加载中...
共找到 17,939 条相关资讯
Despite strong January and February gains, the REIT sector plunged into negative year-to-date territory (-2.22%) by quarter end as REITs aggressively sold off during a rough March (-7.52%). Small cap REITs (-5.65%) saw the least severe average negative returns in March, followed by even tougher declines for large caps (-6.42%), mid caps (-7.15%) and micro caps (-14.90%). Only 10.60% of REIT securities had a positive total return in March.
Crude oil rebounds from key support but faces resistance near the 20-day average, with broader bearish structure suggesting risk of renewed downside if recovery stalls.
Kevin Warsh wants to reduce the balance sheet. Congress could help by creating a resolution fund.
IREN Limited is completing its transformation from Bitcoin mining to a major AI cloud infrastructure operator, scaling up to 150,000 GPUs. The $6 billion additional share issuance limit raises dilution concerns, potentially increasing shares by 37.5%, but enables non-debt financing for GPU purchases and capacity expansion. A $9.7 billion, 5-year cloud contract with Microsoft underpins IREN's forecasted ARR of up to $3.7 billion and supports a bullish 'Buy' rating.
As stocks see-sawed throughout Tuesday's trading session, Marley Kayden and Sam Vadas focus on stories you may have missed underneath the slew of earnings and geopolitical headlines. They highlight a tariff refund process taking shape and touch on incoming Fed Chair Kevin Warsh's confirmation hearing, along with his plan for the FOMC.
Gold breaks down from a bearish wedge, testing key support levels as momentum shifts lower, raising the risk of deeper correction toward lower channel support zones.
President Donald Trump said Tuesday he would extend the U.S. ceasefire with Iran, which is set to expire Wednesday, despite calling off negotiations and warning earlier in the day he would resume bombing without a deal in place.
Fed Chair nominee Kevin Warsh denied that President Trump demanded he lower interest rates in a heated Senate hearing Tuesday.
Comprehensive cross-platform coverage of the U.S. market close on Bloomberg Television, Bloomberg Radio, and YouTube with Romaine Bostick, Isabelle Lee, Carol Massar and Tim Stenovec. -------- More on Bloomberg Television and Markets Like this video?
US stocks closed lower on Tuesday, reversing earlier gains as geopolitical uncertainty surrounding Iran and concerns about the Federal Reserve's independence weighed on investor sentiment. Markets had initially found support from strong corporate earnings and economic data, but those gains faded as the session progressed.
Former Dallas Fed President Richard Fisher joins 'Closing Bell' to discuss Warsh's hearing in front of Congress, the nominee's ability to cut rates and much more.
Kevin Warsh, tapped by President Donald Trump to lead the Federal Reserve, told a Senate panel on Tuesday he would work with the Treasury Department to help achieve his goal of a smaller Fed balance sheet, in an effort observers say would represent a long-term project for the central bank.
Jeff Dick: Good afternoon, and thank you for joining our first quarter 2026 earnings webcast. My name is Jeff Dick. I am the Chairman and CEO of MainStreet Bancshares, Inc. and MainStreet Bank. With me today is our Chief Financial Officer, Alex Vari; and our Chief Lending Officer, Tom Floyd. Chris Marinac, Director of Research for Brean Capital, will join us at the end of the call today with his questions. [Operator Instructions] This is a private chat that won't be visible to anyone else on the call. We will address your questions at the end of the presentation. If we miss your question during the discussion, please reach out after the webcast. I'd like to take a moment to point to our safe harbor page that describes the context of forward-looking statements that we may make today. Please also note that we may use certain non-GAAP measures, which are identified as such within the presentation materials. The D.C. metropolitan area is much more than host to the federal government. With our major universities, tourism, data centers, world-class medical facilities and resident Fortune 500 companies, it continues to be a great place to do business. By the numbers, the median household income is up $10,000 year-on-year and is at $135,000. The average home listing price is $831,000 and the median days on market went from 29 days to 30 days, still a seller's market. Federal Reserve economic data from December 2025 indicates that we have 684,000 government employees in the D.C. metropolitan area. Our market remains vibrant, and we continue to see opportunities. We are, of course, tuned into local, national and global geopolitical activities. And when things happen, we determine the potential impact to our market and to our business strategy. Over the past 2 years, we've been hovering around that $2.2 billion total asset mark. We focused on smart balance sheet management, which has involved efforts to replace higher cost funding. We've made progress on that front, but we recognize that as a community business bank in the Washington, D.C. market, our ongoing funding costs may very well remain a little higher than our peers across the country. We opened our doors in May 2004 as a Virginia-chartered community bank. We've been rooted in the Washington, D.C. metropolitan community now for over 22 years. We often talk about having a branch-light strategy. It's worth a moment to frame how we got here. Many of you on the call today will remember that the check clearing for the 21st Century Act, also known as the Check 21 Act, gave us the ability to deposit a digital substitute check. That law was signed in October of 2003 and became effective 1 year later, which was shortly after we opened. We were purposeful with our put our bank in your office approach, but this was new and unfamiliar technology. Customer acquisition was a slog. Each customer that we acquired was both new to us and new to using this technology. The most common response we heard during those days was, well, we'll bank with you once you have a branch closer by. We solved this by strategically covering our market area with a small number of branches, as you can see from the inset on Slide 6. Today, we still host more customers on our remote deposit capture solution than any bank our size in the country served by our core processor. We recently expanded our footprint to Middleburg, Virginia, our seventh branch opened in early February, and the grand opening was held on April 8 with a good crowd of Middleburg business folk present. The team has been doing a phenomenal job building our market presence in the Middleburg community, having already accumulated over $100 million of low-cost core deposits. Slide 8 shows that MNSB is a small-cap stock that trades on the NASDAQ Capital Markets Exchange and is listed on the Russell 2000 Index. As of quarter end, we traded at 87% of tangible book value. During today's presentation, you'll see directional consistency on our net interest margin, expense control and earnings. Asset quality remains strong, and we are well capitalized. At this point, I will turn the presentation over to our CFO, Alex Vari. Richard Vari: Thank you, Jeff. On Slide 9, we summarize our financial performance over the last 5 quarters. The first quarter of 2026 was defined by execution. We increased earnings per share to $0.48 by combining disciplined share repurchases with a 5% increase in net interest income after credit provision. Our net interest margin improved to 3.47%, while our return on average assets and return on tangible common equity stand at 0.76% and 7.58%, respectively. It is important to note that these results include a nonrecurring $685,000 loss on an other real estate owned disposition. We continue to be focused on becoming more efficient and have positioned ourselves for earnings growth in future quarters. Page 10 highlights our intentional management of our loan-to-deposit ratio to maximize our net interest income. Liquidity remains a fortress with abundant funding sources. Our secured available line increased $76 million to $663 million during the first quarter. Our liquidity facilities now cover over 42% of our entire deposit portfolio. Moving to Slide 11. You will see our net interest margin has expanded. The core portfolio is resilient with the core net interest margin increasing to 3.54%. Over the last 4 quarters, we've recognized onetime events that appear in our reported net interest margin. So we thought it was important to show the net interest margin without these nonrecurring transactions. In Q2 2025, we recovered $1.3 million in interest from a nonperforming asset. And in each of the last 3 quarters, we reversed interest on a small handful of loans we are working through. In fact, the average reported net interest margin across the last 5 quarters is 3.50%, which trends closely to the core net interest margin. You can refer to our presentation of non-GAAP ratios at the back of the slide deck for additional details. Our credit culture is built on pricing for risk appropriately, which is evident in our resilient risk-adjusted yields. This calculated risk model allows us to absorb normalized credit fluctuations while still delivering margin expansion. On Slide 12, you will see we've effectively neutralized the interest rate risk on the balance sheet. This provides us the ability to maintain margin stability regardless of the rate cycle. You might be thinking, well, how can that be? So I'd like to share a little bit more detail on how we've achieved that. Over 1/3 of our loan portfolio is variable or will reprice in the next 6 months, giving us quick asset sensitivity if rates increase. And given that we are already operating in a highly competitive deposit pricing environment, we anticipate a lower deposit beta in response to any further rate hikes. You will see we are also positioned well for sharp decreases in rates. With 87% of our time deposits scheduled to reprice ratably over the next 12 months, we maintain the liability sensitivity that allows us to capture funding relief quickly. And when coupled with our aggressive repricing strategy for variable deposits and robust floors across the loan portfolio, we are well positioned for margin expansion should the rate environment sharply soften instead. It's important to remember that this is just one tool that gives us insight into earnings over the near term. Turning to Slide 13, you'll see a deposit mix that is a direct reflection of our disciplined business customer-focused strategy. Over the last 5 quarters, we have both grown our deposit base while simultaneously lowering the overall cost by 64 basis points. Our progress is not just tied to the Fed's rate decisions. In the past 12 months, the FOMC lowered rates by 75 basis points. However, we have increased our interest-bearing deposits to 42% of the portfolio, while the yield on these deposits dropped 79 basis points. We have been aggressively repricing our deposits as demonstrated by our 67% funding beta for this rate reduction cycle. With the Fed forecast shifting to a flat rate outlook, we still have opportunities to lower funding costs through reprice maturing CDs, as I mentioned on the previous slide. However, we do expect the pace of impact to slow from previous quarters given the highly competitive market we serve and uncertain economic conditions. Generally, as we've seen the yield curve start to steepen, we see opportunities for net interest margin expansion through our deposit optimization efforts on the short end, coupled with loan repricing and new loan growth, which tends to be on the 5-year part of the curve. Slide 14 lays out our estimated expense run rate for the remainder of the year. The company has been diligent with expense control throughout the first quarter and expect to maintain that momentum. Our loan growth expectations are 3% to 5% for 2026. On Slide 15, we demonstrate how our share repurchase program has positively impacted our existing shareholders. Over the last 2 quarters, we repurchased over 482,000 shares, resulting in $0.30 per share accretion. The Board will consider future buyback programs when appropriate. At this point, I'll turn the presentation over to Tom Floyd, our Chief Lending Officer, to discuss our loan portfolio and loan performance. Tom Floyd: Thank you, Alex. As we recap the first quarter of 2026, I'm proud of our team's unwavering commitment to being a consistent and reliable financial partner. That dedication is reflected in our first quarter results where we saw a continuation in loan growth in desirable categories. Perhaps most notably, we maintained our credit discipline, finishing the quarter with net charge-offs at $259,000. Over the next few minutes, I'm excited to delve into the details of our portfolio composition and trends that drove these results. Slide 16 highlights our portfolio diversification, where we continue to see growth in our owner-occupied commercial real estate concentration. This was a theme of our 2025 year, so we're glad to see this continue into 2026 as our energy remains focused on the strategic growth of owner-occupied commercial real estate, which we've grown by roughly $80 million over the last year. As of the end of the first quarter, our portfolio composition consists of 30% nonowner-occupied commercial real estate, 25% owner-occupied commercial real estate, 16% in construction, 13% in multifamily, 11% in residential real estate and 5% in commercial and industrial. Additionally, it's worth noting that nearly all of our construction portfolio has an interest reserve held at the bank. Slide 17 shows our trend in average new loan size remaining low as we have grown. This highlights that in the current environment, we're sticking to smaller-sized opportunities within our market, which is full of diverse opportunities of all types and sizes. Moving to Slide 18, you will see the trend in our stress test estimates over the past 5 quarters. While the estimated worst-case stress loss has increased this quarter to $69.5 million, I want to draw your attention to the strength of our balance sheet. Even under these heightened hypothetical scenarios, our pre- and post- stress test capital ratios remain very strong with a post-stress common equity Tier 1 ratio of 11%, well above the 7% threshold of well capitalized. It's important to contextualize this model against reality. While our stress testing remains conservative and rigorous, our actual net charge-offs have remained extremely low. This, coupled with our positive track record for navigating problem loans, gives us continued optimism about our future performance. To remind you of our rigorous methodology, we utilize loan level testing for all construction and investor commercial real estate. For other categories, we apply the worst ever historical loss rates to current balances, and we mark investments to market and bank-owned life insurance to the liquidation value. This comprehensive approach confirms that despite hypothetical pressures, our actual credit performance remains excellent with low charge-offs and our capital base remains solid, both pre and post stress test. In Slide 19, you will see our classified loans at 3.09% of gross loans, nonaccruals at 2.88% and other real estate owned at 0.06%. While we monitor these closely, the most important takeaway is our history of execution. We've broken out our nonaccrual loans there on the slide, and you can see that most of the nonaccruals are attributable to only 2 relationships. Our low net charge-offs demonstrate that even when loans move to nonaccrual, our team is highly effective at protecting principal. We remain diligent in our loan workout efforts and are confident in our ability to drive favorable outcomes for these specific credits. Slide 20 is a lens into our government contracting portfolio. And here, I'm thrilled to announce the appointment of Morgan Higgins to our bank Board. Morgan is formerly an Executive Director at JPMorgan Chase, where she successfully stood up a government contracting lending practice in Northern Virginia. Currently, Morgan is a partner of Blue Delta Capital Partners, a minority investor venture capital firm focused exclusively on the U.S. federal government market. We've already started experiencing the positive impact of her involvement, and I'm excited about the momentum we're building in this space. Currently, our portfolio has 30 asset-based lines of credit in place where all advances are supported by a borrowing base of billed receivables. As you can see, these 30 lines have balances of $8.8 million outstanding with total commitments of $71.7 million, which equates to a 12% utilization rate. Over the average line's lifetime, this is relatively consistent. Our entire government contracting book only has $1.1 million in outstanding term debt. These loans are amortizing rapidly with an average remaining term of 21 months. The highlight here is the average deposit relationships attributable to this portfolio is $104 million. The portfolio's very strong deposit to credit relationship provides a significant funding advantage with deposits averaging roughly 10x the outstanding credit. In summary, we're pleased to deliver a quarter of consistent disciplined performance marked by continuing growth in owner-occupied real estate and a strategic Board appointment. We have a well-maintained and diversified loan book actively managed across all categories. Crucially, our robust stress testing demonstrates that we remain strongly capitalized even in a worst-case scenario, and our classified and nonperforming assets are at manageable levels, supported by a proven historical track record of timely successful resolutions. We remain confident that our disciplined relationship-focused approach positions us to deliver consistent performance and long-term value for our shareholders and the communities we serve. That wraps it up for our loan presentation. Back to you, Jeff. Jeff Dick: Thank you, Tom. As you heard, the lenders have been busy working on new relationships, especially in the owner-occupied space. The team is also working with field precision on each loan requiring resolution to minimize the possibility of a downside. We've also shared good news about the directional consistency of our net interest margin, expense control and earnings. We'll address questions that are submitted through the portal after we hear from Chris Marinac, Director of Research at Brean Capital. Chris, good afternoon. Chris, are you with us? We may be having a slight technical difficulty with this new solution. Bear with us, please, for 1 minute. [Technical Difficulty] Yes, we got you. Thank you, Chris. Christopher Marinac: Great. Sorry, a couple of settings there. So I wanted to ask about customer behavior just in terms of if folks are more cautious or more optimistic and just kind of how that may or may not impact your new business pipeline in the next few quarters. Jeff Dick: Yes, that's a great question. I think I'll turn that over first to Tom Floyd on the loan side. Tom Floyd: Yes. Great question. I think that, generally speaking, in the real estate space, people are optimistic because they're able to take advantage of certain circumstances for expansion that they feel good about going forward. I think overall, our pipeline is still seeing lots of good opportunities, both that are related to some of the activity that comes along with some of the things that are happening at the national level in the government contracting space. But in real estate, I think we're continuing to see good opportunities. I think people -- it's hard to say if -- yes, I think we're definitely seeing a good amount of opportunities in the pipeline. Jeff Dick: And I think it's probably fair to say also that some of those opportunities might be coming at the risk of others who have struggled. And so from a pricing standpoint in the commercial real estate space, everybody loves a good deal. And so we're seeing a little bit of that as well. But mostly, everything stands on its own, and we haven't seen any real changes certainly in the quality of the folks that we're looking at for new opportunities. On the deposit side, it seems like we've been making a bit more of an inroad. And I don't know if it's a general change in where people are putting their money again, but it's -- the business bankers have been keeping busy. And so yes, we're not seeing anything that would lead us to believe things are slowing down any more than they perhaps already had. Christopher Marinac: Okay. Would the ability to get new accounts on the deposit side possibly accelerate if some of the external kind of distractions or uncertainty, I feel like that may benefit your marketplace more than others. Jeff Dick: Yes, I think so. And in the meantime, there's always that flight to quality and FDIC insured deposits are still seen as a very strong quality mark. So yes, I think as international certainly arena settles down, if and when it settles down, yes, we should see some more opportunities, I think, for deposit growth there, too. Christopher Marinac: Okay. And then the net interest margin still seems like it has some potential positive change as some nonaccrued interest shifts. Can you just talk about the puts and takes on that and perhaps just any new visibility on margin outside of that recapture of problem loans? Richard Vari: Yes. Yes, great question. As I mentioned in the slide deck, we are seeing good opportunities, both on the deposit side to continue lower funding costs. We have a set of time deposits that are repricing. And as the short end has come down, we're going to see funding relief there. And on the loan side, again, as the yield curve kind of steepens, we're going to be able to deploy those at a nice margin spread as our loans tend to fall around the 5-year. I think another thing to point out, we recently announced the appointment of a new Chief Banking Officer, who's really experienced in our market. And he's really bringing a lot of great ideas to the table to increase not only the wallet share of our existing customers, but really expand this result [indiscernible]. Christopher Marinac: And then I guess one follow-up for me. It just has to do with expenses. Do you have any efficiency goals, not just next quarter, but just kind of in the big picture of kind of where you would like to see the organization? Is this quarter a step in that direction? Richard Vari: Yes, absolutely. And if you go back to 2023, one of our best years that we've ever had, we are seeing efficiency ratios in the low 50s percent. And that's our target. That's where we're trying to get to. This quarter, we saw expense reduction, and so we saw our increases in efficiency going lower. And we're going to continue that momentum. And our target is to get back to those 2023 levels. Jeff Dick: Yes, which is somewhere between that 53% and 55%. We think it's absolutely doable. But one of the difficulties right now, if we do put a loan on nonaccrual, it generally means reversing 90 days of interest, which can be hurtful for the current quarter, which we saw a little bit of this quarter. But we can -- once we get to the bottom of that, being able to go forward, I think we'll see some good improvements in our efficiency ratio, and that's really a great focus. Christopher Marinac: Got you. Okay. And then last question for me just goes back to your new hire and the sort of expertise that she brings in the gov con area. Will that part of your business be a lot different as we look a year or 18 months from now? Just curious kind of big picture, how that will be impacted. Jeff Dick: So we're definitely focused on that. I'll turn the question over to Tom in just a second. But yes, from the Board level, we think bringing somebody in with Morgan's background and experience is going to help us to really get a better line of sight into some of the government contractors she -- Blue Delta and what she does as a minority equity investor, everybody wants to have time with that group, and there's other groups in that space as well. But -- so we -- our hope is to try to bring people together to host some events and things where she's speaking and really look at the opportunities. Having said that, the conversion rate on government contract borrowers is -- it's a little bit more of an effort. But Tom, I'll turn it over to you. Tom Floyd: Sure. A lot -- everyone in our market says that they want to be in the space, but I think I'm really excited about how we're approaching it because we're bringing someone on that is a known quantity in the space. And from a number of different perspectives, Morgan can help us with opening doors to new customers and prospects and also just making sure that from an internal perspective, we're doing everything we can to be as competitive as possible in the marketplace. And we are seeing some progress already with actual results. And so I think in terms of what we're going to look like in a few years, I do expect some meaningful growth out of where we stand currently. It's certainly a very strong funding source for us. I think it will remain to be a strong funding source because of the nature of the business. But I do think that overall, we expect to see growth on the lending and deposit side. Jeff Dick: Thank you. As always, Chris, it's great to hear from you. We do have just a couple of questions that came in through the chat. One is as a follow-on to Chris' question, is the bank actively working with the developments along the Route 50 corridor out to Middleburg, Tom? Tom Floyd: Our acquisition and development financing is mainly infill, which is closer in inside the Beltway and just outside the Beltway. We do have some exposure to some people that have data center plans. But in those data center opportunities, a lot of them are like covered land plays where there's an industrial component that still makes sense and there's some industrial current uses that are happening where there's future potential for data center development. So it's not fully dependent on that. But going out that way, there's certainly a lot of growth in development. But for us, we're mainly focused a little bit closer into the Beltway. Jeff Dick: Great. Yes, it's safer. I think it's always been -- when we look back to the Great Recession in 2007, prices of land and property inside the Beltway dropped 7%, while in Southern Virginia, you further out, it was 31%. So we've always focused trying to be close in as possible. The other question is a little bit harder to answer right now because we are in a blackout period, but does the bank intend to maintain an aggressive buyback so long as the stock price is below tangible book value. And so I don't think that you'll see any change in trends of what you've seen in the past, but I don't know that we can really speak to that anymore. Alex? Richard Vari: Yes. I'd just say we were very pleased with our current buyback plan, and the Board is always looking at ways to expand capital in ways that make sense for shareholders. So that won't change, and that will continue. Jeff Dick: So I think that's a safe answer to that question. And as looking at the website right now, there's no other questions in the queue. So I want to thank everybody that participated in the webcast today. We're optimistic with what we're seeing. And like Alex kind of referenced a little bit earlier, 2023 was a banner year for us. Our objective is to get back to that level and then some. But we're working diligently to make that happen. So if you find you have any questions once the call is done, please always feel free to reach out. We're happy to talk with you one-on-one and look forward to that opportunity. Thank you, everyone, and have a great rest [Audio Gap]
Operator: Ladies and gentlemen, welcome to Hanmi Financial Corporation's First Quarter 2026 Conference Call. As a reminder, today's call is being recorded for replay purposes. [Operator Instructions] I would now like to turn the call over to Ben Brodkowitz, Investor Relations for the company. Please go ahead. Ben Brodkowitz: Thank you, operator, and thank you all for joining us today to discuss Hanmi's First Quarter 2026 results. This afternoon, Hanmi issued its earnings release and quarterly supplemental slide presentation to accompany today's call. Both documents are available on the IR section of the company's website at hami.com. . I'm here today with Bonnie Lee, President and Chief Executive Officer of Hanmi Financial Corporation; Anthony Kim, Chief Banking Officer; and Ron Santarosa, Chief Financial Officer. Body will begin today's call with an overview Anthony will discuss loan and deposit activities. Ron will provide details on our financial performance, and then Bonnie will provide closing comments before we open the call up for your questions. Before we begin, I would like to remind you that today's comments may include forward-looking statements under the federal securities laws. Forward-looking statements are based on current plans, expectations, events and financial industry trends that may affect the company's future operating results and financial position. Our actual results may differ materially from those contemplated by our forward-looking statements, which involve risks and uncertainties. A discussion of the factors that could cause our actual results to differ materially from these forward-looking statements can be found in our SEC filings, including our reports on Forms 10-K and 10-Q. In particular, we direct you to the discussion of certain risk factors affecting our business contained in our earnings release, our investor presentation and on our Form 10-Q. With that, I would now like to turn the call over to Bonnie Lee. Bonnie? Please go ahead. . Bonita Lee: Thank you, Ben. Good afternoon, everyone. Thank you for joining us today to discuss our first quarter 2026 results. Hanmi delivered strong financial results as key metrics in the first quarter as we consistently advanced our core initiatives and executed against our growth strategy. In the first quarter, a seasonally slower period for loan production, we delivered solid results, supported by strong C&I originations and ongoing expansion of a new full-service commercial banking relationships. At the same time, we maintained a disciplined underwriting and pricing standards. We also executed effectively on our deposit gathering initiatives, generating strong growth in total deposits while continuing to reduce our overall cost of funds. . Combined with the favorable spreads on new loan production relative to payoffs, we generated net interest margin expansion for the seventh consecutive quarter. This strong execution, combined with our disciplined expense management, led to robust growth in net income compared to the year ago period. Our performance highlights the success of our relationship-based banking model and the execution of our growth strategy. Now turning to some highlights for the first quarter. Net income for the first quarter was $22.6 million or $0.75 per diluted share, with a continued growth on both sequential and year-over-year basis. Net interest income increased from the prior quarter and net interest margin expanded by 10 basis points to 3.38% reflecting a lower cost of fund. Return on average assets and return on average equity during the quarter were 1.18% and 10.8%, respectively. Deposits grew 7% on an annualized basis and noninterest-bearing deposits remained healthy at approximately 30% of the total deposits. New loan originations were solid with the C&I loan production increasing by 64%. However, this was offset by higher-than-normal payoffs, which led to a slight decline in total loans. We continue to maintain excellent asset quality driven by focus on high-quality loans, disciplined underwriting standards and found credit administration. Nonperforming assets decreased by 38%, representing 0.6% of total assets. Our disciplined focus and risk management continues to produce positive outcomes. During the quarter, we successfully collected a sizable payment for nonaccrual loans and sold 2 OREO properties for net gain. Turning to our Corporate Korea initiative. The relationships our dedicated bankers have established have driven deposit growth from these customers, resulting in an increase of 10% this quarter. Due to ongoing uncertainty about the impact of tariffs, loan activity remained muted. Our focus on disciplined expense management continues. Noninterest expense decreased by 2% for the quarter primarily driven by the gain on the sale of real estate on lower salaries and benefits and advertising and promotion expenses. Importantly, our efficiency ratio further improved by 150 basis points to 53.5% from 55%. Our strong financial performance drove improvement in all capital ratios while we returned significant capital to shareholders in the form of dividends and share repurchases totaling $13.4 million this quarter. We remain well passioned to advance our growth strategy and deliver attractive shareholder returns. Clearly, geopolitical conflicts may have economic implications for the global economy. However, at this point, we have not seen any impact on our business nor our clients' businesses. We have had a strong start to 2026 and believe we are well positioned to build on this momentum in the months ahead. The strength and consistency of our operational performance underscores the effectiveness of our relationship-based banking model and reinforce our confidence in the strategy we are executing. I'll now turn the call over to Anthony Kim, our Chief Banking Officer, to discuss our first quarter loan production and deposit date. Anthony Kim: Thank you, Bonnie and thank you for joining us today. I'll begin by providing additional details on our loan production. First quarter loan production was $378 million, up $3 million or $0.08 from the prior quarter with a weighted average interest rate of 6.54% compared to 6.90% last quarter. The increase in loan production was primarily due to an increase in C&I and CRE while residential equipment finance and SBA declined from fourth quarter levels. Our disciplined underwriting approach ensures we only engage in opportunities that align with our conservative underwriting standards. C&I production was $135 million, an increase of $53 million or 64% from the prior quarter. The increase was primarily driven by the investment we made in our C&I teams and our strategic efforts to further expand the portfolio. CRE production was $131 million, an increase of $6 million or 4% CRE is now 61% of total loans, which is the lowest it has been in at least a decade. We remain pleased with the quality of our CRE portfolio. It has a weighted average loan-to-value ratio of approximately 47% and a weighted average debt service coverage ratio of 2.2x. SBA loan production declined $3 million from the prior quarter to $41 million, in line with historical ranges. The steady production reflects the strength of our key hires and the momentum we are building with the small business clients across our markets. During the quarter, we sold approximately $33 million of SBA loans. Total commitments for our commercial lines of credit were over 1.3 billion in the first quarter, up 3% or 14% on an annualized basis. Outstanding balances increased by 10% and resulting in a utilization rate of 43%, up from 40% in the prior quarter. Residential mortgage loan production was $29 million for the first quarter, down 59% or $41 million from the previous quarter. Residential mortgage loan represents approximately 15% of our total loan portfolio, down from 16% in the previous quarter. We sold 32 million residential mortgages during the first quarter, resulting in a gain on sale of $0.5 million. We'll continue to evaluate additional sales contingent on market conditions. Corporate Korea accounted for $28 million of total loan production. US KC loan balances were [ $88 million ], down $44 million or 5% from the prior quarter and represent approximately 12.5% of our total loan portfolio. Turning to deposits. In the first quarter, deposits increased 2% from the prior quarter, driven primarily by growth in interest-bearing deposits and a modest increase in noninterest-bearing demand deposits. Deposit balances for US KC customers increased by $107 million or 11%, surpassing $1.1 billion. At quarter end, Corporate Korea deposits represented 17% of our total deposits and 16% of our demand deposits. A little over a year ago, we opened a representative office in Seoul, South Korea marking a key milestone in Hanmi's USKC strategy. Through this office, we're deepening in relationships and supporting these customers as they expand into U.S. market. combined with our Korea desk across the major U.S. cities, this initiative has played an important role in growing our US KC deposits. The competition of our deposit base remained stable, reflecting the strength of our relationship banking model. At the end of first quarter, noninterest-bearing deposits remained healthy at roughly 30% of total bank deposits. Turning to asset quality, which remains strong. Delinquencies declined 25% to 0.20% of total loans from 0.27% in the prior quarter. Nonperforming loans declined 31% to 0.19% of total loans from 0.28% in the prior quarter, primarily driven by a $9.7 million payment received and $10.2 million nonaccrual loans. The performing assets declined 38% to 0.16% of total assets from 0.26% in the prior quarter reflecting the aforementioned payment and the sale of 2 properties that entered OREO status during the third quarter of 2025. These properties were sold for a net gain of $0.8 million in the first quarter. During the quarter, a $21.2 million was downgrade to special mention and a $5 million loan was downgraded to Class 5. These boundaries were borrower specific and not indicative of broader portfolio trends. Both loans remain current and are paying as agreed. Importantly, these actions reflect Hanmi's disciplined approach to early risk identification focused on achieving timely and optimal outcomes. And now I'll hand the call over to Ron Santarosa, our Chief Financial Officer, for more details on our first quarter financial results. Ron? Romolo Santarosa: Thank you, Anthony, and good afternoon. Pre-provision net revenue for the first quarter increased to $33.4 million or 4.1% from the fourth quarter, with all 3 components of PPNR contributing nicely to the growth. First, interest revenue increased 0.5% and net interest margin expanded by 10 basis points to 3.38%. Next, noninterest income was up 2.9% and noninterest expense declined by 1.9%. Looking closely at net interest revenue for the first quarter there was a $1.6 million net benefit from lower interest rates, offset by a $700,000 effect from a lower level of interest-earning assets and an $800,000 effect from 2 less days in the period. . Turning to net interest margin. It increased by 10 basis points, primarily reflecting a 16 basis point decline in the average cost of interest-bearing deposits. For the second quarter, we do not expect a similar decrease in the average cost of interest-bearing deposits. The April month-to-date average cost of money market and savings deposits is about the same as it was for the first quarter. The April month-to-date average cost of time deposits, however, is 10 basis points lower, bringing the average cost of all interest-bearing deposits to only about 5 basis points lower than that for the first quarter. Noninterest income increased 2.9% to $8.5 million, primarily from higher SBA loan sale gains with a higher volume of loans sold and higher trade premiums. Noninterest expense declined 1.9% to $38.4 million, principally due to the gain from the sales of 2 OREO properties where we had OREO expenses in the prior period. As expected, advertising and promotion expense declined from their fourth quarter seasonal high while professional fees and data processing charges increased due to higher activity in the quarter. Salaries and benefits declined as adjustments to performance and equity-based compensation plans more than offset the seasonal increase in employer taxes and benefits. The decrease in noninterest expense and the increase in revenues resulted in an efficiency ratio of 53.48% for the first quarter. Hanmi's effective tax rate for the first quarter was 26%, reflecting both the tax benefit from the first quarter's vesting of equity-based compensation and the lower California apportionment factor. We expect the effective tax rate to increase in future quarters, eventually bringing the annual effective tax rate to approximately 27% for the year. During the first quarter, Hanmi repurchased $4.8 million of common stock under the share repurchase plan, representing 185,707 shares at an average price of $25.89. At the end of the first quarter, 2.15 million shares were available under the plan. In addition, Hanmi bought $1.1 million of common stock from employees to satisfy their tax liabilities upon the vesting of their restricted stock and performance stock awards. Hanmi's tangible common equity per share increased 1.1% to $26.56 per share and the ratio of tangible common equity to tangible assets increased 12 basis points from 9.99% to 10.11%. With that, I will turn it back to Bonnie. Bonita Lee: Thank you, Ron. We believe the favorable trends that we have seen in our business positions as well to deliver strong shareholder results in 2026. Our priorities and expectations for 2026 remain unchanged from what we communicated on our last earnings call. We expect loan growth in the low to mid-single-digit range while continuing to prioritize further diversification across the portfolio. Our focus remains on growing deposits to support loan growth while preserving a stable well-balanced funding profile. Key priorities include deepening existing customer relationships, attracting new clients and further strengthening our core deposit base with a particular emphasis on growing noninterest-bearing deposits. We remain committed to disciplined expense management. While we are making selective investments in talent and technology to support our long-term growth strategy, we continue to operate efficiently emphasizing initiatives that enhance productivity and maintain cost discipline across the organization. Finally, we'll continue to take a prudent approach to credit management to preserve strong asset quality. Conservative underwriting practices, active portfolio oversight and rigorous risk analysis remains central to our operating philosophy and will guide our decision-making as economic conditions evolve. We are encouraged about the opportunities ahead and look forward to keeping you updated on our ongoing progress. Thank you. We'll now open the call to answer questions. Operator, please go ahead. Operator: [Operator Instructions] Our first question is from Matthew Clark with Piper Sandler. This is Adam Kroll on for Matthew Clark. Adam Kroll: Yes. So maybe just starting out on loan growth, had solid loan production during the quarter, and I see the breakdown in