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Operator: Good morning, ladies and gentlemen, and welcome to the Mountain Province Diamonds Inc. Q4 2025 Webcast and Conference Call. [Operator Instructions] This call is being recorded on Wednesday, April 1, 2026. I would now like to turn the conference over to Jonathan Comerford. Please go ahead. Jonathan Christopher Comerford: Good day to everyone who has dialed in to listen to our Q4 and year-end 2025 results call. My name is Jonathan Comerford, and I am President and CEO of the company. Also present on this call is Steve Thomas, our CFO; and Reid Mackie, our Head of Diamond Sales and Marketing. At the conclusion of this presentation, we will be available for any questions you may have. . Firstly, I would like to draw your attention to our cautionary statement regarding forward-looking information. This presentation will be posted on our website for anyone who needs additional time to review the statement. Mountain Province Diamonds produces Canadian diamonds to the highest standards of corporate social responsibility, and this is something we continue to be proud of. We own 49% of the Gahcho Kué mine in the Northwest territories with De Beers Group, a division of Anglo American plc owning the remaining 51%. Today, I will speak to our Q4 and year-end 2025 results and provide some insight into our first quarter of 2026. Following that, Steve, our CFO, will discuss the Q4 and year-end 2025 financial performance of the company. Reid will comment on the overall diamond market. I'll then make some closing remarks to complete the presentation and answer any questions you may have. safety. Starting with safety, Gahcho Kué continues its strong performance in 2025 with total recoverable injury frequency rates of 2.2, which is the best ever achieved at the mine and below the 2.3 in 2024, which is a record at the time. Safety remains a top priority, and we will continue to focus on it across all operations. Q4 and year-end 2025 highlights. 2025 was always going to be a challenging year. In the first 3 quarters, we mainly processed low-grade ore from the Tuzo stockpiles while preparing the high-grade NEX ore body. This went largely as expected. In January to September 2025, we produced about 2.5 million carats at an average grade of less than 1 carat per tonne. In the last quarter, production picked up sharply, nearly 1.9 million carats at a grade of 2.25 carats per tonne. Daily production increased from 9,000 carats at the start of the year to 25,000 carats a day in November and December. The strong performance has continued into 2026. While grades in carats recovered were higher than expected, we saw a lower size distribution -- frequency distribution. In other words, the smaller stones, which are currently under pressure in the market made up a greater proportion of the overall carat production. In terms of mining, the operator moved 38.7 million tonnes of material in 2025. That's ahead of both the budget and guidance and more than 17% above 2024's figures. Access to the high-grade 5034 NEX ore body was achieved as planned. In summary for the operations. Overall, safety, processing and mining were performing well. I would like to thank all of the staff at the GK for what they've achieved in what is extremely challenging circumstances. Grade was a bit challenging early in 2025, but improved in Q4 and as we focused on the NEX ore body and has continued into 2025 -- or 2026. Diamond market. The diamond market remains very tough, particularly for small stones and positive signs have repeatedly been offset by external factors. U.S. tariffs have added uncertainty and the recent conflict in the Middle East has affected consumer confidence impacting key markets such as Israel and Dubai. Overall, the market remains highly uncertain. Liquidity, during 2025, our largest shareholder, Mr. Dermot Desmond, provided vital support during a period of low grade and challenging diamond prices. We are very grateful for this support. After year-end, the company was unable to meet its share of mining costs, which were particularly high in the first half of the year due to the winter road. This led our partner, De Beers to make in-kind elections as announced earlier this year. We are actively working with our partners to resolve these outstanding payments, and I hope to provide further updates in the coming weeks. Given the challenging market, the joint venture partners also decided to postpone the Tuzo Phase 3 earlier this year, allowing us to manage liquidity and preserve optionality. Before I close, I would like to take a moment to thank Jeff Swinoga for his outstanding contribution as a Director and as Chair of the Audit Committee. While we are sorry to see him move on to bigger and better things, we are very grateful for his commitment and staying on to see the audit through to completion. On behalf of the Board and the entire team, I would like to sincerely thank him for his service and wish him every success in the future. With that, I will now turn over the call to Steve, who will take us through the financial results. Steve? Steven Thomas: Thank you, Jonathan, and good morning, everyone. -- noting that all numbers discussed will be in Canadian dollars unless otherwise stated. As Jonathan has said, the company experienced tough market conditions throughout the year with prices falling notably in the second half of the year, which has impacted several aspects of the financial results beyond revenue. In Q4, we processed mined an NEX ore with average grade more than double that of the first 9 months. This explains the higher carats sold in Q4, approximately 50% higher than in each of the first 3 quarters. However, the average selling price in Q4 at USD 52 per carat was unchanged from Q3, reflecting continued market uncertainty, largely due to the 50% tariff on Indian rough diamond imports into the U.S. in place at that time. The average selling price for 2025 was USD 59 per carat, lower than any quarter since the mine opened, except for the prices in H2 2025 and in Q2 and Q3 of 2020 when the retail markets were closed due to COVID-19. This pricing environment has placed the company under significant financial pressure. The financial statements going concern note outlines measures taken to address liquidity, including debt raised to fund operations. It also details outstanding amounts owed to De Beers as operator for unfunded cash calls and how these balances have evolved since year-end. As in the first 3 quarters of 2025, Q4 pricing resulted in significant write-downs of diamond inventory and ore stockpiles, increasing production and depreciation costs. Although ore stockpile tonnes remained broadly unchanged since the midyear, they declined by 1.8 million tonnes in the first half of 2025. This led to the release of previously capitalized costs into production costs -- cash production costs unlike in 2024 when the stockpiles increased by 1.8 million tonnes and costs were capitalized. The resulting loss from mine operations in Q4 2025 was $50.2 million, contributing to a full year loss of $154 million, which compares to a $13 million loss in Q4 2024 and a full year profit of $18.4 million in the year 2024. In addition, Q4 2025 included a material impairment charge of $103 million, which equals a net $90 million after an offsetting deferred tax recovery. This complex calculation required additional audit work by KPMG, which delayed this week's earnings call to today. A weaker U.S. dollar in Q4 and for the full year resulted in an unrealized foreign exchange gain compared to a significant loss in 2024 when the U.S. dollar strengthened. Adjusted EBITDA, which accounts for that impact, saw 2025's result materially below 2024, although positive in Q4 2025 versus being negative in Q4 2024. Cash flow from operating activities was an inflow of $9.1 million in Q4 '25 and an outflow of $22.1 million for the full year, which compares to a $79.8 million inflow in 2024. The combination of low prices and the lowest annual sales volume since the mine opened reflects ongoing market instability and reliance on the lower-grade stockpile wall whilst we stripped the NEX ore body. Key factors for recovery include resolution of the tariff regime, improved geopolitical stability in the Middle East, both of which are critical to restoring diamond prices and enabling the company to meet its future financial obligations. Turning briefly to the balance sheet. Most notably, the year-end balance sheet reflects the reduction in property, plant and equipment by $103 million, being the noncash impairment charge, which effectively accelerates future depreciation charges. The injection of USD 40 million under the bridge credit facility and the equivalent of CAD 33 million through a working capital facility have been reported in the first 9 months of the year. During the year also, in agreement with De Beers, they have drawn funds from the decommissioning restricted cash account in our balance sheet to meet cash call requirements when due. Whereas the restricted cash balance was $14.4 million at the end of Q3. By the year-end 2025, it had been replenished fully to $34.9 million, but to note that since the year-end has been further utilized in a similar fashion to meet cash flows. For the combined value of the derivative assets at $343,000, this compares to an overall liability of $1.8 million at the 2024 year-end. The asset comprises $178,000 being the fair value of the early repayment feature within the second lien notes, which has increased by $780,000 over the quarter, but reduced by $5.9 million since 2024 year-end. The reduction in closing value compared to 2024 is due to a significant rise in the discount rate used to derive its fair value from 9% to now 15%. The other derivative asset of $165,000 represents the fair value of [ one ] USD 15 million currency hedge in place, which has since the year-end been settled. At the 2024 year-end, that was a liability of $7.9 million, given that there were USD 105 million of hedges outstanding that were out of the money. Considering the inventory of $151 million, they have decreased by $3.2 million over the quarter as there has been a $10 million reduction in supplies inventory and the ore stockpile has reduced by $1.9 million. And these reductions have been offset by an $8.8 million increase in the value of rough diamond inventory as the volume of carats on hand has increased by [ 280,000 ], albeit with each of those carats being $7 less in value in its carrying value. Closing inventory value for 2025 is $45.3 million lower than for 2024, primarily due to the $56.7 million reduction in the comparative value of the ore stockpile for which the tonnes held at 100% at 2.3 million tonnes have reduced by 1.8 million tonnes compared to the start of the year. That decrease is offset by supplies inventory being $8 million higher than in 2024, in large part due to consignment stock, which we now hold and early delivery of other stock items. There is also an increase in the value of rough diamond inventory by $3.4 million, reflecting the far higher volume of carats held, which increased by [ 324,000 ], albeit with a lower carrying value of $41 per carat compared to their opening carrying value of $72. This reduction reflects the impact of write-downs taken during the year to adjust the carrying value of cost to its lower net realizable value per carat. In respect of property, plant and equipment, or PPE, the year-end 2025 balance of $518.5 million is down $111.6 million over the quarter and $69 million over 2024 year-end balance. The increase reflects an increase in the decommissioning and restoration asset reported in PPE by $19 million as our share of the undiscounted decommissioning cash flows was reestimated upwards by $32 million in Q4 with the balance of that sum reporting mainly to inventory. Also, an additional $18 million was invested in sustaining capital during the year, plus an additional $45 million of capitalized waste activity in respect of NEX waste material, less about $45 million of depreciation, which is not associated with NEX capitalized waste. All of these additions were offset by the aforementioned $103 million impairment charge and a slight reduction of $3 million in assets under construction as that work was completed. For current liabilities, the $62 million increase in the accounts payable balance of $126 million at 2025 year-end compared to only $65 million at 2024 year-end reflects 2 major increase in respect of accounting for $24 million of accrued interest on the senior secured notes, which the lenders agreed to forego until payment in June 2026. This balance has grown as expected during 2025 and did not exist at 2024 year-end as it was previously being paid every 6 months. Secondly, unpaid cash calls due to the operator at the year-end of $30.6 million, which De Beers financed on occasions during the year by withdrawing funds from the company's portion of the decommissioning funding balance or by utilizing the overdraft facility, which is available to the operator. As addressed in the financial statements subsequent events note, since the year-end, De Beers has issued in-kind election notices or IKEs in respect of unpaid cash calls, which must be paid within 60 days in order to avoid an event of default under the GK joint venture agreement, where the first of these IKEs has become due, De Beers agreed to issue new IKEs in respect of any unpaid balance on the original IKE. And that is taking place whilst the companies are in discussion on how to resolve this issue and manage broader joint venture matters going forward. The current liabilities also reflect the following: the Dunebridge USD 40 million Bridge Credit Facility, which was fully drawn in July, and the balance reflects the principal, unamortized deferred transaction costs and the accrued interest, all translated at the period end closing FX rate. Secondly, the Dunebridge working capital facility of USD 23.6 million, which was fully drawn during Q2 2025 and is accounted for similar to the bridge credit facility. Thirdly, the fair value of the current component of the decommissioning and restoration liability, which has seen a little movement over the 3- and 12-month period ending December 2025 with the risk-free interest rate used in the calculation being comparable at both year-ends. The resulting change in the value of net current assets and current liabilities during Q4 2025 and across the full year results in the working capital position decreasing by $50 million during the quarter to minus $70 million and compares to a working capital balance of negative $120 million at the 2024 year-end. Turning to long-term liabilities. Of $479 million at 2025 year-end compared to $22 million at 2024 year-end, these comprise the translated value of the U.S.-denominated senior secured notes and junior credit facility, which, with the weakening of the U.S. dollar since the start of the year, tends to decrease the Canadian reported value, resulting in an unrealized foreign exchange gain of $4.4 million in the quarter and $15 million for the full year. The other material long-term liability is the discounted value of the decommissioning liability, which has increased from $83.5 million to $114.8 million, which reflects the increase in the estimate for the liability itself, offset by a slight increase in the discount rate used in its fair value calculation. Turning to earnings. Revenue for both Q4 and the full year 2025 declined significantly versus 2024, with average prices down 18% year-over-year and volumes down 31%, reflecting the market conditions and production sourced from the stockpile ore for the first 9 months of the year. Cost of sales at $310 million in 2025 exceed $249 million incurred in 2024. And when normalized for carats sold between the 2 periods and accounting for the higher write-downs of inventory to net realizable value, the underlying costs have increased about 20%, which reflects higher operating costs year-on-year, and increased depreciation charges associated with the higher levels of capitalized stripping undertaken. In respect of cash production costs at $76 per carat and $93 per tonne for the full year 2025, that compares to $60 per carat and $77 per tonne for the year-end 2024. And the costs rose year-over-year, driven by the aforementioned stockpile depletion in 2025 versus its growth in 2024. The gap in these costs that I've set out widen when you include deferred stripping given that $26 million of higher capitalized stripping costs were incurred in 2025 compared to 2024. Finance expenses in 2025 increased to $56 million for the year compared to $43 million in 2024, with the interest charge increase of $10 million, reflecting the new bridge loan and working capital debt facilities and the growing accrual on the senior loan notes and junior credit facility. Foreign exchange movements included both the unrealized gains on the debt translation and a realized loss of $4.4 million on hedge settlements made in the year, which were below the prevailing market spot rate. The deferred tax recovery totaling $30 million for 2025 compares to a charge of $1.6 million in 2024, with $13 million of that change driven by the impairment charge and the balance due to the operating losses incurred in 2025. The company reported a loss from operations of $50 million in Q4 and $154 million for the full year and that compares to a profit of $18 million in the year ended 2024 with the reduction of $173 million, reflecting reduced sales of $112 million and a $61 million increase in the cost of sales, as discussed earlier. In line with operating loss, operating cash flow was an outflow of $59 million for 2025 compared to $15.5 million in 2024. Debt funding of $89 million largely explains the difference to the operating loss versus the closing cash flow movement and provides the reason for us having a closing cash balance of $2.3 million. Adjusted EBITDA was $4.8 million for the year, equaling a 3% margin, and that compares to $91 million in 2024 with a 34% margin. As a result of the above, the net loss after tax was $151.6 million in Q4 and $279.5 million for the full year, which compares to an [ $80.8 million ] loss in 2024 with the difference largely due to the impairment charge, the significantly lower sales volume and price and the write-off charges against ore stockpile and rough diamond inventory flowing through the cost of sales and arising itself due to the low price environment. Loss per share was $1.32 for the full year compared to $0.38 in 2024. In conclusion, 2025 was a challenging year, marked by weak diamond prices and low sales volume whist mining through the NEX waste material. The company has relied on significant financial support from its major shareholder, Mr. Desmond of which -- for which we are very grateful, but we still faced a $30.6 million shortfall in cash calls made to the operator at the year-end. And as mentioned, the going concern note addresses the company's liquidity challenges and extends into the developments seen in Q1 of 2026. Despite these pressures, the mine achieved record operational performance and accessed the highest grade ore in its history. Ongoing discussions with De Beers and the lenders aim to stabilize our financial position. However, a recovery in market conditions is critical to meet obligations and for us to realize the benefits of increased production coming from the NEX ore body. Thank you. And I will now hand over to Reid. Reid Mackie: Thanks, Steve. Going into 2026 from 2025, overall market sentiment was cautious amid the ongoing uncertainty over U.S. tariffs and the pending sale of De Beers. The rough market was showing signs of improvement early in the year and the industry more optimistic for the year ahead. However, the outbreak of war in the Middle East and tariff uncertainty has shifted the market back into a more conservative wait-and-see mindset. Presently, this market reticence is based more on logistical disruptions rather than structural market shifts. At the beginning of the year, we saw signs of a rough diamond market recovery supported by positive holiday retail results and producer supply and price management. In the U.S., holiday retail sales were positive with sales exceeding $1 trillion for the first time year-on-year growth. and year-on-year growth was estimated between 3.5% to 4.2%, and jewelry, the jewelry component of this was up 1.6%. Looking ahead in 2026, the National Retail Foundation recently forecast that 2026 U.S. retail will grow 4.4% over 2025. Globally, luxury brands have continued to perform well, leveraging the rarity and exclusivity of naturals to drive diamond jewelry sales. Solid demand and growth were noted in the Americas, Japan and Hong Kong. And finally, we saw Chinese jewelry retailers reporting improved performance in Q4. The lab-grown diamond market continues to grow, albeit at a slowing rate and primarily in the U.S. at commercial retailers where the incentive to hold on to the short-term high percentage retail margins is still present, if not waning. This contrasts with the rest of the world where naturals hold overwhelmingly strong consumer preference, most importantly in the growth markets of India and China. The luxury brands, which have shown the strongest performance in the jewelry sector, continue to promote the exclusive use of natural diamonds in their collections. More recently, even at U.S. retailers such as Blue Nile, there are signs of differentiation back towards natural diamonds as elevated luxury. The widening price gap between natural diamonds and lab grown appear to have hit an inflection point where this price differentiation is being -- now being recognized at the consumer level. Meanwhile, updates in grading terminology and regulatory guidance serve to further underpin the deepening market segmentation of the 2 products. Global macroeconomic factors stemming from the recent war in Iran and continued tariff uncertainty warrant close monitoring of the rough diamond market. In 2025, we saw diamond jewelry production strategies in the midstream evolve quickly to minimize the impact of U.S. tariffs, highlighting the nimble adaptability of the diamond industry, especially in India. However, it remains to be seen how the most recent events will impact consumer spending preferences going forward. Despite headwinds, it's important to remember that we are still seeing the fundamental signs of a diamond market stabilization to support price recovery. With much reduced rough diamond supply upstream, solid consumer demand and growing differentiation away from lab growth with naturals being an elevated luxury product, we look forward to long-term price growth for our diamonds. And with that, I'll pass you back to Jonathan for his closing remarks. Jonathan Christopher Comerford: Thanks, Steve, and thanks, Reid. Just to summarize some of the highlights for 2025. In terms of safety, we had record total recordable injury frequency rate performance, reflecting the ongoing commitment to safety. In terms of production, Q4 2025 drove a strong finish with nearly 1.9 million carats recovered at 2.25 carats per tonne and daily production rising from 9,000 to 25,000 carats, and that has continued into 2026. In terms of mining, we mined out 38.7 million tonnes in 2025 ahead of the budget guidance with the high-grade 5034 NEX ore body access as planned. We still, however, face a very challenging diamond market with smaller stones remaining under pressure, in particular, due to global uncertainty, tariffs and geopolitical factors, which are keeping the market very unpredictable. And then finally, in terms of liquidity and strategic focus, the focus continues to be working with the beers and our stakeholders to manage costs and optionality while working with other stakeholders, including our workers, government, et cetera, to get through this very challenging time. I would like to thank you for your time. My team are now available for -- take any questions you may have. So over to the operator. Operator: [Operator Instructions] There appear to be no questions. I will turn the call back over to Jonathan Comerford for closing comments. Jonathan Christopher Comerford: And there's no questions from the received in, Steve, is there? Steven Thomas: No. Jonathan Christopher Comerford: Webcast... Steven Thomas: None online. Jonathan Christopher Comerford: Okay. Steven Thomas: Sorry, one has just come on the screen. Jonathan, I apologize. It's just popped up. Can you tell me the total value of diamonds sold on March 17 at the auction? That -- I don't think we can disclose that number. That's from Mr. Barry White from the Sunday Times Ireland Edition because we're here to deal with the year-end financial results. Jonathan Christopher Comerford: Not -- that will be released as part of the Q1 results. Steven Thomas: Correct. Jonathan Christopher Comerford: Which is in May. Steven Thomas: No other questions, Jonathan. Jonathan Christopher Comerford: Okay. So I would like to close off this call, and I'd like to thank everyone for listening in and for the perseverance with this company. It's been a very challenging year. And hopefully, we'll have some news to disclose to the market in the not-too-distant future. I would like to wish everyone a happy Easter, and thank you again. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Gary Friedman: There are pieces that furnish the home. And those who define it. There are places you visit. And those you remember. There are spaces you move through. And those have moved you. Welcome to the world of RH. Albert Einstein's Three Rules of Work: Out of clutter, find simplicity; from discord, find harmony; in the middle of difficulty lies opportunity. Seem especially relevant at this moment. We're compounding clutter from tariffs, global discord as a result of war, and the most dire housing market in decades can make it difficult to separate the signal from the noise. It's important to remember necessity is the mother of invention. And our most important innovations were birthed during the most uncertain times. Transforming a nearly bankrupt Restoration Hardware into RH, the leading luxury home brand in North America was not a feat for the faint of heart. While the external challenges are somewhat familiar, our internal opportunities are massively different. We're not closing stores and fighting to survive. We're building a never seen before brand that's positioned to thrive. Before we get into the details of our strategy, let's start with a few facts that should quiet some of the noise. In 2025, RH achieved revenue growth of 8% and 2-year growth of 15%, far outpacing our furniture industry peers by 8 to 30 points. Adjusted EBITDA reached $597 million, or 17.3% of revenues versus $539 million or 16.9% of revenues in 2024. Free cash flow of $252 million versus negative free cash flow of $214 million in 2024, an increase of $466 million year-over-year. Those results were despite 2025 being our peak investment year with $289 million of adjusted CapEx to support our global expansion plus an additional $37 million to purchase the Michael Taylor, Formations and Dennis & Leen brands to support the launch of our new concept, RH Estates, a strong performance considering the unusual circumstances. Let me shift your focus to our strategy and how we expect our growth to accelerate over the next several years. We believe there are those with taste and no scale, and those with scale and no taste. And the idea of scaling taste is large and far-reaching. We believe our goal to position RH as the arbiter of taste for the home will prove to be both disruptive and lucrative as we continue our quest at building one of the most admired brands in the world. We like to use a simple question to frame our significant opportunity. Who is the home brand for the luxury customer? The LVMH, Hermes, Cartier or Cucinelli customer. RH has curated the most compelling collection presented in the most inspiring spaces in the world. Our brand attracts the leading designers, artisans and manufacturers, scaling and rendering their work more valuable across our growing global platform. Our product is both categorically and stylistically dominant, enabling RH to address the largest market of any brand of its kind. We curate across the 7 major product categories: furniture, upholstery, outdoor, lighting, linens, rugs and decor, and we integrate across the 3 dominant product styles, traditional, contemporary and modern, which we refer to as RH Estates, RH Interiors, and RH Modern. RH Estates, our newest brand extension, launching this spring, will address the traditional market where the RH brand is currently underpenetrated. 