in Q1 in anticipation basically of this program. Robert Vos: Okay. That's very helpful. One follow-up maybe. Now that you mentioned that there were some costs taken in Q1. I also saw that depreciation and amortization was EUR 23 million in the quarter, which appeared a bit high. Is that a proxy for the remaining quarters? Or did it include some impairments in Q1? Peter Kazius: No, it includes some small adjusted items related to two different elements. One is the divestment process of PLA, as you can imagine. And the other one, which is good news, which you will not see basically in our numbers, but only in -- sorry, H1 is that we had a positive tax outcome in a discussion with the Spanish authorities, which would have a positive impact of around EUR 5 million in terms of tax this year, and we incurred some costs, which are also included in that part. So if you look from a depreciation element specifically, it's around just above EUR 22 million, which is in line basically with kind of the trend in Q2, Q3, Q1 and Q4. Alex Sokolowski: Our next question this morning comes from Fernand de Boer from the Degroof Petercam. Fernand de Boer: Fernand de Boer, Degroof Petercam. Actually I had one question. If I look to the drop in EBITDA in FI&S, you can say, okay, part is because of ForEx, maybe the mix was negative, but still, there is an absolute decline of EUR 10 million. So could you help me out a little bit on the bridge because I can understand maybe that food sales were quite negative in that respect. Peter Kazius: So if you look to the absolute EBITDA, indeed, it is a drop. There indeed currency in it, as you know, because it was $1.05 basically in last year, and it is $1.17 in the U.S. dollar in the average of this year. Then if you look to the delta, there is indeed a kind of negative impact in the equation of mix, price and volume. There is, if you compare to last year, of course, a bit of inflation in that one. We did have some additional costs as I indicated. And the other one is, and it's maybe a bit technical accounting wise, but we do share the kind of bill of SG&A, across the different segments. So that means if you have a reduction of your overall sales, it's also impacting basically the absolute number in... Alex Sokolowski: Our next question this morning comes from Setu Sharda of Barclays. Setu Sharda: Yes. So one question on the volumes, given the soft Q1 start and the ongoing inflationary pressure on end market, on customers, has your base case assumption for the volume growth changed in either division and how sensitive is your FY '26 guidance to a slower-than-expected volume ramp-up in Health & Nutrition? And my second question is on the fish oil contracts. Could you clarify how much of your Nutrition business is currently sold on a spot basis versus under contracts? And when do the existing contracts typically come up for renegotiation? And could you provide like more color on how you are approaching contracting in context of volatile fish oil prices? And my third question is on if you can give more info on the trading, how has been the Q2 trading till date in both in FI&S and Health & Nutrition? And are you already seeing some sort of recovery that you are expecting? Olivier Rigaud: Yes. Thank you, Setu. So on taking your question on H&N and fish oil, basically, if you look to the way we are ramping up the H&N volume and primarily the omega-3, which is the large chunk there, what we see is that, again, across the year -- last year, if you remember, on customer phasing, we had a kind of U-curve and this year it's more a V-curve in terms of the contract. And this is, of course, the pattern -- the ordering pattern of this business, which is volatile quarter from a quarter to another, although we have this now firm contract position for the year, but we have a great visibility on this contracted part. And then, as you know, we are adding more stable sales and predictable sales in both pet nutrition and human nutrition that is now nicely ramping up. So we have -- and there, we have also very good visibility. So if I look to the fully contracted position, this year is very similar in H&N than last year, where we have around about 2/3 of our business and their longer-term contract and 1/3 that is open. To your pricing question, obviously, what is open going forward, we have already proof of evidence that we can pass on already some price increases over the next 3 quarters. And these are roughly double-digit price increase on the open contract related to fish oil. Now, where fish oil is going, as you know, we've seen fish oil prices going from the low $3,000 per ton, now around $4,500, $4,600 sometime. And this is what we are translating. On the long-term agreement, to your second question, we are really not looking to align our pricing on fish oil only. The aim of the game during this 2 to 3 years deal is to have visibility on margin because then we are hedging our sugar. And we do not want to play the commodity game that fish oil is about. So it's about giving really visibility and security of supply to fuel the supply gap to our key customers. And some of them, of course, do share that view, others less, but this is the way we approach it. Now, on the renewal, to your question, we had a contract that was ending by end '25 that we have renewed, and the others we are ending in '26. So it means that we would probably start next multiyear negotiation for the next years in the course of the summer to renew these type of contracts because they're all ending now by end of '26. So that's, I mean, again, what I could say on that. On the inflationary pressure, this is, I mean, a difficult one because, of course, I mean, we see our customers trying to push also price to retail and to their consumers. Now, with what Peter explained and what we are facing with the Middle East crisis and how we're going to push also our sulfuric cost and extra freight costs, these are really pricing we are implemented wherever now we have open contracts, but the vast majority will be implemented as from early H2. So this is what we have and what we are planning. But quite a lot of conversations are going on. I have to say that, on freight, it's different from FI&S than H&N. In H&N, on this large aquaculture contract, we have freight clause in all these contracts where we pass immediately any freight surcharge. It's a lot more limited in FI&S where you have this lag. There's going to be a 3-month lag to push these prices as from the end of July, early August. Setu Sharda: That was helpful. Just one question, like because -- do you see any -- like how is the trading update until now, like have you seen the recovery in Health & Nutrition? Olivier Rigaud: No, it's a pretty good. We have very good visibility on Q2, very good, and it's really a very strong start of Q2 there. So I'm feeling really good, feeling really confident what we see in both divisions actually already in April. Alex Sokolowski: Okay. Our next question this morning comes from Karel Zoete from Kepler Cheuvreux. Karel Zoete: I've had two questions actually in relation to the FI&S business unit because the margin has been, of course, a bit lower than expected in the quarter. But if we zoom out, it's been a couple of quarters in which profit margins are declining instead of going up towards the 14% to 15% ambition level. So in relation to that, what are the incremental savings efficiencies, et cetera, you try to capture now? And the more longer-term question then is the positioning of the business. Where are you losing market share? Or is it simply the exposure to more mature categories in the U.S. that have been under pressure? Peter Kazius: Okay. Let me do the first one in terms of the longer-term trajectory and then Olivier can take the market one from that perspective. And you are right, that you see basically a kind of negative momentum if you look quarter after quarter. And I don't want to be -- but there is always a bit of volatility around it, frankly speaking, a bit of phasing. And I don't want to basically go to all these details. But if you look to Q2, and let's start with that. Then I did mention we anticipate a kind of EUR 5 million impact of sugar and cost reduction savings, of which the majority will be in FI&S, and that will lead to a kind of sizable margin improvement as of Q2, following actually an improvement into Q3, Q4. So with that one, I think that in terms of Q1, we reached the bottom, Karel, from a longer term perspective. If you then say the ambition level is still there, I anticipate for the full year to be higher in terms of FI&S margin than last year, but not to the 15%. Olivier Rigaud: Karel, so on the cost positioning of the business, this is a very valid question. So if you look to the entire FI&S, basically, I'm taking it outside the lactic to PLA that is a longer-term formula contract to the other pieces, basically there is this natural preservation specialty that is where we invest in growth, which is high margin, high growth. And we see even a lot more options around the lactic derivatives, but also the vinegar, the antioxidant and a lot of food ferments that are growing the mold inhibitors. So this is the part we really want to grow and focus on. And this is where we are investing in resources, as well. There is the functional systems that basically is transitioning right now from a pure bakery-only play, where we want to specialize in something that has close synergies with preservation, meaning enzyme cocktail shelf-life extension, and this is a business we are now really simplifying as part of the cost program as well to really simplify SKUs and focus on the high end. So this is really one of the big angle of our cost optimization program that Peter mentioned. And then you have what I call the basic derivatives, lactic -- plain lactic acid that is commoditizing where we basically changed the governance, where we run this business now since January with a new team in a very lean base. And that's the business we also are looking to now restructure, leveraging basically where we have the lowest cost plant in Thailand and primarily the new lactic gypsum-free plant. And this is not where we're going to invest going forward. So the aim is really to have this gradual shift in portfolio to the preservation specialties and restructure the functional systems into the shelf life extension and less exposure to bakery-only business going forward. So that's, I mean, our mission there. Now, as you know, there is still a large chunk of these commoditized lactic acid or less differentiated, if I would say, which is where I think pricing discipline is important, but also cost management. And back a minute to the FI&S margin, as Peter alluded before, we started this program. We presented our new Chief Operating Officer ambition in the CMD as well, where as part of also the new ExCo governance, he kicked off a major program that we embarked on. And of course, in Q1, you see the cost of that program is not a benefit yet. But that's fine, we are planning to develop more around that during our H1 results. So that is to come. Alex Sokolowski: Our next call this morning comes from Sebastian Bray at Berenberg. Sebastian Bray: I have two, please. You have talked about, Olivier, the pieces of movement in terms of last expiry of long-term contracts in '26 for algal oils. If everything were to remain the same as it is today and spot prices for fish oil were to remain the same, assuming that the contracts expire and are then re-struck, is the pricing effect from algal oils for 2027, roughly flat? Or is it different to that? My second question is on the ongoing negotiations regarding PLA divestment. Are there any dissynergies to think of here? Because the current setup of contracting is that there is almost an over-the-fence style cost-plus agreement. Is a buyer interested in, let's say, renegotiating that? Or do the economics in all likelihood remain intact as they are for supply of lactic acid to the PLA JV post divestment? Olivier Rigaud: Thanks, Sebastian. So your H&N question is very relevant. Now, you know, what we said publicly in the past is that these long-term contracts were at that time negotiated between $4,000 and $5,000 equivalent, yes. So obviously, we need to understand the fish oil price dynamic in the coming months when we're going to be at the table of negotiation in the summertime. Now, having said that, if you compare the fish oil price volatility, we know it has been picking up to $8,000 or $9,000 and going down as low as $2,000 in the past. We believe this type of price level are the longer-term sustainable price at the margin we have and we need going forward, and you know this level. So I mean, again, it's a difficult answer because, indeed, obviously, as we are growing volume, we have better and better operational leverage and we should get better margin as we go at this price level between $4,000 and $5,000. And we believe these are the longer-term right level of prices. Now let's see where the fish oil price development going to be over the next month, but again, for these contracts, we want to disconnect from fish oil volatility. On the PLA dissynergies, obviously, you know, and this is not -- I'm not pitching that, of course, the sale of that business, but the combination of this PLA factory next to the largest lactic acid plant in the world and the lowest cost one is very powerful for any new owner of that business. Now, obviously, there is a long-term agreement to supply lactic acid that is in place until 2035 and that would survive any change of control of the PLA JV. And for Corbion, whether we own part of the JV or not, it's a very nice plant filler because this business is, as you know, in these huge lactic acid factories, operational leverage is very important and you really make -- and start to make a lot of money when you run above 80% to 85% capacity. And for us, this plant is a guarantee that we run at really very high capacity rate. So it's quite critical. We remain the supplier, and it's the way also to buffer our two lactic plant on sites, yes. So we see it as, I think, a very nice addition. And actually, it's a deal and a contract with very little, if any, cost. It's a pipeline. So yes, on the front face, the margin might look low, but it has such a huge operational leverage impact on the rest of the lactic that we sell to the preservation and other categories that it's very important. So there are no specific dissynergies that we see from that deal. Alex Sokolowski: Our next question this morning comes from Reg Watson at ING. Reginald Watson: I'd like to come back to the cost cutting, if I may, Peter. Thank you for giving us the EUR 5 million delta between sort of Q1 and Q2. Could you break that down a bit, please? How much of that is the absence of the costs you had to take in Q1? And how much of that is the cost saving? And how much of that is the sugar? And a follow-on question from that is, how do you expect this to build through the quarters in the year? Is this a one-off cost-saving exercise? Or do you see further benefits to come in the coming quarters? Peter Kazius: Yes. No, thanks. So the EUR 5 million, by the way, relates to sugar and cost reduction activities. So it's not even reversing the other basically element. This is a kind of recurring benefit, and I actually think it will increase over the second half of the year as well. Reginald Watson: Okay. And then to that, in terms of the language and Olivier, Peter, feel free either of you to answer this. You mentioned that the sales strength in Q2 is expected to "more than compensate for Q1." As analysts, we're too hung up on quarterly volatility, if we look at first half in the round, do you expect them to deliver positive volume for -- sorry, positive sales with particular volume mix for the business as a whole? Peter Kazius: So if I look for, let's say, the business as a whole in terms of volume mix, then for the first half, I do anticipate indeed a kind of positive elements. If I look in the combination a bit, then Health & Nutrition, I see a recovery, but that is around kind of the same. If you look in terms of price, I think I alluded in terms of FI&S, I anticipate in Q2, still a mild year-on-year price reduction, driven by lactic acid to PLA and then basically reversing of that trend in the second half of the year, driven by the growth which we made on Middle East and partly pricing that's true. In terms of Health & Nutrition, if I pick pricing, then we had a kind of 4% pricing delta. I anticipate a mild kind of price erosion during the remainder part of the year. Reginald Watson: And then final question from me. How is the ramp-up of the gypsum-free lactic acid plant going? Where are you at on continuous capacity utilization? Olivier Rigaud: So Reg, so where we are, as you know, the plant is designed on 125,000 tons of lactic acid. We are now approaching really the 100,000 tons type of level on that plant, yes. And it's also important that -- because we've discussed that in the past as well. It's also because these are significant additional volume we put in the market that we -- it's important we also put that in the market wisely, also making sure that, yes, we do not come with large volume that would necessarily impact our margin anywhere. So there is a conscious ramp-up that we have as well on this. Obviously, the sooner we can fill it, the better, but we see a very nice upside on the remaining part of the year on basically PLA that is requiring a lot more globally. And that's, I would say, to me, quite an important statement because, as you know, the conversion ratio usually between lactic and PLA is 1.4. So you need 1.4x lactic to PLA. So when PLA grows, it's really accelerating massively the need of lactic acid. And we see that for our JV, but we see that also for Chinese players right now. And that's something that when we look to the whole balance of lactic market, it would be really helpful to see how Corbion can leverage on one side, the fact that we have a competitive position because we are gypsum-free. And we know our main competition is Chinese. The second is, if you look over the last 6 months, there is quite a positive trend in the favor of Corbion when we look to the carb cost, the sugar -- the Thai sugar cost versus Chinese cost and all our competitors in China are on corn. So the ratio is again back in favor of Thai sugar since September last year. So it's already 2 quarters. And that, I think, going to support also Corbion margin going forward. Reginald Watson: Okay. So I'm really pleased to view that you're running that plant at 80% capacity utilization because that must be driving efficiencies in terms of variable cost of production, et cetera. So that must make it probably the most cost-efficient plant in the world for lactic acid, Am I wrong with that? Olivier Rigaud: No. You're right. But primarily right now with the Middle East, this is the only plant in the world with no sulfuric acid because this -- the whole story about, of course, as you know, conventional lactic process is that you are using lime and then you need sulfuric to precipitate into gypsum. Reginald Watson: Yes. Olivier Rigaud: And the reason why we developed that process over the years is to have no gypsum, hence, you don't need sulfuric. So that's a big competitive advantage, primarily these days with what's happening in the Middle East. Reginald Watson: And then does that mean then that the cost benefit of the ramp-up is now already included in the numbers? Or should we continue to see more benefit to come from any further utilization, any further ramping of this, through the year? Olivier Rigaud: We have already factored in, in our outlook what we think we're going to achieve in terms of capacity this year. So the rest, we keep for '27. Alex Sokolowski: Very good. And our last question this morning comes from Eric Wilmer at Van Lanschot Kempen. Eric Wilmer: Yes, two remaining questions, brief questions, actually. Given that sugar prices or sugar costs actually have come down year-on-year, might this actually result in market dynamics and forcing lower product pricing for functional ingredients during the remainder of this year? And maybe on customer behavior, are there any signs of -- given the current disruptions, customers stocking up your product, you mentioned sulfuric acid supply chain issues. And maybe actually also a third one then on transportation costs. You talked about obviously increasing them. I was wondering to what extent are customers receptive, different from what they may read. Energy costs have actually started to come down a bit again. And I've been hearing that this is not always a very straightforward discussion. Olivier Rigaud: No, I think, Eric, so good point. So basically, I think, we have -- except -- I mean, again, in a few large U.S. contracts, and of course, the joint venture of PLA and sugar-related costs is not something we have really widely spread. So obviously, key customers do track, of course, input cost. But in terms of competitive dynamic, today, it's getting really about, as you know, our critical competitors in lactic are in China, and they are based on corn. So the important is to look to the Chinese corn versus New York 11, Thai sugar or Brazilian sugar. So that's one. And this is what plays in the competitive dynamic. On stocking, we -- I mean, we don't see that because -- of course, the situation has been heavily complexified with tariffs and still is. And what we see is that the advantage of Corbion being the only lucky producer having a plant in each geography is really helpful for us. So there are different dynamics if you look to the U.S., where we have our plant in Blair, Nebraska, in Brazil, in Campos dos Goytacazes, in Thailand. So we do not anticipate any extra customer stocking. On the opposite, we see people being so tight on working capital that we have a lot of rush orders, a lot of last minute which are creating other issues. So that's what we see. And on freight cost, yes, of course, as I said, Health & Nutrition is very different than FI&S. In Health & Nutrition, all the large contracts do have a freight clause that we review on a quarterly basis. So if freight costs are, let's say, improving or declining in the next quarter, we would apply it and vice versa. In FI&S, it's very different. And as you know, we have a big route that is impacting Corbion, where most of the European lactic acid is freight from Thailand to Europe. And this is a very large volume because this is the feedstock for all the derivatives we are making into our Spanish and Dutch operations. So that's an important one for us, where basically, we have more choices than to push these extra freight cost to the market. And this is what Peter explained what we are busy doing and what we have to do. Alex Sokolowski: Okay. This concludes our conference call this morning. Thank you all for your attendance and questions, and we look forward to discussions at upcoming conferences in the next weeks. Please note that we will hold our Annual General Shareholders Meeting on May 13, 2026, in Amsterdam, and our Q2 half year '26 results on July 31. Information on both meetings is available on the Investor Relations page of our website, and we look forward to engaging with you again. Operator, you may close the call. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Greetings. Welcome to Travel & Leisure First Quarter 2021 Earnings Call -- Conference Call and Webcast. [Operator Instructions] Question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. At this time, it is now my pleasure to turn the conference over to Andrew Burns, Vice President, Investor Relations. Thank you, Andrew. You may now begin. Andrew Burns: Thank you, Rob. Good morning, everyone. Before we begin, I'd like to remind you that our discussion today will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements, and the forward-looking statements made today are effective only as of today. We undertake no obligation to publicly update or revise these statements. The factors that could cause actual results to differ are discussed in our SEC filings and our press release accompanying this earnings call. . You can find a reconciliation of the non-GAAP financial measures discussed in today's call in the earnings press release available on our Investor Relations website. Please note that all references to EBITDA, net income, diluted earnings per share and free cash flow made during the call are on an adjusted basis as disclosed in our earnings release. This morning, Michael Brown, our President and Chief Executive Officer, will provide an overview of our results in our longer-term growth strategy. And then Eric Coke, our Chief Financial Officer, will provide greater detail on our results, capital allocation strategy and outlook for 2026. Following our prepared remarks, we will open the call up for questions. Finally, all comparisons today are to the same period of the prior year, unless specifically stated. With that, I'll turn the call over to Mike. Michael Brown: Good morning, and thank you for joining us. Travel & Leisure delivered another great quarter. Thanks to the hard work of our team, we are carrying forward the positive momentum achieved in 2025. We First quarter EBITDA exceeded guidance, driven by strong execution in our Vacation Ownership business and resilient owner demand. In the quarter, we achieved gross VOI sales growth of 7% and EBITDA margin expansion of 180 basis points and EPS growth of 31%. Our strategy starts with delivering outstanding vacation experiences for our owners and members. . We convert that owner satisfaction into recurring demand, predictable cash flow and consistent capital returns. Our first quarter results are a clear validation of that strategy and a proof point of the durability of our model even as the macro environment remains uncertain. In the quarter, we generated revenue of $961 million, EBITDA of $225 million and EPS of $1.45, with compounding growth across the P&L. We are seeing continued strength in our Vacation Ownership business with 7% gross VOI sales growth and above plan VPG. We tour growth of 5% was above our 2025 tour growth rate of 3%. I'd like to emphasize that we achieved these results -- these impressive results while executing on our resort optimization initiative, which naturally pressures those metrics. During the quarter, we returned $128 million to shareholders through dividends and share repurchases. Our dividend increased 7% to $0.60 per share, and we repurchased 1.2 million shares in the quarter. At the same time, we are investing in the business to drive long-term profitable growth. We continue to make meaningful progress advancing our multi-brand strategy and digital road map, and this balanced approach, delivering near-term results and returning meaningful cash to investors while investing for the future is central to how we create long-term shareholder value. Since our last call, macroeconomic uncertainty and geopolitical risks have been prominent in the news. I'd like to start with recent trends we are seeing with our consumer and across the business. Overall, our owner base remains healthy. They are prioritized and travel, and we are not seeing any meaningful shifts in their behavior. First quarter gross bookings were up year-over-year. The booking window remains steady at approximately 100 days and average length of stay is unchanged year-over-year at just over 4 days. The distance travel to our resorts in Q1 was actually up slightly to last year, indicating consumers' willingness to travel to our resorts. The data suggests that in uncertain economic times, our value proposition becomes even more relevant. For the 80% of owners that have paid off their loan, their vacationing for the cost of annual maintenance fees. This value proposition is clear to our owners and is best reflected in our 97% retention rate for owners that are current on their loan or paid it off. As we enter our peak sales season, we are mindful of the macro backdrop and its potential to influence consumer behavior. That said, the trends we are seeing remain healthy, our value proposition continues to resonate, and the model is performing as designed, positioning us to outperform across cycles. During the quarter, we continued to make meaningful progress advancing our multi-brand strategy and saw clear proof points of its success. Margaritaville is rapidly approaching $150 million in annual VOI sales, reflecting the success of our revitalization efforts and new partnerships. In the Accor Vacation Club brand, we expect to nearly double our VOI sales in 2026. We also began selling Eddie Bauer Venture Club at select sales centers. In March, we welcome guests to our first Eddie Bauer Resort in Moab, Utah. We are seeing strong interest and early momentum has exceeded our expectations. Sports Illustrated Resorts, sales are now underway at our new Nashville sales center. We also announced our new Sports Illustrated resort location in Baton Rouge, home to Louisiana State University and Southern University. As the brand's fourth resort, Baton Rouge is a highly complementary sports-centric university market that fits well within the club's growing portfolio. Overall, combined VOI sales from these brands are expected to approach 10% of our sales mix this year, and we expect that to increase further in the years ahead. Scaling our multi-brand strategy remains a critical pillar of our long-term growth plan, enabling us to reach new customer segments and meaningfully expand our addressable market. The progress we are seeing across the portfolio gives us confidence that this strategy is gaining traction and developing as we envisioned. On the partnership front, we recently renewed and expanded a 5-year agreement with United Parks & Resorts, owner of SeaWorld and Busch Gardens, building on the highly successful strategic partnership that began in 2013. In addition to our current on-site kiosk and promotional activations, the new agreement expands our presence across additional parks. This meaningfully increases our ability to introduce new families to our Vacation Club offerings and provide current owners with exclusive events and experiences. Overall, the expanded partnership strengthens our top-of-funnel demand prospects and supports new owner growth. Turning to the resort optimization initiative we announced last quarter. This effort involves removing a small number of aging, lower demand resorts to strengthen our overall resort system for owners while also improving the financial health of Travel + Leisure and our club HOAs. I'm pleased to report that we are realizing all the expense savings outlined last quarter, and we've been able to sustain our historical sales growth rates despite the resort closures. In summary, we've started 2026 from a position of strength with clear visibility into the key drivers of our performance and momentum in our core Vacation Ownership business. We are reiterating our full year outlook, and I remain confident in our ability to drive growth, generate meaningful cash flow and continue creating long-term shareholder value. Now I'll turn the call over to Erik to further elaborate on our results, capital allocation framework and outlook. Erik? Erik Hoag: Thanks, Mike, and good morning, everyone. I'll frame my comments in 3 parts: how the business performed, how we ran it and how we're allocating capital. Starting with performance. First quarter results were ahead of our expectations, continuing the trajectory we discussed on our February call despite a more volatile macro backdrop. What stands out is not just the strength of our results, but how the business performs across different environments. The compounding in the first quarter is clear. Revenue grew 3% EBITDA grew 11%, net income grew 22% and earnings per share grew 31% with tour flow feeding the top line and operating leverage and capital allocation driving outsized growth in earnings per share. Looking at our Vacation Ownership business, this segment continues to operate at a high level with results in the quarter showing steady demand and strong execution. Gross VOI sales were $549 million, up 7% year-over-year, driven by tour flow growth of 5% and continued strength in volume per guest, which increased 3% to $3,321. Tour flow remained strong in the quarter, consistent with the momentum we saw exiting 2025. While our new owner mix was slightly below prior year levels, we remain confident that it will increase as the year progresses. Top of funnel demand remains strong, and we view mix in the quarter as more a function of conversion dynamics rather than a change in underlying demand. Segment EBITDA was $191 million, up 20% year-over-year, with margin expansion driven by operating leverage, improved inventory efficiency and the benefits of our resort optimization initiative. From a broader perspective, demand remains stable. While we're always mindful of the macro environment, it's important to remember that most of our VOI sales come from existing owners who have effectively prepaid for their vacations. As a result, their travel behavior is less sensitive to economic changes, and our performance is driven by the strength of those long-term relationships through repeat usage, retention and ongoing upgrade activity over time. Credit performance remains within our expectations with provision rates slightly down year-over-year in the first quarter. We are seeing some movement in early-stage delinquencies and particularly in more recent vintages, which we would expect to influence provision over time. With that said, we still expect our full year provision rate to be modestly below prior year levels. The underlying credit profile of new originations remains healthy with weighted average FICO scores remaining above 740 and average down payments trending above 20%. Turning to travel and membership. In the quarter, transactions were flat year-over-year, reflecting a continued mix shift within the business with declines in exchange activity, offset by growth in travel clubs. Exchange membership was approximately 3.3 million subscribers, down about 2% year-over-year. As expected, the mix shift continues to pressure revenue per transaction and segment revenue was $165 million, down 8% year-over-year. Segment EBITDA was $59 million, down 13%. This reflects the continued mix shift within the business. with declines in the higher-margin exchange business and growth in lower-margin travel clubs. Travel and membership remains a capital-light, high-margin business that generates significant free cash flow. Our focus is on managing the business for cash and flexibility as we reposition the platform to improve returns over time. Shifting to the balance sheet. We exited the quarter with in line with our expectations, just below 3.2x. As a reminder, leverage typically trends higher earlier in the year and declines as we generate free cash flow over the course of the year. Liquidity remains strong with over $1 billion of available capacity, including cash on hand and our revolver, supported by consistent free cash flow generation and the continued access to the securitization markets. In March, we executed our first ABS transaction of the year, raising $325 million at a 98% advance rate and 5.1% coupon. This transaction reflects our ability to access capital at rates well below the average interest rate on our portfolio, creating significant net interest income even in a more volatile macro environment. Overall, the balance sheet provides the liquidity and flexibility to allocate capital across growth opportunities and return meaningful cash to shareholders. Before I review our outlook, I want to take a moment to discuss capital allocation. Our framework remains unchanged. We focus on deploying capital where it generates the highest risk-adjusted return on a per share basis while maintaining a resilient balance sheet and returning excess capital to shareholders through a consistent dividend and share repurchases. When returns are compelling, we also pursue opportunistic M&A that is well aligned with our strategy and accretive to growth. When you step back, the business rate continues to generate returns well above our cost of capital, while returning a meaningful portion of that value to shareholders. Moving to the outlook. We are reaffirming our full year 2026 guidance, which reflects continued strength in the Vacation Ownership business, cost management and travel and membership and the impact of our resort optimization initiative. While still early in the year, performance in the first quarter was ahead of our plan and our full year outlook continues to appropriately reflect both the current environment and the trends we're seeing in the business. For the full year, we continue to expect gross VOI sales to be in the range of $2.5 billion to $2.6 billion. EBITDA in the range of $1.03 billion and $1.055 billion and volume per guest to be in the range of $3,175 and $3,275. Continue to expect to convert roughly half of our full year EBITDA into free cash flow. During the quarter, we took inventory drawdowns in our Chicago and Nashville Sports Illustrated resorts where sales are now underway. That investment did impact first quarter free cash flow, but does not change our full year free cash flow conversion expectation. We continue to expect our full year adjusted tax rate to be approximately 29% and year-over-year EPS growth to be in the teens, supported by EBITDA growth, lower interest expense and share repurchases. For the second quarter, we expect gross VOI sales to be in the range of $660 million and $690 million, EBITDA in the range of $260 million and $270 million, and volume per guest to be in the range of $3,200 and $3,250. This reflects a continuation of first quarter trends while recognizing that growth can vary across quarters based on mix and timing. Our outlook reflects a business that's performing as expected with downside appropriately managed given the current environment and upside driven by execution. To close, the business continues to perform as designed. We're seeing steady demand, strong execution across the platform and continued conversion of earnings into cash over time. As we move through 2026, we remain focused on executing against our plan, allocating capital to the highest return opportunities and compound value on a per share basis. Rob, we can now open the line for questions. Operator: Thank you. [Operator Instructions] And the first question comes from the line of Chris Woronka with Deutsche Bank. Chris