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Operator: Good day, and thank you for standing by. Welcome to the Hooker Furnishings Corporation Fourth Quarter 2026 Earnings Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Earl Armstrong, Senior Vice President and Chief Financial Officer. Please go ahead. Earl Armstrong: Thank you, and good morning, everyone. Welcome to our quarterly conference call to review financial results for the fiscal 2026 fourth quarter and full year. Our 2026 fiscal year began on 02/03/2025, and the fourth quarter began on 11/03/2025, both periods ending on 02/01/2026. Joining me today is Jeremy Hoff, our chief executive officer. We appreciate your participation today. During our call, we may make forward-looking statements which are subject to risks and uncertainties. A discussion of the factors that could cause our actual results to differ materially from our expectations is contained in our press release and SEC filing announcing our fiscal 2026 results. Any forward-looking statement speaks only as of today, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after today's call. During the fourth quarter, we completed the previously announced sale of the Pulaski Furniture and Samuel Lawrence Furniture Casegoods brands, part of our former Home Meridian segment. Consolidated net sales from continuing operations were $67 million, a decrease of $17.2 million, or 21%, compared to the prior-year period. The decline was partially attributable to the current fourth quarter being one week shorter than the prior-year period, which reduced net sales by approximately $5.5 million based on average daily sales. The decrease also reflects lower sales in our Hospitality business due to its project-based nature, as several large projects shipped in the prior year did not recur in the current year. Additionally, we estimate severe winter weather experienced in January 2026 in a significant part of the United States and in most of our largest markets reduced net sales for the quarter by $3 million to $4 million. Despite lower net sales, we reported operating income of $629,000 for the quarter. This was driven by operating income of $1.2 million in Hooker Branded and $617,000 in All Other, partially offset by an operating loss of $1.2 million in Domestic Upholstery. Notably, despite one week less of sales and severe winter weather, Domestic Upholstery reduced its operating loss by more than half compared to a $2.5 million loss in the prior-year fourth quarter. Hooker Branded operating income was consistent with the prior-year period despite fewer selling days and the weather disruptions. Net income from continuing operations for the fourth quarter was $874,000, or $0.08 per diluted share. Following the divestiture of Pulaski and Samuel Lawrence on 12/12/2025, results of these businesses are reported through that date. Discontinued operations incurred a net loss of $330,000 in the quarter. Consolidated net income for the fourth quarter was $536,000, or $0.05 per diluted share. For the full fiscal year of 2026, net sales from continuing operations were $278.1 million, a decrease of $39.2 million, or 12.4%, compared to the prior year. This decline was primarily driven by lower sales in the Hospitality business within All Other and, to a lesser extent, a shorter fiscal year and the severe winter weather we mentioned earlier. Gross profit declined in absolute dollars due to lower sales; however, gross margin improved by 180 basis points, reflecting margin improvements in the Hooker Branded and Domestic Upholstery segments. Continuing operations reported an operating loss of $16.5 million for fiscal 2026, primarily due to $15.6 million in noncash intangible asset impairment charges reported in the third quarter triggered by our stock price as of the end of the third quarter. These included $14.5 million related to goodwill in the Sunset West division and $556,000 related to the Braddington-Young trade name, both within Domestic Upholstery, as well as $558,000 related to the remaining HMI business in All Other. Additionally, continuing operations incurred approximately $2 million in restructuring costs primarily related to severance and, to a lesser extent, warehouse consolidation, all as part of our completed cost reduction initiatives. Net loss from continuing operations was $12.8 million, or $1.20 per diluted share. Discontinued operations included approximately ten months of activity in fiscal 2026. Sales declined due to ongoing macro pressures and tariff-related purchasing hesitancy among its customers, particularly large furniture retailers. Discontinued operations incurred a pretax loss of $19 million, including $3.9 million in restructuring costs, of which $2.4 million related to the Savannah warehouse exit, a $6.9 million loss from classification as held for sale, which included $2.6 million of trade name impairment, $3.5 million in fair value write-downs, and $735,000 in selling costs. Discontinued operations also incurred $1 million in bad debt expense related to a customer bankruptcy. Consolidated net loss for fiscal 2026 was $27 million, or $2.54 per diluted share. Now I will turn the call over to Jeremy for his comments on our fiscal 2026 fourth quarter and full year results. Jeremy Hoff: Thank you, Earl, and good morning, everyone. We are encouraged to report net income of $536,000 for the quarter. Fiscal 2026 was incredibly transformative as we navigated significant disruptive tariffs on our imports, opened a successful fulfillment warehouse in Asia, and exited two unprofitable divisions, all while reducing fixed costs by about $26.3 million, or 25%, of which approximately $17.5 million in fixed cost savings is related to continuing operations. At the same time, we delivered slight market share growth overall with key strength in key businesses offsetting isolated softness and launched our Margaritaville line, which is delivering on our expectations to be the most impactful product launch in company history. Today, we move forward as a leaner, higher margin business with a much lower breakeven point and the potential for significant profitability as demand returns. We believe we are positioned for a significant improvement in earnings in fiscal 2027, with our expectations bolstered by the early indications of strength within our Margaritaville product line, and we see a clear path to sustain profitable growth by focusing on our core expertise of better-to-best home furnishings. Despite significant headwinds, we are encouraged to report that the Hooker Branded segment reported $1.9 million in operating income for the year compared to a prior-year operating loss of $433,000. Additionally, despite a significant charge in the third quarter, the Domestic Upholstery segment showed improvements in the fourth quarter, reducing its operating loss by more than 50% as compared to the prior-year quarter due to cost reduction initiatives and operational improvements. I would like to also comment on import tariffs, which were a significant disruptor for Hooker and the industry in fiscal 2026. After our fiscal year-end in February 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the International Emergency Economic Powers Act were not authorized by statute. In March 2026, the U.S. Court of International Trade directed U.S. Customs and Border Protection to implement a refund process for previously collected duties. We are evaluating the potential recovery of these amounts. Additionally, the administration appears poised to pivot to new tariffs under different legal authority within the next few months. We continue to monitor developments in this area. Now I want to turn the discussion back over to Earl, who will discuss highlights in each of our segments along with our cash, debt, inventory, and capital allocation strategies. Earl Armstrong: Thank you, Jeremy. At Hooker Branded, net sales decreased 2.9% for fiscal 2026, with the decline entirely driven by a $5.5 million decrease in the fourth quarter, primarily due to one fewer selling week as well as supplier delays and weather-related shipping disruptions. Unit volume declined, partially offset by a 5.7% increase in average selling price implemented to mitigate higher costs and tariffs. Despite lower sales, full-year gross margin expanded by 200 basis points, driven primarily by lower freight costs and pricing actions. Operating income improved to $1.9 million for the year compared to an operating loss in the prior year. Our fourth quarter operating income of $1.2 million was consistent with the prior year despite reduced selling days. Incoming orders were flat year over year, while backlog increased nearly 26%. Domestic Upholstery net sales decreased 2.7% for fiscal 2026, reflecting lower unit volumes in certain divisions, partially offset by growth in contract, private label, and outdoor channels. Gross margin improved by 230 basis points for the full year, driven by lower material costs, reduced labor and overhead expenses, and benefits from cost reduction initiatives. The segment reported an operating loss of $16.9 million for the year, largely due to $15 million in noncash impairment charges, compared to an operating loss of $5.4 million in the prior year. In the fourth quarter, operating loss was $1.2 million, reduced by more than half from the prior year, reflecting cost reduction actions despite lower sales. Incoming orders decreased slightly by about 2%, while backlog increased about 8% year over year. Regarding cash, debt, and inventory, as of the fiscal year-end, cash and cash equivalents stood at $1.1 million, a decrease of $5.2 million from prior year-end. However, amounts due under our revolver decreased by $18 million to $3.6 million at year-end. Cash generated from operations was used to repay $18.5 million of our former term loan, distribute $8.8 million in cash dividends, and fund $3.2 million in capital expenditures. Inventory levels decreased by $17.5 million from $66.2 million at prior year-end to $48.7 million at fiscal year-end. We received approximately $5.5 million in cash proceeds from the sale of the discontinued operations. Despite these outflows, we have maintained financial flexibility with $62.8 million available in borrowing capacity under our amended and restated loan agreement as of fiscal year-end; this is net of standby letters of credit. As of yesterday, we had over $12 million in cash on hand with over $64 million in available borrowing capacity, net of standby letters of credit, with $0 outstanding on our credit facility. Regarding capital allocation, late last year, we announced that our board authorized a new share repurchase program under which the company intends to repurchase up to $5 million of our outstanding common shares beginning in fiscal 2027. In connection with the repurchase authorization, the board recalibrated the annual dividend to $0.46 per share, which began with the company's 12/31/2025 dividend payment. As Hooker Furnishings Corporation transitions to a more focused growth-oriented company, the new share repurchase program together with the adjusted dividend enables us to return capital to shareholders while maintaining the balance sheet flexibility needed to invest in the business. We believe these actions appropriately balance capital returns with liquidity while supporting long-term shareholder value. I will turn the discussion back to Jeremy for his outlook. Jeremy Hoff: In the Hooker Branded and Domestic Upholstery segments, incoming orders have increased year over year for three consecutive quarters, adjusted for the extra week in last year's fourth quarter. Housing activity and consumer confidence remain weak, and the Department of Commerce's February advanced monthly estimates reflect that reality, showing that retail sales for furniture and home furnishings decreased by 5.6% as compared to the prior year and were lower than January 2026. We do not anticipate near-term meaningful improvement in conditions; however, with a more efficient cost structure and a streamlined portfolio, we believe we are positioned to report improved results even if current market conditions persist. Our advantage is a clear focus on our core businesses with the organization fully aligned to drive organic growth and deliver more consistent, sustainable earnings over time. Margaritaville product and gallery commitments continue to scale, with shipments expected to begin in 2027. This ends the formal part of our discussion, and at this time, I will turn the call back over to our operator for questions. Operator: We will now open the call for questions. Certainly. Press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. And our first question will come from the line of Anthony Lebiedzinski of Sidoti. Your line is open. Anthony Lebiedzinski: Thank you, and good morning, everyone. Thanks for taking the questions. It is certainly nice to see the return to profitability in the fourth quarter. So first, looking at the Hooker Branded segment, you had a gross margin of over 39%, which was certainly much better than what we had expected. Was there anything unusual that helped the quarter in terms of the gross margin, and how should we think about the sustainability of your gross margin at Hooker Branded? Earl Armstrong: On sustainability, I believe we said in the call just now gross margin was 200 basis points better year over year. So your question was how do we look at it going forward? Anthony Lebiedzinski: You are saying the 39% was—was there anything unusual in the fourth quarter, 39% versus 32% a year ago for the quarter? Earl Armstrong: No. We cannot think of anything unusual for the quarter that would be driving that, other than the things we have mentioned. Anthony Lebiedzinski: And then going forward, it sounds like you expect continued strong margins at Hooker Branded, right? Earl Armstrong: Yes. Anthony Lebiedzinski: Okay. Sounds good. Switching gears to the Domestic Upholstery segment, you had a nice year-over-year improvement there, though it was lower than what it was in the third quarter. Maybe if you could talk about the various puts and takes impacting the gross margin in Domestic Upholstery, and are you seeing any increases in cost there? There has been some talk of foam prices going up. Please touch on what you are seeing as it relates to foam and other raw material costs. Jeremy Hoff: On the foam—when we talk about Domestic Upholstery, I am going to talk about Bedford and Hickory, which has been Sam Moore and Braddington-Young. Shenandoah is a different part of that, of course, and then you get Sunset West, which is under that same reporting name. Regarding Braddington-Young and Sam Moore, we announced recently that we are combining both of those to become Hooker Custom Upholstery, which is part of a larger strategic initiative that is part of collective living, which means putting everything together and showing all of our strengths in one collection, for example. We believe we have figured out this is a much more powerful stance moving forward. As we have done that, we are combining things like frames that can cross over from fabric to leather across different factories. So factories have become a capability that can be utilized for the strength of the Hooker Custom line versus a silo here that makes leather and another that makes fabric. It is a very powerful unified message. In doing that, we have changed such a big part of that strategic direction that, with the timing of revenue and what is going on macro, revenue is really our only challenge in those divisions. The efficiencies of those factories are significantly improved, which is why you are seeing the improvements in the profit. We are not there yet, and we need more revenue, which we are working on, and that is why we are executing the entire strategy I just described. We feel really good about the direction, and we feel as good as we have felt about that part of our Domestic Upholstery since we purchased them. The additional costs are definitely coming at the industry. Foam, specifically, has seen some disruption. There was a fire in a major Texas facility that affected much of the industry supplied by that provider. There are things driving costs up in that way. And then, of course, the Middle East war has driven different chemicals and oil up, which flow through to raw materials, and that affects not just foam but overseas as well. There are a lot of moving parts with different costs that are rising, but we do not have enough data right now to tell you exactly what that could be, though it is definitely a factor. Anthony Lebiedzinski: Understood. With respect to Margaritaville, it sounds like you are still on track to start shipments in the back half of the year. Can you expand on the interest level you are seeing from retailers since your last call? Has it increased or been as expected, and could placements be even better than originally expected? Earl Armstrong: I believe we reported that we had over 50 committed galleries last call, and that number has grown, so we feel even better than we did about where it is positioned and how it is going to impact our organic growth in the second half and beyond of this year. When you think about the fact that at High Point Market not all dealers come to every market—it is probably a little over half who come to each market—a good number have not even seen Margaritaville yet in our showroom. We continue to be even more optimistic about where that is going to go and how it is going to help our growth. Anthony Lebiedzinski: Sounds good. Best of luck, and thank you very much. Jeremy Hoff: We appreciate it, Anthony. Thank you. Operator: And our next question will come from the line of Dave Storms of Stonegate. Your line is open, Dave. Dave Storms: Good morning, and thank you for taking my questions. I want to start with the weather disruptions that you mentioned. How much of that is recoverable, or does it just change the timing and maybe make Q1 look a little stronger than it normally would seasonally? Earl Armstrong: We had the same experience in Q1, unfortunately, in early February with a storm that was a little more severe than this. I would expect by the end of Q1 that backlog should be mostly caught up—the shipping backlog at least. Dave Storms: Great, thank you. And with shipping, given all the conflicts, are you seeing any second-order impacts to your shipping lanes, and any commentary around the general supply chain environment? Jeremy Hoff: We really are not. Dave Storms: Thank you. Lastly, on tariffs—you touched on this in your prepared remarks. With some of these Section 301/IEEPA-related tariffs, my understanding is they only have a 150-day runway. Are you seeing participants in the industry look through this, or did you see a bunch of ordering ahead? Any thoughts on what you saw on the ground regarding this change in the tariff environment? Jeremy Hoff: Due to the somewhat obvious nature of what has happened, people unfortunately have become used to the up and down. Our industry is somewhat used to disruption, if that makes sense. It is what it is, so we are managing through it as an industry, and none of us pretend to know what is going to happen next. We think something is brewing for how they will replace the tariffs that the Supreme Court shot down, but obviously no one knows what that is. Dave Storms: Understood. Thank you for taking my questions. Jeremy Hoff: Thank you. Operator: As a reminder, if you would like to ask a question, please press *11. Our next question will come from the line of Analyst from Pinnacle. Your line is open. Analyst: Good morning. Thanks for taking my questions. It seems like a lot of heavy lifting was done over the past year or so. Is there any other potential divestiture, plant closure, or warehouse closure that might be forthcoming in the future? Jeremy Hoff: Thank you. No. We feel very good about our position and the companies that we have at this point and the capabilities that we have. When you look at our overall strategic focus on better-to-best in the home furnishings industry, the companies we have are exactly that. We feel good about where we are. We do not feel like we have anything that is not eventually sustainably profitable and a great part of our strategic direction. Analyst: Regarding the tariffs, some companies have disclosed the amount of the rebate they are seeking. Could you put a number on the rebate that you might be attempting to recoup? Jeremy Hoff: It is material. We are not going to disclose that at this point. Analyst: Finally, what was the backlog at the end of the year, and what was the total number of orders for the year versus a year ago? Earl Armstrong: Order backlog at the end of the year was roughly $36 million. What was the second question? Analyst: Total orders for the year versus a year ago. Earl Armstrong: I do not have that in front of me. Analyst: Do you have orders for this order? Earl Armstrong: Actually, yes. Total orders in 2026 were $256 million, just slightly lower than the prior year at approximately $257 million. Analyst: Great. Thank you, and good luck. Earl Armstrong: Thank you. Operator: I am showing no further questions at this time. I would now like to turn the conference back over to Jeremy Hoff for closing remarks. Jeremy Hoff: I would like to thank everyone on the call for their interest in Hooker Furnishings Corporation. We look forward to sharing our fiscal 2027 first quarter results in June. Take care. Operator: This concludes today's program. Thank you for participating. You may now disconnect.
Sarah Matthews-DeMers: Welcome to the AB Dynamics 2026 Half Year Results Presentation. I'm Sarah Matthews-DeMers, the CEO, and I'm joined today by our Interim CFO, Andrew Lewis. I'm going to be taking you through the highlights before Andrew takes you through the detailed financial performance. Following this, I'll provide my initial observations from my first few months as CEO and an update on our progress against our medium-term growth strategy before wrapping up with a summary of FY '26 to date and the outlook for the remainder of the year. We set out our medium-term growth ambitions in November 2024, and I remain committed to delivering these. We have continued to make strategic progress in shaping the group to take advantage of the structural market drivers that underpin the significant medium-term growth opportunity. As we had already signposted, revenue was softer in the first half due to the order intake delays in the second half of last year caused by tariff disruption, with only GBP 44 million of orders received. In half 1 of FY '26, it is pleasing to see positive customer activity and order intake recovering to more positive levels with GBP 64 million of orders received. Our closing order book of GBP 47 million, together with revenue delivered in half 1, provides approximately 70% coverage of expected full year revenue. Combined with our confidence in operational execution, this leaves us well positioned to deliver in the second half of the year. We have enhanced our focus on innovation to drive future growth, an area I will cover in more detail later in the presentation. Our second value creation pillar is margin expansion. Our operating margin was maintained at 18.6% as the impact of lower volume was offset by operational improvements, management of discretionary spend and a positive revenue mix. This shows the benefits of the investment made over the last 5 years to make the business more agile and responsive to dynamic market conditions. Our full year margin is expected to show year-on-year progression given the expected half 2 revenue bias. In addition, the lower-margin Chinese testing services business, VadoTech, will now become a smaller proportion of the group, which will also benefit margin. In the operations function, we have a further program of continuous improvement underway to drive our incremental margin growth. And I am confident of achieving our sustainable margin target of greater than 20%. We have a promising pipeline of value-enhancing and strategically compelling acquisition opportunities that we are continuing to develop. Our significant net cash balance of GBP 39.3 million supports further organic and inorganic investment opportunities. I'll now hand over to Andrew to take you through our financial performance. Andrew Lewis: Thanks, Sarah, and good morning, everyone. It's been a privilege to join the group with AB Dynamics pedigree and to work with Sarah and the team over the last 2 months. I found a business with talented people, great products and excellent long-term high-quality customer relationships. On to the business of the day and the results for the first half of 2026. Revenue and profit in the first half were consistent with the previously guided second half bias for the full year in 2026. We expect this to result in a trading performance weighted approximately 55% to 60% towards the second half of the year, set against the context of a greater first half bias in 2025 than typically expected. Order intake in the first half strengthened, showing that the market and customer activity is returning to a more positive level after a more subdued third quarter of FY '25, which was heavily impacted by global trade tariff issues. Looking at the numbers in more detail. Revenue was down 16%, reflecting the previously communicated delays in the timing of order intake and customer delivery requirements, including the weaker-than-anticipated volumes at our Chinese testing services business, VadoTech, which I'll cover in more detail later in the presentation. Operating profit decreased by 16% to GBP 9.1 million. Operating margin was maintained at 18.6% with a negative impact of operational gearing offset by the full year effect of operational improvements, management cost actions and a positive revenue mix. The effective tax rate remained flat at 20% and earnings per share decreased by 15% to 31.3p. On a rolling 12-month basis, cash conversion of 102% and our rolling 3-year average cash conversion of 105% demonstrates that we're consistently able to turn our profits into cash. We are increasing the interim dividend by 10%, reflecting our strong financial position and confidence in the business. The order book at the end of the period was GBP 47 million, of which GBP 29 million is for delivery in the second half. This, combined with first half revenue, provides approximately 70% cover of full year 2026 expected revenue. Moving on and looking at the year-on-year operating profit bridge. The negative impact of operational gearing was offset by a combination of the full year effect of operational improvements, primarily in testing products, Management implemented cost mitigation actions, largely around the timing of discretionary spend and revenue mix, which contained a number of components. In Testing Services, growth in the high-margin U.S. mileage accumulation business, together with lower revenue in the low-margin Chinese testing services business and in simulation, a higher proportion of high-margin RF Pro software. This delivered an operating margin, which was maintained at 18.6%. Looking into the second half, we expect the volume to be higher and thus will benefit from operational gearing. Operational improvements are embedded into the business. Revenue mix is harder to forecast as it is often dependent on the timing of some large individual deliveries. And overheads will be managed carefully to balance financial performance with investment in innovation and our people. Now looking at cash. While in the period, working capital increased due to the timing of customer deliveries falling later in the period than usual, driving an increase in receivables, our rolling 12-month cash conversion of 102% demonstrates a continuation of our track record of turning profits into cash. We have achieved this by maintaining our focus on commercial contracting, inventory levels and ensuring a disciplined approach to cash management. We have reinvested this operating cash into the business with GBP 2 million invested in capital projects, including on new product development in line with our technology road map. After returning cash to shareholders in the form of dividends, we had a significant net cash balance at the period end of GBP 39.3 million available to support strategic priorities. Moving on to the performance of each segment and starting with Testing Products. This segment includes driving robots, ADAS platforms and soft targets and laboratory-based test equipment. Revenue was down 17% as a material delivery of robots to a North American OEM made in the first half of 2025 did not recur in the period. Underlying demand drivers remain strong and order intake was encouraging during the first half of 2026, particularly in Asia Pacific and North America. The increase in margin was driven by operational efficiencies, together with cost control measures focused on the timing of discretionary spend. Testing services includes our proving ground in California, powertrain and environmental testing in Michigan and on-road testing in China. Revenue decreased by 29%, which is very much a tale of 2 geographies. Performance has been positive for our U.S. businesses, where new customer wins for our mileage accumulation business and increased track testing activity on behalf of the U.S. regulator drove good revenue growth. However, our business in China, VadoTech, has seen significantly weaker-than-anticipated volumes under the new contract with a European OEM awarded at the end of last year. The customer has faced challenging local market conditions as its market share as a premium European brand has been replaced by domestic brands such as Geely and BYD and the lower consequent on-road testing activity has resulted in a reduction in our revenue. The VadoTech Testing Services business remains in continuing activities in the half year numbers as a strategic review commenced shortly after period end. This slide illustrates the financial impact of the VadoTech business on the Testing Services segment in the first half of this year with comparatives for last year's half and full year. In light of the performance of the VadoTech business in the first half of this year and customer intelligence about their revised expected volumes, the group recorded an impairment of the VadoTech business of GBP 16.8 million, the majority of which is noncash. The detail on the slide should provide sufficient information to allow modeling of the U.S.