60% of luxury homes feature classic or traditional architecture, which influences the majority of furniture purchasing behavior. RH Estates will feature the introduction of RH Bespoke Furniture, customizable collections from our recently acquired Michael Taylor, Joseph Jeup, Formations and Dennis & Leen to the trade brands. RH Estates will also include the introduction of RH Couture Upholstery by Dmitriy & Co., tailor-made sofas, sectionals and chairs of arguably the highest quality upholstery available anywhere in the world. Designers will be able to order custom made sizes and finishes plus specified COM fabrics. RH Bespoke Furniture and RH Couture Upholstery will enable interior design firms to now specify RH for their most discerning clients and custom projects. RH Estates will also include collections from many of the most talented designers and artisans in our industry. Let's take a look at some of their work. [Presentation] Gary Friedman: RH Estates will premiere at the opening of RH Milan, the gallery on the Corso Venezia, a 70,000 square foot former palace, during Salone, the largest design show in the world with an estimated 500,000 visitors descending on the city that week. The launch of RH Estates will include a dedicated source book, mainly mid-May, and international advertising campaign and freestanding Estates Galleries in Greenwich, Connecticut and the San Francisco Design District opening early summer. And the West Hollywood Design District opening in 2027. We believe RH Estates will become our largest and highest margin brand extension, driving significant growth over the next several years. Let me shift your attention to our multidimensional physical-first global ecosystem, the world of RH. That goes far beyond a typical multichannel approach, inspiring customers to dream, design, dine, travel, and live in a world thoughtfully curated by RH, creating an emotional connection unlike any other brand in our industry. The question we often are asked is why physical first in a digital world? Let me explain. Furniture remains the least digitized large retail category with an 80-20 store to online split, with luxury furniture estimated to be as high as 95.5%. Why do stores still dominate? Comfort, scale, finish and quality are hard to judge online. Even when customers purchase on a website, most experienced the product in a store, we believe the physical manifestation of a brand will continue to be significantly more valuable than an invisible online way. We also believe most retail stores are archaic windowless boxes that lack any sense of humanity. That's why we don't build retail stores. We create inspiring spaces. Spaces that are a reflection of human design, a study of balanced symmetry that creates harmony. Spaces that blur the lines between residential and retail, indoors and outdoors, home and hospitality, spaces with garden courtyard, rooftop restaurants, wine and barista bars. Spaces that activate all of the senses and spaces that cannot be replicated online. While most have been closing or shrinking the size of their stores, we've been building some of the largest and most immersive spaces in the history of our industry. Let's take a look at our most recent work. [Presentation] Gary Friedman: We believe our investments in building completely unique, immersive experiences in Paris, Milan and London, we'll set the stage for RH to become a truly global luxury brand. It's important to understand that there are several strategically significant businesses embedded in our galleries, including RH Interior Design, where we become the largest residential interior design firm in the world, with projects from San Francisco to Sydney, Los Angeles to London, Miami to Milan, and Dallas to Dubai. We offer design services, including interior architecture, landscape architecture, art and antique curation and turnkey installations. Another important business embedded in our galleries is RH to the trade, a specialized team that calls on services and supports interior design firms assisting in the design, curation, delivery and installation of many of their projects. RH Hospitality operates beautifully integrated restaurants, wine and barista bars in our galleries that generate significant traffic and brand awareness. While our galleries might see several hundred customers per week, our restaurants feed several thousand. With 26 restaurants in operation today and are scheduled to reach 40 by the end of 2027, RH is 1 of only 7 globally owned and operated luxury restaurant brands with 20 or more locations worldwide. We believe our galleries create a unique competitive advantage that will likely never be duplicated in our lifetime as the cost of construction at the luxury level has doubled post-COVID. To address that challenge, we've developed several immersive new gallery concepts that will enable us to scale in a faster and more capital-efficient manner. The first, the most revolutionary is what we call an RH design compound, currently in development in Naples, Miami and Walnut Creek, a compound is 6 to 8 independent buildings connected by beautifully landscaped garden courtyards with a sun-filled atrium restaurant anchoring the project. Due to the absence of multiple stories that require steel structures, grand staircases, elevators, complex mechanical systems and long development time lines, we believe we can build design compounds significantly faster and more capital efficient than our prior design galleries. Another new approach to deploying the RH brand in a faster and more capital-efficient manner is what we call a design ecosystem, currently under construction in Greenwich and Palm Desert and in the development process in West Hollywood Design District. An ecosystem is a multi-building brand presence on a street, in a neighborhood, design district or shopping center. Our first ecosystem will be in Greenwich, Connecticut, and includes our gallery at the Historic Post Office, our new outdoor gallery opened last year, and our new RH Estates Gallery with an integrated restaurant opening in the former Ralph Lauren building this summer. We've also developed a new single-story gallery, ranging from 15,000 to 20,000 square feet with a dramatic courtyard restaurant targeting secondary markets. We're currently under construction in Los Gatos, California and are in design development for galleries in Richmond and Milwaukee. We have been extremely pleased with our performance of our first freestanding RH Interior Design office in Palm Desert, California and have plans to open a second interior design office in Malibu this fall. In total, we have an opportunity to expand our presence in 27 existing markets, and open 1 of our new design concepts in 48 new markets across North America, representing a $2 billion opportunity. Let me shift your attention to our business model and balance sheet. While we believe it's prudent to plan conservatively this year due to uncertainties around interest rates and inflation, and have planned revenue growth in the 4% to 8% range in 2026. We do expect growth to accelerate to 10% to 12% in 2027, and reach $5.4 billion to $5.8 billion by 2030. Adjusted EBITDA in the 14% to 16% range for 2026, reaching 25% to 28% by 2030. We expect cash flow of $300 million to $400 million in 2026, and $500 million to $600 million in 2027, inclusive of $200 million to $250 million of asset sales each year. We expect cumulative cash flow of $3 billion by 2030, inclusive of the asset sales and expect to be debt-free by 2029. While one might look at the current market discord and argue that RH has been in the wrong place at the wrong time. I would argue we've used this period to position our brand to be in the perfect place at the perfect time. Let me explain why. There are two important factors that will meaningfully expand the size of our market over the next 10 years. One is the exponential spending of high and ultra-high net worth consumers on the home. Ultra-high net worth consumers with a net worth above $20 million, own on average 3.7 homes, billionaires own 10. Ultra-high net worth consumers spend 6.4x more on home furnishings than a consumer with a single primary residence. Two, is the estimated $30 trillion to $38 trillion wealth transfer projected to take place over the next 10 years, which is more than double the past 10 years. Not only does the absolute dollar amount more than double, it's estimated that the dollars transfer from one to an average of 7 people. It's possible over the next 10 years our market will be multiple times larger than the past 10 years. When you combine that with our efforts to elevate and expand our product, globally expand our platform, generate significant revenues and brand awareness with our immersive hospitality venues, I would argue that the RH brand is in the perfect place at the perfect time. And we will emerge from this period of clutter, discord and difficulty as one of the highest performing and most admired brands in the world. Allison Malkin: [Operator Instructions] Your first question comes from the line of Simeon Gutman with Morgan Stanley. Simeon Gutman: First question, I want to talk about demand signals from the consumer. This has been a transitional period for the company. I realize the demand is outpacing a lot of other home furnishing companies, but it's come at a pretty big cost to margin. So expectations around demand improving while we see the margin of the business begin to turn. That's my first question. Gary Friedman: Simeon, the margin pressures somewhat disconnected and unrelated from the demand. The margin pressures really from -- kind of the investment cadence we have as far as expanding the business throughout Europe and some of the margin pressure coming from the tariffs, from a transition and timing and resourcing. But you basically have kind of an inflection point of we're in kind of a peak investment period from a capital and an expense and cost perspective based on the investments we're making, both from a global expansion and North American expansion point of view and from a product point of view with the launch of RH Estates. I think you have to think about the launch of RH Estates in Q2, we'll have significant costs with sourcebook and advertising and launching costs, without having much revenue until we get into the third and fourth quarter. And Estates is, remember is basically running late. Our original plan was to have Estates in the third and fourth quarter last year. So we have some timing issues. I think when you think about the significant investments we're making, both from a capital and expense perspective, and we're going through kind of an unpredictable time. So I think that's why it's important as you're looking at the business, you're looking at the model, if you're thinking about being an investor here, you have to have a longer-term view than a shorter-term view in periods like these. And in many ways a lot of people are going less than we're going right as people are pulling back and trying to manage the margin side of their business, we're investing in the most significant way we have in our history, and that's just going to create some timing dislocations from an earnings perspective. Simeon Gutman: And then my follow-up, you made a couple of executive leadership changes, one, a new President and two, a second person. And in the release you talked about potentially helping monetize some of the real estate. So can you talk about both of those hires, what prompted them? And then what does it speak to about the direction of the business you are heading in? Gary Friedman: Well, I think it's explained in the press releases. I don't know if there's anything different than that. We mentioned -- we're extremely happy to have Dave Stanchak rejoined Team RH. He's -- has made a significant impact while he was here, both from a North American transformation point of view and a global transformation point of view and was involved in really setting up the structure of the real estate for European expansion. And so it's good to have Dave back. And I think, Dave, it's probably the most, I think experienced real estate executive on a retail point of view because he's -- both -- not someone who's just been involved with mall leasing and -- which is typical, when you think about most retailers, Dave's been involved in real estate investments. He is an investor. He's had his own shopping centers and controls real estate themselves. So he comes out from an investor perspective, a much bigger perspective and it's a kind of a transformational leader as you think about a unique business like ours and the platform we're building, which is unlike anything anybody else is doing or has done at a level of quality and locations and so on and so forth. So there's not anything that I didn't talk about, I think, in the press release. And then with Veronica's joining RH, we've known Veronica for a long time. We've been able to observe her and her leadership and her ability to build what we think is one of the leading manufacturing businesses in North America for an upholstery point of view. But mostly what we, I think, think about here is not just the upholstery part of our business. But if you think about the best luxury models in the world, whether you're looking at Vuitton or Hermes, or CHANEL or others, one of the things that's very unique with their business models as they have a very concentrated core business, 80% of their business is in the leather goods and accessories part of the business. It's very similar to our business from a penetration point of view, 80% of our business is furniture, that's typical if you look at the home furnishings business. So if you're in all categories, that's going to directionally be the mix depending on how you position those categories. And we think there's an opportunity when you look at our business from a global scale and building a unique platform that's synergistic and appropriate for the unique platform we're building from the selling side. I think we've built -- have built and are building the most unique physical selling platform in the world. And I think it deserves and will be positively impacted by building the most unique manufacturing and sourcing platform in the world. So eliminating, when you think about the inefficiencies of manufacturing, when you don't -- when you don't control your distribution, there's quite a bit. So long term we think we can build a unique manufacturing platform. And as I said in the press release, a combination of owned joint venture and outsourced that can be very unique and significantly accretive from a -- we think both a revenue and a cost perspective and a margin perspective. So yes, so we're excited. We think Veronica is the best person in the industry we've met. I think she's a unique talent leader. She's an engineer by education and experience, and has a big -- and very big and kind of strategic view of manufacturing and sourcing. So it's a new level of talent in the company. We've never had someone this kind of pedigree and experience and talent, and we think she's going to do some incredible things long term. Allison Malkin: Your next question comes from the line of Steven Forbes with Guggenheim Securities. Steven Forbes: Gary, with Milan and London slated to open here in short order, curious if you could give us an update on RH Paris and/or just comment on the anticipated revenue contribution from the broader RH International strategy behind the 2030 reference year you laid out in your prepared remarks. Obviously, just looking today, any color to help support or build conviction around those longer-term outlooks you laid out today? Gary Friedman: Not sure if I get that question correctly. Jack Preston: The impact of international as it relates to the 2030 targets, how we think about that growth of that. Gary Friedman: Yes. Well, I think what we've articulated most recently over the last few quarters and really since, I think, our start, really that the opening of Paris, Milan and London is kind of the brand foundation to build on when you think about European expansion. There are the three most important cities in Europe, we think they're important from a positioning of the brand and a brand awareness point of view. And all three of those are really the besides, again, RH England, which is out in the countryside, which was important from a brand impression and awareness perspective and how to kind of make an entry into the European market. But these really are where we have significant investments in the presentation of the product that hospitality experience, which we think is going to be critical long term to building brand awareness throughout Europe. And then one of the keys here is really not just these key stores because if you -- as we assess the business in Europe, and we have since day 1, I believe that the basic distribution and where the sales will come from will be long term, more important in suburbs and second home markets than cities that the cities are really going to be the key to brand awareness and driving the brand, positioning the brand, and we'll do significantly more revenues, we believe, in Paris and Milan and London than we will in other cities. And if we were ranking them, clearly lending, we believe, going to be the biggest market for us as it should be. But our distribution of business is significantly suburbs and second home markets in North America. 90%, 92% of our business is in suburbs and second home markets. And second home markets are kind of like a suburb, right? And about 8% of our business is in the cities. And we think that distribution is going to be similar throughout Europe. And if you looked at Apple's real estate strategy and you look at their distribution throughout Europe, which we believed was a good kind of model for us to look at as far as a higher-end consumer. And you looked at like Apple's North American kind of distribution versus our North American distribution, their penetration in suburbs, our penetration in suburbs. There are similarities there. We're more highly penetrated into second home markets than they are. Most people have their phone with them. But one of the keys for, I think, Dave is joining the company, too, is just to continue that leadership into Europe and building out into the suburbs and into the second home markets to cover the business. So strategically, we're setting up the business in the kind of key markets that you would from a brand and awareness perspective and not that we don't think that the business is going to have revenues there. We just think the biggest revenues are going to come long term when you think about the longer-term plan as we expand into the suburbs and [ certain end ] markets where people really buy much more furniture, both indoors and outdoors. Steven Forbes: Maybe just a quick follow-up. Obviously, great to hear Dave rejoining the company. You talked about -- you talked about $250 million of asset sales in each of the next 2 years. This is sort of a 2-part question. One, can you speak to sort of the value of the non-core assets or the assets that you don't plan to operate in the future versus the value of the assets RH is still planning to operate in the future. And then maybe any color on sort of timing for 2026 asset sales as we think through the potential interest expense savings. Gary Friedman: As far as that mix, I'd say the majority of the asset sales are assets that we will be operating that are in a sale leaseback kind of properties and then there's some investment properties that we had in Aspen. And a few other things that we've decided not to pursue for whatever reason, we own a building in Milan -- not Milan, excuse me, Madrid, and we're not going to pursue the development of that. We're fine with the location we have today. And so it's just looking at -- taking a look at our balance sheet and just turning the facets into cash, as we said we would be doing. So we've said we have about $0.5 billion of real estate assets that we could monetize. And we're going to begin to monetize those. Dave has got tremendous experience on that end of real estate. So -- and he feels very confident in what we're going to be able to do. And some of these are properties that we had purchased and had developed over the last 2 to 3 years, I guess. You got to think about a lot of our investment horizons are pretty long from a -- when you think about some of the galleries that we've built, you've got significant time to design and develop and get through the approval process and then you've got significant time building them. So you have a relatively long holding time. And I think post-COVID, all of the construction cost have went up, particularly at the luxury level. And those prompted us as we communicated in the video, to develop just other faster, more flexible ways to deploy the brand. And when you think about the design compounds and think about where the first couple are going in Naples, we're taking that what was formerly a Nordstrom's site in Walnut Creek, we're taking what was formerly a Neiman Marcus site. And then in Miami, we're developing kind of a parking lot size kind of a key visible area in Miami, that was kind of Bank of America. But we think about those opportunities to be significantly faster and more capital efficient. We've built most of our big, kind of, I'd say, the higher investment, higher capital side of the business, we've been transforming the real estate here now for 15 years. And so even on a European and global point of view, I would say that we have Sydney coming, but that's a different model that's really being built by the developer. It's not going to take much capital from RH. But yes, we have significant assets. We're going to now monetize, turn into cash, and then we've got some assets in Aspen and other things like that, that will monetize over time. So yes, so a lot of that will come off the balance sheet. I don't know, Jack, do you have anything to add on? Jack Preston: No. I think from a timing perspective, Steve, we'll just keep you posted. We're not ready to commit us to show the cadence to 2026, and we'll just update you as things as appropriate. Allison Malkin: Your next question comes from the line of Max Rakhlenko with TD Cowen. Maksim Rakhlenko: So first on Estates, can you provide color on how you're thinking about scaling the collection? We know when the books will hit, but how are you thinking about the cadence of the product rollout into the galleries? How are you looking by inventory, et cetera? Just if you could compare and contrast this collection versus the Modern and Interiors launches that you had a couple of years back. Gary Friedman: Sure. So the books will hit kind of mid-May, and we will -- we've got a handful of stores that will get the initial product that we'll be able to kind of test and then we and get some reads on, but we feel very confident in this selection. So we went out with a bigger inventory by -- and a lot of it based on just the data. You got 60% of luxury homes in America that have classic and traditional architecture. So -- and it is really the next big trend. As you think about how the trends cycle through, this trend is a lot of the product you're going to see cycle through, it's why we've made some of the acquisitions that we made, whether it's the Michael Taylor brand and the famous diamond table and so on and so forth to really be able to not only have authority, but be able to have intellectual property rights for a lot of the kind of key products that are going to come. And so we just think it's going to be a big building trend. But in the second half will be -- and how many galleries do we think? 30? Unknown Executive: I think -- yes. Gary Friedman: About 30, 40 galleries -- our top 30, 40 galleries in the large design galleries, we'll take over the first floor with RH Estates. So this is a significant launch and a significant bet. Maksim Rakhlenko: Got it. That's helpful. And then just a two-parter on margins. If you could just isolate how you're thinking about the impact of tariffs for 2026, both the cadence and magnitude as I don't think you discussed that in the letter this time around. And then separately, if we exclude tariffs and some of the timing shifts that you discussed earlier on the call, how healthy is sort of your -- or how healthy are your product margins as we think about the long-term targets you laid out? How much higher can the product margins go as you do continue to add these new collections that I think come with much higher margin. So if we just think about the core, where can the business go from a product margin perspective? Gary Friedman: Yes. I think -- I mean, we're not giving detailed margin forecast. But our margin -- our product margins are relatively healthy, except for some bumps we're going through from a tariff point of view. I think we've been able to perform reasonably well. If you exclude kind of the weight that we have from this investment cycle and the drag from Europe and you kind of take a look at the business. And I think one of the things we're doing, as we think about this business, a lot of times with brands as you go through the history of brands, you've got kind of the levels and the transformations you make to kind of get to where you want to go. And this next -- this cycle we're in now, it's a key investment cycle. Clearly, we've spent a lot of capital. We've made big investments to kind of position the brand not only in North America, but positioned in Europe for the long term. And once you get past those cycles, we're going to have great leverage. Opening galleries like we're opening and restaurants like we're opening or significant costs, especially when you're doing them in a different country. There's just more travel, more expense from hiring people and building new organizations and so on and so forth. So from a -- I just think, it's not just the product margins, it's really just the overall margin structure of the business once we go post peak here on this investment cycle, both from a capital and from an expense and cost point of view. I think the model of this business is going to look like one of the best models people have ever seen in our industry. So if not the best model, I think it's going to be the best model anyone seen. So we feel confident in that. I mean, we're also just -- from a global perspective, navigating through very uncertain times. And we do have a product mix that is going to be somewhat more cyclical and have more of a drag. So when you're really focused on the furniture business versus the home furnishing, the broader furnishings business, accessories business, tabletop business, kitchen businesses and so on and so forth. You're going to have more weight during times like these. So that's going to require you to fight for more business. But that's throughout our history. We've always fought through the business in times like these. We've always been more promotional than less promotional in times like these. And we think it's times like these that there's a lot of fallout. And there's going to be a lot of competition that's not going to make it through these times. There's been greater fallout in the furniture business. As most people know, over the last few years than in any time in history. And I think there's going to -- as long as the housing market remains difficult, there's just going to be a lot less competition, and we're going to be better positioned than we've ever been for the other side of the cycle. As we build out the assortment, especially in the Estates over the -- think about the Estates expansion over really a 5-year horizon from a product point of view, I'd say over the next 5 years as Estates assortment is going to grow, it's going to build, it's going to become more dominant. The trend is going to -- that wave is going to keep building over the next 5 to 10 years, right? So I think about the whole model of the business in this way, we're very confident in the long-term model. I think what confuses people is most public companies go public and they kind of manage the business, right? They have a simple rollout and they're going to do so many stores a year and the stores are all the same and everything is really predictable and most of them go through their rollout cycle of 5 to 7 to 10 years, however -- what amount of time they stay relevant for. And then usually, becomes kind of a dated concept over time. And that's why we like to say that most retail malls or graveyard for short-lived ideas. Most retail companies don't even concepts don't live out the first term or second term of their leases. So we're going through one of those investment cycles that will leapfrog this business forward and you're looking at kind of peak investment cycle and kind of trough kind of economic cycle, right? So and even with those two, you still get a business here with a kind of a mid-teens EBITDA margin to high teens EBITDA margin. And once you get past this cycle, there's a lot of leverage in this model. So... Jack Preston: Max, I'll add on tariffs. So in Q4, we talked about last year tariffs having an impact of 90 basis points in terms of a drag. And Q4, we had talked about $170 million. We ended up at $190 million in Q4. And the way we characterized that in the last call is that, that's ultimately by Q4, you're fully baked into the sort of prior tariff regime. Obviously, things have changed now with the Supreme Court decision. But tariffs come out in and out of turn, as you know. And so while in the -- let's say, in the first half, you might have some tailwinds from that relatively lower rate that exists under Section 122 today. Who knows what happens in the second half. There's obviously a sprint to replace all those tariffs and potentially more as Trump first said under Section 301 in the back half. So we're just -- we're playing by year being -- as you know, we're nimble and we're dynamic. But as far as last year's tariff impact was sort of fully baked in at Q4, the bit of an indicator as to how it plays out in the first half, but obviously, the math will tell you that there's going to be some relief there as far as that tariff drag is concerned. So we'll keep you updated if there's -- as things play out. Obviously, we're watching it like you guys are watching. Allison Malkin: Your next question comes from the line of Steven Zaccone with Citi. Steven Zaccone: I wanted to ask about the cadence of the year from a revenue growth perspective because the first quarter, obviously calling for revenue to be down, but in the full year, it looks like an acceleration in the back half. Can you just talk through