the deck that just shows the strong growth in C&I during the quarter, I guess, -- was there any specific industry or geography driving that? And then do you expect C&I to be the main driver of the low to mid-single-digit growth for the year? Bonita Lee: Yes, sure. We do expect the C&I to be the focus, continuing with our portfolio diversification. but we expect the growth to come from other portfolios as well. As far as the C&I production during the first quarter, it's pretty fairly broad-based in terms of different business types and industry. Adam Kroll: Got it. I appreciate the color there. Maybe switching to credit. I was just wondering if you could provide any additional color on the retail loan that migrated to special mention or the hospitality loan that migrated to class during the quarter and maybe how you see the situation playing out? Bonita Lee: Sure. So first of all, we did have $1.2 million loans to the initiative and downgraded to special mention. This is a retail commercial real estate loan. First of all, loan is current with past due payment history. Loan was downgraded due to the loss of 1 of their major tenants. However, despite of the vacancy of this tenant, the property continues to generate sufficient income to service the debt. And further, this credit is supported by personal guarantees with a substantial network. So accordingly, at this time, we do not expect any loss from this particular credit. The second credit, which is a $5 million substandard credit. It is a C&I loan in the hospitality industry. . The subject business was impacted by extensive renovation construction of hote where the subject business is located. As the construction is complete, we expect performance to improve to support the stability during the slow period, the modification was granted, and we downgraded the loan. The sponsor on this credit has a substantial experience and the network. So loan is paying as agreed under the modification, and we do not expect the low fund coming from this credit at this time. Adam Kroll: Got it. I really appreciate the color there. Last 1 for me is just -- do you expect to remain active on share repurchases, just given your healthy capital levels and just where the shares trade today. Romolo Santarosa: Yes, Adam. I think looking at the strength of the balance sheet, the excellent asset quality, the trends of earnings. I think it's fair to anticipate the Board will continue probably in amount not too dissimilar from what we saw in the first quarter. Operator: Our next question is from Kelly Motta with KBW. . Kelly Motta: Thanks for the question. Maybe to kick it off on expenses, these were very well controlled in what's usually a seasonally higher quarter with payroll taxes and whatnot. As you look ahead with your strategic plan, can you remind us any planned investments you have for the year? And if there's any kind of puts in case of this $38 million level that we should be considering as we think through the run rate as we go ahead. . Romolo Santarosa: Kelly, I -- we do not have any, I would consider significant notions relative to expenditures. I would characterize them as ordinary. That said, in looking at the somewhat favorable counterbalancing of seasonal effects. I have a sense that we'll probably continue at the first quarter trend with some things that I know will happen, but I couldn't tell you which direction they're going to go in. But I would think the first quarter is a fairly indicative idea of how we may play out for the rest of the year. Kelly Motta: Okay. Okay. That's helpful. And how about the pipeline for SBA? I think there's been some rule changes there. Just wondering, it looks like it was a pretty solid quarter for gain on sale, but wondering if there's any anticipated impact from changes in kind of the pipeline there. Bonita Lee: Yes. So we gave a guidance of $45 million to $50 million. In certain quarters, the seasonally high quarters we give 50 million to 55 million per quarter. Given the guideline change and the eligibility for SBA loans, we're going to continue with the $45 million to $50 million range of SBA production. Kelly Motta: Okay. Very good. Got it. maybe lastly for me. I mean, you guys have had some migration into the special mention. And I think notably, as you did note, they're paying aired highlights our proactive nature. As you survey your customer base, like how are you feeling now versus say, a year ago? And any kind of notable changes in terms of what you guys are watching more carefully? And what gives you confidence in ultimately the low level of loss content in that book? Bonita Lee: Sure. As we proactively review and communicate and our loan customers, including what's coming for the renewal trade customers, in terms of overall trend, particularly on the small businesses or consumer loans like residential mortgage loans, we don't see the negative trend compared to last year -- last quarter. The migration that I have for us, this is really due to our very we're taking the initiative and look as we communicate with each individual customers and the lows that have migrated, it's very specific to to the customer, specific to this relationship, for example. As I had mentioned, the construction from the -- where the business is located at it's very unique to customer specific, not formation any type of trend. And as we proactively work on the renewals, some of the actually payoffs, the higher payouts, they experienced in the first quarter as we look at the trends, if we are concerned of a certain trends, we communicate to the customers early on. and we ask customers to pay up the loan. So that has been done that as well. So -- and we're looking at through across our entire portfolio. So that's why in terms of just at a high level trend, we don't see the trend that's happening. So where that's where the comfort it. It's very borrower specific. And in our past, if you look at our history, some of the loans that we put on the special mention category, at 1 time, it was higher than the level that we are. We had a resolution we had to successfully resolved the most of the loans in the history for the last couple of quarters as well. So we are very optimistic for the loans that are in the downgraded category that we will aggressively work on these loans to to come to a resolution as evidenced by 1 of the nonaccrual loan, $10 million, that was a noncosts, we had a successful collection of $9.7 million. of that $10 million nonaccrual this quarter. So we'll continue with the process. Operator: [Operator Instructions] Our next question is from Ahmad Hasan with D.A. Davidson. Ahmad Hasan: On for Gary Tanner here. First question is on NIM dynamics. I appreciate the detail on Slide 10. If I see correctly here, there's about $1 billion in CDs rolling off in the next quarter. Do you think that would be the key driver and that could potentially push NIM up further from here? Or this loan yields kind of offset that in the next couple of quarters? Romolo Santarosa: Yes, Ahmad. So what we tried to point out though, with the time deposit book being the percentage that it is of the total interest-bearing deposit book, the pickup that you would envision as those CDs are repriced at current rates, while by themselves, let's say, enticing as a percentage of the book, it becomes rather small. And that's why we're just not seeing as much of a benefit to the interest-bearing deposit costs month to date. But there is something there. I think the other 2 elements that would be more potentially of a positive buying to the NIM. But again, I have a sense it's going to be in a smaller contribution than we've experienced in the previous quarters is both the securities book and the loan book. I'll first touch on the securities book, and then I'll let Anthony talk about the loan book. But on the securities book, we have substantial cash flow occurring here in 2026. That will reprice into more of a current rate idea and let's just say 3% and whatever basis points you want to assign to the right of that whole number. So there will be some lift coming from the securities book. And then I'll let Anthony talk about the loan book. Anthony Kim: Yes, sure. We have CRE maturing for the next 12 months, totaling about $1 billion. It's weighted average rate of high. So we should be able to reprice these loans and renew this loan with a much higher rate. To give you more detail on the CD maturity on about $1 billion maturing with a weighted average of in second quarter and another -- let's say, $1.16 billion maturing in the second half of the year with medium to high 3s percentage that we have opportunity to reprice for the reference point of the first quarter about 800 million retail CD was matured at low 4s. We're able to retain 77% of that with 40 basis points lower. So it's not much, but we do have an opportunity to add some benefit to net interest margin. Bonita Lee: Just to add, just on the the $1 million maturing CRE loans, as Anthony said, it's currently priced at high 4%, let's say, close to 5%. And if you look at the first quarter, the new loan yield, it's coming in at 6.5% average, right? So there will be that pick up. So that's what we are expecting that may contribute to the expansion of the net interest margin going forward. Ahmad Hasan: Great. That is really helpful. And then maybe 1 more on -- you guys seem really excited about Corporate Korea initiatives, and that seems to be going really well. Just any color on client sentiment over there given the macro recently? Anthony Kim: Yes. Based on the conversation with some of the customers, they no longer see its tariff as an obstacle. I think it's beyond them. but ongoing economic uncertainty, rising energy price inflation related to water, making companies very cautious about taking on additional lines and loans. So they're opting to use their excess cash instead. So that part of the approach is contributing to subdued loan demand. So as economic certainty improves, we're hoping to see recoveries in loan demand. And then we continue to see influence of deposit coming from Korea for them to prepare for the investment in the U.S. So that's why we had a surge of deposit increase in first quarter. and an increase in U.S. KC portfolio. Ahmad Hasan: Great. That makes sense. And maybe last 1 for me. any kind of planned new hires for this year? I know you talked a little bit about you bringing on new people this quarter. Can you talk a bit more about the planned new hires for the next couple of quarters? Bonita Lee: Yes. I mean Talent investment is 1 of our key focus. So as we see the opportunity, definitely, we will pick up the talented bankers. But we do keep in mind that what we embed in and what we get in terms of return. So -- and for the last couple of years, we have managed investment tied to the the talent investment and then the performance coming up. So the timing, we always try to balance it. So it's not impacting the bank an overarching impact on the quarter. So it's a continuation of the continuing process for us. . Operator: Thank you. We have no further questions in the queue at this time. I will now turn the call back over to Ms. Bonnie Lee for concluding remarks. Bonita Lee: Thank you for joining our call today. We appreciate your interest in Hanmi and look forward to sharing our progress with you throughout the year. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference.
Jessica Smith: Good morning, and welcome to BOQ's financial results presentation for the half year ended 28th of February 2026. My name is Jessica Smith. I am the General Manager, Investor Relations and Corporate Affairs at BOQ. On behalf of the management team, I would like to acknowledge the traditional custodians of the land we are meeting on today, the Gadigal people of the Eora Nation. We pay our respects to elders past and present. I'm joined in the room today by BOQ's Managing Director and Chief Executive Officer, Rod Finch; and our Chief Financial Officer, Racheal Kellaway, who will present the results. We are also joined by BOQ's executive team. Following the briefing, there will be an opportunity for questions. I will now hand over to Rod. Rodney Finch: Thank you, Jess. Good morning, everyone, and thank you for joining us today. Our first half 2026 results reflect disciplined execution against our strategy and ongoing delivery of the group's transformation. Over the half, with strength and resilience across the bank and work to position BOQ to deliver more sustainable earnings through the cycle. We continue to deliver against the milestones and initiatives we have previously outlined, making further progress, simplifying the group, strengthening our operational foundations, advancing our digitization agenda and reshaping the balance sheet to optimize returns. At the same time, our focus on customers and communities remain central. In an environment that continues to test households and businesses, we provided targeted customer support, invested further in fraud prevention and financial crime capability and maintained a strong and visible presence in our core markets, particularly Queensland. The operating environment remains complex with geopolitical uncertainty weighing on consumer and business sentiment. That said, our approach has not changed. We continue to prioritize resilience and sustainability of earnings while progressing our transformation to improve returns and ensure the bank is well positioned for future growth. From a financial resilience perspective, BOQ remains in a strong position. Capital and liquidity levels are robust, asset quality remains sound and our balance sheet provides the flexibility to support customers, navigate uncertainty and continue investing through the cycle. I'll now turn to performance for the half, beginning with our financial results. For the first half, cash earnings were $176 million, down 4% on the prior comparative period. Underlying profit increased by 2%, reflecting revenue and expense growth associated with the completion of the branch network conversion in March 2025. Loan impairment expense was $20 million compared to $3 million in the prior comparative period, which contributed to the 4% decline in cash earnings. We have maintained a strong capital position, which remains well above our management target range. This provides the group with flexibility to support future growth and capacity to absorb potential economic shocks. Reflecting this position, the Board has declared a fully franked interim dividend of $0.20 per share, representing a 75% payout ratio for the half. Racheal will provide more detail on the financial performance shortly. Turning now to the key drivers of our strategy and the strong execution during the half. The digital platform remains a core enabler of our retail strategy, supporting customer growth, improving customer experience and progressively enhancing the economics of the retail bank. Following the launch of term deposits during the half, the core build is now complete, and our focus is shifting to ongoing enhancements that further extend our proposition. To date, we have migrated more than 300,000 customers with over 70% of active retail customers on the platform. Growth and engagement are particularly strong across younger demographics, which was a key strategic objective of the digital bank. From a funding perspective, the digital bank is supporting lower cost deposit growth. The majority of new personal deposits are now originated digitally, supporting higher transactional balances and stronger customer engagement than our legacy platforms. This is also translating into improved lending outcomes. The platform is scaling mortgages in line with plan, with 75% of group home lending originations processed through the platform in March, supporting lower origination costs. Scale increases and enhancements are delivered through the second half of '26 and into FY '27, we remain confident in achieving an improved time to decision and a 50% reduction in origination costs. Overall, this progress reinforces our confidence that the digital bank is delivering on its role, materially improving customer experience, enabling scalable growth and improving retail banking economics. Our productivity program remains a critical enabler of our strategy, reducing complexity, strengthening operational resilience and reducing our cost to serve. Since FY '23, we delivered tangible productivity benefits through a simpler operating model, exits from noncore activities, technology rationalization, a reduced property footprint and continued simplification of our distribution and processing environment following the branch conversion. Our strategic partnership with Capgemini is delivering efficiency through the business processing arrangement. More broadly, we continue to evolve the use of AI across the business with the establishment of a central AI hub to drive adoption and deployment of use cases, including near-term opportunities in the contact center, commercial lending and technology development. When we set out to deliver the $250 million program, we recognized it was ambitious and that the pathway to delivery was unlikely to be linear. As priorities and initiatives have evolved, we expect the full run rate benefits to be achieved of FY '26. With the decommissioning of ME heritage systems and our Capgemini partnership key drivers of that outcome. Importantly, productivity improvements have been sustainably embedded into the way BOQ operates. We have reduced complexity, improved efficiency and created capacity to absorb cost pressures while continuing to invest in our transformation. We expect that on exit of FY '26, we will have generated simplification benefits equivalent to more than 20% of our cost base compared to when the program commenced in FY '23. This is an important outcome in what has been a complex operating environment and reinforces our focus on embedding sustainable efficiency into the way the bank operates. Looking beyond FY '26, we acknowledge there is more work to do. Continued simplification alongside the increasing use of data, automation and AI provides a pathway to drive further productivity and to support operational leverage over time. The capital partner with Challenger announced earlier this month represents an important evolution in our approach to balance sheet optimization and capital efficiency. Our strategic intent is to deliver sustainable returns through shifting asset and funding mix to optimize risk-adjusted returns and grow capital-light income. The capital partnership supports is providing balance sheet optionality and the opportunity for scalable noninterest income growth without the need for capital or funding. The partnership includes a sale of approximately $3.7 billion of our equipment finance back book alongside the establishment of a forward flow arrangement. This structure supports scalable growth in equipment finance without increasing balance sheet concentration or funding requirements while maintaining customer relationships. Under the whole of loan sale, the assets are fully derecognized from BOQ's balance sheet. Risk funding and ownership transfers to Challenger, enabling BOQ to reduce approximately $3.4 billion of higher cost funding, strengthening shareholder returns and further reinforce capital resilience. The forward flow agreement enables us to continue originating new lending using our existing capabilities while scaling the customer offering without increasing balance sheet intensity or concentration risk. Over time this model generates capital-light income through origination and servicing fees, while Challenger provides funding and absorbs credit risk. For BOQ, this supports returns and the ability to do more with our customers. As announced, our intention is to return capital release from this transaction to shareholders with the objective of optimizing return on equity and EPS over time. We are planning to do so through a combination of a fully franked special dividend and an on-market share buyback subject to regulatory and board approvals and market conditions. We expect the transaction to be completed by the end of May. Turning now to progress on our remedial action plans. Delivery of our remedial action plan meeting our regulatory obligations remains a key focus for our management team. We continue to make strong progress across both programs. At the end of the half, 61% of total activities were complete with both Program rQ and AML First transitioning from implementation into the embed phase. This reflects not only delivery against milestones but also a clear shift towards embedding changes into day-to-day business as usual processes. The program remains well governed and appropriately resourced, and we continue to progress in line with regulatory expectations, further strengthening BOQ's risk governance and control frameworks. Turning now to our Retail Bank. Our priority in retail banking remains clear, to reset the economics of home lending and improve returns by scaling a lower cost-to-serve digitally enabled model. We have made considerable progress in reshaping the Retail Bank, including reducing origination costs through the digital platform, delivering term deposits on the platform, which completes the product suite with all deposit products now available on the digital bank and optimizing distribution following the branch conversion. We've also been deliberate in allowing portfolio runoff where returns were uneconomic while improving funding efficiency at the same time. We are now at a key phase as the digital bank scales. More than $23 billion of home lending sits on the platform with approximately 75% of flows originated digitally. The branch conversion has stabilized on a smaller, more efficient footprint and distribution is now better aligned to evolving customer preferences. Foundationally, operating on a modern, cloud-enabled digital platform is also creating a strong underlying capability for the deployment of AI and automation. This has allowed us to explore introducing AI-driven automation across customer operations, particularly in the contact center with further opportunities to improve customer experience and reduce cost to serve. As noted at our full year results last October, the rate of home lending decline has moderated. While we will continue to prioritize returns over short term volume, we expect home lending to return to growth in FY '27, supported by lower origination cost and improved customer experience. Moving to our Business Bank. We are seeing the benefits of focused execution in targeted higher returning specialist segments. Over the half, commercial lending grew above system by 7%, driven primarily by health care, agribusiness and well-secured commercial property. This reflects deliberate portfolio positioning in a sector where we have deep expertise. Housing contraction within the business division reflects targeted runoff where returns were less attractive. The branch conversion continues to support this strategy, enabling banker deployment into key growth corridors and regional SME markets while maintaining strong customer relationships and attracting experienced bankers aligned to our specialist focus. Banker capacity is being further augmented by AI within commercial lending to free up bankers to spend more time with their customers and grow their portfolios. Overall, the Business Bank remains well positioned to deliver sustainable growth, underpinned by strong relationships, quality bankers and deep industry expertise in our key segments. I'll finish by reinforcing the importance of our purpose and values. As a bank with more than 150 years of Queensland heritage, supporting our customers, communities and people remain central to how we operate and make decisions. Across the half, we continue to invest in regional and SME communities and strengthen partnerships supporting vulnerable Australians. At the same time, we remain focused on our people, strengthening the leadership capability, investing in learning and development, including the launch of an AI Academy and sustaining a strong risk culture that supports discipline execution and long-term performance. Together, this underpins the transformation we are delivering, building a stronger and simpler BOQ for our customers, communities and people. I'll now hand over to Racheal to talk more about the financial results in more detail. Racheal Kellaway: Thank you, Rod, and good morning, everyone. The first half 2026 result reflects a steady and continued delivery of our strategy, including bold choices and the disciplined allocation of capital. We delivered cash earnings of $176 million in the half, down 4% against the prior comparative period and 12% against the second half 2025. When compared with the second half of 2025, total income reduced 4% driven by margin compression, fewer days and lower asset balances. There was an uplift of 4% in noninterest income, and we delivered another period of strong cost management, holding expenses flat. Loan impairment expense increased 11% to $20 million. This was primarily driven by one specific provision within the asset finance portfolio, and at 5 basis points to GLA remains below historical levels. Against the prior comparative period, total income increased 5%, primarily driven by revenue uplift from the branch conversion. Expense growth of 6% included bringing on the cost of operating the branch network and is down 2% excluding these costs. Pleasingly, underlying profit increased 2%. Higher loan impairment expense compares to $3 million in the prior comparative period, which included a write-back in commercial lending. The progress we have made on executing against our strategy, including positive lead indicators of success in the digital bank, growth in our Business Bank and our capital partnership and multiyear proof points on cost discipline leave us well positioned as we enter the second half. As outlined to the market earlier this month, there was a $31 million post-tax impact driven by the equipment finance portfolio being recognized as held for sale. Further changes to number will primarily be driven by market movements in swap rates. The impacts of which will be known at completion. There was a further period of amortization relating to the branch strategy with $8 million incurred this half. This program has been delivered on time and on budget as announced in 2024, adding in a small impact from hedging and fair value changes resulted in statutory net profit after tax for the first half of $136 million. I will now spend some time looking closer at the net interest margin given the number of moving parts. On mortgages, we saw ongoing competition, and we experienced slightly higher-than-expected retention discounting, particularly to support branch customers early in the half. Commercial lending competition was in line with expectations and came with strong growth in our Business Bank. We have seen acquisition spreads stabilize through the half. We saw a 1 basis point benefit from continuing mix shift from higher margin -- towards higher-margin business. Outside of these underlying lending drivers, cash rate movements contributed a 4 basis point headwind, driven materially by the non-repeat of benefits in the second half result as rates reduced. Funding contributed a 3 basis point uplift with equal contribution across term deposit optimization, wholesale pricing and funding mix benefits. Liquidity and other was a negative 1 basis point. This included higher HQLA balances, impacting margin by 2 basis points, replicating portfolio, benefiting margin by 1 basis point. However, this was offset by unhedged exposures where the average cash rate in the half was lower than the prior period and less exposure to basis risk and improved basis cost provided a small benefit. Finally, we had a 2 basis points -- we had 2 basis points of a nonrecurring benefit. This is made up of an adjustment to brokerage GST. And as our fast-growing novated leasing portfolio matured, we have an updated view on the average life of that portfolio. Net interest margin for the period was 1.67%. We exited the half with a stronger second quarter margin than the first. Looking to the second half, we will see the benefit from the February and March cash rate movements. Retention activity is expected to continue to feature as households and businesses look to manage their budgets in a rising rate environment and as inflation persists, continuing the trend on underlying price competition. We expect to see ongoing benefit from reshaping the balance sheet toward business lending. We anticipate increasing funding cost benefits from current favorable term deposit spreads, retail deposit optimization and funding mix benefit. Replicating portfolio will continue to be a positive with higher attractive rate. We will optimize liquidity following the sale of the equipment finance portfolio, while impacts from the sale across lending and funding will be broadly neutral to net margin. The 2 basis point benefit one-off I described in our first half will not reoccur. Despite there being somewhat uncertainty and volatility in our outlook, there are more tailwinds than headwinds for margin as we enter the second half. This half, we delivered another period of strong expense management with costs flat on the prior half against a backdrop of high inflation. We are in the final period of our 2023 simplification program, which since its commencement has almost entirely offset annual inflation and new costs to operate the branch network from conversion. This period, inflation and investment across technology, risk and business banking were offset by productivity benefits, seasonality in employee leave and a modest reduction in group investment spend. Whilst we have seen early success in our business processing partnership, we are experiencing some delays in the transition of our technology outsourcing, which is contributing to the multiyear $250 million productivity target and our 2026 cost guidance. The full $30 million of annualized benefits remains on track for 2027. I do want to take this opportunity to reiterate our commitment to sub-inflation cost growth for the full year 2026 against the prior year. This requires a planned reduction in our cost base into the second half. Our guidance on costs remains unchanged. We have continued to invest in the business at a sustainable level with $77 million invested in the first half. As outlined at the full year result, we are moving to a more sustainable level of investment for our business, following a number of years of high investment, including the integration of ME Bank, investment in the Business Bank, the build and scale of the digital bank and risk and regulatory uplifts. 85% of our software intangible assets are now in use and amortizing following the successful delivery of the digital bank and as we acquire and migrate customers and see more features released. Moving now to portfolio quality, and we remain strongly provisioned at 39 basis points to GLA. Impaired assets reduced on last half to $84 million. This includes a reduction in commercial lending and housing impaired balances and an increase in asset finance. Loan impairment expense increased to $20 million or 5 basis points to GLA, remaining at a low level. Looking at each portfolio in more detail over the half. Home lending remains supported by strong underlying asset prices and a decrease in 90-day arrears. There was a $7 million credit to loan impairment expense, driven by the improvement in arrears and house price increases over the period. Commercial lending 90-day arrears saw a slight increase with 2 single name exposures, contributing to a 5-basis-point increase off a low base. Specific provision equity remained low. Total loan impairment expense on the commercial lending portfolio was $3 million. A modest increase in asset finance arrears was largely driven by seasonality with loan impairment expense of $24 million, impacted by a single name exposure, contributing almost half of the expense. BOQ remains well provisioned for a change in the cycle. We hold $298 million in provisions, which is $68 million above the base scenario. We had a reduction in the total collective provision due to the sale of a noncore credit card portfolio, which occurred in the period. Our weightings remain unchanged in the period. However, we have adjusted downwards the economic assumptions, underpinning the base and downside scenarios. We continue to hold collective provision overlays for unique portfolio factors, including specific industries. If we were to enter a 100% downside scenario, a provision increase of $24 million would be required. Our downside scenario assumes residential house prices declining, negative GDP growth and an unemployment rate of 5.6% this calendar year. Whilst we consider our provisions to be appropriate, with current volatility in the broader economic environment, we are remaining vigilant. In a period of sustained lower home lending growth, as we recycled the balance sheet, there was a reduction in total funding. We continue to focus on deposits as a primary source of funding with runoff in less stable deposits and held deposits as a percentage of total funding at 72%, with a broadly stable deposit-to-loan ratio of 85%. There was targeted runoff in term deposit portfolios of 6%. This was both a strategy around optimization for cost of funds but also as we migrated customers onto our new digital platform. Customer deposits remained broadly flat outside of this. Our average LCR remained strong at 141%. As we near completion of the whole of loan sale, we are prudently managing down our liquidity position. We will then see a temporarily elevated LCR before managing this to normalized levels through the second half. Our optimization plan will take the opportunity on our long-term wholesale maturity through our short-term wholesale portfolio and on retail deposits more broadly. Capital ended the half above our target management range at 11.18%, a 24-basis-point increase was driven by earnings, net of dividends. Business lending growth increased underlying risk-weighted assets. However, this was more than offset by a reduction in deferred acquisition costs, adding 2 basis points. Investment consumed 2 basis points. And lastly, other movements increased CET1 by 13 basis points, including mark-to-market gains in the available-for-sale reserve of 9 basis points, deferred tax assets in excess of deferred tax liabilities benefiting 6 basis points and equipment finance portfolio sale impacts of 3 basis points. Our strong capital position supports our planned capital return following the sale of the equipment finance portfolio and as we enter a period of higher uncertainty. As announced earlier in April, we have entered the partnership -- into a partnership with Challenger on the sale of our equipment finance portfolio and the establishment of a forward flow arrangement. Today, we have provided some further detail on the expected impact on our '26 outlook. These impacts do remain subject to change through to completion date, which is on track to occur ahead of initial expectations by early May. In addition, the ranges provided include assumptions on the key moving parts, including the expected benefit from what loan impairment expense would have been without a sale and movements in swap rates. Lastly, while we won't comment further on the detail of the capital management plan, which is subject to Board and regulatory approvals and market conditions, we intend to complete this in an efficient way to support current shareholders and to provide an enduring benefit to both ROE and EPS. In closing, this period saw our focus on costs and capital management did the positive results for the group. 2026 is a key year of delivery against our 4 strategic pillars, in particular, our digitization initiatives, which, in addition to simplifying our business, enables us to grow customer deposits, supporting our commitment to return to asset growth in 2027. We have shown that we will be bold and disciplined in how we deploy capital. With heightened volatility and uncertainty in our environment and how this may in particular, impact funding, margins and losses, commitment to our transformation is even more critical. We continue to remain sharply focused on improving returns over the long term. I'll now hand over to Rod for closing comments and outlook. Rodney Finch: Thanks, Racheal. The external environment remains highly unpredictable with geopolitical uncertainty continuing to increase risks to the economic and financial outlook. We will continue to support customers through these conditions while maintaining disciplined risk settings and strong balance sheet resilience. We will maintain focus on optimizing our balance sheet settings and growing in specialist segments. Growing at system in business lending remains our target heading into the second half, while home lending contraction is expected to continue easing with a return to growth anticipated in FY '27. On the funding side, potential market volatility and further increases in the cash rate will influence competition for deposits. As Racheal outlined, we anticipate tailwinds to margin in the second half through expected funding benefits. We are targeting sub-inflation cost growth, including the full year impact of branch conversion and higher amortization while continuing to progress productivity and simplification initiatives. Loan impairment expense is expected to remain below long-run average loss rates in the near term, though downside risks are clearly present given the global environment. We expect the capital partnership to complete as planned and remain open to further partnerships. We have not changed our management target for CET1 or dividend payout ratios. Overall, we remain focused on disciplined execution, resilience and sustainability as we continue to progress the transformation of BOQ. I want to close by stepping back to where we are in the group's transformation. Our strategy to become a simpler specialist bank has been clear and consistent: strengthening foundations, simplifying the organization, digitizing the retail bank and improving returns. Since resetting the strategy in 2023, we have made tangible progress against each pillar and embedded new capability across the group. We are now entering an important next phase with several near-term milestones approaching, completing the ME retail customer migration and materially decommissioning the legacy ME Bank environment over the next half is the culmination of several years of foundational work. These milestones represent a further step in unlocking lower costs, better customer experience and improved returns over time. They reinforce our confidence in the strategic direction and our continued focus on sustainable performance. On a personal note, when I stepped into the CEO role 8 weeks ago, I reflected on the responsibility that comes with leading a bank with more than 150 years of history. It is a privilege to be a custodian of a brand that generations of Australians have trusted. I'm leading a committed team with a strong focus on the next phase of our transformation with a continued priority of improving returns and supporting customers, in particular, improving our cost of funding as we scale deposits on our digital bank, extend relationships in the business bank and leverage our capital partnership to support a sustainable return to growth. We face into this coming period of uncertainty from a financially resilient position with strong capital, liquidity and asset quality. As I look ahead, our focus is on the continued disciplined execution of our strategy to deliver a better experience for our customers and increased returns for our shareholders. I will now hand to Jess for Q&A. Thank you. Jessica Smith: Thank you, Rod. We will now move to questions. [Operator Instructions] Operator, may we have the first question, please? Operator: First question today comes from Ed Henning from CLSA. Ed Henning: The first one is just on asset growth and mortgages and thank you for your comments today and talking about returning to growth. And I understand continuing to focus on profitability. But can you just talk about as you move forward, both in the near and the medium term, are you willing to continue to lose market share on housing? At what point do you have to step back into the market? Or do you just don't think you need to, if you continue to see margins contracting like you are, are you willing to grow below system in mortgages. Rodney Finch: Yes. Thanks, Ed. So in terms of the mortgage portfolio, the focus is really on returning to growth in '27. If we think about the economics of the mortgage portfolio. The key areas we've been focused on is first is really scaling the digital bank. That's a really critical capability in terms of reducing cost to serve and providing a better experience for both customers, brokers and our bankers. We've talked today to some of those metrics. That platform is scaling to plan. We had around 75% of the originations flow through that in March. So we are well progressed. There's more work to do. I think that also combined with the branch network is really shifting the economics for us in that channel and in that mortgage portfolio. So for us, we're not going to chase short-term returns. We're really focused on the pathway back to returns above our cost of capital, starting with writing business that's accretive to current ROE and then making sure we're contributing to the fixed cost base and being really disciplined as we continue to step our way back to return to growth in '27. Ed Henning: And just on that, I understand the return to growth, but growth doesn't mean growing at system, I would imagine, or is your plan to be at system in '27? Rodney Finch: We're not putting a target on growth relative to system. I think our positioning is returned to growth from a book perspective. I think the priority there, Ed, is making sure that the growth that we are achieving is within the return profile that we're comfortable with. Ed Henning: Okay. And then just a second quick question. And again, thank you for your comments on the cost outlook and growing below inflation. As you move forward, you've made some significant changes in your cost base and you talk about the reducing investment spend. Over the next few years, in the medium term, do you still think you can grow below system or around system in costs? Is that your goal that we should be thinking about? Rodney Finch: We won't give long-term guidance on cost. I think for us, we have worked really hard on the productivity program. As I said, it was an ambitious target when we set it. We're making progress against that. I certainly think leveraging the investments we've made in technology and seeing further opportunities there around automation, digitization, there's continued work that we can do there. We have the benefits of the partnership with Capgemini also flowing through. So for us, we really think that's a key aspect of