Woronka: Congratulations on a nice start to the year. Michael, you guys have started off with a nice collection here of the Sports Illustrated Edipower and our Greenville resorts. So 3 distinct brands in addition to the core brands that you started with, the question is kind of to what extent do you think you can possibly grow those brands further? And are you seeing any attractive opportunities on the hotel conversion front that kind of enable those? . Michael Brown: We're very pleased with how each of the brands, the additional 1 that I'd add to that is a core Vacation Club, which is the newest one post post-COVID and would since our name change. And that, as we mentioned, we'll double the sales this year. When you look across all of those brands, our anticipation is we want to grow each of them to support the growth of our Battleship brand, the Wyndham brand. As we start to look at how each of them can grow, I think the total revenue potential varies by brand. However, as we've stated on a number of calls is we want to get each of these up to about $200 million plus. And if you start to think about those 4 brands and stack that level of growth, you can have a lot of visibility into that 6% to 8% total VOI run rate for the foreseeable future. Fundamental to our strategy is to do things pragmatically, do a brand, start executing to another one, start executing. And if you look at the cadence of what we've done in adding brands, adding a core growing that brand, then add the second one in the revitalization of Margaritaville, as you heard, highly successful. And then the last two, Eddie Bauer, we started lightly last year, and it's really picking up momentum in Q1, and then we'll start Sports Illustrated. So we believe the success of adding new brands is the execution of the ones we already have, starting with Wyndham, ending with our latest announcement -- our latest start-up sales, which is Sports Illustrated. So those are key to our strategy, and we think we're going to grow. And I think that validates and is providing more clarity and precision around our long-term growth rate on VOI. Chris Woronka: Okay. Very helpful. Just as a follow-up, I know you guys mentioned a little bit of uptick in early delinquency activity. I guess, I don't know, Eric, if there's any more detail you want to ask the question that comes out of it is do you think that ultimately opens up an opportunity to essentially reacquire some of that inventory at favorable pricing? Or are you not quite down that path yet. . Michael Brown: Thanks for the question, Chris. So maybe a couple of comments on the loan loss provision. Maybe I'll start with how we actually performed. So maybe even going back to the fourth quarter. Fourth quarter provision was roughly 19%. It was down year-over-year. Full year 2025 provision was 20.7%. The first quarter start to the year were down to 19%. And -- so we've had 2 quarters of year-over-year decline. Second, regarding the early-stage delinquency predominantly in newer cohorts of loans, loans originated over the last several quarters. I do think that these will ultimately manifest into the provision. But third, there are several components to the loan loss provision calculus that I think are worth noting. First, I just mentioned delinquencies. Second, down payment rates, which are up, which is a good guide for the provision for us. FICO scores remained stable and healthy at above 740, which is another good guide for the provision. And maybe the last thing I'd say associated with this is the percentage of sales financed is also down, which is another good guide for the provision. So it's really those elements that give us confidence in projecting that the full year provision should be down year-over-year. And Chris, to your question, yes, when defaults happen, that does give us the ability for us to take that inventory back and resell it at today's prices with a very low cost of sales. Operator: Our next question comes from the line of Patrick Scholes with Truist Securities. Charles Scholes: Mike and Eric. Mike, I wonder if you could just put to bed any concerns, and it sounds like you had already, but just to finalize it -- any changes or concerns for the remaining 3 quarters versus your guidance earlier in year, certainly, the Algebra says if you beat on 1Q versus your guide, but maintain implied the rest of the year down slightly. Is it simply just Iran has happened since you reported in mid-February that kind of keeps you cautious and there's nothing else in your business that has -- as your outlook has changed. Is that a fair assumption? . Michael Brown: You've nailed it, Patrick, but let me first say -- let me first say, let me first speak to our business. We reported in mid-February, it's 2 months later, nothing's changed in our confidence in the building for the remainder of this year, prospectively. You've seen the results in Q1, which I would characterize as an extremely strong quarter, we had a great Q1 last year. I view this quarter as better. We beat the high end of our range. If you remember last year, we had Liberation Day, April 1, I believe it was, and we expressed that, that uncertainty led through in the way we thought about the rest of the year. this year, there's a war going on, which creates macro and geopolitical uncertainty. And we don't want to be tone out to that reality. But if you just step back and look at our consumer, great first quarter, 3 weeks into Q2, continued momentum exactly as we saw in Q1 and if you look prospectively, yes, it's great to look in the rearview mirror. But looking forward, we look at our summer bookings. They're up year-on-year, a great sign given that Q2 and Q3 is our high season. We get a daily report card in the form of VPG, continues to perform extremely well. Erik just spoke that we're monitoring early-stage delinquencies, but that's more retrospective. And I think between the macro uncertainty not micro uncertainty, we think our business is performing extremely well. I think the last piece of this puzzle is that Q1 is about 21% of our full year number at the consensus point. If that number was 29% versus '21, we might be having a different conversation. But early in the year, business is performing well, macro economy, we just want to be cognizant of what's going on outside of our business. And given that it's very early in the year, be thoughtful about that. So that was a very extended way to agree with you. Charles Scholes: I just wanted to put that to rest. I'm sure you -- as the quarter progression you may get questions, so we have the answer and writing there. Erik, my question for you. You talked about the earlier-stage delinquencies, specifically in newer cohorts. Does that means the newer first-time buyers, and specifically, what is it about those? Is it maybe a little bit weaker -- relatively weaker financial demographic, a younger customer than, say, your less newer or your legacy cohorts. Could you explain a little bit more about that? . Erik Hoag: Yes. Sure, Patrick. So when I say newer cohorts, these are the more recent cohorts, I think the last 3 quarters. When you sort of double-click into the characteristics within the cohorts, there's not a single attribute that I would say is maybe worth calling out. It's not tied to FICO. It's not tied to product type. It's not tied to income band. It's -- we're seeing a little bit of wobble associated with the loans that have originated in the last several quarters. Operator: Our next question is from the line of Stephen Grambling with Morgan Stanley. . Stephen Grambling: I think I heard in the comments that you said that the new owner mix was a little bit lower than expected and you attribute that to conversion dynamics. So I'm wondering if you could just expand on, what is happening in terms of the conversion dynamics there that might be impacting it and how you expect that to evolve over the course of the year? Michael Brown: Stephen, this is Mike. I would say that's a result of a positive story we have, which is growth in our new owner tour growth. There was a lot of commentary last year around our ability to grow new owner tours in Q1. Although our total tour growth was 5%, our new owner tour growth was 7%, Which is extremely strong. That's always step 1 and driving new owner mix into your total business. When we talk about conversion dynamics, basically, our close rate was lower in Q1. That's natural. Anytime you scale the business and grow new owner tour flow or any tour flow, you're likely to suffer maybe a little bit of underperformance on close rates. We've got that, but we've got step one accomplished, which is a great new owner tour growth in Q1. We think that will continue to be strong as we head into the high season with both our new partnerships and just the way we've developed some of the smaller ones on a regional basis. And we believe as we tend to do quarter after quarter improve the execution when we get focused on something that we think is a little bit behind. That's what happened in Q1. But again, I'll just reiterate that, probably the big storyline for us in Q1 was the new order tour growth year-on-year, which was 7%. Stephen Grambling: That's helpful. And then 1 unrelated question, just on free cash flow. I think you made a couple of comments on the intra remarks, but can you just maybe elaborate on any kind of puts and takes to think about impacting the cash flow conversion over the course of this year? And then maybe if you can remind us how to think through free cash flow conversion differences between the segments even as we think about the vacation ownership versus T&M segment. Erik Hoag: Sure. So let's start maybe a little bit with free cash flow, and we can talk about the segments on the back side. Free cash flow for the full year, we're reiterating our roughly 50%, roughly half of adjusted EBITDA should convert to free cash flow. I will say that the pace of free cash flow in 2026 will be backloaded. We've got inventory investments that we're making, we made in the first quarter associated with Nashville and Chicago. We've got inventory investments in the second quarter as well. So you're going to see the concentration of our free cash flow more back loaded. And then from a conversion perspective, with the benefit of our ABS transactions and being able to generate cash off of those, the free cash flow conversion across segments is very similar. Operator: Our next question is from the line of David Katz with Jefferies. David Katz: Thanks so much. I think a lot of the commentary around the VOI business is very clear. What I'd love to get just a little more color on is what you're including as we go through the quarters for the remainder of the year in your guidance or, 1, travel and exchange. It is flat the high end of the bracket and down some number at the bottom end, that kind of help is what I'm looking for. And then with respect to the resort optimization, I'd love to get a clearer sense of what exactly you're baking in for the quarters and the remainder of the year and whether from that, or sort of flat challenge, et cetera. I think hopefully, that's a clear question. Erik Hoag: It is, David. So it's Erik. So let me give you a couple of components associated with what's driving the year for us. So we had mid-single-digit tour flow growth in the first quarter. Our second quarter and our full year expect similar trends, mid-single-digit tour flow growth. We expect gross VOI sales to also be mid-single digits in both the second quarter and in the full year. I think about the Travel and Membership business as a little bit of an extension from where we finished 2025. And some of those stats are the following. The Travel and Membership business was down 9% in 2025. They were down 10% in the fourth quarter. They're down 13% here in the first quarter. So I think an extrapolation of the travel and membership business in 2026 is a fair base case to pursue. And then the resort optimization initiative has been a bit of a tailwind for us to start the year, when the Q is filed later this morning. You're going to see that the developer obligation, our carry cost, that savings is manifesting itself right into the P&L. And the one thing that we are also seeing is that despite the fact that we've closed several sales centers with the resort optimization initiative, our gross VOI sales have continued to remain very strong. So as I think about the rest of the year, it's very much a continuation of the mid-single-digit guide that we've got for the second quarter. It's an extrapolation of travel and membership. It's the manifestation of the resort optimization savings, and all of that compounding through the P&L to teens EPS growth as we continue to repurchase shares. David Katz: Okay. Very helpful. Congrats on the quarter. . Operator: Our next question is from the line of Ben Taken with Mizuho Securities. Benjamin Chaiken: Maybe we could talk about Worldmark and Eddie Bauer. I think you said Eddie Bauer was exceeding your expectations. I mean my understanding is that you're effectively combining these 2 portfolios. I would imagine that would create a pretty powerful upgrade opportunity. So my question is, one, am I on the right track regarding this upgrade opportunity; two, if so, have those upgrades started? And with that contributing to some of the strength in 1Q? And then three, as you see it, is the bigger opportunity upgrading the 180,000 or so market customers? Or is it selling the new combined portfolio to new customers entirely the world market of Bauer. Michael Brown: Great question. What we're trying to do is basically put a booster to Worldmark. The Walmart owner base has a clear travel demand. And we've heard time and time again, they love that. outdoor experience, the chance for families to be together for a friendly resorts and in not urban centers. And the plan for Worldmark is to highly, highly align the Eddie Bauer Venture Club with it so that in effect, operates as a singular club. . The success in Q1 is right along the lines of what you laid out, Ben, is it's a new product offering with a slightly different experience. that owners are going to get to enjoy. What I would say is, though, even though it exceeded our expectation, I don't think we've really unleashed the full power of what that brand is going to be. And what I mean by that is that in our world, it takes time to get fully registered in all jurisdictions, and we're partially -- we're registered in a few, but not all. We've opened only 9 sales locations. And we've only announced one resort. You can expect more this year and can expect more nice destinations. And I think as the Worldmark base sees those new destinations, the upgrade opportunity, the ability to own world market by incremental opportunity or credits into the Eddie Bauer system will only get strengthened. So ultimately, we want to preserve and grow the Worldmark brand through this brand extension, which is the Eddie Bauer Venture Club. As you mentioned, it's off to a great start. It's on the back mostly of upgrades, but it is our full intention to start feathering into the Eddie Bauer mix, new owners and I think it really attracts a new opportunity and gives us a new chance to grab some partnerships that maybe otherwise wouldn't be available in some of our other brands. Benjamin Chaiken: Understood. That's helpful. And then switching gears a little bit. There's kind of this never-ending question regarding the exchange business. Maybe you can walk us through your feelings on both sides as it pertains to keeping our disposing of the asset and then what your current stance is? Michael Brown: Well, it's as we've always shared, we're -- we will make our decisions on what we think is best for shareholders and the optimization of return for shareholders. we're all clear on the landscape of the traveler membership business. Exchange is in natural industry secular decline for the reasons we've all spoken about in the past. Despite that and despite what's happened over the last 3 to 5 years in that business, we've been able to maintain our overall travel and leisure mid-single-digits growth enterprise-wide on an EBITDA basis. We believe that is very much in our grasp despite what's happening on the exchange side. We continue to focus first on organic growth and by adding new business lines and new focus. We think the outlook that we laid out in travel and membership is the realistic, but we're looking to outperform that and outperforming it is not easy, but we're constantly looking both inside the timeshare space and outside for new lines of business, and we're actively working on those business lines, and we're going to keep working until we can change in the curve to be additive to our story, not basically absorb it as part of our mid-single-digits growth. What I would add on top of that is if there is a strategic opportunity, we'll evaluate it. And if it makes sense, we would not hesitate to make that type of move. But at this point, we're super focused on trying to bend the curve from the current decline trajectory because we know with the strength of our VO business that provides an additive nature to our EBITDA growth. Operator: The next question from the line of Ian Zaffino with Oppenheimer. Ian Zaffino: As far as VPGs, how do we think about that? I know you gave guidance for the full year, but how do we think about that throughout the the year. I'm just thinking about you're talking about mix earlier. Does that kind of impact how you're thinking about the VPG? Because I guess we were to believe that the VPG would be coming down just given more new owner mix and now it seems like the mix is changing a little bit. So any kind of color you could give us on where you think things are going and why. Michael Brown: What you're thinking about -- you're thinking about it the right way, and VPG will take natural pressure on an enterprise basis when you get a higher new owner mix. we're heading into Q2 and Q3, which naturally has a higher new owner mix, which we expect to happen definitely in Q2 and again in Q3. So you would expect some natural pressure on VPG, but that's a mix issue, not a performance or an execution issue. So as you look at the cadence, you would expect those higher VPGs in Q1 with a higher owner mix, which is what we got. But Erik has laid out our range for the year, and I think that's accurately reflecting both the cadence and how we think we'll ultimately perform on VPG. Ian Zaffino: Okay. And then I guess as a follow-up, I know the question if I ran kind of came up. And any kind of potential softness you might see? Like how do you think that's actually going to play out? Is it a matter of fuel prices are high and that's what might soften demand? Is it just kind of like a sentiment thing where consumers don't want to either travel or spend money on a DO. How does it actually manifest, you think or kind of what's baked into what you're expecting? . Michael Brown: We'll give you our best thinking about how we think it would show early signs of showing up in our individual performance. And it's why we highlighted some of the travel trends we're watching. We would expect a little bit of conservatism in the consumer travel behavior. First and foremost, booking windows would shrink, they have not so far this year. I would expect people to transition away from air travel to drive 2 destinations. That has not inspired so far this year. I would also look at VPGs to modify. They haven't. They've continued to perform extremely well. We said we're monitoring early-stage delinquencies. There's nothing in the travel trends that's noticeably moved. In fact, it feels like it's actually moved the positive direction, that would cause us to say there's an early radar sign or a signal that says the consumer is weakening. I say all that, knowing that every week, we look at these because we're looking for early signs, they just -- all we can report is what we know on April 22nd and what we would know on April 22, is early warning signs have not shown up in our travel trends, but we'll continue to monitor them. Operator: Our next question is from the line of Lizzie Dove with Goldman Sachs. Elizabeth Dove: I guess on a similar theme, just thinking about that new owner mix that you mentioned and being a key focus for this year. I guess, like, I think, typically in precedent times where there's a macro slowdown like getting that new owner to make that big purchases typically been tougher. Can you maybe walk through how you're thinking about like levers that you have to drive that new owner growth this year as you push that more for the remainder of the year? Michael Brown: Well, it all starts with what happened in Q1 is you have to see the guest. And then secondly, you have to look at your conversion rates and the 7% growth in Q1, I can't emphasize it enough is a big one coming out of Q1. We have laid the groundwork with our partnerships. We've laid the groundwork with the execution to be able to grow top of funnel key metric. And now our focus will be and our teams already very focused on it is the next stage down the funnel, which is conversion. Unquestionably, as consumers confidence rises and falls just like every single metric that's in every single business, it fluctuates. And we will have fluctuation in almost all of our metrics on the owner and the new owner side, I think what we rest on is that as we monitor and get ahead of any metric that starts to adjust, our team is quick to react, whether it's in cost management, whether it's changing our strategies, either on the marketing side or the sales side, that we feel as we mentioned in our prepared remarks, we think we can outperform across all cycles because there's a ton of value in the business. We've got the key metrics in place, being top of funnel, both owner arrivals in the summer and new owner tours that we can execute further down the funnel and have a lot of levers to make sure that we ultimately deliver the results we've put out to the Street. Elizabeth Dove: Got it. That's super clear. And then going back to the strategic review that you're undergoing. I think last quarter, you mentioned the swing factor was somewhere in between $15 million and $25 million in terms of EBITDA benefit. I know we'll get the queue later, but just any sense of like how we're tracking and kind of range of outcomes in terms of like coming in at the low end versus the higher end of that as we get through the year. Michael Brown: So just to clarify, when you say strategic initiative, you're referring to the resort optimization initiative, correct? Elizabeth Dove: Yes, yes. Michael Brown: Yes. So as Erik mentioned, when you see the Q, you'll see great proof points is that we're realizing full, if not slightly above the cost savings. So we're super encouraged first and foremost that -- the cost savings are being fully realized. Our team is doing a great job combining very process-oriented of of extracting those. Again, as a reminder, the resorts we're taking out have an average tenure of, I believe, about 40 years. So we're looking at more aged resorts with lower demand. And our focus really now is around the consumer and helping them determine having all the facts of their options, whether they want to stay in their ownership or exit, and working through on a one-on-one basis, the population of owners who ultimately need to make a decision. But when it comes back to the economic side of the equation, we're realizing the savings we expected, if not slightly ahead, but it's sort of like our full year guidance. It's early in the process. We have 3 quarters to go, but super encouraged around the execution being at or slightly above plan through the first 90 days. Operator: Next question come from the line of Trey Bowers with Wells Fargo. Raymond Bowers: Just had a couple of modeling questions on the free cash flow side of things. As we think about inventory for the year, is there a chance that as we look to EBITDA to free cash flow conversion, if another city where you wanted to add inventory popped up, could that shift things or just kind of the pace and timing of VOI sales caused what would be some of this conversion to kind of get pushed into '27? And then second, just around nonrecourse debt. Is that expected to be kind of neutral this year or a bit of a draw or a bit of a positive? Erik Hoag: Yes, so free cash flow, the pace of free cash flow in 2026 is going to be back-end loaded. With the Chicago and Nashville spent the inventory investments that we made in the first quarter, we've got additional investment that we're making in the second quarter. So we've got some conviction around converting roughly half of EBITDA into free cash flow on the full year, but you're going to see it really manifest in the back half of the year. From a portfolio perspective, I would say it's generally neutral. Raymond Bowers: Okay. And then just from the brand perspective, are there other sports illustrators or any Bowers out there that you guys are talking to? Both of those brands are not brands that I think a lot of people are super resonate with consumers, but obviously, it's doing something really positive for you guys. Could you just maybe walk through why Eddie Bauer and SI or kind of brands that are bringing in new owners? Is it the brand itself? Or is it kind of just what you've done with the brand that is causing it to resonate. Michael Brown: Well, I would say that I believe the Sports Illustrated brand highly resonates and is an iconic brand that almost everyone associates with a sports experience. I'd like to equate it to Margaritaville, which is not your typical hospitality brand and yet everyone associates it with the lifestyle. So I think those retail brands that express a lifestyle, both Sports Illustrated and Eddie Bauer are highly reflective of how we think hospitality is changing to be lifestyle based. And we just simply have taken the opportunity to find new markets through those lifestyle brands. I would add to it is a core is a traditional hospitality brand. And in the grand scheme of things, we're trying to combine lifestyle and our core hospitality brands of Wyndham and a core and ultimately grow the top line. So -- yes, I think, first of all, they're great brands and that they strongly are identifiable with the lifestyle, and that is resonating with the consumers as they make decisions. Raymond Bowers: And 1 more, if I could sneak it in with the core. Will the license fees around that be similar to what you guys have with the guys at Wyndham or is that a different structure to that deal? . Michael Brown: It's roughly the same. Operator: Our final question is from the line of Brandt Montour with Barclays. Brandt Montour: So I'm having a little bit of trouble, for having my head around the delinquency stuff. I wanted to go back to that quickly because it's not really super clear to us what's driving it. If there's no obvious characteristic you'd call out or normally, it seems like that you want to blame the macro for this. So you've seen a lot of many delinquency cycles. You called it a wobble. How would you say it feels this one feels in terms of how it would play out, like is it worse than -- I'm assuming it's better than the one you saw at this time last year? And then what are you kind of assuming when you say that the provision should still get better and you called out a bunch of good guys. On the bad guy side, what are you kind of assuming in terms of like where it stabilizes, when it stabilizes or anything you can kind of give us there? Michael Brown: Brandt, the first thing I'd say is that it's early stage delinquencies. There -- it's early in the cycle. We've seen it, wanted to communicate it. And the reason I wanted to bring up some of the good guys that are also running against the loan loss provision is just that, that as we sit here in the middle of April, we still got conviction that the loan loss provision will be down year-over-year based on just the confluence of things that make up that calculation. So the delinquencies that we've seen in the early stage delinquencies that we've seen I would say just that there are more recent vintages. But beyond the more recent vintages, there isn't a characteristic that I would specifically call out. And we're monitoring it, and we're working it. We've got aspirations to bring it down. Brandt Montour: Okay. And the second question is actually on AI. You guys have showcased some great progress in terms of your guest experience and the technology stuff that you've done. But I wanted to more ask about how you're using or planning to use new AI tools on the distribution side, i.e., enhancing the top of funnel and sort of working with the bigger models out there that are disrupting some of the ways in which consumers find their travel options. And so is that something you're doing directly or planning to do directly with tech companies? Are you working through the brand companies that you partner with to speak to them and work with them? Or what can you tell us about progress on that initiative? . Erik Hoag: Let me start with AI and then I'll just move to some technology updates as well to show some, as you said, showcase some positive things we're doing. On the AI front, we view sort of 2 opportunities there is, first is on the customer experiences to start in the search and book window and then expand outward from there. So we really want to get our owner-based engage when they're looking at resorts, planning their resorts, creating as little friction as possible and getting their destination confirmed in their inbox as a confirmed reservation. That's the starting point. Secondly is, as we look at AI in the distribution side of the equation, I think the bigger opportunity for us on the stage 1, stage 2 basis is going to be on sort of non-full product type of vacations, whether its rental short-term product, low transaction prices that's where you're best to start as opposed to trying to transact on an average transaction price of $25,000-ish through AI. I think we want to start with lower transaction prices and move up the chain from there, and that's work going forward. On the digital side, a lot of exciting things happened. We talked about Club Wyndham app that we launched and was received very well. We spoke recently about the Worldmark app that we launched last year. We already have 20% of our bookings, which is pretty amazing how recent that app was launched in how quickly that was adopted by our Walmart owners, already 20% of our bookings are happening through the Worldmark app. And we launched the Margaritaville app in Q1. So when you think about the cadence of reducing our friction, some of it's AI, but a lot of it is just the quality of our IT team and the speed at which they've worked with the business to get usable tangible customer experience technology out into the market that we're getting affirmation that it's working through the actual level of bookings we're seeing from our owners. Operator: This now concludes our question-and-answer session. I'd like to turn the floor back over to Michael Brown for closing comments. Michael Brown: Thanks, Rob. Thanks for joining us today, everyone. To wrap up, we've had a great start to 2026, and our strategic priorities are clear. We remain focused on disciplined execution to deliver strong results in 2026, while continuing to scale our multi-brand strategy to drive long-term profitable growth. Erik and I look forward to continuing the conversation with many of you at upcoming conferences and again on our second quarter call. Thank you for your time and continued interest in travel and leisure. Operator: Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Per Brilioth: Okay. Hey, welcome, everybody. This is our -- as in we are VNV Global. This is our Q1 investor call. And I'll kick things off. We have like this usual summary page, which is the next one. Yes, NAV $462 million, which is down a bunch since the end of last year. And as we tried to sort of highlight in the narrative in the report, it's because of market and the peer group, the public sort of peer group from which we take multiples, they're down a lot. In some cases, there are names that we use that are down like 30%. And that's the main driver because the portfolio at large is doing really well. And as I wrote sort of -- if that sort of peer group multiple that we download and multiply with what we see at our companies, if that would have been flat this quarter, the NAV would have been up since the end of last year. So -- but this is how we value the portfolio. And it's no -- can sort of change that from quarter-to-quarter even if we don't think it sort of reflects the reality of the value here. And so we're subject to that volatility. And sort of if we -- if the second quarter were closed today, it would have been up. We'll see where it closes. But we're basically subject to that volatility. That volatility has taken the NAV down, but it's not reflective of what's going on in our portfolio. And I don't know if one sort of just has a go at trying to put the big sort of high-level reasons for why this peer group is down. I think it sort of falls into 2 main buckets. One is this fear, uncertainty, combination of those and what AI will do to a bunch of software companies. And as we've been on and on about before, we really don't see that as relevant even sort of -- it's the other way around for our portfolio companies is that we feel that these companies in our portfolio, they benefit from the emergence of AI platforms, models, that whole new toolbox in so many ways. I mean, the combination of hardware sort of proprietary data sets and sort of a customer base that sort of goes directly onto the platforms without any intermediaries. And just the ability sort of these sort of new ways of writing code and software, et cetera, is so beneficial basically for these companies. So -- and then the other one, of course, is I think you'll agree with me is this sort of are we heading to a recession, energy prices are up, inflation is up, interest rates are high because of inflation, that whole thing. And the point there is that we have sort of strong elements of countercyclicality in our portfolio. So in tough times, you use these products more. It's most intuitive around BlaBlaCar. We'll come back to that, but it's there basically. So yes, so with that sort of long-winding intro, I thought we'd sort of kick off this -- we'll take you through the numbers and touch a little bit upon the different names. So Bjorn, do you want to run us through the numbers? Björn von Sivers: Sure. So starting off sort of the overall portfolio. Here is a simplified sort of breakdown of the balance sheet. So as Per mentioned, NAV down to $462 million, down 15% over the quarter in dollars to $3.61 per share. In SEK, that's SEK 34.25 per share or down 12% over the quarter. Total investment portfolio amounted to $503 million, consisting of sort of $486 million of investments and $17 million worth of cash. Important to note that sort of we have an additional $30 million of cash and cash equivalents, but in liquidity management investments. So all in all, we're looking at sort of cash, cash equivalents and liquidity placings in the range of $47 million, borrowings down to $45.7 million as per quarter end. Continue to trade as a significant discount to NAV as of today, sort of 49% discount. And moving down to the sort of big drivers over this quarter is, of course, the larger constituents of the portfolio and just going through sort of the few largest ones here. So BlaBlaCar, obviously, the largest driver, down 27% or $44 million to $120 million for the holding, primarily driven by depreciating multiples over the quarter, both driven sort of from the overall rapid developments and uncertainty coming from the AI space, but then also, of course, from the geopolitical tension, whereas BlaBla sort of part of that peer group is in the OTA travel-related marketplaces that's been hit a lot. Same goes for Voi, that's also down over the quarter based on multiples. It's the order of sort of 16% or $20 million. HousingAnywhere here actually valued on a new transaction, we participated with EUR 1 million and then another sort of $1.5 million sort of converted from earlier convertible investments we held. Numan and Breadfast based value on transactions were relatively flat, a little bit of FX on Numan. And then Bokadirekt down roughly 10%, also driven by contracting multiples. All in all, these 6 names represent SEK 26 per share or sort of on an aggregate basis, 77% of the NAV. And again, sort of ended the quarter with $70 million of cash and cash equivalents and $30 million in liquidity management investments. Also sort of during the quarter, we bought back another close to 500,000 VNV shares and also a small amount of the outstanding bonds, which I'll come to now, which we also sort of announced today that we announced a partial buyback offer of the outstanding bond up to a transaction cap of SEK 275 million. This is to sort of effectively take down the gross debt and also lower the interest expense going forward. We launched this today and we'll hopefully have sort of the outcome sometime next week. With that, I thought I hand back to Per and we'll touch a little bit more deep in the larger portfolio holdings. Thanks. Per Brilioth: Yes. And yes, the structure of the portfolio looks very similar to what you've seen before. And so nothing really to comment here. But if we flip to the next page, this portfolio, as we've been on and on about, trades at sort of roughly half of the reported NAV. And as we -- as I think it's clear, we think it's -- we think that NAV is attractive, cheap. And hence, we've been buying back stock as we think that, that's the absolute best thing one can do with shareholder money. Our sort of aim is absolutely to continue doing that. And the reason being, as the next slide shows, as you've seen before, is that this is a portfolio that at large is positive, is earnings positive, is profitable. The slight downtick from a year ago is because of the absence of Gett, which is a profitable company. But at large, this company -- this portfolio is profitable and not sort of craving a lot of money to stay alive. And so that's not a reason for saving money to sort of put back into the portfolio names. We can use the money we have to buyback stock. And this profitability does not come at the expense of growth. We've made a new slide, which is the next one, just to -- which sort of you'll recognize it from earlier that this portfolio continues