the points of the acceleration? I assume Estates is a big piece? How much is International? Any details you could share would be helpful. Gary Friedman: Well, yes, clearly, International and Estates, the cycling of -- Estates across the entire platform, International from opening cadence and just what we think the growth in the first couple of years. We really -- RH England is kind of our best point of history and -- we know how that ramps. So we expect the International stores to have a ramp to them over the first several years. But when you think about the back half, sure, you've got openings in North America, you've got openings in Europe. You've got Estates, which will -- in Q3, Q4, you'll start seeing the revenues flow from demand in Q2. And you'll see a ramp in Estate. You'll have a second mailing of the book. You'll have newness in both Interiors and Modern. So all of those things combined, we believe is a big step up in the business in the second half. And we would have expected more in the back half of last year and the first half of this year because Estates would have been part of that cadence. Steven Zaccone: Okay. Understood. And then the second question I have is just on the margin recovery of the business, right, because we've been an investment period for the business for some time, and I think you've used the term leapfrog in terms of margins in the past. For the longer duration investor, when you look at the business, what do you think is the biggest factor holding back margins for improving? Is it just the fact that some of the investments have taken a little bit longer and have been a little bit higher than expected? Has it been the top line, the macro environment? How do we think about some of the unlocks to see that margin improvement on the other side come back stronger? Gary Friedman: I think you've just outlined it. Yes, I mean we've -- we're in peak investment cycle in trough -- economic cycle, especially from a home point of view. So the -- I mean, not just trough investment cycle, you've had the whole kind of chaotic tariff cycle, that has caused kind of significant disruption on the business. I mean we've resourced 40% of our assortment business of our size -- resourcing 40% of your core assortment, which is really -- 40% of the assortment is bigger -- it's a larger part of the business. So, yes, it's all of those things together, Steve. So this is a good time to buy our stock. This is when people create generational wealth, right? This is no different than trough times in a real estate market, trough times in any kind of a transitional time for an industry or business. And all businesses in our industry get hit in these times and all businesses that survive to the other side, get a lift in this time. I think what's different is we've historically been investors during times like this is when we've seen the biggest opportunities. But this time is, I think, different than previous times because we're in a kind of a real peak investment cycle. We're opening Europe, we're launching new businesses. And so the opportunity to have a leapfrog, if we're more right than wrong, and we don't have to be completely right, we just have to be directionally right here. And so we say don't let perfect be the enemy of great. And yes, we've got a lot of experience here in this company. We've been doing this a long time. And I think we've proven that we've been a lot more right than a lot more wrong. I mean if you think about the transformation from what was Restoration Hardware before, to what is RH today, if you think about the transformation of this brand, over a 20-plus year period and try to say, name other brands that have made transformations like that, name other brands that are positioned like we are. These are the times that businesses like ours separate ourselves even further from the pack. But you have to make those investments, you have to take that level of risk to be able to do that. So we are not kind of a management culture or leadership culture. And we're constantly innovating and investing, but this is one of those significant cycles. It just happens to be -- during a significant down cycle, especially focused on our industry. And so -- but we're in a better position than we've ever been from a historical point of view to weather the storm. And I think if you just think about what does the next 5 years look like from an investment point of view. I mean we're going to come off, if you take that -- the $37 million and the $289 million, you've got kind of a peak type of investment year historically. And then we come off that peak. And we come into the $250 million to $260 million, and then that's going to drop to $150 million to $170 million a year. So you think about the company growing, the capital investment period coming down, and it's not just the capital, right -- the investment, but it's also all the expense that's connected to that capital. All the expense that's connected to bringing up those stores, training the people, building the infrastructure, building the distribution capability in the business, all the marketing and advertising that supports a launch, all the time and energy to kind of build out the assortments, develop all the products at scale to create a leapfrog, not to kind of slightly outperform. But it's no different than taking a $300 million business that was losing $40 million a year. That was Restoration Hardware and creating RH, that's a $3.5 billion business. I mean that -- think about what the next cycle looks like. The next cycle is, I think, even more magnified that -- we -- our framework for the model. And the biggest pieces of the model are the pieces we're talking about. If I was on the outside, looking at this, I'd say, hey, what is the outlook for capital investments as they go forward and not just thinking about the capital, but what is the expense, the cost investments that are connected to that capital, how does that change over the next 5 years? And how does it change over the next couple of years, right? Just over the next couple of years, the investment cycle is post peak, and it's going to turn down and accelerate in a downward way just as revenues are going to accelerate in a positive way, right? And when you have those two things going in different directions, that's when you have inflection points in return on invested capital, on margins, earnings, et cetera, et cetera. So the framework for the math is pretty simple. I think the strategy because it's never been seen before is -- can be suspect and could be hard to understand. There can be less believers than more believers at certain times. So look, I don't blame anybody for kind of saying, "Hey, this is -- it looks like an uncertain time to invest," whether it's in our stock or any stock in our category. But especially, you've got to kind of believe in the longer-term debt here. And we think this is going to be the -- one of the best bets that people will make as referenced by my personal investment here. So that's how we think about it. Allison Malkin: Your next question comes from the line of Michael Lasser with UBS. Michael Lasser: Gary, you've laid out this ambitious and aspirational plan to take advantage of what seems like a very large and growing addressable market, and yet the market is not really willing to give you the amendment, sort of a doubt. And part of that is RH has been averse to and does not really look at its business on a same-store basis, which is understandable, and that's long how you've articulated it. But at this point, that has defaulted to the narrative where RH needs to grow concepts and its physical footprint in order to drive growth, and that comes with a significant cost. And as a result you may not be able to realize its aspiration, understanding that it's come a long way from its origin, but it's the market's relying heavily on the recent experience. So why based on the recent experience is the default of the market wrong? Gary Friedman: I think it's what I just said. You have to think about peak investment period and what hopefully is a low point in the trough from a market perspective. It's -- again, I think if you pull out the investments, just pull out the European drag of the investment -- think about -- we're investing in Europe. The European market is worse than the American market right now. It's -- we're investing at a time you likely would like to not invest, but you can't make long-term real estate investments and expect to get them all right, right? So the -- why is the simple model, Michael, of saying I'm cycling peak investments, and I'm cycling hopefully what is trough growth, right? And we've got significant growth opportunities as we've laid out. And the cost, they're going to kind of go away. So a lot of people thought Amazon wasn't going to make a lot of money until he did, right? That's -- I think it's that simple. Think about -- yes, I think the key is don't bake this cost structure into your model right now. You're looking at the -- a peak cost structure, both from capital and an expense perspective. These galleries that we're opening are the most expensive galleries that we've opened, both from a capital and a cost point of view. Michael Lasser: Got you. Very helpful. So put it in parlance that the investment community would think about it is, essentially this is, the peak of the disruption, there will be significant same-brand growth that will lead to sizable margin expansion, especially as the investments moderate. Now the counterpoint would be, hey, we're living in a world of high uncertainty between the geopolitical, technological and other factors. So what would be the sensitivity to your outlook for free cash flow in the event that sales in the back half just don't materialize like you would expect. And without asking you to show your hand, but it is important to the investment case, what options would you pursue in the event you needed more financial flexibility to execute on your strategy? Gary Friedman: Yes. I think it's a great question, Michael. Look, we've got the ability to pull back investments further, right? When I think about the major strategic investments that we had -- we had to decide to go international, invest into Europe, years ago, right? These weren't short-term decisions. These were 5, 6, 7, 8 years ago, right? We're making some of these decisions and investments. And those decisions are easy -- are not easy to pull back on, right? But we're cycling those. We've got a lot of flexibility. When you think about the next wave of investments, whether it's expanding in North America, whether it's expanding in Europe, you're looking at much smaller investments, you're looking at much more flexible real estate, many more choices, et cetera, et cetera. And you're just not going to have the same kind of cost. I mean we're going to -- the cost of building some of the new concepts that we've laid out, just the way we're thinking about deploying capital in North America through compounds and ecosystems and secondary market galleries that are in the 15,000 to 20,000 square foot range. Just the real estate risk, the investment risk of those, the financial participation of developers and landlords is much higher than when you're investing in major cities internationally. It's just a very different investment cadence. And we just have a lot -- and you don't have the same time horizon, right? So there's just a lot more flexibility. And -- so when I look at -- I would say, peak investment, peak risk right now. You're looking at peak investment, peak risk. And who knows from day-to-day or hour-to-hour about the geopolitical and economic environment. Of course, this is -- it's kind of different times. And there's major news headlines are made by tweaks and post today, right, and they happen all day long. So I just think that if you're just trying to say, okay, how do I think about the go forward? There's just a lot less risk. There's a lot more risk, I'd say, over the last couple of years than over the next couple of years. I mean there's -- is there further risk in the housing market? There always could be further risk. There always could be other things. I mean, could the war escalate? Could China try to take Taiwan? Could -- yes, there's a lot of things that can go the wrong way. We can all kind of imagine what those look like. But it's no different in calculating what the federal funds rate is going to be, right? Like everybody has been wrong on that. And unfortunately, that's been bad for our business, right? They're supposed to be 3 cuts to the federal funds rate this year. Now it looks like there's going to be no cuts, then there might be hikes. Does that create some short-term risk? It does. Can we navigate through that? We can. Do we have more upside to downside in the second half from a revenue -- demand and revenue point of view? We do. But I kind of say, look, if I was on the outside of this today and I had the information that the outside world has that we're giving you today. I'd say it's or you could -- I would -- look, I bought the stock at what, $2.16 a share, I bought $10 million of the stock. I was wrong, which is at the low point. But I don't see too much more downside risk in the model. Most of the work is behind us, building the galleries, getting the people trained, bringing up restaurants internationally. We -- the product side, I think, is a lot less risky. We're not going into some unknown aesthetic or trend we're betting on what is kind of the biggest market, the traditional classic market. And it just so happens, if you look at the trend that's going to come through, that is going to be the next trend. So -- but yes, your question is correct. We have toggles we can pull. We have assets that we can monetize. And we're pretty good at navigating 3 times like this. We've got it. Yes, this is my 26th year here. So I've seen cycles and the teams seem cycles, and we've navigated through. I would face somewhat similar times, not completely similar times. Allison Malkin: Your next question comes from the line of Brad Thomas with KeyBanc Capital Markets. Bradley Thomas: Gary, first, I wanted to follow up a bit more about the RH Estates line. And you, I believe, alluded to working more with designers and decorators in this. And so I was hoping you could talk a bit more if the selling process or how you go to market needs to be different on this line that seems to have so much potential for you? Gary Friedman: Well, we do a big business with design -- interior designers today. We have, I think, like I outlined in my comments that we have multiple businesses embedded in our galleries. We have a trade team that services interior designers and decorators, that's a meaningful part of our business. We think it will become a bigger part of our business, especially with the launch of RH Bespoke Furniture and RH Couture Upholstery because that's going to open up the ability to have kind of more customizable product from a size, fabric, finish, so on and so forth. And that will open up -- I think it should open up that market pretty significantly. We have some other strategies to address that market that you'll hear more about, that will kind of support what we're doing from a marketing point of view. So yes, Estates, I think, is when you think -- again, if you think about kind of the high-end part of the business that we're going to address with Estates, and that's just kind of the beginning. We'll also address that throughout the entire brand. But let's say, a stage represents the launch of RH Bespoke Furniture and the launch of RH Couture Upholstery kind of framing those. Think about those across the whole business long term. Bradley Thomas: That's helpful. If I could ask a follow-up on the 2030 margin targets. Just wondering if there's any high-level framework to think about perhaps how International fits into that, and how much mix or leverage of sale -- from sales factors into that? Gary Friedman: Yes, I mean, we have some data now. We kind of know as we've opened some of these, how they're evolving, how to think about, how they might evolve and grow. And so I think we have very reasonable targets internationally, mixed into this. I don't think there's anything that's a stretch perspective. So when you look at -- you just look at the total composition of kind of the top line accelerating in the out years to 12% growth. I think the way I'd think about that is you've got about 4 to 5 points from the platform expansion, you've got 3 to 4 points, maybe 5 points from the product expansion. And you've got -- at some point here, we think, there's a couple of points from the housing market coming back. I mean, I don't think we're going to be in a 9- or 10-year downturn of the housing market. Let's hope not. But if it doesn't come back, it's not like we've got a big number out there for the housing market. We've got kind of a 2- to 3-point hope in the out years of that plan that we'll see some lift in the housing market. If we see a lift in the housing market, you could see -- I mean, based on where it's been, I mean, you could argue there's a 10-point lift from the housing market in the out years. And if that happens, you don't have us growing at 10% to 12%, you have us growing at 18% to 22%. Allison Malkin: Your final question comes from the line of Marius Morar with Zelman. Marius Morar: Just a quick question on the growth outlook for next year. Gary, I think on -- in the video, you mentioned that it's a bit conservative. I was just wondering at the low end, do you sort of embed any sort of deterioration in the housing market or maybe an increase in interest rates? Gary Friedman: Yes. I think we're conservative throughout the second half. I mean, obviously, we have embedded the growth from our platform and the new galleries and the galleries that are cycling, and we've got growth from Estates and some of the newness and expansion of the assortment in Interiors and Modern. But do we have the housing market getting worse? I'd say we have embedded in this -- the current environment right now, which I believe is worse and mostly from a geopolitical point of view and a perception point of view, of more things can go wrong then maybe can go right. And I think that's how the market's generally risk times like these, when you've got uncertainty and you've got global tensions and war and oil issues and the endless amount of things that oil impacts, right? So, yes, I mean -- but did the housing market gets better when interest rates came down somewhat? Not really. Is the housing market going to get worse if they go back? If we get 25, 50, 75 basis points, you get three hikes. I don't think it gets much worse. I think you've got to think back in history and say, in 1978, we sold -- there's 4.06 million homes sold, and that was a low point. And in 2003, '04 and '05, you had 4.06 million homes sold on average, 4 million to 4.06 million of somewhere about 4.03 million. And that's -- and that's with 53 -- I think it's 53% more people, right? So it's hard to believe it gets worse than this to get worse in this for a small period. I mean, none of us have seen a world war in our lifetimes, right? Is there a risk of a world war? I don't think so. I mean I think, cooler heads will prevail. But this is uncertain times. So I think the -- whether the interest rates go up or down 25 to 75 basis points? I don't think it's going to change much in the housing market. If the interest rates go up 300 or 400 basis points, I think that's different. I think they go down 100 basis points with pricing coming down, which is pricing is coming down across the market, I think you're going to see a housing market acceleration. So I'd say short term, handicap it, as even. I think we're seeing pressure right now. Longer term, I think you have to kind of handicap it as a positive because we've never -- we've never seen -- we're now in the fourth year of the worst housing market in 40 to 50 years. That hasn't happened in my lifetime, I've never seen 2 down years -- seen 1.5 down years in my career. I've never seen 3 down years, and I surely never seen a fourth down year. I don't think anybody has. So how long does it stay here? I don't know. It's all today the new normal and build out from here. At some point, I think how the market comes back. And I think it's more likely to come back than go down. But if the interest rates are moving 50 to 75 basis points to 100 basis points, I don't know if that moves the needle plus or minus. On the minus side, you're getting closer to affordability, right? On the upside, you could have some moderate slowing. I think the bigger thing is if we have real inflation and interest rates have to rise 300, 400 basis points, that's a problem. Marius Morar: That's helpful. And maybe a quick follow-up. In the first quarter guidance, do you also embed any drag from the back order and special order similar to the drag you had in the fourth quarter? Gary Friedman: Jack, do you want to take that? Jack Preston: Yes. Yes, that's something that's going to take probably until the second half to fully resolve itself just because of the complexities of resourcing. So that is just -- yes, there's something that... Gary Friedman: We take that drag in, yes. Marius Morar: Is it getting worse in the first quarter? Jack Preston: There's some modest impact that that's over and above what we felt in Q4. And then so then we'll see the resolution of that in the second half. Gary Friedman: It's basically from the amount of resourcing and just the new factories being brought up in different countries, being able to ramp up fast enough. And so that's the biggest hit is coming from tariff-related resourcing of furniture, outdoor furniture, specifically metal outdoor furniture. Lighting is a big one. Rugs is a big one, and furniture is a big one. If you think about our business and you've got -- you take the furniture part of the business includes about 80%. And then you take lighting and rugs, which are the next biggest pieces, those are all being impacted. But you've got to -- by far biggest part of our business has been all impacted in a bigger way. Resourcing things like bedding, pillows, [ throws ], accessories, picture frames, things like that, which are not -- from a percentage point of view, not a very big part of our business, much easier to resource those things, much easier to move picture frames, pillow cases, [ throws ], tabletop, glassware, accessories, things like that much, much more easier. When you talk about ramping furniture factories, lighting factories, rug factories, moving those categories just more complex. And so those have been just slower to scale and transition. And when you think about just the -- being on the manufacturing side or manufacturing partners moving from one country to another, building factories, scaling them. And then all of a sudden, having tariffs change and going, "Oh, God, what do I do now? By doing the right thing, I mean, think about the rug business. And we -- for a while there, I mean, India was a big source of rugs, and you get hit with the 50% tariff and you're sourcing rugs to other countries. There's not that many places that have that kind of capacity to move those businesses. So same thing with lighting. Lighting is very different than any other kind of an item. Again, the more accessories, more seasonal parts of the business, you want to resource Christmas ornaments, things like that, very simple. When you're resourcing the core part of our business, much more complex. Allison Malkin: That concludes our question-and-answer session. I will now turn the call back over to Gary Friedman for closing remarks. Gary Friedman: Thank you. Well, thank you, everyone. We know this is an uncertain time in our business. Hopefully, we've shed some light to give you more certainty and more confidence in our outlook and our strategy. We believe this is the most important period in our history, and we've never been more excited about the outlook and what we believe will be the outcome. So we look forward to talking to you soon. Thank you for all the leadership and partnership from our teams and our partners all around the world. Everybody is working hard to kind of get to the next place. And so thank you. Allison Malkin: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to Penguin Solutions Second Quarter Fiscal 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Suzanne Schmidt, Investor Relations. Suzanne, please go ahead. Suzanne Schmidt: Thank you, operator. Good afternoon, and thank you for joining us on today's earnings conference call and webcast to discuss Penguin Solutions Second Quarter fiscal 2026 results. On the call today are Kash Shaikh, Chief Executive Officer; and Nate Olmstead, Chief Financial Officer. You can find the accompanying slide presentation and press release for this call on the Investor Relations section of our website. We encourage you to go to the site throughout the quarter for the most current information on the company. I would also like to remind everyone to read the note on the use of forward-looking statements that is included in the press release and the earnings call presentation. Please note that during this conference call, the company will make projections and forward-looking statements, including, but not limited to, statements about the market demand, technology shifts, industry trends and the company's growth trajectory and financial outlook, business plans and strategy, including investment plans, product development and road map, anticipated sales, orders, revenue and customer growth and diversification and existing and potential strategic agreements and collaborations. Forward-looking statements are based on current beliefs and assumptions and are not guarantees of future performance and are subject to risks and uncertainties, including, without limitation, the risks and uncertainties reflected in the press release and the earnings call presentation filed today as well as in the company's most recent annual and quarterly reports. The forward-looking statements are representative only as of the date they are made, and except as required by applicable law, we assume no responsibility to publicly update or revise any forward-looking statements. We will also discuss both GAAP and non-GAAP financial measures. Non-GAAP measures should not be considered in isolation from, as a substitute for or superior to our GAAP results. We encourage you to consider all measures when analyzing our performance. A reconciliation of the GAAP to non-GAAP measures is included in today's press release and accompanying slide presentation. And with that, let me now turn the call over to Kash Shaikh, CEO. Kash? Kash Shaikh: Good afternoon. Thank you for joining our second quarter FY '26 earnings call. This is my first earnings call as CEO of Penguin Solutions, and I'm excited to step into this role. I want to start by thanking Mark Adams for his leadership and for the strong foundation he built. Since joining in early February, I've spent significant time with customers, partners and our teams around the world. I've witnessed the strength of the company, both in our technology and our customer relationships. What is clear is this. AI is moving from experimentation to production with workloads increasingly shifting towards real-time inference. We are already seeing this translate into customer demand beyond hyperscale across enterprise, neoclouds and sovereign AI markets. We expect this transition to expand our addressable market and drive increased demand for integrated AI infrastructure, where Penguin is already winning. We see this firsthand in the breadth of our deployments from a sovereign AI factory, Haein in South Korea to enterprise voice AI with Deepgram to large-scale research systems with Georgia Tech, along with a growing pipeline across all 3 market segments. What makes this opportunity so significant is that the architecture of AI is also changing. Model training was largely compute bound, inference powering agentic AI is memory bound and latency sensitive. We believe this is driving a rearchitecture of the data center across compute, memory, interconnect and software. We also see AI driving memory demand, not only for the high-bandwidth memory or HBM used with GPUs or other accelerators, but also for general-purpose memory. General purpose compute wraps around every GPU build-out and whether it's reinforcement learning pipelines or inference serving, that workload runs on processors backed by significant memory content across the entire system. So while memory markets are cyclical, we believe AI is adding a more durable layer of demand for memory. As AI factories scale, I expect customers to increasingly prioritize partners that deliver with speed and precision, along with full stack AI factory platform capabilities, including compute, scalable memory systems, cluster management software, end-to-end services and a partner ecosystem to deliver a differentiated solution. Time to deployment is now directly tied to time to first token. Against this backdrop, we are building Penguin into an AI factory platform company. Our AI factory platform is built around 6 core elements. First, Penguin ClusterWare, our AI infrastructure management software. Second, our new Penguin MemoryAI line of systems designed specifically for AI inference workloads. Third, Penguin Advanced Computing Systems optimized for AI workloads. Fourth, Penguin OriginAI factory architectures, our reference designs for AI factories. And fifth and sixth, end-to-end services and our partner ecosystem. Production-grade AI factories require full stack design across