how we want to organize the business and run it. We think being disciplined on cost management and driving operational leverage in the business, given the investments we made will be a key focus for us into the future. Operator: Our next question comes from Andrew Triggs from JPMorgan. Andrew Triggs: Racheal, a question for you, please. Just on your exit NIM commentary, which you said was higher than the average for the half. Does any of that apply to -- or is any of that driven by lower liquid assets? I'm wondering if the same comment would apply on an ex liquid asset basis? Racheal Kellaway: There is benefit, Andrew, for the liquids portfolio. And so there's 2 elements of that. One is lower HQLAs and the second is a high yield on that portfolio. But it would still hold excluding the sort of comments around it being higher would still hold excluding the specific liquidity impacts. Andrew Triggs: And presumably, that 2 basis points of nonrecurring brokerage and amortization adjustment actually turned into -- does that reverse in the next half? Or just is it -- it will be a non-event in the walk for next half? Racheal Kellaway: It will be -- you'll see it as a negative 2 basis points because it's a non-repeat. So there won't be a P&L. There'll be -- it would come out of P&L, yes. Andrew Triggs: So what moving parts sort of moved in the right direction, therefore, to drive that to cycle that headwind, please? Racheal Kellaway: Yes. So I mean, there's a couple of things in the second, in the first half result, that will not repeat that are negative. And so the first of that really is, if you think about the timing of our end of half, it was the 28th of February. So our half actually saw the negative impacts of cash rates reducing. So there was 3 basis points of negative in this half from the non-repeat of benefits we saw in the second half last year that we called out. If I step back from that, the tailwinds into the second half are cash rate related. So we have seen February and March cash rate increases, that gives us a benefit, both the timing benefit sort of -- but also on the unhedged portfolio. So that is a benefit into the second half. And we have expectations that it is most likely that we will see more cash rate increases through the period as well. The other big driver is really on funding costs more broadly. And so currently, term deposit spreads, for example, are positive. We are expecting that to continue through the half. We're seeing favorability in terms of savings, repricing and then also some funding mix benefits both on an underlying basis, but then also as we optimize from the proceeds of the equipment finance sale. Operator: Our next question comes from Andrew Lyons from Jefferies. Andrew Lyons: Just a first question just on your provisioning. Geopolitically, a significant amount has changed in your result in October, your second half result in October, which appears broadly negative for the economy and your outlook comments appear to confirm this. However, your provision assumptions imply lower dollar value provisioning for each of your scenarios and you've also made no changes to any of your weighting. This does seem a bit at odds with the evolving macro conditions the economy is faced with and also what your peers are doing. Can you just explain why that is the case? Racheal Kellaway: Yes. Look, I mean, as you can imagine, we have thought a lot about our provisioning levels and continue to do so. A couple of comments. The weighting of our collective provision is 45% weighted to downside and severe downside economic scenarios. We have got a worsening outlook within those scenarios. So whilst the weightings haven't changed, the economic assumptions within those scenarios have. If I then step back just more broadly as to your comment around the collective provision in dollar terms reducing, there are 2 idiosyncratic kind of things happening for BOQ in that number. The first is, we did sell a credit card portfolio. That was all settled in the half. It's very small from a balance sheet perspective, but it did mean a reduction in the ECL of $8 million. So that was a step down. The second factor underlying here is our reduction -- overall reduction in assets. And so as our GLA balances have declined, that is also a driver. If you then take those and take those out of the impact, we have increased our CP balance by about 3%. That is actually in line with what we've seen really recently, some of our peers also do. So it's about a 3% increase in the CP. We're very focused there on specific overlays for industries. To call out accommodation in food services, construction, transport, particularly. And so from an overall provisioning perspective, excluding those movements that I called out as sort of one-offs, then we feel that at 39 basis points, we're well provisioned for what could come. But obviously, this is not an area we are really, really comfortable with, and we will remain super vigilant on this. Andrew Lyons: Great. That's really helpful. And then just a second question on costs. On PCP, software assets are up about 86% and yet your amortization charge is up just 23%. Now I realized your FY '26 expense guidance does take account of higher amortization in the second half. But can you perhaps talk to the extent to which the P&L faces a headwind into FY '27 from amortization? Or maybe as an alternative, where do you expect the amortization charge to ultimately peak? At what level and exactly when versus the $43 million 1H '26? Racheal Kellaway: Yes. So we have, as you just called out, we have been really clear that we expect amortization to increase and that is one of the key drivers into the second half that is requiring an offset from our productivity initiatives. So we'll see an increase into the second half. We'll then see quite a similar increase actually into the first half of '27 and again in the second half. So if you look into 2027, we will have higher amortization again, so effectively another half. It will then largely stabilize. So sort of through the end of FY '27 into financial year '28, you can expect our amortization profile to sort of normalize and flatten out at that point. Andrew Lyons: And can I hazard the question as to what that peak level will be in '27/'28? Racheal Kellaway: Look, I mean, we'll end this year close to $100 million. You can sort of expect that to increase by 20% to 25% through until that peak period. Operator: Our next question comes from Matt Wilson from Jarden. Matthew Wilson: Matt Wilson, Jarden. Just look broadly, the balance sheet shrinking and you're only yet -- you're only getting a small amount of capital being released, you hope to return the loan sale capital to shareholders, but at the same time next year, you want to return to system growth, your returns are very low. Do you need that capital to fund that future growth? And given the uncertainty in the macro environment, would it be better to hold on to that capital? It would be a shame if you had to raise capital next year because we went through a credit cycle. And I've got a second question, as per Slide 27, you highlight the impact of the loan sale. If we take the impact on your net interest income, it implies the loss spread of selling those loans, impacts your margin by about 7 basis points. Could you confirm that? And then how do you offset -- that's a lot of work to do by reducing liquids? Rodney Finch: Yes. Thanks, Matt. I'll respond to the first question and I'll just pass to Racheal on the question on the capital sale -- sorry, the capital partnership. Look, in terms of our capital level, we're, as to Racheal's comment, the way we've approached provisioning for the half, she’s going to give an outline of how we're viewing. We note that within the result, we've returned to CET1 well above our management target range of 11.18%. We -- in considering how we approach dividends and shareholder return the capital management plan, we obviously factor into how we're looking to grow and how we want to continue to deploy capital in a really disciplined way. And so when we look into that future scenario into '27, from our perspective, it accommodates how we want to grow within the Business Bank, where we think we have an opportunity to do that in a sustainable way with returns that we're comfortable with, and also in the mortgage portfolio as well as we talked to earlier, which is a pathway to returning growth within the mortgage portfolio. So from where we sit today, recognizing there is some uncertainty in the outlook. We sit here with a strong capital position. We have some flexibility of how we approach it. We have clear plans of where we want to grow, but we are going to be kind of continuing to watch really closely as the market evolves and respond accordingly. But Racheal, I'll pass to you on that. Racheal Kellaway: Yes. So look, on the capital partnership, I will answer your specific question, but I do want to just take the opportunity to step back and talk about the overall P&L impact because I think that is really important and also the sort of capital impacts of that as well. The impact on our 2026 NIM, so the end of this year, is broadly neutral. And so that is a reduction in the net interest income as you described and by sort of 1 or 2 basis points and then that will be offset by funding, largely offset by funding benefits by about the same amount, so broadly neutral to NIM specifically. I think what's really important in this structure is that whilst we recognize there is lost net interest income, we are generating noninterest income, which is capital-light revenue. And so that is the really key thing to look to here. It is also a cyclical business, so you can remove the loan impairment expense that we would have otherwise had. And so this is not a partnership or an arrangement or a structure that really is driving cash earnings impacts in a material way. It is about capital partnership. It is about capital release and then the ability to grow the business, scale the business and to generate more noninterest income capital-light fees without having -- without taking that onto our balance sheet. Matthew Wilson: Just to follow that up, it's -- if you do the math, you're generating 150, 160 basis points of spread on those assets that you've sold. You don't -- that spread you've given up, so that captures the less funding, et cetera. And then when you look at the origination side of the business, 90% of it comes through the broker channel, yet your call out an origination capability, the economics don't make sense either because you're obviously paying brokers. Rodney Finch: Yes. Look, Matt, in terms of the way we think about this business, obviously, it has driven the portfolio. It is a broker-driven industry as well, but there's also significant opportunities within our proprietary franchise as well. We see it as a really core need for many of our customers. If you think about our sector specialization in health care, it's a core need set of those customers as well as wider portfolio. So we see growth not just through the broker channel. We also see work within our proprietary channels as well. As we talked about when we announced this, we see an opportunity to scale growth in this portfolio. And this capital partnership gives us the foundation to do that, driving capital-light income. Matthew Wilson: And on the spread? Racheal Kellaway: Look, I don't think you've quite got the spread. We can go through the detail this afternoon, Matt, if you like. I mean I think I just need to really take you back again though, like we will absolutely be reducing our NIM as a result, of this, but we are looking at this much more broadly than just looking at the NIM. We will be generating noninterest income, as I said, and we will not see a cyclical portfolio and the impacts that, that tends to have on our earnings profile. And so there is a much more benefit to this structure than just the impact on margin. Operator: Our next question comes from Jon Mott from Barrenjoey. Jonathan Mott: I just got a question on the commercial portfolio. Obviously, this is a part of the book, which is growing very rapidly. So if I turn you over to Slide 42 of the presentation, which goes through this in a bit of detail, when we look at it, we can see the commercial book by industry. Property is now at 41% of the book. And if I look at that same slide from last half, it was about 37% of the book. So you work the math out and expand by the growth of the book. The commercial property book is growing at close to 20% half-on-half. This is the commercial properties, so it's growing 20% half-on-half and 40% versus the previous corresponding period. And then you sort of work the rest of the portfolio out, healthcare is pretty flat, agriculture is up a touch, and there's really no growth at all. And then if we look by state, nearly all of this is coming in New South Wales. So a couple of questions about what's driving this. Are you participating in any syndicated facilities that could come through? Can you continue? Are you comfortable with this rapid growth in New South Wales commercial property? And why is the rest of the book not growing? Rodney Finch: Thanks, Jon. So just a couple of comments. What you're seeing in terms of growth in the business portfolio is really the deliberated and targeted approach we've taken to growth corridors. So we have invested in bankers in New South Wales. We thought there was an opportunity to grow there. We were underpenetrated. And so that is really coming through. And more broadly than that, when we look at the types of loans that we're doing, we're really comfortable with the security that we're taking over it, these are quality assets that we're lending. We're well secured on that lending as well. We're operating in industry and sectors that we know well, and that's the experience of our bankers and the credit policy we're applying. So look, that is the composition of the portfolio. We are kind of continuing to focus on growth in the key sectors from a specialist perspective that we're looking at. But as we stand today, we're comfortable with the quality of the growth that's coming through as well. Jonathan Mott: Why so heavily in the commercial property and no growth in health care and all the other sectors, a little bit in agri, but everything else looks flat? Rodney Finch: Yes. Look, I think it's a reflection of where we've targeted growth. And so obviously, as we bring on bankers, they will build their portfolios and that is reflected, I think we take a really balanced approach to where we want to go. I think, obviously, we are well diversified across industries and geographies overall, and we're going to continue to kind of plan that out in terms of how we construct the portfolio. So I would view this as the lending we have done. It's really reflective of where we've looked to invest from a sector and geography perspective. But we're going to continue to take a really balanced approach as we think about growth in business banking. Jonathan Mott: Okay. And finally, is any of this syndicated or is this all purely originated by those banker teams? Rodney Finch: Look, there's some elements of syndication in there as well. From a syndication approach, our philosophy there is really following our customers and supporting our existing customers through that. So there is elements of it, but our really key core focus is on -- is working directly with customers on lending facilities. Operator: Our next question comes from Sally Hong from Morgan Stanley. Sally Hong: I just have 2 questions. The first being on the margin. For the outlook commentary on the deposit pricing and mix sounds quite favorable, and you talked about benefits from higher cash rates. It does sound like margins are going up in the next half. Is that a reasonable assumption? Racheal Kellaway: Yes, Sally, that's absolutely reasonable. We don't usually go into as much detail on, in particular the quarterlies, but we thought it was important for the market to understand that we have a stronger second quarter than the first quarter and that we are seeing tailwinds into the second half. Sally Hong: Great. And you guys -- on costs, you guys reiterated that FY '26 cost growth should remain below inflation, and you've also talked to further benefits from Capgemini, decommissioning the ME Bank platform and as well as broader productivity actions. As we think about the medium term, how should we frame the cost outlook for FY '27? Should we assume that will come down again? Rodney Finch: Look, we're not giving guidance on FY '27, Sally. The way I think about it is, as I said earlier, we think we have more opportunity and more to do in terms of how we simplify the organization and creating the operational leverage, building on the investments we've made, particularly in technology. So coming into next year, we obviously have the decommissioning benefit and Capgemini coming through, as we called out. I think over the medium term, as we've completed the ME migration, we're turning our attention to the BOQ legacy environment. That will again be something that we work on over the kind of medium to longer term given the time it takes to safely migrate customers over time. So we've built really strong execution capability in that regard. We are redirecting the team to that as we close out ME migration. So that, combined with scaling the platform and leveraging the kind of leverage it allows you with the digitization and AI opportunities starting to emerge, we think this is going to be a key priority for us going forward as well. Operator: Our next question comes from Brian Johnson from MST. Brian Johnson: I have 2 questions, if I may. The first one is just on the agreement with Challenger. Two aspects of this. You speak about ROE and EPS growth. You've actually got about $600 million in surplus franking credits. You've got a share register skew very much towards retail shareholders who get a disproportionate benefit from the franking. I get the fact from a management perspective. ROE and EPS growth makes a lot of sense. But Rod, I'd just be interested, how should we be thinking about the fact that your share register is skewed to the group that get a disproportionate benefit from the massive balance in the surplus franking accounts that have not been able to be distributed thus far? Rodney Finch: Thanks, Brian. In terms of the capital management plan, as we've indicated, we're looking at a combination of a special dividend fully franked and an on-share market buyback, still subject to regulatory and Board approvals. And obviously, the conditions in the market in a buyback scenario. For us, the priority is really thinking through, as you said, the composition of our book, but also the efficiency in returning capital to shareholders, and it's really -- that principle that's driven how we're thinking about returning the capital post the transaction completing. Racheal Kellaway: I might just add... Brian Johnson: But Rod, just going back to that point, why isn't it all 100% of special dividend? Rodney Finch: Yes. Look, I think it's a combination of recognizing the shareholder, as you say, we do have a lot of retail shareholders today and they will benefit from the dividend. We want to reward shareholders who have stuck with us over the last few years, and certainly, that's a component. But we also recognize there's benefit for them going forward in a reduced share count in a buyback as well. So it's a combination of the 2 that we're looking at. Brian Johnson: Okay. The second one is, if we have a look at home loan profitability, and I appreciate the amazing efforts that you guys have made to digitize everything, but the operating costs in originating a home loan somewhere between $600 and $700 versus the net interest income is about $6,000. If we have a look at it, Patrick Allaway have been telling us that front book mortgage pricing was below the cost of capital. I'd nearly go so far as suggesting that Macquarie is still pricing the way they are, both deposits and home loans. Even with the digitization benefits that we get, can we just get a feeling about what your view is on front book mortgage pricing relative to the cost of capital regardless of whether it's done through, or through the 3 channel, digital, branch and broker? Rodney Finch: Yes. So I think just in terms of the way we've designed and built the digital platform, it is multichannel. So we'll support -- supporting brokers at the moment through our ME brand. We will roll it out over the next 12 months to our proprietary channels, both banker and direct as well. And so those benefits will kind of flow through across all channels. When we think about mortgage profitability, there's obviously the cost and the cost to serve and cost to originate funding cost is another element as well. I think the branch conversion also helps the economics in terms of that margin returning to us overall. Brian, for us, I think our priority is really the walk back up to returns above the cost of capital. Our focus is on returns above our current ROE and making sure we're contributing to the cost base of the wider group or the fixed cost base of the wider group. We're getting to a position where that is the case. And so for us, it's really continuing to work through that. We feel as though, that is a clear pathway for us. Obviously, it's subject to competition in the market. But I think the investments we've made and those priorities we'll called out are the right combination of activities to get us to where we want to be. Brian Johnson: So Rod, it's still below the cost of capital there, even through the 3 channels when you put all this through? Rodney Finch: Look, in terms of what's recent acquisition, I think we're above our current returns, and it's contributing to our fixed cost base with the pathway to get back up to the cost of capital. Operator: Our next question comes from Carlos Cacho from Macquarie. Carlos Cacho: I just wanted to get a bit more detail around those cash rate impacts you mentioned on the margins. You call out 3 bps to the non-repeat benefits in the second half. I'm guessing that's the timing benefit of taking a little bit longer to pass on the lower rates to some products. Is that going to work in reverse? Are you going to get a timing headwind with the rate cuts we've just seen the 2 in Feb, and March and potential if we look at market pricing and another 1 or 2 in the -- to come still in this half? Racheal Kellaway: Yes, Carlos, it's a great question. We, so the 3 basis points is exactly for the reason you outlined. So you're absolutely right. As you can see in the walk, we've called out a negative 4, which is cash rate timing. Negative 3 relates to the non-repeat of the benefit in the second half '25 and negative 1 actually does relate to the February cash rate increase. So yes, there is an opposite effect that happens as cash rates increase. I think though, if you step back, there are other benefits, obviously, in a cash rate environment, cash rate increasing environment for margin and particularly on the unhedged component of our low-cost deposits. Carlos Cacho: Great. And the second one, I just wanted to ask about provisions. I understand the economic forecast might be the product of the -- of your economist, but if I compare your economic forecast for a downside scenario versus major bank peers. They look to be quite a bit more optimistic. And unemployment rate that's in a downside scenario 1 to 2 percentage points less fall in house prices and commercial property prices, that's 20% small. Only 10% versus 30%. It looks to me like the downside scenario, the very modest downside and not quite as severe, how comfortable are you with those forecasts? Or take it that you're provisioning top-up to get your downside scenario is not significant, but it seems like the downside scenario itself is quite a bit more optimistic than what peers are forecasting their downside scenarios, which is more like 10% unemployment and 30% fall in property prices. Racheal Kellaway: Yes. Look, we -- what we haven't shown you here, and we do at the full year result is actually what the severe downside scenario looks like as well because we have a 45% weighting from a downside and severe downside and the kind of some of the measures that you just called out, the economic assumptions that you called out, actually, are much more aligned to our severe downside scenario, which has a weighting on the overall collective provision. I think if you were to take a view that we would get to 100% downside in this calendar year, so a fairly quick worsening of the economy, you would be taking an extra $68 million above the base scenario. And so that's the kind of -- that is one of the ways we look at this. I think as you can expect, we would obviously also look at and peers as a sort of outside-in-view on our provisioning levels, and as I called out earlier, if you take out the 2 one-off kind of benefits that we're getting from a CP perspective, we are increasing our collective provision, largely in line with the rest of the industry. And so we are tracking to industry metrics more broadly. And one of the ways we've done that this period is in the form of some specific industry overlays. I think just to summarize, our view is that we are -- as we sit here today, well provisioned, but we have definitely got a cautious bias when looking ahead. We are remaining very vigilant. Things are moving quickly. And so I think whilst we are well provisioned as of today, this is an area that we will closely monitor. Operator: Our next question comes from Brendan Sproules from Goldman Sachs. Brendan Sproules: Congratulations on the appointment to CEO role, Rod. Look, I just want to get a bit of a medium-term view of Retail Banking division. Obviously, as you've stated that you're resetting the economics here and the return you're scaling through lower cost and digital to serve. Slide 35 shows us. And in the last 12 months, the pre-provision profit has dropped around 20%, and this is despite the branch conversion. So a couple of questions for me on this. Firstly, on the deposit side, when do you think we'll start to see growth in lower-cost transaction deposit accounts? And I guess what is the medium-term outlook in terms of how much will that type of product fund the loan book. I mean you have one of the lowest funding in terms of mortgages from those particular products? And then I have a second question. Rodney Finch: Thanks, Brendan. So look, retail banking, I talked to this earlier just in the presentation. The economics of this has really been driven by a couple of factors. One is moving to a modern digital core. We're making great progress on that. We're really comfortable with the metrics that we're seeing both from the customer response. So it's a much stronger proposition than our legacy environment and customers are responding well to it and also the economics of the platform in terms of cost to serve and cost to originate. We do see a real opportunity to grow more transactional deposits on that platform. That is a long slow burn in this industry. I think our view is we've got the right product portfolio on that. We want to compete in that space. One of the key things that we've been looking for to really help that growth is bringing mortgages onto the platform. And what we actually see is mortgage customers are a good source of transactional deposits over and above what sits in their offset account just in the transaction account on balance, they tend to higher -- carry a higher average float than non-mortgage customers, mortgage customers. So from our perspective, that is the real focus with the build now completed and migration of ME. That gives us the capacity to really drive that growth. I would also say over the last 12 to 18 months as we've made the portfolio choices, the funding profile has really been reflected in the growth that we've required of what we needed from a funding perspective. So that is a big priority for us. I would also say outside of the Retail Bank, if we think about those lower cost deposits, we think there's a big opportunity in our Business Bank. We know that the proposition there has some gaps in it, and that's a priority for us in the near term to address that. And we think we can do more with our business banking customers and help meet their needs on the deposit side of the portfolio as well. So for us, we think we've got the right proposition. We want to get out there and compete and win more of those balances into the future. And we think that's really key to supporting growth for us in the longer term. Brendan Sproules: That's a very detailed answer. And just my second question is on the cost-to-income ratio, which is now moved into the mid-80s and a few years ago, particularly prior to the ME Bank acquisition, it was more like 50s or 60s. To what extent will this move to the lower cost to serve materially move that ratio? Or is there other initiatives that you have to put in place to really get that back to what has been the longer-term cost-to income within that business over a very long period of time? Rodney Finch: Yes. Thanks, Brendan. It's certainly not where we want it to be today. For us, the pathway back is a combination of factors. One is it's moving on to a simpler digitally enabled modern core, as I talked to, and that's -- we're seeing the metrics that we want in that space. I think more broadly, we still have complexity in the business that we obviously -- these numbers today still contain the ME legacy environment and the BOQ legacy environment as well as the digital bank. Our intent is to move all of our Retail Bank onto that modern core. I think the other element is what that provides is operational leverage. And so we see this is about returning to growth as well. As we talked to earlier, in response to other questions, we've been really thoughtful about planning for a return to growth in mortgages, what we want to see from a returns profile and how we work our way back to it. So I think it's 2. It's -- one, it's a combination of the operational leverage we're looking for from the platform, but also returning to growth through obviously our BOQ brand and the other brands that we have in the Retail Bank as well. Operator: Our next question comes from Nathan Lead from Morgans. Nathan Lead: Just 3 questions, if you don't mind. First one is about the digital bank. Your Chairman at the 2025 AGM seems to suggest that the Heritage Bank customers would be migrated across onto the digital bank platform starting in sort of 2027. And then your previous CEO also said there was a very large prize from that migration. So I just wanted to know whether you can sort of give us a bit more of a definitive target on that migration and if you can sort of firm up what the quantum of that benefit could be? Rodney Finch: Thanks, Nathan. So look, the way I would think about the migration of legacy. There's actually 2 legacy environments we talk about. There's the ME legacy environment, which we're kind of 80%, 85% done with final migration events planned for later this half and then we move into decommissioning. And then our attention, as I mentioned earlier, will turn to the BOQ legacy environment. I would be thinking towards what we've done on the ME migration is a good guide to how we'd approach it for the BOQ side. They are long exercises. There's obviously risk to migration. We've developed a great amount of experience on how to do that. We need to support customers through the friction that's caused with migration, and we also need to do this in the context of running the wider business. So we've got good capability in this space. We think our intent is to start migrations for BOQ in '27 and then work our way through it there. Obviously, as we've done with ME, we will take a really thoughtful approach to making sure we just manage the risk of that. But the types of benefits we see from decommissioning that environment, I think the ME is a good guideline to think about how we view the benefits you'll get from that as well. Nathan Zaia: Okay. Great. Second question is just the comment about returning to home lending growth in FY '27. Is that an intention that you expect the end of year balances to be higher than the start of the year? Or is it just some point within FY '27, you're going to start to see growth again? Rodney Finch: Look, our focus there is, we really want to do it in a way that we're not chasing short-term volume. We really want to prioritize returns. And so I think what we've established over the last couple of years is a really disciplined approach where we won't deploy capital if the returns aren't meeting the levels that we're looking for. So I won't put a data or a timing on it. It's really about us making sure we've got the capability in place, which, as I said, there's a little bit more work we need to do, but then really stepping back into the types of lending that we want to do, getting the balance across the composition of growth and making sure it meets the return profile and then over the course of the year, our return to balanced growth. Nathan Zaia: Okay. Great. And then final one for me. Just Slide 22 with the investment spend. Could you give us an indication now about what you're sort of thinking in terms of like where steady-state is in terms of that investment spend and the expensing rate attached to it? Racheal Kellaway: Yes, Nathan, we have clearly peaked in terms of investment. And so the way that we think about the overall envelope is we are looking to rightsize that investment to our earnings profile. However, we will always look for opportunity to go after investments if there is an appropriate benefit profile. And so we don't give specific guidance. It is about disciplined management of that portfolio just to ensure that we are getting appropriate returns for what we are investing in. And pleasingly, as we've described today, we are starting to see some of the benefits emerge from the investments that we've been making over the past few years. Operator: Our next question comes from Matt Dunger from BofA Securities. Matthew Dunger: Yes. I just wanted to follow up on the deposit growth. You've called transaction deposit growth a slow burn, and we've seen about $2.5 billion runoff in the term deposits year-on-year. Rod, are you able to give us a sense of how you'll fund the return to growth? Rodney Finch: Yes. Look, I think there's -- Matt, I come back to we have built a great proposition on the retail bank. We want to see growth there. Look at transactional growth -- transactional banking growth is important, but I would say -- would call as well and pricing discipline in that space, that all helps build that stable retail funding base. I would call out, I think we can do more in business banking, a real opportunity to get our fair share of our customers' deposit business. And so that's something we're going to be focusing on over the next period as well. I'd also say if we think about the funding stack and optimizing that overall, we also have the capital partnership is an important element of that, not needing to fund growth in asset finance with the capital partnership allows us to think differently around how we optimize that stack. And so it's really a combination of both growth in retail deposits, and I would call out both across our consumers and our Business Bank but also having the opportunity to optimize the funding stack with capital partnerships is another tool that we have available going forward. Matthew Dunger: And just a follow-up on that, if I could. On the branch conversion, are you able to share with us what impact they have had on deposit funding? Is there a future headwind from those OMB conversions? Rodney Finch: Look, we've worked through that over the last 12 months. We've reset onto a kind of optimized network. We've got a strong team in place now, and we're working to really grow the productivity through the branch network and customers. So we're comfortable with where we're at. We think with the digital bank available in deposit sense through the BOQ brand, there's a great opportunity here to continue to grow through the branches as well, and it's part of our thinking going forward. Operator: Our next question comes from John Storey from UBS. John Storey: Appreciate it's been a long call. I just wanted to ask you, Rod, last year, so you go look at your presentation last year and BOQ obviously called out the fact and have done a lot of work, I guess, ultimately to bring across the owner-managed branches, and you're pretty excited about proprietary channels, right? If you go and have a look at your flow rates during the course of this year in mortgage flows from brokers have gone from 60% to 70%. Just wanted to get your insight into why the proprietary channel is not yielding the expected benefits that you guys laid out last year? Rodney Finch: Yes. Thanks, John. Look, I think we've worked through -- it was a big transition the branch network in terms of part of what we had to do as part of that is go out and hire the existing teams from the franchisees to work into our branch network. So look, the change journey that we've been through, that change program has taken some time to work through. We've obviously optimized the footprint as part of that as well. We do have some stats in the back of the pack. We are starting to see the productivity we would expect on that network. That is, again, more work to do there, but we think we've got the right, as I said, the right team in place and the right focus on productivity. And going forward, it's a key part of our thinking of the proposition that we've got. And I think one of the other aspects of the OMB conversion is, it's really allowed us to think about where we want to invest from a geography perspective, not just for home lending managers or from a retail perspective, but able to put our business bankers in key growth corridors where we see an opportunity to grow as well. So we've got more work to do in the branches, but we think we've got the right set of activities to lift productivity over the near term. John Storey: And then just on the 2 half trading and obviously, results for the end of Feb, right, but maybe if you could just give a little bit of color on some of the trends and trading conditions that are starting to evolve through March and I guess, into April, interested to get your insights into things like mortgage applications, business activity. Have you seen any kind of increased flows into arrears? Just general kind of trends that you can comment on, particularly over the last kind of 2 months, March and April? Rodney Finch: Sure. Thanks, John. So look, at this stage, we're not seeing anything material. And we're being really -- we're looking hard, we're looking very closely to see the impacts. In terms of the mortgage portfolio, you'll note that the arrears are down. I think that we reported for the half. We're seeing hardship levels remain consistent with what we expect. We are starting to see some impacts come through probably that transport sector with fuel prices. Again, that's probably more a compounding factor than a factor in its own right that's driving some of the deterioration there. I think in agri, we are conscious of the agri sector where they're getting both the fuel price impacts as well as fertilizer. But again, we're staying very close to our customers and working through it with them. So at this stage, we're not seeing anything significant emerge, but we are staying really close to our customers, as you'd expect and being vigilant. Racheal Kellaway: I might, John, just take a perspective on market more broadly as well, which is we have seen absolutely sort of a higher volatility experienced due to those energy-led inflation risks, but functioning is still remaining intact actually, and conditions are how we would describe as orderly. We are starting to see some spreads repricing quite selectively. We think that is largely driven by kind of underlying valuation as opposed to any sort of significant market disruption or funding disruptions, but it is certainly a little bit more volatile out there. We have seen sort of a slowing in overall market activity. Operator: Our next question comes from Tom Strong from Citi. Thomas Strong: Just a follow-up, on the capital partnership numbers on Slide 27. In terms of the FY '26 noninterest income guide of $8 million to $10 million, to what extent is there seasonality from an origination perspective in that in terms of -- and how to extrapolate those, that run rate into '27? And then, I guess, more broadly, how are you thinking about the origination opportunity in '27 versus FY '26 just given the potential slow? Racheal Kellaway: Yes, I think I caught the question, just cut out there at the end. But look, noninterest income in that portfolio, there's 2 elements of the numbers that you're seeing on the page. The first is the servicing fee that we will receive on the sale of the back book. So that is broadly stable. We will see some runoff in that portfolio. As an asset finance portfolio, it is a bit shorter, but that is one driver of the fee income coming through there. And then the second is the new originations as you've called out. And so that is the establishment of the forward flow partnership. This is a really exciting development for us. From our perspective, we have the opportunity to do more in this market. We are a strong player in asset finance across the industry, but we certainly think there's opportunity to do more. That's obviously subject to conversations with Challenger, but there is the intent certainly for this partnership to be not only long term but to do more business over time as well. And so this is something that we think even despite sort of a slight downturn in the market, we would be able to pick up more volume. Thomas Strong: So you think that the arrangement with Challenger would allow you to do more business that you wouldn't have otherwise done on balance sheet? Is that the implication? Racheal Kellaway: Well, look, I think the way to sort of think about that is we have concentration of it as a balance sheet. And so that was certainly going to be something that we were going to find a constraint at some point. And so we are absolutely looking to do more business. We have a very strong SME business in our Business Bank, this is a core product for those customers. And so the ability to do more of that, to generate income and do more with those customers that we have and then also to kind of get more customers as well, I think, is really exciting. The parameters are really clear with Challenger, but there is certainly opportunity for us to do more business in this space. Operator: Thank you very much. I will now hand back to Jessica. Jessica Smith: Thank you for joining today's call. That's the last of the questions. If you have any further questions, please reach out to the Investor Relations team. We look forward to connecting with many of you over the coming days.