to grow over the past sort of is it 3 years, you've got a CAGR of nearly 30% across these 6 top names in terms of revenue growth, and it's turned from being slightly negative profitability to positive. So big change there. And as we try to highlight here also just as a reminder of how markets move around, these 6 names are -- those 6 names back in '23, this quarter, first quarter of '23, we had them in our NAV at $446 million and total NAV was like $800 million back then. And we now value them at $358 million. And so despite that sort of big shift in loss-making to profitable and very, very sort of steady growth. This last quarter, that portfolio grew by some 25%, still but marked lower. The overall NAV is, of course, lower also because we've sold some stuff to pay down debt. So I think that's a useful reminder of where we've come from and where we are today, both in terms of sort of quality of the portfolio, but also how we market. Yes. If we then go into the bulk of the portfolio, there's nothing really new around BlaBlaCar. This is a good summary, I think, around how they sort of closed 2025. EUR 2 billion of GMV is a sizable number. I know GMV is not revenue, but it's -- and as you remember, a bunch of their markets are unmonetized yet and some of them are really coming strong into monetization like Brazil now, but others remain unmonetized, waiting for liquidity to sort of further improve. But still GMV, that's a tool that many people use to sort of value these kind of sort of platforms, et cetera. And if you use that number and to where we're marking it today, it's 0.4x GMV, which I think is fair to sort of categorize as attractive. Certainly, in my mind, that is. And if you go to the next page, we also have a BlaBlaCar that's doing really well at the start of 2026. They have had a strong start. And -- and also of late, we've really seen this element of countercyclicality in the business model where oil prices go up, it's -- energy prices go up at large, driven by oil prices now. The activity of BlaBlaCar goes up because it's more expensive to drive a car and you're more prone to get other people into fill those seats. You do that through the BlaBla platform. So BlaBla gets more business and the graph on the right sort of highlights that. I think that's sort of all for BlaBlaCar. If we -- let's go and talk about Voi. Dennis, do you want to run us through Voi? Dennis Mohammad: So Voi closed a record 2025 with EUR 178 million of net revenue. This is up 34% year-over-year and adjusted EBITDA of EUR 29.3 million, which is up 70% year-over-year and adjusted EBIT of around EUR 3.2 million, up from essentially breakeven in 2024. So a very significant improvement across the board in the P&L. As we alluded to earlier, the company during the year also did a tap of EUR 40 million on the existing bond framework to fund the growth CapEx for 2026. And they also secured an RCF with Danske Bank and Swedbank here in the Nordics for EUR 25 million, which is still untapped, but provides additional financing flexibility should they need it. In Q1 of 2026, we've written down the value of our stake in Voi by 16%. This is primarily driven by peer multiples trading down as Per has already talked about earlier, but in part also driven by FX as the dollar has depreciated against the euro during the quarter. Operationally, Voi has had a strong start to the year. It continues to win tenders in Q1 alone. They won tenders in the Netherlands, in France, in Germany and in Norway. And they've started to roll out their new fleet of e-scooters, the V9 scooter and e-bikes, the E5 and EL2 across the streets of Europe. So putting to use the bond money that they raised at the end of last year. The company will issue their Q1 report on Monday next week, that's on April 27. So more information will be available then. I see we already jump to the next slide, which is good. As Per wrote about in the intro to the report, when Voi issued its bond in 2024, it pioneered the financing model that industry peers have since either replicated or attempted to replicate. We have now received the first public financials from one of those peers and the comparison truly reinforces our conviction in Voi's strategy and in their execution. As you can see in the numbers here on the graph, while Voi grew revenues by 34% year-over-year and generated reported EBITDA, different from adjusted EBITDA, but reported EBITDA of EUR 19 million and EUR 24 million of cash flow from operations, the European peer here saw a revenue decline of 16% year-over-year and on essentially the same revenue base generated negative EUR 13 million of EBITDA and negative EUR 20 million of cash flow from operations. We've excluded EBIT here as the peer change methodology on this metric during the year, so making a like-for-like comparison difficult, but that number was heavily negative as well for the peer. As I said, we are convinced that Voi strategy and execution is the best in the industry. And I think one additional data point that supports that is when looking at the revenue generation per vehicle end day on the right-hand side of this slide. So Voi generating EUR 3.94 per vehicle in a day in 2025 and the peer down at EUR 2.88 in revenue per vehicle per day. We can see here that, that's a 37% more revenue generation per vehicle at Voi. And I think this really shows how Voi's investments across the full platform, everything from hardware, where they have their own proprietary IT module, high-capacity swappable batteries to software where they use machine learning for fleet optimization. They have a very strong fleet and inventory tracking system. And lastly, operations where they have best-in-class fleet sourcing, fleet management, maintenance and eventually resell is truly paying off. With that, we go to the final slide, where there's really nothing new to report. They've seen continued growth on top line and improvements on profitability across the board, as I alluded to earlier. As also mentioned, their Q1 report is out on Monday. So we encourage you to keep an eye out on their IR website then. If we then jump to the next company being HousingAnywhere, HousingAnywhere has had a good first year under Antonio Intini, who joined as a CEO roughly a year ago after having senior roles at both Immobilare and before that, Amazon. Looking at their 2025 financials, the company closed the year with continued growth on top line and positive adjusted EBITDA, which is a big improvement on the year before. In Q1, as Bjorn mentioned, HousingAnywhere closed a financing round where VNV participated with EUR 1 million and where previously held convertible loan notes were converted to equity. With this new funding, we think that the conditions are in place to push growth harder from here, and we look forward to following that transaction, which was done around the VNV mark at year-end last year. If we then finally go to Numan. Numan closed a very strong 2025 with north of 125% growth on revenues and positive adjusted EBITDA. As we've spoken about in the past, their weight loss vertical has been a key driver of this growth over the past couple of years and 2025 was no exception. In Q1 2026, the company has continued to grow, albeit we have seen growth come down from the levels it's seen in past years, primarily driven by some price changes in the market for GLP-1 in the U.K. which initially led to some stockpiling behavior ahead of the increases and then some slightly lower activity following. But as I said, they're still growing year-over-year in Q1, and we value Numan on the back of a transaction that they closed last summer. However, should we have valued it on the back of a peer group model this quarter, it would have been roughly in line with the mark we currently carried at. Finally, this company continues to invest in its unified Numan 2.0 platform, which we believe is a key driver to long-term LTV growth and patient retention, and we look forward to seeing the results from those investments in the quarters to come. That's it on Numan. Handing it back to you, Bjorn. Björn von Sivers: Thank you. I'll finish off with sort of a short comment on Breadfast here, who continue to see strong growth in its core e-commerce business and also sort of initial promising dynamics in its fintech offering. During Q1, the company announced sort of the final tranche of their $50 million funding round, which they completed sort of majority of last year, but the final tranche sort of closed in Q1. So company is funded and continues to grow well, hence, sort of flat valuation still based on this transaction. And then finally, on the top 6 here, we have Bokadirekt, who is also sort of down during the quarter, primarily driven by multiples, but on sort of that side, continued strong performance, strong profitability. Bokadirekt also announced a small acquisition during the first quarter. They bought a company called Zoezi, which is sort of a niche SaaS player for gyms and personal trainers, which will add both sort of top line and profitability to the company. And with that, I think we're through the top 6 names, and we'll head to a Q&A. Björn von Sivers: And as a reminder here on the Zoom, please use the chat function or the Q&A function in Zoom and we'll try to address them. And I believe we have a few questions. We could start with this one for you, Per. Perhaps, once you do the partial bond redemption, what do you think is the remaining headroom to repurchase shares? Or put it differently, how do you weigh sort of the bond redemption versus share buybacks going forward? Per Brilioth: Yes. We -- our target is to sort of -- our goal for a long, long time, as you know, and which we sort of achieved now with the sale of Gett, this has sort of become debt-free and not to sort of be burdened by paying a coupon to -- because of the debt we have. So this is just a continuation of that. But at the same time, we absolutely aim to have liquidity to make use of this sort of gift that the market is giving us of valuing us where we are and put shareholder money to work at that. So -- and we've been active around that, and we do it in the way we do it, as I think you've all sort of seen, we try to -- or we do sort of highlight in press release what we bought the previous week. So I think it's fair to expect us to continue doing that and to sort of and also to fund that. Now this partial bond redemption sort of leaves a little bit of cash. We're still net cash, but -- or yes, barely, but we are -- but it leaves liquidity to continue to do that. So that's good. And when we get to the sort of the end of the duration of this bond, then we -- during that sort of period, we see that we will have completed several more exits. There's an ongoing sort of process, some driven by us, some driven by sort of things at large that will provide us with liquidity. So it's too early to talk about that because nothing is done until it's done. But I feel sort of assured that we will have sort of ample liquidity both to sort of retire this bond at full and then and to buy back stock. But nothing is done, unless it's done, but this redemption leaves us with, I think, a good balance of liquidity to sort of make use of what we want to do here in the market. Björn von Sivers: Another question here on BlaBlaCar. You mentioned profitability at BlaBla briefly. Could you give us some color on how this would scale if the higher activity levels from March were to persist during the year? Does the increased activity sort of translate into higher profitability as well? Per Brilioth: For sure, it does. And we're unfortunately not at liberty to share sort of any further details as much as we would like. We're not at liberty to do that. So -- but for sure, this drives sort of revenue -- business revenue and higher sort of earnings. So it is a positive for sure. Dennis Mohammad: Maybe I can add there, Per, without saying too much to your point, we're not at the liberty to do so. But the core carpooling business that they run operates at north of 90% gross margin. So any kind of revenue coming outside of what you have anticipated covers the fixed cost is already covered, so you get a pretty high contribution on the bottom line from that. So to Per's point, the answer is yes. Per Brilioth: Yes. No, well described, Dennis. So yes, I hope that answers that question. Björn von Sivers: And then sort of a follow-up question sort of on buybacks of shares and bonds sort of given the volatility in the markets and contracting multiples, aren't you sort of more eager to increase buyback levels of the share? And/or if not, are there other plans for sort of additional investments in the existing portfolio companies or new funding rounds? Per Brilioth: There's sort of just having a go at that question, the different parts of it. So there's nothing major. None of the large ones sort of have any large rounds going on. There's small bits and pieces that we have been -- where we've been active in the portfolio, but they're really sort of on the marginal side of things. So not a big sort of draw on liquidity. And yes, no, I mean, if we -- if we had liquidity to do more now, we -- I absolutely would be a strong advocate of doing more in terms of buybacks. I think it's very attractive. I really, really believe that our NAV will be able to deliver serious returns over these coming years. And so if we have sort of liquidity to do more, we'll do that. But sort of obviously need to balance that liquidity, but very eager to sort of participate in the way we're doing now. So it's that balance that you may feel is keeps us doing this at a frustratingly timid kind of level. But it's -- yes, it's necessary to do it that way. If we can accelerate some exits that are at NAV or around NAV, then of course, it makes a lot of sense to do those and then sell. But it's -- nothing is done unless it is done. I feel very strongly that we will be able to sort of complete some further exits and hence, we'll have liquidity to do more, but got to keep an eye on that balance. Björn von Sivers: Another question here, specifically sort of on the Voi valuation, maybe for you, Dennis, other than sort of contracting multiples, what has sort of -- what levers have been moving around on that in the model? Dennis Mohammad: So the multiples are the -- is the primary driver. As you know, we value in the next 12 months. So we've moved 1 quarter forward. So the NTM outlook is obviously higher than it was in the previous quarter since the company is growing. But you also have FX, as I alluded to earlier, the dollar has depreciated against euro. So that's one negative contributor. And also net debt. And in the case of Voi, we don't simply take cash minus debt. We look at what obligations the company has with the existing cash. In this case, it's CapEx investments for 2026, where they've improved the kind of -- they've improved payment terms significantly over the past couple of years. So cash outflows happen during the year to a larger degree than everything going out when you place orders. So it's a combination of FX, net debt, but primarily, as said, multiples. Björn von Sivers: Thank you. With that, I don't think we have any further questions at this point in time. But as always, feel free to reach out over e-mail, and we'll try to be helpful. And other than that, I'll leave it to you, Per, for any final words. Per Brilioth: Nothing more to add, frustrating quarter because of all the stuff that we've talked about, but we feel really positive about the portfolio and the opportunities that we have here. . So yes, when is our next report Bjorn, it's -- we're looking at July 14, the National Day in France. So that's when we will speak next. Thank you, everyone. Dennis Mohammad: Thank you. Björn von Sivers: Thank you.
Operator: Good day, and welcome to the Stifel Financial's Q1 '26 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Joel Jeffrey, Head of Investor Relations. Please go ahead. Joel Jeffrey: Thank you, operator. Good morning, and welcome to Stifel's First Quarter 2026 Earnings Call. On behalf of Stifel Financial Corp., I will begin the call with the following information and disclaimers. This call is being recorded. During today's presentation, we will refer to our earnings release and financial supplement, copies of which are available at stifel.com. Today's presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Stifel Financial Corp. does not undertake to update the forward-looking statements in this discussion. Please refer to our notices regarding forward-looking statements and non-GAAP measures that appear in the earnings release. I will now turn the call over to our Chairman and Chief Executive Officer, Ron Kruszewski. Ronald J. Kruszewski: Thanks, Joel. Good morning, and thanks to everyone for joining us. In the first quarter, we delivered very strong performance. Net revenues of $1.48 billion were up 18% from a year ago. That includes a nonrecurring gain from the sale of Stifel Independent Advisers, which closed in February, which was partially offset by interest on a legal judgment. We've excluded both from our core results. Excluding the SIA gain, revenue grew 15%. Either way, it was a record first quarter and regardless, it's the growth rate comparable to the best firms on The Street. Earnings per share were $1.48 on a GAAP basis and $1.45 on a non-GAAP basis compared to $0.33 last year. That's a significant improvement, so I want to be transparent. Last year's results were impacted by $180 million legal accrual, which was unusual to say the least. Adjusting for that, EPS was up 32% on a comparable basis. Our annualized return on tangible equity was nearly 25%. We expect 2026 to be a good year, and the first quarter reflects that, yet the environment has become more uncertain. Against a backdrop of escalating geopolitical risk, energy prices have risen, credit spreads have widened and interest rate uncertainty has increased. The wildcard remains the conflict in Iran and its potential impact on energy prices, inflation and ultimately growth. But I'd like to note that unlike some of our larger peers, Stifel's business model isn't built around trading volatility. We have a trading business, but it's client driven and relationship oriented, not structured to capitalize on market dislocations. Delivering these results in a volatile quarter tells you something important about the durability and diversification of what we've built. Our growth was broad-based. Global Wealth Management delivered record first quarter net revenue driven by record asset management revenues and growing adviser productivity. We also generated record first quarter investment banking revenue, producing a record first quarter for our Institutional business. Our firm-wide pretax margin was more than 22%, reflecting continued robust wealth management margins, coupled with an institutional pretax margin of nearly 20%. It is noteworthy that this metric improved nearly 1,300 basis points from last year, benefiting from both revenue growth and our international equities restructuring. Jim will provide more detail on that. Look, at the risk I cite remain within a range of market expectations, we are confident in the strong 2026. That confidence is grounded in something more than one quarter. Let me put these results in the longer context. Stifel is a company that both grows and understands the concept of return on invested capital. We've scaled revenue from about $100 million in 1996 to roughly $6 billion today, and we're targeting $10 billion in revenue and $1 trillion in client assets. We grow and we grow the right way. That long-term philosophy also informs how I think about some of the questions dominating every earnings call so far this season. For each one, I want to tell you what Stifel is doing and share my observations about what I'm seeing in the market around us. The first is AI. Across Stifel, we're seeing real benefit from our AI investments. The technology enables our advisers, our investment bankers, our commercial lenders and support teams to work faster and smarter. In every case, we're working to enhance client relationships with AI, keeping our professionals at the center of the value proposition. The opportunity here is significant. We are in the early process of linking our data to these new tools, and there is a lot of work ahead, but the early results give me confidence that we're on the right path. But I'd be less than candid if I didn't raise the concern about frontier models like Mythos that are becoming an entirely new category of technology as recently as a few weeks ago. I'm not sure any of us really fully understood what Mythos was, possibly even those that create it. And the next version, as I understand it, is already in development. Models this powerful increased capability on both sides of the table, for those defending and for those who would do harm. And if you ask me what our industry needs to get right before anything else, the answer is cyber, not just for Wall Street. This requires a national response. I have consistently said that this is an issue of national security. The second is credit. At Stifel, our lending philosophy has never been built around chasing yield. We treat lending as a relationship-oriented business, not a volume-driven growth engine. The headlines this season involve specific credit situations. First Brands, Tricolor, Medallia, where aggressive structures, weak collateral monitoring and in some cases fraud drove the losses. People had essentially 0 exposure to any of them. As an aside, the more recent concern has been about liquidity in private credit vehicles. Some funds are limiting withdrawals, and we're seeing secondary market participants offering liquidity at significant discounts to NAV. It reminds me of the scene in It's a Wonderful Life where Potter is trying to buy Bailey Building & Loan shares at $0.50 on the dollar during a run on the bank. The underlying assets haven't changed. But when everyone rushes to the exit at once, the gates come down. That's a structural issue. The third consistent question is around software loans. I've read the predictions that every software loan is essentially worthless given AI disruption. To put some numbers to Stifel, our software loan exposure is approximately $500 million on a $43 billion balance sheet, not a material number. The more important point is that we have reviewed our software exposure carefully. And while there are always normal pockets of stress, we don't see the broad credit issues that the headlines suggest. The fourth is legislation and market structure. Two questions are dominating this debate right now, stablecoin yield and tokenized equities. Let me tell you where Stifel stands on both. On stablecoins, we will offer them. But in my opinion, if a stablecoin pays yield, that's a deposit, subject to capital requirements, AML, BSA and the full framework of bank regulation or if the yield comes from investing in the underlying fund, then it's a money market fund. Follow those rules. Legislation should not create a third option that avoids both. On tokenized equities, we will build the capability to offer, settle and trade them. But in my opinion, the regulatory framework should follow the underlying assets, a tokenized Apple share is still Apple stock. Every rule that applies to that stock, disclosure, best execution, settlement finality, investor recourse applies to the token. The technology changes the delivery. It doesn't change the obligation. And for those who say this is about protecting the incumbents, if that was true, we wouldn't be building the capability at all, but we are building this capability. The principle is simple, a deposit is a deposit, a security is a security, custody is custody. Nearly a century of investor protection wasn't built to apply only to some participants. The technology doesn't change that. I've discussed AI and software disruption, credit markets and legislation and market structure. In each case, I wanted you to understand both where Stifel stands and my observation about what's happening around us. Over the last 30 years, we have shown a consistent ability to adjust to economic and technology change. Global Wealth Management is growing, our institutional pipelines are strong and our investments in the innovation economy through venture lending and deposit generation are paying dividends. Bottom line, what I see is a firm that is very well positioned. So Jim, please take us through the numbers. James Marischen: Thanks, Ron, and good morning, everyone. Before I jump into the financial results, I'll remind everyone that the EPS numbers are reported on a split-adjusted basis following our 3-for-2 stock split that was effective in late February of this year. Turning to the results. Total non-GAAP revenues of $1.44 billion was right in line with consensus estimates. Investment Banking was a primary upside driver, exceeding expectations by $8 million or 2% as the number of transactions closed late in the quarter. Advisory revenue was the primary driver of the beat. Transactional revenue came in 1% below expectations, but increased 7% from the prior year. I'll cover the components in more detail when we get to the Institutional segment. Asset Management revenue was modestly above consensus and increased 12% from the prior year and was driven by market appreciation and net new asset growth. Net interest income came in at the lower end of our guidance and $3 million below consensus. I'll cover the details and the second quarter guidance when we get to the Global Wealth Management section, but to highlight the miss to consensus expectations was driven by lower corporate or nonbank net interest income. Expenses were well controlled and benefited from the strategic actions Ron referenced earlier. Both our comp ratio and noncomp expenses came in below consensus. The effective tax rate was roughly 23%, slightly below both guidance and consensus due to improved profitability from our non-U.S. operations. Turning to Slide 4. Global Wealth Management generated $932 million in net revenue, the strongest first quarter in our history and essentially in line with last quarter's record. Results were driven by record Asset Management revenue and growth in net interest income. These results are particularly strong given the sale of SIA reduced our transactional and asset management run rate for 2 months during the quarter. We ended the quarter with total client assets of $539 billion and fee-based assets of $220 billion. Excluding the SIA impact, total client assets and fee-based assets were essentially flat sequentially despite the equity market decline as net new asset growth was in the low single digits and was offset by market depreciation. Our recruiting pipeline remains robust, though activity is episodic and dependent on changing competitive and market dynamics. Over the last 12 months, we've recruited trailing 12-month production totaling approximately $80 million, which does not include the impact that recruiting has on net interest income. Our client-driven balance sheet continues to enhance both earnings consistency and client engagement. As I mentioned, net interest income came in at the lower end of our guidance due to slower loan growth as market volatility impacted fund banking late in the quarter, more than offsetting growth in residential mortgages, securities-based lending and C&I loans. Nonbank interest income, particularly within corporate interest and securities lending, was approximately $3 million lower than originally forecast. For the second quarter, we expect net interest income in the range of $280 million to $290 million. Client cash balances increased meaningfully during the quarter. Sweep balances increased by more than $670 million, while non-wealth client funding increased by nearly $1.2 billion reflecting strong momentum from our venture group. Third-party money fund balances increased by nearly $200 million. We have significant funding to grow our loan book. While loan growth in the first quarter was slower than originally forecast, we've already seen fund banking activity pick up in April, and we are maintaining our full year guide of up to $4 billion in asset growth. Turning to Slide 5. Our Institutional Group posted its strongest first quarter in our history. Revenue was $495 million, up 29% year-over-year, driven by record first quarter investment banking. Investment banking revenue totaled $341 million, up 44% year-over-year, coming in slightly above our recent guidance due to the number of transactions closing late in the quarter with a particularly meaningful contribution from our new partners at Bryan, Garnier. Advisory revenues increased 59% to $218 million with continued strength in financials, industrials, consumers and health care. Equity capital raising was $67 million, our second strongest first quarter result with increased issuer engagement led by health care, industrials and energy. Fixed income underwriting of $50 million was up 9% year-over-year driven by increased public finance activity and higher corporate issuance. We remain the #1 negotiated issue manager in public finance by deal count with nearly 15% market share and are also seeing increased success in larger par value transactions. Investment Banking and Advisory pipelines remain very strong. That said, the pace of realization will depend on the geopolitical and economic factors that Ron mentioned earlier, including energy prices, credit spreads and interest rate uncertainty. We continue to anticipate a strong 2026. Transactional revenue increased 4% year-over-year, driven by a 12% increase in fixed income revenue reflecting increased client activity from market volatility. Equity transactional revenue was down 7%, entirely reflecting the European restructuring. Excluding that impact of a $9 million year-over-year decline due to those restructuring efforts, our core equity transactional business grew by 10%. This was always -- this was also the primary driver of the nearly 1,300 basis point improvement in our Institutional pretax margins year-over-year. While we've made significant progress in our non-U.S. operations, the first quarter benefited from some larger advisory fees and results will not be linear over the remainder of the year. Moving on to expenses. Our comp ratio of 57.5% was at the high end of our full year guidance and down from 58% a year ago. We are certainly conservative in our comp accruals early in the year, and we'll continue to look for leverage as the year progresses. Non-compensation expenses totaled $293 million, up 8% year-over-year after excluding the legal accrual from the first quarter of 2025. Our operating noncomp ratio was 19% and was at the midpoint of our full year guidance. The declines in our comp and noncomp ratios benefited from the strategic actions referenced earlier, and we remain confident in our full year guidance. Turning to Slide 7. Our capital position remains strong and provides meaningful strategic flexibility. The Tier 1 leverage ratio increased to 11.4% and the Tier 1 risk-based capital ratio rose to 18.7%. Based on a 10% Tier 1 leverage target, we ended the quarter with nearly $560 million of excess capital. I'd also highlight that we have thoroughly reviewed the new proposed capital rules. Based on our review, Stifel would obtain some relief across risk-based capital requirements, but these rules would have no material impact on our Tier 1 leverage capital. Finally, we repurchased 2.8 million shares during the quarter and have 10.2 million shares remaining under the current authorization. Assuming no additional repurchases and a stable stock price, our fully diluted share count for the second quarter is expected to be approximately 163.1 million shares. And with that, Ron, back to you. Ronald J. Kruszewski: Thanks, Jim. I want to close by saying that I'm generally excited about where Stifel is headed. We have a strong business and experienced team and a model that has proven itself in good times and in challenging ones. The environment is uncertain. I said that at the outset, and I mean it, but uncertainty has always been the context in which Stifel has grown. Look, Global Wealth Management is growing. Our institutional pipelines are strong, and I look forward to reporting our future progress. So with that, operator, please open the lines for questions. Operator: [Operator Instructions] We will take our first question from Devin Ryan with Citizens Bank. Devin Ryan: Question on AI. Ron, I appreciate the context you gave in the script. But a couple of questions we're getting. Obviously, as the technology gets stronger and stronger and potentially agents are automating more and even transacting, do fewer people seek out financial advisers? Or does that impact pricing that advisers charge? And then the more pointed question that we're getting is just around kind of tools that automate kind of customer cash sweep and just, does that drive balances even lower? And so that's a revenue stream that firms have to think about. Love your thoughts on both of those. Ronald J. Kruszewski: Well, look, the technology is powerful to your first question. And it just really helps adviser productivity. I believe, as I've said in many of things I've talked about that today, at least, the models are mathematically driven, and they're great at summarizing, organizing, putting -- helping you solve math. I said it's like chess. It's a finite board, and it's very good at that. When you move to judgment, which is what our advisers do, it just really isn't that good, and I'm not really comfortable thinking that we're going to serve our clients with some consensus building mathematical AI, to be honest with you. And we can debate whether or not human judgment will matter. But investing in markets are not a finite game. It's constantly changing. Every second, it changes. The participants change. Their outcomes change, their risk tolerances change. And so that's an ever-moving target. So to answer your question, what will happen, I believe, at least on the adviser side, is that this will make our advisers more productive. It will unearth potentially and it will, more opportunities, more ideas, more things on tax savings idea, more on a state, more things that will help our advisers do what they do, which is generally be the financial adviser to not only individuals, but the families. So I see this as a tailwind to advice, not a headwind. And it's a more sophisticated version. We've seen it in the past with robo-advisers and a number of things. This technology will be better, but again, I'm going to say it's a tailwind to the advice business. As it relates to agentic-type models and the cash optimization. Look, we've been through that, Devin. I mean we have about -- I'm going to say this, I think -- when I look at it overall, we have about $60 billion of our AUM that I would say is allocated to short-term cash between sweep deposits, smart rate, money market funds, short-term treasuries, it is about $60 billion, which is frankly about consistent, a little 11%, 12% of our AUM toward that portion. And of that, when you get right down to it after you take out adviser cash, we have about $7 billion that is, if you would be unsorted. I love that industry term. And look, it's transactional cash. It's -- I look at my own accounts. I have transactional cash because I have cash and I have needs, and I'm paying bills or I'm doing things or I'm getting a dividend, I'm reinvesting it. So will some technology come that will help optimize that? I think so, but at what cost, it's not free and what kind of movement, what kind of transactional things are going to happen. Listen, I think it will happen, but do I lose sleep over that? No. Okay. This is a business model question. And I'm hearing a lot of things, well, you just replace it with fees and things like that. And I think, well, look, we could do that, we do it anyway. We're not going to do it just because of this. So not overly concerned about the second, very optimistic about the first part of your question. Jim? James Marischen: Maybe add a little bit of detail there to support what Ron was saying is of the $60 billion as of the end of the first quarter, $12 billion was in sweep. So roughly 1/3 of that is an advisory cash accounts. And so that's not subject to the same type of sorting dynamics we're talking about here. So that's how you get to that $7 billion or $8 billion that's remaining. And I'd just say, as Ron reiterated, we've been out in front of this topic, minimizing our exposure to this. We've adjusted our balance sheet, both on the asset side and the liability side to give clients the yield-seeking products they want on the liability side and having a flexible balance sheet on the asset side to earn an acceptable return. So do we have some exposure here? I think everyone has some exposure, but you're never going to see, as Ron said, transactional cash go to 0. So I think on a relative basis, this general topic is less impactful to Stifel than to a lot of other players. If you think back 10 years ago, we funded our bank balance sheet 100% with sweep accounts. Today, that's [ 12 ] of much bigger numbers. So we've diversified and have already seen the sorting occur to a material extent. Ronald J. Kruszewski: Yes. And I answered the question, I tell you it's not that big of an issue. I'm giving a lot of oxygen to it. But I do think about these things. And I think for Stifel, it really is not a big issue. I mean I have to look at the numbers. But you can take it to the broader financial system, and zero-based interest in many banks and stuff and you wonder what will happen there. And my viewpoint is that the market will adjust. If rates go up, so are loan, banks are earning their spread and return on capital. So enough said, there's a lot of oxygen to something that I'm not thinking that much about. Devin Ryan: I appreciate it to both of you. And it's a question that we're, I think, all getting quite a bit. So just addressing it and I appreciate it. I'll ask a quick follow-up just on investment banking. Obviously, a very good start to the year. It sounds like backlogs are at a pretty healthy level as well. When you drill into that, can you just talk about the depository side, like just the expectations for more activity there and how that's kind of feeding into, I think, maybe the announced backlog or even preannounced backlog? And then with sponsors, are middle market sponsors reengaged right now? Or do we need to see them ramp up and that's the hope as the year progresses? Ronald