compute, memory, storage, networking and software. We partner with leading AI companies, including NVIDIA and SK Telecom and partners like Dell. We also offer complete end-to-end services spanning design, build, deploy and managed services. We are strategically positioned at the intersection of AI infrastructure and memory with a long track record in both. Few, if any, companies combine these capabilities at scale. We believe that together, our AI infrastructure and memory expertise position us to meet the evolving requirements of AI infrastructure as it shifts towards inference workloads. This supports our ability to develop differentiated solution. Given the momentum we are seeing in our AI infrastructure business and the significant market opportunity ahead of us, we are very focused in this area. We plan to invest more in our AI factory platform to accelerate our AI business growth, specifically in product innovation, go-to-market and customer engagement. In March, at NVIDIA GTC Conference, we announced 2 AI inference-centric solutions aligned with this strategy. First, the Penguin MemoryAI server. Building upon our Compute Express Link or CXL-based memory expansion capabilities, we introduced a new line of scalable memory systems called MemoryAI. CXL is a high-speed interconnect that enables scalable, shared memory across GPUs and CPUs. We also announced the immediate availability of our new MemoryAI KV Cache server. Here KV or key value cache stores inference context to accelerate large language model responses. Second, the expansion of our OriginAI Factory Architecture portfolio, which now includes blueprints that address the larger workloads and the low latency demands of AI inference. We also continue to expand capabilities of ClusterWare toward a unified control plane for AI factory infrastructure, integrating the open ecosystem to deliver repeatable production scale deployments. To accelerate the innovation and strengthen our leadership team, we recently appointed Ian Colle as Senior Vice President and Chief Product Officer. Ian brings more than 2 decades of experience building AI infrastructure platforms and scaling high-performance computing, most recently at Amazon Web Services. He was recently named by HPCWire to its People to Watch 2026 list, reflecting his reputation in the industry. Now let me briefly address our second quarter performance. In Q2, we delivered net sales of $343 million. Non-GAAP gross margin was 31.2%. Non-GAAP diluted earnings per share were $0.52. These results reflect strong demand and execution in memory and continued progress in our AI/HPC business. Before turning to the segments, I would like to address our updated outlook. As Nate will describe in further detail, following our solid Q2 net sales and EPS performance, we are raising the midpoint of our full year net sales and EPS outlook. We are raising our outlook for our integrated memory business, fueled by AI-driven demand, strong execution by our team and favorable pricing dynamics. While our second half advanced computing net sales outlook is lower than our prior expectations, we are encouraged by strong year-over-year Q2 bookings growth for non-hyperscaler AI/HPC business, which included 5 new AI/HPC customer wins that brings our first half total this year to 7 new AI HPC logos compared to 3 in the first half of last year. With that context, let me turn a closer look at each of the segments. Starting with advanced computing, net sales for the quarter were $116 million, representing 34% of total company net sales and declined year-over-year. Advanced Computing net sales for the second quarter reflect both the timing of large deployments and our transition away from hyperscaler concentration. They also reflect the previously disclosed wind down of our Penguin Edge business. We believe diversification of [ net sales ] and wind down of Penguin Edge will strengthen the long-term quality of the business. As I mentioned, we are transitioning our AI infrastructure business from hyperscaler concentration toward a more diversified customer base across enterprise, neocloud and sovereign AI. This transition is showing very encouraging progress, but we still have more work to do. Non-hyperscale AI/HPC net sales grew 50% year-over-year for the first half of the year, representing over 40% of first half segment net sales, supported by strong non-hyperscale year-over-year booking growth in the quarter, including 5 new AI/HPC logos across financial services, biomedical research and energy. We expect further diversification in the second half of the fiscal year. Our AI HPC pipeline continues to strengthen with opportunities to acquire additional logos in the second half of the fiscal year across enterprise, neocloud, sovereign AI customers. As previously discussed, these engagements typically progress over many months from prospecting to design to award, followed by contracting and ultimately, system build and deployment. While the sales cycle can be long, often 12 to 18 months and can introduce quarterly net sales variability, it also supports deeper customer relationships, repeat business and a more durable long-term growth. I'm encouraged by the trajectory of the business and the signals we are seeing in the market. Beyond the numbers, we are also seeing increased activity in specific enterprise verticals. For example, we recently announced our collaboration with Deepgram and Dell to support enterprise voice AI deployments. This win highlights the growing demand for low-latency, production scale inference infrastructure in real-time applications. In this engagement, Penguin designed and deployed an optimized inference environment built on Dell PowerEdge servers and NVIDIA RTX Pro 6000 Blackwell GPUs. This solution facilitates Deepgram's speech-to-text, text-to-speech and voice agent functionalities for applications within health care and retail sectors. This case study also demonstrates how design and integration expertise delivers differentiated value. As inference workload scale, we expect these types of deployments to become an increasingly important driver of AI infrastructure demand. Georgia Tech's AI Makerspace developed in partnership with NVIDIA is a strong example. Our relationship with Georgia Tech continues to grow and validates Penguin's ability to help organizations move efficiently from concept to production-grade AI infrastructure. Now turning to Integrated Memory. Net sales for the quarter were $172 million, representing 50% of total company net sales and grew 63% year-over-year. AI-driven demand remains strong across networking, telecommunications and computing market segments. Pricing dynamics were favorable and although supply remained tight, we continue to manage constraints effectively through our supplier relationships and disciplined procurement. Stepping back, our AI/HPC and memory segments taken together enable us to integrate compute and memory architecture in ways that meet the requirements of production AI environments. Memory architecture is becoming increasingly central to AI performance, particularly as inference workloads scale. Our early investments in CXL position us well as customers evaluate more dynamic memory architectures. Furthermore, we are beginning to see this demand translate into customer deployments, including a recent substantial order for CXL cards from a generative AI company building solutions for inference workloads. This reinforces our strategic position at the intersection of memory and AI infrastructure to capitalize on the next phase of AI, focused on inference powering agentic AI workloads. These solutions are sold to enterprise AI infrastructure buyers, the same customers we serve in our AI HPC business. For example, we sold our CXL-powered KV Cache servers to a Tier 1 financial institution for their on-premise AI factory. In parallel, we continue to advance development of our Photonic memory appliance or PMA, formerly referred to as OMA, which is designed to extend memory capacity and bandwidth for large-scale AI environments. We were an early investor in a photonic memory company, Celestial AI, reflecting our long-standing focus in memory architecture innovation and our early conviction in the importance of optical interconnects for next-generation AI systems. Celestial AI was recently acquired by Marvell in a multibillion-dollar deal. Beyond the portion of proceeds we received from the acquisition as an investor, we are positioning ourselves for future growth in this market. As inference workloads expand, technologies like PMA can help address key memory scaling challenges in the next-generation AI systems. Last but not least, LED. Net sales for the quarter were $56 million, representing 16% of total company net sales and were down 7% year-over-year. The business continues to operate with focused leadership and dedicated operational discipline. While market conditions remain mixed, we are maintaining a disciplined approach to investment and capital allocation. We are focused on optimizing portfolio value while concentrating resources on areas where we see the strongest long-term returns. In close, the demand for data center AI infrastructure and memory is expanding rapidly. AI factories are becoming infrastructure that powers artificial intelligence across a range of industries. As AI shifts toward inference and agentic systems and scales across large enterprise, neocloud and sovereign AI environments, we expect demand to accelerate. At the same time, memory is becoming a defining constraint and a defining opportunity. Penguin sits at the intersection of AI infrastructure and memory innovation. And we believe that is a powerful position to be in. Our focus is clear. We are prioritizing 4 areas. First, to invest in product innovation across our AI factory platform, particularly at the intersection of AI infrastructure and memory to drive profitable growth; second, to execute with speed and precision; third, to deepen customer engagement and our ecosystem to support long-term growth; and fourth, to continue diversifying our customer base while building toward more consistent and predictable growth. We believe this focus positions us well to execute in a rapidly evolving market while continuing to build a durable and scalable business. With that, I'll turn it over to Nate. Nate Olmstead: Thanks, Kash. I will focus my remarks on our non-GAAP results, which are reconciled to GAAP in our earnings release tables and in the investor materials available on our website. With that, let me now turn to our second quarter results. In the quarter, total Penguin Solutions net sales were $343 million, down 6% year-over-year. Non-GAAP gross margin came in at 31.2%, which was up 0.4 percentage points versus Q2 last year. Non-GAAP operating margin was 13.2%, down 0.2 percentage points versus last year, and non-GAAP diluted earnings per share were $0.52, flat year-over-year. In the second quarter of fiscal 2026, our overall services net sales totaled $64 million, up 1% versus the prior year. Product net sales were $279 million in the quarter, down 8% versus the prior year. Net sales by business segment were as follows: In Advanced Computing, Q2 net sales were $116 million, which was 34% of total company net sales and down 42% year-over-year. This sales decline reflects both the ongoing wind down of our Penguin Edge business and hyperscale hardware sales in Q2 last year, which did not recur in Q2 this year. Drilling down deeper into our advanced computing results, our non-hyperscale AI/HPC net sales were down 35% year-over-year in the quarter, but up 50% for the first half of the year. Given the project nature of the business, where sales can be lumpy from one quarter to the next, we believe looking at the multi-quarter trend is a helpful way to evaluate the growth in this portion of our business. In addition to solid first half growth in our non-hyperscale AI/HPC business, we continue to make good progress on diversifying our net sales to new customer segments. For the first half of the year, the non-hyperscale AI HPC business represented more than 40% of total advanced computing net sales versus approximately 20% in the first half of last year. We expect to see our mix of net sales from enterprises, neoclouds and sovereign AI customers increase further in the second half of this fiscal year. In Integrated Memory, Q2 net sales were $172 million, which was 50% of total company net sales and up strongly with 63% growth year-over-year. And in optimized LED, Q2 net sales were $56 million, which was 16% of total company net sales and down 7% versus the same quarter last year. Non-GAAP gross margin for Penguin Solutions in the second quarter was 31.2%, up 0.4 percentage points year-over-year and up 1.2 percentage points sequentially with strong margin performance in each business, driven primarily by product mix in advanced computing, favorable pricing in memory and tariff recovery in LED. We currently project lower gross margins in the second half, driven by a higher mix of lower-margin AI hardware and memory sales, rising memory costs in our AI factory solutions and less tariff cost recovery in LED. Non-GAAP operating expenses for the second quarter were $62 million, down 3% year-over-year and relatively flat sequentially. We expect a modest sequential increase in operating expenses in the second half, reflecting normal seasonality and increased investments in R&D, including for our ClusterWare software and MemoryAI solutions. Q2 non-GAAP operating income was $45 million, down 8% year-over-year and up 9% versus last quarter. Operating margins were down 0.2 percentage points versus the prior year, but up 1.1 points sequentially, driven by higher sequential gross margins in both memory and advanced computing. Non-GAAP diluted earnings per share for the second quarter were $0.52, flat versus Q2 last year and up 7% versus the prior quarter. Adjusted EBITDA for the second quarter was $50 million, down 6% year-over-year and up 11% versus the prior quarter. Turning to the balance sheet. For working capital, our net accounts receivable totaled $371 million compared to $330 million a year ago, with the increase driven by higher memory sales volumes and variations in sales linearity across the quarters. Days sales outstanding were healthy at 50 days, consistent with the prior year and down 1 day versus last quarter. Inventory totaled $322 million at the end of the second quarter, up from $200 million a year ago, reflecting increased memory costs, growth in our memory business and strategic purchases to fulfill memory and AI demand in the second half of the year. Days of inventory was 51 days, up from 37 days a year ago and 38 days last quarter, primarily due to our strategic memory purchases and the timing of receipts and shipments. Accounts payable were $401 million at the end of the quarter, up from $238 million a year ago due primarily to higher memory costs, growth in our memory business and the timing of purchases and payments. Days payable outstanding was 63 days compared to 44 days last year and 55 days last quarter. The year-over-year and quarter-over-quarter movements were due to the timing of purchases and payments. Our cash conversion cycle was 38 days, an improvement of 5 days compared to Q2 last year and up 3 days versus last quarter due to the timing of purchases and payments. Consistent with past practice, days sales outstanding, days payables outstanding and inventory days are calculated on a gross sales and a gross cost of goods sold basis, which were $672 million and $578 million, respectively, in the second quarter. As a reminder, the difference between gross and net sales is primarily related to our memory businesses logistics services, which are accounted for on an agent basis, meaning that we only recognize the net profit on logistics services as net sales. Cash, cash equivalents and short-term investments totaled $489 million at the end of the second quarter, down $158 million versus Q2 last year and up $28 million sequentially. The year-over-year fluctuation was primarily due to proceeds from the issuance of preferred shares in Q2 of last year, offset by debt repayments for our term loan in Q4 of last year. Sequentially, the cash increase was due to cash generated from operating activities as well as approximately $32 million received from proceeds from the disposition of our investment in Celestial AI in connection with its sale to Marvell Technology. These sources of cash were partially offset by our share repurchase activity in the quarter. We ended the quarter with $450 million of debt, down $20 million versus last quarter due to the retirement of our 2026 convertible notes. In total, we closed the quarter in a net cash position. And based on our current debt maturity schedule, have no further scheduled debt payments due until 2029. Second quarter cash flows provided by operating activities totaled $55 million compared to $73 million provided by operating activities in the prior year quarter. The decrease in cash flow in the quarter versus last year was due primarily to investments in net working capital to support growth for the second half of this fiscal year. For those of you tracking capital expenditures and depreciation, capital expenditures were $2 million in the second quarter and depreciation was $5 million for the quarter. Wrapping up our cash flow activities, we spent $32 million to repurchase approximately 1.7 million shares in the second quarter under our stock repurchase program. As of February 27, 2026, an aggregate of $64.5 million remained available for the repurchase of our common stock under the current authorization. And now turning to our outlook. Given our solid half 1 performance and an improved half 2 outlook for our Memory business, we are raising our full company net sales and non-GAAP diluted EPS outlook for the year, which at the midpoint now calls for 12% net sales growth and $2.15 of non-GAAP diluted EPS, up from our previous outlook of 6% net sales growth and $2 of non-GAAP diluted EPS. As a reminder, our full year outlook assumes that we will continue to diversify our customer sales mix and does not include any advanced computing AI hardware sales to hyperscale customers. And also consistent with our assumptions from last quarter, our FY '26 financial outlook reflects the ongoing wind down of our high-margin Penguin Edge business. We expect sales from this business to essentially cease by the end of fiscal 2026. The combined effect of these 2 assumptions in our FY '26 outlook remains approximately a 14 percentage point unfavorable year-over-year impact to our total company net sales growth and approximately a 30 percentage point unfavorable impact to Advanced Computing. With that said, our full year net sales outlook reflects the following full year growth ranges by segment. For Advanced Computing, we now expect full year net sales to change between minus 25% and minus 15% year-over-year. While our Advanced Computing net sales outlook for this fiscal year is lower than our previous forecast, we are encouraged by our AI HPC bookings, including several new logos and pipeline growth. As it has previously, this outlook reflects the Penguin Edge and hyperscale hardware sales impacts mentioned earlier. For memory, we now expect net sales to grow between 65% and 75% year-over-year, driven by strong demand and a favorable pricing environment. And for LED, we continue to expect net sales to decline between minus 15% and minus 5% year-over-year. Our non-GAAP gross margin outlook for the full year is now 28%, plus or minus 0.5 percentage points. We adjusted our gross margin outlook down by 1 percentage point to account for a higher mix of memory sales, which have a lower gross margin than our company average and higher memory costs in our AI hardware business. Our full year expectation for total non-GAAP operating expenses remains $250 million, and we have narrowed that range to plus or minus $5 million. For FY '26, we now expect a non-GAAP diluted share count of approximately 53 million shares, down from our prior outlook, primarily reflecting the impact of our recent share repurchases. Our non-GAAP full year diluted earnings per share is now expected to be approximately $2.15, plus or minus $0.15. Our forecasted FY '26 non-GAAP tax rate remains at 22%. And while we expect to use this normalized non-GAAP tax rate throughout FY '26 and beyond, the long-term non-GAAP tax rate may be subject to changes for a variety of reasons, including the rapidly evolving global and U.S. tax environment, significant changes in our geographic earnings mix or changes to our strategy or business operations. Our outlook for fiscal year 2026 is based on the current environment, which contemplates, among other things, the global macroeconomic environment and ongoing supply chain constraints, especially as they relate to our advanced computing and integrated memory businesses. This includes extended lead times for certain components that are incorporated into our overall solutions impacting how quickly we can ramp existing and new customer projects and fulfill customer orders. Our outlook also contemplates the industry-wide higher costs for memory, which may slow customer demand for our products and solutions and may lower our gross margins in our advanced computing and memory businesses. Overall, we believe our focused execution, disciplined expense management and balance sheet strength provide a strong foundation for sustained profitable growth. We expect these qualities to support our continued progress as we pursue opportunities to enhance long-term shareholder value. Please refer to the non-GAAP financial information section and the reconciliation of GAAP to non-GAAP measures tables in our earnings release and the investor materials on our website for further details. With that, operator, we are ready for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Katherine Murphy from Goldman Sachs. Katherine Campagna: I'll ask about the raised Memory segment outlook for 65% to 75% growth. How much of this is from increased favorable pricing versus demand for new product categories? And as a follow-up, how should we think about the impacts to the operating margin outlook for this segment and the investments that need to be made into new technologies like CXL and photonic memory appliances? Nate Olmstead: Kath, it's Nate. So on the memory outlook, listen, we're really pleased with the demand that we're seeing as well as the favorability that we see in the pricing environment. I would say for the increase that we're seeing in the second half, that's majority pricing but demand is also very strong across telco, networking, AI-driven demand is just very strong. In fact, to get to the high end of that outlook really just refers to our ability to secure materials, which is really the only inhibitor we see right now to raising that outlook here in the second half. So we're chasing materials. We're using the balance sheet to strategically purchase ahead where we can, but the demand is very strong in memory. In terms of the investments, we've reflected it in the outlook. So I kept the OpEx for the year at $250 million, plus or minus $5 million. We're balancing the portfolio as we always do, to look for opportunities to accelerate our investments in innovation in AI or in the memory solutions that we've been talking about. But that's all included in the outlook. I expect the operating margins for memory to remain pretty healthy in the back half of the year. I do expect some pressure on gross margins in AI as we see a higher mix of new hardware shipments in the second half as well as factoring in some of the higher memory input costs that we have in that business. Operator: Sorry, your next question comes from the line of Brian Chin. We're experiencing some mild technical difficulties. My apologies. Your next question comes from the line of Brian Chin from Stifel. Brian Chin: Maybe first question, I guess, in Advanced Computing, what changed that caused you to lower the midpoint of your prior guidance to the new range you've communicated? And can you describe how booked you are to that midpoint of that new range? Kash Shaikh: So one of the main factor is the lag between our bookings and the revenue. Our revenue lags about 3 to 6 months from the time of the bookings. And this is primarily driven by the timing of the deployments, in some cases, the material availability and so on and so forth. And given where we are in terms of our fiscal year, we have 5 months remaining. So going forward, most of the bookings that we are expecting may not materialize into the revenue for the second half of this fiscal, but we believe that it will have a positive impact, obviously, going into the first half of the next fiscal. So that's one of the reasons that we are lowering the guidance for advanced computing driven by the deployments. But we are seeing strong momentum in our pipeline as well as bookings. Bookings grew very significantly in Q2 for non-hyperscale AI/HPC business, which is very strategic for us, and we are encouraged to see the progress. We closed 5 new logos with AI/HPC in Q2. And in first half, that takes the total to 7 new logos as compared to 3 new logos last year. So we are very confident in our ability to execute. The main issue at this point is timing. Brian Chin: Okay. Yes. I appreciate that, Kash. And it sounds like you're pretty well booked into the fiscal second half lowered outlook and that some of these new bookings are more kind of beyond a 6-month window. Also thinking about growth in the business, obviously, there's that sort of headwind that you helped to clarify in terms of reduction in hardware revenue to the new hyperscaler, the wind down of Penguin Edge. And so 30 percentage point impact, if we kind of net that against the guidance, maybe 10% growth for this year, net of that in that segment. So moving forward, as you survey the business and you haven't been in the role that long, and you think about what that sort of apples-to-apples growth rate was or is tracking to for this fiscal year, how are you thinking about sort of target growth rates for the advanced computing business moving forward? Kash Shaikh: So overall, let me give you a data point. So the first half of this fiscal, our net sales grew about 50% year-over-year for non-hyperscale AI/HPC business, representing 40% of the overall mix of advanced computing, which is almost 2x of what we closed last fiscal. So the growth is substantial in terms of the bookings as well as the revenue that we see, and we expect that to continue. And as we continue to close the bookings converting the pipeline, we see strong pipeline across all 3 segments that I mentioned between enterprises, on-prem AI deployments, significant activity with sovereign AI customers as well as neocloud customers. Operator: Your next question comes from the line of Matthew Calitri from Needham & Company. Matthew Calitri: Matt Calitri here from Needham. Do the new memory launches mark a shift in strategy on that front? Just curious because in the past, the company has talked kind of more about the niche parts of the integrated memory business and noted it's early on things like the CXL front. But now it sounds like memory is expected to be a larger driver as part of this AI factory platform. So just wondering if anything has changed there. And what gives you confidence there's durable demand here? Kash Shaikh: Yes. So it is a part of our strategy. The MemoryAI appliances that we launched about a month ago starting with GTC is a part of us investing more in our AI factory platform strategy. So there are 6 elements to this strategy and MemoryAI is one of the strategic elements where it is very timely if you look at how AI is transitioning from model training to inference. And in the workloads where you are focused on inference, memory becomes an increased requirement because of lower latency as well as larger context size for inference, powering the agentic AI. So this is very strategic for our business. In fact, we are leading the market in this area, taking advantage of our unique position at the intersection of memory and AI infrastructure. and combining the deep understanding and architecture, we introduced this MemoryAI KV cache server as one of the products in the line of MemoryAI. We are working on other products, and we will continue to invest and in fact, invest more in this area to take advantage of the market opportunity because the timing is perfect and our leadership in the MemoryAI line of products. To give you a proof point, the, one of the new logos we acquired Tier 1 financial institution. Not only we are deploying the AI infrastructure, AI factory deployment for them, they also purchased our CXL-based KV cache server, which is a proof point of as customers are transitioning from training and bringing AI on-premise in their factories, deploying on-premise, focusing on inference and powering agentic AI, it is very strategic for us and the timing is just right. So we expect to see this demand, and we plan to continue to invest in this area. Matthew Calitri: Awesome. That's great to hear. And then, Nate, with a new CEO in the seat and some moving pieces around sales cycles and supply chain, did you change the guidance philosophy at all or embed any additional conservatism? Any color on the puts and takes there would be helpful. Nate Olmstead: Yes. Matt, no, no change in the philosophy. We -- Kash and I are very quickly aligned, I think, on how we think about tracking the business and looking at things. And in fact, I think with our new CRO, who came in a couple of quarters ago, he's done a nice job of adding some