-based Testing Services segment, which as can be seen, is a higher-margin segment without the VadoTech results in it. It is important to stress that this is an isolated issue with a single European OEM who is facing challenging local market conditions in China. And has no bearing on the opportunities to sell testing products to Chinese OEMs for local use in China, which has been a strong market for our testing products in the first half of the year. Simulation includes our simulation software rFpro and driving simulator motion platforms. The slight decrease in revenue was driven by lower motion platform sales, where we expect revenue to be more heavily weighted to the second half, offset by higher software sales. Customer activity in this area was buoyant in the first half and included the EUR 9.7 million contract win to supply advanced driver in the loop simulation equipment to a major European OEM, which we announced in December. Margins were impacted by the mix of higher software and lower equipment sales in the period. As a reminder, high-value simulator sales are individually material and 2 further order wins are assumed in our second half revenue expectations. Our key financial enablers are unchanged and include our great people with over 200 qualified engineers and technicians, supported by an experienced team of professionals across sales, operations and finance. Our retention rate, which at circa 90% is above industry averages, is testament to the investment that's been made in our people. Our cash conversion, which we aim to continue at 100% through the cycle, and our strong balance sheet, which gives us flexibility with GBP 40 million of cash and a GBP 20 million revolving credit facility. Whilst we prefer to remain debt-free, our debt capacity at approximately 2x EBITDA is now GBP 55 million, which for the right acquisition, we could use for a short period, then pay down from cash generation. Our capital allocation policy is unchanged, and we're pleased to demonstrate how this is supporting the year-on-year progression of the group's return on capital employed. Our first priority is to invest in organic R&D and the CapEx, then M&A and finally, dividends. We have a disciplined approach to R&D and CapEx, assessing each potential project using structured financial and strategic criteria to ensure alignment with our medium-term growth plan. New product development is critical to our business to ensure our solutions meet the evolving technical requirements of our customers. Our technology road map for testing products is designed to address the opportunities of both regulation and NCAP testing over the next 5 years based on the long-standing deep customer relationships we have with OEM R&D teams and service providers. Our road map covers both hardware improvements such as the speed and reliability of our ADAS platforms as well as software enhancements. In simulation, new product development is targeted at addressing evolving customer requirements and ensuring our product range provides solutions for a range of use cases and budgets across the road and motorsport markets. We have well-invested facilities across the group, but where appropriate, we'll invest CapEx to increase production or service capacity. And we will complete our global ERP system rollout, having now embedded this in our core testing products business and driving margin improvement as a result. In M&A, we will continue to target profitable cash-generative businesses. Any transaction should be EPS accretive and meet or exceed our internal benchmarks on financial returns. Where this is not the case, we maintain a patient and disciplined approach to ensure we only invest where we can create long-term shareholder value. We have a progressive dividend policy, as shown by our track record of consistent double-digit increases over the last 5 years. We will only consider returning further capital to shareholders if we are holding surplus cash and acquisition multiples ever become unattractive. The graph on the right illustrates that we have deployed capital in a number of ways over the last 4 years in a disciplined manner and are now starting to see the benefits in the group's return on capital employed metric, which has increased to 21% in the first half of 2026. I'll now hand over to Sarah, who will provide an insight into the first few months in her new role and to recap on the progress against our medium-term growth strategy. Sarah Matthews-DeMers: Thanks, Andrew. Having been in the CEO role since the 1st of December, I'd like to share my initial observations. We have made a huge amount of progress at ABD over the last 5 years, and it's a very different business to the one I joined. We have great people, great products and a great market position, which underpin my confidence in the future of the business. There is no change to our overall strategy. And going forward, you should expect evolution, not revolution. We have reviewed the portfolio of prior acquisitions and taken early decisive action given the changes in market dynamics for our VadoTech business. I'm passionate about driving the group forward and will focus on innovation, continuous improvement and developing and growing our people. During the last few months, I have visited 9 out of 10 of our business units and personally met around 90% of the group's employees. I've really enjoyed my time visiting our sites and talking to some of our very talented people. We've run innovation workshops attended by all levels of the organization, designed to generate new ideas for innovation, continuous improvement and excellence and to promote a culture of respect. I was delighted that these workshops attracted full attendance and the engagement and enthusiasm of my colleagues reinforced my view that the group is a wash with talented and engaged people. Over 500 ideas have been generated and are currently being reviewed and actioned. A broad range of opportunities have been identified to drive both revenue growth and operational improvements. As a reminder, our medium-term ambition is to double revenue and triple operating profit from our FY '24 baseline, and I am fully committed to delivering the plan. The graph demonstrates how this will be achieved by the compounding effect of delivering average organic revenue growth of 10% each year, expanding operating margins to 20% plus and investment in acquisitions, continuing our disciplined approach against well-defined acquisition criteria. When we articulated the plan in November 2024, we clearly didn't have visibility of some of the geopolitical and macroeconomic issues and challenges that the second half of FY '25 brought or the more recent developments in the Middle East. And we have always said the medium-term progression was unlikely to be delivered in a perfectly linear fashion. As expected, half 1 '26 had a softer trading performance due to the macroeconomic disruption we experienced in the second half of last year, with revenue down 16%. And we expect FY '26 to have a greater weighting towards the second half. Despite the decrease in revenue, we have maintained the group operating margin at 18.6%. And in M&A, our pipeline continues to progress. I will give further detail on each of the 3 elements in turn on the next slides. Our growth is supported by very long-term structural and regulatory growth drivers in 4 main areas: new vehicle models, new powertrains, consumer ratings and regulation. The first 2 relate to the wider automotive market and the third and fourth are linked to the rapid developments in safety technology for assisted and automated driving functions and the increasing regulation and certification requirements in this area. These long-term tailwinds support the growth of the group's end markets across each of its 3 sectors, but have also led to volatility in the wider automotive market that can impact the timing of specific customer procurement activity over a short-term period. At a macro level, in the wider automotive markets, we note a continuation of the regional trends noted previously, whereby traditional European OEMs are losing market share to new entrants and are under pressure to innovate in response. Overall, in 2025, the global automotive market recovered to near pre-COVID highs with growth driven by APAC, where the group has a strong market position. A divergence internationally in terms of the rate of EV adoption following changes implemented by the U.S. administration, which will mean EVs and ICE vehicles are likely to coexist for longer, driving increased platform churn and therefore, testing demand. Rising investment in Level 2 ADAS systems, which provide partial driving automation such as lane keeping assist with premium technologies filtering into more affordable cars. Our product lineup is well suited to continue to capitalize in this area of development and testing. While the development of autonomous vehicles has been well publicized, we do not expect full-scale adoption of AVs until well into the future. With that said, the products and services we offer are critical to AV development, be that in high fidelity simulation or physical track testing scenarios. Our business is resilient against short-term market disruption, and our market drivers support sustainable double-digit revenue growth in the medium term and beyond. We are OEM and powertrain agnostic with over 150 different customers globally, including conventional manufacturers and Chinese EV makers. We sell into R&D functions and the organizations independently conducting testing. We don't sell anything that goes into a production vehicle. Therefore, production volumes are not directly relevant to us. As OEMs seek to innovate and develop faster, more cost-efficient methods of developing new models, this will lead to faster adoption of simulation and further opportunities for our simulation capabilities. In summary, all of these market drivers and our high-quality long-term customer relationships provide resilience against the challenging near-term dynamics in the automotive industry. We have a number of organic growth opportunities. And on this slide, we have broken them down across each of our 3 segments to help illustrate how we expect to sustain increases in both volume and pricing going forward. The key takeaway is that across all segments and product or service offerings, we operate in growing end markets, which in the long term, we expect to drive incremental sales volumes. The timing of this is fluid across different geographies and OEM customers. But as technological advances in safety technology continue, the associated regulatory and certification environment is expected to follow, thus driving demand for our equipment. In addition to this overall market growth, there are further opportunities for growth in areas where the group can increase its market share. For example, in platforms and soft targets, where it competes with 2 other main competitors and has greater scope to win new customers. The group has a strong position in the market and a premium offering, which gives it strong pricing power and has enabled it to consistently increase prices above inflation in recent years. In areas where the group has strong niche positions such as robots and its simulation software, we will continue to maximize this opportunity. Finally, while replacement cycles underpin a level of steady-state revenue, our continued investment in new product development will help to stimulate demand and enhance growth prospects. While opportunities exist across each segment, there are particularly strong opportunities in robots and platforms as our equipment evolves to keep pace with ADAS technology and for driving simulators as we incorporate new customer requirements into new product launches. Operating margin expansion will be achieved through delivering operational gearing as we scale the business, simplifying the business and standardizing our processes and procedures. In our main manufacturing facility in the U.K., we delivered a net improvement of GBP 1.1 million in FY '25 with initiatives spanning supply chain efficiencies, planning and layout improvements and product rationalization. In half 1 '26, the full year effect of last year's initiatives delivered a further GBP 0.3 million. The innovation workshops I have conducted over the last few months will drive the next wave of incremental margin improvement opportunities, which we are working to monetize in FY '27. We have demonstrated a strong track record in delivering and implementing value-enhancing acquisitions, and this will continue to be an important area of focus for the group. Our pipeline includes a range of near-term opportunities and longer-term relationships. There are no changes to our well-defined strategic and financial criteria against which targets are screened. Importantly, we have the resources in place to execute transactions. The market is fragmented, consisting of a high number of small- to medium-sized businesses, which are filtered down into targeted approaches. These are usually off-market opportunities with vendors with whom we have built a relationship over a period of time, but are sometimes structured M&A transactions. We typically have several acquisition opportunities in various phases of the transaction process at any one time. During the year, we have refocused our pipeline of opportunities and continue to develop relationships with a number of targets. We continue to apply our highly disciplined and well-structured approach to deal execution, which led us to withdraw from a potential transaction in the period. In summary, we have a promising pipeline and sufficient resources to take advantage of opportunities that arise. To summarize half 1 performance and the outlook for the remainder of the year, Revenue and profit in half 1 were consistent with the previously guided second half bias for FY '26. Order intake in the first half of GBP 64 million shows that the market and customer activity are returning to more positive levels after a more subdued third quarter of FY '25. Despite the lower revenue, we maintained margin at 18.6% from a combination of operational improvements, cost mitigation actions and positive revenue mix. We have proposed a 10% increase in the dividend, reflecting the Board's confidence in the group's financial position and prospects. Our strong operating cash generation and cash conversion of 102% leaves us with GBP 40 million of cash, which supports further organic and inorganic investment. In terms of the outlook for FY '26, the group is OEM and powertrain agnostic and sells into automotive R&D functions, providing resilience against short-term industry headwinds. The group's geographic diversification and critical nature of its market-leading products and services have created a highly resilient platform that is well positioned to support customers navigating dynamic market conditions. We have good visibility into the second half of the year with an order book of GBP 47 million, of which GBP 29 million is for delivery in half 2, giving coverage of around 70% of expected revenue for the full year. We note the emerging situation in the Middle East. And whilst the group has no operating footprint in the region, we continue to monitor any potential impacts from broader risks to trade and cost inflation. The group has strong pricing power and a proven agile approach to managing the business through changing conditions. And so we remain confident in delivering on our key strategic and operational priorities. Whilst we are mindful of the current geopolitical uncertainty, absent an extended disruption, we expect adjusted operating profit for FY '26 to be in line with current expectations with an expected 55% to 60% revenue bias towards the second half of the year. Future growth prospects remain supported by long-term structural and regulatory growth drivers in active safety, autonomous systems and the automation of vehicle applications, underpinning our medium-term financial objectives. That concludes the presentation. Thank you for joining us. Unknown Executive: So question number one is, how are you maximizing the use of AI in the business? Sarah Matthews-DeMers: In a number of different ways in our products, mainly in our software for AB Elevate. This enables our customers to train and test AV and ADAS using AI, using customizable training data that can generate hundreds of scenarios testing sensors. In our product development, we're using AI for software code debugging and also reducing engineering lead times. And then in the back office of the business, we're using it for efficiencies in terms of customer support, prepare training materials frequently asked questions and meeting minutes, et cetera. One of the things we are looking at is risk of using AI and allowing our IP to leak out into the wider Internet. So we're being very careful about the tools that we're using and ensuring that they are ring-fenced and safeguarding our IP. Unknown Executive: Great. Thank you. Question number two, what is the current state of OEM R&D budgets? And have they been cut in response to end market weakness? Sarah Matthews-DeMers: Well obviously, OEM R&D budgets are immune to falls in production volumes. Actually, what we're seeing in the market is that in the current environment, OEMs can't afford to cut their R&D budget significantly because of the competition from new Chinese entrants that are bringing models to market more quickly and efficiently and the more traditional OEMs having to fight hard to keep up in Europe and the U.S. So we're not seeing that as a significant movement. Unknown Executive: Okay. And following on from that, next question is, do you work with Chinese OEMs? Sarah Matthews-DeMers: We do absolutely work with domestic Chinese OEMs. And we sell testing products and simulators into China. While we sell direct to some of the larger OEMs, there are around 400 start-up OEMs in China who don't have the facilities to do their own testing. So we're selling into the testing providers that they're using to be able to do that testing. Unknown Executive: Great. And then finally, perhaps this is one for you, Andrew. How significant is the growth opportunity from here? Where could this business be in 5 to 10 years' time? Andrew Lewis: Yes. I think we set out the medium-term growth ambition is to double revenue and triple operating profit over the medium term. And Sarah explained the 3 component parts of how we believe we can deliver that. And I guess the growth drivers are structural and long term. And so we see a compounding effect from there that could take that out over the next decade. Unknown Executive: Sure. Okay. Well, that's all we've got time for. I'll hand back to Sarah to finish off. Sarah Matthews-DeMers: Great. Thank you. Thanks for listening, everyone, and we look forward to speaking to you again in Autumn.
Operator: Good morning, and welcome to KeyCorp’s First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question during that time, simply press star 1 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to Brian Mauney, KeyCorp’s Director of Investor Relations. Please go ahead. Brian Mauney: Thank you, operator, and good morning, everyone. I would like to thank you for joining KeyCorp’s First Quarter 2026 Earnings Conference Call. I am here with Chris Gorman, our Chairman and Chief Executive Officer, Clark Khayat, our Chief Financial Officer, and Mohit Ramani, Chief Risk Officer. As usual, we will reference our earnings presentation slides which can be found in the Investor Relations section of the key.com website. In the back of the presentation, you will find our statement on forward-looking disclosures and certain financial measures including non-GAAP measures. This covers our earnings materials as well as remarks made on this morning’s call. Actual results may differ materially from forward-looking statements; those statements speak only as of today, 04/16/2026, and will not be updated. With that, I will turn it over to Chris. Chris Gorman: Thank you, Brian, and good morning, everyone. Our strong first quarter performance demonstrates disciplined execution and significant momentum as we continue to deliver on our commitments. We reported first quarter earnings of $0.44 per share, up 33% year over year. Return on tangible common equity exceeded 13% as we continue to make significant progress with respect to our goal of 15% plus return on tangible common equity by year-end 2027. Revenue grew 10% year over year with revenue growing more than two times the rate of expenses. Adjusted pre-provision net revenue grew an additional $29 million sequentially, marking the eighth consecutive quarter of adjusted PPNR growth. Net interest margin expanded five basis points sequentially to 2.87% as we remain on track to exceed 3% net interest margin by year end. Commercial loan growth was strong and broad-based across industries and geographies, increasing $3.3 billion or 4% sequentially on a period-end basis. We continued to be disciplined with respect to funding cost management. Total funding costs declined by 15 basis points during the quarter with interest-bearing deposit costs decreasing 22 basis points, resulting in a cumulative through-the-cycle down beta of 56%. Asset quality metrics remain strong, with a net charge-off ratio of just 38 basis points. In addition to improving our return on capital, we remain committed to substantial return of capital to our shareholders. During the quarter, we took advantage of the pullback in regional bank stock prices and repurchased nearly $400 million of common stock, well in excess of the $300 million plus commitment we made in January. We are also encouraged by the latest Basel III endgame proposal. Our preliminary estimate shows a 100 plus basis point benefit to our marked CET1 ratio under the revised standardized approach if implemented as currently proposed. This would imply a fully phased-in ratio of around 11%, higher than our peers, and higher than we believe we need to operate our business in the ordinary course. Our capital position gives us flexibility to continue to lean in aggressively this year and in the coming years to support our clients, to support our own organic growth, and to repurchase our shares. Subject to market conditions, we expect to buy back at least $1.3 billion of our shares in 2026, up from the $1.2 billion we previously communicated. While the macroeconomic environment has continued to be dynamic, we will remain laser focused on managing what we can control: the delivery of our differentiated capabilities, acceleration of new client acquisition, and exceptional service to all our clients. We continue to grow clients. Commercial clients were up 3% and relationship households were up 2% from the prior year, in the first quarter. We continue to gain share across our priority fee-based businesses—Wealth, investment banking, and commercial payments. In the first quarter, these businesses collectively grew by 12% when compared to the prior year. This past quarter, we raised nearly $47 billion of capital on behalf of our clients, retaining 19% on our balance sheet. Investment banking pipelines continue to remain elevated, up 5% from year end with M&A pipelines at record levels. While we do currently expect investment banking fees to decline in the second quarter compared to the record first quarter given current market conditions, we continue to feel very comfortable that we can grow investment banking fees in the mid-single digits for the full year. Commercial loan pipelines also remain very healthy, up nearly 20% from year end despite the strong pull-through in the first quarter. Our mass affluent wealth strategy continues to bring in new households. Net flows and client assets to KeyCorp reached 57 thousand households and $7.4 billion of total client assets as of March 31. With a mass affluent household opportunity of 1.15 million customers, we remain less than 10% penetrated, implying a significant runway going forward. We continue to hire frontline bankers. This past quarter, we hired a middle market banking team based in Atlanta, and a family office and private capital team based in Kansas City. We also hire talented investment bankers and wealth managers as our differentiated platforms continue to attract top bankers. We will continue to grow our banker ranks, including evaluating team hires and niche tuck-in nonbank transaction opportunities as they arise, in order to leverage our unique but currently underleveraged platforms. Lastly, we are investing approximately $1 billion in technology this year that will give us new product and service capabilities and deliver better outcomes and experiences for those we serve. As it pertains to AI, we are focused on a few thematic use cases that will enhance client experiences, accelerate credit decisioning, increase technology productivity, and strengthen risk and security monitoring. Given the strong start to the year, and the favorable dynamics we are seeing across loans and deposits, we have increased our full-year net interest income and loan guidance while reiterating each of our other financial commitments. While we enjoy strong momentum, we will remain vigilant as it pertains to a wide variety of potential macroeconomic outcomes. Our updated NII guidance assumes a wide range of interest rate scenarios. Additionally, we have added to our already elevated qualitative loan loss reserves this past quarter in order to account for a wider range of potential macroeconomic outcomes. As it pertains to private credit, we have provided additional disclosures this quarter. The summary here is we continue to be very comfortable with these books of business. Finally, the first quarter was a strong quarter, and our business enjoys a significant amount of momentum. Before turning it over to Clark, I am pleased to announce that Clark has assumed an expanded role to lead our technology and operations organization, in addition to his role as CFO. We look forward to the contributions he will bring to our technology and operations teams at a pivotal and exciting time as we leverage AI to grow our business and better serve our clients. With that, I would like to turn it over to Clark. Clark Khayat: Thanks, Chris. Starting on slide four, we reported first quarter earnings per share of $0.44. Revenue was up 10% year over year, while expenses increased by 4%. Taxable equivalent net interest income increased 11% year over year and was up 1% sequentially, despite impact from two fewer days in the quarter and seasonally lower deposits. Noninterest income increased 8% year over year as our priority fee businesses collectively grew by 12%. Loan loss provision of $106 million included 38 basis points of net charge-offs, a reserve build of $5 million. The net build reflected additional qualitative reserves to account for the macro uncertainty, offsetting improvement in Moody’s economic scenarios and credit migration trends. Tangible book value per share increased 10% year over year. Moving to the balance sheet on slide five, average loans were up $1.4 billion sequentially and increased $2.6 billion on a period-end basis. Average C&I loans and average CRE loans both grew by 3%, partly offset by the ongoing intentional runoff of low-yielding consumer loans. On a period-end basis, C&I loans grew by $3 billion or 5%. Growth was broad-based across industries and regions with both institutional and middle market clients. The largest industry contributors were within our financial services, and utilities, power, and renewables industry verticals. C&I line utilization increased 1% sequentially to 31.5% as loan growth outpaced commitments. Turning to slide six, with the attention that NDFI and private credit have been getting lately, we provided some additional disclosures with respect to our portfolio, and we want to share how we manage the businesses. First, a reminder that the NDFI nomenclature is a regulatory definition. As you know, these definitions have changed and continue to be refined, and we will continue to apply our best efforts to categorize these loans within the spirit of these definitions. In the quarter, we grew NDFI loans by $2.4 billion. A third of that growth is a result of the reclassification of existing loans—so that is not actual loan growth, but rather a refinement of what had previously been included in the category based on further examination of the regulatory guidance. The loans here are real estate non-owner-occupied. The additional growth of approximately $1.6 billion comes from three areas. About half of these are loans connected to real estate debt funds run by sophisticated sponsors with whom we have deep relationships, and where the underlying properties are geographically diversified. We expect to syndicate about 25% of these loans in the second quarter. Second, $400 million of this growth is fairly evenly split between insurance and other high-quality finance companies. And third, our specialty finance business loans grew about $400 million, primarily from AAA-rated CLOs. While we will, of course, continue to disclose NDFI under the regulatory rules, this is not the way we think about these loans. They are a reflection of four distinct businesses that are collectively 90% investment grade: institutional real estate lending, specialty finance lending, insurance and finance companies, and our unitranche funds. Each business is relationship-based and has its own set of credit concentration limits and risk parameters, with de minimis NPLs and much lower criticized loan rates than our other commercial loans. As it pertains to private credit, as the waterfall shows, we estimate approximately $10.9 billion of outstandings as of March 31, with roughly 70% through our specialty finance lending business, which are asset-backed loans made largely through bankruptcy-remote SPE vehicles. SFL loans are 98% investment grade, diversified by industry and geography, with thousands of underlying obligors. We typically underwrite to the counterparty and their underwriting policies and have a long list of collateral eligibility criteria that they must adhere to. First-loss cushions typically range from 30% to 50% and we are very disciplined when it comes to ongoing collateral and liquidity monitoring with structural protection if performance deteriorates. Through the first quarter, all of our facilities are performing as structured and required. In short, we think these are great businesses. They are relationship-based with excellent credit profiles, and require the focus and expertise that make them excellent examples of our targeted scale strategy. Turning to slide seven, average deposits decreased by 2% sequentially, reflecting typical seasonal patterns and the intentional runoff of $1.6 billion in higher-cost brokered CDs. We expect deposits to trough in early May and grow from there through year end. Reported average noninterest-bearing deposits decreased 5.5% sequentially, but remained stable at 24% of total deposits when adjusted for our hybrid accounts. Total deposit cost declined by 16 basis points to 1.65%. Our cumulative interest-bearing deposit beta increased to 56%. We continue to take proactive actions in repricing deposits through limiting our incremental funding needs by remixing loans from consumer to commercial, gathering low-cost commercial deposits—particularly in payments—while allowing certain rate-sensitive excess commercial deposits to leave, and by actively rotating maturing CDs into money market deposits and consumer. Overall interest-bearing funding costs decreased by 21 basis points, bringing our cumulative funding beta to 68%. Slide eight provides drivers of NII and NIM this quarter. Taxable equivalent NII was up 1% and net interest margin increased five basis points from the prior quarter to 2.87%. The increase was driven by remixing lower-yielding consumer loans into higher-yielding commercial loans, swap repricing, and proactive deposit beta management, which more than offset the impact of seasonally lower deposits and two fewer days in the quarter. Our balance sheet position continues to be fairly neutral to changes in interest rates as we move through 2026. We would see some modest benefit from reductions in the short end of the curve, as well as from increases in three- and five-year reinvestment. On slide nine, noninterest income increased 8% year over year. Investment banking and debt placement fees were $197 million, an increase of 13% year over year and a new first quarter record. Growth was driven by M&A, equity issuance activity, and commercial mortgage debt placement activity. Our pipelines remain elevated, and were up about 5% from year end. M&A pipelines were at record levels. Still, as Chris mentioned, given uncertain market conditions, we are planning for second quarter investment banking fees to be in the $175 million to $180 million range, with upside if geopolitical and other macro risks subside. We continue to feel very comfortable that investment banking fees will grow mid-single digits in 2026. Trust and investment services income also grew 13% year over year, reflecting positive net flows and higher market values. Assets under management remained stable at $70 billion. Service charges on deposit accounts and corporate service fees increased by 129% year over year, respectively. The increase in service charges was driven by growth in commercial payments, which grew fee-equivalent revenue at 11%, while corporate services income was driven by higher loan commitment fees and client FX activity. Commercial mortgage servicing fees were $62 million, down $14 million year over year, largely driven by lower deposit placement fees as well as resolutions in special servicing. At quarter end, we were named primary or special servicer in approximately $720 billion of CRE loans, of which about $265 billion is special servicing. Active special servicing third-party assets were $10 billion, about half in office. This is down from $12 billion a year ago as the commercial real estate industry continues to recover. We continue to expect commercial mortgage servicing fees to run about $50 million to $60 million per quarter for the remainder of the year. On slide 10, first quarter noninterest expenses of $1.2 billion improved 6% sequentially when excluding the prior quarter’s FDIC special assessment and increased 4% year over year. Compared to the year-ago quarter, the increase was driven by higher personnel expenses related to our frontline banker hiring, incentive compensation associated with the strong fee performance, and higher benefits costs. Sequentially, expenses declined due to lower incentive compensation, seasonally lower professional fees and marketing expenses, and fewer days in the quarter. Expenses are expected to increase through the balance of the year, reflecting our ongoing investments in people and technology, incentive compensation associated with expected continued revenue momentum, and other seasonal impacts. We continue to feel very comfortable with our full-year expense growth guide of 3% to 4%. Turning to the next slide, credit quality remains solid. Net charge-offs were $101 million, down 3% sequentially and were an annualized 38 basis points of average loans. Nonperforming assets increased by $65 million sequentially, back to third quarter 2025 levels, and remain below historical levels at 63 basis points. The increase was driven by two credits in utilities and multifamily real estate industries, respectively. We are confident we will resolve these credits in the coming quarters, and we are well reserved against them today. Lastly, criticized loans declined by $3 million sequentially. Moving to slide 12, our CET1 ratio was 11.4%, and our marked CET1 ratio was 10% at quarter end. Our preliminary assessment of the updated Basel III endgame proposal is that our risk-weighted assets would decline by approximately 9% under the revised standardized approach, resulting in a 100 basis point plus improvement to our marked CET1 ratio. RWA relief would come primarily from lower risk weight associated with off-balance sheet commercial loan commitments, residential mortgages, and corporate loans. As we wait for rules to be finalized, we will continue to manage our marked CET1 ratio in the 9.5% to 10% range under current RWA methodology. We expect to repurchase at least $300 million of our shares per quarter for the balance of the year, which implies at least $1.3 billion for the full year. We remain