J. Kruszewski: Yes. Look, on the depository side, I was talking with Tom Michaud a little bit about this. And what I would say is that -- in fact, it crossed M&A, not just on the depository side, but specifically on the depository side, there's a lot of uncertainty. And this uncertainty is impacting buyers. You talk -- reading the press saying about $150 oil and interest rates may be rising and what happens to credit spreads, et cetera, et cetera. And I think that, that is a pause. There's some market concerns about have the deals been done with enough of a premium. So there's a little bit of combine all this, and I think making people think about it. But the overriding question as depositories is that this administration and just compared to the last administration is fostering and encouraging bank M&A, and that's not going to change. And as we get closer to an election, not the midterms per se, but the 2028 elections, the potential and what's going to happen is going to happen, right, as people are incented to do that. It's not linear, which is what we're seeing now. And that's -- and you need the same thing as it relates to 2026. Deals got to be announced in the next couple of months. Otherwise, the 2027 deals. But that's what I would say. And overall M&A, look, we're seeing a lot of activity. But my sense is that if we didn't have the economic uncertainty that we have out there, we'd be seeing even more. James Marischen: Specific to sponsor, we're seeing a lot of activity and growth in backlog across a number of verticals. The one area I would call out that has been a little bit weaker is technology. And that's not as big of a vertical for us, but that is certainly an area that has been slower. Ronald J. Kruszewski: Software. James Marischen: Software specifically. Operator: We will take our next question from Mike Brown with UBS. Michael Brown: So Ron, you're allocating more capital to recruitment in 2026 and some good organic growth in the first quarter. Maybe can you just expand on how the recruitment and productivity efforts are faring relative to your expectations? Maybe what specific profile adviser are you kind of more aggressively targeting and having success recruiting? And then how is the competitive space from the wirehouses or some of your other peers? How is that been impacting recruitment and maybe cost of recruitment? Ronald J. Kruszewski: Well, I'll take your second part first. The competitive environment, a number -- a couple of the large firms, you may know some of them yourself, have really, really ramped some of these -- the competitive aspects of transitional pay, the so-called deals, and that's been interesting. But the quarter across the industry was slower for, I think, the same reasons that we're talking about M&A and everything else. It's just some uncertain times. As it relates to us, our strategy hasn't changed. We continue to be disciplined. As I said earlier in my remarks, that we grow and we've grown through acquisition for a number of years and recruitment and our return on tangible equity is 25%. You don't do that by making investments with an RO -- return on invested capital of 5%. It just doesn't work. So I'm very confident. What I'm mostly pleased about is our ability to compete, attract and recruit large teams, which is relatively being in the last, say, 10 years, new to Stifel and that we have that, and we're talking to a number of large teams. And that, to me, is encouraging. So recruiting [indiscernible] you get this every quarter, same question. My answer seems to be the same every quarter. Michael Brown: I appreciate the color there, Ron. Ronald J. Kruszewski: Yes. I mean it's -- no big news there in terms of -- we're still -- we're #1 in J.D. Power. We're #1 in advisory. We have a great culture. We have things -- if anything, what we're trying to do, and we've talked about this, it takes a little bit longer. We're just trying to get our name out there. I get discouraged sometimes when I'll talk to people and they say, oh, I didn't really know -- I didn't know that much about Stifel. And we're really trying to fix that. We've done that with a lot of our brand advertising and a lot of things we're trying to get out there. But that's still an area that we can improve, we will improve, and then that will improve our results. Michael Brown: Great. That makes sense. And just as a follow-up, I appreciate the color on the advisory side. I wanted to ask about the IPO window, which has certainly had some stops and starts in 2025 and in 2026. And we've had the Middle East volatility this year that seems to have contributed to some delays. But what's your read on maybe the ECM calendar specifically as we think about the back half of 2026 for Stifel and the industry here? Ronald J. Kruszewski: Look, I think it's good. I was talking to our desk. This might be dated by a week or so. But what I said was what's happening. And often when deals get delayed, they just get pulled and they'll get pulled maybe for the next set of numbers. And we've seen delays that are a week or two. So people are -- what that told me at the time was that people or clients or issuers and buyers are just concerned about volatility. And the volatility has always impacted ECM, and I think that's the case now. But when I layer that with the fact that things are just being delayed maybe for the next news that comes out of the Middle East or something or next comment. But it's healthy, I think. And now the environment changes in a nanosecond, as you know. But as I sit here today, I would say that, that's a healthy market. Operator: We will take our next question from Steven Chubak with Wolfe Research. Steven Chubak: So wanted to double-click, Ron, into some of the comments that you made around Agentic AI. I know you gave it quite a bit of airplay and you might argue too much airplay during at least at the start of Q&A. But this is perceived to be a pretty meaningful potential source of pressure eventually on idle Sweep Cash, whether it's Agentic AI, tokenization, lots of technology that's in the nascent stages of development. And I was hoping you could simply speak to the levers you might consider if headwinds to Sweep Cash do, in fact, materialize? And how does your pricing model differ from some of your competitors just in terms of account fees, platform fees that could serve eventually as potential offsets down the road? Ronald J. Kruszewski: Yes. Well, I read your report this morning, and so well thought out, I would tell you that. And the -- but again, when I put it down -- yes, I didn't go oh my gosh, we got an issue here at Stifel because we don't. But as it relates -- Steven, I don't -- I do think that there will be changes, okay? And there were changes on 0 rate commissions. And one of the leading consultants at the time said there wouldn't be another commission trade done by 2004. And the robo-advisers were going to do this, and were going to do that. And it's a business model. And the business model will adjust. And so if, in fact, Agentic can come in and be more efficient at sweeping cash, I don't really see how it's going to be that much more efficient, myself with all of the things that you would have to do. You'd have to actually give something -- access to everything, not only your recurring expenses, but your nonrecurring and your clearing checks and your -- all your credit cards, not just your one single account. And that's not going to be done for free. And so you're going to sit there and tell me that because of transactional cash is -- has a lower yield that someone is going to do and pay for that and give all that information, maybe, but it's a ways away, in my opinion. And if it does happen, there's a lot of things that you can do. Many banks will raise the yield in general, there's a competitive thing just to make sure that the NIM remains. And as it relates to platform fees, which I know you referred to in your report and you just did in your question, platform fees and account fees and inactive account fees, those are all levers. We don't have an account fee at Stifel. We don't have an inactive account fee. So those levers are actually unpulled at Stifel today, while many of our competitors do, do that. And so a fair question to me would be, well, why don't you do it? And my answer is it's not that easy, okay? It just -- I'm reminded of a commercial we did years ago where the person says, hey, what are all these fees? Why don't I have an idea, why don't we charge a fee on a fee. And the guy said, that's a good idea. It's just as difficult to do. And I'll be watching. And if the market -- if the cost of advice across the industry begins to be consistently with platform fees and done for firms that are trying -- that have bigger issues with cash sorting than we do. And you know that, Steven. We're probably at the low end of your issue of firms that are going to impact it on this. I think that's what your report said. So look, we have a lot of levers. We have dealt with changing economics in this business for as long as I've been in the business, and we will continue to do so. James Marischen: The other thing you have to think about here is the impact on the client and higher interest income is not just a complete wash based upon the fee when you think about the tax effect of those things because the higher interest income is taxable while the fee that they're paying is not tax deductible. So you have to consider that overall impact on the client as well when you're doing your overall thesis here. Ronald J. Kruszewski: Yes. I'd be interested when you get your feedback as to the number of firms that will say, oh, yes, it would be easy to institute these fees because I would take the other side of that. Steven Chubak: We'll certainly keep you in the loop, and I appreciate that perspective. For my follow-up, just on the restructuring within Europe, I was hoping that you could quantify the benefit to the margins that we're expecting in the coming year just from shuttering some of the businesses. And I was also hoping to get your longer-term perspective on how this informs at least your ambitions or appetite to expand outside the U.S. and tying that with just your M&A appetite in general, at least in the current environment amid what remains a heightened level of uncertainty. Ronald J. Kruszewski: That's a fair question. I'm going to let Jim -- I don't think we can really talk nor do we disclose margin improvement in that segment, but I'll lateral to Jim and let him decide whether he can answer in a moment. So you can think about that, Jim. As it relates to our strategy and what we have seen margin improvement, what we did and something that we sort of unwound was the fact that we invested in sales trading and capital markets within Europe and thinking we'll either be on the London Exchange or the Nordics, and we would do IPOs and we do sales trading and research over there. And what we found was that, that market because of MiFID and what they've done raised to themselves is that, that business, even at scale, I'm not sure you make any really money, but you certainly were not making -- we weren't making any money at the size that we were. But just as importantly was that when I would visit clients in Europe, and I would ask them what their objectives were, it was interesting. Most of them -- and this is a credit to the United States, their dream was to list on NASDAQ or the New York Stock Exchange. And we started -- and we've seen this. We just did a large transaction, European-based. We listed it on the U.S. Jim referred to it. And so what we decided to do strategically, and it frames or you can frame my thoughts about this is to lead our U.S. capabilities into Europe through advice, our advisory platform. And then we -- and then when we have an equity capital markets transaction, for the most part, they're coming back to the U.S., especially in health care and in areas where we have some expertise. So I feel that this was maybe you can criticize the way we started, but where we're ending up is where we want to be. We're a global firm. We have global capabilities. I just don't think we needed to do market-making sales trading in local markets to achieve our ultimate goal. And frankly, many of the clients' ultimate goal, which is to access the U.S. capital markets. Jim, I don't know... James Marischen: So in terms of some numbers to support the question you're asking here is as we've talked about this in prior quarters, we frame this up with a combination of not just the European restructuring, but also the sale of SIA. And we've told you in the past, that's about $100 million of revenue, probably roughly half and half between the 2 groups, the SIA as well as the European equities business. You think about it, that was probably somewhere between 70%, 80% comp margin that we're going to save off of. And then we talked about $20 million to $25 million of non-comp expenses gets you roughly to around a breakeven number of pulling those revenues out, and that's a good way to think about it. As we look at the non-comp expenses and what actually occurred, we were able to pull out about $6 million here in the first quarter, which is relatively consistent to what our guide was or what we talked about as we kind of framed this up last quarter. And so all of those things are fairly consistent. As we look forward, there's still more costs to be taken out of some of our European operations post restructuring. Think of some of the longer-term contracts like leases, think of subscription agreements and things like that. So more to come. But as we sit here today, we'll just caveat that this is a pretty good quarter for the international or the non-U.S. business, given some of the larger fees Ron talked about, it won't necessarily be linear, but it gives you a sense of kind of the overall financial benefit we'll receive over this entire year. Ronald J. Kruszewski: And look, you see it in our margins. Our margins in Institutional when I was getting questioned about that when it was sub-10% and now it's nearly 20%. That's a combination of both productivity and revenue plus the restructuring that we did. So I mean, it's a good thing. Operator: We will take our next question from Brennan Hawken with BMO Capital Markets. Brennan Hawken: So I wanted to touch on NII. You touched a little bit on the headwinds in the quarter. You mentioned corp and securities-based loan headwinds. But maybe could you provide a little bit more texture around what caused that versus your prior expectations? And then in the context of the $280 million to $290 million expected for next quarter, good to see your expectations for that to uplift. But maybe could you provide a little bit more texture around what's going to drive that? Ronald J. Kruszewski: I love giving NII and margin questions to Jim, and that's -- I'm not -- I'm going to do that right now. So Jim. James Marischen: Right. So in terms of this quarter, obviously, the nonbank NII is the main piece there. If you look at kind of the consolidated NII numbers and back off what you see in Global Wealth Management, you can compare 1Q year-over-year, and you can see the nonbank is down about $3 million. So it's consistent. That delta is consistent with what we described there. Most of that -- some of it is corporate interest. It wasn't securities-based lending, it was kind of stock -- securities lending, stock lending, if you will. That's opportunistic based upon individual hard to borrowers in your box. That number can move around from period to period. It was just somewhat slower in this individual quarter. We do view that kind of getting back to its normalized run rate. But the bigger piece of the $280 million to $290 million NII guide is going to go back to asset growth within the bank. And we said on the call that we still feel comfortable with up to $4 billion of asset growth. We're seeing things like fund banking pick back up in April. There was a number of paydowns kind of late in the quarter specific to fund banking that kind of caused the period-over-period end-of-period balances to decline. So as we look forward, we feel comfortable. Our original NII guide is $1.1 billion to $1.2 billion. We're already annualizing the low end of that, and we think there's a fair amount of growth that can occur in the second through fourth quarter that can help support getting higher in that range. So we feel pretty good about where we're at. Ronald J. Kruszewski: Yes. And it's not necessarily NIM expansion. It's just growing -- it's just growth. And we've never -- growth is always there in banking. That's not the issue. The issue is prudent growth, and that's what we're doing. But we see a lot of opportunities. I've always -- I am still optimistic about what we're building in venture and for the innovation economy, and that is -- that's got nice growth written all over it. Brennan Hawken: Great. And then you touched on this a little bit, Ron, in your prepared remarks about concerns around the software loans and whatnot. But curious to hear your -- what you're seeing in the CLO portfolio. So we've seen spreads widen out in the levered loan market, equity and lower-rated layers of CLOs have been under some pressure recently. So totally appreciate that you're in the higher layers, which have been fine. But what underlying trends are you seeing? Ronald J. Kruszewski: Yes, Jim? James Marischen: Yes. So our CLO book at the end of the quarter sat right around $6.8 billion. I'd say a little over 60% or 62% of those holdings are AAA rated with the rest AA rated. What we're seeing in terms of credit enhancement has remained consistent with what we've said in prior periods. On a blended basis, that's around 32%. You can see AAA class is 36% and north of there in terms of credit enhancement. AA class is around 24%. The underlying collateral here is very well diversified. There's no particular concentrations over, call it, 11%, 12%, 13% of the underlying portfolio. Our portfolio is spread out over nearly 100 CLO managers. And I think the key here is that what we see in our stress testing has not changed. We're not seeing any new issues. We're seeing consistent levels of the ability to withstand stress that are multiples of the great financial crisis and not break the underlying structure. So we feel very comfortable with the overall credit exposure in terms of CLOs. Ronald J. Kruszewski: Yes. And look, I've always said that,Brennan, what people are talking about is the lower rated tranches. That's really what they're talking about as you would expect. But as it relates to diversification, I don't think there's any class that's more than 10%. I think they can't go more than 15%. And every time I look at it, which I think I did in the first quarter, I just put it down. It's not an issue for us when we look at -- we look at it individual loan by individual loan across CLOs and look at it consolidated and individually. Our team does a really good job. But at the AAA, where we are at the top and what happens when it gets stressed, actually, the subordination gets higher as stress occurs because you divert cash flow. So what I sometimes ask myself is that is the yield give up worth the subordination, sometimes we got a lot of subordination. Remember, we don't get the full yield. We get the AAA yield. And thus far, over 10 years, risk weighting, risk-based capital, the way that it's allowed us to sort cash because a variable rate asset, it's been a great asset class for us, and I don't really see any stress in what we own. Operator: We will take the next question from Alex Blostein with Goldman Sachs. Alexander Blostein: I got almost as enthusiastic of response as you gave to Steve, so I appreciate that. So I wanted to ask you guys a question around the bank growth and loan growth and kind of how that comes together. Obviously, that's a priority for the firm for some time. I'm curious how you're thinking about funding that? Because if we look at the sweep deposit balances, they've been basically in a range of, I don't know, $10 billion, $11 billion for quite some time, a couple of years, even holding the whole AI sweep cash issue aside, as you think about the forward loan growth and without a whole lot of balance sheet sweep options, how do you sort of think about the funding mix here over time? Is that more institutional? Is it more sort of high-yield savings? I'm just trying to think about the funding of the bank on the forward. Ronald J. Kruszewski: Well, [indiscernible] both, but I would have [ accused ] Alex. I thought you might have complemented us on our deposit growth, okay, relative to our muted loan growth, okay, in terms of -- I think our deposit growth was $2 billion. And what we're seeing is much of our loan growth and the potential we see is not only self-funded, if you will, by deposit generation, but self-funded in a multiple of the loans outstanding. So some of those deposits are not sweep. So if you're focusing on sweep, then we got to go all the way back around the barn and come back and say, transactional cash and clients isn't going to get that much higher for all the reasons that we've been talking about. But in terms of our smart rate and our venture deposits and our sort of non-wealth deposits, that growth has been very strong. And that's -- to then answer your question, that's how we're funding that growth. James Marischen: If you look at the supplement and you look at Page 10, the bottom of Page 10 has a disclosure of third-party deposits available to Stifel Bancorp. There's $6.2 billion of excess deposits that are off balance sheet today that we can use to fund that growth. Obviously, a good portion of that is going to be in that third-party commercial treasury deposit line. So that's $5.7 billion of it. The vast majority of that's going to be obviously venture and fund banking. And as you think about that, that grew $1.2 billion in the first quarter. And if you look at that as kind of a mark-to-market of where we're at through, I don't know, as of yesterday, that's up another $700 million. So that's a significant source of funding capacity growth that continues to occur that's been fairly consistent and gives us a lot of flexibility if we're talking about up to $4 billion of asset growth. Ronald J. Kruszewski: And I'll end by saying, as I've said before, in this segment of what we're doing, we're really in the early innings of some of the things that we can do as we've been adding, frankly, technology capabilities to our treasury platform, international settlements. So there's a lot of work that we're doing to have a very competitive platform. And I see the potential. It's a great question. But again, we've said that it's almost self-funding what we're doing. Alexander Blostein: That's really helpful. Question on the buyback. Really nice to see pickup. I know you guys tend to do a little more in the first quarter than typically over the course of the year. So as you think about your share repurchase plans from here on through the rest of the year, any thoughts you'd share would be helpful. Ronald J. Kruszewski: Capital allocation, capital utilization, return on invested capital, all of those are the inputs to the model that will -- we're always buying back shares. The pace of -- that math changes daily as well as to what is. That's why we don't just sit there and say, we'll buy x number per day. We look at it. We balance that against M&A, other opportunities. But we've been more consistent because we felt that relative to our growth, our stock has been undervalued. So you see us buying back our stock. Jim do you want to... James Marischen: Ron touched on the strategy and how we think about it. In terms of capacity, we had $560 million of excess capital at the end of the quarter. If you think about what we've talked with the balance sheet growth expectation of up to $4 billion, say we do the full $4 billion. That's only about 70% of the current excess before retained earnings. So we certainly have a fairly material amount of capacity if the strategic rationale that Ron talked about, if that math works, we can buy back a lot of stock if we're so inclined. Operator: We'll take our next question from Bill Katz with TD Cowen. William Katz: Most of my big picture questions have been asked already. So maybe just thinking tactically, update us on sort of what's been happening in April just in terms of maybe client engagement, whether it be on the advisory side or on the institutional side and what the sort of cash levels look like just net of maybe billings and/or seasonal tax payments? Ronald J. Kruszewski: Yes. Look, I said client engagement remains strong. It certainly hasn't -- I just said that, Bill, and that wasn't through the quarter, I guess, my comments were through this call. And it is. I have to caution though, because from where I sit, the level of uncertainty, which we're not seeing right now, but the things that can change pretty quick whether it would be on the technology, this Mythos Anthropic thing is concerning. There's a number of things that can change investor sentiment and perspective very quickly. And this is one of those environments where it just feels like there's a lot of uncertainty. But today, things are good. Engagement is strong. Jim, I don't know if you want to comment on cash. James Marischen: Right. So if you kind of go bucket by bucket, sweep is down since quarter end. Smart rate is down since quarter end, while treasury deposits are up. And to provide some detail, you're down probably $1.4 billion in sweep, so call it about [ 10.6% ]. You're down about $400 million in smart rate. And then again, you're seeing a $700 million increase offsetting some of that in the other treasury deposits. Ronald J. Kruszewski: Yes. But you know what, I would just say that -- yes, this is so seasonal. I wonder if we've ever had an increase in April, okay, ever, is an outflow for -- and it's a lot of taxes. That's just what happens. And that's across the street, Bill. So that's -- I don't want those comments to be taken as some trend. It's April. William Katz: Of course. And then as a follow-up, I'm just sort of curious, you mentioned on the banking side, a very good pipeline, but it also seems like a lot of this conversation is about just sort of the ebbs and flows around uncertainty and certainly appreciate one day to next with the headlines coming out of Middle East is the confounding for everything. Should we be assuming that a little bit of a deceleration here in terms of activity from a revenue perspective, given your comments that if some things don't get sort of booked in the next couple of months, it's more about 2027, just as we think about the pacing for this year versus next for the advisory side of investment banking? Ronald J. Kruszewski: Look, I think our banking is overall strong. We're seeing real pockets and our at least what our guys tell me is it's strong. I think we caution a little bit on depositor. We're big in depositories. And so that feels like it's a low a little bit, but that can change quickly, too. And software and the technology side, which we haven't been as big at, but we can see when we look at numbers, that appears to be more muted relative to what else is going on. But overall, as I've said, if the risks land within the range of market expectations, we see the business improving. It's -- if some of these things get resolved, it could really improve. It's not just all downside from here. The business especially in ECM can really pick up here if we take some of the volatility out of this and uncertainty out of this market. There's always volatility. There's always uncertainty. It's just heightened, and we all know this. I'm not telling you anyone on this call anything that news from my desk. Operator: There are no further questions at this time. I will turn the conference back to Mr. Kruszewski for any additional or closing remarks. Ronald J. Kruszewski: Well, I would just want to complement all the questions. Actually was very robust questions, and we like being able to engage and give you our best answers, and I appreciate that. I appreciate everyone's time, and I look forward to talking to you in July. I would just say who knows what's going to happen between now and July, but we'll -- many of you will be talking before then. But to our investors that are on the call, thank you for calling in, and have a great day. Thank you. Operator: This concludes today's call. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to the Bridgewater Bancshares' 2026 First Quarter Earnings Call. My name is Danielle, and I will be your conference operator today. [Operator Instructions] Please note that today's call is being recorded. At this time, I would like to introduce Justin Horstman, Vice President of Investor Relations, to begin the conference call. Please go ahead. Justin Horstman: Thank you, Danielle, and good morning, everyone. Joining me on today's call are Jerry Baack, Chairman and Chief Executive Officer; Joe Chybowski, President and Chief Financial Officer; Nick Place, Chief Banking Officer; and Katie Morrell, Chief Credit Officer. In just a few moments, we will provide an overview of our 2026 first quarter financial results. We will be referencing a slide presentation that is available on the Investor Relations section of Bridgewater's website, investors.bridgewaterbankmn.com. Following our opening remarks, we will open the call for questions. During today's presentation, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We caution that such statements are predictions and that actual results may differ materially. Please see the forward-looking statement disclosure in the slide presentation and our 2026 first quarter earnings release for more information about risks and uncertainties, which may affect us. The information we will provide today is as of and for the quarter ended March 31, 2026, and we undertake no duty to update the information. We may also disclose non-GAAP financial measures during this call. We believe certain non-GAAP financial measures, in addition to the related GAAP measures, provide meaningful information to investors to help them understand the company's operating performance and trends and to facilitate comparisons with the performance of our peers. We caution that these disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP. Please see our slide presentation and 2026 first quarter earnings release for reconciliations of non-GAAP disclosures to the comparable GAAP measures. I would now like to turn the call over to Bridgewater's Chairman and CEO, Jerry Baack. Gerald Baack: Thank you, Justin, and thank you for joining us this morning. Bridgewater is off to a strong start in 2026 with several positive developments during the quarter, positioning us well for the rest of the year. First and foremost, I would like to point out our net interest margin expansion. While we mentioned last quarter that we expected to reach a 3% margin by the end of 2026, we nearly got there in the first quarter as margin expanded to 2.99%. Deposit costs declined and loans repriced higher, helping us get there quicker than anticipated. We expect to see slow additional margin expansion over the coming quarters. Because of the strong net interest margin, we were able to continue growing net interest income. This happened even while our balance sheet shrunk during the quarter due to some strategic sales of securities. These securities sales were part of several opportunistic actions taken in the first quarter to enhance our balance sheet efficiency, resulting in both a substantial gain and positioning us for improved profitability moving forward. I want to be clear that this was not the standard balance sheet repositioning many other banks have done recently that involved selling securities at a large loss to increase future margin, but rather a calculated tactic Joe and our treasury team recognized as interest rates moved in our favor. In response to this shift, they executed on an opportunity to improve forward profitability while taking an immediate gain. Joe will provide more details on this in a minute. I'm pleased to report we continued to take market share in the first quarter as the loan portfolio grew 5.5% annualized, with much of the growth continuing to come from our commitment to our affordable housing vertical. Core deposit momentum also continued as balances increased 3.2% annualized, while the overall deposit mix continued to improve. Asset quality remained positive in the first quarter as net charge-offs and nonperforming assets both declined nicely. We continue to feel good about the overall asset quality of our loan portfolio resulting from the strong credit culture we pride ourselves on. In addition, we saw a nice uptick in our capital ratios as CET1 increased 36 basis points to 9.53%. Turning to Slide 4. Tangible book value growth continues to be a staple of the Bridgewater story. And that was no different in the first quarter as tangible book value increased 9.9% annualized to $15.93 per share. This is an important differentiator for Bridgewater. We are proud of our ability to create and sustain shareholder value through tangible book value growth and how consistent this trajectory has been over the past decade. Before I pass it over to Joe, I also wanted to share that we successfully expanded our footprint to the East. In February, we opened our de novo branch in Lake Elmo. This is a growing area in the Twin Cities, and we are thrilled with the opportunities it presents to Bridgewater Bank. With that, I'll turn it over to Joe. Joseph Chybowski: Thanks, Jerry. Before we take a deeper dive into the first quarter results, I wanted to walk through the balance sheet efficiency actions we took in late January and early February, which are laid out on Slide 5. As Jerry mentioned, this was really a win-win for us as our treasury team recognized how we could take advantage of the volatility in interest rates to not only improve future profitability, but also generate substantial near-term revenue. As part of this strategy, we sold a portion of our high-quality securities portfolio, which included the sale of $147 million of treasuries for a net gain of $1.2 million, and the sale of $62 million of municipal bonds for a net gain of $6.1 million. By selling these securities that were yielding in the 4% and 5% ranges, we were able to redeploy these dollars into higher-yielding loans going forward. In addition to these securities sales, we also prepaid $97.5 million of higher cost FHLB advances that were being used to fund the securities. While this resulted in a prepayment expense of $982,000, it helped to improve our funding mix and reduce our overall cost of funds. At the end of the day, we generated an additional $7.3 million of pretax net income in the first quarter, increased our permanent capital levels and supported future net interest margin expansion by reducing our cost of funds and creating an opportunity to redeploy capital into higher-yielding loans. This is another example of how we are actively and thoughtfully managing our balance sheet to drive shareholder value. Turning to Slide 6. We were able to grow net interest income by 3% quarter-over-quarter despite the average interest-earning assets declining $185 million as a result of the balance sheet actions I just mentioned. This is pretty impressive and was driven by 24 basis points of net interest margin expansion in the first quarter to 2.99%. Our expectation had been to get to a 3% net interest margin by the end of '26, but we were very pleased that several factors allowed us to nearly get there in the first quarter. First, we saw the full quarter impact of the fourth quarter rate cuts on both sides of the balance sheet as total deposit costs declined 18 basis points and loan yields were still able to reprice higher by 3 basis points given the fixed rate nature of the portfolio. Notably, deposit betas during this most recent rate cut cycle have outperformed the betas we saw during the prior cycle, primarily due to a larger portion of our deposit base being directly tied to short-term rates. Second, loan fees continued to increase as payoffs remained elevated. And third, there was a modest margin impact within the quarter from the balance sheet efficiency actions we took, which resulted in a decrease in higher cost borrowings and a smaller balance sheet. Given that we were able to pull forward much of our expected net interest margin expansion for the year into the first quarter, we expect the pace of margin expansion to slow meaningfully going forward. However, we still expect to see some mild margin expansion over the coming quarters, even with no additional rate cuts. With net interest margin resetting higher, some margin expansion expected to continue and earning asset growth set to return, we are well-positioned to continue driving net interest income moving forward. Slide 7 highlights some of the net interest margin drivers. The cost of total deposits declined by 18 basis points in the first quarter and is now down 40 basis points over the past 2 quarters. The decline in the first quarter reflects the full quarter impact of the rate cuts from the fourth quarter of 2025. Absent any additional rate cuts, we would expect to see deposit costs stabilize going forward, although we will continue to look for additional opportunities to lower the rates of deposit accounts where it makes sense. Our portfolio loan yield increased 3 basis points during the quarter to 5.81%. As we've said in the past, we expect our loan portfolio to continue to reprice higher in the current environment given the larger fixed rate component, which makes up 65% of the portfolio. We have been actively originating more variable rate loans to make the portfolio more rate neutral going forward. Variable rate loans now make up 23% of the loan portfolio, up from 17% a year ago. We would expect this loan repricing to continue to support future margin expansion as our loan portfolio includes $644 million of fixed rate loans scheduled to mature over the next 12 months at a weighted average yield of 5.73% and another $106 million of adjustable rate loans repricing or maturing at 3.86%. With these lower yields running off the books and new originations in the first quarter going on the books around 6%, we have further repricing upside ahead of us. Turning to Slide 8. We continue to see strong profitability and revenue growth trends as our adjusted return on average assets was just under 1% for the second consecutive quarter. We have also continued to consistently