more rigor to the planning process in our AI business and just improving the visibility there a little bit. But it's a challenging environment from a supply chain standpoint, and we're, of course, got a lot of experience managing supply chain in our memory business. And I think that that's an advantage for us in an environment like this. Operator: Your next question comes from the line of Samik Chatterjee from JPMorgan. Manmohanpreet Singh: This is MP on behalf of Samik Chatterjee. So my first question is I just wanted to double-click on your advanced computing guidance. You mentioned that a lag of 3 to 6 months for the revenue, which you will book in your second half. But was there a change observed for the bookings which you did in first quarter or any change relative to what were you expecting to do in 2Q? And I have a follow-up as well. Nate Olmstead: Yes. MP, I think bookings were strong in Q2, really good growth sequentially and year-over-year. I do think that the deployment cycle has lengthened a little bit with some of the supply constraints, in particular, on memory, things have gotten a little bit longer. But we're really pleased with the 5 new logos. And I think demand is good. We're seeing good strength in the pipeline, and it's also diversifying nicely across the non-hyperscale segments such as enterprise and neocloud and sovereign. So I think we feel really good about the demand. I think this is just an issue of a little bit of timing as we can convert bookings into revenue. Manmohanpreet Singh: Okay. And my second question would be also on advanced computing and your AI factory-related business. Like does NVIDIA coming up with their own reference designs for factory-level solutions? Like how does that play relative to you? Like is that a tailwind for you? Or is that a headwind for you? Like can you please help us understand...? Kash Shaikh: Yes, we believe this is an advantage for us. So we work very, very closely with NVIDIA and some of the wins that I mentioned, for example, the Tier 1 financial institution recently along with our MemoryAI product in this transaction. NVIDIA worked very closely with us, and we are working with NVIDIA leveraging their reference design, combining that with our AI factory platform and complementing NVIDIA's NVI as an example, to provide full stack to our customers. So their blueprints are more complementary to our AI factory platform and the components that make up for it. So we are actually quite excited about those blueprints and working very closely with NVIDIA to capture the opportunities, especially as NVIDIA is increasingly focused on enterprise, it aligns with our strategy and go-to-market. Operator: Your next question comes from the line of Ananda Baruah from Loop Capital. Ananda Baruah: A couple, if I could. Kash, and maybe Nate as well, earlier remarks were that you're seeing increased momentum across neocloud, sovereign and enterprise. And you mentioned 1 of the 2 of the new wins. Do you have -- and I think, Kash, you had mentioned you've made some specific or at least general inferencing remarks, including around agentic. Do you have any specific context you can give us around what your customers are telling you their thrust in inferencing is right now and maybe the degree to which agentic is showing up there. Like we just want to get a sense of what the customer activity tone is like behaviorally, say, over the last 90 to 180 days. Do you have anything there you can share with us to make it a little bit more experiential for us? And then I have a quick follow-up too. Kash Shaikh: Sure. we believe we are early in the adoption of inference with these customers, but it is increasingly deployed as in customers as they move towards agentic, inference provides the opportunity for powering the agentic. And when you think about inference, I'll give you an example of why the architecture is changing and why memory is becoming increasingly critical in inference as compared to the model training. So for example, let's say, if you are writing a book and if you have to write a new sentence without having the memory as a supporting component for you, you will have to reread the entire book before writing the next sentence. So in the inference, you're doing an inference on a lot of data you already have. And if you have a component where the book you have written so far is stored, so before writing the new sentence, you don't have to reread the book. That's kind of how it is changing for the enterprises and other segments. And we see customers already deploying it and the architecture is changing, which is why not only we have the opportunity and advantage to provide them our AI infrastructure as well as the services, increasingly, we are seeing the demand for our MemoryAI portfolio, where they are deploying AI infrastructure and increasingly inference, they need products like that to be able to provide that memory component for the inference so that the responses of LLMs can be much more faster than they would be otherwise. Ananda Baruah: I got it. That's helpful. And just one last -- one quick follow-up, I'm mindful of the time here in case there's anybody behind me. The CXL product, it sounds like you -- to the earlier question, it sounds like you guys are a little bit more enthusiastic about the CXL sleeve today than you were maybe 90 days ago, you have the new products out at GTC. Is that accurate statement? Are you expecting maybe it's because of these new products, a little bit more -- and certainly some of the NVIDIA announcements at CES as well. But are you expecting a little bit more revenue a little bit sooner than maybe you were CXL-wise 90 days ago? And then a quick second part to that. Do you need photonics to work before you really get CXL amplification? Like do you need CPO or photonics to work before you can really amplify CXL and scale out -- or scale up? That's it for me. Kash Shaikh: Yes. So let me address your CXL question first. I think CXL adoption is timely given the transition to inference because, as I mentioned, with inference, you need increased memory for faster LLM responses. And what CXL provides compute Express Link is you can share the memory between for GPUs and CPUs. So what it allows is new memory pooling, which is an advantage in inference workloads. So while CXL was obviously available for the last, I'd say, few quarters, it is driving that -- that inference adoption is driving the adoption for CXL and this transaction that I mentioned where we received an order, it's actually an enterprise generative AI company working on inference workloads. So you can imagine, CXL cards make sense for them because those workloads need increased memory and the memory pooling capabilities provided by CXL between GPUs and CPUs are an advantage for those kind of customers. And then in terms of photonic memory appliance that we are working on in our partnership with Celestial AI, which is now obviously Marvell, that provides increased capability because obviously, when you have photonic connectivity, then you have increased capacity to share the memory. So it takes it to the next level. However, CXL in itself is an advantage. We can take it to the next level with the photonic appliance. There is another element which is KV Cache that I mentioned, MemoryAI, KV Cache server, which is essentially providing much more responsiveness for larger context workloads, again, used in inference. So various requirements, you can think of it as inference has various requirements related to memory and the type of workloads it has and some of it is latency. So these components between CXL or the CXL-based KV Cache which provides increased responses and larger memory -- largest context sizes and then taking it to the next level photonic memory make up various use cases for inference. So inference gets mainstream, we will have an advantage of this portfolio helping with various use cases of inference. Operator: Your next question comes from the line of Kevin Cassidy from Rosenblatt. Kevin Cassidy: And just the gross margin for the memory, your gross margin was up in the quarter and memory revenue was up strong. And I just want to understand what the dynamics were there. Nate Olmstead: Yes, sure, Kevin. We saw a little favorability in memory margins. Some of that is mix, a little bit stronger demand in flash actually, which is a little bit higher margin product for us within the portfolio. And then also some of the pricing increases, we were able to capture a little bit of margin upside on that just based on the timing of our inventory purchases relative to the timing of shipments and sales to customers. Kevin Cassidy: Okay. So you kind of -- as you look out to the second half of the year, you see that catching up to the price increases compared to... Nate Olmstead: Yes. So as the price increases slow, right, if that's an assumption that you use that price increases are going to slow, then we would see -- we would expect to see less margin favorability from that because it'd be less of a timing difference between -- or less of a price variation between the timing between purchasing inventory and selling. But we have been using the balance sheet to try to secure inventory where we can. It's a tight market. So it's not unlimited supply. But where we can, we're using the balance sheet to try to gain a little bit of an advantage. Kevin Cassidy: Okay. And maybe just as we're talking about memory, as you get to these CXL systems, would you expect that's going to be higher margin than the module business? Nate Olmstead: Yes, we do. It's really a solution. It's got software aspects to it, some good differentiation on the hardware as well. So I see that as a nice margin opportunity for us down the road. Operator: At this time, there are no further questions. I will now hand the call over to Kash Shaikh, CEO, for closing remarks. Kash Shaikh: Thank you, operator. We see AI shifting towards inference with demand expanding beyond hyperscaler to enterprise, neocloud and sovereign AI customers. We are still in early shift in this transition, but the combination of our customer demand, product innovation and booking momentum gives us the confidence in the path ahead. We believe we are well positioned at the intersection of AI compute infrastructure and memory, and we are making good progress diversifying our customer base. My focus is on strong execution across product innovation, customer engagement and diversification, disciplined capital allocation and investment in our AI/HPC business to support the long-term growth. We look forward to updating you on our progress. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to the NOVAGOLD's First Quarter 2026 Financial Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Melanie Hennessey, Vice President, Corporate Communications. Please go ahead. Melanie Hennessey: Thank you, Galen. Good morning, everyone. We are pleased that you have joined us for NOVAGOLD's 2026 First Quarter Webcast and Conference Call and for an update on the Donlin Gold project. On today's call, we have NOVAGOLD's Chairman, Dr. Thomas Kaplan; President and CEO, Greg Lang; and NOVAGOLD's Vice President and CFO, Peter Adamek. At the end of the webcast, we will take questions by phone. Additionally, we will respond to questions received via e-mail and the webcast. I would like to remind you, as stated on Slide 3, any statements made today may contain forward-looking information such as projections and goals, which are likely to involve risks detailed in our various EDGAR and SEDAR filings and forward-looking disclaimers included in this presentation. With that, I will now turn the presentation over to NOVAGOLD's President and CEO, Greg Lang. Greg? Greg Lang: Thank you, Melanie. On Slide 5, we highlight the key attributes that make the Donlin project unique in the gold industry. Donlin has a combination of scale, grade, long life, low operating costs and significant upside potential in the exploration areas, and we're in a safe jurisdiction. With about 40 million ounces of reserves and resources at 2.25 grams, Donlin has got grade better than twice the industry average. Our known resource occupies only 5% of our total land holdings and there is considerable potential to increase the strong reserve base. We're also fortunate to have long-term committed shareholders who understand the value in an asset like Donlin. Moving on to Slide 6. This chart illustrates the value of Donlin and a variety of gold prices. With today's gold price approaching the upper end of this chart, the project has a net present value of almost $24 billion at a 5% discount rate. This underscores the leverage and significant economic potential of Donlin in the current gold price environment. As highlighted on Slide 7, Donlin will be a big mine. It will average over 1 million ounces a year during its 30-year mine life and about 1.3 million ounces the first 10 years. This asset production makes it really unique and stands out in the gold space. Grade is one of the most important attributes of a mining project. At 2.25 grams, Donlin is twice the industry average. It's this high grade that contributes to Donlin's very low operating costs at less than $1,000 an ounce. This slide really highlights the significant exploration potential at Donlin. Our known resources reside in the ACMA and Lewis areas, as shown on Slide #9. These areas represent only 3 kilometers of an 8-kilometer gold bearing system. When the time is right, we will continue to explore both along strike and at depth, and there's tremendous potential right in our own backyard. Turning to Slide 10. This slide is a summary of the status of our permitting. We've completed the federal permitting process and we're wrapping up the state permitting. We've worked well with the federal and state agencies over the years, and our permits are in good standing. The only remaining permit in Alaska is for the dam safety certificates and the design packages have been submitted to the state, and we anticipate approval well in advance of needing this permit. Slide 11 highlights a recent statement from Governor Mike Dunleavy up in Alaska. Governor Dunleavy as well as the other elected officials in Alaska have long been staunch advocates for the Donlin project and the importance of what it can mean to the state of Alaska in the Y-K region. On Slide 12, we highlight our long-standing engagement with our Native Alaskan partners, Calista owns the mineral rights and TKC owns the surface rights. We've got a life of mine agreements in place with both of these entities. And it's really important to remember that this is private land that was designated for mining activities. Both Calista and TKC have an owner's interest in seeing this project go forward. Moving on to Slide 13. We are starting to fill out the Donlin Gold feasibility team. Frank Arcese is our project manager. He's been around the industry for almost 40 years and is very well seasoned with big projects in remote locations. We've hired Fluor, one of the industry's leading engineering firms to lead the bankable feasibility study. Under Fluor, we have 3 specialty firms, Worley, who was responsible for the pipeline; Hatch, who is a leader in pressure oxidation and oxygen plants; and WSP, a firm specializes in, among other things, power plants. These are all industry-leading firms that will help us with the bankable feasibility study and taking the project forward into construction and, ultimately, operation. I will now turn the call over to NOVAGOLD's Vice President and Chief Financial Officer, Peter Adamek. Peter? Peter Adamek: Thank you, Greg. Turning to our operating performance on Slide 15. NOVAGOLD reported a fiscal 2026 first quarter net loss of $15.4 million. This represents an increase of $6.3 million from the comparable prior year period primarily due to higher expenditures at Donlin Gold following the commencement of the bankable feasibility study related activities including hiring for key roles on the Donlin Gold project team and higher G&A expenses at NOVAGOLD. The company's share of Donlin Gold expenses in the first quarter of 2026 was $3.9 million higher than the comparative prior year period due to camp remaining open this winter and increased project activities following Fluor being awarded the lead engineering role for the Donlin Gold bankable feasibility study in early February 2026. Unlike the comparative prior year period, the company's first quarter results also reflect NOVAGOLD's 60% interest in Donlin Gold. NOVAGOLD's G&A expenses increased in the first quarter of 2026 by $3.9 million from the comparable prior year period, primarily due to higher professional fees and share-based compensation. Professional fees were elevated during the first quarter but remained in line with quarterly cadence expectations and are expected to decline from first quarter levels during the remainder of the year and remain within previously issued 2026 guidance. On Slide 16, our treasury increased by $277.4 million to $392.5 million at the end of the first quarter, primarily due to closing of a private placement of approximately [Technical Difficulty]. NOVAGOLD intends to use the net proceeds from the private placement for expenditures associated with Donlin Gold activities, exercise of the company's prepayment option on the Barrick promissory note and general corporate purposes. Excluding the financing, corporate G&A costs during the first quarter increased by $3 million, and our share of Donlin Gold funding increased by $11.9 million compared to the prior year. Moving to Slide 17. Our treasury at the end of the first quarter sits at a robust $392.5 million. NOVAGOLD is well funded, enabling it to complete the Donlin Gold bankable feasibility study in 2027 and exercised its option to prepay the Barrick promissory note later this year. Our operating cash expenditures in the first quarter of fiscal 2026 remained in line with our 2026 budget and guidance. And with that, I will now turn the presentation back over to Greg to discuss first quarter highlights. Greg Lang: Thank you, Peter. Slide 18 highlights our continuing engagement with the communities in and around Alaska. We work closely with Calista and TKC on all of these programs as well as preparing them and the local people for ultimate employment at the mine. All of these programs are a testament to our commitment to total engagement with the local communities and ultimately preparing a workforce for the Donlin project. Turning to Slide 19. During the first quarter, we announced the advancement of the Donlin Gold bankable feasibility study as well as additional engineering firms have been engaged for very specialized components of this study. This integrated approach leverages the deep technical expertise that all of these firms bring to the bankable feasibility study. On Slide 20, another development we follow with a lot of interest is the proposal to bring gas down from the North Slope into the Cook Inlet, ultimately tying into the header that will feed the Donlin project. We've got a nonbinding letter of intent with Glenfarne to evaluate natural gas supply from this proposed pipeline. This pipeline has the potential to be a real game changer for Donlin, giving us access to cheap, reliable and long-term natural gas. We will continue to advance discussions with Glenfarne as the project moves forward and where they might potentially fit in supporting the infrastructure for the Donlin project. Last year was really a transformational year for the company. Post the Barrick transaction, we've steadily made meaningful progress to advance the Donlin Gold project through a bankable feasibility study. We're building up the team with expertise to do this. In a while, we will continue to engage with our local communities. Turning to Slide 22. This highlights our top shareholders, we have always valued their long-term commitment to the project into the company. I think it's important to note that Paulson, who is now our 40% partner with Donlin has been a major shareholder in NOVAGOLD for over 15 years. This slide also highlights the coverage that NOVAGOLD has from various banks. NOVAGOLD is focused on delivering on every single commitment we've made, advancing the Donlin Gold project through a bankable feasibility study and achieving all of these milestones. Operator, we are now prepared to open the line for questions. Operator: [Operator Instructions] Our first question is from Francesco Costanzo with Scotiabank. Francesco Costanzo: I'll just start with the BFS. I appreciate that you'll be giving a more fulsome update on the BFS time line around midyear. But given that you've now awarded the engineering contracts for the project, can we consider that the clock on the 12- to 18-month time line to complete the BFS has now started? Greg Lang: I would say, yes, certainly, we have got all of the firms in place to do the bankable feasibility study. Fluor hit the ground running. They're obviously the key driver in this. And from where we're sitting today, I'd say, give or take a year, we will have it wrapped up. Francesco Costanzo: That's great. And my second question is just going to move to project financing. Just this week, we saw Perpetua Resources announced the approval of a $2.7 billion loan from EXIM. Now though the projects are obviously different, I'm wondering if you see any read-throughs on the potential debt financing availability for a project that offers significant domestic investment in the U.S., such as Donlin? Thomas Kaplan: Shall I take that one, Greg? Do you want to begin? Greg Lang: Sure. Go ahead, Tom. Thomas Kaplan: I think that it's very fair to say that when you're building the biggest gold mine in the United States, you're going to have multiple sources of financing that come to the floor. And if I had to hazard a guess, I would say that governments will be a very large component in that. There is, of course EXIM. I believe that EXIM is very well aware of our project. And for many reasons that you've cited, the domestic component of this story, not only being the largest gold mine in the United States, but being located in a place where it becomes a nexus for the energy story in Alaska, which is of extraordinary importance to this administration. Yes, I think it is fair to say that we should expect that the U.S. government has a serious interest in this story. But equally, I would point out that at least 2 Asia Pacific countries, Japan and South Korea have made very substantial commitments to investment in the United States. $550 billion in the case of Japan, $350 billion in the case of Korea. And both of those have advanced in terms of execution over the last several months. I think that it is fair to say that one of the things that we do expect them to be interested in is being able to make quite a statement with Donlin as the biggest, but also as enjoying the fruits of location, location, location. If you're on the Pacific Coast of Alaska, you have an opportunity to really develop relationships that are natural in terms of meshing together. The Japanese are very large buyers of gold and the South Korean Central Bank. Several months ago, announced that it was going to go back into the market to add to its reserves. Their timing was actually quite good. The prospect for us to be able to utilize the benefits, for example, of offtake agreements of 1.3 million, 1.4 million ounces a year, clearly make us a bit of a unicorn in terms of the ability to attract financing. And I'm not even talking about the other traditional sources. I hope that helps. Operator: The next question is from Soundarya Iyer with B. Riley Securities. Soundarya Iyer: Congratulations on this, the quarterly update. My question is on the exploration work. So as you mentioned in your opening remarks, the current resource is just 5% of the land package. So have you planned any 2026 exploration drill program or budget to test further targets? Or is that a priority after the bankable feasibility study? Greg Lang: I'll start with that one. We have putting together an exploration plan, more I would describe it as general reconnaissance work throughout our land holdings and the area in and around Donlin. So I think that's getting started. But you have to remember, I think there's a lot of snow left on the ground in Alaska. So it will be another month or 2 before we really can get on the ground. But it's more general recon. We've been studying Donlin. We believe the next Donlin is at Donlin, and we're in a modest program starting to evaluate that. Thomas Kaplan: If I may add just a few words on that because the drill bit has been my best friend over the last 3 decades. If I may echo Greg's comment, and this is obviously a very forward-looking statement. But being that for reasons belonging to Barrick's ultimate belief that this would fall into their lap one day or the other. The 95% of the property that's been unexplored is all prime real estate. And we believe that in addition to what we see as low-hanging fruit to add tens of millions of ounces within the 8-kilometer belt, 5 kilometers of which just simply have been drilled, shown mineralization, but there was never any follow-up because the deposit was already so big that it was thought you leave that for later. But in addition to the 45 million ounces of resources that we already see, it's low-hanging fruit to add, in our view, tens of millions of more ounces. But we are looking for that at Donlin. In a bear market, people really don't care about exploration results. And so I'm very glad that you asked that question because in a bull market, great drill results can cause the stock price to double or more. And we do expect to be adding a lot more ounces in the immediate vicinity of the property as we go from the 3 kilometers to the 8-kilometer mineralization. But at the same time, what Greg is referencing is that we are undertaking a project or property-wide analysis in order to identify the best drill targets that are extrinsic of the 8 kilometers. Because in our view, the odds that this occurrence is alone. Well, mother nature is very fickle. We know that the odds are very long in exploration. But I've been in this movie before. And I found that in the case of precious metals, and in the case of hydrocarbons, where we made our biggest killing at Electrum, Wildcatting is something that can take a 10x opportunity to 100x. And fortunately, we have a partner who doesn't see exploration success as being a challenge. But John Paulson and his team completely have aligned with us on understanding that good news through the drill bit is a multiple expander. And if this turns out to be what we hope it is and it's a hope, this is really the next Carlin. And the partners are aligned in being able to identify that. So when you think of the relatively low cost of exploration versus the high reward, I think you can understand that the partners in Donlin are very keenly aware that we may just be scratching the surface in this story. It remains one of the greatest exploration stories in the world, and that will unfold for the market. Soundarya Iyer: Yes. I mean I totally agree with that. My question was on that front that exploration work could gain more value in a bull market. And just one more. On the state permitting, can you walk us through what's left there on the -- as a full state permitting checklist? What is in hand? What remains outstanding? And how do we expect the receipt of those permits going forward? Greg Lang: Sure. I'll take that one. The only outstanding state permit is for the tailings dam and other water retention structures. Our federal permits which are all in hand, authorized us to do this work. However, in Alaska, these structures are administered by the state, and they require final engineering drawings before they grant approval. We've submitted the design packages to the state. We had already completed the geotechnical work, and we expect approval of these permits about the time we're wrapping up the bankable feasibility study. So they're not on the critical path, but the work to get these permits is well in hand. All of our other remaining state permits are in good standing as is our federal permits. Melanie Hennessey: Thank you. I do have a few questions from the webcast that I wanted to read out. The first is from Eric. Will the BFS include a closure and recognition estimate, including long-term water treatment and post-closure monitoring assumptions? Greg Lang: I'll start with that one. Yes, it does. Part of the feasibility study and actually the permitting requires you to have approved closure plans that have to be invested by the state and our native partners. The lease plans, reclamation and closure and water treatment, they are all part of the commitments in our existing permits. Once the mine is in operation, it will cash fund these permits through a trust. So it's -- the procedure is well defined and the approvals are all in place for the subsequent reclamation and restoration of the Donlin site post mining. Melanie Hennessey: Great. Thank you, Greg. The next question comes from Jean. Given the recent share price volatility and now with the feasibility team in place, which upcoming milestone in this study do you believe will be most important in helping the market recognize the project's underlying progress and value? Greg Lang: Well, there's -- I mean, the important piece of this, obviously, is to finish the feasibility study. But along the way, we're advancing many different avenues. I think particular interest is we will be evaluating third-party participation in our gas pipeline and other components in the infrastructure that we could logically bring in a