Operator: Ladies and gentlemen, welcome to the Temenos Q1 2026 Results Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Takis Spiliopoulos, CEO and Interim CFO. Please go ahead, sir. Panagiotis Spiliopoulos: Thank you. Good afternoon, good evening. Thank you for joining our Q1 '26 results call. As usual, I will talk you through our key performance and operational highlights before updating you on our financial performance. Starting on Slide 6. We delivered a strong performance in Q1 '26 across all our key metrics and our product revenue continues to grow above market. This follows on from the strong performance in 2025, where we delivered above-market growth in product revenue in the first year of our strategic plan. The sales environment remained stable through the quarter. And in fact, we had a particularly good performance in the Middle East and Africa, signing a number of deals with new and existing customers. Importantly, we also saw good momentum in the U.S. As we discussed at our Capital Markets Day, we have a strong pipeline of deals in the U.S. and several of these are progressing nicely through the sales process and we fully expect to sign some of them this year. Of course, it is hard to give precise timings given the complexity of the deal process. But I'm confident we will convert the U.S. pipeline into revenue and this is one of our key measures of success for the business this year. We also delivered another strong quarter of growth for maintenance, again, largely driven by premium maintenance signings as we continue to upsell across our customer base. We have a well-funded investment plan in place for the year, with planned incremental investments of $28 million to $35 million partially offset by around $10 million of cost efficiencies. One quarter into the year, we are on track with our investment plan, and I would like to highlight that we made several senior hires in sales and product. I'm also pleased to announce the hiring of our new CFO, Daniel Schmucki, who will join us on August 3 this year. Daniel brings a wealth of experience, most recently as CFO of SIX Group and before that, as CFO of publicly listed Zurich Airport. Daniel has a strong track record in building and leading high-performance teams in complex international businesses and he will be an excellent addition and strong partner for Executive Committee and senior management. Turning back to the business. We delivered good operational leverage in the quarter with a cost base growth from investments we made last year, offset by strong revenue growth in Q1 '26. And lastly, we have reconfirmed our 2026 guidance and 2028 targets. Moving to Slide 7. I'd like to highlight some of the key deals with clients in the quarter across different geographies and peers. We had a number of expansion deals with existing clients, including a Tier 1 bank in Japan for new core and payments solution and a leading Swiss private bank expanding their payment suite across several geographies. In SaaS, we extended our partnership with a digital arm of a leading bank in GCC, and we signed with a leading bank in APAC for core, payments and FCM to support their launch of a new digital bank serving retail, corporate and wealth clients. The diversity of deals across customer tiers, geographies, business models, products, and delivery types demonstrates the breadth and depth of our banking domain knowledge, customer trust and product capability. Turning to Slide 8. I'd like to highlight the value we are delivering to our customers. Given all the focus on the Middle East, I'd like to show one success story from the region this quarter with Al Salam Bank in Bahrain going live on our core banking platform. They selected Temenos to future-proof their business as we were able to demonstrate our platform's scalability and support their future growth. They wanted a platform that could enable market-leading digital services, support their AI initiatives and help them meet their regulatory compliance requirements. In the implementation, we replaced multiple siloed legacy systems with 2 acquired banks migrating to our single platform, delivering a significant increase in capacity and throughput and enabling the bank to launch a new digital app for real-time integrated services, thus creating new revenue opportunities. This is a great example of what our platform can do for banks looking to scale with confidence and reflects the kind of partnership and execution that sets Temenos apart. Moving to Slide 9. We showed this slide at our Capital Markets Day in February, but I want to reiterate our positioning in the AI era. AI is clearly reshaping technology markets. But banking is not a typical technology environment, and that distinction matters. Banks operate at the intersection of 2 of the highest thresholds in technology, product complexity and customer risk aversion. This is not an environment where generic AI solutions can simply be dropped in. The requirements are fundamentally different, and that is where Temenos' competitive moat is strongest. On the product side, banks demand trusted domain expertise that handle highly complex workflows, proprietary data and platforms that can be extensively audited. These obligations do not shrink with AI. As banks automate more, these obligations become more concentrated in critical systems. From a customer risk perspective, our solutions are mission critical. Banks operate in one of the most highly regulated sectors and have 0 tolerance for errors or hallucinations. Every decision must be deterministic. The cost of getting it wrong is existentially high. That's why we sit in the upper right quadrant of this matrix, where both product complexity and customer risk aversion are highest as is the threshold for AI adoption. But the benefits of AI are real and adoption will increase over time, and Temenos provides the regulated backbone for banks globally. By embedding AI into our platform, it allows customers to automate, scale and innovate without compromising on compliance or reliability. We are not only protected from AI innovation from peers, incumbents and customers, it is increasingly foundational to our right to win. Turning to the next slide. We have a well-defined AI strategy to capitalize on our advantage across our products, our process and our people. Our strategy will lower total cost of ownership for our customers to embedding AI across our products, and it will speed up our software development life cycle and support customers with GenAI assistance. And lastly, it will empower our people to leverage AI and enable greater productivity. As I mentioned before, the adoption threshold for AI in the banking sector is very high, where there is high product complexity and significant risk aversion. This combined with deep customer trust and domain knowledge creates a strong competitive moat for Temenos and gives us the right to win in the AI era. Moving to Slide 11. I'd like to give you an update on the progress we made in the first quarter on executing our strategy. Our product teams have made good progress on the product road map and we are on track for several new product launches in the second quarter across core, digital, AI and composability while also increasing the range of AI capabilities embedded in our products. We have continued investing in the business, in particular with several senior hires in our global sales organization. These individuals bring significant expertise to Temenos to further support and drive our core banking sales pipeline as well as expanding our team responsible for delivering large complex deals with Tier 1 banks in particular, which requires a specific skill set and the ability to manage highly complex negotiation to a successful closing event. We also launched our new pricing and packaging in the first quarter, which will drive better value for our clients and for Temenos by simplifying our approach, especially for deals involving multiple modules or products. And lastly, we continue to roll out AI tools across the company, most notably including the rollout of Anthropic in our product teams to enhance our software development life cycle. I will now run through our Q1 '26 financial highlights, focusing on constant currency non-IFRS financials. On Slide 13, we delivered strong ARR growth of 13% and despite the headwind from the BNPL client that moved off our platform at the end of last year. For those interested, we have shown the underlying growth rates for all our key metrics this quarter in the appendix excluding the impact of the BNPL client. We had good growth this quarter across all our recurring revenue lines, both subscription and SaaS as well as maintenance. And this was also reflected in the strong product revenue growth of 14%, well above the market run rate growth. Turning to Slide 14. Subscription and SaaS grew 12% in Q1 '26 continuing the strong performance from the previous year. As I mentioned earlier, there has been so far no visible impact from events in the Middle East with the region having a strong quarter in terms of deal signings with a good performance in SaaS in particular. Outside of EMEA, we also saw broad-based growth across client tiers and products. This was complemented by strong growth in maintenance and also decent services growth, which together drove total revenue growth of 13% in the quarter. Moving to Slide 15. Both non-IFRS EBIT and EPS grew 20% in the quarter. The year-on-year increase in our cost base is reflecting the significant investments we made throughout 2025 in product, go-to-market and operations. However, this was more than offset by the strong revenue growth and benefits from efficiency gains in the quarter. Pro forma non-IFRS R&D costs were up 14% year-on-year in constant currency as we are accelerating our investments into product as communicated in February. All this together demonstrates the strong operational leverage in our business. Premium maintenance, in particular, attracts a high margin and continues to help drive the growth in profit. Let me highlight a few items on Slide 16. ARR stands at $860 million despite the headwind from BNPL giving us excellent visibility on future recurring revenue and cash flow. The 15% growth in maintenance revenue was largely linked to strong premium maintenance signings as our sales teams continue upselling to our existing client base. We continue to guide for maintenance growth of 7% to 8% for the full year as we are taking a prudent view on the remaining demand for premium maintenance across our customer base. On profitability, EBIT margin improved by 190 basis points to 32.7% year-on-year, reflecting strong operating leverage and some benefit from cost efficiencies. Moving to nonoperating items on Slide 17. Net profit was up 19% in Q1 '26 and EPS grew 20%. Our EPS continues to benefit from the strong growth in profit and the lower share count from the shares canceled at last year's AGM from prior buybacks. We saw an increase in net finance charges and taxes in Q1, partially offset by FX. We had a slightly higher tax rate this quarter with the expected full year tax rate unchanged at 19% to 21%. On Slide 18, free cash flow for the quarter came in at $60 million, growing 22% year-on-year, driven by strong ARR growth, good EBIT to cash conversion and our disciplined approach to capital allocation, which we outlined at our Capital Markets Day in February. Our strong growth in free cash flow is a key metric for us and is in line with our expectations, given we are now in the fourth year since introducing subscription contracts in 2022. We raised our 2028 target for free cash flow in February this year, reflecting our confidence in the strength of our operating model, balance sheet and cash generation. On Slide 19, we set out our changes in group liquidity in the quarter. We generated $204 million of operating cash and bought back $104 million worth of shares as part of the buyback launched in December. We ended the quarter with leverage at 1.3x comfortably within our target range of 1.0 to 1.5x. Turning to Slide 20, a few comments on our debt, leverage and capital allocation. We completed our share buyback program for a total of CHF 100 million in April 2026. With shares representing 1.9% of registered capital purchase to be used for general corporate purposes. This was the second share buyback we launched in 2025 with the first for CHF 250 million completed in August 2025. The shares purchased in that larger buyback are to be canceled at the AGM in May this year. Our reported net debt stood at $609 million at quarter end. We reiterated our disciplined approach to capital allocation at our Capital Markets Day in February. Our priority is to invest in our business, in particular, to accelerate our R&D road map and using share buybacks to ensure capital efficiency and enhance shareholder return while maintaining flexibility to support our growth levers through bolt-on acquisitions. We also have a progressive dividend policy, which reflects the recurring nature of our business model. Next, we have reconfirmed our 2026 guidance, which is non-IFRS and in constant currency, except for EPS and free cash flow, which are reported. The guidance reflects the strong performance in 2025 and the investments we made last year which we are now starting to benefit from. The guidance includes the headwind from the termination of a BNPL client in 2025, which we have given on the slide. There will be no further headwind from this beyond 2026. And lastly, we have reconfirmed our 2028 targets based on our strong first year of execution, confident in our strategic positioning and good visibility. Operator, please can we open for questions. Operator: [Operator Instructions] Our first question comes from Charlie Brennan from Jefferies. Charles Brennan: Congratulations on good results. Maybe I'll start just with a geographic question, if I can. If I've done the numbers right, it looks like most of the growth in the quarter has come from Middle East and Africa, perhaps maybe not what I would have expected given some of the news flow that we've seen. Can you give us a sense of whether you felt any disruption in March and could the numbers have been better? And I guess, aligned to that, it looks like the U.S. was broadly flat in the quarter. Was there any sense of disappointment for you in the U.S.? Panagiotis Spiliopoulos: Charlie, thanks for the question. So maybe first on, I think, the situation in the Middle East. And clearly, when they started at the end of February, we, like everyone else, were worried about the safety of our people. So we went into this like prepared from past events like COVID. So the company handled this really well and especially locally. So thanks to everyone. Now from a business perspective, I think it's worth taking a step back in Middle East and Africa. These are 2, let's say, large regions broadly balanced in terms of contribution. So both the Middle East and Africa, with Africa having seen, in the past, quite strong growth, stronger than the Middle East. We have, throughout the month and actually also into April, seen overall a stable sales environment and also specifically to the Middle East and Africa region -- or Middle East, no change. So I think this is important to note. And while there was some limited disruption of travel at times, we should note and if you look at the situation on the ground, governments are putting significant resources and everything they can to keep business operating as normal. This is what we saw throughout March. So yes, no impact seen in terms of -- no negative impact seen so far, either on pipeline generation or conversion rates, and this is what we have seen also in the first few weeks in April. Now looking at the other regions. I think on specifically the Americas, U.S. developed actually as planned, LatAm as well. Europe was probably also in line where we saw some, I think -- because we had a tough comparison base with Asia Pacific. But overall, I think the performance was pretty much in line what we expected. We didn't -- I think we didn't save deals or anything for Q2. So nothing actually specifically to call out in terms of the regional performance. Operator: The next question comes from Frederic Boulan from Bank of America. Frederic Boulan: If I can ask a question on the revenue guidance. So we have subscription and SaaS growth of 12% in Q1. You've kept full year guidance unchanged at around 9%. It would be good to discuss any specific phasing we should expect or specific points. And maybe we can also extend that question to the EBIT guidance, 20% in Q1, guidance of 9% for the full year. So here as well, I mean, any specific items we should have in mind? Or is just a guidance framework prudent at this stage? Panagiotis Spiliopoulos: Fred, so on guidance, I mean, we've never raised guidance after Q1. Q1 is like every year, the smallest quarter. There are still quite a number of uncertainties out there on the macro side. We don't know what's going to happen. So I think we having a good start is really helping with the full year guidance visibility. But at this point in time, I think it's the right approach to stay prudent. Also, if you look at the details, clearly, we had good performance in subscription and SaaS and maintenance and services. So across the board, we invested as planned. So the upside ultimately on the growth came really from stronger top line, demonstrating the operating leverage. Yes, we're tracking ahead on all KPIs. Q2 is a bit a more difficult comparison base. Let's see where we end up then. But for now, I think it's the right prudent approach. Operator: The next question comes from Toby Ogg from JPMorgan. Toby Ogg: Maybe just bigger picture one. We've obviously seen over the last couple of quarters, better momentum, and that's obviously been translating into upward revisions to expectations. When you take a step back what do you think are the key drivers that have been yielding that upward momentum? Panagiotis Spiliopoulos: Toby, good question. Overall, if you look at the track record over the last few quarters where we put a lot of effort into transforming Temenos across the organization, clearly accelerating on the product road map, putting a lot of investments into the company across go-to-market and also product and operations. All this on the back of, let's say, stable sales environment. We have seen an environment where banks were printing good results. And I think that's also the expectation going forward. It's also -- so that's -- if you want a stable sales environment, coupled with a more determined, more focused organization is clearly something that's helping us on top, and this is where we always believe it's worth and the first time we do upfront investments, we're reaping now the benefits of that. We -- if you go back early 2025, we said it's going to be an investment year. We've done the investments. We said in February, we're accelerating the investment because there is a very, very large revenue opportunity. And this is what we're seeing the benefit from. And the one element, what I mentioned, expanding what we call the large deal team. This is also driven because we see, as we've seen in the past years, more and more large deals coming into pipeline, which -- where we need -- where we want to have dedicated resources driving those deals end-to-end. And this is across the regions, and this is across the tiers, not just Tier 1s, so this is -- again, you need to invest ahead and reap them the benefits, and this is what we are seeing and obviously striving for more. Operator: The next question comes from Grégoire Hermann from Barclays. Grégoire Hermann: Maybe just I think you had clearly a good start into the year. But I think Q2 is maybe a very difficult comp. Can you tell us maybe how is the pipeline coverage looking like next quarter? Can you provide any indications on the level of growth we should expect for the second quarter, please? Panagiotis Spiliopoulos: Grég, so as we said at the start of the year, that was 2 months ago when we initiated -- when we issued the initial guidance for 2026, we said the pipeline coverage is there for delivering those numbers, also stating we want to be prudent. So 2 months down the road and as you would expect with more salespeople being onboarded and being now live and generating pipeline, the pipeline evolution has been very pleasant to put it like this. What we also said is there are a number of large deals embedded in our full year guidance, and we didn't sign any large deals in Q1. We had a good start in Q2. So we're always taking a risk-weighted approach to large deals, yes? Not all of them need to come. So we're confident that we can grow our SaaS and subscription as well also in Q2 despite the, yes, tougher comparison base. Operator: The next question comes from Mark Hyatt from Morgan Stanley. Mark Hyatt: Congrats on the results. I've just got 2, please. Firstly, if we just touch on the maintenance side of things. Obviously, you called out strong growth there, 15% and strong premium maintenance signings were a driver of that. Obviously, you've given some guidance and help around how we should think about the full year result. But could you just tell us a little bit more around how sustainable that tailwind is for the rest of the year? How should we think about the phasing? And if you can quantify how much of that upsell opportunity you've already worked through, that would be really helpful. And then secondly, maybe just a bigger picture question on AI. Could you talk about what you're hearing from bank's C-suite members today on the AI type priorities? Are they still mainly focused on productivity uplifts and customer-facing use cases? Or are they starting to think about AI more deeply being embedded in core banking and operations? How are they engaging with Temenos as a strategic partner for that at this stage? Panagiotis Spiliopoulos: Mark, so on maintenance, yes, 15% growth was a bit ahead of the full year growth rate we have envisioned, we said about 7% to 8%. But you need to think about it's Q1 '25, which posted a relatively benign comparison base, which is going to become incrementally more difficult to lap. And clearly, we see -- we're always positively surprised and continue to see a good uptake of our premium maintenance offerings on the one hand. But it's also we have -- we see very little downsell or attrition on that, yes? So that helps basically with the -- on the renewal of these maintenance offerings. Overall, I'm not going to -- I can't give you that level of detail how much opportunity there is still there. But clearly, we are -- it's still a very small part of our overall maintenance number. And therefore, I think the growth will continue. I think with 7% to 8% for the full year, clearly, growth rates probably coming down into single digits for the rest of the quarters. I think this is the phasing we would see. And then longer term, so '27 and beyond, we said about 6% -- 5%, 6% is the right number. Again, let's stay prudent because we've been positively surprised before, but I think we're now seeing really the tracking according to what I just said. On AI, there is -- basically, there are 2 areas where we see demand from our banking customers. On the one hand, is overall use cases around the core, if you want, whether it's in digital or something like FCM AI. And this is where we're going to launch a number of new ideas, a number of new products this year. What we do with our clients, with our banks is really develop those use cases in what we call a design partnership, we're trying to find ideas where we can basically take across our installed base. If something is very bank specific, we're not the ones to basically do the custom development of that. But if we find AI use cases like FCM AI, this is something we can then deliver to our installed base. The other area where I think clients are very keen to get AI expertise is -- and this is the main questions they're asking us, and we're developing some ideas, trialing some ideas, both ourselves, but also with partners is can you, with the help of AI, help us accelerate the implementation time line, the upgrade time because this is where they would save a lot of money. So far, we don't have discussions on AI in the core, but really those areas, specific use cases around the core in digital, in FCM and then can you help us accelerate the implementation and the upgrade time because this is where they spend a lot of money. And we have some ideas, but I think it's still early to talk about. Operator: The next question comes from Pavan Daswani from Citi. Pavan Daswani: Could you maybe come back to the EBITDA growth guidance question, given the strong start to the year. Are there any kind of phasing of costs that we should be thinking about for the rest of the year particularly, you mentioned some senior hires in the quarter? And are there any further investments needed to drive the pipeline conversion that you kind of aim for, for the rest of the year? Panagiotis Spiliopoulos: Pavan, so there is, I think, nothing unusual what we plan in terms of the phasing this year. As you heard, we have an investment budget of $28 million to $35 million, which is clearly something we're putting in place, especially in the first half of the year. There's also the exit cost. We exited 2025 with our fully invested cost base. There is clearly -- if we continue to see if there is upside on the top line, this will -- this shows the operating leverage on this. But again, as with the top line, I think we want to stay prudent. We want to see -- so far, we see the investments coming through. There is nothing extraordinary planned. The bulk of investments really go into product acceleration. So -- and this will continue throughout the quarter. So I think the cost base as you would expect, let's say, normal seasonality. And so let's say, Q2 will be maybe, I don't know, $12 million to $15 million higher as we had last year, yes, and then also increase slightly in Q3. And then in Q4, you have basically all the variable costs coming in, yes. So this is overall the $50 million cost increase year-on-year. Operator: The next question comes from Mohammed Moawalla from Goldman Sachs. Mohammed Moawalla: Congratulations on the quarter. I just wanted to concentrate a bit on North America. I know sort of 18 months back with regard to add more capacity, you've obviously been bringing some of that on. Can you give us a sense of sort of the pipeline? I know you touched on potentially some larger deal wins to come how is North America kind of a key part of that? And more importantly, obviously, in terms of the strategy more broadly for North America, are you focusing more on that kind of Tier 2 of regional banks and credit unions versus a very long sales cycle of kind of Tier 1 deals? Panagiotis Spiliopoulos: Mo, on the U.S., so we have seen and we continue to see good progress on a number of -- a lot of deals through the pipeline, as you would expect. Now given this is all new logos and new procurement, it's usually difficult to quantify the time until really you have -- from being selected until you have the contract signed. But this is what's driving the pipeline and where those deals stand, which is driving our confidence that they will get converted in 2026. Now if I look at the pipeline overall, and we always targeted those 150, 160 banks we have a very substantial number of these banks is in our pipeline, which shows also the effectiveness of building pipeline. We still have to convert those and maybe not all will turn into deals. But clearly, that drives our confidence on the -- in the U.S. Now what we see is given we hired a lot of salespeople, what we also see is the U.S. innovation hub is really making a difference for the U.S. pipeline because it's something which we didn't have before. It's a different approach, and it's resonating well with prospects. The other thing which we didn't do before is investing upfront in not just go-to-market, but also the support organization and the backbone. And this is something clients want to see there happening because these are long-term decisions they're taking in the core space. So I think where we still have opportunities is that, as you mentioned, in larger deals, and this is why we're expanding the teams. This is not specifically to the U.S., but clearly also in the U.S. We still haven't moved away from a target market in the U.S. It's still the lower Tier 2, Tier 3 market as occasionally, you get also Tier 1 opportunities. But clearly, again, we're taking a very risk-weighted approach on large deals, whether they are in the U.S. or in any other country. So overall, we're feeling very confident about execution of the pipeline. Operator: The next question comes from Justin Forsythe from UBS. Justin Forsythe: Congrats on a good start to the year. Just a couple of questions from my end, if you don't mind. The first one, I just wanted to unpack that Middle East and Africa number a little bit more. Understood that you said earlier in the Q&A that Africa is contributing a little bit more than the Middle East. I think you talked a little bit about that win in Bahrain as well. Maybe you could just be a little bit more specific on the countries within Africa, which you're seeing strength and the type of banks which you're working with and what types of products you're selling them? Is it the Islamic banking solution? I think you've talked about that in the past? Or is it something else? And maybe what degree of continued strength in the Middle East is baked into the guidance versus closing of some of those U.S. deals popping through the pipeline? And then just a broader high-level question for my second one. Can you just talk a little bit about the mix within core banking between some of these different factors? So for instance, retail side of core banking, corporate, LMS and wealth, clearly, it encompasses a lot of different types of products. And what is expected to be the go-forward driver of growth, the most material go-forward driver of growth within those? Panagiotis Spiliopoulos: Justin, thanks for the question. Let me start with Middle East and Africa. What I said is it's broadly balanced in terms of size, but Africa had the -- more recently, the faster growth rates, yes? So if you look at back some of the last few quarters, yes? We don't -- I think if I look at the pipeline across both the Middle East and Africa, it's very strong. It's very healthy. And Middle East and Africa has been a strong performance over the last couple of years, a lot of structural reasons. So we don't expect any change or we don't assume any change in conversion rates, neither an improvement nor a deterioration for the rest of 2026. As we've shown on one slide, the -- we're doing everything in Middle East, yes. It's also picking up in terms of SaaS. We signed this Tier 2 bank where basically they expanded the core banking partnership with their basically digital subsidiary in GCC. So that's just one example. In terms of products, it's really front to back for many banks, but also core, also digital. I think wealth, we're seeing quite some pickup as well. Islamic banking that remains a key pillar. So it's really across the products we see for Middle East. On your second question, it's quite an interesting one. So wealth, I think we see wealth for especially the larger banks. We're especially dominant and play in the high-end ultra-high net worth piece. So that's for the wealth opportunity. If you look at pure core, it's mainly retail and corporate. What I would say is the last few years, so post COVID, you saw a lot of demand for retail because this is where banks felt the pressure from basically the nonincumbents, yes, with price pressure. So they needed to lower the cost. So their investment was first and foremost in retail because they wanted to protect their offering, their profitability. I would say in the last 2 years because they basically fought off the nonincumbents to a large extent. Now their focus has turned more towards corporate. There is still very good profitability and banks want to protect and even expand profitability. And there is much less competition on the corporate side from non-incumbents, whether it's trade finance, treasury and so on. So this is where we see clearly -- from a pipeline perspective and from a demand perspective, this is clearly where we have seen the pickup in the last 2 years. Operator: The last question comes from Josh Levin from Autonomous Research. Josh Levin: Just 2 questions from me. Takis, you said there's no visible in -- can you hear me? Panagiotis Spiliopoulos: Yes, we can. Yes, Justin, yes, we can. Josh Levin: Yes, yes, yes, you said there's no visible impact so far from the war in the Middle East. But if the war resumes or oil prices stay high and we're heading towards sort of a global recession that some people are talking about, how do we think about how exposed Temenos is to that? How do bank executives think about sort of this as -- they're going to push through this because this is really a long-term project versus actually retrenching on spending on software because they are concerned about the recession? And then secondly, the Orlando investment hub, I think it's been open since June, so it's maybe a bit early, but any lessons so far, any successes, anything that's unexpected from that? I know it's a key part of the U.S. strategy. Panagiotis Spiliopoulos: Josh, yes, unfortunately, we don't have a crystal ball here at Temenos. So we take a prudent view on uncertainty and macro risks coming back to the Q1 performance and the guidance. So what we believe is -- and this is the lessons learned from the past, if you see -- as long as you see only a short-term disruption to anything, so short term being a few months, there is maybe a lower likelihood for a recession. If this keeps going and lasts into well into, I don't know, Q3, the second half, then probably you would expect to see an impact on overall GDP growth and maybe a higher risk for global recession. What we have seen, again, in the past is sometimes countries tipped into like technical recessions without any impact on demand for our software, yes? So we're not -- we have not been benefiting in upward cycles if economies were booming, but also being less affected in, let's say, more recessionary environments as long as there is no massive external event like GFC or COVID. So for now, the way we look at this is obviously being very alert on what's happening day-to-day. Again, the countries there, and we have most exposure is obviously Saudi and UAE, much less on the other ones. Clearly, the governments are doing everything to keep operating normally. They're open for business. And I think this is how we see the banks behaving so far, yes? So this is as much as we can say, again, taking an overall prudent view on what can happen and will happen. On Orlando, it's really a success story from different angles. It's on the one hand, we're getting very good, highly skilled people there. It's something we see resonating well also for our prospects. We have a lot of banks coming in, ideaizing, looking at what can be done. We have very interesting demos there. And it's really the hub where we keep investing and keep hiring as we do in India as well. It's -- we do a lot of 1 or 2, ultimately, a lot of U.S. product-specific development there, which is obviously also resonating well with clients. We're now about 70-plus people, and we'll keep expanding there because, yes, we have demand for U.S.-specific product, and we want to deliver, but clearly also have a strong pipeline in the U.S. So this will -- I'm very happy about the progress in Orlando. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Takis Spiliopoulos for any closing remarks. Panagiotis Spiliopoulos: Yes. Thanks, everyone, for joining us for this Q1 update. Looking forward to update you in July with our Q2 '26 results.