focused on supporting our clients and growing our business, and as Chris mentioned, delivering a return of capital and a return on capital for our shareholders. Moving to slide 13, we are positively revising our 2026 guidance given the strong start to the year. We now expect full-year net interest income growth of 9% to 10%, compared to our prior guide of 8% to 10%. We now also expect to exit the year with a net interest margin of approximately 3.05% on a stable earning asset base relative to the first quarter. This guidance holds under a fairly broad range of interest rate scenarios. As of today, our base case assumes no cuts this year. We also improved our loan guidance. Average loans are expected to increase 2% to 4%, compared to our previous guidance of 1% to 2%. And average commercial loans are now expected to grow 6% to 8% this year. All of our other guidance remains unchanged, although, as you would expect, we continue to monitor macro conditions closely. In summary, subject to the usual macro caveats, we are confident that we will deliver another year of outsized organic revenue and earnings growth for our shareholders. With that, I would like to now turn the call back to the operator to provide instructions for the Q&A session. Operator? Operator: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove your question or your question has been answered, please press star followed by two. If you are streaming today’s call and would like to ask a question, please dial in and enter star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly to allow questions to register. Our first question will go to the line of Erika Najarian with UBS. Erika, your line is open. Erika Najarian: Thank you, and good morning. The first one is for you, Chris. Given the strength that you showed this quarter on both lending and fees, maybe talk a little bit about client sentiment and how they are balancing sort of the geopolitical volatility with, you know, some of the, you know, positive on-the-ground, you know, big beautiful bill stimulus and, you know, everything else that is happening domestically. And, additionally, thank you so much for the NDFI in quotes breakdown. I am wondering what you are seeing in terms of, you know, sponsor activity, what you are seeing in terms of your private credit clients. And one of your peers, David Solomon, mentioned, in the private credit space, widening spreads. I am wondering if KeyCorp is seeing something similar. Chris Gorman: Well, sure. And good morning, Erika. Let me start, if I could, with the consumer because that is a little less complicated. The consumer is in great shape. If you look at all of our credit metrics, if you look at the fact that these tax refunds from the big beautiful bill will exceed what they did last year, you look at spending, spending is up kind of mid-single digits year over year. Online spending is up maybe double digits. The other thing that is interesting with our client base is the wealth effect. And I think this is something that has been underreported. So when we talk about mass affluent, we are talking about our customers with between $150 thousand and $2 million to invest. Eighteen months ago, we thought that universe was 1 million of our 3.5 million customers. We went back and redid it based on market activity. We now believe it to be 1.15 million, so up 15%. So on the consumer side, the consumer—our consumer—is in good shape. Now on the commercial side, there is obviously some puts and takes. You saw for the first time—and Clark detailed—our utilization went up, which is a good thing. We are starting to see people actually invest more in CapEx with some of the benefits from the big beautiful bill that you pointed out. And then, of course, the flip side of it is just the macro uncertainty. And so what we did see in the quarter is some people pulled some deals forward. So think about—you were going to go to the investment grade credit markets, and the activity started—you probably pulled that forward. Conversely, on M&A deals, what is happening is they are not going away. But people are kind of slow-playing it, doing a lot of due diligence because there is so much volatility kind of day to day, week to week. So we sort of saw both sides of that. Having said that, as we said earlier, our pipelines remain very, very strong. So I am very optimistic about where we are from our commercial businesses. But, obviously, it is not without impact from the near-term volatility. Second part of your question as it relates to NDFI is a very great question because this is kind of a developing area. And so we have seen a steady march down in terms of spreads for a long time because there has just been too much capacity in the market with respect to commercial loans. What we are seeing just as of late is a firming there. And part of the firming of that is that some of the private credit players—obviously in light of redemptions—are not in the market the way they have been. And I actually think as you look forward, there is a lot of discussion around private credit. I personally do not think there is a credit problem, but these redemptions are real. And if you have a bunch of redemption requests, the first thing you do is stop shoveling it out the front door. I think that will give the banks, in some instances, an opportunity to reintermediate some of those activities. That is my perspective. Anything else on that, Erika? Operator, we will take the next question. Operator: Yes, of course. Thank you, Erika. The next question will go to the line of Ken Usdin with Autonomous. Ken, your line is open. Ken Usdin: Thanks a lot. Appreciate it. I want to ask a question on deposits. I know the first quarter is seasonal. It had a decline in brokered CDs. Just wondering how you think that deposits will trend from here and if you think you are getting close to the bottom of that NIB mix, which I know was part of that seasonality in the first quarter. Clark Khayat: Yes. Ken, it is Clark. Thanks for the question. So you hit on, I think, the bigger drivers—broker deposits coming out at about $1.6 billion, seasonal decline. So first, I would say, as we did decline, we are actually slightly better in the first quarter than we would have planned, so I think just consistent with our expectations. On NIB, you did see that come down on a reported basis. I think if you put our hybrids in there, we are stable. So those continue to be a very good vehicle to work with commercial clients and maintain those high-quality operating deposits. And I think, as usual, we would expect to trough mid-May and then build up through the quarter. So I would say first quarter to second quarter average balances will be stable to maybe slightly up, but I would expect ending balances June 30 to be higher, and those to continue to rise through the course of the year. So we feel very good about the liquidity we have. If loan growth continues or picks up, we have low loan-to-deposit ratio on a relative basis. We have brought our market funds down, so we have a lot of third-party capacity if we need it. And then we have great access to client excess deposits and new operating deposits. So if we need to fund more loan growth, that is a high-class problem that we feel very confident about. Ken Usdin: Yep. And as a follow-up, on the cost side, you put in the slides about the cumulative down beta has been great at 56%. With rate cuts presumably on hold for a while, can you just talk about deposit competition—how much room do you have, if any, to continue to bring down deposit costs—and just, you know, the environment out there across the businesses for deposit taking? Clark Khayat: Yeah, sure. So, look, I think you hit it. With no cuts—and that is our base case—we would expect deposit pricing in general to sort of stabilize. Now, if loan growth really kicked in, some of the dynamics Chris talked about, if banks really step back in, we would expect some intensification of that deposit pricing. Right now, our view is that those will be fairly stable. Our deposit price will be fairly stable at this point. And as I just outlined, we will get back some balance on things like NIB and others. So I think we have some puts and takes. We will continue to drive down broker deposits through the first half. But if we needed more funding and we had to dip into that market to not hit more pricing across the book, we can do that. So I think we continue to have a lot of avenues at our disposal. I think if there were cuts, our deposit betas will probably drop a little bit in-year just given the timing component of that. Again, our base case is stable, and I think we can hold serve in the mid-50s as we move forward. But that is all premised on the loan growth we are guiding to. So if that came in stronger, we might see a little bit of a dip there, but I think we would make that trade-off as long as it is good-quality relationship growth. Ken Usdin: Okay. Thanks, Clark. Operator: Thank you. Sure. Thank you, Ken. Our next question will go to the line of Analyst with Evercore ISI. John, your line is open. Analyst: Good morning. Chris Gorman: Good morning, John. I guess just similarly on the competitive front on the lending side, I mean, one or two of your peers have cited a bit more aggressiveness out there on the lending front, particularly on structure. For the most part, also to a degree on pricing. Are you seeing this showing up in your markets and maybe if you can talk about how it has influenced loan spreads that you are seeing as you are pricing new originations? Chris Gorman: Yeah, John. So the phenomenon you are talking about has been a prevailing phenomenon for some time. What I was describing in my answer to Erika is sort of real-time some adjustment that we are seeing. But there is no question there has been excess capacity for some time, and I have talked about this at length—that a properly graded commercial loan cannot return its cost of capital. And there has been just a constant pressure on spreads and on structure. I think we may be—and I emphasize the word may—be at an inflection point on that trend. Mohit Ramani: And just from a risk management perspective, we have not adjusted any of our credit boxes or underwriting standards. We are still maintaining, again, the same standards that we have always had. Chris Gorman: Yeah. Moe, I think that is a good point. I mean, we never give unstructured. Obviously, it is a market out there and we price where we need to price. The advantage we have, John, is we can do a lot of other things for these clients—whether it is payments, whether it is strategic advice, hedging, etcetera. That is how we run our business. And, frankly, if the capital markets have a better deal, we will place it, as we did 80% of the time this last quarter. Analyst: Got it. Okay. Very helpful. Thank you. And then you gave some pretty good color here on the capital front in terms of buyback expectations. I guess, if you could just remind us of your allocation priorities there, and if anything could impact that pace of buyback? How do you think about any potential inorganic opportunities? Chris Gorman: So, I mean, obviously, what could impact it more than anything is if we had a severe macroeconomic downturn and started having credit losses. We do not see that. We feel really good about our credit book. Our capital priorities remain unchanged. It is first to support the growth of our clients, which we were pleased to see that we got in this last quarter. The next thing is to invest in our business. And when we talk about investing in our business, it is really people and it is technology. So we will continue to invest heavily in our business. We also, as I mentioned in my remarks, will continue to hire a lot of individual bankers. We will hire groups of bankers. And, opportunistically, we would look at small acquisitions of kind of boutique type operations, which are really just an extension of hiring a group of people. The next priority, of course, is to pay our dividend, which we do not talk about a lot, but it is $0.205 per share, which is not inconsequential as you look at the yield. And then, lastly, repurchase our shares. And we said earlier in our comments, John, we plan to repurchase $1.3 billion worth of stock in the year. Operator: Thank you, John. The next question will go to the line of Ryan Nash with Goldman Sachs. Ryan, your line is open. Ryan Nash: Hey, good morning, everyone. Chris Gorman: Hey, good morning, Ryan. Ryan Nash: So, Chris, if I look at the high end of the loan growth guidance, you know, it does not imply that much growth from the 1Q end-of-period levels. Now, I know you mentioned some moving pieces in one of your other answers, some syndications that could be coming in 2Q. But curious on the drivers of loan growth from here—what will drive the slowdown and can there be some upside from current expectations? Thank you. Chris Gorman: Well, thanks for the question. I will start with—I guess, the premise of your question is the loan guide is conservative. And that if we did not book a whole bunch more loans, we will basically grow at 6% for the year. And I would say there probably is some appropriate conservatism in the number, given the macro uncertainty out there. But let me give you the pieces and parts. Utilization, actually, for the first time in a long time, spiked up. I would not necessarily imagine that that will continue to spike up. We waited a long time for it to start moving. We do have broad-based growth across all geographies and industries, which should play forward. I mentioned in my remarks that we have a 20% increase in our backlog—obviously, would expect some of that to, in fact, pull through. Utilities and power continue to be an area of huge opportunity when you think about both renewables and the massive build-out that is required for GenAI. There are two other areas where we are starting to see some traction. One is health care—we are starting to see consolidation; it is necessary, by the way, in the health care industry. And then lastly, for the first time in a long time, we are starting to see this backlog of commercial real estate transactional activity. We have been refinancing a lot of commercial real estate, but what we are starting to see is people are starting to trade as the bid and the ask comes in and everybody sort of gets comfortable that we are going to be in this kind of an interest rate range for a while. So that is kind of the puts. Oh, and then also, I just would remind you we are going to continue to run off $500 million to $600 million of commercial residential mortgages per quarter. So that is kind of the puts and takes, Ryan. Ryan Nash: Gotcha. No, that is super helpful, Chris. And maybe as a follow-up to something that was talked about before—you know, within the investment banking business, if I look at the mid-single digit guide, it implies low single digit growth for the remainder of the year. And I feel like coming into the year, you were upbeat on the potential return of M&A to drive outsize, as historically it has been a bigger part of your business. So it sounds like from your comments earlier that M&A has not been as robust as you would have expected. But are there other parts of the business that are trailing? And what will we need to see for some of those parts of the business to begin to outperform expectations? Thank you. Chris Gorman: Sure. So with respect to M&A, what is interesting about M&A, Ryan, is there have been a lot of headline numbers. And as you well know, the G-SIBs have reported some incredible numbers with respect to advisory. I think deal volumes in total are up, like, 46%. Transaction volumes, however, are down 26%. And so we put all that together and we are still waiting for this huge surge of middle market M&A activity to come through. And so that is something that we are keeping a close eye on. Those transactions are binary. What we are guiding to right now is 5% to 6% growth year over year. So we did about $780 million last year. So the middle of the range, that would be something like $825 million off of a record year last year. So I feel really good about the business. But, admittedly, while we have record backlogs, we are not seeing as much come out of the pipeline right now as we would hope. I think when some of the geopolitical things are resolved, it will be a little better environment for that. Thanks for your question, Ryan. Operator: Thank you, Ryan. Our next question will go to the line of Scott Siefers with Piper Sandler. Scott, your line is open. Scott Siefers: Good morning, guys. Thanks for taking the question. Wanted to return for a moment to the capital discussion. You know, it seems like there really should be good capital management runway for a while, especially if you elect to put to work some of the additional excess you would have should the Fed’s NPR pass as proposed. I guess I am curious to hear how you would decide when and how aggressively to deploy that additional excess if those proposals in particular do advance. And, you know, what other considerations are there, whether it is rating agencies, investor expectations, etcetera, just as you think about the appropriate capital levels to sort of land on? Clark Khayat: Hey, Scott. Thanks for the question. So, one, we guided on the fourth quarter call that we would try to get to 10% marked by the end of the year. We actually arrived there a few quarters early in this quarter, so we feel very comfortable there, and would feel comfortable over the course of the year dipping into that 9.5% to 10%. And that is under the current regime. So, again, no issues there. To the extent the NPR passes as proposed, we expect, as we said, 100 plus basis points of additional marked capital there. So I think that gives us more room to continue to both invest in growing client activities but also to continue our share repurchase. So on the one hand, I know we are guiding to $1.3 billion for the year. Short of some more extreme situations, I would expect that to be more like the floor for buybacks for the year. I do not know how much more we will go over that. We will play that by ear. But we certainly believe over time, as you know, we have more capacity to lean into capital return. The other point that I would just make is I do not think anybody should expect one big swing at this. I think you should expect from us thoughtful, orderly, kind of methodical capital management over time where we are sharing as much visibility as we have given conditions and kind of marching down to that range over some meaningful and manageable period of time. But we are not going to do anything dramatic in any quarter or two. Scott Siefers: Gotcha. Okay. Perfect. Thank you. And then maybe switching gears for just a second. You know, appreciate the refresh and the color you guys have given on the full-year investment banking expectations. Clark, was hoping maybe you could kind of provide some thoughts on how you see some of the other key areas—whether it is wealth, payments, some of those other focus areas—projecting through the year. Clark Khayat: Sure. So, one, as Chris noted, we continue to get gains in our wealth business. So, to the extent the market cooperates, we would expect to see investment management fees continue to grow, and I think that is a mid- to high-single digit number for the year. That is tracking pretty well even despite a little bit of volatility in the first quarter. Our payments business, particularly on a fee-equivalent revenue—which, as you know, Scott, is the gross fees—continues to be very strong. If you unpack, for example, what happened in the quarter on deposit service charges, those numbers would have been mid-teens year over year. So we continue to get really good activity from our payments team, either selling additional services into existing clients or anchoring with new clients as they come in. No reason to think that that is going to stop. We continue to add new capabilities in payments, whether it is in our portal, our information reporting, or things like embedded banking. I think all of those are on very good trajectories, and we would continue to expect to see those grow—so that is again on a gross number, kind of low double digits; on a net number, high single digits. Then corporate services, which is really FX and derivatives and other hedging—the oil volatility has created some tailwinds there. If that settles in, derivatives tends to follow with loan growth, so that has been very positive. And we have seen some good traction in FX as well. So I think all of those categories continue to look up and have been consistently strong. The one place that we called out in the fourth quarter call—and will continue to be year-over-year down, but that is not a reflection of the quality of the business—is our commercial real estate servicing business. And, again, that is a function of advance rates coming down, clients paying us with deposits versus fees, and some recovery in the industry that causes special servicing and other resolutions to likely be down year over year. So, again, nothing negative to say about that business. That is just the market trends that are affecting it right now. In summary, expenses and fees, we expect to be relatively close. We would like to be a little bit better on fees, but we are really looking at reported fees to be, again, pretty consistent with expense growth over the course of the year, and then adjusted fees being in that mid-single digit range and priority fee businesses high single digit. Scott Siefers: Excellent. Alright. Good. Thank you very much. Operator: Thank you, Scott. Our next question will go to the line of Mike Mayo with Wells Fargo. Mike, your line is open. Mike Mayo: Chris, you have already answered part of the question about your investment banking and debt placement business. And I know you have built that business—big organic grower. But when you said you are looking for mid-single digit growth this year, like, that is, like, not so exciting, right? Like, waiting this long for cap market to come back, and I know it has been skewed towards the large mergers, and you say it is not really back yet, and so I guess that mid-single digit guide—is that just, like, what it is? Or is that what it is given your thoughts that activity will be delayed maybe until next year? Thank you. Chris Gorman: Well, first of all, good morning, Mike. That is what it is based on where we are right now in the market. I do take a lot of comfort in that our first quarter was a record. It was a record after last first quarter was a record. Last year was our second best. Our pipelines are at record levels. If we could get some stability out there in terms of rates and in terms of people’s perspective going forward, I think there is a huge opportunity here. But right now, as we look at it, what we are comfortable with is guiding 5% to 6%, understanding that the business has a lot of momentum. Mike Mayo: What do you think the difference is for the very large mergers and what we heard from the biggest banks is that dereg and pent-up demand and still very high stock prices and liquidity—that is all transcending the conflict. And you are seeing these pipelines get replenished and all that. With more of your middle market companies where the activity is still subdued? Chris Gorman: Yeah. So I think it is a couple things. One, those are transactions that obviously require a lot of approval, and there is no question that regulatory approval has improved geometrically. So that is the first thing. Second thing is many of those deals are stock-for-stock or a huge component of stock and, therefore, do not require nearly as much financing. And then the third thing is, typically, I have always noticed as you come out of a rut—and we have been in a rut in M&A—the first deals to start coming out are really large high-quality deals, and I think that is what you have seen. And I think it will matriculate to the entire market. Clark Khayat: Hey, Mike. One other element we are seeing more consistently also on the middle market end, which is heavily sponsor-backed: we are seeing more continuation vehicles as an option versus outright sales. And those obviously do not always translate to the same level of activity. Mike Mayo: That all makes sense. Would you say that some of the same factors, though, that could drive more loan demand due to CapEx could also drive merger? In other words, to the extent that middle market CEOs become more comfortable, then they are more likely to spend for CapEx and maybe, therefore, they are more likely to do mergers. So what is the demand for CapEx-driven financing? Chris Gorman: I do not think there is any question. I think as people get comfortable with the forward view and get comfortable with where they think rates are going to be, I think that will be an impetus to transact. And I think having gone through a bunch of market disruptions, once people see that sort of the coast is clear, I think there are probably a lot of people that are gearing up to go, and we have many in our backlog. Mike Mayo: Alright. Thank you. Operator: Thank you, Mike. Our next question will go to the line of Manan Gosalia with Morgan Stanley. Manan, your line is open. Manan Gosalia: Hey, good morning. So Chris, Clark, since you gave the ROTCE guide, NII and loan growth are trending better. You noted 100 basis points or so of benefit from 15% or so exit route, say, for 2027? Chris Gorman: Well, clearly, I think as the rules get finalized, we will have greater flexibility. We mentioned to the tune of—if you just look at the standardized approach—100 basis points or so. So we will have more to say about that after we have final rules come out and we make final decisions with respect to standardized approach or ERBA. Manan Gosalia: Got it. Okay. Great. And then you noted that, I guess, the balance sheet should stay fairly flat in 2026, which would mean that the LDR moves a little bit higher. How should we think about that going into 2027? Is there still more room to take the LDR up and, as we think about deposits and maybe some of the higher-cost deposits, at what point does it make sense from a relationship perspective and a franchise perspective to keep and pay up for them rather than let them leave? Clark Khayat: Yeah. Hey, Manan, it is Clark. So I think you hit that right. I mean, on a general basis, that last point is probably the most important here, which is—as we have talked about before, I will just talk to commercial for the benefit of this answer—80% of those deposits are operating accounts and 95%–96% of the deposits come from clients with operating deposits. Meaning, these are strong relationships. We know where the dollars are. And we are making often name-by-name decisions month by month about where the bid is on those excess deposits and whether we want to fund with those or not. So in the first quarter, we let some of those go. We did that last year in the first half and then brought them back in the second half. I would not be surprised if that happened again this year. And as we go forward, past 2026, and we start to see some balance sheet growth, we will have the opportunity to make those calls as we do today. And my guess is if we are starting to grow the balance sheet, we will look to fund with client deposits wherever we can as long as it makes sense on the margin. The nice thing about those commercial deposits is they are, at some level, individual decisions, and we are not sort of repricing the whole book across the board. This is why—as I mentioned with the hybrid accounts earlier—we have gotten real benefit out of that because we get advantageous rates there and we get deeper client relationships as we provide them with more and more payment services. Chris Gorman: And just to add to that, Manan, we would not let these excess deposits go if we thought it put our relationship at risk. These are excess deposits with people that are very good customers of ours. As Clark said, 81% of our commercial deposits are core operating. This goes back to our focus on primacy going back a decade. So we really have the flexibility to move those in and out as we need to. Clark Khayat: And I would say there is one last point just worth making because we talked about, in commercial mortgage servicing, some clients paying us with their deposits instead of hard fees. So we took deposits back on balance sheet in the first quarter. We also then, just to manage the deposit base, took some deposits off balance sheet, and those can be brought back if we needed additional funding. So we have a fair bit of levers to fund as it grows, and we are not sitting here overly concerned, to Chris’s point, about the marginal dollar funding if a quality loan is available. Manan Gosalia: Got it. Thank you. Operator: Thank you, Manan. Next question will go to the line of Ebrahim Poonawala with Bank of America. Ebrahim, your line is open. Ebrahim Poonawala: Thank you. Good morning. I guess just two sort of macro level questions, but, Chris, you should have a great perspective on this. When we think about the AI data center loans that are being made right now, is it your understanding that most of that is being distributed in the capital markets, or when we think about loan growth at the banks, is some of that being syndicated to banks and it is coming on bank balance sheets? And who knows how to think about AI two years from now and these investments? But is there risk tied to this data center spending that is being put on bank balance sheets at KeyCorp, and just broadly, across the industry? Chris Gorman: So it is a great question. The answer is the funding for these data center buildouts are in the capital markets and also at some of the banks. And, you know, we have been in the power business for a long time. And as a consequence, I think we do it pretty well. There are all kinds of nuances in these deals. Who pays for the cost overruns, for example, etcetera, etcetera. Who has the right to do what under a bunch of circumstances. We feel very good about the loans that we have. But these loans are both in the capital markets and in the banking system. Clark Khayat: Yeah, and, Chris, I just might add that our data center exposure is fairly de minimis. We have also looked at what we have called AI-adjacent type exposure and worked with our board on that as well. And, again, very, very well controlled and monitored. We are really not chasing a lot—again, these larger projects or hyperscalers. And so, again, it is very well managed. Ebrahim Poonawala: Got it. And just one quick follow-up, Chris. I think you talked about this. When we think about investment cycles are far longer than political cycles, are you actually seeing some element of manufacturing reshoring showing up in your footprint or across your businesses leading to longer-term domestic CapEx, which creates loan growth opportunities, not just this year, but thinking about the next two to five years? Chris Gorman: So we are starting to see that. I could give you some specific examples of people that are—and typically, it plays out like this: it is people expanding existing facilities in lieu of having contract manufacturers that are overseas. The other thing that we are seeing is people relocating from the Far East to Mexico and really shortening their supply lines and taking control that way. So we are starting to see it, but I would not say it is the biggest driver at all of, say, loan growth. It is very early days on that front. Ebrahim Poonawala: Got it. Thank you. Chris Gorman: Thank you. Operator: Thank you, Ebrahim. Our next question will go to the line of David Giaverini with Jefferies. David, your line is open. David Giaverini: Hi. Thanks for taking the question. I wanted to ask about credit quality. You mentioned the NPL increase was driven by two credits in utilities and multifamily. Are you able to point to any emerging trends by sector or geography that you are watching more closely? Chris Gorman: Well, we are always looking at certain sectors. As it relates to those two, when you have it kind of bumping along the bottom, there will always be one deal or two. Neither of those do we look at as systemic in any way. You know, we are watching a few areas as we always are—things like agriculture, things like transportation. But there is nothing—each of those are idiosyncratic in their nature. Clark Khayat: And, again, just a reminder, that slight uptick was not private-credit related. But, again, just—again, to Chris’s point—just idiosyncratic. David Giaverini: Thanks for that. And then shifting over to when thinking about expenses—and you mentioned the hiring of frontline bankers. Curious, is there more to come there? And how is pipeline looking? Chris Gorman: So last year, we talked a lot about the fact that we grew our sales forces by 10% collectively in our investment banking, in our wealth business, and our payments business. We continue to hire people in all of those businesses. Those are our targeted fee businesses where you will see in our report out today, we grew about 12% in the aggregate. We track all of this very, very closely. And we are pleased with the trajectory of the people we have been able to hire. And as a consequence, we will continue to do that. David Giaverini: Very helpful. Thank you. Chris Gorman: Thank you. Operator: Thank you, David. Our next question will go to the line of Gerard Cassidy with RBC. Gerard, your line is open. Gerard Cassidy: Hi, Chris. Chris Gorman: Hey, Gerard. Good