third party to handle. So that will be one of the catalysts coming up as we advance the feasibility study. Then the other milestones along the way as different components of the study are completed, and we will update the marketplace as this work unfolds. But the real key item is finishing the study, and we anticipate it will certainly demonstrate robust economics in this price environment. Melanie Hennessey: Great. Thank you. I have a further question that come through the line from Matt. Dr. Kaplan, at the last quarter's update, you mentioned that your decisions toward NOVAGOLD and Donlin were family influence. I have been following NOVAGOLD for over 15 years and now have many family members investing in the story. I just wanted to say that I appreciate your's and NOVAGOLD's integrity over the years. A big thank you. Could you comment on the recent movement in gold and how that relates to NOVAGOLD? Thomas Kaplan: Well, that's very kind. While I'm going to ask our team, could you please call up the chart that references the long-term bull market in the Dow, and just let me know when it's up there. Melanie Hennessey: Yes, the slide is up. Thomas Kaplan: But before that, let me get to the best part of the questioner's remarks. First of all, I find it very gratifying, we all do that you're able to make this comment about our integrity and your family's investment in NOVAGOLD. Needless to say, as Electrum is the largest shareholder of the company. And as the largest shareholder of Electrum is my family. I take it very much to heart that I have a responsibility to my family, but all the other shareholders and in your case, your own family, to do the best possible thing that we can. And I would say that the thing that Greg and I are most proud of since having come into the story together in 2011, we are celebrating 15 years of joyful monogamy. And one of the things that we are most proud of is that any promises that we made, we kept. To the extent that we disappointed, I think 100% of our shareholders understood it was for reasons beyond our control. And we had all the tailwinds that I think and John Paulson thinks will take us to $100 per share. But we had one headwind. And when you think that a year ago, our stock was at $2 and change, and reached 14, and I have no doubt that we will vastly surpass that and multiply past $14. You understand that we took it to heart as much as any shareholder that we were being held back. And once that was relieved approximately a year ago, we knew that we would be on our way to $10 to $15 to $30, and we think well beyond that for all of the reasons that have become so clear to everyone that whether people realize it or not, and I'm not saying we're going back to a gold standard, because we'll never see that kind of discipline ever again in human economics. But we are seeing the remonetization of gold. We are seeing that central banks have shown through their purchases that gold is the asset that they hold because it doesn't represent someone else's liability. When central banks hold gold, when central banks buy gold, they're making a statement. To the extent that some central banks need to lay off some gold as Turkey is said to have, that proves, proves to all of the rest of them that gold is the asset that you want to own because gold traditionally in a crisis gets hit because if it's in a bull market, it may be one of the only things in which people have a profit. So the ability to not just buy but the ability to sell something, if you need to take some chips off the table because I don't know, you have missiles that are flying into your territory and need to be taken out with Patriots. That's a good thing, not to be concerned about. And this is one of the things that I enjoy most in the time that I've been bullish on gold and publicly so since gold was at $500 in 2007. And when I said my first equilibrium for gold would be between $3,000 and $5,000, people thought I was nuts. Similarly, when I said that silver will go to triple digits, people thought I was nuts, but that's my stock in trade. I don't know how to build a mine. Greg Lang knows how to build the mine. Richard Williams knows how to build the mine. They know how to do it on budget and on schedule. I can't figure out how to make chrome work over Safari. But I don't need to. You surround yourself with the very best people. My job is to protect my family's wealth. And by extension, all of the families that depend on me, including our management team and including our shareholders. So with that, let me go back to a chart that I spoke to on our last conference call because I wanted to give people a heads up as to what might happen. It wasn't required, but it might happen. In fact, what I would call the 1987 correction started 3 days later. Now I'm not going to say that I was predicting it. I was going to say that it should be expected. And for that reason, whereas people who predict a downdraft are seen as Cassandra's, I wasn't actually being a Cassandra in this case. And I have been a Cassandra in different cases, like on the Middle East. But in this instance, I was presenting people with my belief that we could have in 1987. 1987 is not so much remembered for how you felt when you thought the world was caving in, in October of '87. It was -- it is and should be remembered as the blip that created the best buying opportunity of the bull market in stocks. The best because we've already seen the stock market go to 2,750. And when it pulled back to 1,650, you have to fade these numbers a bit, I'm sorry. That was actually the cream of the opportunity to be able to build the position if you didn't have one or to add on weakness in a bull market that has all the structural factors going forward. And if anything, we can see that the world is a very different place. I hope that it's going to turn out to be a much safer place. But without getting into politics, the reality is that we're in unchartered waters economically and the debt burden will never be repaid. So just for all these reasons, if you didn't own gold on the way up, taking advantage of a pullback was what I was trying to express, while some people were a little bit upset that I said that there could be such a pullback, the reality is we're looking at it. So look at this chart again because this is the exact same chart as I issued. And I'll just repeat the sentence that I repeated 3 months ago. As a curiosity, I want you to go back and look back at the mid-1980s. The blip, which barely is noticeable is the crash of '87 that a lot of us thought was going to be the harbinger of The Four Horsemen of the Apocalypse. You can't even see it as the Dow march from 1,000 to 45,000 and up to 50-some-odd thousand plus leap in value over the decades. A few days later, '87 began. And then it was compounded by the need for people to be able to have some liquidity due to the war with Iran. So once again then let me reiterate, in the words of Ray Dalio, one of our greatest contemporary applied historians, Gold is now the second largest reserve currency behind the U.S. dollar. To understand why you need to look at the history of fiat currencies like the dollar and hard currencies like gold. The way I see it, we're currently facing a classic currency devaluation similar to what we saw in the 70s or 80s. In both of those cases, fiat currencies around the world all went down together and all went down in relationship to hard currencies like gold. If events today follow a similar pattern that makes hard currencies an attractive asset to hold. For all of you who've known me or listened to me over the years when I was asked which currencies to own, I said, if you have to own a paper currency on the dollar. But the real currency is gold. And now I don't really know what paper currencies are going to thrive the most. But I will repeat something which I've said now over the last couple of years, regardless of your view on currencies against gold, the dollar is actually collapsing. So every once in a while, you'll have a pullback, but the long-term trend on gold, to my mind, is going to be very similar and indeed price-wise, it actually looks at, but that's coincidence. Very similar to what we saw in the Dow Jones. And so for those, if you haven't taken advantage of the pullback, my strong recommendation is that you do. And I can only say that what my family does, we are long-term holders in our flagship gold asset Donlin and will absolutely remain so because to our mind, if we sell it, we can't go into something at least as good, and we really think impossible to go into anything better. So thank you for being a long-term shareholder. Thank you for your support. I can tell you it means a lot to us. And the last conference call for those who managed to stay through it. One of the callers actually said that he and his wife had an argument over NOVAGOLD during the tough times, but that the revival of NOVAGOLD actually saved his marriage. And we regarded that as probably not only the funniest, but the most heartwarming piece of news we've had all year. So with that, I thank you and all of the shareholders who have kept the faith. All I can do is promise you that I, the entire management team is devoted to being able to unlock the fullest value of what we consider to be the greatest gold development story in the world and what will be the largest single gold mine in the best jurisdiction on the planet. Thank you. Operator: I'd now like to hand the call back over to Greg Lang for concluding remarks. Greg Lang: Well, I just want to thank everybody for taking the time to get an update on NOVAGOLD, and our Chairman's thoughts on gold prices and markets. So everybody thank you. We'll be in touch. Operator: This brings to a close of today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Philippe Palazzi: Good evening, everyone. I'm pleased to hold this presentation today together with our CFO, Angelique Cristofari. Just keep in mind that the figures we are presenting today are financial data that have not been yet approved by the Board of Directors and as well, they are not audited. Angelique will provide further details later on regarding the financial framework behind all these figures. I will start with a short introduction on where we stand in our transformation journey, followed by our key financial indicators for the full year '25. Then I will provide you with a brief reminder of our Renouveau strategic plan ambition, and I followed by an overview of key '25 business achievement per brand. Then Angelique will walk you through our financial performance for '25, and I will close the presentation by providing you with some perspective and insight on the French retail market. We'll take your questions at the end of the presentation. Let's start with a quick update on the turnaround plan status. Casino turnaround is a long-term 3-phase mission, restore, recover and grow. After an intense period of transformation, we're entering in the phase of recovering. Our strategic plan, Renouveau 2030 defined in Q4 '24 had been updated and expanded by 2 years last November with the objective to generate value over the period '26, 2030. We have also launched in November '25, the adaptation, the strengthening of our balance sheet structure. Angelique will provide you with more details during this presentation. Let me first start by introducing our '25 financial data estimate. First and foremost, '25 marks a new momentum in a strong increase in profitability for the group. '25 financial data estimates are fully in line with our value creation plan and confirm that the turnaround is well underway. Regarding our sales performance and for the first time since the financial restructuring, we are posting a positive like-for-like sales growth. Net sales reached EUR 8.3 billion with a like-for-like growth of plus 0.5% versus PY. Regarding our profitability, adjusted EBITDA before lease payment is growing by 14% versus last year and reached EUR 655 million. This result reflects the efficiency of our cost optimization, our store fleet rationalization measures and last but not least, the improvement of our retail gross margin. The adjusted EBITDA after lease payments reached EUR 198 million, representing a growth of EUR 86 million. Finally, our free cash flow reached minus EUR 120 million, an improvement of EUR 519 million versus PY. Let me give you a brief reminder of our Renouveau strategic plan ambition before to enter into the key business '25 achievement per brand. If I have to summarize our long-term strategy in one sentence, I would say, differentiate brands as possible and centralize resources as necessary. We are a group of 7 well-known brands that are all unique and complementary, which is Casino, Cdiscount, Franprix, Monoprix, Naturalia, Spar and the last one, Vival. We are now fully engaged in delivering Renouveau 2030 ambitions to offer our customers the best brands in convenience retailing. We have just updated and expanded our Renouveau strategic plan by 2 years and our vision, mission and direction remain unchanged. Our 2030 strategic plan is based on 5 key strategic levers supporting unchanging core vision for the group, strength of our brands, our culture of service, our strength as a group, the energy of our people and our societal and environmental values. These levers are all connected, interconnected and declined per brand to specific actionable measure. The entire company is focusing on execution on a day-to-day basis. Before providing you with the key business '25 achievement per brand, let me give you a brief summary of our Group '25 focus. Here are 6 core execution focus of 2025. First, brands and store concept investment, focusing on actions on creating, testing and launching pilots and rolling out store concept as well as refining brand personality. Investing in our franchisee development with now circa 85% of our store portfolio is franchised, streamlining our store portfolio to eliminate loss-making store with profitability as a key driver versus market share at any cost, managing COGS improvement, rationalizing and massifying private label volumes, increasing national brands assortment overlapping across brands, implementing Aura Retail and Everest alliances and continuing cost reduction, notably through the rollout of several group shared services such as IT, accounting, payroll, legal, name it. Last but not least, cash management with a definition and a follow-up of a detailed CapEx program and optimization of our remodeling costs. I will now guide you through an overview of the key business '25 achievement per brand. Let me start first by Monoprix. For you recall, Monoprix business unit represents 624 stores by the end of 2025, of which 283 are owned stores and 341 are franchised. Let me present to you in one slide the main Monoprix achievement in 2025. Monoprix sales reached EUR 4 billion in 2025, representing a like-for-like growth of plus 0.6% and an adjusted EBITDA growth by 10.9% versus PY. The results reflect the good performance of Monoprix, especially in fresh products, nonfood categories such as fashion and home decoration. What are the main Monoprix achievement in '25? First, several initiatives have been launched in the key quick meal solution market. Monoprix defined, tested and launched the new concept La Cantine in 12 stores by the end of '25, posting encouraging double-digit growth. During Q2, Monoprix introduced a new quick meal solution assortment with circa 250 SKUs rolled out in all of our stores. Second, regarding the food category, Monoprix was focusing on developing fresh category with the rollout of 25 new fresh counter and 14 stores with a new fruit and veg concept. The team continued to strengthen Monoprix singularity and personality brand, thanks to the introduction of over 800 innovation to the assortment this year. As far as the nonfood is concerned, Monoprix sustained growth in the beauty and fashion category by defining, testing and launching a new beauty concept rollout already in 14 stores and by developing a new collection supported by our 11 partnership with designers in '25 in home and fashion category. Fourth, we have also worked to continue our digitalization to position Monoprix as an omnichannel brand. To name a few, we extended our partnership with Amazon to 22 additional cities. We developed quick commerce solution with Uber Eats and Deliveroo covering today 92% of our store network in France. We finally developed our new e-commerce site, [monoprixshopping.fr], dedicated to fashion and decoration categories. In parallel, we kept on working core retail fundamentals, improving product availability and reducing shrinkage, increasing the number of conveyor belt checkouts plus 10 points versus last year, giving more shelf space to highly profitable nonfood category. We took the opportunity by closing 28 magazine and newspaper departments in our store. Regarding the Monoprix and Monop' store network management, 26 new stores opened over the period, while 20 underperforming ones were closed. 30 owned stores were switched to franchise. And last but not least, we started store remodeling with 7 stores in 2025. Let's now continue with Franprix. For you recall, Franprix business unit represent 999 stores by the end of 2025, of which 296 are owned stores and 703 are franchised. Let me present to you in one slide main Franprix achievement in '25. '25 obviously was for Franprix, a year of unlocking potential. Franprix sales reached EUR 1.5 billion in '25, almost flattish with -- sorry, adjusted EBITDA growth by circa 20% versus PY. The execution of the Renouveau strategic plan includes several important achievements. First, the rollout of our performing oxygen concept in 89 stores in '25, summing up to 107 stores at year-end. As far as our quick meal solution is concerned, we have proceeded with important space reallocation for snacking, development of a new stacking assortment and menu such as breakfast at EUR 1.9 or pizza menu at EUR 5.5, positioning Franprix as the cheapest among all our own competition in the market and launching a set of exclusivity such as Krispy Kreme. We also launched several customer-focused commercial initiatives. The new loyalty program, bibi! with circa 50,000 additional subscribers in '25. We launched as well the PF initiative that includes essential articles at highly competitive price. The rollout of daily in-store services such as Nannybag, Franpcles, et cetera. And finally, the rollout of Leader Price as a core private label of Franprix and Tous les jours as a brand as an entry price range. We also developed specific B2B promotional offers under the concept of buy more, pay less to help our franchisee in boosting their sales and profit. And finally, in terms of store network management, we maintain a disciplined approach with 20 new store opening, 85 store exit and 6 own store converted to franchise. Now let's continue with Casino, Spar and Vival brands. For you recall, Casino, Spar and Vival business unit in France represent 4,528 selling points by the end of 2025, of which 236 are owned stores and 4,292 are franchised, which is 95% of the stores are franchised. Let me show you in one slide, like for the previous brands, '25 achievement. Casino, Spar, Vival sales reached EUR 1.28 billion in '25, representing a positive like-for-like growth of plus 0.6% with an adjusted EBITDA decreased by circa minus 37% versus PY, mainly driven by HM/SM disposal dis-synergy that we carry them since '24. The execution of the Renouveau strategic plan includes several important achievements. We launched in '25 2 new store concepts. We defined, tested and launched the new concept of Spar called Origins in 5 stores by the end of 2025, posting encouraging double-digit growth. We defined a new Casino brand identity in Q4 2025. And the first store -- the first 2 store, I must say, will be inaugurated not later than tomorrow in Saint-Etienne. And in case you are close by, please, you will be welcome to visit us. In the key quick meal solution market, we continue to roll out of our Coeur de Ble concept with 53 corners deployed in '25, summing up since '24 to 62 stores up to date. We complete our snacking assortment by introducing 70 new SKUs in '25. We also launched several customer-focused commercial initiatives. We continue to roll out our Coup de pouce loyalty program launched in '24 with circa 128 new subscribers in 2025. In parallel, the team continues to strengthen Casino, Spar, Vival singularity and personality, thanks to the introduction of new assortment tailored to the trade areas as well as corner of Naturalia, for example, in 20 stores. As for Franprix, we introduced B2B promotional offer, buy more, pay less type of, and we launched new IA functionality of Casino Pro. Casino Pro is a tool for franchisees in ordering too but help them to better manage their store performance. In terms of store network management, we opened 151 new selling points, 1,052 stores were exited and additionally, 78 owned stores were converted to franchise. Now let me switch to Naturalia. For you recall, Naturalia business unit represent 213 stores, of which 152 are owned stores and 61 are franchised, means 29% on franchise. Let me show you in one slide what have happened in '25 for Naturalia. It was a year of growth acceleration for Naturalia. Sales reached EUR 300 million, representing a positive like-for-like growth of plus 8.6% and an adjusted EBITDA increase by circa 57% versus PY. Main achievement for Naturalia was the rollout of our performing La Ferma concept in 25 stores in '25. End of December to date, 36 stores are already rolled out. Naturalia had launched a new organic quick meal solution concept in 35 stores and a new beauty concept in 47. Teams have also worked to continue Naturalia digitalization by adding 7 new stores with our partner, Uber Eats and launched several commercial initiatives. In terms of store network management, 6 underperforming stores were closed and 1 store was opened in 2025. Let's finalize an overview per brand of '25 by Cdiscount. '25 was for Cdiscount the year of customer acquisition. Cdiscount GMV reached EUR 2.75 billion in 2025, representing a growth of plus 3.5% versus PY, EUR 1 billion of net sales and an adjusted EBITDA of EUR 67 million. Starting with our solid B2C performance, we saw sustained 3P momentum with a GMV increase by 7.7% in '25, reaching plus 8.1% in Q4. Our marketplace business grew representing now 67.3% of our total GMV, a 2% point increase over '24. We continue to expand our customer base, acquiring 2 million new customers in 2025. Our major investment plan has been fully deployed, providing support for both sales uplift, brand equity and obviously, customer acquisition. Moving on to our B2B activities. We've seen significant progress in enhancing the experience of our sellers, resulting in a notable or noticeable 20% reduction in support tickets. Furthermore, our Retail Media business has experienced strong growth with net sales up 13% compared to last year. Finally, we developed in-house conversational chatbot deployed with more than 900,000 customers, leveraging generative AI to enhance search and improve conversion. Let me now share with you a few group initiatives, starting with our store portfolio streamlining and how we strengthen our relationship with our franchisee. We continue streamlining our store portfolio to eliminate loss-making store and coordinate selective expansion with profitability, as I said, as a key driver versus market share at any cost. From Jan to end of December, 1,178 stores left our network portfolio. During the same period of time, we also opened 207 stores, and we switched 112 stores to franchise. In parallel, we continue to strengthen our franchisee relationship by organizing, for example, annual franchisee event, sharing monthly newsletter, implementing B2B Net Promoter Score and involving our current franchisees in the franchisee selection process for new store openings. Finally, we support franchisee store performance by providing them with user-friendly store performance report versus their local competition, for example, or versus the average network performance. As far as cost reduction is concerned, we have put a lot of effort in efficiency improvement, cost reduction and CapEx monitoring. In the first half of '25, we successfully launched 7 group shared service centers covering key functions like IT, accounting, payroll and [others]. We kept on increasing the assortment overlap for national brands across all our business units. We are continuously managing our CapEx with detailed calendarization and reduction of our concept remodeling cost per square meter. Finally, we strengthened our process to recover overdues receivable, ensuring better financial discipline. And last but not least, 2 purchasing alliances are now operational, supporting our retail gross margin improvement. The Aura Retail purchasing alliance with Intermarche and Auchan in place since March 2025 for large 20/80 supplier, the European Everest purchasing alliance since August '25 for international purchases. By the end of '25, 37 supplier were rolled-out. Let me now hand over to Angelique. Angelique Cristofari: Thank you very much, Philippe, and good evening to you all. Let me first provide the context and financial framework behind these key financial data estimates for 2025. This publication is intended to provide the market with financial information relating to 2025, subject to the formal approval of the financial statements for the year. As such, this information does not stem from a full set of financial statements since it has neither been approved by the Board of Directors nor audited by the statutory auditors. However, the process related to the preparation of the consolidated financial statement has been completed. This financial data have been prepared on a similar basis as that used for preparation of the consolidated financial statements in accordance with the IFRS reference framework and are based on the information known by the group as at the date of this presentation. These data have been reviewed by the Board of Directors at its meeting held today. The approval of the financial statements on the basis of the going concern assumption remains subject to a favorable outcome of ongoing negotiations among the stakeholders involved in the group financial restructuring. Here is a summary of our full year financial data estimates. As you can see from the table, the trend is reserve positive with a net sales like-for-like growth over the full year period at plus 0.5%, driven by solid initial reserves results of the rollout of new concepts in the food business and the sustained momentum of the nonfood activity. So a significant improvement in profitability with a 14% growth in adjusted EBITDA driven by, first, the implementation of action plans such as reducing shrinkage and improving receivables collection. Second, the benefit of purchasing massification under alliances. Third, the measures to streamline the network, as Philippe mentioned, and fourth, our cost discipline. Our consolidated net loss group share would come out at minus EUR 402 million, mainly due to the net financial expenses in continuing operations. Free cash flow before financial expenses remains negative at EUR 120 million, representing a strong improvement versus last year, mainly derived from the growth in operating cash flow and the change in working capital. Net debt stood at EUR 1.5 billion, up EUR 290 million compared to December '24, still impacted by cash outflows from discontinued operations. The group liquidity position was EUR 1 billion at the end of December '25. It includes operational financings for which the group has obtained from its creditors, an extension of the maturity to May 28 of 2026. The group aims to reach an agreement with its creditors and FRH, its main shareholder within this period and at the latest by the end of June. Let's now go into the market environment. According to Circana data for 2025 and more specifically the FMCG category, value sales across all channels were up plus 1.9% in '25 with inflation up plus 0.6%. The positive news last year is that volumes rebound in 2025 with plus 0.9% growth versus '24 after 4 years of decline in France alongside a slight premiumization trend. Combined with moderate inflation, these factors are driving revenue growth. In this context, the convenience store segment continued to outperform other store formats in '25 in both value, plus 6.3% and volumes, plus 4.9%. This supports our strategic positioning in line with changing consumer trends. As for Monoprix, its performance followed the general trend among supermarkets category. However, in Q4, market trends were marked by a significant decline in festive products in all segments over the key 4-week period ending January 4. It was minus 4.4% in value and minus 3.4% in volume. A similar trend was also observed in our operational performance for December '25. First of all, a quick overview of our group sales figures. Full year 2025 net sales totaled EUR 8.3 billion, up 0.5% like-for-like. This performance must be split into, first, a return to growth for our convenience brands, up plus 0.7% like-for-like with 0.6% at Monoprix and Casino, Spar, Vival, while Naturalia increased by plus 8.3%, but Franprix slightly declined. Second, a minus 0.7% decline for Cdiscount on net sales, sorry, which, however, reflects an improvement over the year with a strong acceleration in Q4 with plus 3.7%. On the GMV side, as Philippe mentioned, Cdiscount was up plus 3.5%, also supported by an acceleration in Q4 with plus 6%. Let's now focus on Monoprix. Monoprix net sales amounted to EUR 4 billion in '25, up plus 0.6% like-for-like, of which minus 0.5% in Q4. Nonfood sales representing about 30% of net sales were up plus 2.1% and once again supported the trend driven by Fashion & Home, which is outperforming the market. Food sales representing about 70% of net sales were stable, reflecting a contrasted performance with positive momentum in fresh products, plus 1.3%, offset by unfavorable market trends in festive products in December, as mentioned before. The brand recorded a plus 0.4% increase in footfall in '25. And in terms of adjusted EBITDA, Monoprix totaled EUR 424 million in '25, up EUR 42 million year-on-year. This change is driven by the reduction in shrinkage, the margin gains resulting from the alliance with Aura Retail, the cost savings, which partially offset the rise in store staff costs. Franprix net sales came to EUR 1.5 billion in '25, slightly decreasing by minus 0.4% like-for-like, of which minus 1.4% in Q4. The good performance of stores converted to the oxygen concept was offset by negative impacts from price cuts rolled out in September '24 and the nonrenewal of a promotional operation in Q1 '25. However, footfall rose by plus 3.8% in 2025, of which plus 2.5% in Q4 as a result of commercial offer developments. Loyalty program acceleration, as Philippe mentioned, the [prix francs] campaign with prices cut and frozen on 30 private label products, the development of services such as Francples for key duplication service or the Nannybag luggage security service. Adjusted EBITDA for Franprix totaled EUR 136 million in 2025, up EUR 22 million year-on-year, driven by strong cost management and lower impairment of receivables as a result of actions to streamline the store network. Casino Brands net sales amounted to EUR 1.3 billion in '25, up 0.6% like-for-like, of which 0.3% in Q4. 