grow total revenue, driven by steady net interest income growth. In addition, noninterest income has topped $2 million every quarter since the fourth quarter of 2024, even excluding securities gains. This is a result of new fee income sources we have added recently, including swap fees and investment advisory fees, both of which we expect to continue to see throughout 2026. Turning to Slide 9. We have a strong track record of well-managed expense growth as evidenced by our consistently better than peer efficiency ratio. Excluding the $982,000 of FHLB prepayment expense, expenses still a bit elevated in the first quarter, which is typically the case due to some seasonality. First quarter expenses included our annual merit increases going into effect across the organization early in the quarter, several key strategic hires related to the disruption in the market and the pull forward of some charitable contributions. Occupancy expense also increased due to the opening of our new branch in Lake Elmo. As we've said before, we continue to expect adjusted noninterest expense to track closely with our general pace of asset growth over time. Keep in mind that this won't apply in the first quarter as assets decline due to securities sales. With that, I'll turn it over to Nick. Nicholas Place: Thanks, Joe. Turning to Slide 10. You can see our core deposit momentum continued with annualized growth of 3.2% in the first quarter. We were pleased with this level of growth as balances tend to remain seasonally lower earlier in the year. We have also seen an ongoing positive deposit mix shift given the more consistent core deposit growth and overall decline in higher cost brokered and time deposits, which have declined on a combined basis year-over-year. We continue to be very pleased with our core deposit growth and pipeline overall. This includes traction in our affordable housing vertical as well as opportunities from the ongoing M&A disruption in the Twin Cities. While our deposit growth tends to be a bit slower during the first half of the year, we feel really good about our ability to continue growing core deposits over time as these provides the fuel for our organic loan growth. Turning to Slide 11. Loan balances grew 5.5% annualized in the first quarter. We have seen an increase in competition in recent months, which has caused spreads to tighten a bit, but our pipeline remains strong and is near 3-year highs. As a result, we are in a good position to be selective on the types of deals we want to do and at yields that make sense. Overall, we feel we are right on track to hit our expectations of high single-digit loan growth for the year. Obviously, there will be various factors that impact our pace of growth, including competitive dynamics, levels of payoffs and of course, core deposit growth, which is really our governor on how quickly we can grow loans. Turning to Slide 12. You can see that our loan pipeline is continuing to translate into new originations, while loan advances continue to increase as well. The increase in loan advances was driven by new construction projects over the past year that are now funding. We would expect to see new originations and advances remain strong in 2026. Payoff activity also remained elevated, and we expect these to continue given the current interest rate environment. Turning to Slide 13. C&I was the largest loan growth category during the first quarter. This was largely due to activity in real estate-related C&I, including affordable housing. C&I is a strategic growth focus for us and an area in which we continue to invest. This includes adding additional talent with 3 new C&I bankers we've recently brought on board, stemming from the M&A disruption in the market. Overall, we are optimistic about our ability to continue expanding both talent and clients in this area. We continue to see meaningful opportunities for growth in affordable housing as balances in this vertical increased $57 million or 35% annualized during the first quarter. This growth was spread across both C&I and multifamily. With an ongoing focus on growing affordable housing and C&I as well as our strong expertise in multifamily and CRE, we feel good about the mix and growth outlook for our loan portfolio. With that, I'll turn it over to Katie. Katie Morrell: Thanks, Nick. Turning to Slide 14. Our overall credit profile remains strong. After a modest increase in nonperforming assets and net charge-offs in the fourth quarter, both came back down in the first quarter. We mentioned in January that the multifamily loan we moved to nonaccrual in the fourth quarter was under a purchase agreement. As planned, this transaction closed in the first quarter, dropping our NPAs back to 0.22%. Net charge-offs were also very minimal at just 0.05% annualized for the quarter. As we have said before, with a loan portfolio of our size, we do expect to have some modest net charge-offs and upticks in nonperforming assets from time to time. But we have also demonstrated our ability to effectively work through these credits. Overall, our loan portfolio continues to perform well, and we remain well reserved at 1.31% of total loans. Looking at Slide 15, our watch and special mention loans have remained relatively stable, sitting right around 1% of total loans, while substandard loans declined quarter-over-quarter, primarily due to the multifamily loan mentioned previously. We continue to monitor all watch list credits closely, but again, feel good about our overall asset quality and our ability to identify emerging risks within the portfolio. I'll now turn it back over to Joe. Joseph Chybowski: Thanks, Katie. Slide 16 highlights our enhanced capital position, which benefited from some of the balance sheet efficiency initiatives we mentioned earlier. Notably, our CET1 ratio increased from 9.17% to 9.53%. We did not repurchase any shares during the quarter given our strong organic growth pipeline and where the stock was trading. In fact, we actually announced the launch of an at-the-market offering for the sale of up to $50 million of common stock, which could add approximately 100 basis points to our CET1 ratio, if fully executed. However, we did not execute on the sale of any of these shares during the first quarter. While we feel comfortable with our current capital levels, we like the additional optionality and capital cushion the ATM offering can provide if we choose to use it. Given the strong recent performance of the stock, we want to have the optionality to execute on the ATM and support capital levels if market conditions are favorable. Turning to Slide 17. I'll recap our near-term expectations. As Nick mentioned, we feel we are on track to grow the loan portfolio at a high single-digit pace over the course of 2026. This will be dependent on a variety of factors, especially our ability to continue generating strong core deposit growth as we look to keep our loan-to-deposit ratio in the 95% to 105% range. From a net interest margin standpoint, we have basically already reached our 3% target that we had for the end of the year. As a result, we expect to see just some slow margin expansion from here, assuming no additional rate cuts in 2026. Our main focus remains on growing net interest income, which we believe we can do given expectations for margin expansion and continued loan growth. We also expect expense growth to align relatively well with asset growth over time. This may not be the case each quarter, but over the long run, we believe this alignment can continue as we have seen in the past. We feel we are well reserved at current levels and would expect provision to remain dependent on the pace of loan growth and the overall asset quality of the portfolio. We also feel that we can maintain stable capital levels after a solid increase in the first quarter. We also have some future optionality based on market conditions around share repurchases and the ATM we have in place. I'll now turn it back to Jerry. Gerald Baack: Thanks, Joe. Before we open it up for questions, I wanted to provide a quick progress report on our 2026 strategic priorities. We remain focused on taking market share in a profitable way. In the first quarter, I was pleased to see good loan and core deposit growth, but what was even more exciting was a substantial net interest margin expansion. Our credit culture also continues to show through with minimal net charge-offs. Our affordable housing vertical is another area that we are very focused on in 2026, and we have seen positive traction in this space as our brand and reputation continue to build. Lastly, on the technology front, we are working through several initiatives, which include bank-wide efforts to set the foundation for leveraging AI thoughtfully across the organization. I'm proud of the team and the efforts put forth in the first quarter and believe we are well positioned for the year ahead. With that, we will open it up for questions. Operator: [Operator Instructions] The first question comes from Brendan Nosal from Hovde Group. Brendan Nosal: Maybe just starting off here on capital. You created, what, 30 to 40 basis points of tangible capital this quarter with the securities sale. Do you think that lessens the need for you to tap the market with the ATM in your view? Joseph Chybowski: Brendan, this is Joe. Yes, I mean, I think it all depends like we said. I mean, we're going to be opportunistic with the ATM. We like the optionality that it provides. I think we're not going to bank on translating unrealized gains to realized gains. So I just think as we just generally think about capital, I think we're comfortable with where we're at. We're comfortable with the optionality we have on both sides. I want to be thoughtful about the organic growth prospects that we have. And so I don't think it changes the calculus by kind of the onetime gain that we took. Brendan Nosal: Okay. Okay. Maybe turning to the hires you made this quarter. I think FTE headcount was up like 15 for the quarter. I guess that there's a lot of M&A dislocation in your markets. But just wondering if there's any really notable hires in that number that you're particularly excited about? Nicholas Place: Brendan, this is Nick. Yes, I mean, we've been saying it for a while that we feel like we're well-positioned in the market to take advantage, both on the client front and the talent front, from the M&A disruption. I think sometimes those hires come early in that process, sometimes it takes some time, and we're starting to see the fruits of that labor pay off now. We're really excited about some C&I hires that we've had in the last handful of months. Those folks are really hitting the ground running now and are able to be bringing in some really phenomenal opportunities for us with great local C&I relationships. And around that, we're having to bolster and taking advantage of some of that disruption to bolster in other areas. Katie has done a great job hiring some senior credit folks to assist us in that C&I effort. So overall, we feel like our brand is well positioned to continue to take advantage of that M&A disruption on the hiring front. Brendan Nosal: Okay. Great. I'm going to sneak one more in here. Just on this quarter's actions with the securities portfolio, do you view that as additive to your prior outlook of the 3% NIM by the end of '26 or just kind of an acceleration of getting there? And I'm asking because if the NIM outlook is still around 3-ish, but the earning asset base is a couple of hundred million smaller, there's obviously like NII considerations to that dynamic. Joseph Chybowski: Yes. I mean I think that the securities sale certainly contributed to the margin outperformance, but it was a small amount. I mean it's 2 basis points in the quarter. So it's just -- there's no one silver bullet, certainly. This was part of it. So I think it's not like by not doing that, we are going to miss out on pulling forward margin going forward. So it had an impact. It was just part of the overall strategy itself. But the bigger thing, I think, is just the cost of deposit decline that we experienced and really outperformed in the quarter. I think that, coupled with loan payoffs, I mean, I think, as we said, there's -- we really wanted to not rely on rate cuts and additional rate cuts to really pull forward that margin. So it's definitely an all-hands-on-deck effort to achieve the margin expansion we did in the first quarter. Operator: The next question comes from Jeff Rulis from D.A. Davidson. Jeff Rulis: Just a question on the M&A side. A lot of discussion of benefiting from disruption. I guess taking the other side of that is just a check-in on your outward acquisitions, if talking about conversations and the interest. I see it's #2 on your capital priorities of chasing down M&A. Any updates to mention there? Gerald Baack: Jeff, it's Jerry. I'd say nothing different than the past. I mean, I certainly continue to stay in front of people. I would probably say things up here in the first quarter to have slowed down more than I expected, but I think that has a lot to do with just geopolitical reasons. So we'll see. But it certainly continues to be a priority. But at the end of the day, it's organic growth and continue to take market share in the Twin Cities is first and foremost what we're focusing on. Jeff Rulis: And maybe on the -- not to focus too much on the margin, but it didn't sound like the restructuring or kind of the moves you made with the balance sheet didn't have much impact in the quarter. I guess the timing of that, maybe for Joe, is there any tail benefit of those moves that it was 2 basis points this quarter. So that's, I guess, question one on the margin. Is there a tail that you expect to see in the second quarter? And then the other part is, I guess, as you hit the margin goal, maybe you got to set a new one, we get the language of moderate increases from here. But just trying to see about further out where you think a terminal margin could be where the balance sheet sits today. Joseph Chybowski: Yes, Jeff, I'll try to address the first part and then the second. I think there's definitely going to be a pull forward or a future impact by just selling those securities and redeploying those into higher-yielding loans. So the 2 basis points this quarter, you can certainly -- it was early on in the quarter, so you could somewhat annualize that as we redeploy those into loans earning in the 6s. So that's certainly definitely beneficial. I think as we talked about, in the past, the amount of deposits that we have linked to Fed funds, I mean, we're close to $2 billion now. I think to have 75 basis points of cuts in the fourth quarter really saw obviously a full quarter benefit of that here. And I think that certainly drove the majority of the margin expansion. I think even outperformed our expectation on really deposit betas as we compared it to prior cycles. So super pleased with that. And then obviously, on the loan repricing side, we've kind of laid out that's more spread pretty evenly throughout the year as loans reprice. So I think that's where we just talk about the more kind of mild expansion opportunities. It's pretty front-loaded, driven by deposits, and then it will be more gradual and backloaded based on assets. And the securities itself were -- I think, it's always been a source of strength for us. Our securities portfolio has been above market earnings certainly. And so -- but by selling the securities, by no means do we now have an underperforming securities portfolio that lags on performance. It's certainly additive as well. So I think we'll continue to look for opportunities to rationalize deposit costs lower throughout the year. I mean that will never stop, and we're certainly not going to bank on rate cuts. As I said, I think we're assuming no rate cuts the rest of the year. And we're just really pleased with the expansion we had. I mean, we get certainly to experience, and that margin uptick, ultimately, most focused on growing NII. And I think as the loan portfolio and the loan growth prospects translate, that certainly will happen. Operator: Next question comes from Nathan Race from Piper Sandler. Nathan Race: Just going back to the last line of question around kind of the yield pickup on the fixed and adjustable rate loans that are maturing over the next year. Joe, can you help us just with the yield pickup that we can expect on those 2 portfolios relative to what you laid out in terms of the runoff yield on Slide 21? Joseph Chybowski: Yes. I mean, I think, as I said, it's pretty balanced throughout the year. So it's not like it's concentrated in one quarter or the other. I think specifically the adjustable rate portfolio, just over $100 million, sub-4%. So as that comes up on reprice, and whether that -- either that pays off or it reprices and resets today at kind of new money yields in the 6s, I think they're certainly additive to margin going forward and accretive to the existing loan book. I think the fixed rate portfolio, as we've continued to churn through the reprice over the last couple of years, obviously, that yield and reprice, there's less of a benefit, but there's still certainly a benefit today that's still sub-6%. I just think the other piece that we talked about on the loan payoff front, as deals that have deferred fees associated with them on originations do pay off, that obviously accelerates the fee potential. We saw a pickup here in the first quarter. 12 basis points of the loan yield was loan fees. That's an uptick from prior quarters and gives us an opportunity to recycle dollars in the low 6s. So I think it's certainly not concentrated. It's spread throughout the year. Continue to see that benefit both from new originations and growing the portfolio and then just existing kind of repricing opportunities. Nathan Race: Got it. That's helpful. I appreciate the earlier commentary around kind of deposit costs under the current kind of forward rate outlook. But just curious kind of what you're seeing from a competitive perspective in terms of deposit pricing across the Twin Cities? And when it comes to deposit gathering, curious if maybe, Nick, you could touch on kind of what the latent deposit gathering opportunities look like with some of the team members you brought over recently from some competitors in terms of what the size of their kind of deposit portfolios look like at their prior institutions? Nicholas Place: Nate, this is Nick. Yes, I mean, on the deposit front overall, I mean, it continues to be a competitive market, but we are seeing new deposits come in at costs that are meaningfully lower than we saw last year. We feel really good about the team that we have and their ability to get in front of the right opportunities to bring in core deposits at cost that makes sense. The teams that we brought on board or the individuals we brought on board, they're actively prospecting and working through their portfolio. There's low-hanging fruit on the deposit front that can come over quickly. And those balances tend to come more in the savings and money market side of things, which tend to be a little bit more expensive with operating accounts to follow as our treasury management teams work with their clients to onboard the full relationship. So overall, we'll be able to blend the cost of those deposits down. But the prospects with these folks to bring in sticky core deposit relationships, both on the consumer -- the commercial and the business owner side, which our executive banking team does a phenomenal job of bringing on full deposit relationships with the owners and executives at these companies, we feel great about our prospects to continue to grow core deposits over time. The Lake Elmo market that we talked about, we feel like that's a really underserved market and that long term, we'll be able to grow well within that community. We've hired some great folks on that side of town as well that we feel will drive deposit growth long term. So we feel really good about our deposit pipeline and our ability to drive core deposit growth, especially when we think about the first half of the year being a seasonally low part of the year for us on the deposit front. We grew balances really well in Q4, which is pretty typical for us from a seasonality perspective. And we were not surprised to see some of those balances drift out as our customers did distributions, pay taxes, that sort of thing. So we feel good that we were able to grow deposits even in what is a seasonally more difficult quarter for us to do so. Nathan Race: Got it. That's great color. Really helpful. I apologize if you already touched on this, but if I could sneak one last one in on expenses. Just given the step-up in 1Q, I'm curious if there was any kind of front-loading of costs just given the branch opening and maybe some seasonality. And then maybe, Joe, if you could just help us with kind of the starting point for 2Q expenses just to kind of get to that high single-digit growth guide consistent with kind of the loan growth expectations? Joseph Chybowski: Yes, Nate, I think as we said, our annual merit cycle, there's always a step-up at the beginning of the year as promotions and merit increases take place. So it's historically and with prior years is a step-up in salaries and benefits. However, I would say, to Nick's point earlier, I mean, we continue to get in front of great people as part of the M&A disruption. And so I think the headcount up and just supporting the growth of the organization also contributes to that step-up in salaries. Certainly, Lake Elmo coming online, super excited about that and a little bit of step-up in occupancy, but that market is going to be fantastic for us. And then the other thing is just a real push on marketing and advertising throughout our market. Given the disruption, that's been a continued campaign. So not kind of a onetime item, but certainly just a continuation of really trying to continue to build the brand. So I think ultimately, as you said, I think we don't try to look at expenses in isolation on a quarter-over-quarter basis. We're more just thinking about continuing to invest in the business over the long haul. And just given the growth prospects, we feel really good about the investment we continue to make in people and technology. And I think over the long haul, as we've always said, that relationship of asset growth relative to expenses, we still feel like we maintain that. I get this first quarter, obviously, with the sale of the securities, that average assets, NIE to average assets ratio does somewhat break down. But I think over the long haul, we're confident that the asset growth and the expense growth will go in line and excited about the investments we continue to make in the business. Nathan Race: Understandable. Makes sense. I appreciate the color. Operator: [Operator Instructions]. The next question comes from Brandon Rud from Stephens. Brandon Rud: Thank you for all the color on the NIM. I think you just touched on it, but the difference in the period end and average deposits, when you look at a good starting point for the second quarter, would you see deposits kind of closer to the period end level of $4.3 billion or closer to that average level? Joseph Chybowski: Yes, I mean closer to the period end. And I think as Nick said, there are some seasonal outflows with the deposit base, but I do think as taxes get paid, distributions get made, I mean, those balances build back up. So I think that's a good way to think about it. Nicholas Place: Yes, Brandon, I think our low watermark on deposits is usually like early January, late January -- or mid- to late January, I should say, and it typically rebuilds from there. So we feel good about where we ended the quarter. Brandon Rud: Okay. Perfect. And just my last one. It seems like a bit of a slower start to the year for the multifamily portfolio. Is that more reflective of stronger growth in '25? Or is that a broader trend? Nicholas Place: Brandon, this is Nick. I don't think it's a broader trend. I mean, I think quarter-over-quarter, there's some quarters where we see large growth where we have some good originations and a small amount of payoffs, and then certain quarters where payoffs outpaces our new loan originations. So I'm not overly concerned around what we saw in Q1 within that portfolio. Our teams continue to be in front of the right clients and building deep relationships with folks. We mentioned our advances. We've seen an uptick in both multifamily and CRE construction in the last 12 months. So that's providing some tailwinds for us to build construction advances, and those loans, once complete and stabilized, do sort of roll into our multifamily and CRE buckets, creating some growth within those categories as well, as those construction projects convert. So no, I mean, our pipeline remains really strong. We feel really good about the opportunities we have in front of us. And I think we are continuing our trend over the last handful of years of really being disciplined in our growth approach, being laser-focused on trying to grow our loans in line with deposits and remaining in front of as many folks as we can to build a really strong pipeline and then be selective on the credits that we feel the best about and the ones in which we can add to the balance sheet in a profitable way. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jerry Baack for closing remarks. Gerald Baack: Thanks, everyone, for joining our call today. We're really excited about 2026 and the growth and profitability outlook that is in front of us and continuing to take advantage of the M&A disruption in the Twin Cities. I also just want to give a big shout out to our team members, our veterans and our new hires. We have a phenomenal team here, and I appreciate everything they do. Everybody, have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, everyone. Welcome to Western Alliance Bancorporation’s First Quarter 2026 Earnings Call. You may also view the presentation today via webcast through the company's website at westernalliancebankcorporation.com. I would now like to turn the call over to Miles Pondelik, Director of Investor Relations and Corporate Development. Please go ahead. Miles Pondelik: Thank you, and welcome to Western Alliance Bancorporation’s First Quarter 2026 Conference Call. Before I hand the call over to Kenneth A. Vecchione, please note that today’s presentation includes forward-looking statements, which are subject to risks, uncertainties, and assumptions. Except as required by law, the company does not undertake any obligation to update any forward-looking statements. For a more complete discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, please refer to the company's SEC filings, including the Form 8-Ks filed yesterday, which are available on the company's website. Now for opening remarks, I would like to turn the call over to Kenneth A. Vecchione. Kenneth A. Vecchione: Good afternoon, everyone. I will make some brief comments about our first quarter 2026 performance before handing the call over to Vishal to discuss our financial results and drivers in more detail. After reviewing our revised 2026 outlook, Dale and Tim will join us for Q&A as usual. Western Alliance Bancorporation’s financial results in the first quarter reflect strong core business performance alongside decisive actions taken on two previously disclosed fraud-related credits. Adjusting for these actions, we generated earnings per share of $2.22, which is consistent with where we were tracking on a reported basis prior to the charge-off announced on March 6. Importantly, these matters are now largely behind us. By removing these lingering distractions, we can refocus attention on the trajectory of our underlying operating performance. I will briefly review these related charge-offs and mitigating actions before discussing our core results. As previously announced, we fully charged off the remaining $126.4 million balance of the loan to a fund of Lucadia Asset Management. We initiated legal action at the time of the announcement and are actively pursuing recovery through those proceedings. Given the nature of this process, the outcome may take time to resolve, and we will not provide further commentary while the matter is ongoing. As discussed last month, we executed security sales, which generated $50.5 million of pretax gains. These gains, together with identified expense savings and other revenue initiatives, substantially offset the impact of this charge. We are also providing an update on the Cantor Group 5 loan. We believe the $29.6 million specific reserve established in Q3 has been validated by current as-is appraisal values across all the collateral properties as well as our updated lien positions. We believe recoveries on this loan will be realized in the future from multiple sources, including springing guarantees from ultra-high-net-worth guarantors and a mortgage fraud policy. Due to the complexity and potential duration of the resolution process, we charged off $26 million of this loan during the quarter. Turning to Q1 results. Deposit growth was exceptional at $5.6 billion on a quarterly basis, putting us ahead of pace to reach our $8 billion deposit growth target for 2026. This outperformance positions us to accelerate deposit optimization programs, which should further reduce funding costs and support net interest margin, even absent interest rate cuts this year. In the first quarter, interest-bearing deposit costs declined 21 basis points, contributing to a 3 basis point quarterly increase in net interest margin to 3.54%. Total loans grew $903 million this quarter, split nearly evenly between the HFI and HFS portfolios. We grew HFI loans 3.2% on a linked-quarter annualized basis and 8% compared to the prior year. We deliberately grew the HFS portfolio with lower risk-adjusted weighting so we could repurchase shares and remain at our target CET1 ratio of 11%. This strategy afforded us the opportunity to delay loan growth into Q2 and reevaluate the credit, macroeconomic, and geopolitical environments. We have not backed away from our $6 billion target. Overall, core asset quality remained steady as net charge-offs for the quarter, excluding fraud-related credits, were marginally higher than the upper end of guidance. We believe the portfolio is past peak stress, particularly within office CRE, as we have seen classified loans increasingly migrate towards resolution instead of further deterioration. Classified assets to total assets declined 9 basis points from the prior quarter to 1.08%. We are positioning nonperforming loans to decline in the back half of the year, with several credits to be resolved by Q3. We continue to manage our capital dynamically in an evolving macro environment. During the quarter, we repurchased 700,000 shares at a weighted average price in the low seventies, reflecting our conviction in the intrinsic value of the franchise. Strong capital generation drove an adjusted return on average assets and return on average tangible common equity of 1.0% and 14.2%, respectively. This supported a stable CET1 ratio of 11% and ACL ratio of 87 basis points, while compounding tangible book value per share 13% year over year. Overall, we delivered strong balance sheet growth, net interest margin expansion, and sustained core earnings momentum underpinned by healthy risk-adjusted PPNR, while also opportunistically defending the stock through accelerated share repurchases. Western Alliance Bancorporation continues to benefit from a highly diversified franchise, differentiated market positioning, and deep integrated relationships with our clients that enable us to perform across a wide range of economic scenarios. At this time, Vishal will now walk you through our results in more detail. Vishal Idnani: Thanks, Ken. In the bottom right corner of slide three, we highlight two earnings adjustments this quarter. The execution of a series of security sales generated aggregate pretax gains of $50.5 million. These gains partially offset the impact of the LAM provision and together reduced net income by $62.1 million, or $0.57 per share on a net basis. As a result, my comments on our adjusted performance exclude these items, as we do not view them as reflective of the ongoing run-rate outlook of the business. Turning to the income statement on slide four, net interest income of $766 million was in line with the fourth quarter and increased approximately 18% year over year. Lower funding costs, driven by declines in interest-bearing deposit costs, helped offset pressure from lower loan yields, while higher average earning assets also supported NII stability. Noninterest income increased 18% quarter over quarter to approximately $253 million. Excluding securities gains realized in both Q1 and Q4, noninterest income would have declined modestly by $5 million, largely due to lower mortgage activity. Service charges and fees increased $15 million sequentially, primarily reflecting strong performance in our Juris banking business, with the corresponding but smaller offset flowing through other noninterest expense. Mortgage banking revenue was stable year over year but declined $18 million from the prior quarter. Importantly, fundamentals across the mortgage business continued to improve, with gain-on-sale margin expanding 18 basis points year over year to 37 basis points and loan production volume increasing 18%. Q1 mortgage earnings were impacted by the sharp backup in interest rates, highlighted by the 10-year Treasury yield rising 33 basis points in March. Elevated rate volatility during the month also created modest headwinds for hedging performance and servicing income. Early April results indicate mortgage banking is reverting to levels seen in January and February before rates backed up. Noninterest expense increased about $22 million from the prior quarter to $574 million. Excluding the FDIC special assessment rebate last quarter, noninterest expense only increased about $15 million. The increase reflects higher compensation expenses related to annual merit increases and other typical Q1 costs. Deposit costs declined from a full-quarter impact of two Fed funds rate cuts in Q4. As mentioned earlier, the increase in other noninterest expense was partly driven by higher Juris banking fee revenue and related expenses. Adjusted pre-provision net revenue was $394 million, up 42% from the same quarter a year ago. Provision expense was $87 million, excluding the LAM charge-off cited earlier. Adjusted net income available to common stockholders was $241 million, representing a meaningful increase from a year ago, and generated adjusted EPS of $2.22, up 24% compared to reported EPS in the prior-year period. Now turning to the balance sheet on slide five. Cash and securities rose meaningfully toward quarter-end, driven by strong deposit growth. As we execute our deposit optimization strategy, we expect the relative size of cash and securities to total assets to return to more normalized levels seen in Q4, while our loan-to-deposit ratio returns to the mid-70s. Total loans increased $903 million from the prior quarter. Diversified and meaningful contributions from mortgage warehouse, Juris, HOA, and regional banking drove $5.6 billion of quarterly deposit growth. We view this outsized growth as providing flexibility to further optimize deposit funding costs throughout the year. As deposit growth approaches our 2026 target of $8 billion, our balance sheet expanded in total by $6.1 billion from year-end to just shy of $99 billion in assets. The slight decline in total equity resulted from more active share repurchases and a rate-driven change in our AOCI position, mitigating the impact from continued organic earnings growth. We opportunistically repurchased $50 million of shares during the quarter, bringing program-to-date repurchases to 1.6 million shares, or $120.4 million at an average price of $76.55. Looking closer at loan growth trends on slide six, HFI loan growth continues to be powered by C&I loan categories. Nearly two thirds of quarterly HFI growth came from C&I, with the remainder concentrated in residential loans. From a business line perspective, regional banking was a primary driver of quarterly growth, led by homebuilder finance with solid contributions across businesses. Interest-bearing deposit costs declined 21 basis points from sustained cost reduction, despite growth in average balances. Overall, liability funding costs moved 12 basis points lower from Q4, mostly from lower deposit costs as well as reduced borrowing costs stemming from less reliance on short-term FHLB borrowings. On the asset side, the securities yield rose 5 basis points from the prior quarter to 4.59% due to a shorter day count. Despite the elevated level of security sales during the quarter, we were able to reinvest at slightly higher rates due to the recent backup in rates. The HFI loan yield compressed 16 basis points following a full-quarter impact of rate cuts made in late October and December. Looking at slide nine, net interest income was stable versus Q4 at $766 million, supported by $1.1 billion of average earning asset growth and lower funding costs. Earning asset growth was driven by C&I loan growth as well as higher held-for-sale balances. Net interest margin expanded 3 basis points sequentially to 3.54%, reflecting meaningful reductions in funding costs. The interest cost of earning assets declined 12 basis points while the earning asset yield compressed only 8 basis points, with rounding accounting for the net 3 basis point improvement in margin. Strong back-loaded deposit momentum increased liquidity toward quarter-end, as evidenced by the significantly higher period-end cash balance despite a slight decline in average balances during the quarter. Turning to slide 10, the efficiency ratio of 56% and adjusted efficiency ratio of 48% both improved by approximately 8 percentage points year over year. We continue to realize strong operating leverage as year-over-year revenue growth outpaced noninterest expense growth by approximately 3 times. As discussed earlier, noninterest expense increased $22 million in Q1, or approximately $15 million when adjusting for the FDIC special assessment rebate recorded in Q4. The increase was primarily driven by seasonally elevated compensation costs as well as incremental expenses incurred to support higher Juris banking fee revenue. Deposit costs declined $8 million due to lower rates, although higher balances driven by momentum in HOA and Juris