morning. Gerard Cassidy: Chris, can we circle back to—you pointed out about the emerging affluent, how it grew 15%. I think you said to 1.15 million out of a total customer base of 3.5 million. How can you guys embrace AI to penetrate that client base and make it even more profitable because you are using AI? Chris Gorman: That is a great question, and it is very timely because I spoke to our big producers in this business as recently as Tuesday morning at their sales conference. I think there is a huge opportunity to use AI. We are already investing heavily in our wealth platforms. And I think as you think about serving that many customers, there is huge opportunity for AI. We will have more to say on that in the future, but that is a perfect application. Many of these customers are rather homogeneous in their needs. And I think we are armed with perfect information because it is all running through the bank. And I think harvesting more detailed information so we can do a better job of serving these customers that already know and trust KeyCorp and have their money on some other platform where, as you can imagine, they are not getting incredible service—just because it used to be that if you had $5 million, you got incredible service everywhere. Now, as you know, the number is a lot higher. And so this is a huge opportunity for us. Gerard Cassidy: And then to put Clark on the spot, but following up with this AI, do you think we will ever get to the point where outsiders like folks on this call could actually measure, you know, for your dollar of spending in AI, it actually incrementally led to a 50 basis point of ROTCE improvement? Will it get to that kind of metric some point in the future? Clark Khayat: Well, we would have to get to that first, and then share it because, as you know, Gerard, these are pretty hard to measure. I would say where we—and I think others—are seeing benefits is in efficiency and capacity, but it is really showing up more in avoidance of future investments. And so that is hard for me to come and say, “Hey, Gerard. I did not spend these dollars I may have otherwise spent.” The way I think we really need to demonstrate that is to scale some of these platforms, which has been a theme of Chris’s now for—I do not know—as long as I have known him. If we can do that, then you start to see the scale of the platform and the benefit of that cost avoidance in a real way. Then we can come back and say, we spent these dollars, we created these improved processes, and they drove this level of margin expansion. Gerard Cassidy: Great. And then just as the follow-up question, Chris, obviously, KeyCorp is well positioned as a commercial lender, and it looks like commercial lending for the industry and for you specifically is picking up. You obviously have your industry verticals that are national—that drives this commercial product—along with, as you point out, it is not just a loan, but it is multiple products. Outside of those seven verticals, is there much opportunity for commercial lending in, you know, the Pacific Northwest or the Midwest or New England? How do you look at that kind of commercial lending, or do you really not do it and it is just in those seven verticals? Chris Gorman: No, we do both. Our seven verticals give us what we think is a unique competitive advantage because our middle market bankers—who are also our payments representatives—call with our investment bankers, and that is something that others cannot do. So in those seven verticals, we have a huge advantage. But we also are out there looking for great payments and commercial banking customers just like everybody else. And, yes, there are significant opportunities outside of our seven industry verticals. And we compete effectively there as well. Clark Khayat: And, Gerard, just as a reminder, over the last couple of quarters, we have seen not just great industry vertical growth, but we have seen very consistent broad-based geographic middle market growth. So it has been a combination of both. We have been adding bankers in verticals and markets. And, as we have talked about before—whether it is Chicago, Southern California, recently Atlanta, or this family office business—we are adding bankers in new geographies with new capabilities in the middle market because we see exactly what you are referencing, which is really good opportunity to grow in specific geographies. Chris Gorman: And our uniqueness is not limited to just the investment banking area. In our payments area—which Clark at one point ran, by the way, and now Ken Gavrity runs both our commercial business and our payments business—we feel like we have a competitive advantage there as well, Gerard. Gerard Cassidy: And speaking of payments, and here is a layup maybe for Clark since you used to run payments. We all know about the risk in credit, and you guys have been very clear how you manage your credit risk, and it is quite good. What is the risk in payments? And as you grow new commercial customers, is it an increasing fraud risk we have to watch out for? I mean, which is totally out of the risk questions that we normally ask. But what do you guys think about that part of the equation—that as payments, and not just for you folks, because every commercial bank seems to be telling us the whole relationship includes a payment part of it—do we have a risk here that none of us are really focusing in on yet? Clark Khayat: Yeah. I mean, there is a little bit of credit risk in things like ACH and merchant, but those are very manageable and I think well understood. To your point, I think you see probably two versions of risk. The biggest pull is going to be operational. This is a technology business. So whether it is fraud or security—and often the easiest doors in are through clients who are not necessarily educated enough to manage the risk—so we do a lot of proactive client outreach on how to better secure their own platforms. But, you know, it is clearly a technology and software business, and that is why you need to be very dialed in on that level of risk. And then the other one is just reputation. Right? You are getting into clients. You are offering services. I used to joke, but I think it is true, that when we make a loan to a client, they sign the paperwork, they get the money, we talk to them in a couple weeks or months. When you sign a payments contract with the client, the work begins because you pop open the hood and you start rewiring the enterprise. So that comes with a lot of potential client friction. You have to manage that onboarding and servicing relationship very carefully and very thoughtfully. And it is a bit of an offensive lineman game where they expect things to work and when they do not is when you hear from them. So there is a lot of very important proactive communication and management of that process. And so I really think about it in the obvious operational risk you raise, which we spend an enormous amount of time thinking about and managing, and then the reputational piece because, as we say at KeyCorp, our payments business is about helping clients run their business better every day—because they use it every day—which means there is an opportunity for something to go wrong every day, and we have to manage that. Gerard Cassidy: Thank you. Very insightful, Clark, and good luck with the new responsibilities. Clark Khayat: Thanks. Operator: Thank you, Gerard. Our last question will go to the line of Analyst with KBW. Christopher, your line is open. Analyst: Hey. Good morning. This is Chris O’Connell filling in for Chris. Oh, okay. I just wanted to circle back to the margin discussion. And just given the overall shift in the rate environment this past quarter towards higher-for-longer environment, what impact do you think that might have on the margin improvement story? Clark Khayat: Yeah. So as we noted, our base case would be no cuts. So that is incorporated in this, and we did improve the margin guidance a bit. So what I would say—maybe alternatively—is we feel very good about managing to that guidance under a variety of circumstances. We would likely feel a little stress if there were hikes. And we have got some upside potentially if there were cuts—assuming those cuts, as we would expect at least at this point, with a little bit of steepening of the curve. So, right now, the reflected slight improvement in that margin guidance incorporates a flat, no-cut scenario. So hopefully that is responsive to your question there. Analyst: Okay. Great. And then, you know, you guys provided a ton of color on private credit and the specifics—both in the discussion, the deck, and overall credit quality relatively stable for the quarter. But just wondering if you could kind of stack rank or update us on, you know, your wall of worry on maybe more hot-button credit pockets. And then where private credit—either as a whole or within the parts that you disclosed and discussed—falls within that stack ranking. You know, I guess, in particular, with context of your view versus the overall markets. Chris Gorman: Sure. So I would be happy to address that, Chris. So I would not put private credit in my basket of things that we are really focused on right now. A few areas that we spend time thinking about: first is the oil and gas producers. Depending on how they are hedged, they actually could be making more money in this environment—particularly if they are unhedged. We have a couple billion dollars of exposure there. We have another $2.5 billion or so exposure in transportation. And to the extent people do not have escalators with their customers, obviously, costs are a significant issue. There is no issue yet with respect to consumer discretionary. But if we remain in an inflationary environment and people are spending a lot more for gas, the theory is that they will have less money to spend on discretionary consumer, which I agree. On the other side of it, we have seen some interesting recovery in that we had been worried a bit about health care. Health care is firming up nicely, so we feel good about that. We also were really focused on some materials and construction products—those areas have also firmed up nicely. So that is kind of where we are worried—where we look. Anytime I focus on areas of concern, it is where there is leverage, and we frankly have very little. If you look at our leverage book, it is about $2 billion, and it has been $2 billion for as long as I can remember. So I am not too worried about that. So that is kind of the around-the-horn on our portfolios. Analyst: Perfect. Appreciate all the color. Thank you for taking my questions. Chris Gorman: Happy to do so. Operator: Thank you, Christopher. With no additional questions waiting in queue, I would now like to pass the conference over to our CEO, Chris Gorman, for any closing remarks. Chris Gorman: Well, thank you, Megan, and thank you all for joining our call today. We appreciate your continued interest in KeyCorp. If you have additional questions, please do not hesitate to reach out directly to Brian or others on the Investor Relations team. Thank you, and have a great day. Operator: This concludes today’s call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Hays plc Trading Update for the quarter ending 31st of March 2026 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, Kean Marden, Head of Investor Relations and M&A. Please go ahead. Kean Marden: Good morning, everyone, and thank you for joining us on a busy reporting day for the sector. I'm Kean Marden, Head of Investor Relations, and I'm joined here today by James Hilton, Chief Financial Officer, to present Hays' Q3 '26 results. Before we begin, please be aware that this call is being recorded, and the replay is accessible using the number and code provided in the release. Please be aware that our discussions may contain forward-looking statements that are based on current expectations or beliefs as well as assumptions on future events. There are risk factors which could cause actual results to differ materially from those expressed in or implied by such statements. Hays disclaims any intention or obligation to revise or update any forward-looking statements that have been made during this call regardless of whether these statements are affected by new information, future events or otherwise. I'll now hand you over to James. James Hilton: Thank you, Kean. Good morning, everyone, and thanks for joining us today. I'll present the key points and regional details of today's trading update before taking questions. As usual, all net fee growth percentages are on a like-for-like basis versus prior year unless stated otherwise, and consequently exclude our previously communicated exits from operations in Chile, Colombia, Thailand and Mexico. Group net fees decreased by 8% with Temp & Contracting down 6% and Perm down 12%. I'm pleased to confirm that strong consultant net fee productivity growth and cost discipline continues to offset lower net fees. Although near-term market conditions are likely to remain challenging, and we remain mindful of heightened global economic -- macroeconomic uncertainty, we currently expect FY '26 pre-exceptional operating profit will be in line with consensus. I would like to highlight the following key items from the results. Temp & Contracting net fees decreased by 6% as we saw a modestly stronger return to work in the U.K. and Ireland and ANZ and the year-on-year decline in volumes and average hours worked in Germany was in line with our expectations during the quarter. Group Temp & Contracting volumes decreased by 5% year-on-year, including Germany, down 9%, UK&I down 8%, ANZ down 6%, and Rest of the World up 2%. Perm net fees decreased by 12%, driven by a 15% decline in volumes as conversion of activity in UK&I and ANZ reduced modestly versus Q2. This was partially offset by a 3% increase in the group average Perm fee supported by our actions to target higher salary roles. We continue to manage our consultant capacity on a business line basis. And despite challenging markets, our actions delivered 7% year-on-year growth in average consultant net fee productivity in Q3, including notable increases in the UK&I and our Rest of the World businesses. On a seasonally adjusted basis, productivity has now increased for a sector-leading 10 consecutive quarters. Consultant headcount reduced by 3% in the quarter and by 14% versus prior year. We've continued to make strong progress towards our structural cost saving program with a further GBP 15 million per annum savings delivered in Q3. We've now achieved GBP 30 million annualized savings in FY '26, making excellent progress towards our target of GBP 45 million by FY '29. In total, we've now delivered GBP 95 million annualized cumulative structural savings since the start of FY '24. Our non-consultant headcount exited the quarter down 7% year-on-year. And the group's net debt position was circa GBP 15 million, which is in line with our expectations and reflects normal seasonal cash flows. I will now comment on the performance by each division in more detail. Our largest market of Germany saw fees down 11% year-on-year. Temp & Contracting fees decreased by 11% with volumes down 9% and a further 2% impact from negative hours and mix. Temp & Contracting volumes remained solid overall with return to work in line with prior year and the year-on-year decline in average hours were during the quarter predominantly in our public sector and enterprise clients was in line with our expectations. These sectors hired in anticipation of fiscal stimulus, hence, our placement volumes have remained resilient, but hours work remained softer in the quarter after federal budget approval was delayed. Perm was sequentially stable through the quarter and the year-on-year decline in net fees eased to 10%. At the specialism level, Technology and Engineering, our 2 largest specialisms, were flat year-on-year and down 27%, respectively, the latter impacted by ongoing subdued performance of the automotive sector. Accounting & Finance was down 22%, but Construction & Property performed strongly once again with 37% net fee growth, driven by our focus on infrastructure and the energy sector, and it now contributes 9% of our net fees in Germany. Consultant headcount decreased by 6% in the quarter and by 15% year-on-year. Net fee productivity increased by 5%, driven by our ongoing focus on resource allocation, and we made strong progress with our structural cost-saving initiatives. In U.K. and Ireland, fees decreased by 10% with a modestly stronger return to work in Temp & Contracting down 6%, but Perm remained subdued and was down 15%. Fees in the private sector declined by 8%, while the public sector was tougher, down 13%. At the specialism level, Technology was flat versus prior year, while Construction & Property and Accountancy & Finance decreased by 8% and 6%, respectively. Enterprise fees declined by 4%, while office support was flat as our actions just to target higher salary roles offset lower volumes in our junior roles. Consultant headcount decreased by 4% in the quarter and 16% year-on-year. Consultant net fee productivity increased by 11%, and we made further good progress in improving operational efficiency. Once again, a key driver has been our greater focus from our consultants on high skilled roles, consistent with our Five Levers strategy. As a result, year-on-year growth in average candidate salary remained at 8% for Perm in Q3 and accelerated to 9% in Temp & Contracting. As expected, our sustained focus on cost discipline, including ongoing initiatives to optimize our office portfolio and delayer management has driven a further structural improvement in costs. We've made good progress towards building a higher quality focused business and consequently anticipate improved profitability in the second half. In ANZ, fees decreased by 2% year-on-year with modestly improved momentum in Temp & Contracting, but Perm was more subdued. Temp & Contracting decreased by 1% year-on-year with a Return to Work modestly ahead of previous years. Perm net fees down 6% slipped back into modest year-on-year decline as conversion of activity to placement became more challenging. The private sector decreased slightly by 1% with the public sector down 6%. At the specialism level, Construction & Property, our largest specialism at 21% of ANZ net fees increased by 6% with office support and Accountancy & Finance up by 7% and 5%, respectively. Technology declined by 11%. Australia net fees were down 2% with New Zealand at minus 11%. ANZ consultant headcount was up 2% through the quarter but decreased by 4% year-on-year. Driven by our focus on resource allocation, consultant net fee productivity grew by 7%. As with U.K. and Ireland, the key driver of our profit recovery has been greater focus from our consultants on higher-skilled roles. As a result, year-on-year growth in our average salary of our Perm placements was maintained at 5% in Q3. In our Rest of World division, comprising 24 countries, like-for-like fees decreased by 6%. Temp moved back into positive year-on-year growth and fees were up 3%, but Perm declined by 12%. As a reminder, our total actual growth rate includes the impact of our previously communicated exits from operations in Chile, Colombia, Thailand and Mexico. In EMEA ex Germany, fees decreased by 8%. France, our largest Rest of the World country, remained tough and loss-making with fees down 17%, but our actions to address productivity and costs are being delivered on plan, and we continue to expect an improved performance in H2. Southern Europe performed strongly with Spain and Portugal again achieving record quarterly net fees, up 17% and 6%, respectively, and Poland grew by 2%. In the Americas, fees decreased by 7%. The U.S. and Canada were down 8% and 2%, respectively. We have previously highlighted a substantial bid pipeline with large enterprise clients in North America, and I'm pleased to share that several contracts have now reached final close with mobilization anticipated over the coming quarters. Brazil, down 12%, was again challenging. Asia fees increased by 8% with activity -- improved activity overall through the quarter. Japan grew by 33%, driven by strong growth in our Temp & Contracting business and an easier comparable. Mainland China grew by 16% and Hong Kong by 9%. For the Rest of the World as a whole, consultant headcount increased by 3% in the quarter and by 14% year-on-year. Before moving to the current trading, I wanted to take a few moments to update you on our strong strategic progress during the quarter. As we've previously shared with you, our initiatives to improve consultant net fee productivity in real terms through our Five Levers and structurally improve our cost base will be key drivers of profit recovery. Amidst challenging markets we are executing well and continue to make significant operational progress. We continue to invest in high potential and high-performing business lines and scale back or exit those with low performance and potential. As previously communicated, we have exited 4 countries over the last year, and we'll continue to review our country portfolio in the medium term. Consultant fee productivity up 7% in the quarter has increased for a sector-leading 10 consecutive quarters, driven by careful allocation of consultants to business lines with the most attractive productivity and long-term structural growth opportunities. Greater focus from our consultants on high skilled roles and our investments to provide them with the best tools. Within Temp & Contracting net fee growth was positive in 3 of our 8 focus countries in Q3. And at the group level, Temp & Contracting now contributes 65% of net fees. In Enterprise Solutions, we've recently signed several new contracts which we expect to contribute to fees over the coming quarter. And our programs to structurally reduce our cost base performing well with GBP 95 million per annum aggregate structural savings now secured since the start of FY '24. We continue to make strong progress with our initiatives and expect the full financial benefits to build over time. Moving on to current trading and guidance. To date, we have observed minimal impact from developments in the Middle East, but we remain vigilant. Although we have limited forward visibility given the heightened levels of global macroeconomic uncertainty, we expect near-term Perm market conditions to remain challenging but expect greater resilience in Temp & Contracting to continue. We were pleased once again with our net fee productivity through Q3 and believe our consultant headcount capacity is appropriate for current market conditions and therefore, expect it to remain broadly stable in Q4 as we balance focused investment in high-performing and high-potential business lines with improving productivity in more challenging areas. We will continue to structurally reduce our cost base to position Hays strongly for when end markets recover and expect to make further substantial progress in Q4. As a result of the acceleration of our cost program, we have incurred around GBP 20 million of exceptional restructuring costs to date in fiscal 2026. But finally, there are no material working day impacts anticipated in Q4 '26. I'll now hand you back to the administrator, and we're happy to take your questions. Operator: [Operator Instructions] We will now take the first question from the line of Rory McKenzie from UBS. Rory Mckenzie: It's Rory here. Two questions, please. Firstly, I'm sure you've scrutinized all the forward indicators all the ways that you can. So have you seen any signs of client activity changing at all since the start of the Middle East conflict? Then secondly, within enterprise clients, can you say what the net fee trend here was excluding those 2 large RPO contracts you lost? And you referenced a growing pipeline and improving win rates. Can you just talk more about any sectors or countries that are driving that and what your hopes are for that fee pile going forward? James Hilton: Thanks, Rory. I'll start off with the first one around the impact in the Middle East. And look, standing back from this the first an immediate priority for us has been the safety and the well-being of our 70 or so colleagues over in the region, specifically in the UAE I mean as I put in the statement and in the script, we have seen to date little to no impact at all in our -- either our fees or in our forward indicators. But clearly, we remain highly vigilant given the level of uncertainty that's building around the world. And as you would expect, we'll watch every piece of data like a hawk. And if and when we see any change, we'll react accordingly. But as we stand here today it's business as usual. We're continuing to focus on our priorities, which is optimizing our resource allocation for the best long-term opportunities versus -- and managing it versus the current level of demand and activity. We're fully focused on our cost programs, and we expect to make good progress through the next quarter, and we're continuing to invest in our technology and our people and position ourselves for the long term. So as a team, Rory, you know us well, we've been through choppy times in the past, whether that's GFCs, whether it's pandemics. This is the next thing to come along to the world of geopolitics, but we'll manage it accordingly, and we'll stay very, very close to it. And as and when we see anything, we'll let you know. Second question was around Enterprise and really the trends in that business. I think if we just look through the impact of 2 large losses that we had in Q4 last year, actually, excluding those, we were about flat year-on-year in the Enterprise business. I mean, bearing in mind this time last year, it was an all-time record performance for our Enterprise business. So we're up against a relatively tough comp. We were down 5% in the quarter. But if I adjust for those 2 contracts, it's about flat. In terms of the pipeline, it's been encouraging, actually. We've been talking a little while now around the efforts we've had to sharpen our focus on the bid pipeline and what we've had is some really successful conversions of that and now getting those deals over the line in the last quarter have been -- should be beneficial for us in the coming quarters ahead. In terms of where those are concentrated, we've had several wins in the North America and in the U.S., in particular in the tech sector as well. So that's where a lot of our focus has been, as you know, in terms of investment and really pleasing to see some of those efforts coming through. And I think that will help that business going forward over the next 6 to 12 months. Rory Mckenzie: Great. Maybe just one more to follow up on the kind of the business repositioning in these tricky markets. You're having to manage some areas that are up strong double digits right now and other areas that are still down strong double digits. So I know you've closed 4 country operations, and there's lots of kind of repositioning in the group. But can you talk about how you -- are you still in a process of a very active portfolio management? Could there be other countries or practices you might be closing to redeploy? Or how far through the evaluation of all the mix do you think you are right now? James Hilton: I mean the way we run the business, Rory, is not just at a country level. We -- as you know, we run it at a business line level. So whether that's a specialism or the contract form within that specialism. So we may be investing in tech contracting in a country while we're disinvesting in Perm because we see deeper levels of demand and activity, and we have to make appropriate decisions. And you're absolutely right. If you look at our consultant headcount at a macro level in the last quarter, we were down 3%. But actually, several of our countries, we were strongly investing in, and I'd highlight Japan, Spain has been 2 good examples there where we're seeing relatively benign macroeconomic conditions, we see really good long-term opportunities to structurally grow our businesses there, particularly in the Temp & Contracting area, and we really made some investments in both of those markets, which are really coming through quite nicely. So the way we run our business, as you know, is really to map our resource allocation to both the long-term opportunities for us to grow, but also we have to manage it within the markets we're in and have to respond to current levels of demand and activity. So that's how we do that at an overall group level, Rory. In terms of the portfolio, clearly, we've had 4 countries we've withdrawn from over the last 12 months or so. There's a couple more that we're looking at. I expect us to think about that more strategically going forward and think about the long-term opportunities and the major markets that we need to focus on. But we'll update on that in due course. I mean -- but as today, business as usual, we're very much focused on making sure we've got the right consultants on the right desks in the right markets. Operator: We will now take the next question from the line of James Rowland Clark from Barclays. James Clark: My first question is just in France. You commented it's loss-making at the moment. Are you able to update us on a potential time line for turning profitable at this level of activity in the market? And then my second question is on Australia and New Zealand. It slipped a little bit in this quarter to mind, the private sector was down 1%, it was up 2% last quarter. Just interested to know what's happened there? And a similar comment on Germany and Technology, which has done the opposite. It's materially improved to flat from down 10%. I just wondered if that was complicated or anything else to draw out. James Hilton: Great. Thanks, James. I'll kick off with France. And clearly, it's been a challenging market for us and for the sector overall to be fair, over the last couple of years. Clearly, we've not been happy with the performance there. And as you know, we were loss-making in the first half of the year. We're very much focused on turning that business around, both in terms of the markets that we're focused on increasing our exposure to Temp & Contracting away from junior clerical roles and moving further up the food chain and at the same time, bringing some of the structural costs down in that business. We're well on with our plan. Our current plan at the levels of demand that we've got today would see us back into a breakeven position or even slightly profitable in our Q4. So we're very much focused on that. But clearly, as all our markets is subject to current levels of demand. But other things being equal, I'd expect to be back into a positive position there. As we exit the financial year, which is important for us because France is an important market for us. Not so long ago, we were making GBP 15 million plus of profit there. Let's not forget. So it is an important market for us. It's been through an incredibly challenging time, talk about instability and the broader impacts on business confidence, that's right in the heart of that. The team have had a real battle on their hands, but I think we're coming through that now, and I expect to be in a better position as we exit the year. Question on Australia is a fair one. And actually, we talked last quarter about some positive momentum. As you mentioned, the private sector was up slightly. We were back in growth in the Perm business. And we've seen that slightly inflect actually whereas our Temp & Contracting business has continued to move forward. And I think overall, I look at Australia and we're pretty consistent with where we were 6 months ago. But I would say that the Temp & Contracting business has probably been slightly ahead of where we expected to be and have good momentum and good trends through the quarter as we've highlighted in the returns to work. But on the other hand, Perm has been a little bit softer. And it's interesting because we -- the top of funnel activity is actually pretty good. And I look at the number of job registrations, interview numbers, it's consistent with where we were in September and October. We just haven't seen that conversion come through at quite the same level. As we had 6 months ago. And hence, the Perm fees have come in just slightly short, but it's relatively small deltas both ways, but just a subtle shift there. But overall, it's a pretty stable trend in Australia and actually a pretty similar picture in the U.K. actually, not dissimilar in the trends that we've seen there. Germany tech is predominantly underpinned by our contracted business. So if you think about the weightings of our businesses, the Temp business is heavily weighted to the Engineering sector and the Automotive sector more broadly, whereas the contracting business is the largest business there is in technology. And that's been pretty stable. We've had reasonably pretty solid performance in terms of the number of starters there over the last 3 months post-Christmas. The hours has been stable, which is helpful. The team are doing a really good job of pivoting that business and finding growth within our clients, not everywhere is difficult in Germany. There are pockets of opportunity, and I think the team are doing a good job of finding that. So Technology being flat was a pretty decent result overall for the German business. Hopefully, that covered everything, I think, and please forgive me