Operator: Good day, and welcome to the East West Bancorp's First Quarter 2026 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Adrienne Atkinson, Director of Investor Relations. Please go ahead. Adrienne Atkinson: Thank you, operator. Good afternoon, and thank you, everyone, for joining us to review East West Bancorp's First Quarter 2026 Financial Results. With me are Dominic Ng, Chairman and Chief Executive Officer; Chris Del Moral-Niles, Chief Financial Officer; and Irene Oh, our Chief Risk Officer. This call is being recorded and will be available for replay on our Investor Relations website. The slide deck referenced during this call is available on our Investor Relations site. Management may make projections or other forward-looking statements, which may differ materially from the actual results due to a number of risks and uncertainties. Management may discuss non-GAAP financial measures. For a more detailed description of the risk factors and the reconciliation of GAAP to non-GAAP financial measures, please refer to our filings with the Securities and Exchange Commission, including the Form 8-K filed today. I will now turn the call over to Dominic. Dominic Ng: Thank you, Adrienne. Good afternoon, and thank you for joining us for our first quarter earnings call. I'm pleased to report that East West had another record quarter for loans, deposits, and fee income. Our consumer and commercial depositors continue to place their trust in us, helping grow total deposits by 9% year-over-year. Growth in noninterest-bearing deposits was particularly strong this quarter, up nearly $800 million, driven by our continued focus on providing solutions to retail and small business customers. We also delivered 7% year-over-year loan growth. C&I loans increased by more than $900 million quarter-over-quarter, driven by higher line utilization, particularly amount capital call borrowers. We also achieved a record quarter of fee income growing 12% year-over-year. We saw strong momentum and wealth management this quarter as we stayed closely engaged with clients. We continue to see opportunity to grow and diversify our fee revenues over time. Credit performance remained stable. Net charge-offs and nonperforming assets were low in absolute terms consistent with our expectations and reflecting our disciplined approach to risk management. Our capital position remains a key advantage for East West with a tangible capital ratio of 10.3%. We maintained this capital level, while growing our balance sheet, increasing our dividend and opportunistically repurchasing shares. We continue to be focused on being disciplined stewards of our customers' trust and our shareholders' capital. I will now turn the call over to Chris to provide more details on our first quarter financial performance. Chris? Christopher Del Moral-Niles: Thanks, Dominic. Let's start with deposit growth on Slide 4. Our end-of-period deposits grew by $1.8 billion quarter-over-quarter. Average DDA growth was up 12% year-over-year and nearly $0.5 billion on an average basis. This checking account growth led us to price our leaner New Year CD campaign more conservatively this year, allowing us to focus on CD balance retention and drive a better mix of deposit costs for the quarter and going into the rest of 2026. Money market deposits were also up 9% year-over-year, as we continue to further diversify away from CDs and other higher-cost deposits. Turning to loans on Slide 5, as we have emphasized before, our focus has been and continues to be on growing our C&I portfolio, and C&I was the primary driver of growth in Q1. Most of the increase was driven by net line draws from existing customers. While utilization ticked up across a range of industries, as Dominic mentioned, capital call-related borrowings made up the lion's share of the first quarter's net growth. The quarter's net draws on capital call lines reflected broad-based increases in M&A and real estate property acquisitions across the quarter. While some of these lines have already been paid down here in the second quarter, private equity markets and real estate markets remain active and we expect to continue to participate in this activity during the remainder of the year. Residential mortgage experienced a seasonally slower Q1 than we expected, but our pipelines have grown and continue to grow into Q2; and we expect residential mortgage to be a consistent contributor to our overall loan growth during the year. We also grew commercial real estate balances this quarter. Our priority continues to be on supporting our long-standing real estate relationship clients. Given the level of net growth we saw in the first quarter and the pipelines we see going into Q2, we are comfortable reiterating our guidance for the full-year loan growth to be in the range of 5% to 7%. Now turning to 6, our loan portfolio remains well-diversified, with over 70% of our loans to commercial customers across a broad range of industries and commercial real estate asset types. C&I now represents 34% of our total loans, reflecting the results of our focus and emphasis on balanced growth across our balance sheet. Our CRE portfolio remains diversified by a number of product types with an emphasis on multi-family, retail, and industrial projects. As we look ahead, we remain focused on growing the portfolio in a disciplined way that enhances diversification and remains aligned with our overall risk appetite. Turning to Slide 7, we provided incremental disclosure on our NBFI portfolio. Growth in this portfolio this quarter has been driven primarily by capital call line. Our NBFI portfolio is granular, with diversification across industry and category types. 99.99% of our NBFI loans are current, and the past decades, there have been virtually no net charge-offs in this portfolio. Approximately 30% of this portfolio is made up of capital call lines. Capital call is not a regulatory classification, and our capital call loans are spread across a range of private equity, mortgage credit, and business credit borrowers. I'll now turn to net interest income and margin discussion on Slide 8. Quarterly dollar net interest income increased to $671 million, reflecting our ability to grow our balance sheet while overcoming the headwinds of rate cuts in Q4 and 2 fewer days in Q1. Our short-term liability sensitivity on deposit pricing dynamics and our positive deposit remixing during the quarter allowed us to continue to reduce our deposit costs, driving period-end costs down a further 6 basis points quarter-over-quarter. Looking back to the start of the cutting cycle, we have decreased interest-bearing deposit costs by 111 basis points, comfortably exceeding our 50% beta guidance shared in prior periods. Moving on to fees on Slide 9, fee income grew 12% year-over-year to a new record $99 million for the quarter, with significant growth in wealth management fees driven by structured note and annuity sales and deposit-related fees, driven by higher customer activity. We will remain focused on driving this growth and further diversifying our revenue overall, and are quite encouraged by the pace of growth in fee revenue so far this year. We continue to aspire to deliver double-digit year-over-year growth in fee income in 2026. Now turning to expenses on Slide 10. East West continues to deliver industry-leading efficiency while investing for future growth. The Q1 efficiency ratio was 36.2%. Total operating non-interest expense was $258 million for the first quarter and included seasonally higher payroll-related costs, some increased stock-based compensation costs, and higher incentive comp, reflecting increased commissions for our wealth management activity. Nonetheless, overall, we continue to expect expenses to come in line with our guidance for the year. Now let me hand the call over to Irene for comments on credit and capital. Irene Oh: Thank you, Chris, and good afternoon to all on the call. As you can see on Slide 11, our asset quality metrics held stable and continue to broadly outperform the industry. Quarter-over-quarter, non-performing assets remained stable at 26 basis points as of March 31, 2026. We recorded net charge-offs of just 9 basis points in the first quarter of 2026, or $12 million, compared to 8 basis points in the fourth quarter. We recorded a higher provision for credit losses of $36 million in the first quarter, compared with $30 million for the fourth quarter. We remain vigilant and proactive in managing our credit risk. Turning to Slide 12, the allowance for credit losses increased $26 million to $836 million or 1.44% of total loans, as of March 31, reflecting quarter-over-quarter loan growth and the portfolio mix shift. We believe we are adequately reserved for the content of our loan portfolio given the current economic outlook. Turning to Slide 13, all of East West's regulatory capital ratios remain well in excess of regulatory requirements for a well-capitalized institution and well above regional and national bank averages. East West Common Equity Tier 1 capital ratio stands at a robust 15.1%, while the tangible common equity ratio now sits at 10.3%. These capital levels continue to place us amongst the best-capitalized banks in the industry. In the first quarter, East West repurchased approximately 938,000 shares of common stock during the first quarter of $98 million. We currently have $117 million of repurchase authorization that remains available for future buybacks. East West also distributed approximately $111 million to shareholders via a quarterly dividend, East West's second quarter 2026 dividend will be payable on May 18, 2026, to stockholders of record on May 4, 2026. I will now turn it back to Chris to share our outlook. Christopher Del Moral-Niles: Thank you, Irene. We've assumed the forward curve as of March 31, which models no rate cuts. And therefore, we're updating our full-year 2026 net interest income guidance to grow between 6% to 8%, up from our prior expectations of growth between 5% and 7%. We're also updating our net charge-offs and now projected to fall between 15 and 25 basis points for the full year. With that, we'll be happy to open the call for questions. Operator? Operator: [Operator Instructions] And the first question will come from Ebrahim Poonawala with Bank of America. Ebrahim Poonawala: I guess, maybe the first question, just given the capital proposals that were put out by the Fed last month. I'm wondering if you can quantify what impact you expect to your capital ratios -- and yes, I guess, first, just what's the impact that you expect for what are really strong capital levels? And where is this headed if the proposal becomes a final rule? Christopher Del Moral-Niles: We are happy to cover that for you. The risk-weighted asset adjustment from what has been put out there as Basel III Endgame is roughly a $7 billion reduction in our current risk-weighted assets relative to our current balance sheet. And that would probably translate to something on the order of magnitude of 1.6% to 1.8% increase in our various respective regulatory capital ratios. Ebrahim Poonawala: Are you going to use all that excess capital to start another bank, but... Christopher Del Moral-Niles: Dominic is very opportunistic. And I think we are very comfortable maintaining very strong capital levels and having more capital has never served this bank badly. Irene Oh: We're going to use that capital to grow organically. Ebrahim Poonawala: That's the best answer. So I hope you do. So -- and maybe, I guess, moving to the P&L, strong deposit growth. I wanted to get on the private capital call-line lending. Lots of focus on just private equity in that space. One, it didn't sound like that any of that drawdown on capital call-line lending was stressed and it felt like there was more activity that drove that, if you can confirm that? And why are we not seeing more diversified C&I growth pick up, given just the broader momentum. I understand the macro volatility, but are you seeing at least green shoots of other areas where C&I is picking up? Christopher Del Moral-Niles: Well, Sure. So EB, I think on the capital call lines, it was pretty diversified. It was the lion's share of the total growth, but it was across a range of industries, and that gives us comfort that things are happening out there and there are green shoots in general. And of course, there was a component that was a capital call line, which is well over $300 million, and that was all encouraging evidence of continued activity across a range of industries. So, we saw activity in true distribution. We saw some cross-border. We talked commercial real estate. We saw a lot of areas that had positive momentum and continue to have positive momentum going into Q2. Irene Oh: And maybe I'll just add to clarify as a clarifying point, none of the drawdowns that we saw in the quarter were anything distressed. Opportunistically, it really is the time of that. And I think, as Chris alluded to, some of those, there's a timing component of this, right? Some of those did pay off in the early part of the second quarter, normal activity. Operator: The next question will come from Dave Rochester with Cantor Fitzgerald. David Rochester: I just wanted to ask about the deposit growth. Very solid this quarter. Can you just give an update on the competitive environment there? Do you find yourself having an easier time growing core deposits. I mean normally, this is a softer quarter for that for most banks. The DDA trends look really good. How do you feel about that going into 2Q and the rest of the year, especially on the DDA side. Christopher Del Moral-Niles: I think the DDA growth that you saw has been the result of a now more than a year's long campaign to really deepen our connection with retail, small business customers across our footprint. That's been successful and continue to bear fruit into Q1 '26. We're not letting up on that strategy. That campaign has been working arguably better than we expected here going after it for more than a year, but in a way that we are continuing to go more time and effort to make sure we nurture it even more. The landscape for deposits, however, is not easy. It is a very competitive landscape. And from a pricing perspective, the fact that we moved from the outlook with multiple customers to an outlook with no cuts means that deposit pricing pressure is real and coming upon us. And so the reality is, it's doubly impressive from our perspective that our teams are able to go out there and win non-interest-bearing DDA money in an environment where rates aren't expected to come down anytime soon. Kudos to our retail team, kudos to our strong business teams, kudos to all commercial RMs out there working with their customers to find opportunities for us to add value, really paid off here in the first quarter. But no, I don't think pricing is going to get any easier, and I don't think competition is going to get any easier. David Rochester: I appreciate that. Just a follow-up on wealth management and you talked about staying close to the customer and that helping you guys out this quarter. It's a really big number this quarter. Can you just talk about how you see that trending moving forward? If you've added new people that are helping boost that number, you've got new products. Just anything else that can help us figure this out going forward. Christopher Del Moral-Niles: There was a fair amount of volatility in Q1 and some of our clients decided that some structured notes were a good thing, and we added some notable volume in structured notes. We also added some annuities during the quarter as people moved out of equities at record highs into annuity products. But we also added people late in the quarter, so it don't have a big impact to the Q1 numbers, but we expect it will continue to support continued growth in wealth management as we roll through the rest of the year. Operator: The next question will come from Jared Shaw with Barclays. Jared David Shaw: I guess sticking on the deposit theme, with the good growth that you're seeing in the mix shift, how should we think about sort of the trend of deposit pricing costs in a flat environment? I mean, do you think you're still going to be able to continue to march that lower as we go forward? Christopher Del Moral-Niles: I think, Jared, in some prior calls or meetings, I had alluded to the fact that we have been benefited from rolling down the hill and there would come a point in time where the hill would stop to be so steep and flatten out. And I think we've hit that point now. So no, my comments earlier that I don't think deposit pricing is going to get easier allude to the fact that I think our ability to march down or roll down the next wave of CDs that sort of run its course to a large extent. That having been said, I'll just remind you all, we are asset sensitive which is why when we're changing our guidance from cuts to a flat rate environment, we're also upping our NII guidance because higher for longer is net better for East West Bank. Jared David Shaw: Okay. That's good color. And then any color, maybe, Irene, on the growth in resi nonperformers? Are you seeing any areas of stress there maybe from tech worker disruption from AI or anything that you're spending a little more time looking at? Irene Oh: Yes. That's a great question. We have seen a little bit of increases in that, ultimately, there isn't anything that we view as systemic. It really is customer by customer loan by loan. And ultimately, for us, given the low loan to values we underwrite it, we don't see a lot of loss content there. Operator: The next question will come from Casey Haire with Autonomous Research. Casey Haire: I wanted to touch on loan growth. Apologies if I missed this, but the guide of 5% to 7% off of a quarter where you're growing at 8% annualized and pipeline sound pretty constructive kind of a recurring question for you guys, but why -- is that a little conservative? Or what are we missing here? Christopher Del Moral-Niles: I would point you to Page 9 of our press release tables which says that from March 31 of last year to March 31 of this year, we grew by exactly 7.0% on total loans. So that felt like it was in the range of 5% to 7% and warranted holding the range. Casey Haire: Okay. Yes. I mean last year, it was much different. I mean, we had the tariff and obviously, the macro is -- okay. I get it. All right. Just moving back to the capital discussion. Irene, I heard you say you're going to grow organically. I've also heard you guys talk about some M&A aspirations on the East Coast where there's pockets of Chinese American populations that would fit well with the strategy here. Just some updated thoughts around that. And just given the excess capital under the Basel III proposal, what -- if you were to find an opportunity that you did like what are some parameters around earn-back and tangible book value dilution? Irene Oh: Well, I'll start and maybe Dominic and Chris can chime in afterwards. We have a kind of hierarchy organic, right? Organic growth is our priority, and we've been able to show over many, many years the ability to grow our franchise through organic growth. Although, as you know, we have a history many years ago also of being able to do successful well priced strategic acquisitions as well. So organic growth is our #1 priority. I think, certainly, when is opportunistic stock buybacks, you know what the return is and then also acquisitions, well priced, strategic, makes sense for the franchise, something that ultimately has to be a better return than our ability to grow organically. Christopher Del Moral-Niles: And we complement that, of course, with the regular dividend and we review the dividend at least annually and then the dividend is our second go-to after organic growth, and that's where we have most recently increased our dividend, you'll recall in the first quarter by 1/3, and we'll continue to look at that to make sure it remains competitive. And then as Irene mentioned, follow up the organic growth with dividends and then inorganic opportunities at the right price and then share buybacks perhaps opportunistically. Operator: The next question will come from Manan Gosalia with Morgan Stanley. Manan Gosalia: On the deposit growth side, the question is do you typically see some sort of flight to safety from clients, clients just holding more liquidity at times when there is elevated geopolitical risk. And I guess the question is, did you see any of that this quarter? I'm just trying to assess how much of the strength in DDA growth is seasonal or idiosyncratic versus how much of that -- do you see this as a new base to grow off of? Christopher Del Moral-Niles: Clearly, East West Bank over the last 15 years has been the beneficiary a very strong, well-capitalized and highly liquid bank of net deposit flows from our customers and increased balances from other banks in the region, from other banks in the country and even some pockets outside. All of that has served the East West benefit and continues to be. And it does feel like whenever there's an errant headline, we see more opportunities to engage with more customers and have been successful at gathering more deposits. So we like the positioning that we have. It apparently pays dividends to be the best capitalized bank in the industry and one of the most profitable banks in the industry and for everybody to recognize that and trust us in that way. And so I think we are well positioned, and I don't think it's temporary. But yes, we do see flows come in and out and tax flows do happen on April 15, and we saw some of those flow out, but we feel good about the base that we've built and the year-over-year growth in deposits that we've been seeing for almost 15 straight years. Manan Gosalia: Right. Perfect. And then you guys gave the C&I loan yields at the back and not a surprise to see that edge down slightly. Is that all just rate related? Or is there anything that comes there from mix shift maybe to capital call or investment-grade clients? Or is there anything you're seeing in terms of competition impacting spreads? Christopher Del Moral-Niles: I think we have seen competition broadly impact spreads over the course of the last year. We also provide the net interest margin table on Pages 10 and 11 of the press release. And what you'll see there is a broad repricing downwards because most of our portfolio is floating rate and that just come through as those naturally move forward with the rate cuts that we saw last year, including the ones that happened in December. But as we've mentioned, our reset here sometimes don't kick in for about 45 days late. So we saw still repricing impact in Q1 related to the December rate cut. Operator: The next question will come from Bernard Von Gizycki with Deutsche Bank. Bernard Von Gizycki: Chris, you mentioned the checking account growth led to pricing the Lunar New Year CD campaign more conservatively this year, allowing you to focus on CD retention. Can you just remind us how much CDs rolled off during the quarter? How much was retained? Any color on expected improvement in pricing from rolling forward CDs in 2Q? Christopher Del Moral-Niles: Yes. So we had a little over $10 billion of rollover during Q1, and we net grew CDs as presented on Slide 4 by $127 million. So we eventually priced for retention and achieve retention. And then from a pricing perspective, as I mentioned earlier, we've been benefiting from rolling downhill, but we sort of flattened out that role. And as we sit here today, I'm not sure incremental new CDs will be necessarily repricing with much of a benefit as we roll into Q2 and Q3. We're currently pricing our CD special at 3.60%, which is not going to necessarily move the needle a lot on our CD price. Bernard Von Gizycki: Okay. And just as my follow-up, I think in last quarter, you mentioned the impact from hedging impact. There was a headwind of about $2 million. What was it this quarter? Any expectations for full year you can provide? Christopher Del Moral-Niles: Yes, it's roughly flat and all those hedges today are in the money looking forward, given the backup in that but we're still in the money -- on all the mark-to-market value of all the trades is positive. So we're going to add value moving forward. Operator: The next question will come from David Chiaverini with Jefferies. David Chiaverini: On the NII outlook, so you raised it 6% to 8% from 5% to 7%. You alluded to higher for longer being good for East West. Was this the main contributor to raising the guide? Or was the loan outlook also part of it? Can you unpack that a little bit? Christopher Del Moral-Niles: Yes. We would attribute the guide increase exclusively to the change in the rate outlook. And as I noted earlier, we're not raising our loan guidance at this point in time. So that's still baked in there at 5% to 7%. David Chiaverini: Got it. And on the net interest margin, how should we think about the outlook from here based on your commentary on the deposit front, is a dip a reasonable way to think of it? Or how should we think about the NIM going forward? Christopher Del Moral-Niles: So we're thinking about the margin and dollar NII as moving higher, they'll probably both track at least flat to positive. David Chiaverini: So the NIM flat to positive from here? Christopher Del Moral-Niles: Correct. Even though -- and this sort of leads to the question I answered earlier, even though there's incremental deposit pressure, the fact that loans will be yielding higher for longer this year, we will still end up with a better net interest income and likely slightly better net interest margin than we were previously projected. David Chiaverini: Very helpful. Thank you. Christopher Del Moral-Niles: I would remind you, though, that the first quarter has fewer days, but don't index off of the Q1 number, index off of the day count adjusted number. Operator: The next question will come from Chris McGratty with KBW. Christopher McGratty: The tweak in the credit guidance is a tweak, but it's -- I think it's a fairly important vote of confidence or statement. Could you unpack what drove you to change the charge-off guide after 1 quarter? Irene Oh: Yes. That's -- it's simply put, right? When we look at the portfolio and we look at kind of what we're seeing, this is our view as far as at least today where we think the net charge-offs are going to be. Christopher McGratty: Okay. So good visibility on the outlook. Okay. And then within the 7% to 9% expense growth. I'm wondering if you could parse out, run the bank versus invest in the bank and how over time, this level of growth. I think this is a similar guide you gave last year at the beginning of the year, how AI might influence that over the medium term? Christopher Del Moral-Niles: In the short to medium term, AI is a cost because we all have to run to figure out how we're going to combat missiles and everything else that the market is doing at. And so the reality is we're spending time to make sure we're -- as we have been for the last year, investing in our cyber defense and investing in our monitoring tools, investing in our daily operating capability to make sure we're as resilient as possible. And those are investments that I'll highlight are not regulatory-driven. There are investments that are driving us to be the best bank we can be every day for our customers, and we're going to continue to make those investments every day. And that's why we will continue to believe 7% to 9% expense growth is the right level while delivering the best efficiency ratio in the industry. Operator: The next question will come from David Smith with Truist Securities. David Smith: Good afternoon. I was wondering if you could give us any updates on how you're looking at blockchain or stablecoins as you look at ways to better help your plans with international business needs, transfer money more efficiently? Christopher Del Moral-Niles: We continue to see the vast majority of our customers wanting and continuing to transact in Fiat currencies, but we do have customers that hold a variety of crypto and stablecoin, and we're monitoring those continued conversations, development, new products and new solutions. We have put some projects sort of into the hopper that we think we'll be able to deliver at the appropriate time when there's a little more market acceptance to those, and we've been working with 1 or 2 clients on select opportunities to be supporting them on a back office basis. And so we'll continue to be active around the state, but have not yet rolled anything out to customers. David Smith: Are tokenized deposits part of that potentially or anything there? Christopher Del Moral-Niles: We have explored those. We have not yet rolled out or put something like that on the shelf, but that's one of the things that we've looked at in concert with, I think, some larger industry vendors that have proposed solutions, and we're trying to figure out if we want to use those or something different. So we're just exploring that and monitoring those development cycles. Operator: The next question will come from Janet Lee with TD Cowen. Sun Young Lee: In recent years, your deposit, you generally were able to grow deposits at a pace that's modestly above loans. Is it fair to assume that your deposit growth for 2026 would be the same as in coming in, in line to above your loan growth guide for the year, given the strong results, especially given the strong results from the first quarter? Christopher Del Moral-Niles: Janet, I would note that on Page 3 of our financial highlights. We led with deposit-led growth as the story. And so we continue to see deposit-led growth as the story and continue to expect deposits to help us drive a better funding mix, a better liquidity profile and more reservoir dollars available to meet our clients' needs as borrowers over time. But yes, it's been a deposit-led story. Sun Young Lee: Okay. And maybe I'm missing something here, but if you were able to keep your net interest margin flat to modestly improving versus the first quarter, I guess, excluding the day count impact and then loans growing at 6.5% to -- sorry, what was your loan growth guide? Loan growth in the 5% to 7%. Your NII, what would be the puts and takes around you getting to that lower end versus the high end. It looks like you're tracking at least at the higher end and potentially better or... Christopher Del Moral-Niles: I think some of those things are true, but the other things that we talked about are that deposit pricing pressure continues to build, and we would expect that to eat into some of the benefit that we might see from higher for longer as we move through the course of the year. If the economy is strong enough, or inflation levels are strong enough such that rates are not nearly lower then probably there's more net funding going on in the industry and deposit pricing competition strengthens or becomes more rigid or even increases and makes that more costly, and we factor that into our models for 2026. Operator: The next question will come from Timur Braziler with UBS. Timur Braziler: Just circling back on the loan growth, maybe specifically for the coming quarter. I appreciate the comments that some of the capital call lines had already paid down. That's going to be offset with improvement in the mortgage warehouse business. I guess, net-net, in 2Q, are you still expecting those loan balances to grow? And are we still thinking that 1Q is kind of seasonally softer for some of the traditional commercial business lines? Christopher Del Moral-Niles: So unpack that question again because you said something about warehouse, and we don't do a lot of warehouse. So repeat your question, Timur, sorry. Timur Braziler: Yes. Just the puts and takes on some of the lines being paid down in 1Q versus the growth that you're expecting in the second quarter and whether or not that's going to net positive balances in 2Q? And then just the seasonality on some of the commercial pieces. Christopher Del Moral-Niles: Sure. So on the private equity capital call line activity that we saw in Q1, Irene mentioned and I mentioned, we've already seen some of that pay off here in April. And we probably expect more than 1/3 of it to pay off, frankly, in the ordinary course during the ordinary second quarter. So that uptick that we saw should be in the ordinary course paid down to some extent. However, we continue to see continued activity in private equity and in mortgage private capital. And those 2 areas may therefore offset those paydowns and allow us to deliver additional growth in Q2. As we sit here today, we would expect that. Too much seasonality per se in the other areas of our commercial business. Timur Braziler: Got it. And then one on credit ACL has been building over the last couple of quarters. I think you guys called out some mix shift here in the first quarter. Just give us a sense of where you are likely in that ACL build. And should we expect that to start settling out and being utilized here at some point? Or is that going to remain fairly conservative in holding up at these kind of levels? Christopher Del Moral-Niles: I think the bank has traditionally approach ACL as being making sure it was appropriate. And perhaps on the margin, making sure it was modestly conservative, I think we've continued to do so. From a build perspective, it was 2 basis points for the quarter. I'll defer to Irene on specific comments around the portfolio. But I think the reality is, with our visibility that we do have in the charge-offs, we feel pretty good about where we stand. Irene? Irene Oh: Yes. Maybe I'll just add a little bit on the technical side of that. You use a multi-scenario model for calculating our allowance. And as of March 31, the downsides scenario did change quite substantially from what it was at year-end. That certainly was one of the factors. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Dominic Ng for any closing remarks. Dominic Ng: Well, thank you to everyone for joining us today. I want to thank our team for their continued hard work and dedication, which continues to show in our results. We appreciate everyone your time and interest and looking forward to speaking with you again next quarter. Goodbye. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Northern Star March 2026 Quarterly Results. [Operator Instructions] I would now like to hand the conference over to Mr. Stuart Tonkin, Managing Director and CEO. Please go ahead. Stuart Tonkin: Good morning, and thank you for joining us today. With me on the call is Chief Financial Officer, Ryan Gurner; and Chief Operating Officer, Simon Jessop. As previously announced, in the March quarter, gold sold totaled 381,000 ounces. And today, we announced the delivery of those ounces at an all-in sustaining cost of AUD 2,709 per ounce. This improved operational performance exiting the quarter has delivered high-margin ounces to generate group underlying free cash flow of $301 million. More specifically, we are prioritizing cash flow at KCGM by accelerating volumes from the high-grade Golden Pike zone during current mill constraints. At Jundee, the operational review is underway, and across Thunderbox and Pogo, we've seen gold grades improve. With this improved performance and high-grade ROM stockpiles at KCGM, the company is forecast to deliver its revised FY '26 production guidance of above 1.5 million ounces. As previously disclosed, this outlook remains particularly dependent on mill throughput at KCGM with both downside and upside potential. Total growth capital expenditure for FY '26 remains unchanged with revisions to the KCGM mill expansion project and operational readiness CapEx. The KCGM mill expansion project remains on track for commissioning in early FY '27. And pleasingly, the project started transitioning from construction to the completions and commissioning during the March quarter, which is marking the next stage of project delivery. Due to ongoing poor productivity levels for construction activity, we prioritize the importance to keep the project on track, and therefore, forecast capital spend increased to $680 million to $700 million in FY '26 and $160 million in FY '27. The increased capital expenditure during FY '26 for the mill expansion has been offset by a reduction in the forecast spend for operational readiness related to delay in the spend of the thermal power plant and transmission infrastructure. You will see in the quarterly report, we've also introduced some extra detail regarding Stage 1 and Stage 2 for on-site construction. Stage 1 refers to the construction of the 27 million tonne per annum plant. Stage 2 refers to the consolidation of the Gidji facility, which simplifies the processing footprint to a single location in Fimiston, which supports longer-term operating efficiency and cost structure benefits. At Hemi, our team continues to optimize the engineering and design of the project while advancing approvals. So our balance sheet remains in a net cash position, and our hedge book -- as our hedge book decreases, our growing exposure to spot gold price, coupled with increasing production, positions us for a strong increase in cash flows going forward. I'd now like to hand over to Simon Jessop, our Chief Operating Officer, to discuss our operational highlights. Simon Jessop: Thank you, Stu, and good morning. This quarter, we delivered a solid operational financial performance with improving production, stronger cost control and continued investment in the long-term growth across our portfolio. At the Kalgoorlie production center, we sold 210,000 ounces of gold at an all-in sustaining cost of $2,550 an ounce, improving on the December quarter. This was driven by stronger cost efficiency at KCGM and a return to normalized performance at the Kalgoorlie operations. Mine operating cash flow was $588 million, generating a net mine cash flow of $156 million after $432 million of growth capital, reflecting both asset strength and continued investment. KCGM sold 117,000 ounces at an all-in sustaining cost of $2,485 an ounce, supported by higher grades and optimizing the available mill feed. Importantly, mining volumes continue to trend towards our annual targets. Open pit material movement is tracking towards 90 million tonnes and underground production towards 3 million tonnes per annum. Ongoing waste stripping is supporting this progress. At the same time, productivity gains are allowing us to accelerate mining in the high-grade zones, prioritizing margin and cash flow, particularly while the mill throughput remains constrained. At Carosue Dam, open pit mining is expected to conclude in the June quarter with production transitioning to underground sources and stockpiles. At the Kalgoorlie operations, performance improved with higher grades and the normalization of underground mining following the earlier H1 disruptions. Turning to our Yandal production center. Performance also strengthened. Gold sales increased to 105,000 ounces at an all-in sustaining cost of $3,347 an ounce with a mine operating cash flow of $177 million and net mine cash flow of $91 million after growth capital. At Jundee, an operational review is underway to reduce costs and improve consistency. During the quarter, we returned to conventional ore processing following the remediation works while a completed power upgrade is expected to support improved mining volumes and grades in the June quarter. At Thunderbox, production was particularly strong, with gold sales plus 26% quarter-on-quarter to 59,000 ounces driven by higher grade ore, initial open pit contributions and improved mill recovery. Turning to Pogo, we saw a step change in performance. Gold sales increased to 66,000 ounces at an all-in sustaining cost of USD 1,529 an ounce, driven by higher grades from optimized stoping in the mining areas. This translated into a mine operating cash flow of USD 136 million and a net mine cash flow of USD 124 million, highlighting the strength of this asset as a cash generator. Operations continue to perform strongly with the mine and mill running at an annualized rate of 1.4 million tonnes per annum. Development activity remains robust, establishing new mining fronts and advancing infrastructure to unlock future production, including access to the Star ore body, supporting both growth and potential mine life extension. In summary, the March quarter reflects a business delivering improved operational performance, disciplined cost management and positioning itself for stronger, more sustainable returns. I would now like to pass over to Ryan, our Chief Financial Officer, to discuss the financials. Ryan Gurner: Thanks, Simon. Good morning, everyone. Northern Star remains in a great financial position. Our balance sheet remains strong with cash and bullion of $1.2 billion at 31 March. Pleasingly, all 3 production centers generated positive free cash flow in the quarter with capital expenditure and exploration fully funded. Quarterly net mine cash flow was $426 million. Figure 8 on Page 10 sets out the company's cash and bullion movements for the quarter with key elements being the company generating just over $1 billion of post-tax operating cash flows, a 180% increase on the prior quarter. After deducting capital of $618 million relating to the KCGM expansion, plant and equipment and mine development, $48 million of exploration and $66 million of lease payments, quarterly free cash generation was $301 million. Also during the quarter, the company received $50 million in proceeds from the divestment of the Central Tanami Gold project and paid an interim dividend of $0.25 per share, totaling $347 million. Stuart has already discussed the revisions to FY '26 growth capital expenditure forecast, particularly KCGM. But in respect of the other investment activities, our exploration expenditure is tracking to plan, with guidance of $225 million for the full year unchanged. And at Hemi, we continue to work closely with key stakeholders and regulators to advance the project including approvals and progress on the engineering and design works and procurement of long lead items. On other financial matters, the Board has recently approved an on-market share buyback program of up to $500 million, supported by the company's strong outlook and value opportunity. The buyback will be subject to the company's security trading policy, including blackout periods, and will not affect the company's dividend policy to pay out 20% to 30% of cash earnings. From a cash tax perspective, we are guiding the second half of FY '26 range to be $240 million to $280 million, with $37 million already paid in Q3. No changes to our estimate quantum or timing for landholder duty for the De Grey and Saracen transactions, both likely to be paid during FY '27. The company is not experiencing any supply restrictions on fuel, and we continue to engage with our suppliers on this matter frequently. Q4 all-in sustaining costs are expected to be $75 to $85 per ounce higher as a result of increased oil prices. Year-to-date depreciation and amortization of $1,015 per ounce sold is just above the top end of the guided range of $875 to $975 per ounce and is expected to track modestly above the top end of the guided range for the full year. For the quarter, noncash inventory charges for the group are a credit of $46 million, primarily from increases in stockpiles at KCGM. During the quarter, the company refinanced and upsized its corporate bank facilities with maturity dates of March 2030 and March 2031 across 2 equal tranches totaling $1.75 billion. These facilities remain undrawn and available at quarter end. Also a reminder that the company will pay interest on its senior guaranteed notes in Q4, which will amount to USD 18 million. The company continues to unwind its hedging commitments with 165,000 ounces delivered during the quarter. At 31 March, commitments totaled 950,000 ounces at an average price of just over AUD 3,350 per ounce. I will now hand back to Ashley to begin the Q&A. Operator: [Operator Instructions] Your first question today comes from Hugo Nicolaci with Goldman Sachs. We will move on. Your next question comes from Levi Spry with UBS. Levi Spry: Maybe just a little bit more detail on the 2 key growth projects, KCGM and Hemi. So can you just talk us through the delay in capital into next year, how that ties in with the potential ramp up through, I guess, second half of this calendar year? Stuart Tonkin: Yes. Thanks, Levi. So there's -- on the actual expansion project, there's an increase in the overall capital and it's pretty much spread this financial year, next financial year. So you'll see those lifts in FY '26, FY '27 in regard to the expansion, about $60 million, $30 million in FY '26, FY '27, $30 million. That's due to the productivities. We're just getting poor productivities, got a lot of labor there. But it's very important to us to keep the timing of the completion in line, and that's why we've been jammed, but prepared to keep that labor there to complete that project. The delay of the spend is the thermal -- the new thermal power station infrastructure pending approvals. We're following with power because we own the Parkeston joint venture power station there, plus we are grid-connected. So they're not issues, but that's just delayed capital. And in FY '26, there's no net change, but there's certainly that uplift of the overall project due to these poor productivities. Levi Spry: Yes. Okay. I guess I'm just trying to drill down a little bit more on your retaining the 23 million tonnes as a guidance number effectively for next year given that the capital has moved a bit. So is there anything more you can add on that? Stuart Tonkin: No. So we will provide the full year guidance with the quarterly, which we typically do in July, on the June quarter. So that will give the outlook for everything for the full year for FY '27 and equally, the overall ounces throughput for KCGM sources, et cetera. So yes, quarter, we're on track for completion and commissioning of the plant in the September quarter. It obviously moves from the old plant to the new plant and then has a ramp-up, and that will relate to how we achieve the full year on that. Levi Spry: Got it. Okay. And then just is there -- can you give us a little bit more detail on the progress at Hemi as you move towards FID there sometime next financial year? Stuart Tonkin: Yes. So really, it's still depending on environmental approvals. We're working closely on the water trial progress, which would be this quarter. So working on that progress... Just need silence on the back of some of those calls, people who need to go to mute. The -- yes, sorry, on Hemi. So the approval is still pending with environmental. It's tracking okay. There's no real curveballs in it, but we're certainly -- it's been delayed from where we predicted, and that's why we pushed the timing of FID out. But yes, we -- I think the other part with FID, we're going to have to be very dependent on the refreshed pricing and with the current backdrop of cost escalations some real comfort with learnings from KCGM, et cetera, productivity levels in labor and the escalation costs around any hydrocarbon-based plastics, fuel, tires, freight. We've got to be really certain on FID there. So I think we'll be very conservative in our view on that. Operator: Your next question comes from Daniel Morgan with Barrenjoey. Daniel Morgan: Just on the super pit, I mean, you've explicitly given more detail on splitting the project ramp up in the Stage 1 and Stage 2. I'm just wondering what are you trying to -- the message you're trying to get to the market here is it the throughput will face a lot of disruptions to factor that in from tie-ins? Is it cost realized pricing from selling concentrate, not gold dore for a period of time. And I know that throughput is 23 million tonnes on Page 4. Has this been updated at all in light of latest thoughts of delivery? And does it include the disruption at Gidji that you're talking about? Stuart Tonkin: Thanks, Daniel. Look, the 23 million tonne hasn't been updated, and we'll revisit that with the full year guidance that we'll provide in July. So we need to consider everything at that point on the stage at which we've turned on the plant. What we're trying to communicate with the division of Stage 1 and Stage 2, it would not make sense or sound odd if we were continuing to spend money in FY '27 on this project yet have it running. So we're trying to be really clear that Stage 1 is the 27 million tonne per annum plant operating and that's for commissioning. That's built in that way and will be commissioned and ramped up in the September quarter. Continuing on in parallel and subsequent to that, not affecting throughput or impact is stage 2. It's effectively all of the ultrafine grinding activity occurring for 100% of that 27 million tonne per annum capacity at the Fimiston location. So people just -- I think maybe that granularity wasn't there. Right now, the concentrates go 20 kilometers north to Gidji from the current plant, get ultrafine ground and then brought back and treated and turned into gold dore at Fimiston. So all of that, the part of the efficiency is productivity to bring all that activity, which was explained in the FID and explained in the overall project approval. It's all occurring on the 1 side. The original pricing included those 2 things, but the design of the activity Stage 1, Stage 2 is there. The other highlight that we'll talk to is in half 1 of FY '27, we will be selling concentrates, continuing to sell concentrates, which is fine and the economics of it are sound. So that's not an issue, but we are just letting people know that until that second stage is complete and can take 100% of the concentrates generated, there will be some of the concentrates go to Gidji and some go in sales, which we've been doing. They go out through ports and going to smelters, and we've got good payability terms on that. Daniel Morgan: Yes. Just moving to Carosue Dam. I see that you've just called out that open pit mining is ceasing. Any plans for higher underground production? Or what are current thoughts on the longevity of underground mining? Simon Jessop: Yes. Thanks, Daniel. It's Simon. So we're still continuing with the underground mines that we've got. So Karari, Dervish is looking better at depth, and we're getting some drill hole hits at Dervish, but porphyry and million. That's the four undergrounds that we're running at the moment. Our sort of next phase is really looking at Twin Peaks and Kiena as the underground operation. So we're just moving into that phase of more underground as some of them wind off over the next couple of years. We then transition to those other underground operations coming in. There will be some open pits further into the future, but not at the moment. Daniel Morgan: And just on, I guess, a broader question of, I think you're conducting operational reviews across the business. Obviously, you've got Jundee... Simon Jessop: Sorry, Daniel, I think, you dropped out there. Daniel Morgan: Sorry, can you hear me? Stuart Tonkin: We can now. Simon Jessop: We can now, yes. Daniel Morgan: My last question is just you're doing operational reviews, I imagine across the business, including Jundee and others. What is the latest plan on providing the outcome of these? Earlier you had said by the end of the year, is there any update to that time? Stuart Tonkin: Yes. Thanks, Daniel. No, we will stick to the timing of -- we'll provide that medium-term guidance, which is a multiyear outlook, and we'll provide that this calendar year. We will provide the FY '27 guidance with the quarterly for the June quarterly, so in July. Operator: Your next question comes from Matthew Frydman with MST Financial. Matthew Frydman: Can I firstly just dig into a little bit more detail on that staging of the expansion. And I understand the detail you've given in terms of the mechanics of Stage 1 versus Stage 2 moving the ultrafine grind down to Fimiston. But I guess just wondering, is this timing or staging approach, has this always been the plan? Or has this really been an outcome or has it been driven by the productivity issues that you faced in terms of bringing 1 part of the process on a little bit later than the rest? Stuart Tonkin: Yes. Thanks, Matt. Look, the staging and the way the contracts form with the contractor has always been separable portion 1, separable portion 2, always and their contract structure is different. So they were designed, engineered, sequenced exactly like that, and that's how the FID was approved, and that's how the total number contemplated this we've contingencies on both those projects. As they've transpired separable portion 1, which is that 27 million tonne per annum plant. That's on track with the timing, but it's overspent because of the productivity is, and we're still working very hard for those final commissioning to be commenced and switched over from the old plant to that new plant in the September quarter, early in the September quarter is our current design and plant and ramping up throughout. Separable portion 2, the ultrafine grinding activity is another 4 to 6 months of activity. So the team moves from step first to the second, stay inside and get that completed. So that was always understood to be the case, and we don't get the recovery improvement of the overall project, and we had said that on the onset until all of that activity and that volume of concentrate gets done. So we're saying expect that through half 1, which will be material going to Gidji and the lower recovery in half 2 of FY '27, and we've got Stage 2 all commissioned and all the concentrates staying there, improved recovery, lower operating costs and all of the activity staying on the site. That's the final piece of the improvement for the investment project. Simon Jessop: And Matt, just to add to that. So Separable Portion 1 is over 95% complete today. And the second portion that Stu was talking about is already 48% complete. So they're happening in parallel. It's just the priority. 27 million tonne case is the focus to get first ore into the mill and start producing gold. And the second stage is just under 50% complete at the moment. So that's just trails and gets finished in H1. Matthew Frydman: Understand. And then secondly, on the power plant, you said that you're comfortable there, given that, obviously, or got your own plant and also a grid connection, but obviously, we know that the grid stability in Kalgoorlie has been an issue recently. So I guess just wondering when exactly is the new power plant needed to support the from the bigger mill. And I guess, how do you see those stability issues potentially impacting or potentially not impacting. Stuart Tonkin: Yes. So we won't -- we'll have access to the grid and the 50-odd meg of power from it. We won't be reliant on it. In the first instance, Parkeston is the foundation supply for the new plant and then the move to the newer thermal plant. It can occur within today 18 months, 2 years, and it improves the overall unit cost of the power and final piece of that is the renewables project that has been approved. So the wind and solar. So really that thermal is just the firming power for that renewables project and that's another step change in the cost structure for the site. So yes, step 1 is we're in 50% joint venture of Parkeston Power, which underpins the expanded sort of mill demand. We are building a new thermal power station subject to those approvals timing and then the renewables that sits on the back of that, which is a third-party's balance sheet. We've got some switching gear we own. Fundamentally, that comes in within a couple of years to start really driving the power costs down, and we will be in control of our own power security, not dependent on the grid. And if anything, we're out there to support the Goldfields grid in Western Power. We've got some arrangements we're progressing quite positively with the state to assist the Northern Star and assist the gold fields in underpinning that power. Matthew Frydman: Okay. I mean, maybe to put it another way, can you achieve 22 million tonnes without the support of the Kalgoorlie grid in FY '27? Stuart Tonkin: Yes. And it will be running at times, it will be running a full 27 million tonne per annum capacity. So full demand. We've got over 100 meg capacity at Parkeston. So 99 meg derated with temperature, and we got 52 meg from the grid well in surplus of the demands of the mine and the mill expanded case. Matthew Frydman: Okay. That's pretty clear. And then maybe just lastly on the Jundee technical review. You've talked about considering a range of outcomes there. And obviously, you said you're going to give more detailed guidance a little bit down the track. But maybe just conceptually, can you book in the sort of range of options that you're considering in that study? I mean if I think hypothetically may be a conservative outcome or a conservative option might be at Jundee that you just mine out the remaining reserves and then kind of ramp down the reinvestment in that asset. That might be a conservative kind of view? Or should I actually be thinking even more conservatively than that conceptually could there be a reduction in the current reserves, given the increase in the cost structure or some of those other factors? Stuart Tonkin: I think it's too early to give that granularity. But the concepts are -- the costs are high. And our aim is to cut absolute costs out of the site and then see the maximum output we can get through the current infrastructure that's there. So it means a reduction in intensity of activity to get the lower unit costs. If anything, that will extend at a lower profile can extend the reserve life that's there. And as far as that investment, again, has to be ranked and prioritized against the other opportunities we have in the business. As you appreciate now, there is a lot of intensity around a number of jumbos developing number of stopes carrying a number of diamond drill rigs doing discovery to come in depletion. So taking a bit of that pace out will actually enable a bit more time with the overall asset to focus on quality over quantity. Operator: Your next question comes from Kate McCutcheon with Bank of America. Kate McCutcheon: I got the company right this morning. I wanted to ask about the buyback. So we had that announced the $500 million circa 1% of your market cap. Just talk me through how you think about buying back your stock here versus investing that in organic growth, et cetera? Ryan Gurner: Kate, it's Ryan. Look, I think right now, it's -- yes, some of the most accretive capital allocation we can put back into this business. We see a strong outlook ahead. We're close to turning on our new mill. We're going to see cash flows live significantly there. So we see strength ahead and we see value in our underlying business. Kate McCutcheon: Okay. And while I've got you, Ryan, I think the tax cash saving numbers you gave us are new. Is it fair to think about that magnitude being less than P&L tax for '27 and '28 that you gave us on the tax shield? And secondly, did you say next quarter's asset is expected to be $75 to $85 an ounce higher as a result of oil prices? Or did I mishear what those comments were? Ryan Gurner: No. So I'll start with that for the last question first, yes. Yes. So $75 to $85 an ounce higher is our sort of estimate. Obviously, oil is volatile, but that's our best view of the impacts this quarter. And then on the tax shield, which I think you're referring to Hemi, I guess we added some more commentary at the back there on Page 10, but it's really just again reminding people of some of the timing of that. So again, the math being that we get a shield essentially of that purchase price. The total value of that from a tax effective perspective is about $1.5 billion, and we're sort of saying we'll get 50% of that back over 5 years. And it's a bit front-end weighted from a tax perspective. So we're just guiding and reminding people that, yes, we will get this benefit. We won't see it though. We're not going to see a big lump sum come back into our treasury, it's just -- it just means that FY '27 tax will just be slightly lower, that's all. Kate McCutcheon: Clear. And then if I can sneak 1 more in, updated resources reserves in May. Can you help me understand the drilling that's being done at Hemi? I assume that's mostly been infill drilling too, because I will probably get an update on CapEx, OpEx with the multiyear outlook. Is that correct before the end of the same way? And I'm just trying to understand how we think about mine life or upside at that asset versus what the focus is now. Stuart Tonkin: Yes. Thanks, Kate. Just before I close, I go to Hemi on that as with diesel and fuel, that is the expected uptick the $75 to $80 in AISC, but it's not last quarter plus that. So it's the component that is increased within. But as we grow out to ounces to the so there's other things that are moving in that side, please don't just accretively add that. Hemi, we've done the drilling, but you're right, it has been really infill and testing, and we've been more aggressive on some of the pitches and shelves on the resource. So we've been -- we've had to sort of incorporate that into how we would do things which may be a little bit stricter. But that will be reflected in how we report the resource and I think equally is being more aggressive on the reserve generally to be contingency and the like. So that will be reflected and reported, which will likely be in May. We won't be giving any other aspects of the Hemi project there, but we will be working on -- we're still working on those numbers in line with expectations around approvals. But the CapEx you're talking about perhaps is the budget of exploration in the forward years. That will be in the multiple and whether we intend to put money into Hemi, my attitude is, there's enough ounces in the ground without really heavily going into growth. We don't need it for a trigger for a FID decision. So there might be other opportunities like Pogo or Fimiston where we get much more effective investment in exploration to add ounces to make bigger longer-term decisions than Hemi needs today. So Hemi might have a lighter approach to that drilling expenditure because there's a very, very solid base for an investment case without it. Operator: Your next question comes from Hugo Nicolaci with Goldman Sachs. Hugo Nicolaci: Sorry, technical issues, and apologies if some of these have been asked. I was just revisiting firstly on Carosue Dam and Simon, your comment that the open pit mining concludes. I appreciate you've probably got new open pits that need developing. But I guess just to clarify around the timing, is that decision in the open pits this quarter and maybe demobilize that fleet largely around the strip ratio increasing and the diesel requirements that go into that. And then you're able to maybe talk through anything around the underground mining rate and grade going forward from here to potentially offset the fall in gold production by processing stockpiles? Simon Jessop: Yes. Thanks, Hugo. No, look, just to be clear, it's not around diesel and trying to conserve. I'll slow down open pit mining due to diesel. It's purely the mine sequencing. So mines coming and going at that asset is fairly normal over the journey. It's just we've reached the end of the current open pits, 11 bells Redbrook finishes this quarter, then we might have some box cuts and a few things to do early in FY '27, but there's no ounces attached to that. It's more setting up for the next leg of the underground growth. So probably the best way to think about it is when we do the Investor Day later on this calendar year. We could really show with a bit more visibility on some of the sequencing of the mines. Hugo Nicolaci: That's helpful. So if we think about it today, then realistically, the underground rates aren't picking up that materially, you're probably seeing Carosue drop below that 200,000 ounces a year for the next couple of years where you do that underground development? Stuart Tonkin: It could do. We're still working through that, but we've got some good growth at Dervish. So we'll see how that plays out when we do the resource and the reserves and then feed that current information back into the life of asset mining plan. Hugo Nicolaci: Got it. That's helpful. And then, Ryan, just sort of running back on the buyback piece, just confirming then to the timing and magnitude of the buyback as it stands purely a value decision on your stock and then maybe come August as KCGM and your capital requirements become a little bit clearer. Should we consider scope to maybe take this to a magnitude you've previously targeted as being more meaningful around the buyback? Ryan Gurner: I think everything is always on the table, Hugo. We want to allocate our capital to the best return. So buyback is something if it gets exhausted, if we're through it quickly, it's always -- we're always able to assess new opportunity there. And as I said, we're not too far away from seeing that change in free cash flow. There's challenges across the business. There's challenges in oil, all these things. So right now, we've decided on that, I guess, quantum. We're ready to act. And I guess we'll make those decisions as positive time plays out. Operator: Your next question comes from Jonathon Sharp with JPMorgan. Jonathon Sharp: Just with KCGM mill expansion, the CapEx. Can you just help us understand the split between construction productivity and cost inflation and which is proving harder to control as we move through commissioning. Stuart Tonkin: Yes. So -- thanks, Jonathon. So look, there's no lift about $60 million for that project that we've just reported, so 30 this year for next year. I'd say, and it then knocks through to the other, but probably 2/3 of that is just the lower productivity. So you've got more people doing the same work at that elevated cost. In turn, cost escalation is occurring, not just through diesel but through all other things, and labor is embedded in all of those cost escalations, which we don't see easing. So that's been a large part of -- you have extra labor, it flows through to commuting that labor, housing that labor, the consumables they use, all of those things knock through. But yes, it's a reality that underpins anyone spending money at the moment. Jonathon Sharp: Yes. Okay. That's clear. And just as you move through commissioning without getting into commercially sensitive detail, does the main contract to remain accountable through wet commissioning, performance testing and other performance incentives acceptable criteria tied to sort of final handover, just interested in knowing a little bit of detail on that? Stuart Tonkin: For sure. I mean, there's pretty traditional standard things where you do a handover and it's got to make criteria, so that's embedded. And look, we've got the commitment from the contractor that they want to see this working as well as we do and promote it for the next opportunity. So that's there. Equally, we've got the same contractor doing Stage 2. It's a different structure, again, different incentivization. So our approach to that is going well. And Simon spoke to 95% of the stage 1 is complete. Nearly 50% of Stage 2 is complete and those structures drive that behavior largely. So yes, we're okay with those things, and we'll be tracking and checking those things closely. We won't be silly on the risk balance here. If it comes down to disputes around small amounts of quality, we think running the plant and addressing some of those things as we go rather than not waiting to move in new house to your fly screens are on, we'll be sensible in the timing of that. Operator: Your next question comes from Adam Baker with Macquarie. Adam Baker: Thanks for the color on the increase in fuel prices. Assuming mostly it's related to diesel. But just looking at the midpoint of guidance, I mean, that's implying about a 3% increase in your cost base. Just wondering if you go back to the start of FY '26, prior to the diesel price escalation. Can you give us any color on what diesel prices were as a percentage of cost base for the business? Ryan Gurner: They're probably -- Adam, it's Ryan. That's basically doubled, I guess, in this quarter that we're forecasting. They're probably 4% of our business, I'd say, back then. Now they're obviously pushing 7%, 8% for the quarter. Adam Baker: That's good. And just secondly, on clearly, a lot of optionality for you guys to deploy that. Just wondering if you've considered any minimum net cash threshold before you deploy it, noting you've got $320 million at the end of the quarter, I'd say that you wouldn't draw down on the $1.75 billion corporate bank facility to prioritize the buyback, for example. Ryan Gurner: I think, Adam, what I'd say is, yes, we want to maintain good liquidity. We've got good flexibility on our balance sheet if we have to draw debt if for whatever purpose. And we see the cash flows ahead, right? So we're sitting here in late April. The mill will turn on early FY '27. We're really looking forward to that. We see what's ahead. There's challenges in the sort of more global economy with oil, but we feel is on with our balance sheet, with our cash and bullion on hand, we can manage that. Operator: There are no further questions at this time. I'll now hand back to Mr. Tonkin for closing remarks. Stuart Tonkin: Okay. Well, thanks, everyone, for joining us on the call, and I appreciate your interest in the company on what is a very busy day. Thanks very much. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Intuitive First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Daniel Connally, Vice President, Investor Relations. Sir, please go ahead. Daniel Connally: Good afternoon, and welcome to Intuitive's First Quarter Earnings Conference Call. Joining me today are Dave Rosa, our CEO; and Jamie Samath, our CFO. Before we begin, I would like to remind you that comments made on today's call may contain forward-looking statements. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in our Securities and Exchange Commission filings, including our most recent Form 10-K filed on February 3, 2026. Our SEC filings can be found through our website at intuitive.com or at the SEC's website. Investors are cautioned not to place undue reliance on such forward-looking statements. Please note that this conference call will be available for audio replay on our website in the Events section under our Investor Relations page. We are experiencing technical difficulties with distribution of today's press release. Note, you can find today's 8-K, including our press release, on our website or at the SEC's website. The Q1 2026 financial data tables have been posted to our website as well. Our format for this afternoon's earnings conference call is as follows: Dave will review business and operational highlights. Jamie will provide a review of our financial results and procedure highlights. I will review clinical highlights and discuss our updated financial outlook for 2026. And finally, we will host a question-and-answer session. With that, I will turn it over to Dave. David Rosa: Good afternoon, and thank you for joining us. Q1 was a solid start to the year for Intuitive, driven by 17% total procedure growth and broad-based adoption across da Vinci and Ion as customers continue to advance minimally invasive care. In Q1, da Vinci procedures grew 16% to 847,000, and Ion procedures increased 39% to 43,000. Performance was strong in the U.S. and Europe, with mixed results in Asia. In the United States, da Vinci procedures grew 14% year-over-year, led by strength in general surgery. Growth was supported by a 31% increase in after-hours procedures and higher overall utilization. da Vinci 5 utilization continues to exceed that of da Vinci Xi, driving U.S. utilization growth to 4%. Outside the U.S., da Vinci procedures grew 19%, led by continued strength in general surgery and gynecology as adoption expands beyond urology. The lower growth rate relative to prior quarters reflects ongoing challenges in China and Japan. In China, the environment remains largely consistent with recent quarters reflecting relatively low tender activity across the category, domestic competition and policy-driven pricing pressure. Given our belief in the long-term opportunity, we continue to make investments to improve procedure growth, establish favorable patient charge codes and support other market access activities. In Japan, procedure growth improved sequentially, but remained below historical levels following fewer system placements in 2025. We are encouraged by recent policy developments, including incremental financial support for higher-volume robotic programs and new reimbursement for 7 additional procedures. Both policies to be effective starting in June 2026. Jamie will describe these changes in more detail shortly. I have confidence in our ability to execute our international strategy. Investments in our organizational capabilities, clinical trials and research, and market access efforts are yielding supportive robotic surgery policies and reimbursements in many of the countries we serve. The arc of progress is evident with OUS procedures now representing 38% of total da Vinci volume, up from 25% a decade ago. We are well positioned to expand access and drive deeper adoption in these countries with the addition of XiR to our system portfolio, and our overall ecosystem of technologies, training and services. Turning to capital. We placed 431 da Vinci systems in Q1, including 232 da Vinci 5 systems, 34 SP systems and 34 XiR systems. We also placed 52 Ion systems in the quarter. As da Vinci 5 moves into broader clinical use globally, customer adoption and feedback remain very encouraging. Customers are building experience with the da Vinci 5 ecosystem, resulting in increased clinical throughput and expanded access to da Vinci surgery. At the recent annual SAGES conference, several clinical abstracts demonstrated objectively lower tissue forces using da Vinci Force Feedback instrumentation across multiple procedure types. We continue to believe that objective knowledge of applied forces in surgery will lead to improved surgical outcomes and are investing to demonstrate this at scale. In March, we received FDA 510(k) clearance for additional uses of our Force Feedback instruments. Five of 6 instruments are now cleared for 15 uses, while our Mega SutureCut Needle Driver is cleared for 10 uses. Combined with multiyear investments in supply chain and manufacturing, this clearance supports broader availability in Q2 that will increase over the rest of the year. We expect adoption of Force Feedback instrumentation to progress steadily through 2026 and beyond. Turning to our digital ecosystem. We continue to invest in the data and digital infrastructure that underpins our longer-term innovation road map. da Vinci 5 captures real-world surgical data at greater scale and fidelity, enabling deeper insight into how procedures are performed in practice. That insight paired with clinical context from connected electronic medical records, provides better understanding of variation, workflow and outcomes, and informs current and planned digital and AI-enabled capabilities. My Intuitive+ continues to play an expanding role in training and program support, with growing adoption of Intuitive Telepresence capabilities that enable proctoring, mentoring and collaboration across surgeons and sites. Collectively, these efforts are foundational to our long-term digital and AI road map where we expect to add telesurgery, deeper decision support and augmented dexterity, including aspects of future automation, all in pursuit of advancing the Quintuple Aim. I'm excited by the progress our development teams are making. Turning to our Single Port Platform. SP momentum continued in the quarter with procedures growing 68% year-over-year. Growth was driven by expansion in Korea and the U.S. and ongoing early adoption across select international markets. Recently, U.S. surgeons performed the first non-IDE nipple sparing mastectomy cases as we advance our measured rollout focused on training and support of our customers. We also moved our single-port stapler into broad launch, which will support deeper penetration in thoracic and colorectal procedures as customers expand their programs. Our teams are focused on new product and procedure launches, expanding our customer base and securing new geographic clearances. Over the midterm, SP will incorporate much of the da Vinci 5 ecosystem, including current and future digital and AI capabilities. We're excited about the potential of SP to drive meaningful improvement in the Quintuple Aim. Moving to Ion. We're pleased with the results and progress this quarter. Ion's North Star is to help physicians improve lung cancer patient survival. Clinical publications continue to reinforce progress here, including a recent Mayo Clinic publication of approximately 2,000 patients, which demonstrated that use of Ion supports earlier identification of malignancy with the potential to improve patient survival. Dan will walk through the study in more detail later in the call. Our teams are making progress on our rapid on-site tissue evaluation technology, or ROSE, and endobronchial ultrasound integration as we look to further streamline the time from detection to diagnosis. Looking ahead, our company priorities for 2026 are unchanged. First, the global expansion of our platforms, digital feature releases and ecosystem enhancements. Second, increased adoption for focused procedures by country through training, commercial activities and market access efforts. Third, building industrial scale, enhancing product quality and achieving manufacturing optimization. And finally, advancing innovation to reach more patients in current and new disease states. Before I turn the call over to Jamie, I want to recognize an important leadership transition at Intuitive. Dr. Myriam Curet is retiring this quarter after more than 20 years as Intuitive's Chief Medical Officer. I'd like to thank Myriam for all her efforts in advancing our mission as a physician, a patient advocate and a business leader. I'm also pleased to announce Dr. Jamie Wong's promotion to Chief Medical Officer and member of our executive leadership team. Jamie provides -- combines a deep clinical background as a practicing da Vinci urologist with his experience of more than a decade at Intuitive, leading a variety of functions. As CMO, he will lead our global medical office, overseeing customer training, clinical evidence generation and research, and reimbursement and market access efforts. And with that, I'll turn the time over to Jamie to take you through our finances in greater detail. Jamie Samath: Good afternoon. I will describe our performance on a non-GAAP basis, and I'll summarize our GAAP results later in my remarks. A reconciliation between our non-GAAP and GAAP results is available on our website. All references to total procedures and their related growth rates include both da Vinci and Ion procedures. Before detailing our quarterly results, I would like to briefly address the cyber incident that occurred during the first quarter, which resulted in unauthorized access to some customer business and contact information as well as certain Intuitive employee and corporate data contained in certain of our IT business applications. The incident did not disrupt our business or manufacturing operations and did not affect our products. It also did not have a significant impact on our first quarter financial results. We have contained the incident, notified customers and informed appropriate data privacy regulators. We are also taking additional steps to further strengthen our cybersecurity protocols. In Q1, total procedures grew 17%, reflecting 16% growth in da Vinci procedures and 39% growth in Ion procedures. Quarter 1 revenue increased 23% to $2.77 billion, with recurring revenue also higher by 23% to $2.4 billion, accounting for 86% of total revenue. On a constant currency basis, revenue growth was 22%. Non-GAAP operating margin was strong at 39%, primarily reflecting leverage of fixed costs. The strength of our financial results reflect the continuing global expansion and procedure adoption of our da Vinci 5, Ion and SP platforms. Turning to the clinical side of our business. In the U.S., total procedures increased 15%, reflecting 14% growth in da Vinci procedures and 37% growth in Ion procedures. For our da Vinci platforms, we continue to see strong growth in cholecystectomy and appendectomy procedures, which combined grew by 31%, driven in part by continued expansion of use of da Vinci during after-hours and on weekends. We are starting to see emerging evidence that a broad set of clinical outcomes for appendectomy are improved with da Vinci surgery as compared to laparoscopy. Over the last year, in the U.S. we've invested in incremental clinical support for surgeons performing benign gynecology procedures given the opportunity to improve patient outcomes. While total U.S. gynecology procedures grew 10% in Q1, investments in this area drove a 19% increase in non-hysterectomy benign procedures, including sacrocolpopexy, endometriosis, oophorectomy and myomectomy during the quarter. da Vinci bariatrics procedures in the U.S. continue to be impacted by the growth in use of GLP-1s and declined approximately 10%. da Vinci utilization in the U.S. increased 4% in Q1, higher than recent quarters, driven by a growing installed base of da Vinci 5 systems, where utilization is approximately 11% higher than Xi. With respect to the expiration of subsidies for enhanced premiums under ACA, while we did not see any significant impact on procedure volumes in Q1, at this time, we remain cautious as to what the potential impact, if any, might be. Outside the U.S., total procedures grew 20% with da Vinci procedure growth of 19%, reflecting strong results in India, Canada, the U.K., Korea and Taiwan, and solid growth in distributor markets, Italy and Germany. The market in China continued to be challenging. In Q1, procedure growth was below the corporate average, reflecting lower tenders and competitive and pricing pressures. There are ongoing discussions with provinces regarding potential new charge code and reimbursement policies in China for robotic procedures. We are actively engaged with policymakers but do not expect clarity on the outcome of these matters until 2027. Procedure growth in Japan was also below the corporate average, reflecting lower capital placements over the last several quarters. In Q1, the Japanese Ministry of Health, Labor and Welfare, or MHLW, recently introduced incremental reimbursement for hospitals that exceed robotic procedure volumes of 200 qualifying cases per year. In addition, 7 new procedures have been granted robotic reimbursements starting in June of 2026. Furthermore, rectal resection has been granted premium reimbursement when performed robotically. While we are encouraged by these steps, we remain cautious in our outlook for the Japanese market in the short term given the financial position of public hospitals in recent periods. Globally, we continue to see healthy procedure growth for our SP platform at 68% for Q1 with strength in Korea and continuing robust early-stage growth in Europe, Japan and Taiwan. In the U.S., SP's average system utilization continued to accelerate following recent additional clearances, growing 22% as compared to quarter 1 of last year. During the quarter, we moved our new SP stapler into broad launch in the U.S., where it was used in almost 40% of cases where we would expect a stapler to be used. We are planning to move the SP stapler into measured launch in Korea and Europe in Q2 as we expand manufacturing capacity. As a result of our clinical performance, total I&A revenue in quarter 1 grew 23% to $1.7 billion. da Vinci I&A revenue per procedure was approximately $1,880 compared to $1,780 last year, driven by customer ordering patterns, a higher mix of SP and da Vinci 5 procedures and FX, partially offset by lower bariatric and high cholecystectomy procedures. Turning to capital performance and starting with our da Vinci business. We placed 431 da Vinci systems in quarter 1, a 17% increase from the 367 systems placed in the same quarter last year. 232 of the 431 placements were da Vinci 5, including 40 in OUS markets. The installed base of da Vinci 5 is now almost 1,500 systems used by almost 13,000 surgeons since launch. Customers acquired 34 refurbished Xi systems in Q1 compared to 2 in the year ago period. 26 of the 34 placements were in OUS markets in segments where we see greater cost sensitivity. There were 119 trade-in transactions in quarter 1, up from 67 a year ago, primarily driven by U.S. customers upgrading to da Vinci 5. In the U.S., we placed 226 systems, up from 204 last year, driven by adoption of da Vinci 5. Outside the U.S., we placed 205 systems, an increase of 26% compared to the 163 systems placed last year. OUS placements included 117 systems in Europe, 62 in Asia and 26 in the rest of the world compared to 88, 52 and 23, respectively, last year. Relative strength in Europe was driven primarily by the U.K., where we placed 34 systems as the NHS closed out its budgetary year. We placed 13 systems in Japan and 4 systems in China, reflecting lower overall tender volumes. Within the 431 da Vinci placements, we placed 34 SP systems in Q1, higher than the 19 systems last year, driven primarily by increased placements in the U.S. and Taiwan. For our Ion platform, we placed 52 systems in Q1 compared to 49 systems last year. Q1 Ion placements included 13 systems in OUS markets. Given our capital performance, quarter 1 systems revenue grew 24% to $651 million. For our da Vinci business, leasing represented 56% of da Vinci placements as compared to 47% last quarter and 54% last year, driven primarily by customer preference. da Vinci leasing revenue increased 28%, reflecting a 14% expansion of the installed base under operating lease arrangements and a 12% increase in lease revenue per system, driven by a higher mix of da Vinci 5 systems and higher utilization for usage-based arrangements. The average selling price for purchased da Vinci 5 systems was $1.7 million in Q1 as compared to $1.6 million last year, driven both by a higher mix of da Vinci 5 systems and dual-console systems, partially offset by higher trade-ins. Lease buyout revenue was $51 million as compared to $39 million last quarter and last year. Quarter 1 service revenue increased 19% to $434 million, reflecting an increase of the da Vinci installed base of 12% and the Ion installed base of 22%. Service revenue per system for our da Vinci installed base increased 6% year-over-year, primarily reflecting a higher mix of da Vinci 5 systems. Turning now to the rest of the P&L. Non-GAAP gross margin for the quarter was 67.8%, an increase from 66.4% in Q1 of last year. The year-over-year increase reflects product cost reductions and fixed overhead leverage, partly offset by the impact of tariffs. While Q1 results were not significantly impacted by higher oil and memory prices, we do expect those to have a greater unfavorable impact in the remainder of the year. During the quarter, our da Vinci 5 system achieved contribution margins comparable with our Xi system, and our Ion platform achieved contribution margins that are close to the corporate average, reflecting significant efforts by our engineering and operations teams. Continuing initiatives to further improve gross margins, excluding the impact of tariffs, are focused on leverage of fixed overhead, improving product and service margins for da Vinci 5 and additional reductions to product costs for our SP and Ion platforms. Future gross margins will reflect our execution on these initiatives, competitive pricing dynamics, global tariff rates and product, regional and trade-in mix. Quarter 1 non-GAAP operating expenses increased 10% year-over-year, a little lower than our expectations due to the timing of certain expenses. The year-over-year increase was driven by higher headcount, increased variable compensation and higher facility costs, partially offset by lower legal expenses. We added 425 employees during the quarter, of which 230 were related to the acquisition of our distribution business in Italy, Spain and Portugal. Non-GAAP other income was $85 million for the quarter as compared to $86 million last quarter, reflecting lower interest income. Our non-GAAP effective tax rate for quarter 1 was 22%, consistent with our expectations. Non-GAAP net income for the first quarter was $901 million compared with $662 million last year. Non-GAAP earnings per share was $2.50 per share as compared to $1.81 per share in quarter 1 of last year. Now turning to our GAAP results. GAAP net income for the quarter was $822 million or $2.28 per share compared to $698 million or $1.92 per share in Q1 of last year. We ended the quarter with $8 billion in cash and investments, down from $9 billion last quarter, driven by stock repurchases of $1.1 billion, the acquisition of our distributor business in Italy, Spain and Portugal, and capital expenditures of $103 million, partially offset by cash generated from operating activities and proceeds from employee equity activity. Taking a moment to recap our recent financial performance, a core element of our strategy focuses on excellence in product innovation to launch highly differentiated products that drive the Quintuple Aim for the benefit of customers and patients. Revenue growth ahead of total procedure growth reflects, in large part, the differentiated value of da Vinci 5. As that new platform becomes a greater proportion of our business, revenue growth benefits from accretive pricing, higher levels of integration and incremental trade-in volumes. We see opportunities to continue to drive innovation-led revenue performance with our SP stapler, planned SP vessel sealer and growth in use of existing and planned AI and digital capabilities. We also have plans to increase the value of our Ion platform in the lung through our pursuit of a staging indication and the integration of AI-based ROSE technology. With that, I'll turn it over to Dan to discuss recent clinical publications and our updated outlook for 2026. Daniel Connally: Thank you, Jamie. Earlier this month, Dr. Sebastian Fernandez-Bussy from Mayo Clinic in Jacksonville, along with co-authors across Mayo Clinic sites in Jacksonville, Phoenix and Rochester, published a study in Mayo Clinic Proceedings titled 2000 Peripheral Pulmonary Lesions Sampled by Shape-Sensing Robotic-Assisted Bronchoscopy and Mobile Cone-Beam Computed Tomography: The Mayo Clinic Experience. In the study, which ran from July 2019 through August 2024, 12 proceduralists used Ion to biopsy 2,115 peripheral pulmonary lesions from 1,904 patients. Lesions biopsied were an average size of just under 18 millimeters, with more than half located in the upper lobes at a median distance of 17 millimeters from the chest wall. Diagnostic yield according to the recently published strict ATS/ACCP Consensus Statement definition was 79% with sensitivity of malignancy reported at 85%. Further, 74% of patients had concurrent endobronchial ultrasound lymph node staging with the authors noting, "The ability to perform diagnosis and staging within the same anesthetic event reduces the risk of repeated interventions, facilitating lung cancer diagnosis and advanced disease management." Additionally, results demonstrated a strong safety profile with a pneumothorax requiring intervention rate of 1.4% and severe bleeding defined as Nashville Grade 3 or higher of 0.3%. Notably, the rate of early-stage primary lung cancer diagnosis in the study increased by 23 percentage points from 46% in 2019 to 69% in 2024. The authors concluded, "In this high-volume multi-center 5-year study, shape-sensing robotic-assisted bronchoscopy has shown a consistently optimal diagnostic yield with low complication rates. To our knowledge, this is the largest cohort assessing shape-sensing robotic-assisted bronchoscopy following the recent strict consensus on diagnostic yield. The ability to sample multiple peripheral pulmonary lesions and include hilar and mediastinal staging within the same anesthetic event positions shape-sensing robotic-assisted bronchoscopy as the preferred method of choice over CT-guided thoracic biopsy for assessing suspicious peripheral pulmonary lesions." I will now turn to our updated financial outlook for 2026, starting with da Vinci procedures. In January, we forecast full year 2026 da Vinci procedure growth to be within a range of 13% to 15%. We are increasing our forecast and now expect full year da Vinci procedure growth within a range of 13.5% to 15.5%. We continue to expect primary growth drivers in 2026 to be generally consistent with those in 2025, including general surgery in the U.S. and procedures outside of urology internationally. Our updated range continues to consider the potential impact of changes to ACA premium subsidies and patient behavior in the U.S., capital pressure in parts of Europe related to macroeconomic impact and shifting governmental priorities, China's tender volumes and competitive intensity in that market, recent capital challenges in Japan and how long those persist in 2026, and pharmaceutical products for obesity management. Turning to gross profit. On our last call, we forecast non-GAAP gross profit margin to be within a range of 67% and 68% of revenue, which reflected 120 basis points of impact from tariffs. We are updating our estimate for non-GAAP gross profit margin to be within a range of 67.5% and 68.5% of revenue, which now reflects 100 basis points of impact from tariffs as well as higher input costs in other areas, including freight and semiconductor memory. Other factors for the year include faster growth of newer products in daVinci 5 and Ion, modest incremental depreciation from recent facility expansion and the impact from higher da Vinci system upgrades, partially offset by cost reductions. Our actual non-GAAP gross profit margin will vary quarter-to-quarter depending largely on product, regional and trade-in mix and pricing. In regard to operating expenses, we now expect non-GAAP operating expense growth to be between 11% and 14%. We continue to estimate noncash stock compensation expense between $890 million and $920 million. We now forecast other income, which is comprised mostly of interest income, to total between $315 million and $335 million due primarily to lower average cash balances following share repurchase activity in Q1. With regard to income tax, we continue to expect our non-GAAP income tax rate to be between 22% and 23% of pretax income. That concludes our prepared remarks. We will now open the call to your questions. Operator: [Operator Instructions] Our first question will come from the line of Travis Steed with Bank of America. Travis Steed: Congrats on a good quarter. Maybe to start, I kind of want to talk a little bit about some of the future. You talked a lot about data and digital infrastructure, augmented dexterity. Just kind of curious how you see the digital and data road map for Intuitive. And there's also some hints on biopsy and the ROSE acquisition. So I'd love to kind of hear your big picture view of how that kind of plays out and anything you can say on timing? David Rosa: Yes. Happy to do it, Travis. Thank you for the question. So I'll start with AI. And I'm really -- and you asked the question, but I'm going to speak specifically about AI as it shows up in our products and with our customers and not so much AI on the corporate side. And so if -- when we look at AI, it's like any other product, and it's really through the lens of the Quintuple Aim and will it advance outcomes and reduce variation, improve certain patient experiences, lower total cost, advance access for patients around the globe. And we believe, yes, that AI will be a contributor to moving the Quintuple Aim forward. And our approach here is what we've described in the past. And it's really to build kind of this layered capabilities. And it starts with high-quality data, and that data will exist in video data from surgeries. It will exist in robotic data streams like kinematic data and force data. It will exist in connected electronic medical records, where we're working with customers to do so. And once we have that high-quality data set, then the job of our AI and our data scientists is to turn that into meaningful insights. And once we have those, I think the critical part here is how do we deliver those to the customer and it has to be in a consumable fashion, it has to be at the right time in the moment that matters to the customer. So there are, I think, ways in which this will show up to the customer. Some will be as operational guidance and assistance as they look at their hospital robotic program and want to increase efficiencies or understand costs. Some of it may show up in the learning of a surgeon and/or a care team. But a lot of it will show up in the operating room and I think show up in the surgery itself. And an example of this kind of first phase might be AI-enabled anatomy identification where you can see AI showing critical structures in the surgical field, showing tissue planes to help assist the surgeon. Then, over time, what we expect is that many of those same foundations that are being established and built in kind of that first phase, if you will, will support more advanced assistance around augmented dexterity and it will include -- likely include aspects of automation. There, an example might be helping to control the camera as the surgeon is focused on the procedure. And so throughout this, every step, it's about clinical value, of course, and it's about safety and reliability, and not just doing this in a one-off but doing this in a scaled fashion. And so if I look at that as the layer that we're progressing through and I look to see where -- how do we sit, how do we exist within the AI ecosystem and how are we differentiated? I think part of that differentiation is around the installed base of systems that we have out there, including about the 1,500 da Vinci 5 systems, the 3 million and more procedures that are being done on an annual basis. And I believe that gives us the foundation to strengthen the differentiation over the next 3 to 5 years. If you look at the industry and you say, what is broadly available, broadly available to everyone, it's things like edge and cloud compute, the math that underscores much of this, some of the training algorithms. Our advantage, we believe, lies is in the unique data sets that are available to us today through something like Force Feedback and will be increasingly available to us as we add capability to da Vinci 5. And so all of that together creates this flywheel. It's a flywheel that starts with data, insights, actions. Advancing the Quintuple Aim, the flywheel spins, it becomes that virtuous cycle. And we have the teams focused on it, and we are investing to advance this in the future and look forward to updating you along the journey. Travis Steed: That's exciting. Can't wait. Maybe my follow-up question, Jamie, on margin. You highlighted some macro stuff, but still raised gross margin 50 basis points and tariffs only came down 20 basis points. So I guess the contribution margin of dV5 comparable to Xi, a nice positive for margins. But kind of curious kind of what you saw in the macro and what you kind of baked in on that front? And any color on kind of what percent of COGS you'd call chips and exposure to oil and resin? Jamie Samath: Yes. I'd just say for oil prices and the derivative impact that has on input prices and logistics costs and memory, based on what we know today, in the gross margin guidance, it has an impact, but it's relatively small. I think what you see in Q1, in particular, is relatively significant leverage from the 23% revenue growth and a really nice contribution from the product cost reductions that we've described. So the macro is having an impact. And obviously, we're watching it carefully and you also have to watch the potential supply constraints. But the macro is baked in and relatively small, just given the components of our product costs. David Rosa: So Travis, real quick, you had asked about ROSE and EBUS and just some color there. So both are known technologies. And the time lines are more short term, but they won't be this year. We do believe that they are bringing a truly significant differentiated value to the lung cancer diagnosis -- detection and diagnosis journey and expect to share that value with customers. And so as that gets closer, we'll let you know more about it. Operator: [Operator Instructions] Our next question will come from the line of Larry Biegelsen with Wells Fargo. Larry Biegelsen: Congrats on a good start to the year here. I had one on procedures, and then I had one follow-up for Jamie. So I'd love to hear you talk about the appendectomy opportunity. It looks like about 300,000 per year. It's one of the first times I've heard you call that out on an earnings call, 300,000 per year in the U.S. And if you could size the incremental Japan opportunity from those new procedures, that would be great. And I had one follow-up. Jamie Samath: Yes. We haven't sized appendectomy yet. I think there's a question of what makes sense in terms of the robotic portion of that overall TAM because we're so early in appendectomy, we're still kind of working through internally on what we think is the right opportunity. We called out the kind of emerging evidence on clinical outcomes just because over the quarter, actually, we've had a couple of engagements with surgeons that have kind of done work in their own institutions. And we saw several of those come together. And across the set of functional outcomes in the work that they did, da Vinci was better on all comparison points, which we thought was encouraging. We'd like to see that show up in clinical studies that have larger data sets in terms of number of patients, but we think that's super interesting for what is typically a relatively quick procedure with relatively low reimbursements. Larry Biegelsen: And Japan? Daniel Connally: On Japan, I think we noted MHLW added reimbursement coverage for 7 procedures across a couple of different categories. The largest of those is bilateral inguinal hernia repair. Reimbursement there is roughly $1,500 per procedure. I think in aggregate, it's too early for us to size the incremental procedure opportunity in Japan. But the impact is relatively modest, and like in prior periods where we've had incremental reimbursement, it will take time to develop. Larry Biegelsen: Jamie, I'd love to maybe flesh out more what you meant by innovation-led revenue growth. This is the first time I've heard you talk about that. Is there any way to frame how much faster revenues will grow versus procedures. In Q1, it was obviously 23% versus -- 17%, I'm sorry. Do you expect that delta to increase going forward? Maybe just talk about the implications of this innovation-led revenue growth. Jamie Samath: Yes. I really felt like it was worth describing because if we look back at last year, even revenue growth was 21%. And obviously, procedure growth was also lower than that last year. And then you see the numbers in Q1. The business framing we have is kind of what I described as a push and pull. We're very conscious about deploying our R&D to places where we can be differentiated and make a difference on the Quintuple Aim that's integrated in how we make R&D deployment decisions. And so where you can be differentiated and make a resale difference for customers, then -- and create value for them, then you get to sharing that value in the form of on the Intuitive side, accretive pricing or incremental pricing. And we see that in da Vinci 5, you see that actually in SP I&A and there are other areas where we have that opportunity. On the other side of it, if you look at the totality of our business, there, of course, are procedures and geographies that are more cost sensitive. And so we also then look for -- as we work on bringing our costs down, particularly our manufacturing and product costs, we also look for opportunities to then share that cost savings with our customers because they have economical cost sensitivity. And we do that particularly in mind with what can be the elasticity response when it's cost sensitive. And so we work on both of those. And therefore, that creates a mix dynamic between the 2. In terms of like how long does it sustain? I don't think I want to get into that just because we don't guide revenue, it's really our attempt to just describe what's happened in recent periods with respect to the difference between revenue growth and procedure growth. And I think we're just reemphasizing the fact that innovation is critical to our success. Operator: [Operator Instructions] Our next question comes from the line of Robbie Marcus with JPMorgan. Robert Marcus: I'll add my congratulations on a really nice quarter as well. Two for me. First, the utilization continues to just be really impressive, especially with the after-hours metrics and the utilization improvement on da Vinci 5, which is now becoming a pretty substantial part of the installed base. I was hoping you could just add a little more color there in terms of how much more is there to go? Because I think everyone knows that utilization and procedure volume growth ultimately is what drives placements. So how much more is there to go? And how do you think about that translating into unit growth down the road? How much and when, if you're willing to quantify? Jamie Samath: That's -- in some regards, that's the impossible question to answer in the following sense, Robbie. It really -- you have to be aware of the averages, and you have to look at it by market in terms of where is the distribution of utilization within any given market, what's the mix of systems they have in any given market. From a macro perspective, we are strategically aligned with customers that we want to increase robotic throughput because we think that serves them well economically and is good for Intuitive long term. So it's a difficult question to answer. There are markets where there's obviously room to improve utilization such as Japan and some of the European markets. In the U.S., I think utilization growth will mostly be driven by the rate by which the entire installed base in the U.S. switches over to da Vinci 5, which we think structurally has the ability given its feature set to run higher levels of utilization in Xi. For us, we'd like to keep utilization growth going because we think it's supercritical and differentiates us, I think, from competitors also. But I don't think we have the ability to call how long it goes and what the derivative impact is. Robert Marcus: I know it's a hard question. That's why I'm asking you. I'm hoping you could do my job for me a little bit. Maybe just a follow-up. We have more and more competitors trying to enter the market here, some in the U.S. from big surgical competitors, some in China, others in Europe, you now have the opportunity to offer a tiered pricing strategy with refurbished Xis. It'd be great just to get a refresh on how you're thinking about global competition at different price points in different markets and how you're feeling about your positioning there? David Rosa: Yes, Robbie. So I think we've -- competition is about, I think, meeting the needs of the customer at the right price point. And so it's really about the value that they're going to obtain for getting a robotic program established and treating patients and getting to great outcomes. And so what we know is that the basis of competition, we are wanting to make sure that people look at it not as the kind of the price you pay for the robot and the fact that now you have it in one of your ORs, but it's really the value of your program. How are patients being treated? Are you seeing the outcome improvements? Are you seeing a shift in the mix of open surgery to minimally invasive robotic procedures that you expected in any of the other strategic initiatives that a given customer might have? And so that's where and how we want to ensure that we are entering the conversations with customers and helping educate them around the globe about the questions they should be asking, what kind of data should they be looking for as they engage one or more robotic competitors from around the globe. And when it comes to those conversations and the data that are shared, I expect with our portfolio and now with XiR added, that will be a strong choice to lead in those value because of the demonstrated clinical output, the reliability of our systems, our ecosystem of services and training that can support them on their journey. And so that is, I think, the high-level picture of how we compete globally. Jamie, anything else you may want to add to that. Jamie Samath: I would just say we're still selling X, and actually, we sold 41 X systems in the quarter, 34 refurbished Xis. And then, of course, we have dV5, I think the segmentation there is really appealing. And in some sense, is a competitive advantage for us to be able to tier feature the capability and economics for various segments of our customers. The refurbished Xi like Dave said, if I'd just say it again, that is a very capable product. It has the full complete suite in the ecosystem and the economics for customers are really attractive. And so I think that's been a great kind of addition to the system portfolio. Operator: [Operator Instructions] Our next question will come from the line of Rick Wise with Stifel. Frederick Wise: Sorry for my scratchy voice here. One, a specific question for Jamie and then a bigger picture question for you, Dave. Jamie, just help us, if you could, better understand what dynamics internationally drove I&A at double the rate of procedure growth. I mean it's -- obviously, it's a big delta of 40% OUS I&A versus 19% OUS procedure growth. Was there anything onetime there or country specific? And is this dynamic -- should we imagine this dynamic continues? Jamie Samath: I have not looked at that deeply for OUS specifically, Rick. I do think the customer ordering pattern is likely a good chunk of that because all of our distributors obviously are international, and they can be pretty lumpy in terms of their kind of ordering patterns. They can place orders for several quarters. So I'd imagine that the greatest impact is that. And I think given the strong capital placements, we probably had a bunch of stocking orders that also benefited Q1. And finally, there is a benefit from FX. Frederick Wise: Got you. All right, Jamie. Dave, for you, just as we get ready for some upcoming robotic meetings and I reflect on some of the topics that are going to be discussed and presented. I was hoping you maybe would sort of step back and looking longer term, talk about a couple of initiatives that others are focused on. And to what degree is this important to Intuitive Surgical? Like telesurgery robotics. We saw the first promote procedure done recently. The value of robotics to stroke or a minimally invasive cardiovascular disease. And just again, at the highest level, your interest or passion or focus on areas like that, that might be future drivers of growth for Intuitive. David Rosa: I really appreciate the question, Rick. If I stand back and I think about adding incremental capabilities to our ecosystem, it is about where, one, number 1, we can drive the Quintuple Aim. Number 2, whatever it is, we think will be better in our hands. And so to -- for example, some of the things that you called out on telesurgery, I actually -- I really believe deeply in the collaboration capabilities of these telestration, telecollaboration tools. And we are seeing some pretty rapid