partially offset the benefit from the rate reductions. On slide 11, you will see we remain asset sensitive on a net interest income basis. When factoring in the potential impact on earnings from mortgage banking revenue growth and also reduced deposit fees, our model now indicates we are slightly liability sensitive on an earnings-at-risk basis in a down 100 basis point ramp scenario. In this scenario, earnings are now expected to rise 1.7%, mostly from improved forecasts in mortgage banking. On slide 12, we highlight several metrics demonstrating core asset quality remains stable, excluding fraud-related charge-offs. Classified assets as a percentage of total assets continued to improve, declining 36 basis points year over year to 1.08%. Criticized assets were largely stable sequentially, increasing modestly by $60 million to approximately $1.47 billion, while special mention loans increased $78 million quarter over quarter. The change was not thematic, and the balance remains $57 million below first quarter 2025 levels. Nonperforming loans and OREO declined 7 basis points quarter over quarter as a percentage of total assets. Now let us move to slide 13 to review our allowance and coverage ratios. Provision expense was $87 million, excluding the LAM charge-off, and replenished other net charge-offs as well as supporting incremental loan growth, primarily in C&I. Our allowance for loan losses remained constant at $461 million, or 78 basis points of funded HFI loans. The total loan ACL to funded loans ratio also remained constant at 87 basis points. Over the medium term, we expect the allowance for loan losses to trend into the low-80 basis point range, reflecting a higher proportion of C&I loan growth within the portfolio. Our total ACL still fully covers nonperforming loans, shifting higher to 105% coverage at the end of Q1 compared to 102% a quarter ago. Looking at capital on slide 14, our tangible common equity to tangible assets ratio declined approximately 50 basis points from year-end to 6.8% due to approximately $6 billion in asset growth, increased share repurchases of $50 million, and a rate-driven change in our AOCI position. We believe our active buybacks in Q1 were prudent uses of capital, given the modest difference between where our stock was trading in early March and our tangible book value per share. Nevertheless, our CET1 ratio remained at our targeted level of 11%. Turning to slide 15, tangible book value per share increased 13% year over year and has grown at an 18% CAGR since 2015. The gap between historical tangible book value accumulation and peers stands at four times. Western Alliance Bancorporation has been a consistent leader in creating shareholder value over the medium and long term. On slide 16, we have provided 10 metrics that highlight how we stack up against our peers on earnings growth, profitability, and other critical factors that drive financial results and create durable franchise value. We view these metrics as important in compounding tangible book value and ultimately generating a long-term superior total shareholder return. For the last ten years, our EPS growth and tangible book value per share accumulation have ranked in the top quartile relative to peers. We are also the leader in tenure and adjusted efficiency. We continue to make strides towards top quartile returns on average assets, deposit and revenue growth, and average tangible common equity. I will now hand the call back to Ken. Kenneth A. Vecchione: Thanks, Vishal. Our updated 2026 outlook is as follows. We reiterate our expectation for $6 billion of HFI loan growth, as our business pipelines remain robust. We will continue to actively evaluate risk-adjusted returns across the pipeline. Vishal Idnani: Should spreads become less compelling, our appetite for some of these loans may change. Our $8 billion deposit growth target remains unchanged. As you heard during our prepared remarks, excellent year-to-date deposit growth provides ample liquidity and flexibility to remix deposit concentrations in order to lower interest-bearing deposit costs, improve the NIM, and better position the bank to achieve EPS targets, while still achieving 2026 deposit balance objectives. As a result, it is reasonable to assume deposit balances should be flat in Q2, with performance returning to more normalized levels beginning in the third quarter. Our CET1 target remains 11%. We continue to evaluate capital levels relative to peers and believe our current position remains appropriate. Accordingly, we do not expect capital ratios to meaningfully change from these levels over the near term. Net interest income growth continues to be projected in the range of 11% to 14%. While the range is unchanged, we now expect results to trend towards the upper end of the range. This reflects three key factors. First, our largely variable-rate loan portfolio benefits from an outlook which now assumes no rate cuts this year, compared to one cut previously assumed in Q2 and one in Q3. Second, our full-year loan growth outlook is unchanged. Third, optimizing deposit composition will provide opportunities to mitigate interest expense as interest income accelerates with loan growth. Taken together, we expect the net interest margin to experience modest expansion relative to full-year 2025 levels. Noninterest income, excluding the impact of security sales, is projected to grow between 13% and 17%. This reflects strong underlying momentum across the franchise, driven by higher expected growth in our Juris banking business and a return to the solid trajectory in mortgage banking activity experienced prior to the March rate volatility. Previewing April’s results, mortgage performance has begun to return to January and February levels. Improved growth in commercial banking fees is also expected to contribute to higher fee income growth. Total noninterest expense is now expected to increase between 7% and 11%. Our deposit cost range of $650 million to $700 million reflects higher average balances from stronger performance in select deposit businesses as well as the removal of projected rate cuts from our 2026 forecast. Operating expenses are now expected to be between $1.6 billion and $1.65 billion, driven by higher variable compensation, incremental costs associated with increased banking fee revenue, and continued investments in new business and technology. Importantly, these projections incorporate the $50 million of projected expense savings identified in early March, which will not impact LFI readiness or our key strategic growth initiatives. Our revenue and expense outlook continues to reflect solid operating leverage supported by continued improvement in our adjusted efficiency ratio. With respect to asset quality, we reaffirm our core net charge-off guidance of 25 to 35 basis points, excluding the two fraud-related charge-offs recognized in Q1. Based on current migration trends and the expected cadence of NPL resolution efforts, we anticipate full-year results will be at or slightly above the midpoint of this range, with charge-offs declining in the back half of the year. Our full-year 2026 effective tax rate outlook remains approximately 19%. And finally, we are excited to host our inaugural investor day in less than three weeks. We look forward to seeing many of you there in person on May 12. We will now open the call for questions. Operator: We kindly ask that you limit your questions to one and one follow-up for today's call. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Matthew Timothy Clark with Piper Sandler. Please go ahead. Matthew Timothy Clark: Hey. Good morning. Vishal Idnani: Good morning. Matthew Timothy Clark: Just to touch on the five, you wrote off $26 million, I believe, of the just under $30 million that you had reserved. And I think that suggests you have just around $70 million left tied to that exposure. Can you just give us a little color on whether or not you are relying on personal guarantees to cover the remaining amount here? Because I believe they are suing one another and not sure how easy it is to get at that liquidity. Kenneth A. Vecchione: I think I got your question. On our last earnings call, we said that we were in the process of getting and receiving appraisal values. All the properties have been appraised and all the appraisal values held to what we originally had forecasted or originally had in the old appraiser. That was good news, point one. Second bit of good news was that the liens in front of us were less than what we thought. So what we have done is mapped out several different strategies to resolve this issue, trying to collect on the equity that sits behind these buildings. At this time, we feel taking the charge-off of $26.5 million is reflective of the strategies we are going to put forward to collect the remaining equity value that sits behind all the properties. We have not incorporated any of the ultra-high-net-worth individuals’ guarantees in coming up with the $26.5 million, nor have we captured the mortgage bond, which is up to $20 million after a $5 million deductible. So that is why we said we took the $26.5 million now. We have a number of resolution strategies. This will take some time. We are not going to talk about this every quarter, but as we go through the resolution strategies and finally get to the outcome, we will then turn our attention to the high-net-worth individuals and go after them, and then also whatever we do not collect from them, we will then put against the mortgage bond. So we think the $26.5 million is appropriate now. We do not see any other charge-offs or reserves coming from this point, and we believe recoveries will come later on in the process. I hope that answers your question. Matthew Timothy Clark: That is helpful. Thank you. And then just on the service charges up again, driven by Juris. How should we think about a normalized run rate there? I know it is difficult, I am sure, to guesstimate, but what do you view as a more normal run rate? And I assume we would see a reset in related expenses from that business. Vishal Idnani: It is Vishal here. Thanks for the question. We agree it is hard to do this. These fees tend to be a little bit lumpy. As we mentioned, we have a leading practice with the mass tort settlement here. We did talk about the Facebook Cambridge Analytica settlement that we had, and I think we got more of the revenue from that in the first quarter than we initially anticipated. So that is why you have the elevated number in Q4 and Q1. We do anticipate that number going down in Q2 and Q3, and then in Q4, you could see a higher spike as well. But it is hard to give you more clarity around that because it will just depend on how that comes through. What we will say is that the business continues to do well, and we have won the next large settlement. It is just a matter of timing around that. Operator: Your next question comes from the line of Jared David Shaw with Barclays Capital. Please go ahead. Jared David Shaw: Hey. Good morning. Thanks. Vishal Idnani: Good morning. Jared David Shaw: When we look at the deposit costs on the guide there, how should we think about the ECR beta in this environment with now no cuts? Where should we think that ultimately settles out? Vishal Idnani: Hey. It is Vishal here. Overall, when we think about the ECR deposit beta, I think it is in line with what we were thinking before, which is 65% to 70% when you think about the three businesses that have ECRs. Obviously, they are very specific to each one. In the mortgage warehouse, we tend to think of the beta as up to 100%, maybe in the 90% to 100% range. The other two businesses we have are Juris and HOA. The deposit beta on that tends to be around 35%. So when you blend those together, you get that 65% to 70%. The next piece of your question is our deposit costs went up because we did take the rate cuts out of the forecast. Where do we anticipate that going? We are continuing to push down on the cost. Given the big increase in deposits in the first quarter, we are going to make a concerted effort here to optimize the deposit cost across the company throughout the rest of the year. I would also tell you on the mix of the ECRs, we are planning to hold the mortgage warehouse deposits more flat and focus more growth in HOA and Juris. That should also help push the ECR cost down over the course of the year. Jared David Shaw: Okay. Thanks. And then as my follow-up, looking at asset quality, and maybe the criticized/classified, how are you looking at your exposure to software companies in the tech and innovation sector? Is that driving any credit migration here? Kenneth A. Vecchione: No. It is not driving any credit migration at this time. The conversation that is out in the marketplace is really around private credit. We have a very limited exposure inside of our private credit book to technology, and specifically software companies are under 5% of our total book. More importantly, we have such a granular approach in that book of business whereby all the credit that we have granted to the clients is roughly $4 million on average in commitment and $2 million drawn against the $4 million of commitments. So we are not seeing any problems in that book at this time, and it is not reflected in our criticized or classified asset viewpoint. Operator: Your next question comes from the line of Casey Haire with Autonomous. Please go ahead. Casey Haire: Yeah. Great. Thanks. Good morning, guys. Kenneth A. Vecchione: Good morning. Casey Haire: I have a million questions on NIM. I guess I will start with the loan-to-deposit ratio. Vishal, I heard you say you plan to get normalized cash and get back to a mid-70% loan-to-deposit ratio. Just in terms of timing, how quickly do you expect to get there? And a little more color on the deposit optimization plan if you can. Vishal Idnani: On the loan-to-deposit ratio, that is the target. When you think about our loan and deposit growth targets, $6 billion and $8 billion, that is 75% when you think about the target. I would say by the end of the year, that is the plan. It will also come down to the deposit optimization. We might actually see deposits in the second quarter not at the typical run rate you would see from us given this optimization. Plan for it at the end of the year. Hopefully, we will get there on the sooner side because we are trying to bring loan growth up to the earlier part of the year. On the deposit optimization, we are going to continue to work through that. As you can see from the first quarter, up $5.6 billion in deposits, close to our $8 billion target already, I think it just gives us a lot of flexibility to go to the highest-cost deposits in the bank and see where we can push those rates down. Casey Haire: Okay. Great. And then on the capital front, have you guys looked at the Basel III proposal and what that means for you guys in terms of capital ratio lift? Kenneth A. Vecchione: Yeah. Actually, it is very positive for us. All in, we expect it, based on the rules that we are reading, to increase CET1 by 81 basis points. Operator: Your next question comes from the line of David Charles Smith with Truist Securities. Please go ahead. David Charles Smith: Hey. Good morning. Vishal Idnani: Morning. David Charles Smith: If the operating expense guide is $20 million lower than January following the $50 million in mitigating actions, does that mean that you are expecting an extra $30 million of variable comp for production? Or is there anything else underpinning that as well? Vishal Idnani: You are right. We mentioned $50 million. We are only down $20 million. The answer there is twofold. One, our Juris banking fee income was higher than we anticipated, and therefore, what you are seeing are the expenses which find their way into operating expenses. And the second thing that we said in our prepared remarks is that we expect the mortgage business to do better than we initially planned, and the variable compensation relates to the fact that we will be hiring up people to support increases in mortgage income. So those two or three things taken together bring the operating expenses down by $20 million. David Charles Smith: Okay. And then you mentioned the plan to hold mortgage warehouse deposits flat over the course of the year. If the market is rebounding from a depressed level in March, does that mean that you are expecting to lose share somewhat in mortgage warehouse? Or can you expand on that? Vishal Idnani: So let us be very candid here. We are trying to finesse the deposit growth and deposit pricing in this bank. We are starting with warehouse lending where we have some of the higher-cost deposits. We are going to work with our clients to see if we can move some of those higher-priced deposits out of the bank. We expect that our overall deposit growth for Q2 will be flat because we will be accelerating some of these deposits outside of the bank. We then expect Q3 to have its seasonally high production, and we expect less runoff in Q4 since we moved a lot of the deposits out of the bank in Q2. This is a finesse operation. We will give you more update on this, a little more color, at the investor day as we work with our clients to do this as well. This is a little bit of a tougher one to forecast, but the direction is very clear, which is we are trying to lower deposit costs, lower interest expense, help support NIM going forward, and actually bring up our loan-to-deposit ratio so we do not have to carry this excess liquidity at either a flat or negative drag to the bank. Operator: Your next question comes from the line of Timur Felixovich Braziler with UBS. Please go ahead. Timur Felixovich Braziler: Hi. Good morning. Kenneth A. Vecchione: Good morning. Timur Felixovich Braziler: Ken, you had made a comment about reevaluating credits, the macroeconomic backdrop, and the geopolitical environment when talking about pushing out some of the loan growth into the second quarter. Can you maybe unpack that comment a little bit? And maybe what does that mean for loan composition going forward, if that changes at all? Kenneth A. Vecchione: I think we were just a touch conservative here, and we did not push to accelerate closings in this quarter. We had the time to negotiate. There was not an urgent press from the clients to close before the quarter end, and we just took a little bit of a wait-and-see approach. What we are seeing and what we are feeling and what we are reading—and this is your guess as good as ours—we feel there will be some type of ceasefire that will continue on. We are certainly seeing the robust pipelines that are in front of us, and we are still encouraged that we will achieve the $6 billion on a go-forward basis. Timothy R. Bruckner runs regional; he is sitting here. Tim, do you have anything you want to add to that? Timothy R. Bruckner: Yeah. I think when you really look at Q1 in particular, and it signals a view into our look-forward, we really saw the preponderance of the asset growth in those core commercial full-relationship segments that we have consistently talked about on this call. Where we pulled back a little bit or showed some hesitancy was in some of the asset-specific finance-oriented segments, predominantly the commercial real estate-related segment. So we are really committed to that full relationship. Growth in our pipelines in those segments is robust and, of course, with appropriate sensitivity to the market conditions. Timur Felixovich Braziler: Okay. And then one on credit for me. Just maybe reconcile your comment on being past peak credit with just the pickup in special mention and 30- to 89-day delinquencies. And I am wondering, with the allowance ratio here at 78 basis points, if there is anything incremental that would need to be done there as we get closer to or breach that $100 billion level. Kenneth A. Vecchione: I am going to team up here with Bruckner on this answer, but first part on the special mention: special mention increasing $75 million is really no big whoop, alright, and I would not get nervous about it. When we looked at fourth quarter results for our peer group, for example, which consists of 22 banks, our total criticized assets, which includes special mention, were 15.7% of criticized assets to Tier 1 capital plus ACL. That is well below the peer median of 25.5%. It actually puts us at the third best of the 22 peer group. So, at our size, having something move in and move out does not necessarily mean our asset quality is deteriorating or getting materially better. What we do here—you have heard this—is an early process of early identification, escalation, and then resolution. Timothy R. Bruckner: I would really say on special mention, that is a transitional rating. That is a rating that signals early warning and a potential problem loan, and we use it in a very directed way as transition. If something has the characteristics that, with the passage of time, would result in a problem, we mark that as a problem loan. Our credit process is conservative in that respect, and we push resolution. Early elevation, early resolution is our mantra there. Kenneth A. Vecchione: And on ACL reserves, I think what we said last quarter and still holds true this quarter: as we migrate and change the loan composition here, moving more into C&I, you will see the loan loss reserve move up from where it is today at 78 basis points into the low 80s. You will see that all throughout the year, and I would expect the provision will follow that. So you ought to plan accordingly, and that is very consistent with what we said last time. Operator: Your next question comes from the line of Christopher Edward McGratty with KBW. Please go ahead. Christopher Edward McGratty: Great. Good morning. Kenneth A. Vecchione: Good morning. Christopher Edward McGratty: Ken and Vishal, on the pace of buybacks, you mentioned, obviously, being there to step in when the stock was weak in the quarter. How do we think about balancing the benefit from Basel over time, the low valuation in your stock, and the strong capital position? Is there a scenario where you could perhaps slow or further optimize the balance sheet and just lean more on the buyback given the valuation? Kenneth A. Vecchione: Strategically, what is very important for us is to work to continue to lower deposit costs. We have several businesses—corporate trust, business escrow services, our digital asset group, and Juris Banking—that really depend on credit ratings from the rating agencies, and we are investment grade. It is very important to sustain that or improve those investment ratings. We think keeping our CET1 ratio at 11% is the appropriate thing to do and, slightly over time, continue to migrate that number upward. For long-term value, it is more important for us to maintain the ratings. Secondly, unlike many of our peers, we still see a very strong pipeline in front of us. Longer term, we think having the capital to support that long-term growth will help investors and will support investors’ trust in us as we continue to grow the bank. So, Chris, we are not expecting to go deep back into the market to do stock buybacks. They are not in our models right now. If there is a reason for the stock—if it gets disrupted in the market—then we will come back and look to support it as we did in Q1. Christopher Edward McGratty: Understood. Thanks for that. And then just digging into the mortgage a little bit, could you help us on a Q2 estimate for mortgage revenues? You mentioned trends in April reverted back to early Q1. I know there have been moving parts—servicing and production. Thanks. Vishal Idnani: I can jump in on this. I will make a couple of comments on mortgage banking. We were in line with the same quarter a year ago. Obviously, the business is seasonal. We were down $18 million from the fourth quarter of last year. As Ken mentioned, we are very constructive on the trajectory of mortgage banking in 2026, especially given the current administration’s focus on home affordability. January and February were good months. In March, there was a slowdown with the spike in interest rates. Fortunately, we are seeing that activity come back in April. For the full year, we are expecting revenue from mortgage banking to grow about 15% over last year’s level. Encouragingly, the gain-on-sale margin was up 7 basis points quarter over quarter and up 18 basis points from the same quarter a year ago. That margin improvement is being driven by increased retail recapture volume at AmeriHome, and we hope to see that continue. While volumes were down in Q1 compared to Q4, volumes were materially up 18% from Q1 last year, and the trajectory looks good for the rest of the year. Operator: Your next question comes from the line of Gary Tenner with D.A. Davidson. Please go ahead. Gary Tenner: Thanks. Good morning. I just wanted to check to make sure I understood the way you are parsing that lender finance data on slide 20, that private credit slide. Does that $2.3 billion basically represent the rightmost slide, the NDFI—slide 24—or make up the vast majority of it? Is that the right way to think about it? Vishal Idnani: I think if I got your question right, you are trying to figure out, on page 24 where we break out the NDFI bucket, where that lender finance sits. It is going to be in that business credit intermediary. The large proportion of that 5% of the loans—call it about $3-something billion—is going to be our lender finance book. Our lender finance book on page 20 is $2.3 billion within that category when you look at the NDFI loans. Gary Tenner: Okay. That makes sense, and that is what I was thinking. I am just curious—you point out that the average funded amount per obligor is quite light. I am just curious on the level, the average would be around $40 million I think. So I am wondering what the range is and what the top end of exposure is on the fund level. Kenneth A. Vecchione: The top end for any one credit inside of our private credit portfolio is about $60 million of commitment, of which we have about $30-odd million funded, and that is the largest credit that we have. As we said, it is very granular inside of our private credit book. Gary Tenner: Alright. That is very helpful. Thank you. Kenneth A. Vecchione: I will just add on that: I did a tour maybe three, four weeks ago, as soon as all the private credit noise hit the market, with our largest private credit clients—and you would all know them by brand names. What they were telling us was exactly what we were seeing inside of our book, which was credit was performing well. There were redemption requests mostly coming from the retail side of their LP base, and institutional LPs were remaining confident about performance. We are clearly seeing that as well inside of our book. Vishal Idnani: And, Ken, if I can add just a couple of things on the book. On page 20, you will see how granular it is. The other thing we would flag here in this bottom right bullet is we actually also serve as the trustee on about 60% of this, which helps us a lot in terms of oversight and monitoring the cash flows in and out on a bunch of these deals. Operator: Your next question comes from the line of Analyst with TD Cowen. Please go ahead. Analyst: Hello. So just to piggyback on the earlier question, can I interpret that as within the lender finance, there is no loan that is over $100 million in size? And if we broaden that outside of lender finance—just overall—are you able to share the number of exposures that are over $100 million in size as an example? Kenneth A. Vecchione: No, we are not going to share that, but loans to funds are much larger. Inside of the fund, the composition of the clients inside of that fund—or the borrowers that they are lending to—are the numbers that I just reported. But, yes, we have larger size. We have about 40 major funds that we are doing business with, and the size is larger. Analyst: Got it. And if I look at the lender finance portfolio, the $2.3 billion, when you were talking about the reserve ratio over time in the medium term coming down to low 80s—Is there any change in reserve methodologies that you would embed differently on the lender finance portfolio going forward? Or how should we think about— Kenneth A. Vecchione: Let me just change that statement for you. We are moving the loan loss reserve from 78 to the low 80s. We are not taking it down, okay? You are not going to be seeing releases here. We are looking to build our provision over time. In fact, looking at this last night, from about three or four quarters ago, our peer group has increased their reserve by 11 basis points on average, and over that same time, we have increased our reserve by 10 basis points. But we do not plan to release anything. Vishal Idnani: You may be looking at the total ACL to funded HFI loans, which sits at 87 basis points right now. You are going to see that trend into the low 90s. As Ken mentioned, the loan loss reserve to funded HFI loans is at 78 basis points. That was flat quarter over quarter. We are going to push that into the low 80s. You will see that with the natural movement in the loan balances, and the total ACL to funded loans is going to go from 87 to the low 90s. Analyst: Right. That is what I was referring to. Thank you for the clarification. Is the lender finance portfolio going to grow further from here along with the size of the rest of your loan book, or would you like to slow the growth in this segment for any reason? Kenneth A. Vecchione: I think it will grow as the rest of the portfolio grows. I do not think we are going to put any incremental acceleration to the private credit book at this time. Operator: Your next question comes from the line of Analyst with Wells Fargo. Please go ahead. Analyst: Hi. Thanks for taking the question. I just want to follow up on Timur’s question earlier. What would it take for the loan reserves—the all-in measure, if you will—to go to 1%? Kenneth A. Vecchione: If you want the numeric number, take the percentage and multiply it by ending loans. But if you are wondering what it would take, it would take a change in the economy. We are not seeing that. The economy is strong. We have a process here whereby the first line presents and develops the loan loss reserves. Second line comes in and reviews and comments on it. We have a third line that comes in to make sure that the first and the second lines are doing it correctly. Then we have the Federal Reserve, and our outside auditors come in and review the whole process. So I cannot walk in here and say, “Let us move it up 20 basis points.” I have to have a foundation for that. Everything is based on economic forecasts, and we base them off of Moody’s, and then we look at our overall portfolio. I will remind you, half of our portfolio really has never had a loss. Vishal Idnani: And when you look at the total ACL to funded loans—the 87 basis points—and we have about $8 billion of resi mortgages where we have sold credit, if you just move that out of the loan base, the ACL to funded loans is 1%. Analyst: Got it. Thank you. And then just for clarification, is there a run-rate number you can give for the service fees at all, or did you just give some directional commentary on where it is going over the next few quarters? Vishal Idnani: We are not going to provide a run rate here. We have given guidance for what the fee income is going to do over the course of the year, and you can back out the securities gains and see that growth of 15%. We have also given guidance around what we think mortgage banking will do within there. You can back into the number. We do see that number trending down in the second and third quarter on service charges and fees and then back up in the fourth quarter, but it will get you to the full run-rate guide that we are giving here in the deck. Operator: Your next question comes from the line of Bernard von-Gizycki with Deutsche Bank. Please go ahead. Bernard von-Gizycki: Hey, guys. Just on the resolution process that you previously mentioned during the quarter—the $126 million charge-off against the LAM loan—you identified the $50 million security gains and the $50 million of cost savings. The remaining $26 million, that may be already covered in the updated fee guide, but any updated color on this? Kenneth A. Vecchione: You are right. We took $50 million in revenue and $50 million in expenses. We have not articulated how we are going after the last $20 million or $26 million. We will see if we can work our way to resolving that during the course of the year. But we have enough in front of us to do. Quite frankly, you and many of your colleagues were suggesting that we should not fully resolve the $126 million charge-off, to ensure that we have enough money available for product development, enhanced services, and also to ensure that our loan growth and deposit growth continue on the trajectory that they are at. So we have been taking that advice to heart, and we only offset $100 million against the $126 million as a solve. Bernard von-Gizycki: Great. And then from here, the Investor Day is coming up. Any preview on what you intend to convey? Any big-picture messaging you can share with us today? Kenneth A. Vecchione: We are not like MGM where we give a preview, but one of the things that we are going to talk about is the question we get all the time: why can we grow when other banks cannot? We are going to spend time showing you how we grow and how we think about growth over several horizons, and how the growth that we have is not by accident, and it is not that we run forward to anything that is fashionable today. It has been well thought out for an extended period of time. I think it will be interesting to have you look under the hood and see how we position ourselves for growth inside the bank. Operator: Your next question comes from the line of Anthony Albert Elian with JPMorgan. Please go ahead. Anthony Albert Elian: Hi. Ken, your earlier comment on accelerating some deposits out of the company—I do not think I have heard that before, from a company that has grown as fast as you do. Is that entirely driven by taking a sharper focus on ECR costs now? Will the plan to move deposits out of the company be fully completed here in 2Q? And any other areas of focus as part of this deposit optimization plan? Kenneth A. Vecchione: Stepping back and taking a big-picture look, our bank grows every year about the size of a small regional bank. Most banks do not do that. That is point one. Point two, we had a phenomenal deposit growth quarter. It exceeded our wildest imagination. We thought we would maybe get to $3 billion; coming in at $5.6 billion was far greater than we thought. Third, where those deposits came from—they came in from some of our higher-priced customers, which led us to take a step back and ask, how do we optimize here? What we are trying to do—and as I said earlier, this is a finesse game—we have already started the process to remix, maybe reprice, and encourage some deposits to leave the bank. We are trying to be aggressive on it, and we are trying to get it done quickly by the end of the second quarter. That is why we have given the guidance that our deposits may be flat quarter to quarter. But a lot of this is also going to depend on our clients and what they want to do. That is the game plan, and we will be able to report on it in a little more detail on Investor Day. The goal is to work to bring deposit costs down by doing that. It is either interest expense or it is on the deposit cost side. Anthony Albert Elian: Thank you. And then is the outlook for higher ECR costs entirely coming from now assuming no cuts versus the two cuts previously? Or is this mix shift change—the deposit optimization plan—embedded in the deposit growth outlook of what you expect? Thank you. Vishal Idnani: Sure thing. I would say the large preponderance of it is removing the two rate cuts. More than half of that delta—you will see the deposit costs are going up $115 million at the midpoint—more than half of that is backing those two rate cuts out. The other driver has to do with volume. Volume was much higher in the first quarter. If you actually were to maintain those balances, you are going to just have higher deposit costs as well. The offset to this is what Ken talked about, which we are going to work through here over the next quarter: how do you adjust for that and optimize it? Basically, we are giving you the higher deposit guide here. It includes the base-case run rate we have right now. It is a mix of rate and volume, driven primarily by rate. Operator: That concludes our question and answer session. I will now turn the call back over to Kenneth A. Vecchione for closing remarks. Kenneth A. Vecchione: The only thing I will say is we look forward to seeing you all on May 12 in New York. I think the start time is 08:30 for our first investor day. We look forward to spending more time with you. Thanks again for your time and attention today. Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.