if I missed anything. Operator: We will now take the next question from the line of Karl Green from RBC Capital Markets. Karl Green: Just a quick question to see if you've got anything incrementally, you say, around a permanent CEO appointment in terms of how the process is unfolding there? And secondly, just technically, an update on what you'd expect exceptional restructuring charges to look like in the second half. You said that you expect to incur increased charges in H2. I just want to check how that compares to previous comments, please. James Hilton: I think I got it, Karl. You were a little bit faint. So if I miss anything in your questions, just please just shout. I think the first question was around the permanent CEO appointment -- clearly, Mark stepped into the role in February on an interim basis. And it's very much BAU. As you can imagine, we're focused on driving performance on making sure we've got the right business line allocation. As you're aware, we've cracked on hard with the structural cost program and better positioning ourselves from that perspective, and we expect to make good progress through Q4 as well. So very much making sure that we deliver and best position the business as strongly as possible. While the Board are clearly running their process, evaluating both external and internal candidates. So that's their process to run and they'll update in due course. But working with Mark, it's very much business as usual, and we're very clear on what we're doing, and we're cracking on with that. The second question was around the restructuring work that we're doing and any update on restructuring costs in the second half. We had about GBP 10 million or so of restructuring charges in H1. And I expect a similar level in Q3, bearing in mind, we've accelerated the delivery of the cost program, but I expect similar levels in this quarter. Clearly, we've got another quarter to go, and as I mentioned, we expect to make good progress. So there's highly likely to be some further costs coming through. in Q4. But clearly, we'll update, Karl, in due course when we're closer to the time, and we know what the actual numbers are. Operator: We will now take the next question from the line of Steve Woolf from Deutsche Bank. Steven Woolf: Just one for me. On the Enterprise Solutions business, down overall, mentioning the contracts you previously flagged on North America and Switzerland. And also down in the U.K. So I was just wondering whether there was any sort of knock on those contracts were global contracts that were lost or whether this was anything specific to the U.K. James Hilton: Yes. Thanks, Steve. Yes. No, it's a fair question. And what we've seen in the last quarter is a little bit of a drop in some of the Perm contracts that we have in the Enterprise Solutions business in the U.K., notably in the construction sector. We've seen a little bit less demand coming through, which has been the driver of that being slightly down year-on-year. But as I said before, I'd highlight that this time last year was an all-time record quarter for that business. So pretty tough comp to go up against. But the Temp & Contracting side with the MSP has been pretty solid overall, but we have seen a little bit of a drop in demand in some of the Perm RPO parts of the business. Operator: [Operator Instructions] We will now take the next question from the line of Tom Burlton from BNP Paribas. Thomas Burlton: Sorry, my line did cut out, so apologies if any of these have been covered, but 2 for me. First one is on Asia, which was particularly strong, and I guess, especially Japan. Just wondering if you could dig a bit more into exactly what the drivers of that were? And then on -- second one is on headcount plans for Q4. I know you touched on the Middle East and limited impact there, but you did mention sort of heightened vigilance. I'm just curious if any of that heightened sort of awareness of what's going on there is feeding into headcount decisions as we think about Q4? James Hilton: Thanks, Tom. I'll kick off with Asia. So 8% growth in the region was pleasing. And as you highlighted, Japan, was the standout performance in that region. Underpinning that, has been really quite rewarding is the return on investment that we've made over the last couple of years in our contracting business, that's now a good -- about 25% of our business, actually probably close to 30% of our business is in the contracting space in Japan. And the investments we've made both in Engineering and in Technology contracting have really started to come through and that business was growing at north of 40% year-on-year, which is really pleasing. So the team are cracking on there and doing a really good job. I'm really pleased with that. We see it as a priority business for us. We think we can grow a big business there, and we're making good headway. So congratulations to the team over in Japan. It's been a really, really good quarter, and I expect to see another one in Q4. Moving on to the headcount question. And again, looking out to next quarter, we put the guidance in the statement as we expect it to be pretty flat overall. I think there was an earlier question that talked around resource allocation and how we manage that. So it doesn't mean that we won't be investing in some parts of the business and maybe scaling back in other parts. But I think net-net, we expect it to be broadly flat over the next quarter based on where we are today. And look, that's as I said at the outset, we haven't seen any significant impact on our forward KPIs and then trading in the business. But we remain vigilant and we'll react to that if we see it. So as we stand here today, we look forward to the next quarter, we think it will be pretty stable overall. But as I said before, there'll be lots and lots of moving parts under the covers where we're scaling back or we're doubling down. Operator: There are no further questions at this time. I would now like to turn the conference back to James Hilton for closing remarks. James Hilton: Thank you. That's all for questions. Thanks again for joining the call today. I look forward to speaking to you at our next Q4 results on the 10th of July. And should anyone have any follow-up questions Kean, Prash and myself will be available to take calls for the rest of the day. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen. Welcome to the 2026. At this time, I would like to turn the conference over to Ms. Abbe Goldstein, Senior Vice President of Investor Relations. Ms. Goldstein, you may begin. Thank you. Abbe Goldstein: Good morning, and welcome to The Travelers Companies, Inc. discussion of our first quarter 2026 results. We released our press release, financial supplement, and web presentation earlier this morning. All of these materials can be found on our website at travelers.com under the Investors section. Speaking today will be Alan Schnitzer, Chairman and CEO; Dan Frey, CFO; and our three segment presidents, Greg Toczydlowski of Business Insurance, Jeffrey Klenk of Bond and Specialty Insurance, and Michael Klein of Personal Insurance. They will discuss the financial results of our business and the current market environment. They will refer to the webcast presentation as they go through prepared remarks, and then we will take your questions. Before I turn the call over to Alan, I would like to draw your attention to the explanatory note included at the end of the webcast presentation. Our presentation today includes forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under Forward-Looking Statements in our earnings press release and in our most recent 10-Q and 10-Ks filed with the SEC. We do not undertake any obligation to update forward-looking statements. Also, in our remarks or responses to questions, we may mention some non-GAAP financial measures. Reconciliations are included in our recent earnings press release, financial supplement, and other materials available in the Investors section on our website. And now I would like to turn the call over to Alan Schnitzer. Alan Schnitzer: Thank you, Abbe. Good morning, everyone, and thank you for joining us today. We are pleased to report an excellent start to 2026 with strong underwriting performance across all three segments and a strong result from our investment portfolio. We also continued to deliver on key strategic initiatives during the quarter. For the quarter, we earned core income of $1.7 billion, or $7.71 per diluted share, generating core return on equity of 19.7%. Over the trailing four quarters, we generated a core return on equity of 22.7%, driven by excellent underlying fundamentals. Underwriting income of $1.2 billion pretax benefited from strong levels of underlying underwriting income and favorable prior year development. Each of our three segments generated attractive underlying and reported margins. Turning to investments. Our high-quality investment portfolio continued to perform well. After-tax net investment income increased by 9% to $833 million, driven by strong and reliable returns from our growing fixed income portfolio. Our underwriting and investment results together with our strong balance sheet enabled us to return more than $2.2 billion of excess capital to shareholders during the quarter, including approximately $2 billion of share repurchases. Even after that return of capital, and having made important investments in the business, adjusted book value per share was 16% higher than a year ago. In recognition of our strong financial position and confidence in the outlook for our business, I am pleased to share that our Board of Directors declared a 14% increase in our quarterly cash dividend to $1.25 per diluted share, marking 22 consecutive years of dividend increases with a compound annual growth rate of 8% over that period. Turning to the top line. With disciplined marketplace execution across all three segments, we generated net written premiums of $10.3 billion in the quarter. In Business Insurance, we grew net written premiums to $5.8 billion. Excluding the property line, we grew domestic net written premiums in the segment by 6%. The declining premium volume in property continues to be a large account dynamic. Property premiums were higher in our small commercial business, and about flat in our middle market business. Renewal premium change in Business Insurance was 5.8%. Retention increased a point from recent quarters to a very strong 86% and was higher or stable in every line, reflecting deliberate execution on our part and a generally high level of stability in the market. Renewal premium change in our core middle market business was about unchanged sequentially, also with retention higher at 89%. In terms of the product lines, RPC in auto, CMP, and umbrella remained in the double digits. RPC in GL and workers’ comp was stable, and RPC in the property line was positive. New business in the segment was a record $775 million, a reflection of our strong value proposition. In Bond and Specialty Insurance, we grew net written premiums by 7% to $1.1 billion. In our high-quality management liability business, renewal premium change ticked up sequentially with excellent retention of 87%. In our industry-leading surety business, we grew net written premiums by 14%. In Personal Insurance, we generated net written premiums of $3.5 billion with solid retention and positive renewal premium change in both auto and homeowners. We will hear more shortly from Greg, Jeff, and Michael about our segment results. The results we released this morning are part of a larger story. They reflect a set of advantages that we have developed and that have compounded over a long period of time. Over the course of many years, we have managed through a wide variety of challenging conditions: the 2008 financial crisis, dramatic changes in interest rates, a major inflection in liability loss cost trends, the global pandemic, severe natural catastrophes, and periods of heightened geopolitical and economic uncertainty. We did not predict the full scope of any of those events. But by carefully balancing risk and reward on both sides of the balance sheet, we were positioned to manage successfully through all of them. We have consistently delivered growth in book value per share and earnings per share at industry-leading returns, averaging more than 1 thousand basis points above the ten-year Treasury over the last ten years, and with industry-low volatility. We have also built as strong a capital position as we have ever had. That track record is not a coincidence. It reflects a set of structural advantages that hold up regardless of the environment. Starting with the breadth of the franchise. We are a market leader across nine major lines of insurance, serving personal and commercial customers across the country and diversified across distribution partners, industry class, and customer size. That balance, which represents a bigger advantage than people sometimes appreciate, has resulted in our consolidated loss ratio being less volatile than the loss ratio of our least volatile segment. In an uncertain world, that kind of structural hedge is a meaningful source of stability. Where we operate also matters. More than 95% of our premiums come from North America. At a time of considerable geopolitical complexity, that concentration is a strategic advantage. And the domestic market offers substantial room for growth. With our broad product capability, our leading market position, and the execution you have seen from us over the years, we are well positioned to continue gaining share, as we have in our commercial businesses over the past five years. Equally important is our ability to navigate the loss environment. We have the data, the analytics, and the discipline to see changes in loss activity early and to reflect what we see in our reserves, our risk selection, our pricing, and our claim strategy. That capability is foundational, because until you have an accurate view of the loss environment, the many downstream decisions are working from the wrong inputs. Our early identification of the acceleration in social inflation is a good example. We adjusted before the market did, and since then, we have grown the business and significantly improved our margins. Our scale is also a significant and growing advantage. Our profitability and cash flow support our ability to invest more than $1.5 billion annually in technology, including in our ambitious AI strategy. Our size gives us the data to power AI and the resources to deploy it, creating a virtuous cycle of better insights, better decisions, and better outcomes. Our financial strength also enables us to absorb the increasing severity of weather losses, and all of these benefits position us as a preferred counterparty in the reinsurance market. Beyond that, our product breadth, risk control, claim expertise, and other capabilities that benefit from scale make us more relevant to our distribution partners, deepening those relationships and our access to quality business. Over time, companies that can leverage scale effectively will have a meaningful edge in consolidating industry premium. As for our investment portfolio, the principles that guide us are the same ones that have served us well for decades. We consistently manage for risk-adjusted returns, not headline yield. More than 90% of our portfolio is in high-quality fixed income, with an average credit rating of AA-. Issue of the day, private credit, is a nonissue for us. We manage interest rate risk by holding the vast majority of our fixed income securities to maturity and carefully coordinating the duration of our assets and liabilities. Our investing discipline has produced default rates that were a fraction of industry averages through every stress event in the past two decades. You cannot gracefully reposition a portfolio in the middle of a dislocation. The time to build that resilience is before you need it. In short, whether we are talking about underwriting or investing, the advantages we have built are designed to deliver across environments. And they have. Before I wrap up, I would like to share that a number of my colleagues and I have just returned from our The Travelers Companies, Inc. Leadership Conference, a multi-day event we host each year for the principals and senior leaders of our most significant distribution partners. As we have shared before, the vision for our innovation agenda includes enhancing our value proposition as an indispensable partner to our agents and brokers. We continue to make significant investments to ensure that we realize that vision through best-in-class products, services, and experiences. What we heard consistently is that our deep specialization across a wide range of modernized, simplified, and tailored products, along with a broad and consistent appetite and extraordinary field organization, the ability to deliver exceptional experiences and our industry-leading claim capabilities, are major differentiators in the market. To sum it up, we are off to an excellent start for 2026, and we are highly confident that the advantages that have driven our success will extend our strong record of outperformance. I will now turn the call over to Dan for the financial results. Dan Frey: Thank you, Alan. The Travelers Companies, Inc. delivered $1.7 billion of core income in the first quarter, resulting in a quarterly core return on equity of 19.7% and a trailing twelve-month core return on equity of 22.7%. First quarter earnings were driven by yet another very strong quarter of underlying underwriting income, which at $1.2 billion after tax marked our seventh consecutive quarter of more than $1 billion. Net investment income of more than $800 million after tax and net favorable prior year reserve development of $325 million after tax also contributed to the strong bottom line result. After-tax cat losses were just over $600 million. The all-in combined ratio of 88.6% was again excellent. The underlying underwriting gain reflected $10.6 billion of earned premium and an underlying combined ratio of 85.3%. Within the underlying combined ratio, the first quarter expense ratio came in at 29%. That is what we expected given the timing of expenses in Q1, and we still expect the full-year expense ratio to be in line with our prior guidance, right around 28.5%. The previously announced sale of most of our Canadian operations closed as expected on January 2, and I wanted to take a couple of minutes to summarize the impact of that sale on our first quarter results. Let us start with premium volume. The year-over-year comparison, with Canada’s business included in 2025 but not included in 2026, reduced the first quarter growth rate for consolidated net written premium and net earned premium by about two points each. The impact in both Business Insurance and Bond and Specialty was about one point, while the impact in Personal Insurance was about four points. The impacts on the growth rate of both written and earned premium will be similar for the remaining quarters of this year. To help with modeling the year-over-year impact for the rest of the year, we provided the quarter-by-quarter dollar impact on Slide 19 of the webcast presentation. Within net income for the quarter is a gain on sale consistent with our expectations when we originally announced the transaction last May. That gain does not impact core income. And finally, within the equity section of the balance sheet, you see a reduction in accumulated other comprehensive loss, which is primarily because the previously unrealized FX loss related to the sold Canadian entities became a realized loss upon sale. The move from unrealized to realized had no impact on total equity or on book value per share. Turning back to the rest of the quarterly results, catastrophe losses for the quarter totaled $761 million pretax, with the largest events being the winter storm that impacted much of the country in January, and a large tornado-hail event in March, both of which you can see in the table of significant cat losses in the MD&A section of our 10-Q. We reported net favorable prior year reserve development of $413 million pretax in the first quarter, with all three segments contributing. In Business Insurance, net favorable development of $162 million pretax was driven by commercial property and workers’ comp. In Bond and Specialty, net favorable PYD of $65 million pretax was driven by better-than-expected results in surety. Personal Insurance recorded net favorable PYD of $186 million pretax, with both auto and home contributing. After-tax net investment income increased 9% from the prior-year quarter to $833 million. Fixed income NII was higher than in the prior-year quarter in line with our expectations, benefiting from both higher yields and a higher level of invested assets. New money yields at the end of Q1 were about 70 basis points higher than the yield embedded in the portfolio. Our outlook for fixed income NII by quarter, including earnings from short-term securities, is consistent with the guidance we provided on our fourth quarter earnings call: expecting roughly $810 million after tax in the second quarter, growing to approximately $840 million in the third quarter and then to around $870 million in the fourth quarter. Net investment income from our alternative investment portfolio was also positive in the quarter, although down from a year ago. Given recent movement in the equity markets, this is a good time to remind you that results for our private equities, hedge funds, and real estate partnerships are generally reported to us on a one-quarter lag. And while not perfectly correlated, our non-fixed income returns tend to directionally follow the broader equity market. In other words, the impact of the decline in financial markets that occurred in the first quarter will be reflected in our second quarter results. Turning to capital management. Operating cash flows for the quarter of $2.2 billion were again very strong, as we generated more than $2 billion in operating cash flow for the fourth consecutive quarter. As interest rates increased during the quarter, our net unrealized investment loss increased from $1.5 billion after tax at year end to $2.4 billion after tax at March 31. Adjusted book value per share, which excludes unrealized investment gains and losses, was $161.60 at quarter end, up 16% from a year ago. Adjusted book value per share also increased 2% from year end, despite the very strong level of share repurchases during Q1. Share repurchases this quarter included $1.8 billion of open-market repurchases, in line with the guidance we shared last quarter. And as a reminder, $700 million of that $1.8 billion came from the closing of the Canadian business sale in January. We had an additional $185 million of buybacks in connection with employee share-based compensation plans, and we still have approximately $5.2 billion remaining under prior board authorizations for share repurchases. Dividends were $238 million in the quarter, and as Alan mentioned earlier, our Board authorized a 14% increase in the quarterly dividend to $1.25 per share. In summary, our first quarter results once again demonstrate significant and durable underwriting earnings power and attractive margins across our well-diversified book of business, along with steadily increasing NII from our growing investment portfolio. I will now turn the call over to Greg for a discussion of Business Insurance. Greg Toczydlowski: Thanks, Dan. Business Insurance had a strong start to 2026, delivering another quarter of excellent financial results and successful execution in the marketplace. Segment income of $839 million was a first-quarter record, benefiting from strong underlying underwriting results and net investment income as well as favorable prior year reserve development. For the fourteenth consecutive quarter, we delivered an underlying combined ratio below 90%. That sustained underwriting success reflects the strength of our risk selection, granular pricing segmentation, and field execution. Turning to the top line, we generated net written premiums of $5.8 billion. Domestic net written premiums were up 4% over the prior-year quarter as we grew our leading middle market and Select businesses by 5% and 3%, respectively. National property premium declined as we maintained our disciplined underwriting standards. Turning to production, we achieved renewal premium change of 5.8% for the quarter. Excluding the property line, RPC was nearly 8% and in line with the fourth quarter. Renewal premium change was positive in all lines and higher sequentially in the umbrella and auto lines. Retention increased to 86%, up sequentially from the fourth quarter, a reflection of our continued focus on retaining our high-quality book of business in generally stable market conditions. Strong new business of $775 million was a quarterly record. These production results benefit from the investments we have made in product and underwriting precision. Our new commercial auto product, TCAP, which contains industry-leading segmentation, is now live in 47 states. We also recently enhanced our property pricing models, refining catastrophe and non-cat segmentation. Our advanced analytics, market-facing tools, and sales enablement capabilities also played key roles in our success, reflecting the competitive advantages these investments continue to build. We are pleased with these production results and the excellent execution by our field organization. As for the individual businesses, in Select, renewal premium change was strong at 8.8%, while retention increased one point sequentially to 82%. As expected, we are seeing the benefit of having largely completed our targeted CMP risk-return optimization effort. New business of $157 million was strong and in line with last year’s record. These results underscore our continued investments in product, underwriting, and agent experience. BAP 2.0 is now fully deployed nationwide, completing a multiyear initiative that has transformed our small commercial offering. The recent rollouts of the product in California and New York were meaningful milestones. The industry-leading segmentation embedded in the product is contributing to profitable growth. We continue to enhance Travis, our digital quoting platform, which processes over 1 million transactions annually. In Middle Market, renewal premium change was 6.6%, while retention improved two points from the fourth quarter to a very strong 89%. Price increases remain broad-based, as we achieved higher prices on about three-quarters of our middle market accounts. New business of $468 million was up 7% compared to the prior-year quarter, reaching a new quarterly high. Once again, another great quarter for Business Insurance. We are energized by both the impact of the new capabilities contributing to our strong performance and by the additional capabilities we are currently building that will drive our continued success throughout the remainder of 2026 and into the future. With that, I will turn the call over to Jeff. Jeffrey Klenk: Thank you, Greg, and good morning, everyone. We are pleased to report that Bond and Specialty started the year with another strong quarter on both top and bottom lines. We generated segment income of $254 million, an excellent combined ratio of 83.3% and a strong underlying combined ratio of 88.9%. Turning to the top line. We grew net written premiums by a very strong 7% in the quarter to $1.1 billion. In our high-quality domestic management liability business, renewal premium change was slightly higher sequentially while retention remained strong at 87%. We are encouraged by our continued progress in achieving improved pricing through our purposeful and segmented initiatives while continuing to deliver strong retention. Turning to our market-leading surety business. We are very pleased that we increased net written premiums by 14% from the prior-year quarter. Bond premium growth came from both long-term accounts, many of which are relationships spanning decades, as well as high-quality new accounts recently added to our industry-leading portfolio. These new surety relationships reflect years of efforts spent by our outstanding field team earning trust as well as the strategic investments we have made over time to deliver value beyond the bond itself. Our portfolio of premier contractors is well positioned to continue to benefit from higher and broad-based infrastructure spending. So Bond and Specialty Insurance delivered strong results in 2026, driven by our consistent underwriting and risk management diligence, excellent execution by our field organization in delivering our leading products and value-added services, and by continuing to leverage our market-leading competitive advantages. And with that, I will turn the call over to Michael. Michael Klein: Thanks, Jeff. Good morning, everyone. In Personal Insurance, we delivered segment income of $704 million for 2026. Strong underlying underwriting income and favorable prior year development both contributed to this excellent bottom line result. The combined ratio of 82.9% was a terrific result in the quarter. The underlying combined ratio of 78.3% improved by 1.6 points compared to 2025, reflecting strong profitability in both Automobile and Homeowners and Other. Net written premiums for the segment were $3.5 billion. As a reminder, we completed the sale of our Canada personal lines business on 01/02/2026. The decrease in domestic net written premiums of 5% year over year reflects the impact of both auto and home actions we have taken over the past year to improve property pricing, terms, and conditions, and to reduce exposure in high-catastrophe-risk geographies. The decrease also reflects higher ceded premium related to the expanded coverage we purchased as part of the enterprise catastrophe reinsurance program, which renewed on January 1. Turning to Automobile. Bottom line results continue to be very strong. First quarter combined ratio was 82.9%, reflecting a very strong underlying combined ratio of 88.3% and a 6.3-point benefit from favorable prior year development. As a reminder, the first quarter is historically our seasonally lowest combined ratio quarter in Auto. In Homeowners and Other, first quarter combined ratio was an excellent 83%. The underlying combined ratio of 69.7% improved by approximately three points compared to the prior-year quarter, primarily related to the continued benefit of earned pricing. As another reminder, the second quarter historically has been the seasonally highest quarter for homeowners weather-related losses. Turning to production. In Automobile, retention of 82% was relatively consistent with recent periods, and renewal premium change continued to moderate, reflective of our strong profitability. We are pleased to note that both Auto new business premium and the number of new business policies written increased compared to the prior-year quarter. In Homeowners and Other, retention improved to 85%. Renewal premium change in homeowners moderated, reflecting our successful efforts to align replacement costs with insured values. We expect renewal premium change to further moderate into the mid-single digits reflecting improved profitability. We were encouraged to see new business premium higher year over year as we broadened our disciplined efforts to deploy property capacity. These production results reflect progress toward our objective of delivering profitable growth over time. We are executing a range of initiatives to generate new business growth in both Auto and Property, including continuing to enhance product and pricing segmentation, unwinding eligibility restrictions, lifting agent binding limitations, and increasing new agency appointments. We are focused on providing total account solutions that, together with continued investment in digitization and ease of doing business, make us an indispensable partner for our agents, and an undeniable choice for customers. To sum it up, we are operating from a position of strength. The underlying profitability in our personal lines business is excellent. Our multiyear efforts to improve returns and manage volatility in the property portfolio are largely behind us, and early signs of growth momentum in both Auto and Home are encouraging. And with that, I will turn the call back over to Abbe. Operator: Thanks, Michael. We will now open the call for questions. To ask a question, please press star followed by the number one on your telephone keypad. We ask that you please limit your questions to one. Your first question comes from Gregory Peters with Raymond James. Good morning, everyone. Gregory Peters: So for my first question, Alan and Dan, you have talked about your investment in technology every year for years now, and I am curious how it is affecting the culture of the company. I am thinking about this from two perspectives. First of all, a number of your peers have talked about the potential for headcount reduction. And then at the SBU or line of business level, there are risks, I suppose, of deploying new technology both on growth and margin, and maybe sometimes that might outweigh the benefits. So some perspective on those two points would be helpful. Alan Schnitzer: Greg, good morning. Thanks for the question. I love that question. I will take you back to, I think, 2017 when we came out and we said innovation is going to be a strategy for The Travelers Companies, Inc. What we have done in the