2025 net sales performance was positively impacted by strong momentum for seasonal stores as well as the efficiency of the supply chain with an improvement of service rate at 94.9%, plus 2.5 points versus 2024. Adjusted EBITDA amounted to EUR 29 million in '25, down EUR 17 million year-on-year. Excluding the impact of EUR 21 million in dis-synergies on operating costs and EUR 12 million in logistics dis-synergies, adjusted EBITDA would have increased by EUR 16 million, supported by the important streamlining of the store network and cost savings. As for Naturalia, sorry, net sales came to EUR 310 million in '25, up plus 8.3% like-for-like, of which plus 8.4% in Q4. The brand definitely benefited from a good momentum in the organic market and the success of its La ferme concept plus the effectiveness of measures taken in terms of product offering and assortments. E-commerce sales also performed well in '25 for Naturalia with double-digit growth of website, plus 19.1%, while the partnership with Uber Eats on quick commerce continues to be rolled out, covering 72 stores at the end of '25. Naturalia continues to benefit from a strong growth in footfall, up plus 8.2% in '25 and a solid loyalty customer base since 74% of its revenue is generated by loyalty cardholders. Adjusted EBITDA amounted to EUR 22 million in '25, up EUR 8 million year-on-year, driven by volume, FX and cost discipline. As for Cdiscount, the brand has enjoyed positive momentum in '25, thanks to its relaunch strategy initiated 18 months ago. Global GMV has returned to growth in '25, supported by marketplace GMV with plus 8% growth, while the direct sales GMV decreased by minus 1%, but keeps recovering with a return to growth in Q4, plus 3%. Cdiscount net sales came to EUR 1 billion in '25, down 0.7%, of which plus 3.7% in Q4, confirming the sequential improvement underway since 2024. Adjusted EBITDA came to EUR 67 million in '25, down EUR 4 million year-on-year due to higher marketing costs as part of this reinvestment plan, which was partially offset by strong commercial momentum, operational efficiency and cost savings. By contrast, adjusted EBITDA after lease payment increased by EUR 5 million, primarily supported by a significant decrease in lease payments resulting from the rationalization of warehouse capacities. By walking through the P&L statement, we would arrive at a consolidated net loss of EUR 402 million, including a net loss from continuing operations of minus EUR 571 million and the net profit from discontinued operations of plus EUR 168 million. The net loss from continuing operations was mainly impacted by EUR 64 million trading profit resulting from an adjusted EBITDA of EUR 655 million, but EUR 591 million of depreciation and amortization. Second, a reduction in other operating expenses, which amounted to minus EUR 258 million in 2025, including EUR 87 million related to assets disposals, mainly real estate assets, minus EUR 275 million asset impairment losses, including EUR 218 million in goodwill impairment and minus EUR 41 million from risks and litigations. A negative impact of EUR 369 million from net financial expenses, including a net cost of debt of EUR 192 million, interest expenses on lease liabilities for EUR 145 million and the financial cost of CB4X for Cdiscount of EUR 25 million. As regards the discontinued operations, the net profit of EUR 168 million was mainly due within the HM/SM segment to favorable settlements of liabilities related to reorganization costs, termination of operational contracts and store closures. It thus reflects costs that are ultimately lower than initially estimated. In 2025, we then reported a free cash flow deficit of EUR 120 million, an improvement of EUR 519 million versus 2024. This change reflects the growth in adjusted EBITDA after lease payment for EUR 86 million, a positive impact of EUR 403 million due to change in working capital. As you know, 2024 was marked by the financial restructuring with a return to normalized payment terms leading to a higher level of disbursement in '24. On 2025, we saw the implementation of the suppliers shared service center with a new organization requiring a complete overhaul of processes. Changes in working cap was also impacted by faster inventory turnover due to seasonal effects end of '25. Generally speaking, the basis of comparison had been adversely affected last year as well by the payment of EUR 153 million social security and tax liabilities placed under moratorium in '23, of which EUR 142 million coming from working capital and EUR 11 million from taxes. Excluding this effect, the free cash flow before financial expenses last year would have been negative for minus EUR 486 million, and the free cash flow would then have increased by EUR 360 million positive year-on-year. Now starting from the minus EUR 120 million free cash flow of the previous slide, our net debt position has been mainly impacted by the net financial expenses, of which EUR 118 million interest paid for the reinstated term loan. EUR 19 million cash flows from discontinued operations and asset disposal, including a negative impact of EUR 152 million in cash related to discontinued activities, but a positive impact of EUR 170 million from real estate disposals. As a result, our net debt has increased by EUR 290 million to EUR 1.5 billion end of 2025. On this slide, we can see our debt maturity profile. As you know, most of our debt accepted our main RCF matures in March next year. And for operational financing, we have secured last week an extension of the maturity from our banks until the end of May 2026. In the meantime, ongoing discussions with creditors are continuing with a view to reaching a comprehensive agreement that would, in particular, extend the maturity of the operational financing to a longer term and also revise downward the cost of debt. You can also see on the right the cost of our main debt instruments. In light of this maturity and cost of debt, last November, the group has launched a work to adapt and strengthen its financial structure, as most of you know. Now let's give you some insight on our liquidity position at the end of December last year, which standed at EUR 1 billion, including EUR 11 million of undrawn overdrafts. All the other credit lines were drawn as of December 2025, as you can see here, the main RCF for EUR 711 million, EUR 149 million of overdraft facilities, EUR 95 million of the Monoprix exploitation's RCFs and EUR 60 million of the French state-guaranteed loan, plus EUR 36 million of Monoprix Holding's bilateral lines of credit and EUR 20 million of another bank available line. Just as a reminder, under the loan documentation, available cash is defined as cash and cash equivalents, excluding the float and any trapped cash. Now moving on to our financial covenants. The financial covenants under those financing agreements include EUR 100 million minimum liquidity on the last day of each month. Hence, EUR 1 billion end of December was satisfying. And the same covenants also applies to each month of the subsequent quarter. Here, important for you to know that our liquidity position estimate for the end of Q1, which is tomorrow, is EUR 0.8 billion, of which EUR 0.2 billion is attributable to factoring, reverse factoring and similar programs. The total net leverage ratio at the end of each quarter must also comply with specific thresholds. As at December '25, this ratio was 4.66 based on EUR 194 million covenant adjusted EBITDA and EUR 900 million covenant net debt. It is below the threshold of 7.17, we were to comply with, and it doesn't take into account, sorry, any pro forma restatement as granted by the documentation. I would add that the ceiling of this ratio is set at 7.41% for March '26, and our EBITDA forecast for Q1 is to ensure compliance with this March test. Let's now focus on the project to adapt and strengthen the financial structure of the group. In order to support the execution of the strategic plan and in light of the maturity of our various indebtedness, we have initiated work to adapt and strengthen our financial structure since last November '25. The key terms of the proposals made by either the controlling shareholder or the creditors were made public in February and March and are detailed in the presentation available on the group website. It's important to highlight that such -- should such a transaction to adapt and strengthen the financial structure be completed, it would result in a significant dilution for existing shareholders. The company has last week secured an extension of the standstill agreement from the RCF, TLBs and operating financing creditors until May 28, 2026, while the standstill granted by the Quatrim creditors is in the process of being extended from end of April to end of May. Banks have also agreed to extend the maturity of the operational financing to the end of May 2026. As of today, unfortunately, no agreement has been reached between Casino, FRH and the creditors regarding the adaptation and strengthening of the Casino Group financial structure and discussions are continuing. So that concludes my presentation. Thank you for your attention, and I give the floor back to Philippe for his closing remarks. Philippe Palazzi: Yes. Thank you, Angelique. I will go to a conclusion. That means I would like to provide you with an overview of our market perspective and upcoming challenges that Casino Group will face in the coming months. First of all, I'm convinced that we are at the right place and at the right moment. Convenience retail market, as you have seen in the Angelique presentation, shows a positive trend aligned with change in the consumer habits, especially in the growing segment of quick meal solutions. There are still white spot for expansion in our targeted zone in France. Organic specialized distribution and e-commerce penetration are still growing, offering important opportunities for the group. Main French retailer operate -- move towards growing convenience retail sector on which there is significant investment, especially in Paris. [Recovery] will increase drastically in the upcoming months, most likely leading to a territory and price war. Moreover, traditional retailer position is exposed to risk from the aggressive expansion of nonfood discounters and ultrafast fashion e-commerce platform such as Temu or Shein. Finally, from a macroeconomic perspective, we'll also face consumption decline mainly to political instability in France, low consumer confidence, recent conflict in Middle East and the oil price increase. It's now the moment to conclude. I would say that we are in a dynamic convenience market at the right place, with the right brands at the right moment, but in a market increasingly competitive where players are fighting for price leadership. '25 financial data estimates are fully in line with our Renouveau 2030 business plan and confirm the relevance of our positioning and the successful execution of our strategic plan. We'll focus during the coming months on execution and constantly adapting our model to market evolution as well as to market revolution. I would like to thank you for your attention, and we will now answer your questions. Thank you. Angelique Cristofari: Okay. Then the first question is, when will the group pay the rest of the Quatrim bond given the high interest burden? So you may have noticed that EUR 21 million were repaid last Friday to the Quatrim secured bondholders. Hence, the nominal amount of the Quatrim bond is now EUR 120 million versus what it was end of December. The gross asset value of our real estate asset presently stands above EUR 200 million at the end of last year. And we are ahead of schedule, which means that thanks to this disposal program, we have reduced the coupon at 7.5% since April 2025 instead of an initial coupon of 8.5%. This bond matures on January 27, and it benefits from a 1-year extension option exercisable by the company, which will be -- we will see in the future how this is extended. We also have a question from ODDO. What to expect on margins from Casino and Cdiscount, which were somehow below expectations going forward? On margin, Casino and Cdiscount are not below our expectations. In the next year, we expect that Casino free cash flow should be 0 in 2030, as was shared through the Renouveau 2030 plan, and it should be for Cdiscount a EUR 67 million free cash flow. Philippe Palazzi: Yes. I think the question -- I will take that one. The question is it seems that somehow CapEx is below target slightly, but above all is it enough to growth in the context of increasing competition in proximity. I mean cash flow reached EUR 252 million in '25, slightly below our plan of EUR 263 million. It was just phasing effect we had at this time. As you recall in the presentation that I mentioned that we are very careful in the cost per square meters and as well as to make sure that we implement the right CapEx at the right store and at the right place. This year, we have accelerated at Monoprix as well all the investment, the CapEx investment we are doing in turnaround stores. You know that every store by the end of the plan of Monoprix will be touched till 2030, every single store will be touched on that one. If you take '25, 2030 is more than EUR 1.7 billion that will be invested into our network. And yes, to answer your question, is highly sufficient to fight against competition and even leading the pack. Angelique Cristofari: Yes. We have a question on net debt. So can you elaborate on the position as of December '25 and real estate disposals? How much of the cash from those disposals? Is this level of net debt a kind of run rate? Or shall we make some retreatment to have an idea of the real net debt, excluding divestments? So the consolidated net debt stood at EUR 1.5 billion end of December, increasing by EUR 290 million, as explained during the call. This variation was mainly impacted by real estate disposal for EUR 170 million, but financial expenses for minus EUR 382 million. Cash flows from discontinued operation for EUR 152 million and free cash flow before financial expenses of minus EUR 120 million. So net debt end of December '25 was yet impacted by the real estate disposals and discontinued activities, notably as indicated. Ongoing discussions to change the group financial structure will impact what is the level of group indebtedness and cost of debt going forward. So it's a bit early to answer what is the run rate for the net debt. Philippe Palazzi: And apparently, there is no more questions. But we would like to thank you for the time today and for your question. And we're going to see most of you quite pretty soon. And next financial update will be end of the quarter as well, first quarter. Thank you.
Operator: Thank you for joining today's conference call to discuss Tilray Brands' financial results for the Third Quarter of Fiscal Year 2026 ended February 28, 2026. [Operator Instructions] I'll now turn the call over to Ms. Berrin Noorata, Tilray Brands' Chief Communications and Corporate Affairs Officer. Thank you. You may now begin. Berrin Noorata: Thank you, operator, and good morning, everyone. By now, you should have access to the earnings press release, which is available on the Investors section of the Tilray Brands website at tilray.com and has been filed with the SEC and OSC. Please note that during today's call, we will be referring to various non-GAAP financial measures that can provide useful information for investors. However, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. The earnings press release contains a reconciliation of each non-GAAP financial measure to the most comparable measure prepared in accordance with GAAP. In addition, we will be making numerous forward-looking statements during our remarks and in response to your questions. These statements are based on our current expectations and beliefs and involve known and unknown risks and uncertainties, which may prove to be incorrect. Actual results could differ materially from these described in those forward-looking statements. The text in our earnings press release includes many of the risks and uncertainties associated with such forward-looking statements. Today, we will be hearing from key members of our senior leadership team, beginning with Irwin Simon, Chairman and Chief Executive Officer, who will provide opening remarks and commentary followed by Carl Merton, Chief Financial Officer, who will review our financial results for the third quarter of fiscal year 2026. And now I'd like to turn the call over to Tilray Brands' Chairman and CEO, Irwin Simon. Irwin Simon: Thank you, Berrin, and good morning, everyone. It's been an exciting year at Tilray Brands. We delivered a record quarter with continued international expansion across our platforms. I also want to briefly highlight our BrewDog acquisition. When you have good news, you go to the tallest building and scream it and don't wait. This transaction positions Tilray at approximately $1.2 billion global revenue company on an annualized basis and meaningfully strengthens our long-term growth profile. I've done over 100 acquisitions in my life, and I've never received more calls, congratulations and a brand with more awareness on a global basis, which helps Tilray to be at the forefront around the world. Since 2019, we have transformed the company from a Canadian cannabis business with approximately $50 million in revenue to a global lifestyle consumer products company approaching over $1 billion in revenue on an annualized basis, providing the strength and effectiveness of our strategy and our execution going forward. We are building a diversified global platform grounded in a long-term vision of bringing people together through meaningful connection. With a strong team and clear priorities, we remain confident in our path forward. Today, Tilray leads its global platform as the #1 cannabis company in Canada by revenue, the fourth largest craft brewer in the U.S., a global leader in medical cannabis and a wellness leader in North America. And now with BrewDog, the #1 craft brewer in the U.K. Transforming this business has not been easy. We operate in highly regulated environments globally. Face cannabis regulatory reform in the U.S. and navigate constraints across international markets. At the same time, we've strengthened our global brand portfolio, scale and optimize our cultivation capabilities and our brewing capabilities, built a $0.5 billion beverage platform within a long-established category and established a meaningful wellness strategy. This level of progress reflects both the pace of our execution and the strength of our strategic foundation and the teams that we have in place. Yes, there have been challenges along the way, particularly with integration, and there will continue to be challenges. This takes time. But today, we see the pieces coming together in the way that few businesses can replicate, and we're building something truly differentiated. And our Q3 results reflect this in the third quarter and consecutively from Q2 to Q3, we delivered record results with net revenue reaching $207 million, reflecting 11% organic growth year-over-year and gross profit increasing to $55 million, up 6% from the prior year despite ongoing industry and macroeconomic headwinds, we also maintained a strong financial position ended the quarter with $265 million in cash, restricted cash and marketable securities and approximately $3.5 million in net cash, providing the flexibility to invest in growth while maintaining financial discipline. Our Q3 results reinforce the momentum we outlined last quarter, improving fundamentals, sharper execution and increasing leverage from our diversified global platform. Turning first to our cannabis business. We delivered strong results this quarter across our global platform, with continuous momentum in both Canada and our international markets. As the regulatory environment evolves, particularly in the U.S., we're well positioned with scale infrastructure and experience to expand this business globally, we've built this platform deliberately, and we're ready to execute as opportunities develop. Q3 was the largest quarter ever for international cannabis growth. We generated $24.1 million in net sales with 73% year-over-year growth and 20% sequential growth. This was driven by exceptional sales volume growth. Medical cannabis flower volume was up 100% year-over-year and medical cannabis oil volume was up 90% year-over-year. Tilray holds top position by a significant margin in the medical cannabis oil category across leading international medical markets while we leverage our expertise and reputation in the doctor-led distribution channels. Germany, our largest international market grew 43% year-over-year, an important achievement for our international team as they continue to navigate evolving regulatory framework and significant price compression across global markets. Notably, we overcame $7 million in price pressure that flows directly to the bottom line. Turning to our medical distribution business in Europe. I'm extremely proud to say that CC Pharma was recognized as one of the top 100 innovators, leaders and trusted partners in the European pharmaceutical market. Congratulations to the team on a great accomplishments for continuously driving our business forward. Our Tilray Pharma business grew 35% year-over-year to $83 million, making it our highest ever third quarter for sales and profitability. The increase in distribution revenue in the period was driven by portfolio optimization, mix, positive market trends and increased medical device sales. Our recently announced partnership with Alliance Healthcare further strengthens our leadership in Germany, expanding our reach to more than 16,000 pharmacies, up from 13,000 previously. In addition, we entered into a partnership with Smartway, a leading U.K.-based pharmaceutical distribution company to expand the availability of our pharmaceutical products across the United Kingdom. Together, these partnerships speak to the strength of Tilray Pharma as a valuable strategic asset within our global medical cannabis platform. Looking ahead, our distribution business is laser-focused and driving future operational efficiencies, be automation, centralized sourcing, harmonized packaging and label that sets us up with vertical integration for our cannabis business. Turning to Canada. Our Canadian cannabis business continues to deliver strong results. We reinforced our position as Canada's leading cannabis company by revenue on a trailing 12-month basis, and our adult-use medical grew 8% year-over-year to almost $40 million of net revenue. This performance speaks to the strength of our portfolio and the resilience of our commercial execution and the team that we have in place today. From a market share perspective, Tilray maintained the #1 market share position in cannabis dried flower, pre-rolls, beverages, oils and chocolate edibles. Importantly, this leadership reflects the strength of our tiered brand strategy in dried flower, Tilray is the only licensed producer with 3 brands in the top 10. In pre-rolls, we hold 2 of the top 3 brands. And in beverages, we delivered the top 2 brands in the market during quarter 3. This approach diversifies our reliance across brands and facilities while allowing us to serve the seed consumer segments with clearly differentiated offerings. From a brand portfolio perspective, Broken Coast delivered its strongest quarter in the past 2 fiscal years, growing 16% year-over-year. We also continue to innovate with our core categories launching Good Supply, Where's My Bike and Blueberry Donuts cannabis strains during the quarter. both of which finished the quarter among the top 10 dried flower SKUs in British Columbia, and we plan to scale them nationally and introduce additional genetics in Q4 and into fiscal 2027. Finally, we also introduced a new brand, Portal, featuring vapes, infused pre-rolls late in the quarter. While still early, we're beginning the national rollout. We expect to launch a Portal to build upon our momentum and drive meaningful growth in these key categories going forward. And we're also making clear progress in high-growth price-sensitive categories such as vapes. Quarter 3 marked our strongest vape quarter in the past 2 fiscal years, reestablishing Tilray as a top 10 player in the category. Importantly, this performance reflects our disciplined approach to revenue generation. We intentionally scaled back our vapes volume until we achieve the right cost structure and return the category to profitability. After 7 years of federal cannabis legalization in Canada, we are modernizing the store. We built a strong foundation on Canadian cannabis, and we're now advancing to the next phase transforming our cultivation platform through AI-driven growing systems, next-generation genetics and improved yields across our operations. We're executing a comprehensive end-to-end upgrade of our cultivation capabilities. And while this transition is still underway, we're already seeing progress as we move towards more consistent, higher quality and more efficient production. This evolution is designed to enhance margins, strengthen product quality and position us ahead of the curve as the industry continues to mature. In the U.S., we continue to monitor the rescheduling of medical cannabis and are actively engaged with legislators and regulators. We're also evaluating our participation in the center for Medicare and Medicaid Innovation pilot programs. Tilray is well positioned to contribute to the pilot program with its proven track record of operating at a scale in a highly regulated medical cannabis globally. Moving to our beverage business. This quarter and shortly after the quarter end, we successfully executed against our key strategic priority to expand our global beverage platform through a strategic licensing partnership with Carlsberg and the targeted acquisition of BrewDog, strengthening our portfolio, improving utilization and advancing our global growth strategy. We are honored and proud to begin our partnership with Carlsberg, one of the world's leading brewers starting in January of 2027. Through this partnership, we'll produce, market and distribute a portfolio of leading Carlsberg brands across the U.S., leveraging our brewing network, commercial capabilities and our national distribution footprint. We expect this to drive immediate scale accretive to revenues, supported by increased volumes, expand shelf presence and a more favorable product base. Following the Carlsberg announcement and post quarter close, we acquired craft beer icon, BrewDog, creating approximately $500 million global craft beverage platform on a pro forma basis. We acquired BrewDog's global IP, strategic brewing and brewpub assets across the U.K. Ireland, Australia and the U.S., creating immediate scale, strengthening our infrastructure and broadening our international reach. This positions us to extend our reach into previously untapped markets such as the Middle East, Asia Pacific and take our U.S. brands globally while strengthening their portfolio with a highly recognized craft brand. We acquired this platform for approximately EUR 40 million, which reflects a fraction of its replacement cost. This strategic acquisition has significantly accelerated the implementation of our global strategy by several years. Now turning to the results of our beverage business. We're making disciplined progress on the integration of our beverage acquisitions, while staying focused on the work still ahead to generate growth and profitability. As expected, beverage net revenue of $43 million in Q3 was impacted by margin-focused actions as well as industry-wide softness. These margin-focused initiatives are delivered and necessary to reset