Operator: Good day, everyone, and thank you all for joining us to discuss Equity Lifestyle Properties First Quarter 2026 results. Our featured speakers today are Marguerite Nader, our Vice Chairman and CEO; And Patrick Waite, our President and COO; and Paul Seavey, our Executive Vice President and CFO. In advance of today's call, management released earnings. Today's call will consist of opening remarks and a question-and-answer session with management relating to the company's earnings release. [Operator Instructions]. As a reminder, this call is being recorded. Certain matters discussed during this conference call may contain forward-looking statements in the meanings of the federal securities laws. Our forward-looking statements are subject to certain economic risks and uncertainty. The company assumes no obligation to update or supplement any statements that become untrue because of subsequent events. In addition, during today's call, we will discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release, our supplemental information and our historical SEC filings. At this time, I would like to turn the call over to Marguerite Nader, our Vice Chairman and CEO. Marguerite Nader: Good morning, and thank you for joining us today. I am pleased to report the results for the first quarter of 2026. We continued our long-term record of strong core operations and have maintained our full year normalized FFO guidance of $3.17 per share. Our manufactured housing portfolio represents approximately 60% of our total revenue, and these properties are currently 94% occupied. Our communities distinguish themselves by their ability to sustain high occupancy levels over extended periods. This resilience is driven by the composition of our resident base as homeowners represent 97% of our MH portfolio. Homeownership promotes long-term residency and supports our strong operating performance. The high concentration of homeowners is a key driver of our predictable recurring cash flow Residents are invested in their communities, which encourages stability, long tenure and strong neighborhood engagement. Within our RV portfolio, the increase in annual revenue reflects continued strength across our customer base. Our annual customers stay in park models, resort cottages, and RVs with many families viewing our properties as an integral part of their traditions and family history. This loyal -- this loyalty supports sustained long-term revenue. Turning to demand. Our offerings across our portfolio are unique. We offer great long-term experiences in sought-after locations at a fraction of the cost of alternatives. We are engaging with our customers through traditional e-mail campaigns, social media outreach and digital advertising. For the quarter, our websites attracted a combined 1.3 million unique visitors and generated 94,000 online leads, reflecting strong engagement. The drivers of the lead generation are from our RV annual lease campaign and trip planning lead generation. Our social media strategy seeks to engage both customers and prospects in a wide variety of platforms. We have over 2.4 million fans and followers across several social media networks. Over the past 10 years, we have grown our social media fans and followers by an average of 25% annually. During periods of uncertainty, it's important to recognize the stability of our business and the fundamentals that support continued growth. I will highlight 3 of the key components of our success. First, our unique business model drives sustained long-term outperformance. Over the past 25 years, ELS has outperformed the REIT industry NOI growth by 150 basis points. The stability through economic cycles is a hallmark of our success. Second, the demand drivers are the support for continued long-term outperformance. Our core customers are baby boomers and 10,000 people per day turn 65 through 2030. Thereafter, the Gen X generation maintains the demographic tailwind for the 15-year period following the baby boomers. The runway remains long supported by favorable migration patterns. And finally, our capital structure is an advantage for us. Our balance sheet is in terrific shape with an average term to maturity of more than 7 years. Our debt is fully amortizing and not subject to refinance risk, and our debt maturity schedule through 2028 shows only 14% of our debt coming due compared to the REIT average of 35%. We have delivered an 18% compounded annual dividend growth rate over a 20-year period. ELS offers a rare combination of strong income growth, stability and demographic tailwinds backed by a well-managed balance sheet. I want to thank our team for a great start of the year. They've done an excellent job supporting our snowbird guests and will soon welcome our customers for the upcoming summer season. I will now turn it over to Patrick to provide more details about property operations. Patrick Waite: Thanks, Margarite. We're in the middle of our seasonal shift with our snowbird customers heading back to Northern climates and our northern properties gearing up for the summer season. As we wrap up the busy season in the Sunbelt, I'd like to provide an update on our key Sunbelt MH markets and the value found in our communities. Florida is our largest market, accounting for about 50% of our core MH revenue. In our top markets of Tampa St. Pete and Fort Ladders. Pound Beach, the average single-family home price ranges from 350,000 to over $500,000. Our communities in these markets offer a compelling value with average new home prices of $100,000 and resale home prices averaging about $50,000. We continue our strategy to expand existing communities in areas of high demand and have added more than 1,100 MH sites in Florida since 2020. In our core Arizona market of Phoenix, Mesa, single-family homes averaged more than $400,000, while new homes in our communities averaged $100,000 and resale homes averaged $70,000. We are actively selling homes in our expansion projects in Arizona or new inventory is selling at prices typically ranging from 110,000 to $180,000. And we have 500 completed expansion sites to support further occupancy growth. In our Northern California markets around San Francisco and San Jose, homes averaged over $1.3 million. All the Southern California markets of Los Angeles and San Diego are about $900,000 to $1 million. Given high demand and the strong value proposition for our California properties, the portfolio is 99% occupied and home sales are typically resales of resident homes in the range of $100,000 and higher. In each of these markets, residents received an exceptional housing value along with desirable amenities, including swimming pools, clubhouses, pickleball courts and more. The active lifestyle and social engagement offered our communities as why homeowners stay with us for an average of 10 years. Leveraging feedback from our customers, our property operations team establishes comprehensive budget plans for each property. Our on-site team members prioritize occupancy and revenue growth while thoughtfully managing expenses such as seasonal staffing, overtime and discretionary spending. We're able to adjust to changes in the business to meet high customer expectations while managing expenses scaled to property operations. At the same time, we are investing in new technology across our business. customer touch points like online payments, customer surveys and follow-up and operational efficiencies like online check-in, staffing plans and expense management. This continued innovation allows us to increase operational capacity while improving the customer experience. Importantly, these efficiencies give our on-site team members more time to make connections with our customers and create memorable experiences. In our RV business, the long-term annual are the core stable occupancy -- core of our stable occupancy. Through April, we have seen improvements in attrition trends compared to last year, and we are looking forward to the summer sales season. Annual sites account for 75% of our core RV revenue, and most of our annual RV customers on a park model or our view of site improvements and sell their unit in place when they choose to leave the can grow. Annual Marina revenues experienced occupancy headwinds year-over-year from delays for permits and longer construction time lines for projects related to previous storms. We expect these construction projects to be completed late in 2016 and into 27, which will then contribute to occupancy gains as we build back that business. We're looking forward to launching the 12th annual 100 days of camping social media campaign this summer, which runs from Memorial Day weekend through Labor Day weekend. We see strong engagement with this campaign year after year, earning over 45 million views across social media last summer. Our teams will be following along as customers post photos online, helping each guest make memories and reinforcing the legacy of our brand. Now I'll turn it over to Paul. Paul Seavey: Thanks, Patrick, and good morning, everyone. I will review our first quarter 2026 results and provide an overview of our second quarter and full year 2026 guidance. First quarter normalized FFO was $0.84 per share, in line with our guidance. Core portfolio NOI growth of 4.9% compared to prior year was slightly ahead of our expectations for the quarter. Core community-based rental income increased 5.7% for the quarter compared to the first quarter of 2025. The increase in rental income is primarily the result of noticed increases to renewing residents and market rent paid by new residents. Occupied sites increased 54% during the first quarter, resulting in occupancy of 93.9%. During the first quarter, we sold 228 new and used homes. The occupancy comparison to first quarter 2025 is impacted by expansion sites added during the past 12 months. Adjusted for expansion sites, occupancy would be 94.4%, in line with first quarter 2025. First quarter core resort and marina based rental income outperformed our budget by 10 basis points in the quarter. Rent growth from RV and Marine annuals increased 4.2% for the quarter compared to prior year. slightly below expectations for the quarter. Marina performance was impacted by delays in slip restoration efforts. Seasonal and transient ramp was 70 basis points higher than guidance as a result of higher-than-expected seasonal rent in the quarter. For the first quarter, the net contribution from our total membership business, which consists of annual subscription and upgrade revenues, offset by sales and marketing expenses was $17.6 million. an increase of 13.7% compared to the prior year. Membership dues revenue growth is primarily rate driven. Approximately 1,200 upgrade subscriptions were originated in the quarter from new and existing members. Core utility and other income increased 5.4% compared to first quarter 2025. Our utility income recovery percentage was 50.4%, about 280 basis points higher than first quarter 2025. First quarter core operating expenses increased 1.8% compared to the same period in 2025. We renewed our property and casualty insurance programs, April 1 and the premium decrease year-over-year was approximately 18%. We are pleased with the results, which reflects no change in our property insurance program coverage. Core property operating revenues increased 3.7%, while core property operating expenses increased 1.8%, resulting in growth in core NOI before property management of 4.9%. Our noncore properties contributed $3 million in the quarter, slightly higher than our expectations. Property management and corporate expenses were $28.6 million in the first quarter of 2026, and 3.4% lower than 2025. The press release and supplemental package provide an overview of 20,262nd quarter and full year earnings guidance. The following remarks are intended to provide context for our current estimate of future results. All growth rate ranges and revenue and expense projections are qualified by the risk factors included in our press release and supplemental package. Our guidance for 2026 full year normalized FFO was $3.17 per share at the midpoint of our guidance range of $3.12 to $3.22. We project core property operating income growth of 5.7% at the midpoint of our range of 5.2% to 6.2%, we project the noncore properties will generate between $5.7 million and $9.7 million of NOI during 2026. Our property management and G&A expense guidance range is $119 million to $125 million. In the core portfolio, we project the following full year growth rate ranges, 4% to 5% for core revenues, 2.2% to 3.2% for core expenses and 5.2% to 6.2% for core NOI. Full year guidance assumes core MH rent growth in the range of 5.1% to 6.1% and Full year guidance for combined RV and Marina rent growth is 2% to 3%. Annual RV and Marina rent represents approximately 75% of the full year RV and Marina rent and we expect 4.8% growth in rental income from annuals at the midpoint of our guidance range. As I mentioned, the change in expectations for full year growth in annuals compared to our prior guidance is attributed to our Marina portfolio, which is experiencing longer-than-anticipated delays in restoration of slips. Our full year expense growth assumption includes the impact of our April 1 insurance renewal for the rest of 2026. Our second quarter guidance assumes normalized FFO per share in the range of $0.69 to $0.75. Core property operating income growth is projected to be in the range of 4.8% to 5.4% for the second quarter. Second quarter growth in MH rent is 5.6% at the midpoint of our guidance range. We project second quarter annual RV and Marina rent growth to be approximately 5.1% at the midpoint of our guidance range. Our guidance assumes second quarter seasonal and transient RV revenues performed in line with our current reservation pacing. We've made no changes to prior guidance for seasonal and transient rent in the third and fourth quarters. Second quarter growth in core property operating expenses is projected to be in the range of 3.9% to 4.5% and includes the impact of our April 1 insurance renewal. I'll now provide some comments on our balance sheet and the financing market. Our balance sheet is insulated from refinance and rate risk and is well positioned to execute on capital allocation opportunities. Our floating rate exposure is limited to balances on our line of credit. Our debt-to-EBITDAre is 4.5x and interest coverage is 5.6x. We have excess to approximately $1.2 billion of capital from our combined line of credit and ATM programs. We continue to place high importance on balance sheet flexibility, and we believe we have multiple sources of capital available to us. Current secured debt terms vary depending on many factors, including lender, borrower sponsor asset type and quality. The current 10-year loans are quoted between 5.25% and 6.25% 60% to 75% loan-to-value and 1.4 to 1.6x debt service coverage. We continue to see solid interest from life companies and GSEs to lend for 10-year terms. High-quality, age-qualified MH assets continue to command best financing terms. Now we would like to open it up for questions. Operator: [Operator Instructions]. And our first question comes from Jamie Feldman of Wells Fargo. James Feldman: Great. I wanted to dig a little deeper into the insurance renewal and then just the impact on the expense savings and the new guidance. Can you talk about what you had in the original guidance for the insurance renewal, how that compares to the down 18%? And then just maybe some of the moving pieces around the expense savings and the guidance going forward? Paul Seavey: Sure, Jamie. I think that we've guided to full year core expense growth. I think I mentioned this in the January call. It includes a premium to CPI. That is offset by some anticipated savings in a few line items. And just as a refresher for everybody, roughly 2/3 of our expenses are comprised of utilities, payroll and repairs and maintenance. And those three line items, we expect year-over-year growth for the remainder of 2026 to be approximately 4.7%. The CPI reported in April was almost 100 basis points higher than the prior month, and we've made some expense adjustments, including utility expenses and R&M both in anticipation of potential energy and supply cost increases. And with respect to the insurance we had an assumption in our budget, which was informed based on what we understood what's happening in the market at the time that we finalized our budget in January. And so we've made the adjustment to reflect the 18% reduction in premium and all of that is rolled into the guidance that we provided. James Feldman: But are you able to say like what was in the initial number for the insurer? I'm just trying to figure out how much better it was than what you thought. Paul Seavey: Yes. Generally, we don't go into that level of detail, Jamie. Operator: And our next question comes from Jana Galan of Bank of America Securities. Jana Galan: Following up on the revised seasonal and transient top line guide, can you just talk a little bit more about like booking visibility and kind of reservation pacing. And I don't know any impacts with kind of the weather. Paul Seavey: Sure. I mean, with respect to the seasonal business and just as we think about advanced reservation pacing, certainly, we talked a lot in the past about our transient business and not great visibility beyond the coming 90 days as our first point of kind of visibility. So as I mentioned, we've updated our guidance for transient to reflect what we're seeing in the system right now in terms of reservation pacing. But just a reminder, roughly 60% of the revenue comes from bookings that are within 7 to 10 days of arrival. Jana Galan: And also very much appreciate the update on the financing environment. I was just wondering if you can maybe comment on any changes in the transaction environment or any more product coming to market potentially on the RV side. Marguerite Nader: Sure. Thanks, Jana. Yes, as you know, our assets are really in demand from an investor standpoint. It's not a secret that the model that we have is compelling. But we find times in our history that we have limited amount of quality assets for sale, and we're in that time right now. As an industry, we're experiencing a low volume of activity. The ownership remains highly fragmented, but our team is very engaged with owners as they consider their next step in the future. I think that with your -- with respect to your question on whether on the RV side, I think there probably is more opportunities to buy transient RV parks than there were previously. But that's necessarily something we are interested in. Operator: And our next question comes from Eric Wolfe from Citi. Eric Wolfe: For the Northeast annual RV sites, can you just talk through the trends that you're seeing there? I think last year, around this time, you started to see some higher turnover like 20 properties or so. Does that seem to be normalizing? Is occupancy head behind? Maybe just talk through sort of for those Northeast properties, the annual trends you're seeing thus far? Patrick Waite: Yes. Sure, it's Patrick. We are seeing trends that are more consistent with our historical experience as opposed to the elevated attrition that we saw at the same time last year. And as we made our way through the quarter, sequentially month after month, we were able to achieve a higher level of sales. We feel like we have consistent demand in the RV annual space. And just as a reminder, in the back half, of 2025, we added 500 annual. So we kind of rolled out of that period into a period of steady demand, and we're past that elevated attrition that you referenced from last year. Eric Wolfe: Got it. That's helpful. And then maybe just going back to the marina restoration. I guess it sounds like based on your original guidance, you expected maybe some slips to come back, I guess, this quarter, but now it's sort of getting pushed to late 2026 or even early 2027. I guess, first, I just want to confirm, that was right. And then maybe just discuss, I guess, it sounds like maybe over the last 2 months, you've seen construction delays or permitting delays. Just sort of what happened and what the magnitude of it is. I guess I calculated like $1.5 million, but maybe just let us know if that's incorrect. Patrick Waite: Yes. So I'll -- let me speak to what's actually going on at the property. So it's 3 properties. They were impacted by the hurricane season in I think your time line is pretty close to our thinking. I would have expected that we would have been on coming into this year and starting to build occupancy as projects were completed through the current year. The reality is the delays are, call it, in the neighborhood of 9 to 12 months. And the expectation of progress being completed and building back occupancy late in 2026 and into 2027, I think is a good way to think about it. Operator: And our next question comes from John Kim of BMO Capital Markets. John Kim: Many teasing occupancy, it continued to trend down. It did end the quarter on a high note, but I'm wondering how you see that playing out for the rest of the year, excluding the impact of expansions. Paul Seavey: Yes. As I mentioned in the call, occupancy ended the quarter at 93.9%. That's up 10 basis points from year-end on the 54 sites that we filled during the quarter with no expansion sites added. We have a -- we essentially have an assumption in the budget for a modest uptick in occupancy for the rest of the year. not quite the volume of growth that we saw in the first quarter in the future 3 quarters, and so anticipate a slight increase during the rest of the year. John Kim: Okay. Can I ask a second question? Paul Seavey: Sure, you can. John Kim: The 1,000 trails, you talked about a new -- I think a new rate strategy. just given that it's gone up 12% year-over-year despite fewer members. Is this something that you're going to carry on through for the near future and potentially increase rates further at the expense of memberships? Marguerite Nader: Yes. I mean I think if you look at the supplemental, as you point out, you see that increase in revenue. I think all -- if you add all the line items together, you get to about an 8% growth. And that is primarily because we changed that product. And we have a higher annual dues rate. The term is, I think, 2 to 4 years and with costs ranging from $2,000 to $4,000 a and the members want to have that extra time at the properties, take advantage of discounts on cabins, et cetera. So right now, that price is, I think, is properly priced. And as we head into '27, we would look to what increases we would think that we should do in terms of that product. But the product as a whole has been very successful for our customers, our members wanting to get that upgrade and pay the additional does. Operator: And our next question comes from Haendel St. Juste of Mizuho Securities. Haendel St. Juste: I wanted to go back to the OpEx guide for a bit. Again, I guess I understand that you don't want to get into the specific pieces of how much things like insurance or causing an adjustment for the guide. But I guess I was more curious on the oil side. Obviously, the cost of oil has picked up quite a bit this year. And I'm curious how you can hedge the future volatility in the price of oil? Or how -- what's contemplated in the guide and potentially how that can be hedged. So any color on what's being contemplated, how it can be offset and how to think about that in the broader context of the prior guidance versus the new guide Paul Seavey: Sure. So our process to update guidance considered the impact of the roughly increase in oil price since December. We reviewed the pricing structure used by the utility providers in states where we operate. These include regulated, frankly, primarily regulated and some deregulated markets. utility providers in certain states like Florida do have pricing structures with variability clauses that allow them to recapture some portion of their costs if the regulated rates limit their ability to recapture price increases. So as we looked at all of that, we increased our utility expense assumptions for the remainder of 2026. Haendel St. Juste: Okay. Fair enough. I appreciate that, I suppose. And then if I could squeeze in one just on the revised guide for the noncore portfolio income, maybe some color on what's driving that and how to be thinking about modeling that? Is that fair just to perhaps ratably grow that through the model the rest of the year? Paul Seavey: Yes. I think it relates to just improved expectations, a couple of the properties in that portfolio. primarily RV locations. You may recall that there are a number of properties that are in the noncore portfolio that were previously impacted by storms that were not operational. And so as they're recovering, we noticed some upside in the performance and the expected contribution and that was the basis for the adjustment. Operator: And our next question comes from Brad Heffern of RBC. Brad Heffern: Historically, you've talked about weather being the primary swing factor on RV transient and there hasn't really been an obvious impact from gas price movements. Obviously, with the or we're seeing a much more dramatic and quick change in prices. Is there anything in your data that suggests that it might be having a negative impact on transient demand? Marguerite Nader: Yes. We've looked certainly over many years at gas prices and the effect on RV transient. And certainly, gas prices have made headline news over the past several weeks. Year-over-year, I think we've seen a $0.90 increase in the price of gas, not unlike what we saw during the pandemic during times in the pandemic. But we kind of think of it in terms of just what is it -- what's the incremental cost to our customer. And if you consider a 3-night trip. Our average customer is going about 90 miles to our locations. That higher gas price results in an increase of about $25, $30 for the trip -- and if that's three nights, you're talking about kind of $10 per night. So if you think about other vacation alternatives, the overall cost of our vein is really significantly lower and offers the flexibility of really being able to control your spend and also be able to control your environment. So I think at the current rates, net-net, I think it can be a positive certainly, if you're talking about rates that are significantly higher or you're talking about supply issues, then you get into kind of maybe different conversations. But I think where we're at right now, our customers are excited to get out there and use their RB. Haendel St. Juste: Okay. Got it. And then the Canadian tariffs kind of went into effect more than a year ago. So we should be starting to lap some of the comps on the boycotts. Are you seeing any evidence that those Canadian customers might be coming back or any other color that you can give around that? Patrick Waite: Yes. The we're just out of the summer season and the impact of the Canadians rolled through those results. I think it's early to call what we're going to see for the summer season. And certainly, we're in some unpredictable times. But we'll provide updates as we start to get greater visibility into the next couple of quarters. Operator: And our next question comes from Michael Goldsmith of UBS. Michael Goldsmith: Maybe just a follow-up on the seasonal and transient seems like the first quarter number was in line with the initial guidance. You're kind of guiding to second quarter of down 9%, but then it kind of -- it implied that the back half is up about 3%. So I was just wondering how you're thinking about that 3% growth in seasonal and transient in the back half? And if that split is that more fourth quarter weighted than third quarter? And then are you expecting in the guidance, are you baking in kind of an acceleration in the fourth quarter as you lap some of that disruption from the Canadian customer. Paul Seavey: Sure. Broadly, Michael, as you said, the base rental income growth rate, it does reflect a 50 basis point decline to prior guidance. half of that, as we talked about as the marina. The remainder is heavily weighted to our seasonal expectation for the second quarter. That's mainly in April. Just to provide that color. And then as we think about the remainder of the year, as I said during my opening remarks, we've left the assumptions for third and fourth quarters in place as they were budgeted as we don't have great visibility into that activity. Michael Goldsmith: So as they were originally budgeted, was that does that bake in an assumption that you'd get back some of the Canadian customers that didn't come in fourth quarter. Paul Seavey: We have an assumption in the fourth quarter of a recovery of some of that. I wouldn't qualify it to Canadian customers. I think that, as we've talked, the impact on the seasonal business, provides an opportunity for us to backfill occupancy from customers, whether they're Canadian or domestic customers. Michael Goldsmith: Got it. And then just as my follow-up question, on the home sale volumes on price, it looks like new sale volumes were down and the rate and the price per home was down and then similarly on the used homes. I think they were also -- at least the price was down. So presumably that's a mix shift, but can you provide a little bit more color in what's going on in the home film. Patrick Waite: Yes, sure. I mean we continue to see steady demand. The beginning of the quarter was -- it was impacted by weather, it was winter and that even bled down through many of the Southeast markets. And as we work our way through the quarter, we saw steady demand and feel good about the demand profile. Just with respect to the new and used sales the one, I wouldn't read too much into in any particular quarter, the home sale price because to your point, it has a lot to do with mix. I mean, directionally, the price per on the new was up and the price per on the used was down. But all of that is with the backdrop of -- we feel like we have steady demand in the MH portfolio. Operator: And our next question comes from Wesley Golladay of Bard. Wesley Golladay: Can you unpack the seasonal and domestic transient guests for the first quarter? Was that positive growth ex Canadian? Paul Seavey: Yes, it was primarily overall, it was growth. It did included the Canadian customer in the revenue, of course, but just to be clear, the marginal improvement was from customers that we saw booking seasonal stays during. Wesley Golladay: I guess the -- I mean, if you were -- could you unpack the domestic traveler? Was that positive? Is that customer segment bottomed? And do you have a positive outlook for that segment going forward. Paul Seavey: The domestic seasonal customer is what [indiscernible] sorry, sorry. Wesley Golladay: Domestic seasonal and transit segment. So I'm trying to figure out how much of that was weighed down or the outlook this year is maybe Canadian negative, but U.S. domestic and transit gas positive? Just trying to unpack if that is if that segment is bottoming out at the moment. Paul Seavey: Well, I guess. I'll say two things. One, as we -- as Patrick mentioned, we've ended our winter season and we're heading into our northern season. So that's a very different customer and different potential there. And maybe with respect to the seasonal as we just think about the future, the coming winter season next year, maybe it'd be helpful to walk through some historical context on the reservation patterns for the winter season revenue. I mean in the past, we would end our winter season with approximately 50% of the anticipated future winter season revenues booked those advanced reservations allowed customers to reserve the site that they wanted at the property and didn't carry penalties for cancellation. Then following a fair amount of booking and cancellation activity after the first quarter and into the summer months. By the end of any winter season, roughly 1/3 of the revenue that was generated during the winter season came from those advanced bookings. So start the season with 50% of the revenue booked to end with about 1/3 after all the cancellations -- and so as we think about it now, there's been a meaningful disruption to the seasonal business, we think that we've talked about as a result of the domestic and the Canadian relations, and so we look at it in terms of engagement. And as we sit here right now, 50% of the in-place guests have reserved space for next year, and that compares to 47% of the in-place guests last year. Wesley Golladay: And then one more, I guess, bigger picture question. With the rise of artificial intelligence and the way people are searching for product these days, are you noticing any change in the way you source your residents or a seasonal and transient guys? Marguerite Nader: Certainly, our marketing department is very focused on using artificial intelligence inside of our search options, understanding and appreciating customers are searching for our offerings. It is no longer kind of a simple camp grounds in Maine. It's a much more robust search and we're focused on making certain that once that search is put in place and once the person indicates what exactly they're looking for, we are able to have our communities and our resorts come up at the top of the list. And a lot of that is a function of our websites have been around for a really long time, and they have a really high number of reviews, which is very helpful for that algorithm. Operator: Our next question comes from Jason Lane of Barclays. Jason Wayne: Just on the RV and Marina. Looking at the RV and Marina. annual guidance cut, so that was driven primarily by transient and marinas. So can you just give any color on how rent growth and occupancy trended in RV annual specifically in the first quarter and what your assumptions are for the rest of the year, RV annual, specifically. Paul Seavey: The RV annual, when we reported in October, we provided our guide for rate growth that was 5.1%, and that's been consistent. And we anticipate that to be consistent for 2026. We're seeing no change from that. And in terms of occupancy, we had roughly 100 sites that we were down in the first quarter, and we anticipate, as Patrick was talking recovery of those sites and addition of annual sites throughout the year. Jason Wayne: it. And then it looks like there were some other sites added this quarter. Just curious where those new sites were added, if that was all in kind of the markets you mentioned earlier. And if there's any that are expected to come online this year in those markets and maybe outside the. Paul Seavey: We didn't add sites in the quarter. We did have some shifting in our reporting. So a couple of things in terms of just the presentation of sites in our earnings release, if that's what you're referring to provide greater visibility and clarity on the composition of sites in our JV portfolio. We reported those a bit differently and showed those in the categories with footnote disclosure that they relate to the JVs. And then we also annually at the end of the first quarter, we true up our seasonal site count for the number of seasonal customers that we had during the winter season. So that adjustment was made. And with that adjustment, the transient site count was offset or adjusted accordingly. Operator: And our next question comes from David SegaLoggerhead of Green Street. David Segall: Just a follow up on the site count changes. What do you think are the prospects for reclassifying those sites that were converted from or classified from seasonal transient back to seasonal later this year? Or is that more of a 2027 event? Paul Seavey: Yes. Our practice is to update that at the end of the first quarter based on what we saw during the winter season. So we would anticipate doing that a year from now. David Segall: Great. And I appreciate the color on local home prices that you gave earlier in the call. I'm curious what your thoughts are on the impact of stagnating or lowering prices and the local for sale market would be on the MH values and the ability to increase rents and just kind of implicitly what do you expect the spread between stick built homes in your markets to MH home values to remain stable? Or do you think it would narrow Patrick Waite: Yes. Let me -- I guess, first, I'd put in the context the value proposition that I addressed in my prepared remarks is very attractive and is a wide band to the next mark on single family. So we have a strong value proposition even if there was some moderation in single-family home pricing, and we've seen that historically that we've had consistent occupancy and consistent home sales, even in up cycles and more moderate cycles. So I think that's our reasonable expectation as we look forward to 2026. And I'd also highlight that those key markets that I highlighted have a very consistent demand profile, including in single family in the mid-tier across each one of those submarkets. Operator: And our next question comes from Peter Abramowitz of Deutsche Bank. Peter Abramowitz: Yes. Just wondering, could you give us kind of a refresher on general demographics of your transient customer base I think age average income levels would be helpful. And I know you talked about the impact of oil prices on decisions around train and travel. But just generally, kind of what are the democrats of that customer base? And then also maybe some of the broader macro factors like job growth, anything we should be watching for thinking about as it relates to results through the rest of the year? Marguerite Nader: I guess, the demographics of our transient customer really varies by region. So in the northern part of the country, the Northeast and the Midwest is really family camping. So you're talking about a couple. 