intervening years really is hone our innovation skills. We are referring to the last, essentially, ten years as innovation 1.0, positioning us for innovation 2.0. But when you talk about the culture, that is a culture that, fortunately, we have developed and honed over a decade. That is everything from how you pick the right initiatives, how you assess performance along the way, how you measure results, how you prepare an organization to manage change, how you communicate to an organization in the middle of change. That has been a constant for us, and I do not think you can wake up on Monday morning and say, okay, we are going to be innovative today. It is a skill set, and we have a lot of hard-won know-how in doing it. I think that has shaped our culture, which is prepared for it. Gregory Peters: Okay. I guess related to looking at the Personal Lines results, again, Michael, just balancing profitability with possibly adjusted pricing to drive new business and growth. Just curious about how you are looking at that equation. Michael Klein: Sure, Greg. Thanks for the question. That is absolutely what we are trying to accomplish: balance growth with returns and generate profitable growth over time. Given the strong profit position, we have taken a number of actions across pricing, eligibility, and distribution management to drive growth. Importantly, we are doing that from a position of strength. The segment combined ratio and underlying combined ratio in Personal Insurance is the lowest first-quarter segment combined ratio in the last ten years. That gives us some flexibility to look at pricing segmentation. That gives us the opportunity to look at base rate levels in certain states to ensure that pricing is consistent with loss costs. Then, as I mentioned in the prepared remarks, we are executing a range of initiatives across distribution management, expanding eligibility, relaxing limitations, to support that growth. We are encouraged by the momentum we are starting to see. Gregory Peters: Got it. Thank you, everyone, for the answers. Alan Schnitzer: Thanks, Greg. Operator: Next question is from David Motemaden with Evercore. David Motemaden: Hey. Thanks. Good morning. I had a question just on the RPC within the Select business. I was a little surprised at the deceleration there. I was hoping you could unpack that a little bit and sort of what lines were driving that deceleration. Greg Toczydlowski: Hey, David. If you are referencing the RPC, first of all, let me point out that is a real strong number for Select, just under 9%. You can see that drove a real strong retention number also. Rate came in at 4% and down from the fourth quarter, but that really is a reflection of how we feel about the portfolio, the rate adequacy, and the very deliberate execution by our field organization. Alan Schnitzer: David, I would add to that. When you are looking at that pricing metric—any pricing metric—and I would say this for Select or, frankly, anywhere else, you really have to look at it as a package of what is the pricing, where are the returns, and where is the retention. When you look at that trio together and you look at Select, it is an excellent outcome. David Motemaden: Got it. And then maybe just for my follow-up. I thought the underlying loss ratio in BI was definitely better than I was looking for. Could you just talk through the moving pieces there? I think last year, you had talked about increased IBNR on liability lines. Any update there? And also, you had talked about some light non-cat property losses the first couple of quarters last year, and there were some questions if that is durable or not. Was wondering if you have any updated thoughts there that you might be reflecting in loss picks. Dan Frey: Yeah, David, it is Dan. Look, overall, we feel really terrific about the underlying profitability in Business Insurance. As Greg called out in his prepared remarks, that has been sustained for quite a while. I think we are in a really sweet spot, to the point Alan was just making about retention, pricing, and returns. Nothing really unusual in the quarter—sort of the normal suspects that you would expect, a little bit of mix impact—but nothing that we would call out as being particularly unusual, including non-cat weather or anything else. David Motemaden: You also talked about our comment last year on the casualty lines and putting a little bit of what we called, I think, an uncertainty provision— Dan Frey: —in both 2024 and 2025. I think we said that at the end of the 2025 year-end call, but I will repeat it here. We did again carry that into the 2026 loss pick. The losses have not performed poorly. We like the margins in this line, but, again, it is a pretty long-tail line. There is still a lot of uncertainty. There is still a lot of attorney representation. We are going to have a healthy respect for that uncertainty, and so we did include that provision again in the 2026 loss picks. David Motemaden: Got it. Thanks. That makes sense. Operator: Your next question is from Robert Cox with Goldman Sachs. Robert Cox: Just a question for you around AI exclusions from policy terms. We are hearing brokers talk about increasing inbounds around AI-related exclusions from policy terms. So I am just curious how The Travelers Companies, Inc. is thinking about underwriting exclusions for AI-related risks and if you are seeing this play out in the market at all? Greg Toczydlowski: Hey, Rob. Clearly, we review our policy language all the time when there are new perils or dynamics in the marketplace, and that is evolving right now. We have not had any material changes, but it is something we are watching very closely. Robert Cox: Okay. Great. Thank you. Then maybe I just wanted to check in on tort reform. I know we have talked in the past—Florida is kind of viewed as a success story there. There are a number of other states that have recently passed some fairly comprehensive actions. I am just curious if you think that these other states could have similar outcomes as Florida and if The Travelers Companies, Inc. would plan to proactively change strategy in those states with regards to underwriting and pricing, or would you wait to see an improvement before changing strategy? Alan Schnitzer: Rob, we have been very encouraged by what we saw in Florida, and we have seen other encouraging actions in some other states, as you have mentioned—Georgia, Texas, Louisiana, South Carolina, and so forth. It has been terrific to see, and I think in part attributable to a really strong ground game that we and the rest of the industry have put on—state by state—making sure that we are pounding the pavement together with other industries, just making the case for the impact of litigation abuse on affordability. We are really pleased to see early gains, and we hope to continue the momentum. It is hard to answer your question on how we are going to execute with a broad brush, but we will look at the dynamics in each state. We will look at the actions that states take and, either at the outset or over time, that will impact how we think about the opportunity there and how we execute. But we are hopeful that this is the beginning of some momentum. Robert Cox: Thank you. Alan Schnitzer: Thank you. Operator: Your next question comes from Andrew Anderson with Jefferies. Andrew Anderson: Hey, good morning. Within BI, as some of these lines continue to see firm pricing other than property, how do you think about the relative attractiveness of workers’ comp from either a growth or a margin perspective? Alan Schnitzer: The workers’ comp business is a fantastic business for us, and it continues to perform very well. You can look at the calendar year returns, and we are open—more than open—for business in workers’ comp. Andrew Anderson: Got it. And within surety, growth accelerated again. How would you frame the demand conditions relative to credit quality? Jeffrey Klenk: Hey, this is Jeff Klenk responding, Andrew. I would tell you that our growth in the quarter for surety was really broad-based. As I mentioned in the prepared remarks, it was new and existing customers. It was from several different segments within our surety business. We are really proud of the high credit quality of our book of business. We continue to look at that as we take new customers into that portfolio. We feel really good that our portfolio will continue to benefit from the broad-based infrastructure spending that is out there as we look ahead. Andrew Anderson: Thanks for the question. Alan Schnitzer: Thank you. Operator: Your next question comes from Josh Shanker with Bank of America. Josh Shanker: Yeah. Thank you for putting me in. I was curious about the expense ratio. It is a little higher than it has been in the past, on both the acquisition costs and the other expense ratio. Can you talk about the drivers and how we should think about that as the year progresses? Dan Frey: Sure, Josh. We are not at all surprised with the expense ratio. If you look at our results over the last five or six years, if you look at the quarters within any given full year, it is not at all unusual to see the expense ratio vary by a point or more from quarter to quarter. 2025 really did not, but 2025 was more of an outlier and just sort of happenstance. You mentioned compensation, commission—so things like at what point do you evaluate the level of accrual that you think you are going to need for profit sharing or contingent commission? In the first quarter last year, we were sitting here coming out of one of the largest cat events in the history of the industry with California wildfires and saying, look, at this rate, we probably do not need a whole lot of accrual for contingent commissions and profit sharing. That is a different situation this year given the profitability of the book in the first quarter. But as I said in my prepared remarks, first quarter came out pretty much where we expected it to be when we gave the guidance last year that we expected 28.5% for this year’s full year. Josh Shanker: And on Personal Lines, is there a difference in the complexion of the business that is churning out of your portfolio versus business that you are winning currently? Michael Klein: Thanks, Josh. I would say absolutely. The business that is churning out of the portfolio is not as high quality as the business that is coming in. When we look at the profile of the business lost versus the profile of the business added new, the profile of the business we are adding new is superior to the profile of the business that we are losing. Josh Shanker: And what are the qualitative features that make business better? Is it bundled? Is it higher-value homes? Is it more cars per home? Or what is the difference between those two cohorts? Michael Klein: The elements that we look at when we look at profile include all those things—credit quality, limit, bundling, number of vehicles, age of vehicle, age of home—really pretty much across the board. The profile characteristics of the business we are adding are better than the profile characteristics of the business we are losing. Josh Shanker: So can we say that you are churning the business you are losing with some intentionality, that that is actually a business you do not want anymore? Michael Klein: I would say we are very happy with the trade-off between what we are writing new and what we are losing. Remember, in Personal Insurance, the business is mostly systematized. There is certainly an element of business we are nonrenewing or declining to offer renewal for based on risk quality, risk characteristics, and our estimate of what the loss ratio relativity on that business is. But really, I think what you are seeing is the successful outcome of a pricing and segmentation strategy that is tuned to attract the business that we want. Josh Shanker: Thank you very much. Operator: Your next question comes from Yaron Kinar with Mizuho. Yaron Kinar: Good morning, everybody. I had two questions on Business Insurance. The first one: It seems like renewal pricing change is below loss trend for the first time in a while, at least based on the last long-term loss trend that the company provided a few years ago. Assuming that persists, how does that change the company’s approach to writing and retaining business? As an example, I think the last time we saw RPC in this range, retention rates were a bit lower than where they are today. Alan Schnitzer: Yaron, I am not going to respond to whether it is in fact expanding or shrinking on a written basis. But what I will say is we are thrilled with the book of business we have, and we are very happy about the business we are putting on the books. The way we think about the execution is not looking at retention as a headline number. It is executing at a very granular, account-by-account basis. When you are looking at the business we want to retain, you want to keep your quality business, you want to get the right price on it, and through a lot of hustle and franchise value, write new business. Given the quality of the book and the returns in this business, the retention and the fact that it ticked up is fantastic. Yaron Kinar: Okay. Got it. And then my follow-up, again in BI, more focused on Select accounts. I am trying to think about the impact of AI here, where on the one hand it probably offers an opportunity to increase TAM—you can drive scale and efficiency benefits. But at the same time, it could also mean that we see more of a shift of small commercial to larger brokers with more data and analytics capabilities, maybe greater negotiating power. How do you think about those dynamics, whether I am thinking about this correctly, and how you see the business develop over the coming years with the advent of AI? Alan Schnitzer: I honestly think it is a little too early to know how that is going to happen. We have acquired three digital agencies/brokers over the years—Simply Business, InsuraMatch, and others—expecting the digitization of small commercial to move up in size, and it really has not. For Simply Business, for example, the small commercial it writes is—I would describe it as micro. For whatever reason, we just have not had the take-up there the way we would have expected eight or ten years ago. Before we see how this business is going to transition from one size of distributor to another, you are going to have to see customers adopt digital distribution for research and purchasing. We just have not seen it. Greg Toczydlowski: And, Yaron, one thing I would throw out in addition—we are really excited about Gen AI within the independent agents channel and particularly in Select and in Middle Market. In Select, we have executed some Gen AI that helps us process the business, endorsements, and changes, and just remove the friction and allow it to be much smoother for our independent agent channel. I do not think it has applicability of just changing distribution channels. We think it can be a great facilitator in helping us be more efficient in our existing distribution channels. Just to go back to your question, to the extent small commercial does gravitate to the larger brokers, that is probably a good thing for us. We have those relationships, and it is probably a plus for The Travelers Companies, Inc. Yaron Kinar: Thanks so much. Operator: Your next question is from Elyse Greenspan from Wells Fargo. One moment for that last question. We can go to the next, and if Elyse jumps back in, we will take her later. Okay. One moment. Your next question is from Tracey Banque with Wolfe Research. Thank you. Good morning. Tracey Banque: Hey, a follow-up on AI and commercial lines distribution. I appreciate your comments on Simply Business and the lower take-up rate. But if I could take that in a different angle, rather than brokers being disintermediated, I am wondering over time, can commission structures change due to the advancement of AI? Alan Schnitzer: It is pretty early, I think, in the evolution of AI and the distribution of insurance to get into that, and it is probably a broader conversation for a different time, different day. Tracey Banque: Okay. Also have a big picture casualty reserving question. Are claim patterns normalizing post-COVID catch-up period? If so, does that inform your loss development factor selection? Dan Frey: Hey, Tracey. Compared to what we saw in COVID, I would say COVID probably disrupted payout patterns as much as we have seen. Normalized relative to that, yes. But the trend in payout patterns in the casualty lines, particularly the long-tail liability lines, has still been increased frequency of attorney representation and a general lengthening of the tail. The things that we talked about in 2024, when we made some adjustments to our loss picks for accident years 2021 through 2023 and then started to factor in that uncertainty provision I talked about in a question earlier today, are still relevant because we have not seen attorney representation rates slow down. We have not seen severity increases slow down. We have not seen payout patterns return to their pre-COVID patterns. It is an extended payout pattern that has, if anything, continued to slightly extend. Operator: Thank you. Your next question is from Elyse Greenspan with Wells Fargo. Elyse Greenspan: Hi, thanks. Sorry about that earlier. My first question, I wanted to ask just about M&A and capital, Alan. Given that things are starting to soften from a market and premium perspective, or continuing to soften, was hoping to get your current views on M&A—things that you might consider and how that fits into your capital priorities right now. Alan Schnitzer: Elyse, I will give you the same answer that I think I have given you for ten years consistently on that, which is we are always interested in M&A of potentially all shapes and sizes, and we are very active in looking at things. I think our shareholders should demand that we are active in looking at things. Whether that is larger transactions, bolt-ons, or acquiring capabilities, that is all within our thought process and within our regular activity. We do not need to do anything at all to continue to be successful. We have all the tools and capabilities that we need to be successful. But if we find the right opportunity that meets our objectives—and I have shared many times our objectives—obviously we are going to assess a transaction in a million different dimensions, but we are looking for transactions that either improve our return profile, lower volatility, or provide us with some strategic capability. We are actively looking for those. When we find them and can get them done at the right terms and conditions, we will do it. Elyse Greenspan: Thanks. And then my follow-up on Personal Lines: as we start to think about gas prices being elevated, given what is going on overseas—and I guess the offset could be potential supply chain issues, which would impact severity—gas prices are potentially helpful to frequency. Can you give some color on the outlook for margins within Personal Lines given some of the things going on in the market right now? Michael Klein: Sure, Elyse. The gas price dynamic really depends on duration. Short- to even medium-term increases in gas prices do not materially change commuting patterns and driving levels, so it does have to be a sustained elevation in gas prices to really impact miles driven. To be clear, if gas prices stay high for an extended period of time, that puts downward pressure on miles driven and is a benefit to frequency. That is the most straightforward dynamic that we could see. But, again, gas prices would need to stay high for an extended period of time to drive that. From a supply chain standpoint, it is a fast-moving, fast-changing situation. There are lots of different things that could happen. There are scenarios where elevated costs actually put downward pressure on consumers and reduce used car prices because there is not as much demand—as just one example of the type of scenario we could see. At this point, it would be speculative to go beyond that and pick a path. Operator: Your next question is from Michael Zaremski with BMO. Michael Zaremski: Hey. Thanks. A question on the home insurance side. Michael, I believe you said that pricing would start to move to mid-single digits. If we look at The Travelers Companies, Inc. historical loss trend in home, it looks like it is well into the double digits. Are you signaling that the loss cost trend is better after the changes you have made, or you are letting margins deteriorate a bit to accelerate growth, or a little bit of both? Especially if you look at the cat load increased guide over the last few years, it has been a bigger part of the equation. Thanks. Michael Klein: Sure, Mike. Taking those pieces and putting them together, the guidance for property pricing moving down towards mid-single digits really just reflects the fact that we have rate adequacy broadly in virtually every state across the country as we sit here today, and we are pleased with the profitability of the portfolio. Importantly, that has been driven by pricing but also by changes in appetite, terms and conditions, and business mix, including state distribution. What you saw between fourth quarter of last year and first quarter of this year was that we had caught up on insurance-to-value. We had gotten coverage limits where they needed to be on property policies, and so we have gone to a lower inflation factor on those property policies renewing in 2026. That explains most of the quarter-to-quarter drop in RPC. What I am signaling going forward is that rate will also start to moderate in response to that improved profitability. Underneath that is an assumption—based on what we have been seeing—that the elevated inflation you are referring to has returned to a more normal level, and that is aligned with that pricing expectation. Michael Zaremski: That is helpful. My follow-up, pivoting to Commercial Lines loss cost trend. If we look at your commentary about loss cost trend being mid-single digits plus in the past, and your reserve releases over the last year or more, it kind of implies that loss trend has been a bit below the historical stated trend. Would you agree with that? Or is loss trend maybe improving slightly versus your historical view? Thanks. Dan Frey: Yeah, Mike. If you look at Business Insurance in particular, a large part of the favorable reserve development we have seen over the last several years in general has been comp related. We have said on comp, each time that it has come up, there has been favorability both in frequency and in severity, particularly in medical cost trend severity. That does not really bleed over into the way we think about loss trend in Commercial Auto or Commercial Property or the General Liability lines as an example. I do not think that we have seen a sea change in the way we think about loss trend to the positive. There is still a lot of pressure on the liability lines, which is why we continue to talk about things like double-digit pricing in them—in umbrella. Fair question, but I do not think we have seen any big changes there. Alan Schnitzer: Mike, I would add that one of the reasons that we have gotten away from talking about loss trends is because it is a pretty narrow concept of frequency and severity. It is a very blunt instrument to think about what is happening across billions of dollars of premium. Each line has its own dynamic, and there are other things that impact margins. There are base year changes, exposure changes, mix changes, changes in our large loss assumptions, and other adjustments that we make for one reason or another. There is a lot of estimation in that number. We try to get away from it, but holistically speaking, what I would say is the loss picks we have reflect what we think is going on with loss trend and, on the whole, it behaved about as we expected. Michael Zaremski: Thanks. Operator: We have time for one more question, and that question comes from Pablo Zuan with JPMorgan. Pablo Zuan: Hi. Thanks for speaking with me. First, just a quick modeling question. You talked about the impact of the Canada sale on earned and written premiums. I think you had mentioned two points. Should there be a similar proportionate impact on the dollar run rate acquisition and G&A expenses? Dan Frey: I think the way we think about it, Pablo, is just think about combined ratio in general. There is a little bit of a mix difference between the way Canada performed relative to the other lines, but not so significant that we think we should call it out and tell you that you need to adjust the run-rate loss ratio. If you asked the same question about whether it is acquisition cost or G&A or loss ratio or claim and claim adjustment expense—sort of up and down the income statement—we do not think it is going to significantly change the profile of the profitability related to those dollars. Pablo Zuan: Understood. My second one, just a follow-up to Rob’s questions about AI and not entirely related to the quarter. The Travelers Companies, Inc. is one of the largest cyber writers in the U.S., and the question is, how are you thinking about your exposures there and risk management given recent developments with AI? Thanks. Jeffrey Klenk: Thanks for the question, Pablo. Absolutely, it is an underwriting consideration. We are thinking about artificial intelligence, and with some of the more recent announcements in the last few days about the strength of the LLM models and what that could mean. It is not just on the negative side—it also has the potential to be on the positive side from an investment in resilience and capability to actually address the threat. We are heavily invested and have continued to invest in our risk control capabilities to address the cyber risk issue. Ultimately, we will have to make sure we are staying on top of it in partnership with broader government entities, as we already are. The investments we have made in our cyber risk control team for the benefit of our customers—the really good news for them is that as this technology continues to expand and change, we are going to be in an even better position to help them identify and remediate vulnerabilities as they come about. Alan Schnitzer: Thanks for the question. Thank you very much. Operator: There are no further questions at this time. I will now turn the call back over to Ms. Goldstein for any closing remarks. Abbe Goldstein: Thanks so much. We appreciate you tuning in. We know we left some questions in queue, so as always, please feel free to follow up with Investor Relations. We appreciate your time. Have a good day. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Hays plc Trading Update for the quarter ending 31st of March 2026 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, Kean Marden, Head of Investor Relations and M&A. Please go ahead. Kean Marden: Good morning, everyone, and thank you for joining us on a busy reporting day for the sector. I'm Kean Marden, Head of Investor Relations, and I'm joined here today by James Hilton, Chief Financial Officer, to present Hays' Q3 '26 results. Before we begin, please be aware that this call is being recorded, and the replay is accessible using the number and code provided in the release. Please be aware that our discussions may contain forward-looking statements that are based on current expectations or beliefs as well as assumptions on future events. There are risk factors which could cause actual results to differ materially from those expressed in or implied by such statements. Hays disclaims any intention or obligation to revise or update any forward-looking statements that have been made during this call regardless of whether these statements are affected by new information, future events or otherwise. I'll now hand you over to James. James Hilton: Thank you, Kean. Good morning, everyone, and thanks for joining us today. I'll present the key points and regional details of today's trading update before taking questions. As usual, all net fee growth percentages are on a like-for-like basis versus prior year unless stated otherwise, and consequently exclude our previously communicated exits from operations in Chile, Colombia, Thailand and Mexico. Group net fees decreased by 8% with Temp & Contracting down 6% and Perm down 12%. I'm pleased to confirm that strong consultant net fee productivity growth and cost discipline continues to offset lower net fees. Although near-term market conditions are likely to remain challenging, and we remain mindful of heightened global economic -- macroeconomic uncertainty, we currently expect FY '26 pre-exceptional operating profit will be in line with consensus. I would like to highlight the following key items from the results. Temp & Contracting net fees decreased by 6% as we saw a modestly stronger return to work in the U.K. and Ireland and ANZ and the year-on-year decline in volumes and average hours worked in Germany was in line with our expectations during the quarter. Group Temp & Contracting volumes decreased by 5% year-on-year, including Germany, down 9%, UK&I down 8%, ANZ down 6%, and Rest of the World up 2%. Perm net fees decreased by 12%, driven by a 15% decline in volumes as conversion of activity in UK&I and ANZ reduced modestly versus Q2. This was partially offset by a 3% increase in the group average Perm fee supported by our actions to target higher salary roles. We continue to manage our consultant capacity on a business line basis. And despite challenging markets, our actions delivered 7% year-on-year growth in average consultant net fee productivity in Q3, including notable increases in the UK&I and our Rest of the World businesses. On a seasonally adjusted basis, productivity has now increased for a sector-leading 10 consecutive quarters. Consultant headcount reduced by 3% in the quarter and by 14% versus prior year. We've continued to make strong progress towards our structural cost saving program with a further GBP 15 million per annum savings delivered in Q3. We've now achieved GBP 30 million annualized savings in FY '26, making excellent progress towards our target of GBP 45 million by FY '29. In total, we've now delivered GBP 95 million annualized cumulative structural savings since the start of FY '24. Our non-consultant headcount exited the quarter down 7% year-on-year. And the group's net debt position was circa GBP 15 million, which is in line with our expectations and reflects normal seasonal cash flows. I will now comment on the performance by each division in more detail. Our largest market of Germany saw fees down 11% year-on-year. Temp & Contracting fees decreased by 11% with volumes down 9% and a further 2% impact from negative hours and mix. Temp & Contracting volumes remained solid overall with return to work in line with prior year and the year-on-year decline in average hours were during the quarter predominantly in our public sector and enterprise clients was in line with our expectations. These sectors hired in anticipation of fiscal stimulus, hence, our placement volumes have remained resilient, but hours work remained softer in the quarter after federal budget approval was delayed. Perm was sequentially stable through the quarter and the year-on-year decline in net fees eased to 10%. At the specialism level, Technology and Engineering, our 2 largest specialisms, were flat year-on-year and down 27%, respectively, the latter impacted by ongoing subdued performance of the automotive sector. Accounting & Finance was down 22%, but Construction & Property performed strongly once again with 37% net fee growth, driven by our focus on infrastructure and the energy sector, and it now contributes 9% of our net fees in Germany. Consultant headcount decreased by 6% in the quarter and by 15% year-on-year. Net fee productivity increased by 5%, driven by our ongoing focus on resource allocation, and we made strong progress with our structural cost-saving initiatives. In U.K. and Ireland, fees decreased by 10% with a modestly stronger return to work in Temp & Contracting down 6%, but Perm remained subdued and was down 15%. Fees in the private sector declined by 8%, while the public sector was tougher, down 13%. At the specialism level, Technology was flat versus prior year, while Construction & Property and Accountancy & Finance decreased by 8% and 6%, respectively. Enterprise fees declined by 4%, while office support was flat as our actions just to target higher salary roles offset lower volumes in our junior roles. Consultant headcount decreased by 4% in the quarter and 16% year-on-year. Consultant net fee productivity increased by 11%, and we made further good progress in improving operational efficiency. Once again, a key driver has been our greater focus from our consultants on high skilled roles, consistent with our Five Levers strategy. As a result, year-on-year growth in average candidate salary remained at 8% for Perm in Q3 and accelerated to 9% in Temp & Contracting. As expected, our sustained focus on cost discipline, including ongoing initiatives to optimize our office portfolio and delayer management has driven a further structural improvement in costs. We've made good progress towards building a higher quality focused business and consequently anticipate improved profitability in the second half. In ANZ, fees decreased by 2% year-on-year with modestly improved momentum in Temp & Contracting, but Perm was more subdued. Temp & Contracting decreased by 1% year-on-year with a Return to Work modestly