utilization of our current platform with My Intuitive+, and we're seeing thousands of use cases a month. And so that is, I think, demonstrating stickiness and value with our customers. As we expand those capabilities and it will include telesurgery in the future, that is on our road map. We expect that to be a subset of those use cases. And I -- just yesterday, I was with a customer here and we were speaking to their expectation of how telesurgery will be deployed within their IDN, within their small set of hospitals, and I think there's real value there, though we do believe that a majority of the use cases when telecollaboration is warranted will likely be served by existing tools with telestration and audio/video interactions. And it will, if you will, kind of escalate to telesurgery in certain use cases. So I do think that's an important part of our future in what customers will find value in. Recently -- semi-recently, we've announced kind of our investment into cardiac and cardiac surgery. And there, again, I believe that there's going to be a set of patients who can benefit from minimally invasive cardiac surgery and a set of patients who will benefit from percutaneous transcatheter approaches. And the evidence shows that, in some cases, surgery is better, and in some cases, an interventional approach is better. And when surgery is warranted, then I think the investments we're making, capabilities of da Vinci 5 and our investments in training, in particular, will pay dividends and have an opportunity for surgeons to treat patients with a very minimally invasive cardiac approach to their disease. And there are others, you mentioned stroke. That is an interesting area. But there are plenty of areas that I think about in terms of adding capability and procedures and value to Intuitive and to the patients that our customers serve. One of the trends over the year that I've been just kind of fascinated by is how surgeons take the core capabilities of a platform like da Vinci and apply them into areas that we didn't envision that it wasn't an area that we investigated and that's been repeated over and over. And that -- and I believe, with da Vinci 5 capabilities that exist today and as we add more in the future, we're going to see that cycle continue. And we're going to see surgeons and we're seeing it already, say, hey, we think there is value in these areas that aren't currently served. And so I'm excited by some of those opportunities. We'll do the work to see if indeed there's true value there, and it can be scaled and repeatable and teachable. But it's an area that I look forward to updating you along the way. Operator: [Operator Instructions] Our next question will come from the line of David Roman with Goldman Sachs. David Roman: Maybe you could start on SP. And it looks like a lot of pieces are coming together here to support further adoption of that technology, whether that's additional clearances from a procedure standpoint or additional instrumentation. Maybe just give us a sense of kind of where we are in bringing SP to a point where that adoption curve can accelerate, whereby that becomes a more just meaningful percentage of places? And I guess, if you could also contextualize that, is that additive to the overall addressable procedure market? Or does it become a choice of a typical dV5 procedure or SP? Jamie Samath: Yes. I guess I would say, if you look at the kind of procedure growth over the last year or so, it's been strong, 68% this last quarter. And that strength has been in part driven by additional geographical clearances and additional procedure clearances, particularly in the U.S. And so I think that, that then continues over some period. It's not that it suddenly inflects and accelerates from where it is. I think we continue that kind of progression on some reasonable pace. If you look at the question of long term, what are the incremental opportunities that are different from multi-port? That multi-port is not going to serve and therefore, in effect are TAM expanding. I think those opportunities exist. Nipple-sparing mastectomy is a good example of that. And obviously, that's in an early stage. You have some work being done to see if SP is better than alternatives, including multi-port. And of course, that's been largely in exchange between one stream or one set of procedures that we have to another. There's work in our labs that's super interesting for additional disease states that aren't served today that TAM expanding. It's too early for us to discuss because our current focus is on the opportunity we have. We have still a long way to go in each of the markets where we're cleared and for the new indications that we've added. And so like the next year or 2 is -- that's where our focus is. But I think the long-term opportunity for SP is perhaps a little underestimated. David Roman: That's helpful. And I appreciate. It's hard to get into all the detail on a call like this regarding just your OUS strategy given the number of different geographies and moving pieces. But maybe just at a high level, you could help us think about the number of actions you've taken here. You acquired distributors in Europe. You have the XiR opportunity. You have a joint venture in China to go after that market. But how are you prioritizing markets outside the U.S.? And what is, broadly speaking, the strategy here just to ensure competitiveness as new lower-cost entrants approach the market, but also contrasted with things like favorable reimbursement clearances in the U.K., which occurred last year. Maybe just help think about how OUS evolves here a little bit over the course of '26 and how that contributes to your forward outlook here. David Rosa: David, for me, you sort of answered your own question, I think. It is all of the above, right? Our investments start with the people we have in the region and to ensure that they understand deeply, are well trained, of course. The investments we have in our products, including an expanding system portfolio, ensuring that the procedures that are being served in that geography have the right rest of the ecosystem cleared in that geography. That's another piece of the puzzle as we continue to innovate and bring new products to the market, we want to ensure those are available as well. So there are regulatory pathways. And so we have the portfolio of products that are required in a given geography. Then, what we want to do is ensure to the very best of our ability that they are priced appropriately for the value they bring. And so we have broad economic programs and pricing that we're able to tailor to the market. But what we want to do, and I mentioned this briefly before, is we want to ensure that the value that's being realized is able to be articulated and substantiated in a given geography. That is not just all about price. And so that's a piece of the market access effort that goes into ensuring our customers themselves understand the value, but also that the reimbursement in government agencies that drive the overall economics of a given country also understand the value. And that's a multiyear journey. So you get it from both sides, kind of the products and pricing, but also the value being realized by both customers and the government. And that is a geography-by-geography amount of work and that's years in the making around the globe. Jamie Samath: Maybe I'd just add. In each of the markets, we take a localized approach to how we engage, what our strategy is there. And each of those markets has a strict strategic plan, and that results in us investing differentially in each of those markets. For OUS, as you've seen, we'll go direct in markets already where we think the opportunity makes sense for us. And there may be instances where we start to look in large markets, some localized manufacturing, which is becoming increasingly important for some of those markets. I think the final thing I'd say is, we have ambitions internationally, just given we're earlier in penetration. And over time, there may be additional markets that we franchise with distributors that we don't do business in today. David Rosa: Okay. That was our last question. Thank you for all the questions. In closing, we continue to believe there's a substantial and durable opportunity to fundamentally improve surgery and acute interventions. Our teams continue to work closely with hospitals, physicians and care teams in pursuit of what our customers have termed the Quintuple Aim, better and more predictable patient outcomes, better experiences for patients, better experiences for their care teams, lower total cost of care and finally, increased access to care. We believe value creation in surgery and acute care is foundationally human. It flows from respect for and understanding of patients and care teams and their needs and their environment. At Intuitive, we envision a future of care that is less invasive and profoundly better, where diseases are identified earlier and treated quickly so patients can get back to what matters most. Thank you for your support on this extraordinary journey. We look forward to talking with you again in 3 months. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.
Operator: Thank you for standing by. Welcome to the Interactive Brokers Group First Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. Now it's my pleasure to hand the conference over to the Director of Investor Relations, Nancy Stuebe. Please proceed. Nancy Stuebe: Thank you. Good afternoon, and thank you for joining us for our first quarter 2026 earnings call. Joining us today are Thomas Peterffy, our Founder and Chairman; Milan Galik, our President and CEO; and Paul Brody, our CFO. I will be presenting Milan's comments on the business, and all three will be available at our Q&A. As a reminder, today's call may include forward-looking statements, which represent the company's belief regarding future events, which by their nature, are not certain and are outside of the company's control. Our actual results and financial condition may differ, possibly materially, from what is indicated in these forward-looking statements. We ask that you refer to the disclaimers in our press release. You should also review a description of risk factors contained in our financial reports filed with the SEC. In the first quarter, markets began with a strong January, supported by solid equity performance, optimism around corporate earnings, expanding market breadth and resilience despite geopolitical risks. However, that momentum did not persist. Most global market indices declined in February and fell further in March, broadly mirroring the kind of price movement we saw in the first quarter of 2025. The S&P 500 ended the quarter down 5%. Notably, each of the Magnificent 7 technology stocks declined by more than the broader market, resulting in relative outperformance by the rest of the index. Despite this backdrop, we continue to see strong interest from both institutional and individual investors globally in opening and funding accounts. Client engagement remained healthy, trading activity increased and clients gradually took on more risk since last year's tariff-driven market decline, as reflected in higher DARTs and increased risk exposure fees over the past several quarters. We continue to set records across key metrics, including net revenue, total accounts and account adds. Growth in new accounts has driven higher clients' uninvested cash balances, which increased 35% year-over-year to a record $169 billion. Client equity rose 38% to $789 billion and was up 1% sequentially, despite the 5% decline in the market as continued account funding offset market performance. Across products, stocks, options and futures all delivered double-digit year-over-year growth. Of note, futures contract volumes increased 20% to a quarterly record, driven by higher volatility and increased demand for hedging. Turning to our strategic initiatives. We have been incorporating AI across the organization. We had introduced investment themes and connections, tools which use AI to streamline research and visualize relationships among trends, companies and securities to give our clients actionable investment ideas. This quarter, we expanded international company coverage and integrated themes into market screeners, watch lists and news summaries. We continued enhancing our Ask IBKR tool, which enables clients to query their portfolios for insights such as sector exposure, performance, tax loss, corporate actions and fundamentals. It now provides more direct and relevant responses. We also expanded the number of new sources we are authorized to summarize using AI. Within client service, our AI-powered chatbot continues to improve, successfully addressing a growing share of client inquiries in multiple languages. We continue to increase its accuracy and coverage while enabling our reps to focus on more complex issues. We are also applying AI to further automate processes across areas like onboarding, compliance and other operational areas. Expanding the use of AI remains a priority across the firm, both to enhance the client experience and to improve internal efficiency. While we have made meaningful progress, we see significant opportunities to extend it further. Our efforts translated into strong financial performance. Quarterly commission revenue and total net revenues, both reached record levels. At the same time, we remain disciplined on expenses. Our pretax profit margin was 77%, maintaining our position as an industry leader and marking the sixth consecutive quarter with margins above 70%. In recognition of this and as a sign of confidence in the strength of our business model, its growth potential and of our capital base, we revisited our allocation of capital and decided to increase the amount of dividend we paid to $0.35 a year. Turning to our customer segments. Our introducing broker pipeline remains exceptionally strong. We continue to maintain a robust pool of prospects while onboarding a substantial number of new introducing brokers and supporting the growth of existing ones. For larger introducing brokers, we offer customized solutions and have made it easier for them to launch with a wide range of configurable features. Many international brokers require specialized functionality to address their local investment, tax and regulatory requirements. We have user interface enhancements and development that we look forward to discussing in future quarters. Within our hedge fund segment, our High Touch Prime Brokerage offering continues to gain traction, and we are particularly encouraged by referrals to new clients from existing clients. We've also received positive feedback on our ability to handle complex requirements, and several clients have launched additional strategies on our platform. We had a productive quarter for new product introductions. In cryptocurrency, we expanded our offering to clients in the EEA, significantly broadening our footprint. We also introduced crypto transferring capabilities, allowing clients to consolidate external holdings into their IBKR linked accounts. In addition, we launched access to the Coinbase Derivatives Exchange, providing trading in nanosized crypto contracts and perpetual style futures. Our prediction markets have been live in trading 24/7. In anticipation of increased interest ahead of the 2026 U.S. midterm elections, we introduced Election Board, a discovery and trading tool that helps clients browse and trade political event contracts. You may also have seen our client outperformance advertising campaign. As we shared previously, in 2025, the average account across each of our client segments outperformed the S&P on a net basis after fees and commissions. Our average individual account returned 19.2% versus 17.9% for the S&P, while our average hedge fund account returned 28.9%. The campaign began with digital channels and has since expanded into print and television globally. These outperformance results reflect our low-cost offering and high interest paid on client cash, the strength of our platform and our focus on best execution. This focus means that we seek to maximize client outcomes by routing orders directly to the venues offering the best price rather than selling order flow to third parties. We continue to see growth in overnight trading, which is increasingly important for our global customer base. Overnight trading volumes nearly tripled year-over-year in the first quarter, increasing to 8.1 million trades from 2.8 million, and up from 6.2 million in the fourth quarter. We remain highly active across all areas of the business with multiple initiatives underway across platforms and client segments. We look forward to sharing further updates in the coming quarters. With that, I will turn the call over to Paul Brody. Paul? Paul Brody: Thank you, Nancy, and good afternoon. Thanks, everyone, for joining the call. We will start with our revenue items on Page 3 of the release. We are pleased with our financial results this quarter as we again produced record net revenues and strong results in our key operating metrics. Commissions rose 19% versus last year's first quarter, reaching over $600 million for the first time. We saw robust trading volumes from our growing base of active customers across stocks, options and futures. Net interest income rose 17% year-on-year to $904 million, driven by higher balances and partially offset by lower benchmark interest rates. We saw strength from margin borrowing and from our segregated cash portfolio, partially offset by interest we paid on our customers' cash balances. Other fees and services generated $86 million, up 10%, primarily driven by higher market data and FDIC sweep fees, as well as higher payments for order flow from options exchange-mandated programs. Other income includes gains and losses on our investments, our currency diversification strategy and principal transactions. Note that many of these noncore items are excluded in our adjusted earnings. Without these excluded items, other income was $77 million for the quarter. Turning to expenses. Execution, clearing and distribution costs were $106 million in the quarter, down 12% over the year ago quarter, driven by lower SEC regulatory fees, which were set at 0 in last year's second quarter. Versus the fourth quarter, execution and clearing was higher due to exchange fees on greater futures trading volumes. Because they were largely passed through, these fees increased both our commission revenue and execution costs. Execution and clearing costs were 13% of commission revenues in the first quarter for a gross transactional profit margin of 87%. We calculate this by excluding from execution, clearing and distribution $24 million of nontransaction-based costs, predominantly market data fees which do not have a direct commission revenue component. As a reminder, for the upcoming quarters, the SEC raised its fee rate for securities from 0 to $20.60 per million effective April 4. For comparison, based on our volume in the first quarter of 2025, SEC fees then totaled $24 million and the fee rate was $27.80. And again, these fees are a pass-through for us, increasing both commission revenue and execution and clearing expense equally with no impact on the income we earn. Compensation and benefits expense was $167 million for the quarter for a ratio of compensation expense to adjusted net revenues of 10%, down slightly from 11% last year. Note, there are several calendar-based components that tend to increase comp and benefits expense modestly, such as additional U.S. FICA tax on salaries in the first quarter and on the vesting of stock incentive plan shares in the second quarter. Our headcount at March 31 was 3,232. G&A expenses were $68 million, up from the year ago quarter, mainly on expansion of advertising. Our pretax margin was 77% for the quarter as reported and as adjusted. Income taxes of $117 million reflects the sum of the public company's $56 million and the operating company's $61 million. This quarter, the public company's adjusted effective tax rate was 17.2%, within its usual range. Moving to our balance sheet on Page 5 of the release. The consistent strength of our business and our healthy balance sheet support our raising the dividend from $0.32 to $0.35 per year, returning capital to shareholders while still maintaining an ample capital base for the current business and future opportunities. Our total assets were 39% higher than in the prior year at $219 billion, with growth driven by higher-margin lending and segregated cash and securities balances. New account growth also helped drive our record customer credit balances. We continue to have no long-term debt and profit growth drove our firm equity up 23% to $21.3 billion. We maintain a balance sheet geared towards supporting growth in our existing business and helping us win new business by demonstrating our strength to prospective clients and partners while also considering overall capital allocation. Turning to the operating data. We had near record customer activity in options with our contract volumes up 16% over the prior year. Futures contract volumes rose 20% for the quarter to a new quarterly record and stock share volumes were up 25%, all were in line with the industry volumes. Stock share volumes generally increased versus last year as clients gravitated to larger, higher-quality names and traded relatively less in Pink Sheet and some other very low-priced stocks. Growth in the notional dollar value of shares traded in the quarter was significantly higher than the growth in share volumes. On Page 7, you can see that total customer DARTs were 4.4 million trades per day in the quarter, up 24% from the prior year. Commission per cleared commissionable order of $2.69 was up slightly from last year when the full SEC fee rate was being charged. Page 8 shows our net interest margin numbers. Total GAAP net interest income was $904 million for the quarter, up 17% on the year ago quarter. And our NIM table net interest income was $953 million, up 20%. We include, for NIM purposes, certain income that is more appropriately considered interest, but that for GAAP purposes is classified as other fees and services or as other income. Our net interest income reflects strong annual increases in balances as well as reductions in benchmark rates in most major currencies, including the full quarter impact of December's cuts in the U.S. The growth in balances resulted in a rise in interest income on margin loans and customer cash balances, partially offset by higher interest expense on customer cash balances. This quarter, central banks in most major markets held their benchmarks constant. Year-on-year, the average U.S. Fed funds rate fell 69 basis points or by 16%. Despite this decline, our margin loan interest was up 17%, and our segregated cash interest was up 3%, both bolstered by higher balances. The average duration of our investment portfolio remained at less than 30 days. During the quarter, U.S. dollar yield curve inversion from the short to medium term substantially flattened. So we continue to maximize what we earn by focusing on short-term yields rather than accept the uncertainty and higher duration risk of longer maturities. This strategy also allows us to maintain a relatively tight maturity mismatch between our assets and liabilities. Securities lending net interest was higher than last year, though we did not see as much activity in hard-to-borrow names as in the fourth quarter. Contributors to annual growth include several factors: our growing account base, which increases our inventory of attractive stocks to lend including international securities; the interest we pay on short cash balances, which makes us attractive to investors who utilize short selling; our fully paid lending program shares proceeds with clients generally on a 50-50 basis, which appeals to investors looking to maximize the return on their portfolios; and finally, more activity in some of the typical drivers of securities lending, including IPOs and M&A activity. A portion of what we earn from securities lending is classified as interest on segregated cash. We estimate that if the additional interest earned and paid on cash collateral were included under securities borrowed loans, then total net revenue related to securities lending would have been $270 million this quarter, up 45% over the prior year quarter. Fully rate-sensitive customer balances ended the current quarter at $27.8 billion versus $20.3 billion in the year ago quarter. Now for our estimates of the impact of changes in rates, we estimate the effect of a 25 basis point decrease in the benchmark Fed funds rate to be an $80 million reduction in annual net interest income. Note that our starting point for this estimate is March 31, with the Fed funds effective rate at 3.64% and balances as of that date. Any growth in our balance sheet and interest-earning assets would reduce this impact. About 1/3 of our customer interest sensitive balances is not in U.S. dollars, so estimates of the U.S. rate change exclude those currencies. We estimate the effect of a 25 basis point decrease in all the relevant non-USD benchmark rates would reduce annual net interest income by $35 million. In conclusion, we started the year with another financially strong quarter, reflecting our continued ability to grow our customer base and deliver on our core value proposition to customers while simultaneously scaling the business. Our business strategy continues to be effective, automating as much of the brokerage business as possible, continuously improving and expanding on what we offer while minimizing what we charge. And with that, we will turn back to the moderator and open up the line for questions. Operator: [Operator Instructions] One moment for our first question, please. It comes from the line of Patrick Moley of Piper Sandler. Patrick Moley: So last week, the SEC eliminated the Pattern Day Trader rule. It seems like it could be a pretty significant structural change for the industry and it will make more active day trading available to far more retail investors. So I was just curious how you're thinking about the strategic opportunity here. If you think that there's any avenue for increased account growth because of this and how you're just thinking about the overall opportunity to attract some of these smaller wallet retail investors? Milan Galik: Well, we welcome the change. The regulators are basically replacing an outdated concept of counting trades and an arbitrary equity threshold or account size with a risk-based system, real-time intra-day margin requirements. The expectation is that it will broaden the retail access, increase the trading frequency and engagement and also liquidity in the markets. The rule will probably speed up the outcomes. The disciplined participants who have experienced some well-tried trading methodology will probably end up growing their accounts faster, whereas those that trade in a more haphazard fashion will probably realize their losses faster. Patrick Moley: Okay. So you're viewing this as a opportunity for IBKR, I guess. Any color on the strategic opportunity here? Milan Galik: It is an opportunity in the sense that majority of our accounts are individual accounts. Many of these individual accounts are smaller accounts, and they will be able to trade frequently. So in that sense, it is an opportunity. Patrick Moley: Okay. All right. And then maybe just if you could help us break down the account growth that you saw in the first quarter, it seems like it's a pretty two-sided market for the business. On one hand, you have the war and you have an energy market volatility that I think is bringing people to the market and wanting to trade. And then on the other hand, I think that there's some concern about what this could mean for the rest of the year and whether it could create some frictions, I guess, in terms of the new account formation, particularly internationally. So any thoughts on just the current environment and just account growth through the storm here as we enter into the back half of the year? Milan Galik: No, I don't think we need to expect anything different from what we have seen in the past. What tends to happen is as the equity market prices are increasing, more and more of the public wants to participate on the run-up, and we see strong account openings. Whereas as the volatility increases, that may discourage newcomers from joining the market, but that gets offset by increase in the DARTs, increase in the trading. So as I said, the increased volatility is something that we have seen before for different reasons. So I would expect things to continue the way we have seen over the past several years. Operator: One moment for our next question, please. It comes from James Yaro with Goldman Sachs. James Yaro: I wanted to return to a topic discussed on last quarter's call on your focus on accelerating marketing spend to support account growth. Is there any way you could provide a bit more detail on what marketing spend trends might have looked like either historically or perhaps both historically and today? And maybe if you could just provide a little bit more color on how you would think about scaling marketing going forward? Thomas Peterffy: Well, we are hell bent on trying to increase our marketing spend, but we are also very strict about getting the required minimum return on every additional marketing dollar. So as a result, while we keep trying to increase the spend, it is going very slowly. So what we are really doing is we are trying to find additional marketing outlets that are going to hopefully give us more opportunity to spend more. James Yaro: That's very clear. As my follow-up, just there has been discussion among U.S. brokers and banks recently around potential AI-enabled cash optimization tools, which I think the idea is that they could ensure that customers receive yields on their deposits that are closer to Fed funds. I'm curious if you have any views on these sorts of tools. And I guess, is there any consideration that this could affect your pricing on deposits? Thomas Peterffy: So we're not happy about these tools because we have always been paying close to market rates. And if these tools force other brokers to do the same, then we're going to have more competition. But I don't think they will do that. Milan Galik: I mean it is somewhat ironic that we hear these noises about using the AI in the area of cash optimization from the banks, banks that have been paying very, very little on the uninvested cash. And if you think about it, there isn't that much that AI needs to do here. It's really the brokers' or the bank's decision of how much of the interest income they want the client to enjoy versus how much of it they want to keep for themselves. And we have historically been on the forefront of the industry. Our costs have been low, and that has helped us maximize the outcome for our clients. Operator: Our next question is from Ben Budish with Barclays. Benjamin Budish: Maybe to start following up on Patrick's second question. I'm just curious, I remember a year ago, the markets were selling off quite a bit in April, and you gave us an update on your margin balances, which tend to follow the S&P. It seems like there's -- we're seeing the opposite this month where the end of March -- since then, the markets are up fairly meaningfully. I'm just curious if you can give any more of a detailed update, what are margin balances looking like intra-month. Are we seeing this sort of S&P growth supported reacceleration of account growth? Particularly curious on the margins because that seemed to be such an interesting topic last year, and I would think you'd see a bit of a rebound, but just curious any details you could share there. Thomas Peterffy: So our margin loans are precisely at the end of the quarter, $86.6 billion. But that's part of our -- every month's end, we release our margin balances. So if anybody cares to look at that, they could see what's happening. Benjamin Budish: All right. Fair enough. And then maybe just a higher-level topic on prediction markets. Just curious, any updates you can share in terms of -- I know you've always framed this up as a very long-term opportunity. Any updates you can share in terms of conversations with institutions that may be interested in onboarding to ForecastEx, any progress there? Thomas Peterffy: ForecastEx is receiving more and more inquiries from people who have sworn months ago that they will never enter the prediction market. And now more and more of them are curious and are considering becoming members. Yes. So I think this is going to be a huge thing as I have said before, and it's going to be a lot of prediction trading. Operator: One moment for our next question, that comes from Brennan Hawken with BMO Capital Markets. Brennan Hawken: You touched on the non-U.S. dollar sensitivity to rates with 1/3 of those balances there. Is it possible to get a currency breakdown for those balances and maybe which of those currencies are growing the fastest? Paul Brody: Yes, we don't really get into it at that granular level, Brennan. But we make that differentiation between USD and non-USD because, of course, the bulk is in USD. But we want to make sure that in your mind that there's a differentiation when you see the benchmark rates change, what can you expect. Brennan Hawken: Okay. And then is it still fair to assume you framed the changes in rates as a drop in those policy rates, but are the upside and downside scenarios symmetrical? Or do they differ if rates are moving up? Paul Brody: They're roughly symmetrical. There are some low rate non-U.S. dollar currencies as we saw when rates here went near 0. There's a little bit of asymmetry when you go from positive to negative territory, but it's fairly minor. So other than that, they are pretty symmetrical. Operator: [Operator Instructions] Our next question is from Chris Allen with KBW. Christopher Allen: I just want to ask about crypto. You continue to build out capabilities there. You announced the transfer capabilities in crypto. I know it's just been a few weeks, but I'm wondering if you've seen any clients actively -- proactively transfer positions to IBKR since you offered that capability. Milan Galik: We indeed have released it only a couple of weeks ago. We do see amounts coming in. It's mostly United States, but internationally, we see that as well. And the other thing that we announced not long ago was launching our European offering. We have done that in cooperation with our partner, Zero Hash. We have so far been under soft release. We have issued a press release about it. We have sent an e-mail notification to existing clients. We have not yet been marketing it externally. Christopher Allen: Got it. And maybe just following up on that. Anything else you think you need to offer right now to increase or accelerate your digital asset penetration? Or you think you're kind of already there with your product solutions offering? I know you always add coins, things along those lines. Milan Galik: There are a couple of things we still need to do. We are not covering all the geographies. We are working on that in Singapore, for example. And the other thing that we need to work on is the staking. As you know, some of the currencies, cryptocurrencies use the proof-of-stay concept, which allows the holders of those currencies to earn very significant interest income. And our partner, Zero Hash is working on that capability. And as soon as they have it, we're going to integrate it into our offering. Operator: Our last question comes from [ Karim Assef ] with Bank of America. Unknown Analyst: Just one question actually on the crypto business. If you could talk a little bit more about that agreement or partnership that you've had with Coinbase Derivatives, maybe around like the client demand there and how we should kind of think about the potential revenue opportunity and any of the economics that you could share with us? Milan Galik: So the agreement that we have with them is very simple. The Coinbase Derivatives Exchange lists a number of cryptocurrency futures. Most of them are different in terms of size from what the large exchanges offer. They're significantly smaller contracts. So they are geared towards retail traders. There is one particular instrument type that is interesting to the traders. Those are the so-called perpetual futures. That was the main reason why we have decided to integrate that offering into ours. The perpetual cryptocurrency futures, they command very, very significant volumes, and that is why we joined the exchange and now offering it to our clients. Our clients trade. It's not a very large number of accounts yet, but the ones that are trading it are trading it in big numbers. Operator: Thank you. And ladies and gentlemen, this concludes our Q&A session, and I will pass it back to Nancy Stuebe for closing comments. Nancy Stuebe: Thank you, everyone, for participating today. As a reminder, this call will be available for replay on our website, and we will also be posting a clean version of our transcript on the site tomorrow. Thank you again, and we will talk to you next quarter end. Operator: And this concludes our conference. Thank you for participating, and you may now disconnect.