40-, 50-year-old couple with a couple of children, and they come out on a weekend basis, and they're generally employed full-time workers and just have the time when they have time off from their jobs to be able to camp and then very differently in the South and Southwest in Florida, Arizona, et cetera. We have -- our transient camper tends to be a retired couple who tends to go and stay in a few different locations and has just more time on their hands to be able to work their way through our properties and through our system. Peter Abramowitz: Okay. That's helpful. I appreciate that. And then just one more on the scope of the work of the Marinas I think you mentioned it was three properties specifically. Can you share where they are? And then is there any sort of kind of offsetting revenue pickup in 2017? Or is this just work to kind of get the properties back online? And kind of back on the trajectory that you previously expected? Marguerite Nader: Yes. The properties are all in Florida, three properties are in Florida. And yes, certainly, there is a revenue pickup in 2017. There's upside in 2017 for these assets. because there is a high demand for these slips to be brought online, they'll be filled and then we'll be recognizing that revenue in 2017. Operator: And our next question comes from Adam Kramer of Morgan Stanley. Adam Kramer: Just want to ask about capital allocation priorities here. I think, in particular, right, development seems like a really interesting opportunity. Given I think what you talked about for yields historically versus what acquisition yields would be today. So just wondering, again, general capital allocation priorities sort of stack ranking them. And then I think with development in particular, is there an ability or an interest in sort of that beyond, I think, the sort of 700 to 1,000 sites you've talked about on an annual basis? Patrick Waite: Yes, sure. So on the development front, over the last 3 years, we've brought online a little over 2,000 sites, that's been a mix of MH and RV, highly focused on our core markets in the Sunbelt. This year, looks to be in the range of 200 to 400 sites that deceleration is not is not an indication of our desire to continue developing our expansion sites, but it's just the cadence of projects as they're working their way through an approval process and then getting a shovel in the ground. Those yields, we continue to expect to be in the high single digits. Those properties that we're focused on for the upcoming year in Florida, and then we have another 1 out on the West Coast. Adam Kramer: Great. And then maybe switching gears a little bit more of a bigger picture question. Just on the policy side of things. I think the -- so Roto Housing Act has a number of elements related to manufactured housing in it. I think the permanent chassis requirement getting removed sort of a big one, but also some financing elements pushed for factory-built housing a number of others. So I was just wondering, again, sort of open any question here. Sort of maybe the company's thoughts just on the act and what it might mean for the industry and the potential read-throughs to DLS specifically? Paul Seavey: I mean, overall, I would say that it would be helpful to the industry for the points that you just highlighted, specifically to ELS some variability in manufactured housing setup may provide an opportunity for us. I think there's broader opportunities for the manufacturers. We are close to tracking what is the progress on that legislation. And just given the current state of affairs in DC, that bill has stalled for all practical purposes. I think there's still a desire to move it forward, but we'll have to we'll continue to monitor. We can provide updates on future calls as we get some more insight. Operator: And our next question comes from Steve Sakwa of Evercore ISI. Steve Sakwa: A lot of questions have been asked and answered. I just wanted to kind of circle back on the MH occupancy point. I guess whether you kind of look at the data on Page 9 or the data on Page 7, slightly different numbers, but kind of paints the same sort of broad picture, which is the site count has gone up year-over-year. but the number of occupied sites is actually down when you kind of look at the ending March 31, '26 versus March 31, '25, and I think Patrick mentioned that you guys added about 500 expansion sites maybe over the course of the past year. So maybe just talk about that lease-up process? And are you still doing expansions at the same pace, given that the occupancy has kind of been trailing down? Or how do you sort of think about that development lease-up pace and future builds? Patrick Waite: Yes. Well, just high level on the occupancy front, just a reminder that as we made our way through '24 and '25 the hurricane impact from the '24 season was basically 300 occupied sites. So we're working through building that back. With respect to our expansions. We've completed some very solid recent expansions in particular, in Florida and Arizona. The lease-up rates there, I would expect to be anywhere in the range of 20 to 30 sites potentially as high as 40. And that's really going to depend on macro factors and then what's going on in the individual submarkets. But if you're leasing up in this space somewhere between the neighborhood of 20 and 40 sites on an annual basis. That's a good run rate. These properties are -- the expansions are part of very solid core properties and solid submarkets. So they'll continue to contribute to occupancy over the next couple of years to reach stabilization. And then as I mentioned a little earlier, we have a desire to continue those types of projects. We have others in the pipeline, and we can talk about those more as we approach 2027 and 2028. Steve Sakwa: So just as a quick follow-up, Patrick. Is it your expectation that occupancy, given the hurricanes and the expansions, would you expect occupancy, whether it's an average or a spot to be bottoming in '26 and then moving higher in '27 or '28? Or could you envision where occupancy is even down next year as you're kind of working through the pace of that and then it kind of starts to take off in '28? Patrick Waite: I would expect that we're going to increase occupancy in the MH portfolio on a consistent basis over time. That doesn't mean that we're not going to have an external catalyst that's a disruption to the business model temporarily, but we have a long history of continuing to increase the occupancy. And even backfilling the impacts of the hurricanes that I referenced show a very steady demand profile. Operator: And we have a follow-up from Eric Wolfe from Citi. Eric Wolfe: Another questions. If I look at your guidance changes, in the supplemental, it adds up to almost $0.02 positive benefit. I was just wondering what's offsetting that? Paul Seavey: Sure. Eric, we have maintained full year normalized FFO per share guidance though there are a lot of changes, as you mentioned. You can see the items that increased. The main offset in the updated guidance relates to assumptions for our income from home sales and ancillary operations. Eric Wolfe: Got it. That's helpful. And then you mentioned some adjustments to April seasonal. Was that just, I guess, the number of customers that typically extend their stays. So you just saw a little bit less extending their stays this year. And do you think that was perhaps due to sort of the greater shift towards domestic customers versus Canadian? Or is there some other factor around that? Marguerite Nader: A lot of what we see, Eric, in April, is really weather-related where people are saying, okay, it's nice enough up north, we can head up north. And No longer need to seek refuge in the cold or in Florida from the cold. So that's kind of what we saw. And you see that same effect in October, where -- some people stay longer, if you have a longer summer in September and October. And if you just saw people returning back north quicker than anticipated. Operator: And we have a follow-up from Brad Heffern of RBC. Brad Heffern: Yes. On the RV site count, what is the financial impact of a seasonal site moving to transient? I'm sure, obviously, it could just get booked again is the seasonal next winter. But if it stays a transient sight, is there a meaningful negative financial impact from that? Marguerite Nader: I mean it really depends on what -- how that site was performing. I guess just think -- if you just think about the annual conversions to transient our average annual is about $7,000 or $8,000 and your average transient customer is about $81 per night. So it depends how many nights and both the same with the seasonal, how many nights are occupied as to whether or not you have a financial impact to that conversion. Brad Heffern: Okay. But the like shift of those, whatever it was 12 1,400 sites, is that meaningful in some way? Or is it really just moving change from one back to the other? Paul Seavey: Well, it's -- I mean it's already embedded in our guidance because it's simply a reflection of what we experienced during the winter season in terms of the occupancy of those sites. Operator: And we have a follow-up from Jamie Feldman of Wells Fargo. James Feldman: I had a very strict instructions from Adam to ask one question. It's still hard. So I've had a couple of people ask me to clarify. So I apologize if you guys already answered this or provided it. But the 50 basis point cut to RV and Marina based rental income, was that all from the slips. And if it wasn't all the slips, how do you break it out between RV and Marina? Paul Seavey: Well, the -- it's interesting because there's a 50 basis point decline in RV and Marine in total. And there's a 50 basis point decline in RV and Marine annual. So to be clear, the RV and Marina annual 50 basis point decline is attributed to the Marina portfolio. It's not the RV portfolio. It's the Marina portfolio. And I think somebody earlier in the call said they calculated roughly $1.5 million, and that's correct. James Feldman: Okay. All right. And then last, the 300 sites lost in the hurricane, how many of those are back online. Because it seems like it comes up every quarter the occupancy change or fewer lease sites, fewer I should say. Patrick Waite: Yes, we're in the process of putting homes on those sites in I put it in the context of this. It's an additional 300 vacant sites in a portfolio of 70,000 sites where we have a run rate practice of purchasing new homes and these occupancy it's not like the 300 go down, then we fill them 1 through 300 and the move on. They're part of the ongoing investment in inventory in those -- in the broader market. Obviously, they were hurricane impacted, so they're in Florida. I don't have the exact number, but we've filled a substantial number with new homes, and we'll continue through that process to reach full occupancy. The properties that were impacted by those hurricanes are Pinnacle assets where the demand profile is very solid and I would expect the occupancy to rebuild consistently. James Feldman: Okay. And then finally, I think I know the answer, but you do have some portfolios out there for sale internationally. What are your latest thoughts on sticking to your knitting and keeping the type of assets you have? Or is there any yield IRR that would be compelling enough to go international at this point or into new property types or something outside of your core business? Marguerite Nader: I think you were right with how you started, which is you know what the answer is going to be. We are focused on growing our business inside the United States, and we will continue to do that. James Feldman: And in terms of new property types? Marguerite Nader: Well, certainly, more MH, more RBS to new property types, nothing that we're looking at right now. Operator: Since we have no further questions on the line, I'd like to turn it back over to Marguerite Nader for closing remarks. Marguerite Nader: Thanks for taking the time today to listen to our call. We look forward to updating you on our second quarter earnings. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good afternoon, and welcome to Grupo Aeroméxico, S.A.B. de C.V.'s First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session at the end with instructions given at that time using the Ask a Question section on the webcast. As a reminder, today's conference call is being recorded. Now I would like to turn the call over to Ms. Lucero Medina, Head of Investor Relations. Ms. Medina, you may begin. Lucero Medina: Thank you, and good afternoon, everyone. Joining me today to discuss our results are Andrés Conesa Labastida, chief executive officer; Aaron Murray, chief commercial officer; and Ricardo Sánchez Baker, our chief financial officer. Before we get started, I would like to take this opportunity to remind you that during the course of this call, we will present results that are based on our unaudited consolidated financials. Accordingly, financial results discussed today are based on information available to us as of the date of this call and not the comprehensive final statement of our financial results for any period presented. We may make forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act regarding future events and our company's future performance. We caution you that several important factors could cause actual results to differ materially from any plans and expectations expressed in this call, including the risk factors disclosed in our SEC filings. During this call, we will present certain non-IFRS financial measures. We have included a reconciliation and explanation of adjustments and other considerations of our non-IFRS measures to the most comparable IFRS measures. Our call and the earnings release are available on our website. Now it is my great pleasure to turn the call over to Andrés. Thank you, and good morning, everyone. We appreciate you joining us today to discuss our first quarter 2026 results. Andrés Conesa Labastida: As the situation in the Middle East continues to evolve, we remain hopeful for a prompt and peaceful resolution. Our results this quarter underscore the resilience of our business model. Despite several external headwinds, including temporary demand disruptions in certain regions of Mexico and a significant surge in fuel prices, we delivered results generally in line with our original guidance, reflecting the strength and adaptability of our platform. We are fully equipped to navigate these challenging times. Our brand is strong, and our ability to achieve higher premium revenue reflects our appeal to passengers who are less sensitive to price fluctuations. Above all, our team is widely regarded as one of the best in the industry. Thanks to this strong team, we have continued to lead the industry. We were once again recognized by Serium as the most on-time airline in the world in 2026, building on our number one global ranking in both 2024 and 2025. We have been acknowledged as a top employer in Mexico for four consecutive years, ranked twelfth on Forbes Mexico's best employer list, and achieved first place in the MERCO Palento ranking for passenger transport. The expertise and dedication of our team represent a distinctive strength that differentiates us from others in our industry. Aaron and Ricardo will give you a more detailed overview of revenue and financial performance. I want to point out several aspects that demonstrate the strength of our business model. Our unit revenues increased by 15% year-over-year, and we achieved an operating margin of 11%, which falls within the guidance range that we shared for the quarter. Also, we closed March with a robust financial position, liquidity exceeding $1.2 billion. Liquidity improved compared to the same period of 2025 and compared to the fourth quarter of last year, which is notable given that the first quarter of the year is typically weak on cash flow generation due to the seasonality of our business. With low leverage and a strong cash position, we have significant flexibility to respond confidently to current challenges. From a structural perspective, fuel accounted for approximately 21% of our total revenues in 2025, which is lower than the levels observed in other full-service carriers and ULCCs within the region. This positioning gives us meaningful advantage in managing periods of elevated fuel prices. Building on this position, we will continue to actively manage capacity and implement fuel recapture initiatives, including targeted fare adjustments. We are encouraged by the market's response, particularly in international markets where demand has remained strong and our fuel recapture strategies have proven to be materially effective. Approximately 70% of our revenues are generated in these markets. We plan to continue to take advantage of the adaptability of our network, enabling swift capacity adjustments as conditions evolve. As the environment stabilizes, we expect to capture meaningful operational leverage from the aircraft added over the past year, driving improved performance. We do not have any material additional fleet commitments this year, which limits incremental cost pressure and enhances our flexibility. This positions us favorably relative to other carriers with sizable committed deliveries in the following months. Simultaneously, we are strengthening our commitment to cost discipline across the organization to protect margins and sustain strong cash generation. This balanced approach on revenue and costs positions us well to navigate the current climate, just as we have proven in previous years. Looking ahead, we expect the second quarter to remain challenging and anticipate it will represent the weakest period of the year, reflecting the full impact of recent fuel price increases. For the second quarter, we expect to recover approximately 50% of the incremental fuel costs, with a clear path to higher levels of recapture as the year progresses, reaching around 70% in the third quarter and 100% in the fourth quarter, as our pricing and network initiatives are fully reflected in the market. In parallel, the benefits of our revenue initiatives, capacity adjustments, and cost measures will continue to build, supporting a sequential improvement in both margins and profitability. In this context, we expect low- to mid-double-digit revenue growth in the second quarter, translating into an operating margin in the range of 4% to 7%. Ricardo will provide additional detail on our second quarter guidance. Given recent market volatility, it is premature to revise our full-year outlook at this time. As conditions stabilize and visibility for the remainder of the year improves, we intend to provide updated full-year guidance. In the meantime, our structural advantages, strong market position, and disciplined execution are expected to reinforce our leadership in both financial performance and operational excellence. With that, I will turn it over to Aaron to discuss our commercial performance in more detail. Thank you very much. Aaron Murray: Thank you, Andrés, and good morning, everyone. I want to thank the entire Grupo Aeroméxico, S.A.B. de C.V. team for delivering industry-leading service and reliability to our customers in what has been a very challenging environment. We delivered revenue above our guidance for the first quarter, with total revenue of $1.34 billion, up 13.3% year-over-year. This record-setting first quarter performance was achieved despite the material impact from isolated disruptions in late February in Mexico. The impact of those disruptions, which affected both operations and transborder U.S. demand for a few weeks, has since recovered. Across our regions, we experienced strong revenue performance with particular strength in our international portfolio. International revenue increased 13.6% year-over-year, led by our long-haul markets in Europe, Asia, and South America. In domestic markets, revenue grew 12.7% year-over-year, supported by improvements with respect to last year's immigration-related impact on border markets and improved performance in beach markets. On the loyalty front, Aeromexico Rewards continues to build strong momentum, driving increased revenue and customer value. In the first quarter, we reached a new record with 38% of our passengers participating in the program, up 10 points year-over-year and 15 points since the program's reacquisition in 2023. Redemption revenue also grew 22% year-over-year, reflecting higher engagement and perceived program value. We continue to see significant runway for loyalty-driven revenue growth as participation expands. We are also seeing the benefits of the successful rollout of our new app, along with continued enhancements in retailing and merchandising which are strengthening our direct online channels. In the first quarter, direct online share reached a record 48%, up three points year-over-year and 23 points versus 2019. Our latest evolution of branded fares is also contributing to improved premium mix, with premium revenue mix reaching 42%, up one point year-over-year and 18 points versus 2019. These commercial efforts are delivering solid results, supporting revenue performance while strengthening the durability of our business. Turning to second quarter outlook, Ricardo will provide the details of our guidance, but overall demand has remained strong across the network despite continued volatility. March cash sales grew in the low teens year-over-year, with the week ending March 15 marking the highest first-quarter weekly revenue sales performance in the company's history, surpassing the previous record set in January. In response to higher fuel costs, we have been focused on implementing fuel recapture initiatives, which are showing encouraging results while also reducing noncore, lower-margin flying. These capacity actions resulted in the removal of approximately half a percentage point of capacity in the second quarter. Based on the success of the fuel recapture actions and continued demand strength, we expect to recover around 50% of fuel headwinds during the quarter. Beyond the second quarter, the impact of our fuel recapture initiatives will increase as a larger share of our bookings reflect these changes and additional initiatives are implemented. In closing, as we enter the second quarter in a more volatile environment, we are confident in our relative positioning in the industry. We have built a strong and durable airline with a robust commercial strategy that will allow us to navigate these conditions and emerge even stronger. I will now turn the call over to Ricardo. Ricardo Sánchez Baker: Thank you, Aaron, and good afternoon, everyone. I would like to echo Andrés and Aaron in acknowledging our team's dedication and significant contributions to the strong results achieved in the first quarter. We maintained best-in-class results in a complex operating environment, highlighting the robustness of our business model and our ability to achieve strong outcomes in challenging geopolitical circumstances. In the first quarter, total revenue reached $1.3 billion, marking a 13% increase from the previous year and aligning with the upper end of our guidance. This result demonstrates ongoing demand and healthy unit revenue trends. Our total unit revenue, or PRASM, grew 15% compared to 2025. From a cost perspective, total operating expenses increased 16% year-over-year, with higher fuel prices as the primary driver of the increase. Costs were also pressured by the impact of a stronger peso on our cost base, which appreciated 14%. Adjusted EBITDA for the first quarter reached €36 million with a 25% margin. This result represents a 5% increase compared to the first quarter EBITDA level of 2025, notwithstanding an estimated adverse effect of €36 million due to higher fuel prices and demand disruptions affecting revenue in specific regions in Mexico. First quarter operating income totaled $142 million with a margin of 11%, in line with the figures reported in the same period of 2025. These results correspond with the lower end of the guidance range issued in the previous quarter. Our cash position continued to improve. We closed the first quarter with over $1 billion in cash, complemented by a $200 million undrawn revolving credit facility, bringing total liquidity to €1.2 billion, or 23% of last twelve months' revenue. This represents an increase of $578 million compared to the same quarter last year, and is $21 million higher than year-end 2025, despite the quarter's typical seasonal weakness. During the quarter, we generated over $200 million in net operating cash flow and reduced financial debt by close to €10 million. At quarter end, our adjusted net debt to EBITDA ratio stood at 1.7 times, representing an improvement compared to the level reported at year end. Our leverage profile continues to strengthen, underpinned by consistent earnings generation and prudent capital allocation. With volatility continuing to shape the current environment, we remain focused on driving efficiency across the operation. As Aaron has highlighted, our emphasis on revenue management initiatives and network optimization is essential for maintaining consistent performance. At the same time, we are reinforcing cost discipline across the organization to protect margins and cash flow. Key actions include implementing a hiring freeze with backfill limited to critical operational roles, reducing discretionary spending including consulting and travel, prioritizing MAX fleet deployment to optimize fuel efficiency per ASM, leveraging operational flexibility to adjust engine maintenance programs and optimize capital expenditures, executing strategic capacity adjustments to avoid cash-negative flying, and reprioritizing investments and component management to reduce working capital requirements. Given the current level of fuel prices, our strategic investments in fleet modernization have become increasingly significant. Specifically, the enhanced efficiency of our 737 MAX aircraft has contributed to a reduction in fuel burn per ASM. During 2026, fuel consumption per ASM was 1.4% lower compared to the same period in 2025, resulting in estimated cash savings of approximately $5 million. In this context, the second quarter is expected to reflect peak pressure from elevated fuel prices, with the benefits of our mitigation actions not yet fully realized. As these measures are progressively implemented and reflected in our results, we expect a gradual normalization of margins and a stronger profitability profile into the second half of the year. For the second quarter, capacity is projected to increase by approximately 1.5% to 2.5% year-over-year. Total revenue is estimated to increase between 12.5% and 15.5% year-over-year. Adjusted EBITDA margin is expected to be between 17% and 20%, and operating margin is expected to be between 4% and 7%. We remain firmly committed to protecting margins, optimizing cash flow, and maintaining a strong balance sheet while preserving the flexibility to adapt quickly. Challenging environments like this often separate the leaders from the rest, and we are confident in our ability to capitalize on these conditions and strengthen our competitive position. We will now open the call for questions. Operator: Thank you. And as a reminder, to ask a question, press 11 on your telephone and wait for your name to be announced. To remove yourself, press 11 again, or use the Ask a Question section on the webcast. One moment while we compile the Q&A roster. Our first question comes from Pablo Monsivais with Barclays. Please proceed. Pablo Monsivais: Thank you. I would like to have more information on your recapture ability. You made some comments on the progress that you have done already, but I would love to know how much of the jet fuel increase can be offset by the prices that you have already reflected, how you are seeing clients, and when we are going to see this taking place, I guess more in the third and fourth quarter. Ideally, any color on the markets—how domestic is behaving to the fare increases versus international, which I guess is more on the long haul rather than the U.S.—would be great. Thank you very much. Andrés Conesa Labastida: Let me provide a brief comment, and then I will ask Aaron to go in detail. As you mentioned, Pablo, it has been much more efficient to translate these jet fuel price increases in international markets than in the domestic market, and I want to stress that 70% of our revenue is associated with the international market. That positions us in a great spot. Although we have not seen the same level of response in the domestic market in terms of yields, we have seen some capacity reductions, which is also positive going forward. Not necessarily affecting prices today, but in the future the domestic market, because of these capacity reductions, could be supportive of better yields. Aaron? Aaron Murray: Thanks, Andrés, and thanks for the question, Pablo. As it pertains to fuel recapture, in the international space we have great recapture across the board, particularly in our long-haul widebody network, and that is about 40% of our capacity. The fuel recapture initiatives were implemented swiftly and in large chunks and have been in place for the last few weeks. With the increase in fares for fuel recapture, we have been watching demand very closely. After a couple of weeks of sales at these new levels, we have not seen any cracks in demand in any of the international markets where we have sustained fuel increases. On the U.S. transborder, about 22% of our capacity, we did have some disruptions in the quarter that impacted U.S. point-of-sale demand. We have gotten through that, and from a recapture perspective we have had quite strong recapture, and demand is holding up. There is probably some long-term softness in U.S. point of sale, but we have made up for that in Mexico point of sale, so transborder U.S. is also holding strong. On the 50% fuel recapture target for the second quarter, with initiatives already in place, we probably need a little bit more to get all the way there, but the lion's share of increases that have stuck will get us to those targets, subject to fuel volatility. Two additional data points: when the conflict in the Middle East started in late February, early March, we had about 80% of the quarter's tickets already sold, given Easter fell in March 2026 versus April in 2025. That reduced our ability to pass through for the quarter. And our ATL on average is 35 days, so once you get to the new cycle, that is when you can translate higher jet fuel prices to ticket prices as you renew your air traffic liability. Operator: One moment for our next question, please. Our next question comes from Duane Pfennigwerth with Evercore ISI. Please proceed. Duane Pfennigwerth: Maybe just a follow-up: can you comment on the amount of 2Q that was already sold before the fuel spike? I assume as you move forward, you will have a better ability to raise yields. And then from a network planning perspective, as you are flexing down, what are the types of markets that are easiest to cut in this backdrop? And maybe you can speak a little bit about the likelihood and timing of slot waivers in Mexico City, if you even want them. Thank you. Aaron Murray: Yes, Duane. That is absolutely correct. We kind of picked around mid-March as when the fuel recapture initiatives really took hold. For the quarter, we were booked about 40%. At present, we are closer to 60% booked for the quarter. So you are right—about half the quarter was booked before the fuel recapture initiatives were in place. That is part of the staggered recovery of fuel recapture; into the third and fourth quarters, even with initiatives that have stuck and as long as demand continues to hold up, our recapture will grow as a larger percentage of bookings come at the new levels. On the network, Mexico City is the easiest place to target. We have some point-to-point flying not part of our hub, and that was the easiest to pare down, with a focus on driving a return on cash cost. In our hub at AICM, we also have some opportunity to cut, and we have, focusing on markets where we can get some recapture. If the markets are not covering cash and returning on cash, we can pull those back. Andrés Conesa Labastida: On slot waivers, let me stress that our top priority—and we will never put that at risk—is to keep our slot portfolio in AICM. We are in a great position to navigate uncertainty in the industry, so that will not be put at risk. If we are able to get some waivers and certain flights do not cover cash if the conflict continues, we will adjust, but we will never put at risk our slot portfolio in AICM. One example of what we have reduced that contributes to this half-point reduction in capacity is that we will not be flying Atlantas and Ixtapa-Zihuatanejo, which was not contributing to cash and is outside Mexico City. We continue to monitor those types of flights and we will not hesitate to cut and not fly them, with the top priority of keeping our slot portfolio in Mexico City. Operator: Thank you. Our next question comes from Michael Linenberg with Deutsche Bank. Please proceed. Michael Linenberg: As we start thinking about your supply plan for the year, you were down in March; you are up only slightly in June; we are already starting to see some cuts on routes in the third quarter—we can see them in the schedules. You have cut some from Guadalajara, etcetera, some non-AICM markets. How should we think about the capacity plan this year? Are we going to be closer to zero, or where are we with respect to planning? And then second, there was a proposal floated to potentially cap domestic fares in exchange for reduced airport costs. Is there any substance to that? Aaron Murray: For the full year, Michael, our original guide was 3% to 5%. What we are looking at right now is closer to probably 2% to 3%. The driver of our growth for the year is in our widebody network. We are taking deliveries this year, and widebodies for us are incredibly profitable. The capacity is coming in Barcelona, which is a new market for us, and other flying we are going to do in Europe. Even at current fuel levels, the profitability is extremely high for us. If market conditions prove that is not economical, we always have the ability to pull that back, but at this point, even at these fuel levels, canceling that flying would hurt our P&L. Andrés Conesa Labastida: To complement what Aaron was saying, as we have stressed in the past, we have huge operational leverage going forward. To fund the growth we originally planned between now and March, we are relying on the planes that we received, particularly in 2025. If we reduce our growth from 3%–5% to, say, 2%–4%, we are not bringing any additional shells to fund that, so we are in a better position. Given this was early in the year, obviously we needed to hire the crews for that growth in the second half. If we do not grow, we will not hire those crews. We are adjusting; we will not put pressure on the P&L. Regarding domestic fare caps, there is nothing that we see as a threat. As you know, in many countries, congress is always active and looking at potential legislation. We, like other airlines, are very active explaining how such measures, rather than helping the consumer, end up being worse for them. As we stressed in our initial remarks, the pass-through has been reflected more in the international than in the domestic market. You have not seen pressures on yields in Mexico’s domestic market because of oil prices, despite the fact that jet fuel is the only fuel that is not subsidized in Mexico—gasoline and diesel have ceilings—but in the case of jet fuel, it is a free market and we pay international prices. Operator: Thank you. Our next question comes from Filipe Ferreira Nielsen with Citi. Please proceed. Filipe Ferreira Nielsen: Hi everyone. On SEO—especially SEO availability—you discussed the strategy behind capacity and how you are seeing international long haul being very profitable. Are you seeing any constraints in terms of availability or shortage anywhere, especially in long haul? We have been hearing about constraints in Europe and Asia. Any high-level views on how this could impact your plans there? And a second question on the fleet plan: as you adjust capacity, are you primarily reducing aircraft utilization, and how should redeliveries and utilization play out as you adjust capacity? Andrés Conesa Labastida: We are monitoring the situation very closely. In the domestic market, Pemex has the ability to refine jet fuel, so we source a significant share of our domestic fuel consumption locally, and we do not see any risks there. In Europe and Asia, we are hearing about potential shortages. One advantage of working very closely with Delta, being a global airline flying everywhere, is that we are working together to make sure that we have the necessary fuel going forward. With the information we have today, for the airports that we fly to in Europe—which are the main airports in the region—we are not seeing potential fuel shortages in at least the next eight weeks, the remainder of the quarter. If the conflict continues, maybe it is another story, but in the short term we are fine. Ricardo Sánchez Baker: As Andrés mentioned, we source our fuel together with Delta in international stations, and suppliers have confirmed to us the availability of fuel for the next couple of months. If conditions continue to be complicated, then we will keep this space under our radar, but right now we think we have enough fuel to be operative in the next couple of months. On the fleet plan, we had a handful of deliveries coming this year. We are expecting another two 787s that will be delivered in the next few months, which will bring increased capacity in international long-haul markets, and we have three 737 MAXs that will be delivered during the year. We are planning to redeliver one NG this year, and we are evaluating if we will redeliver more aircraft next year. We would not have additional redeliveries this year, given the extensions that we executed last year. We plan to end the year with around 170 aircraft, from 165 at the start. As we have stressed, the bulk of our fleet expansion came in 2025 when we received close to 20 new shells. Operator: Thank you. Our next question is from Jens Spiess with Morgan Stanley. Please proceed. Jens Spiess: Thank you. Based on the 2Q guidance, what jet fuel price are you assuming to reach that guidance, so we can play around with different assumptions? Ricardo Sánchez Baker: Hi, Jens. We use a range, roughly around $4 per gallon, between $3.80 and $4.20. The midpoint would be around $4. Operator: Thank you so much. I will turn the call back to management to see if they have any questions online. Ricardo Sánchez Baker: We will take a couple of questions from the webcast. The first question is regarding free cash flow in the second quarter—what would be our expectation? We talked about the guidance in terms of profitability for the second quarter, but in terms of cash flow, we are coming from a first quarter that was very positive in terms of cash flow generation. Traditionally, the first quarter is the weakest of the year, and we were able to increase our cash balances in the first quarter. Going into the second quarter, we see a couple of forces at play. On one side, we expect peak pressure coming from the increase in fuel prices, and this pressure will have an impact on P&L and cash flow. On the other side, the second quarter is traditionally the strongest for us in terms of cash flow generation, as our passengers tend to purchase their summer travel in May and June. We are anticipating that these two forces will kind of cancel each other out, and we do not expect any material variation in our cash balances at the end of the second quarter—basically a flattish outcome. If conditions normalize in line with, for example, the forward curve that we are seeing, the third quarter should be closer to the normal seasonality that is basically flattish, and the fourth quarter would be a positive quarter in terms of cash flow generation. Operator: Thank you so much. I will now turn the call back to Andrés Conesa Labastida for closing comments. Andrés Conesa Labastida: Thanks again for joining the call. Rest assured that we will be working every day to improve the resilience and profitability of our business model. We are on the right track; we are going to do well. As soon as we have more clarity on the full year, we will not wait for the next earnings release—once we have clarity, we will release full-year guidance. For now, we will stay with the second quarter, but as we have it, we will let you know. Thank you again. I am looking forward to seeing you soon. Operator: And this concludes our conference. Thank you for participating, and you may now disconnect.