ahead of previous years. Perm net fees down 6% slipped back into modest year-on-year decline as conversion of activity to placement became more challenging. The private sector decreased slightly by 1% with the public sector down 6%. At the specialism level, Construction & Property, our largest specialism at 21% of ANZ net fees increased by 6% with office support and Accountancy & Finance up by 7% and 5%, respectively. Technology declined by 11%. Australia net fees were down 2% with New Zealand at minus 11%. ANZ consultant headcount was up 2% through the quarter but decreased by 4% year-on-year. Driven by our focus on resource allocation, consultant net fee productivity grew by 7%. As with U.K. and Ireland, the key driver of our profit recovery has been greater focus from our consultants on higher-skilled roles. As a result, year-on-year growth in our average salary of our Perm placements was maintained at 5% in Q3. In our Rest of World division, comprising 24 countries, like-for-like fees decreased by 6%. Temp moved back into positive year-on-year growth and fees were up 3%, but Perm declined by 12%. As a reminder, our total actual growth rate includes the impact of our previously communicated exits from operations in Chile, Colombia, Thailand and Mexico. In EMEA ex Germany, fees decreased by 8%. France, our largest Rest of the World country, remained tough and loss-making with fees down 17%, but our actions to address productivity and costs are being delivered on plan, and we continue to expect an improved performance in H2. Southern Europe performed strongly with Spain and Portugal again achieving record quarterly net fees, up 17% and 6%, respectively, and Poland grew by 2%. In the Americas, fees decreased by 7%. The U.S. and Canada were down 8% and 2%, respectively. We have previously highlighted a substantial bid pipeline with large enterprise clients in North America, and I'm pleased to share that several contracts have now reached final close with mobilization anticipated over the coming quarters. Brazil, down 12%, was again challenging. Asia fees increased by 8% with activity -- improved activity overall through the quarter. Japan grew by 33%, driven by strong growth in our Temp & Contracting business and an easier comparable. Mainland China grew by 16% and Hong Kong by 9%. For the Rest of the World as a whole, consultant headcount increased by 3% in the quarter and by 14% year-on-year. Before moving to the current trading, I wanted to take a few moments to update you on our strong strategic progress during the quarter. As we've previously shared with you, our initiatives to improve consultant net fee productivity in real terms through our Five Levers and structurally improve our cost base will be key drivers of profit recovery. Amidst challenging markets we are executing well and continue to make significant operational progress. We continue to invest in high potential and high-performing business lines and scale back or exit those with low performance and potential. As previously communicated, we have exited 4 countries over the last year, and we'll continue to review our country portfolio in the medium term. Consultant fee productivity up 7% in the quarter has increased for a sector-leading 10 consecutive quarters, driven by careful allocation of consultants to business lines with the most attractive productivity and long-term structural growth opportunities. Greater focus from our consultants on high skilled roles and our investments to provide them with the best tools. Within Temp & Contracting net fee growth was positive in 3 of our 8 focus countries in Q3. And at the group level, Temp & Contracting now contributes 65% of net fees. In Enterprise Solutions, we've recently signed several new contracts which we expect to contribute to fees over the coming quarter. And our programs to structurally reduce our cost base performing well with GBP 95 million per annum aggregate structural savings now secured since the start of FY '24. We continue to make strong progress with our initiatives and expect the full financial benefits to build over time. Moving on to current trading and guidance. To date, we have observed minimal impact from developments in the Middle East, but we remain vigilant. Although we have limited forward visibility given the heightened levels of global macroeconomic uncertainty, we expect near-term Perm market conditions to remain challenging but expect greater resilience in Temp & Contracting to continue. We were pleased once again with our net fee productivity through Q3 and believe our consultant headcount capacity is appropriate for current market conditions and therefore, expect it to remain broadly stable in Q4 as we balance focused investment in high-performing and high-potential business lines with improving productivity in more challenging areas. We will continue to structurally reduce our cost base to position Hays strongly for when end markets recover and expect to make further substantial progress in Q4. As a result of the acceleration of our cost program, we have incurred around GBP 20 million of exceptional restructuring costs to date in fiscal 2026. But finally, there are no material working day impacts anticipated in Q4 '26. I'll now hand you back to the administrator, and we're happy to take your questions. Operator: [Operator Instructions] We will now take the first question from the line of Rory McKenzie from UBS. Rory Mckenzie: It's Rory here. Two questions, please. Firstly, I'm sure you've scrutinized all the forward indicators all the ways that you can. So have you seen any signs of client activity changing at all since the start of the Middle East conflict? Then secondly, within enterprise clients, can you say what the net fee trend here was excluding those 2 large RPO contracts you lost? And you referenced a growing pipeline and improving win rates. Can you just talk more about any sectors or countries that are driving that and what your hopes are for that fee pile going forward? James Hilton: Thanks, Rory. I'll start off with the first one around the impact in the Middle East. And look, standing back from this the first an immediate priority for us has been the safety and the well-being of our 70 or so colleagues over in the region, specifically in the UAE I mean as I put in the statement and in the script, we have seen to date little to no impact at all in our -- either our fees or in our forward indicators. But clearly, we remain highly vigilant given the level of uncertainty that's building around the world. And as you would expect, we'll watch every piece of data like a hawk. And if and when we see any change, we'll react accordingly. But as we stand here today it's business as usual. We're continuing to focus on our priorities, which is optimizing our resource allocation for the best long-term opportunities versus -- and managing it versus the current level of demand and activity. We're fully focused on our cost programs, and we expect to make good progress through the next quarter, and we're continuing to invest in our technology and our people and position ourselves for the long term. So as a team, Rory, you know us well, we've been through choppy times in the past, whether that's GFCs, whether it's pandemics. This is the next thing to come along to the world of geopolitics, but we'll manage it accordingly, and we'll stay very, very close to it. And as and when we see anything, we'll let you know. Second question was around Enterprise and really the trends in that business. I think if we just look through the impact of 2 large losses that we had in Q4 last year, actually, excluding those, we were about flat year-on-year in the Enterprise business. I mean, bearing in mind this time last year, it was an all-time record performance for our Enterprise business. So we're up against a relatively tough comp. We were down 5% in the quarter. But if I adjust for those 2 contracts, it's about flat. In terms of the pipeline, it's been encouraging, actually. We've been talking a little while now around the efforts we've had to sharpen our focus on the bid pipeline and what we've had is some really successful conversions of that and now getting those deals over the line in the last quarter have been -- should be beneficial for us in the coming quarters ahead. In terms of where those are concentrated, we've had several wins in the North America and in the U.S., in particular in the tech sector as well. So that's where a lot of our focus has been, as you know, in terms of investment and really pleasing to see some of those efforts coming through. And I think that will help that business going forward over the next 6 to 12 months. Rory Mckenzie: Great. Maybe just one more to follow up on the kind of the business repositioning in these tricky markets. You're having to manage some areas that are up strong double digits right now and other areas that are still down strong double digits. So I know you've closed 4 country operations, and there's lots of kind of repositioning in the group. But can you talk about how you -- are you still in a process of a very active portfolio management? Could there be other countries or practices you might be closing to redeploy? Or how far through the evaluation of all the mix do you think you are right now? James Hilton: I mean the way we run the business, Rory, is not just at a country level. We -- as you know, we run it at a business line level. So whether that's a specialism or the contract form within that specialism. So we may be investing in tech contracting in a country while we're disinvesting in Perm because we see deeper levels of demand and activity, and we have to make appropriate decisions. And you're absolutely right. If you look at our consultant headcount at a macro level in the last quarter, we were down 3%. But actually, several of our countries, we were strongly investing in, and I'd highlight Japan, Spain has been 2 good examples there where we're seeing relatively benign macroeconomic conditions, we see really good long-term opportunities to structurally grow our businesses there, particularly in the Temp & Contracting area, and we really made some investments in both of those markets, which are really coming through quite nicely. So the way we run our business, as you know, is really to map our resource allocation to both the long-term opportunities for us to grow, but also we have to manage it within the markets we're in and have to respond to current levels of demand and activity. So that's how we do that at an overall group level, Rory. In terms of the portfolio, clearly, we've had 4 countries we've withdrawn from over the last 12 months or so. There's a couple more that we're looking at. I expect us to think about that more strategically going forward and think about the long-term opportunities and the major markets that we need to focus on. But we'll update on that in due course. I mean -- but as today, business as usual, we're very much focused on making sure we've got the right consultants on the right desks in the right markets. Operator: We will now take the next question from the line of James Rowland Clark from Barclays. James Clark: My first question is just in France. You commented it's loss-making at the moment. Are you able to update us on a potential time line for turning profitable at this level of activity in the market? And then my second question is on Australia and New Zealand. It slipped a little bit in this quarter to mind, the private sector was down 1%, it was up 2% last quarter. Just interested to know what's happened there? And a similar comment on Germany and Technology, which has done the opposite. It's materially improved to flat from down 10%. I just wondered if that was complicated or anything else to draw out. James Hilton: Great. Thanks, James. I'll kick off with France. And clearly, it's been a challenging market for us and for the sector overall to be fair, over the last couple of years. Clearly, we've not been happy with the performance there. And as you know, we were loss-making in the first half of the year. We're very much focused on turning that business around, both in terms of the markets that we're focused on increasing our exposure to Temp & Contracting away from junior clerical roles and moving further up the food chain and at the same time, bringing some of the structural costs down in that business. We're well on with our plan. Our current plan at the levels of demand that we've got today would see us back into a breakeven position or even slightly profitable in our Q4. So we're very much focused on that. But clearly, as all our markets is subject to current levels of demand. But other things being equal, I'd expect to be back into a positive position there. As we exit the financial year, which is important for us because France is an important market for us. Not so long ago, we were making GBP 15 million plus of profit there. Let's not forget. So it is an important market for us. It's been through an incredibly challenging time, talk about instability and the broader impacts on business confidence, that's right in the heart of that. The team have had a real battle on their hands, but I think we're coming through that now, and I expect to be in a better position as we exit the year. Question on Australia is a fair one. And actually, we talked last quarter about some positive momentum. As you mentioned, the private sector was up slightly. We were back in growth in the Perm business. And we've seen that slightly inflect actually whereas our Temp & Contracting business has continued to move forward. And I think overall, I look at Australia and we're pretty consistent with where we were 6 months ago. But I would say that the Temp & Contracting business has probably been slightly ahead of where we expected to be and have good momentum and good trends through the quarter as we've highlighted in the returns to work. But on the other hand, Perm has been a little bit softer. And it's interesting because we -- the top of funnel activity is actually pretty good. And I look at the number of job registrations, interview numbers, it's consistent with where we were in September and October. We just haven't seen that conversion come through at quite the same level. As we had 6 months ago. And hence, the Perm fees have come in just slightly short, but it's relatively small deltas both ways, but just a subtle shift there. But overall, it's a pretty stable trend in Australia and actually a pretty similar picture in the U.K. actually, not dissimilar in the trends that we've seen there. Germany tech is predominantly underpinned by our contracted business. So if you think about the weightings of our businesses, the Temp business is heavily weighted to the Engineering sector and the Automotive sector more broadly, whereas the contracting business is the largest business there is in technology. And that's been pretty stable. We've had reasonably pretty solid performance in terms of the number of starters there over the last 3 months post-Christmas. The hours has been stable, which is helpful. The team are doing a really good job of pivoting that business and finding growth within our clients, not everywhere is difficult in Germany. There are pockets of opportunity, and I think the team are doing a good job of finding that. So Technology being flat was a pretty decent result overall for the German business. Hopefully, that covered everything, I think, and please forgive me if I missed anything. Operator: We will now take the next question from the line of Karl Green from RBC Capital Markets. Karl Green: Just a quick question to see if you've got anything incrementally, you say, around a permanent CEO appointment in terms of how the process is unfolding there? And secondly, just technically, an update on what you'd expect exceptional restructuring charges to look like in the second half. You said that you expect to incur increased charges in H2. I just want to check how that compares to previous comments, please. James Hilton: I think I got it, Karl. You were a little bit faint. So if I miss anything in your questions, just please just shout. I think the first question was around the permanent CEO appointment -- clearly, Mark stepped into the role in February on an interim basis. And it's very much BAU. As you can imagine, we're focused on driving performance on making sure we've got the right business line allocation. As you're aware, we've cracked on hard with the structural cost program and better positioning ourselves from that perspective, and we expect to make good progress through Q4 as well. So very much making sure that we deliver and best position the business as strongly as possible. While the Board are clearly running their process, evaluating both external and internal candidates. So that's their process to run and they'll update in due course. But working with Mark, it's very much business as usual, and we're very clear on what we're doing, and we're cracking on with that. The second question was around the restructuring work that we're doing and any update on restructuring costs in the second half. We had about GBP 10 million or so of restructuring charges in H1. And I expect a similar level in Q3, bearing in mind, we've accelerated the delivery of the cost program, but I expect similar levels in this quarter. Clearly, we've got another quarter to go, and as I mentioned, we expect to make good progress. So there's highly likely to be some further costs coming through. in Q4. But clearly, we'll update, Karl, in due course when we're closer to the time, and we know what the actual numbers are. Operator: We will now take the next question from the line of Steve Woolf from Deutsche Bank. Steven Woolf: Just one for me. On the Enterprise Solutions business, down overall, mentioning the contracts you previously flagged on North America and Switzerland. And also down in the U.K. So I was just wondering whether there was any sort of knock on those contracts were global contracts that were lost or whether this was anything specific to the U.K. James Hilton: Yes. Thanks, Steve. Yes. No, it's a fair question. And what we've seen in the last quarter is a little bit of a drop in some of the Perm contracts that we have in the Enterprise Solutions business in the U.K., notably in the construction sector. We've seen a little bit less demand coming through, which has been the driver of that being slightly down year-on-year. But as I said before, I'd highlight that this time last year was an all-time record quarter for that business. So pretty tough comp to go up against. But the Temp & Contracting side with the MSP has been pretty solid overall, but we have seen a little bit of a drop in demand in some of the Perm RPO parts of the business. Operator: [Operator Instructions] We will now take the next question from the line of Tom Burlton from BNP Paribas. Thomas Burlton: Sorry, my line did cut out, so apologies if any of these have been covered, but 2 for me. First one is on Asia, which was particularly strong, and I guess, especially Japan. Just wondering if you could dig a bit more into exactly what the drivers of that were? And then on -- second one is on headcount plans for Q4. I know you touched on the Middle East and limited impact there, but you did mention sort of heightened vigilance. I'm just curious if any of that heightened sort of awareness of what's going on there is feeding into headcount decisions as we think about Q4? James Hilton: Thanks, Tom. I'll kick off with Asia. So 8% growth in the region was pleasing. And as you highlighted, Japan, was the standout performance in that region. Underpinning that, has been really quite rewarding is the return on investment that we've made over the last couple of years in our contracting business, that's now a good -- about 25% of our business, actually probably close to 30% of our business is in the contracting space in Japan. And the investments we've made both in Engineering and in Technology contracting have really started to come through and that business was growing at north of 40% year-on-year, which is really pleasing. So the team are cracking on there and doing a really good job. I'm really pleased with that. We see it as a priority business for us. We think we can grow a big business there, and we're making good headway. So congratulations to the team over in Japan. It's been a really, really good quarter, and I expect to see another one in Q4. Moving on to the headcount question. And again, looking out to next quarter, we put the guidance in the statement as we expect it to be pretty flat overall. I think there was an earlier question that talked around resource allocation and how we manage that. So it doesn't mean that we won't be investing in some parts of the business and maybe scaling back in other parts. But I think net-net, we expect it to be broadly flat over the next quarter based on where we are today. And look, that's as I said at the outset, we haven't seen any significant impact on our forward KPIs and then trading in the business. But we remain vigilant and we'll react to that if we see it. So as we stand here today, we look forward to the next quarter, we think it will be pretty stable overall. But as I said before, there'll be lots and lots of moving parts under the covers where we're scaling back or we're doubling down. Operator: There are no further questions at this time. I would now like to turn the conference back to James Hilton for closing remarks. James Hilton: Thank you. That's all for questions. Thanks again for joining the call today. I look forward to speaking to you at our next Q4 results on the 10th of July. And should anyone have any follow-up questions Kean, Prash and myself will be available to take calls for the rest of the day. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning. Thank you for standing by, and welcome to the Pluxee First Half Fiscal 2026 Results Presentation. [Operator Instructions] I advise you that this conference is being recorded today on Thursday, April 16, 2026. At this time, I would like to hand the conference over to Ms. Pauline Bireaud, Head of Investor Relations. Please go ahead, madam. Pauline Bireaud: Good morning, everyone, and thank you for joining us today for our fiscal 2026 H1 results. So I'm Pauline, I'm Head of Investor Relations for Pluxee and I'm joined by Aurelien Sonet, our CEO; and Stephane Lhopiteau, our CFO. Let me guide you through today's presentation agenda in the next slide. So Aurelien will start with the key highlights and figures for H1, followed by a focus on our commercial performance, and then Stephane will take you through our financial results. Finally, Aurelien will then conclude with our outlook, including an update on the regulatory situation in Brazil before we open the floor for the Q&A. And with that, I will hand over to Aurelien. Aurélien Sonet: Thank you, Pauline, and good morning, everyone. I'm pleased to be back with you today to present our first half fiscal 2026 results, starting with our key highlights. We are pleased to share that we delivered overall solid H1, which puts us well on track to meet our full year objectives. First, commercial momentum remains strong and resulted in sustained revenue growth driven by our core employee benefits activity. Again, profitability delivered ahead of plan. Recurring EBITDA margin expanded strongly, supported by the operating leverage embedded in our business model and the strong execution of our efficiency initiatives. Lastly, it translated into strong earnings growth and cash generation, reinforcing further our net financial cash position. Overall, H1 performance strengthens our confidence for the full year and allows us to enter H2 from a position of strength amid a more uncertain macro and geopolitical environment. Let's now focus on the key figures for the semester on Slide 5. Despite the increasingly challenging environment, we continue to deliver sustained top line growth with total revenues reaching EUR 655 million, up plus 5.6% organically. This was supported by the continued strength of our core business with Employee Benefits operating revenue reaching EUR 500 million at a 9.4% organically. And I'll come back on this in the incoming slides. At the same time, profitability delivered strongly. Recurring EBITDA reached EUR 242 million, up plus 12.9% organically, and recurring EBITDA margin expanded to 37%, up plus 229 basis points organically. And finally, recurring free cash flow reached EUR 210 million, corresponding to 86% cash conversion rate. In a world, we delivered a strong and well-balanced performance across growth, profitability and cash generation. And this is exactly what the next slide highlights over time. Beyond quality of execution, the performance delivered in one also reflects how our business model structurally convert top line growth into margin expansion and cash generation. At its core, Pluxee benefits from a resilient growth engine anchored in Employee Benefits. Combined with the operating leverage embedded in our platform, and the continued efficiency gains, this translates into higher profitability with EBITDA growing at twice the pace of top line growth. In turn, this profitability translates into strong cash generation, confirming the robust cash conversion capacity of our model. Let me now focus on our core growth engine, Employee Benefits in the next slide. As part of our growth engine is Employee Benefits. This core business represents the vast majority of our revenues and continue to deliver high single-digit organic growth across regions in H1. In Latin America, Employee Benefits grew by plus 11.5% organically, driven by particularly strong commercial dynamics across products and further supported by favorable face value trends underpinned by local inflation cost. In Continental Europe, growth reached plus 5.1% organically. In the current geopolitical and macroeconomic environment, this represents a solid performance and illustrates the resilience of our core offering across European markets. Finally, in Rest of the World, growth was particularly strong at 16.8% organically, illustrating the favorable dynamic that we observe in terms of market penetration in those countries. Overall, Employee Benefits once again demonstrated this semester the relevance of our pure-play positioning. I will now turn to other products and services in the next slide. Even if other products and services is facing temporary pressure in specific activities, the long-term value creation story remains unchanged. Looking first at Public Benefits in Continental Europe. Current performance mainly reflects the effects related to the contract cycle and order phasing, which are inherent in this business. At the same time, by leveraging our merchant network and payment capabilities, these large-scale programs structurally enhance group scalability. On top of that, our highly selective approach and close monitoring of contract performance ensures that Public Benefits remains sustainably accretive to growth and profitability overall beyond short-term phasing impact. As base effects unwind, performance is expected to progressively regain momentum from H2. Switching to the U.K. and the U.S., where we are strategically refocusing our activity towards employee engagement, a structurally growing segment in both countries. We now operate fully digital scalable platforms and are progressively exiting noncore, lower return activities. Together, these countries account for less than 5% of group revenues. And while they are expected to continue weighing on group's revenue growth in H2 2026, they should return to a positive contribution from fiscal 2027. More broadly, we continue to actively manage the portfolio and allocate capital and resources selectively toward activities and markets offering the most attractive long-term returns. Let's now look at the key drivers of the group's substantial margin expansion in the next slide. H1 marked another strong EBITDA margin increase with operating EBITDA margin expansion accelerating at plus 268 basis points compared to plus 235 basis points last year. It comes first from the operating leverage embedded in our model. Our one platform architecture allows us to absorb incremental volumes with limited additional costs, generating structural scale effects and synergies across the group. This sharp expansion also reflects the structural cost efficiency that we've been progressively delivering since the spin-off. It mainly comes from the streamlining of our product range and processes across countries. The accelerated automation, notably through the increasing use of AI as a key optimization enabler alongside technology and data and a clear prioritization of projects and initiatives based on rigorous value creation monitoring. Cost discipline has become an increasingly important margin driver for Pluxee, complementing volume growth and reinforcing our ability to sustainably improve profitability. Let's switch now to the commercial traction delivered in H1 on Slide 11. Our commercial trajectory remains solid in H1 and positions us well on track to deliver on our full year business targets. First, we achieved a record level of new client wins, generating EUR 0.9 billion of new annualized BVI across all client sizes and geographies. Second, net retention proved resilient despite a more challenging macro environment impacting end-user portfolios in some markets. Lastly, face value remains a structural growth driver of business volumes. In fiscal '24, we have generated EUR 2.9 billion of cumulative incremental BVI from increases in face value, bringing us very close to our 3-year target of more than EUR 3 billion. Let me now detail each of these levers, starting with new client development. New client development was particularly strong in H1. We generated a record EUR 0.9 billion of annualized BVI from new client acquisition with positive momentum across all 3 regions. It reflects our strong commercial execution tailored to the specific dynamics of each local market. Just as importantly, performance remained well balanced across client sizes with SMEs making a substantial contribution and accounting for more than 30% of new development over the semester. In addition, recent M&A contributed significantly, notably in Latin America, where the Santander partnership continued to perform at full speed. The acquisition of Beneficio Facil has also been a step change for our employee mobility business in Brazil, driving more than 50% volume growth year-on-year. This momentum is to be reinforced by the ongoing integration of Skipr in Belgium and in France. With a strong diversified and actionable pipeline, we are confident in our ability to deliver ahead of our full year development target, supported by disciplined execution in the second half. Now beyond new client acquisition, let's now look at net retention, another key driver of our commercial performance. Over the semester, client loyalty remains consistently at high level, underlining the strength of our value proposition to our clients. This provides a solid foundation to actively manage our revenue per client through 2 key levers: First, increase in sales values, which remain a key contributor, driven by inflation trends in Latin America and rest of the world as well as the progressive implementation of recent legal cap increases across Europe. This dynamic is expected to accelerate and continue to support BVI growth in H2 and beyond. Second, the cross-selling, which gained momentum, reflecting our strategy to stand up as a multi-benefit partner for our clients, illustrated as an example, by the accelerated deployment of our employee mobility solutions, as highlighted on the previous slide. At the same time, end user portfolio remained under pressure in some markets. A more challenging macroeconomic environment continued to weigh on labor market dynamics in some countries, leading to a temporary contraction in the covered employee base. As a result, net retention stood at 99% in H1, excluding the temporarily delayed large employee benefit program in Romania. It demonstrated solid resilience in the current environment, confirming the stickiness of our solutions and the effectiveness of our commercial and portfolio management strategy. And with that, I will now hand over to Stephane to take you through our financial performance in more detail. Stephane Lhopiteau: Thank you, Aurelien. Good morning, everyone. It is a pleasure to be with you today to present our financial performance for the first half of fiscal year 2026. Let's start this financial review with the business volumes issued on Page #15. Total business volumes issued or BVI reached EUR 12.9 billion in H1 '26. Employee Benefits remained the growth engine, reaching EUR 10.1 billion of BVI in H1, representing a plus 5.9% organic increase over the semester. It is worth noting that these figures include the deferred rollout to H2 of a large employee benefit program in Romania. Excluding this temporary phasing effect, Employee Benefit BVI grew plus 6.8% organically in H1. This performance reflects robust commercial execution driven by Latin America and Rest of the World as anticipated, which both delivered double-digit organic growth in Employee Benefits BVI over the first semester. Looking now at other products and services, business volume issued declined by minus 20.9% organically in H1. As already mentioned by Aurelien, this performance reflected temporary headwinds in Public Benefits due mostly to anticipated contract cycle and phasing effect of certain large Public Benefit programs across Continental Europe. Let's now see how such business volume issued translated into total revenues on Slide 16. Total revenues reached EUR 655 million in H1 '26, up plus 5.6% organically or plus 3% on a reported basis, including a minus 3.6% currency impact, mainly due to activities in Turkey, partly offset by a plus 1% scope effect. In Q2, total revenues increased by plus 2.8% organic. Operating revenue reached EUR 573 million in H1, up plus 5.7% organically and plus 3.9% on a reported basis, driven by Employee Benefits, which continued to deliver high single-digit organic growth as introduced by Aurelien earlier. Focusing on Q2 '26. Operating revenue reached EUR 306 million, delivering plus 2.8% organic growth. As expected, growth moderated, mainly reflecting nonrecurring effects in other products and services, which I will detail on the next slide. When stripping out these one-offs, we continue to see a strong and sustained momentum with operating revenue organic growth running at plus 6.1% in Q2 and plus 8.8% in H1, confirming the quality and resilience of our core business. Lastly, float revenue increased by plus 5.3% organically, reaching EUR 81 million in H1 '26. On a reported basis, it was slightly down by minus 2.5%, including a minus 7.9% currency impact. I will come back to the float revenue growth drivers in more detail later in the presentation. Before that, let's focus on the key drivers behind operating revenue performance over the semester as shown on Page 17. Employee Benefits operating revenue reached EUR 500 million in H1 '26, delivering a solid plus 9.4% organic growth or plus 7.8% on a reported basis. This high single-digit organic performance was fueled by strong commercial momentum, especially across Latin America and Rest of the World, and it was supported by a solid 5% take-up rate. Focusing on Q2 '26, Employee Benefits generated operating revenue of EUR 266 million, up plus 7.5% organic. Turning to Other Products and Services. Operating revenue reached EUR 73 million in H1, down minus 14.3% organically, of which minus 20.6% in Q2. As Aurelien explained it earlier, this decline mainly reflects first, temporary Public Benefit impact in Continental Europe, combined with the ongoing strategic repositioning of our activities in the U.K. and the U.S., including the exit from selected noncore and lower profitability contracts temporarily weighing on both countries' performance. Let's give a look at the geographical breakdown to see how these operating revenue trends were reflected across regions over the semester on Slide 18. Starting with Continental Europe. Operating revenue reached EUR 250 million in H1 '26, corresponding to a minus 0.7% organic contraction and a plus 0.8% reported growth. The trend, excluding one-off effects in Public Benefit remained solid, delivering plus 3.4% organic growth in H1. Growth continued to be driven by Southern Europe, especially Spain, which was up double digit organically, while France and Eastern Europe were more affected by the macroeconomic environment, notably with regards to end user portfolio trends. With the Public Benefit impact progressively fading, growth trend in Continental Europe should improve in Q3 versus Q2 in a still challenging macro context. Turning to Latin America. Operating revenue amounted to EUR 229 million in H1 '26, delivering a strong plus 12.1% organic growth. The region continued to benefit from strong commercial momentum, particularly in Brazil. Growth was driven by increasing penetration of Pluxee solution across both corporates and SME clients, combined with a continued increase in face values supported by local inflation dynamics. In addition, public benefit activity in Chile remains strong, further contributing to the region's strong performance. As the initial regulatory evolution in Brazil has been affecting the group since the beginning of March, operating revenue growth will turn negative in Q3 in the region as expected. Lastly, in Rest of the World, operating revenue reached EUR 94 million in H1, growing plus 8.4% organically or minus 5.3% on a reported basis, including a minus 13.9% currency impact, mainly related to the depreciation of the Turkish lira. Turkey remains a key growth driver for the group, supported by local hyperinflation environment driving higher face values across the client portfolio as well as by continued penetration through new contract wins. As already indicated, performance in the region also reflected the ongoing transformation of our activities in the U.K. and the U.S. Excluding this impact, operating revenue grew plus 16.9% organically, highlighting the strength of the momentum. Before contributing back to growth from fiscal 2027, this in-depth transformation is expecting to weigh more heavily on Q3 than on Q2 as the cleanup of legacy activities continues. I will now come back to the contribution of float revenue to the top line growth in H1 on Page 19. Float revenue reached EUR 81 million in H1 '26, still delivering a plus 5.3% organic growth, including plus 2.2% in Q2. On a reported basis, float revenue decreased slightly by minus 2.5% year-on-year, impacted by a minus 7.9% currency effect, mainly driven by the Turkish lira depreciation. Float revenue organic growth was mainly driven by higher business volumes issued, notably in countries where interest rates remained elevated such as Turkey or Brazil. This was partly offset by lower interest rates across most geographies, particularly in Europe, following successive interest rate cuts by the European Central Bank. Mitigate interest rate volatility and secure float revenue over time, the group continued to actively deploy a flexible investment strategy, increasing exposure to longer tenor and fixed rate instruments tailored to local financial market conditions. As a result, the average investment yield reached 6.1% in H1 '26, up plus 10 basis points year-on-year. Looking ahead for the full year, given, one, the current geopolitical environment and the implied volatility on interest rates; and two, the still uncertain impact from regulatory evolution on float balance sheet position in Brazil, visibility remains limited. As a consequence, our growth expectation for fiscal year '26 float revenue are now fluctuating from slight decrease to slight increase organically. After reviewing the top line performance, let me walk you through the significant profitability improvement delivered over the semester, starting with Slide #20. Once again, this semester's profitability performance clearly highlighted the strong value creation embedded in our business model and supported by our continued cost discipline. Recurring EBITDA reached EUR 242 million in H1 '26, up plus 12.9% organically and plus 7.7% on a reported basis. Recurring EBITDA margin stood at 37%, increasing by plus 229 basis points organically and plus 159 basis points on a reported basis. This strong margin expansion well spread across regions was largely driven by operating performance. Indeed, recurring operating EBITDA, I mean, here excluding float revenue contribution grew by plus 17.3% organically, translating into a plus 268 basis point organic uplift in the recurring operating EBITDA margin up to 28.1%. This performance reflects, as Aurelien already explained, strong operating leverage as well as strict cost monitoring discipline and continuous operational improvement implemented both locally and at group level, combined with top line and cost synergies from acquired businesses. This strong growth in recurring EBITDA contributed positively to the full income statement all the way down to net profit as disclosed on Page 21. Below EBITDA, first, depreciation and amortization stood at minus EUR 62 million in H1 '26, showing a slight increase year-on-year, consistent with the specific phasing of our CapEx in fiscal year '25 and the additional contribution from newly acquired companies. Second, other operating income and expenses decreased from minus EUR 13 million to minus EUR 8 million, reflecting limited one-off rationalization costs in H1 '26 compared with residual carve-out costs in H1 '25. For the full year, including Brazil restructuring, OIE are expected to remain broadly stable year-on-year at minus EUR 25 million. Operating profit or EBIT reached EUR 172 million, up plus 9% in H1 '26. Financial income and expenses came in at minus EUR 3 million, broadly stable versus H1 of last year. Borrowing costs remained unchanged and were largely offset by interest income generated from non-Float related cash. For the full year, we expect financial income and expenses to land between minus EUR 15 million and minus EUR 10 million. Finally, income tax expense reached minus EUR 53 million with an effective tax rate broadly stable year-on-year at 31.4%. As a consequence, net profit reached EUR 116 million in H1 '26, up plus 9.3% year-on-year, reflecting the strong expansion in recurring EBITDA, lower other operating items and disciplined financial expense management. Excluding OIE, adjusted EPS group share reached EUR 0.78, representing an increase of plus 6.8%, including the initial accretion from the execution of the share buyback program. Let's now take a look at how our solid operational and financial performance translated into a strong cash flow generation over H1 on Slide 20. Recurring free cash flow reached EUR 210 million in H1 '26, driven by the combination of a significant increase in recurring EBITDA, a disciplined monitoring of CapEx and a favorable evolution in working capital, excluding restricted cash. CapEx reached EUR 44 million in H1 '26 or 6.8% of total revenues, stable year-on-year, reflecting our disciplined capital allocation and the continued shift towards a more OpEx-driven model supported by cloud migration and IT service management. Change in working capital, excluding restricted cash, improved to EUR 85 million compared to EUR 43 million last year driven effective focus on cash collection and management. As a result, recurring cash conversion rates reached 86% in H1 '26, reflecting the quality of our recurring earnings. This performance keeps us well on track to meet our 3-year average objective of around 80% cash conversion despite expected regulatory headwinds in Brazil in the second half. This strong cash generation has also been a key driver supporting the further increase in the group net financial cash position as we see on Page 23. Net financial cash position, excluding restricted cash, reached EUR 1.270 billion as of end of February '26, representing an increase of plus EUR 107 million over the semester. This evolution reflected the strong recurring free cash flow, which more than covered the cash outflows for first, the deployment of our M&A strategy; second, the dividend payment; and third, the ongoing execution of the EUR 100 million share buyback program, of which around 64% had been completed by the end of H1. Gross financial debt remain quite unchanged over the semester at a bit less than EUR 1.3 billion, mainly composed of the 2 long-term bond tranches. During H1, we also entered into fixed floating interest rate swaps on part of this bond fixed rate debt, further optimizing the financial structure as part of our asset liability management strategy in connection with float revenue. And then this Pluxee's strong financial cash position and cash generation is also reflected in our unchanged BBB+ rating and stable outlook from Standard & Poor's. And with that, I will now hand it over back to Aurelien for the outlook. Aurélien Sonet: Thank you, Stephane. Let me now wrap up this presentation with our outlook, but starting with an update on recent developments in Brazil and the group's updated action plan. Since the revised framework was announced, we have consistently executed our action plan in Brazil, making tangible progress across our 3 work streams in line with regulatory milestones. So starting with operations. From early March, we have implemented the first measures set out in the decree. And in parallel, we've been preparing the rollout of our best-in-class open-loop solution, leveraging our existing [indiscernible] capabilities with the deployment starting in May. In addition, we've been deploying a multilevel efficiency plan to adapt our cost base and protect profitability, adjusted over time to reflect the different stages of the reform and our business needs. In parallel, we continue to maintain proactive and constructive discussion with Brazilian public authorities, focusing on feasibility, scope and implementation time lines to ensure a pragmatic and orderly transition. And finally, we continue to pursue our longer-term legal actions, keeping all options open to support the sustainable development and proper functioning of the PAT work in Brazil. Overall, we are executing our road map in line with the plan and teams both in Brazil and at group level remain fully mobilized. Combined with our strong H1 performance, this supports our confidence in confirming all our financial objectives for fiscal 2026. As a reminder, our fiscal 2026 objectives assume the full implementation of the Workers' Food program reform for the PAT from H2. It also incorporates the positive impact of our mitigating actions and the progressive adaptation of our operating model in Belgium. Within that framework, we continue to expect stable total revenues on an organic basis for the full year, slight organic expansion in recurring EBITDA margin. This is underpinned by the resilience of our model and by the actions we are taking across the group to protect profitability in a more challenging environment. And finally, recurring cash conversion of around 80% on average over fiscal 2024 to 2026. Overall, our strong H1 delivery, combined with our disciplined execution, reinforce our confidence on full year objectives while continuing to manage proactively in this complex geopolitical and macroeconomic context. To conclude, I would say that Pluxee once again delivered a strong H1 performance with solid revenue growth, margin expansion and robust cash generation. While we are facing a contained regulatory evolution in Brazil, it does not change the fundamentals of our business model, the strength of our commercial momentum nor our discipline on execution. And this is why we remain fully confident in meeting all our full year objectives and focused on long-term value creation for the group. Thank you for your attention. And now with Stephane, we will be happy to take your questions. Operator: The first question comes from Pravin Gondhale of Barclays. Pravin Gondhale: Firstly, on retention, it's sort of 99%, excluding Romania. Could you please give us a sense when do you expect it to sort of return to positive territory? And then secondly, on CapEx levels, H1 CapEx were broadly flat year-on-year, but I remember you chatting -- you talking about FY '25 CapEx being lower on temporary sort of delay in IT and tech CapEx. So given your shift to OpEx-driven model now, what's the right level of CapEx we should be thinking in medium term? And then finally, on Brazil, it's been sort of a few months since the announcement of decree. Since then, have you announced any incremental cost mitigation or renegotiation actions, which should help you to reduce the impact from the regulations? Aurélien Sonet: Thank you, Pravin. So I will start with your last question regarding Brazil. So indeed, as we said during our presentation, we started the implementation of our mitigation plan. And I'd like to highlight the strong commitment from our teams locally. And they've been working on 2 sets of measures. On one hand, the client renegotiation for all our clients who've been using the Workers' Food Program solution. So it has been a very deep work and it's a hard conversation that we've been having with clients, but positive overall. And the second set of measure is much more related to the cost. And as we said, we've been running ongoing cost reduction and optimization actions. And we are doing it in accordance with both our business needs and the evolution of our operating model. What I would mention among other items is that we already conducted a restructuring initiative in February to start streamlining the organization. Regarding the CapEx, maybe, Stephane, you want to take this? Stephane Lhopiteau: As you rightly noticed, this semester, we were consistently with last year for the first semester, a little bit lower compared to the 9% average of CapEx versus revenue that we expect and still expect for this full year. We are right now a bit lower compared to what we used to be 2 years ago with, as you said, this switch to a more OpEx-driven model. However, what happened this semester, there is nothing related to some specific events like what we faced last year with the carve-out. This is more just the pace of our internal project where the pace of activation of the project when they are fully completed was a bit behind. But overall, in the full year, we are fully on track with the more standard 9% over. And then in the medium term, it's likely that this percentage will be reduced by still switching to this OpEx-driven model and also with the higher scale of the group as the group will deliver more growth in the coming years. Aurélien Sonet: Thank you, Stephane. And regarding the net retention, look, we maintain our 100% objective for the full year. So we really aim at reaching at least 100% and we will be helped on that sense by the face value increase. We mentioned it. I mean, we still anticipate stronger contribution from the face value increase on H2. And on the end user portfolio growth, for the moment, for some specific country, we expect a positive inflection. But we also -- we have to remain a bit focused within this challenging macroeconomic and geopolitical environment. Operator: The next question is from Hannes Leitner of Jefferies. Hannes Leitner: A couple of questions from my side. Maybe you can comment on your reference to end user portfolio decline. Can you maybe double-click on that, talking also a little bit in terms of geographic dynamic, especially I would be interested to understand the European dynamic. And then thanks for talking about Turkey. Maybe you can also give us a little bit more detail on your current size of the business operating revenue contribution and how there is the dynamic in terms of market share, et cetera? And then just lastly on Brazil. There's one -- it sounds like the incumbent players are looking for kind of adopting the open loop, but also maintaining the closed loop. Can you just like talk a little bit about that, where -- in which case the closed loop just makes sense to maintain and what's led to the decision? Aurélien Sonet: Thanks a lot. I will start with your question regarding Brazil. So in Brazil, as we were sharing with you, we are still having constructive discussion with the Brazilian government clarifying whether there is an obligation even for the Workers' Food Program, is it a definitive decision to use only an open loop system. So we are currently having those, again, constructive discussion. But it's fair to say that if it's -- this obligation is confirmed, we still have other products in Brazil that will still take advantage of our closed-loop network, meaning a strong relationship with merchants. And on this topic, just to share with you, we still see some very good traction. I mean many -- and when I say many, it's thousands of merchants contacting us every month, close to 10,000 merchants to still onboard into the acceptance network of Pluxee. So that's for the -- regarding Brazil and the open loop and closed loop. Stephane maybe for Turkey. Stephane Lhopiteau: Turkey is as I think we already said, is one of our key countries. It's among our top 6, something like top 6 countries. It's a dynamic country for us where -- and this country contributes well to the organic growth of the group with double-digit organic growth, still strong double-digit organic growth from this country. And we don't share precise numbers by country. So I can't -- I'm not going to tell you -- you asked what is the level of operating revenue. We disclose it for France and Brazil as required by the accounting standard because this country represents more than 10% of group revenue. So you can conclude that Turkey is a big one among the top 6, but lower than 10% of the group revenue. Aurélien Sonet: And regarding the end user portfolio decline, so indeed, overall, at group level, we disclosed quite a negative impact. But it's fair to say that it's pretty different from a country to another, from sector, from industries to others as well. We are still penalized in Europe and mainly in countries such as France, Romania and Austria. And for example, in France, we see companies that are really cautious. Some are clearly putting critical projects and investments on hold, and they remain quite conservative in their approach to systems. And this impact is even more visible in the SME segment. And we saw it even during the Christmas campaign. And yes, after we -- I mean, previously, we are mentioning Mexico is still -- I mean, the situation is getting better, but it's not back to positive yet. And we have other countries where still the SME segment can show some weak signal, I would say. So that's why, again, I mean, we remain very, very cautious for H2 on this specific indicator. Hannes Leitner: I'd just like to explain that because they have been impacted by public social programs. So when you reference that kind of end user portfolio dynamic, is that also because of the expiry of those contracts? And if you now exclude those public contracts, just focusing on the core meal voucher, would you say that... Aurélien Sonet: No, no. I was not referring to those public benefits contract. I was really referring to the employee benefits business. Yes, there are some industries such as the IT, automotive industry that in Eastern Europe are under [indiscernible] at the moment. Operator: The next question is from Justin Forsythe of UBS. Justin Forsythe: Just a couple of questions, if I might. I wanted to come back on Brazil. I think we talked last quarter about some of the puts and takes between the revenue impact that you expect alongside the cost reductions. Just wondered if we could revisit that and confirm the progress there. And maybe talk about the different buckets of cost. I think there's a good portion of cost, which comes out relating to processing. So meaning when you remove some of the back-end processing, as you move to open loop, there is a big reduction in cost as a result of that. I wanted to focus on that other portion of cost, which is the OpEx side. Is there maybe more detail you can give on the specific actions you've taken? Aurélien Sonet: Okay. Thank you, Justin. Stephane, do you want to start? Stephane Lhopiteau: And you might complement? Aurélien Sonet: Yes. Stephane Lhopiteau: Justin, as Aurelien explained during the presentation and answering some of the previous question, in Brazil, I think we need to make a distinction between the potential endgame and the transition period. So the endgame and when I say endgame, there is a lot of uncertainty about this endgame, and we explained that right now, we took an assumption of a worst-case scenario with a full implementation of the reform as currently drafted in the decree. And this is this end game. And based on this endgame, we say that our business in Brazil might be reduced by something like twice. And then in this case, we will target to adapt significantly our business model in the countries by reducing our cost base. And we started to look at it because we are preparing for this situation. And it's almost all lines in the cost base that will be concerned, both processing costs as part of cost of sales or SG&A as well. And we said that, again, with this end game, we would target to keep our EBITDA margin in the country unchanged, meaning that if the top line was to be reduced in the end by twice, we will have to organize things to restructure things so as to be able to reduce our cost base by twice as well in order to keep this EBITDA margin unchanged. Now this is not where we are today. As Aurelien explained, we are in a transition phase. We are -- there are still a lot of uncertainties regarding the scope, the time line, the technical feasibility of this reform with some ongoing discussion with the government as well. So the industry has engaged with the government, and we'll see what will happen. So meaning for this fiscal year '26 and for the second half, we have started to reduce a little bit our cost base as we are going to face some preliminary headwinds, but we also need to protect the top line of the company in case in the end, the reform was to be implemented only partially or in a different way compared to what is currently contemplated. So therefore, there will be an impact in the second half of the year, but the potential 50% decrease in revenue and in the cost base, this is for a much later period in case, again, the full reform was to be implemented as currently started. Aurélien Sonet: And maybe just to complement on the revenue side because you remember that the growth in the business volume and the performance of Brazil remains very strong in terms of business volume growth. Our new sales in H1 were very high. We still benefited from the full impact of our partnership with Santander. We also enjoyed a strong performance in cross-selling, thanks to our new employee mobility benefit product. And talking about H2, we still anticipate similar dynamic in terms of business volume growth than in H1, i.e., double digit. And for us, this is extremely important and positive. Operator: The next question is from Andre Juillard of Deutsche Bank. Andre Juillard: Two questions, if I may. First one about the amortization. Could you give us some more color about the evolution of the amortization during H2 and the year after because you have -- correct me if I'm wrong, that you have 2 components. First one about the general evolution of the amortization regarding the CapEx and the OpEx. And secondly, the plan on M&A. And this is my second question. Your cash net position is even stronger than what it was at the end of last year. Do you have any new plan about the use of this cash or still not clear? Stephane Lhopiteau: Andre, regarding -- so this is Stephane speaking, but I guess you recognize my voice. Regarding your question about depreciation and amortization, no surprise for us. This is fully consistent with the pace of our CapEx in the last 2 years. If you look at it over the last 2 years, we capitalized in average, there are some differences year-on-year, but close to EUR 110 million per year. It was a little bit more than this in fiscal year '24. It was a little bit less in fiscal year '25. It will be a little bit more in this year, fiscal year '26. So this is the pace. And after a while, we are likely to reach the same level of depreciation year-on-year, and this is what we are seeing today with a little bit of contribution from the newly acquired company. If you think about companies like Pobi or Skipr, which have some tech assets, of course, we now consolidate the depreciation of the tech platform of these companies. And at the same time, in terms of amortization of intangible assets as identified as part of the business combination, no surprise, this is fully in line again with we were expecting. Regarding your question on the net cash position, I think it's worth differentiating 2 cash position. You have the overall net cash position. And we also disclosed clearly in our activity report, what we call this net excess cash position, making a clear distinction between the contribution of float related cash to cash and this excess cash. And if you look at this excess cash -- excess cash in the first half of the year with no surprise, we don't benefit from an improvement, but we faced a decrease of about EUR 140 million in the first half, which is fully related to the payment of dividend, the execution of the share buyback program, the cash out of program, interest cost, which is happening at the beginning of the year, in the beginning of September every year and all this kind of things. So therefore, the first half of the year for us is always and if you look at what happened in fiscal year '25 or fiscal year '24, it was the same. The first half of the year for us in terms of excess cash, this is a period where we burn some cash, a little bit more this year with the share buyback program, while in the second half of the year, we don't have the significant cash outflows and building again a strong excess cash position for the full year. So I just wanted to make it clear, this EUR 107 million improvement in the overall net cash position is the combination of EUR 140 million decrease in excess cash and EUR 240 million improvement overall on the float related tax position. Aurélien Sonet: And maybe even regarding the question, any new plan on the use of this cash. Just to confirm that M&A remains a key pillar of our growth strategy. We saw it the acquisition that we completed last year had a material impact on our first half [indiscernible] delivering 1% scope effect, delivering also some growth synergies and Beneficio Facil in Brazil has been a very good example with this plus 50% BV growth in 1 year. So we see the acceleration. And we -- the integration of the more recent acquisition is progressing well. So we -- now we have a good track record, and we believe that we are well positioned to continue executing on our M&A road map. And we have a solid pipeline and -- but we -- again, we want to execute this road map in a very rigorous and disciplined manner. So we'll come back to you when it will be. Operator: [Operator Instructions] The next question, gentleman, is from Mahir Bidani of UBS. Mahir Bidani: Just wanted to kind of confirm around the EBITDA guide. You reiterated it, but that's given -- that was reiteration despite a pretty strong beat in the first half. Is that just implying conservatism? Or do you expect perhaps the sort of downward trajectory in 2H in the EBITDA? And in terms of the macro environment, is there a bifurcation between, I guess, the sectors you're seeing the end user portfolio reduction? Is that more the automotive versus the tech? Have you -- the conversations that you've had with some of your clients are reducing the end user portfolio, is that because of AI fears and then stopping hiring for that reason? Or is it more because it's like concentrated towards blue-collar macro jobs? So can you just provide a little color there on that? Aurélien Sonet: Yes. So regarding your second question, so indeed, we start having -- and we are engaging even proactively with our clients because most of them are wondering what would be the future of their organization. Not many of them have very clear answers. But what makes Pluxee so resilient is the diversity of our clients portfolio because we are serving small but also very large clients in the private sector, in the public sector and all of this in 28 countries. So that does explain the resilience. And within this range of clients, we have also, let's say, the future giants, the one who will take advantage of AI, I mean, in order to grow with them. So this is what I can tell you. But I mean, if we look at industry by industry, it's fair to say that at the moment, indeed, the automotive industry, the IT industry and part of the interim industry are currently under pressure because their clients are reading some of their budgets that are related to their own activities. And concerning the EBITDA? Stephane Lhopiteau: Regarding your question about our guidance on the EBITDA. So this is not specifically conservative, the slight improvement in the EBITDA margin. Of course, all the teams are already focusing on doing their best in order to always do better, but this is what we currently have in mind. And if I have a bit more color, we expect all the regions to go on improving the EBITDA margin with a similar trend compared to what we delivered in H1 with one exception, one big exception, which is going to be Brazil. And as I explained, in Brazil, we are not engaging right now in a pool of restructuring. We are making sure that we are able to benefit from all potential scenarios. So there is a little bit of cost reduction, but the reform for the short term and for the second half of the year will weigh a lot on the EBITDA margin of the group. And this is because of Brazil that in the second half of the year, we will face a lower EBITDA margin compared to the previous year. So overall, -- but the improvement, the uplift we delivered in H1 is going to be offset by a deterioration of the EBITDA margin in the second half of the year, not as big as what we delivered in H1. So there will be, in the end, the remaining small improvement in the EBITDA margin for the full year. Operator: There are no more questions registered at this time. Back to you, Mr. Aurelien, for any closing remarks. Aurélien Sonet: Thank you, and thank you for your attention this morning. In closing, I would like to reiterate our confidence in the future, supported by a strong first half and reiterate as well our continued focus on disciplined execution and long-term value creation. And with that, I wish you all a very good day. Goodbye. Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.