the business for profitable long-term growth. What's important is that the underlying fundamentals are improving. Through Project 420, we rationalized the portfolio, removing nonstrategic SKUs to improve velocity, margin and execution. We continue to focus on cost discipline, delivered over $6.2 million in annualized savings during the quarter, completing our target synergy program of $33 million enabling us to achieve approximately 32% gross margins despite significant input costs and headwinds. Without these decisive actions taken, margin would have been more significantly impacted. Operationally, we're building a more focused, higher performing portfolio, we're prioritizing fewer, bigger, better innovations aligned with consumer demand. Products like Pub Light are expanding distribution and our ready-to-drink cocktails on the West Coast are delivering margin accretive growth. We're also starting to see sequential improvement across our core brands, including Sweetwater, Shock Top, Blue Point, Revolver and Montauk. Looking ahead, we expect continued momentum on improving fundamentals and a stronger path to growth. Within the spirits category, in Q3, we focused on enhancing our commercial plan. Wholesale completions were 160 basis points above the national spirits trends, demonstrating strong consumer demand and awareness. Our ongoing efforts remain focused on expanding product distribution to additional states and beyond. Regarding our U.S. hemp-derived THC beverage business, we continue to offer Fizzy Jane's, Happy Flower, hemp-derived THC beverages in 5-milligram and 10-milligram formats through nationwide retail partnerships, including major wine, liquor and grocery outlets across the country. While federal and regulatory changes may affect HDD9 products after November 2026, we continue to stay engaged with legislators and regulators who are closely monitoring the development in Washington. Turning to wellness. Net revenue increased by 16% to $16.4 million in the quarter, driven by our focus on value-added innovation across superseed, better-for-you breakfast and snacking and continued momentum in the high-vol energy grade. We'll continue to focus on distribution expansion broader assortment and promotional improvements while continuing to strengthen the profitability profile of wellness business. With that, I will now turn that over to Carl. Carl? Carl Merton: Thank you, Irwin. Before I begin, please note that we present our financials in accordance with U.S. GAAP and in U.S. dollars. Throughout our discussions, we will be referring to both GAAP and non-GAAP adjusted results and we encourage you to review the reconciliation contained within the press release of our reported results under GAAP with the corresponding non-GAAP measures. This quarter, we achieved record third quarter revenue and strong year-over-year improvements in gross profit and adjusted EBITDA and we are reaffirming our adjusted EBITDA guidance for fiscal 2026. Net revenue was a third quarter record of $206.7 million, an 11% increase year-over-year. Revenue growth was across multiple businesses. Cannabis net revenue increased 19% year-over-year to $64.8 million during the quarter, driven by strong growth in gross international cannabis revenue of 73% and 8% in net Canadian adult-use and medical cannabis. The exceptional revenue performance of our international cannabis business solidifies our point from the last conference call that Q4 2025 and Q2 and Q3 of this year's performance are more indicative of what investor expectations should be going forward. Growth in international cannabis accelerated based on an enhanced supply chain, increased patient adoption in certain markets and our targeted expansion into emerging markets. This quarter, we continue to strategically reallocate supply from the Canadian wholesale market to higher-margin international markets and we'll maintain this approach as those markets continue to scale. Year-to-date, we allocated approximately 6 metric tonnes of product from Canada to international markets, which continues to supplement our ever-increasing cultivation in [indiscernible]. Distribution net revenue increased 35% to $83 million based on a focus on higher velocity and margin SKUs and positive impacts from foreign exchange rates. We expect distribution to continue to be a strong contributor as it complements and scales alongside our international business. Beverage net revenue for the quarter was $42.6 million compared to $55.9 million in the prior year. However, the results do not fully reflect the operational progress we have made in the segment. During the quarter, we successfully completed Project 420, closing and delivering $33 million in annualized cost savings, which improved the underlying cost structure of the business. Those cost savings are not always visible in our margin results as they've been largely offset by almost $2.9 million of higher aluminum costs year-to-date and lower overhead utilization rates. Getting our cost structure right in beverage has been and will continue to be a key focus area for us. Looking ahead, Carlsberg represents a compelling opportunity for us through a partnership with one of the largest global brewers. The relationship enables us to improve overhead utilization without deploying capital to acquire a brand while creating meaningful operational leverage. It also provides multiple avenues to strengthen the platform including increased scale with key global raw material suppliers and the ability to collaborate and learn from one another on innovation and best practices to support long-term growth. BrewDog represents an equally compelling opportunity to strengthen our beverage business in the future, but for different reasons as it is more about an international opportunity. The BrewDog transaction was unique because it represented a chance for the business to start with a clean piece of paper and hand select the best and most important elements of a strong business that was placed in administration for reasons other than its core business. After this transaction, Tilray strengthens BrewDog, BrewDog strengthens Tilray. Lastly, wellness net revenue in the quarter was $16.4 million, growing 16% year-over-year based on our focus on high-value innovations the continued strength of high-vol and growth in the ingredient sales channel. In terms of contribution, cannabis accounted for 31% of revenue, beverage revenue was 21%, distribution was 40% and wellness was 8%. Moving on to profitability. We achieved a record third quarter gross profit of $55 million, a 6% year-over-year increase. Gross margin was 27% compared to 28% last year. By segment, cannabis gross margin was 40% for the quarter compared to 41% year-over-year and remained largely flat, primarily due to price compression in international markets, which reduced international cannabis revenue by approximately $7 million despite higher gram equivalent sold. Distribution gross margin increased to 12% this quarter compared to 9% year-over-year due to favorable changes in product mix and increases in average selling price during the quarter. Beverage gross margin was 32% this quarter compared to 36% in the prior year quarter. This change was a function of lower overhead absorption rates and higher input costs, including the previously discussed aluminum costs. Wellness gross margin increased to 33% during the quarter from 32% year-over-year as strategic price increases largely offset an unfavorable change in sales mix. Net loss was $25.2 million, a $768.3 million improvement compared to a $793.5 million loss year-over-year or a net loss per share of $0.24 compared to a net loss per share of $8.69. The improvement in both net loss and net loss per share is primarily driven by the onetime noncash impairment we reported in the prior year quarter. Adjusted net income and adjusted net income per share, which both exclude the noncash impacts of amortization, stock-based compensation, impairments and nonrecurring charges, improved $5.3 million year-over-year to $2.4 million and $0.02 per share, compared to an adjusted net loss of $2.9 million and adjusted net loss per share of $0.03. Our adjusted cash operating income for the quarter was $4.1 million compared to a loss of $3.1 million last year. Adjusted EBITDA for the quarter increased 19% to $10.7 million compared to $9 million last year, reflecting continued execution against our strategic plan, particularly from our international cannabis business. Cash flow used in operations was $21.9 million compared to $5.8 million last year. The increase in cash used in operations was largely related to inventory ahead of our seasonally stronger fourth quarter and accounts receivable for our growing international cannabis business. Excluding the impacts of working capital, cash generated from operations was $3.4 million compared to cash used in operations of $9.3 million in the prior year. We ended the quarter with cash, restricted cash and marketable securities of $264.8 million and a net cash position of $3.5 million, which improved $40.2 million from a net debt position year-over-year. As we have recently demonstrated our strong liquidity position has enabled us to act decisively in a dynamic environment and provides continuing flexibility to pursue strategic opportunities. We remain focused on managing and strengthening our balance sheet throughout the remainder of the year and beyond. Lastly, we are reaffirming our fiscal 2026 adjusted EBITDA guidance of $62 million to $72 million. Operator, we can now open the call for Q&A. Operator: [Operator Instructions] And the first question is from the line of Kaumil Gajrawala with Jefferies. Kaumil Gajrawala: Can you guys hear me now? Irwin Simon: Yes. Carl Merton: Yes. Kaumil Gajrawala: Great. I wanted to first maybe ask about the supporting the international business in the context of Canada looks like it's also stabilizing. So you have a lot of growth and great margins in one. But on the other hand, you've got stabilization in your bigger markets. So how are you managing the balance between those two? Irwin Simon: What was the line? I didn't hear. You broke up the last piece, the cannibalization? Kaumil Gajrawala: Not cannibalization, but just managing the balance between supporting your international business and what looks like stabilization in Canada? Irwin Simon: And you're talking cannabis right now for us, right? Kaumil Gajrawala: Yes, cannabis. I'm sorry, this is about cannabis. Irwin Simon: Yes. Yes. Okay. So listen, I think the big thing is, number one, we are bringing on our Masson grow facility in Gatineau, which is increases our -- we're going from 137 metric tonnes of grow to almost 200 metric tonnes of grow. And also, we're bringing on outdoor grow in Cayuga. So number one, when we now have plenty of growth, and this has been a tougher year on yields in that, and that's sort of what you heard me say as we're overhauling things and modernizing things on better yields in the Canadian market. On the other hand, the good news is our Cantanhede facility in Portugal and our Germany facility is probably producing some of the best yields and some of the best flower that we ever had. So the number -- the most important thing is we have plenty of supply to supply the European market. The other thing is we're seeing price compression, which I talked about, with the growth that we're having with yields, we'll be able to support that. And I think the most important thing in Europe is this here, consistent supply. We've not had consistent supply. Number one. Number two, one of the things in Europe, you have to wait for permits, and that has slowed down to getting our sales out there. We've seen a real big improvement in the Portuguese government. I want to thank them. They modernize this now, where sometimes it'll take a month, you can see 3 days now. So being able to get product to our customers is something very important. And then with that, we have perfected our grow and our yields, that will help our margins continuously, and deal with price compression. And I think the important thing is from Tilray standpoint, with our Tilray products with our innovation, with our brands, the big opportunity for us is if we got consistent product, we're going to get the volumes and how do we deal with price compression? If price compression consistently happens, we have supply, and I think we have more supply than anybody there. So it's something that we're aware of. We dealt with it in Canada. We've had $250 million of price compression over 5 years in Canada, and we dealt with that. So not that I want to see that in Europe, but it's something we can deal with either now having supply, now having good yields, now having good grow over there to do it both in Canada and Europe. And there's no one else out there that has the supply that we have, both from the Canadian market today and the European market. Kaumil Gajrawala: Got it. And on Project 420, now that I guess, it's coming sort of towards the end or at completion, is there a new project? Or is it sort of more ongoing business as usual as we look forward from a productivity standpoint? Irwin Simon: This is a good question. I mean there is absolutely project ongoing. We never just say, okay, we made a $33 million, $35 million of cost savings, stop. Now with BrewDog in the mix and bringing that together, both internationally and domestically in regards to buying hops, cans, labels, et cetera. And it's definitely something as we combine now. And just remember, we've gone from a $200-plus million beer business, almost $0.5 billion now in size. So from scale, that's going to help us. And as we look at rationalization continuously on our plants, we look at rationalization on distributors. We just said, how do we bring all the organizations together, there'll definitely be additional cost savings available to us. Operator: Our next question is from the line of Robert Moskow with TD Securities. Xin Ma: This is Victor Ma on for Robert Moskow. So I just want to ask about international first. International grew 73%, Germany grew 43%. What drove this delta? Was it shipment timing or permit delays that -- from the previous quarter that were fixed this quarter? And in terms of kind of looking at growth going forward, is that 43% growth rate for Germany? Is that kind of a good run rate to use and looking at growth for the segment? Irwin Simon: So number one, there was some products that did not get shipped in the second quarter because of permits, but there's products that did not get shipped in the third quarter because of the permit. So it equals out. In regards to what was the growth? The growth was based on us having supply and demand. And I'm not sure, again, we have a big fourth quarter, what is the true run rate there. And the big thing is what I said before, what the market is realizing, what patients and what doctors are realizing is that we will have supply. We will have good flower, we will have lots of innovation, we'll have some good oils. And again, we will be price competitive. So what is the right growth number? I'm not ready to give that yet. But again, there's big opportunities for us in the international markets, not only in Germany and Poland, the U.K. and other markets, it's additionally other markets that we're looking at to open up and what will happen in Spain, what will happen in France. And so we're really excited. The other thing that we have there with our CC Pharma, Tilray Pharma and some of the stuff that we're doing in the U.K. and being vertically integrated as we sell through our distributor and sell directly through our distributor into the drug stores, helps us that where we're a grower, where we've got a brand. And then we have -- the third part of it is where we have from a vertical integration, the distribution going to the drugstores. So that helps us tremendously, too. Xin Ma: Got it. And then my second question is on the beverage segment. So in terms of just rising aluminum costs from the Midwest premium related to the tariffs and then additional supply shocks from the Iran conflict. How -- can you offer any color in terms of how hedged you are on your aluminum exposure? And how -- what's the benefit in terms of kind of scale that adding Carlsberg into the U.S. portfolio give towards managing that cost impact? Irwin Simon: So I'm going to let Carl talk about the hedge in a second because we are hedging on some things. But listen, adding Carlsberg in there with a good-sized business, adding BrewDog in there and then being able to buy on global contracts is going to be very, very helpful for us. Right now, a lot of our hops for BrewDog internationally come from Washington State. But we, right now, as we put this together and listened, having Carlsberg, who is one of the largest brewers in the world and possibly buying into their contract, and we still have left over whether there are hops in that from our ABI stuff. So there's lots of opportunities from a scale to be buying hops and cans, and that's the big one to watch out for is as aluminum prices have gone up and Carl, will talk about hedges. Listen, the big watch out there is what happens with fuel and from a standpoint there is the unknown. But Carl, from where we're hedged -- Carl, do you want to talk about that? Carl Merton: Yes. I mean you answered most of it, but just specifically on the hedge for aluminum, we're currently hedging 65% to 75% of our buy on a month-to-month basis, and we're hedging a year out. Xin Ma: Got it. And just one last question, if I can. In terms of just the distribution gains from the shelf resets that typically happen in the spring. How are those conversations going? How is that tracking? Any color you can share there? Irwin Simon: So going well. I will say this here, we gained and we lost. And the big part of it is this here, we're in the craft beer category, lost some space out there. But I think the big thing is this here, where we didn't -- when we bought the Molson's piece and prior to that when we bought the ABI piece, from a timing standpoint, we lost a lot of SKUs where we had no influence in no part of it. So again, it goes against us. Now we've gained a lot of distribution. And the big thing is this here just because we gain distribution and make sure the product sale. So plus-plus, we probably lost more. But again, it's okay because it was the SKUs that were not part of us at the time. And the new SKUs and the new products and new innovation is what we're excited about and where we've gained. And we had some big days at Walmart. We had some big days at Kroger, Albertsons and some other ones across Shop & Shop across the board. So all in all, we're happy with what we got. And listen, I'd rather the set get smaller and us be a bigger player in a smaller set than just have a big set out there. So there's a lot of resetting happening within the craft beer industry in regards to the size and what retailers need out there. Carl Merton: Just to supplement that a little, when Irwin talked about the acquisitions, it's more about the timing of the acquisitions because we bought those brands after the initial discussions on spring resets that already happened. Irwin Simon: And we were not the ones presenting those spring resets. But now whether it's the Molson or the ABI, and that's sort of where we'll be next year in January as we take on Carlsberg, we'll be out there presenting in February -- January, February for the next spring resets for Carlsberg. Operator: Our next question is from the line of Bill Kirk with ROTH Capital Partners. William Kirk: I want to spend a little time on the improvements at Tilray Pharma. Carl, you mentioned a focus on the highest velocity SKUs. So what SKUs or product types are those that are leading the way? And then maybe more importantly, how can you or how are you leveraging this improved CC Pharma for your cannabis business in Germany? Irwin Simon: So I'm going to -- Rajnish, since you're on the call, I'm going to let you jump in here because you're the one managing this. I think there's three things here. Number one, it's the buying that our guys are doing over there. Number two is our assortment. And number three, as we now look to sell our products into Italy and we sell our products into the U.K. Rajnish, do you want to go into the specifics of what the products are that we've really seen the increase in sales? Rajnish Ohri: I mean, there is a group of products revenues, we have about 2,800 SKUs. So what we have done is basically identified SKUs which have higher velocity to go. So there is a bunch of about 50 top SKUs which are right now working where there is a high velocity which we focus on, not just on velocity, but also on the gross margins. So these are the two criteria for us to look at in terms of the growth. And then we are adding the medical cannabis portfolio. I mean, the medical cannabis portfolio is helping us to grow both in margins as well as in revenue because per unit revenue is much higher and margins are better. So these are the two big things in terms of the selling side of the business. And of course, on distribution, we are now -- with our new alliances, which are coming forward, we are now actually increasing our distribution across the pharmacy channel, which helps us to grow not just per unit, but also in the depth of distribution and the width of coverage of pharmacy. So this is really on the seller side. But more importantly, also on the buy side, I think we are now -- our purchasing is becoming much more robust in terms of the timely decisions. We've implemented automation in our purchasing system, which predicts the pricing patterns and then it helps us to take decisions quicker. So I mean these are a few things which in the pharmacy distribution is helping us to grow. And then, of course, on the operations side, a lot of our business, we are also looking at in-house packaging to out-house packaging and whichever way is working for us, there's a big team, which is working to make sure that there is a consistency in supply from the operators, both in-house and out-house, and that's also helping us to improve the margins. Irwin Simon: When we bought CC Pharma, that was a big part of it. But again, it was bought during the Aphria time was for a tender, and was the age of sub-pharmacies. That was not really happening, number one. Now -- and there was challenges with getting different medicines as we're buying all different types of medicines. But as Rajnish said, we're focused on the core medicines with the higher margins. And we've done a lot of automation at CC Pharma. The other thing is what's happened, we've gone from servicing 13,000 drugstores now to 16,000 drugstores. So we've expanded the amount of drugstores in Germany. The other major thing is as we expand out CC Pharma into Italy and into the U.K. is a bigger platform that we'll be selling through. Not the highest margins, but again, as the volume grows, there's a lot more contribution. And as we put a lot more cannabis through it with much higher margin, you're going to see the margin grow there dramatically. William Kirk: Awesome. Thank you for the detailed answers. My second question, Irwin, in the opening comments, you talked about now being a run rate of $1.2 billion in revenue. The last 12 months, I think, it's something like $850 million. So is the bridge between the two? Is that mostly the revenue from acquired BrewDog assets? And I asked because you didn't take all the assets. So how much of the BrewDog revenue that they've released in their annual reports is generated by the assets that you took on and now have? And how much of their annual revenue was tied to assets that you didn't take. Irwin Simon: So let's say between $225 million to $250 million is what we have taken, okay? And again, we took all the U.K., Ireland, Scotland distribution through retail, we've taken it through on-premise. And we've taken 16 brewpubs in U.K., Ireland and Scotland. We've taken the brewpubs in Australia, we've taken the distribution in Australia. We've taken three brewpubs ourselves, and -- 2 brewpubs ourselves and there's three franchises. There's 15 other franchises out there today around the world that we sell them beer to and we get some type of royalty. In regards to the U.S., we've taken the distribution, the manufacturing in the U.S., and we've taken with them Las Vegas, Columbus, St. Albany and Cincinnati is -- and Cleveland, I'm sorry, and the airport in Columbus. That's what we've taken there. So it's somewhere between $225 million and $250 million in sales that we have taken. In regards to the other piece, Bill, it's all coming from growth, and that's where it's going to come from. And don't forget, you saw from a standpoint there, what we've gone through is SKU rationalization in regards to our beer business. If you take what we're down this year and what was SKU rationalization, what was distributor rationalization, and what was product rationalization, I mean quite a bit of sales come out of our business. Operator: Our next question comes from the line of Aaron Grey with Alliance Global Partners. Aaron Grey: First question for me. I just want to dig a little bit more in terms of hemp. So in terms of your outlook potentially for changes to come before the ban on any product is more than 0.4% THC coming to fruition in November. And then taking that into context, how you're looking at the CMS program, you mentioned potentially looking to enter into that. So how are you looking at potential opportunity there, particularly if there is a restriction on THC products and how appealing that program will be for patient adoption or rejection? And then just how you think about that longer-term opportunity there? Irwin Simon: So number one, let me go back to HDD9 and how we're looking at that. We're looking at it three ways. Number one, it gets extended and stays as is. Number two, there is some type of new legislation that comes out that regulates it either 3, 4 or 5 milligrams, and which would be great and that way we can sell it or the ban in November of 2026 happened, and it completely stops. Listen, I think it's going to be one or two. That will be my opinion. In regards to our CBD drinks into Medicare and that within the U.S. Listen, we have Happy Flower, we have the drinks, we're prepared for that now. It's just making sure that as we talk to the FDA, and we talk to them that how we go about it and how we do it. So we're able to do it. We have the products to do it. It's just making sure the right approvals, and we have a team that is working on this within the U.S. regulations and what could happen here. So stay tuned for that. Aaron Grey: Okay. Great. Appreciate that color, Irwin. Second question for me, I just wanted to go back in terms of alcohol gross margin and the outlook. Carl, I know you mentioned in terms of how you guys are hedging some of the aluminum. But just taking a step back and -- level, there's been some lumpiness. You guys now have Project 420 now completed. So how should we think about that margin for the segment going forward? 4Q, I imagine obviously be higher just given the higher sales flow-through, but just on a full year basis, just how best to think about the gross margin there? Carl Merton: So Aaron, good question. If you look at where we are right now, I think this represents the bottom. We have done a significant amount of work, and we'll continue to do work to manage costs and to keep costs at a reasonable level versus where our volume is. As we said on the call, we've got some headwinds with aluminum costs, and there's potential for headwinds with fuel surcharges and things like that, that we're going to keep a close eye on. But the key is really in the overhead utilization rates. And as we've adjusted to that, and we continue to make adjustments going forward, like we'll see that start to come up over time. And right now, we think this is the bottom of the trial. Irwin Simon: And Aaron, I think there's -- once again, you remember, we get in the beer business in late 2020, with Sweetwater and the acquisitions of the three brands in the West Coast and Montauk and then the ABI pieces and the Molson pieces. We had a onetime had 10, 11 manufacturing facilities. And since then, now with Carlsberg coming on, with the rescaling of the beer business and the SKU rationalization. It hasn't been the easiest road for us, but nothing dissimilar that was cannabis in regards to as we opened up the grow facilities, and we had to go deal with it. But now we got time. We now have the right sets in place. We have the right new products in place. We had some new products out there that didn't do as well as we thought. So as Carl said, now with the purchasing power between BrewDog International, between bringing Carlsberg on with us, we feel good about moving forward where we've done a lot of the overhauling. We're now down to 7 manufacturing facilities. We might even get smaller in regards to that. In regards to the facility in Columbus, Ohio, which is a beautiful facility. And what are we moving there from HDD9, if that is a product that's able to stay within the portfolio. We have a great energy drink called, High Voltage, that's growing in leaps and bounds. Some of the other non-alc products that we have out there today that we will move into our facilities. And as we introduce a lot of Vodka Seltzers and some of the other drinks that we're doing, we'll look to bring most of that in-house. And we will have capacity, as we have a great plan to grow Carlsberg. We think the growth opportunity of Carlsberg is tremendous of what we can do with that brand. So again, it's -- we've only been at this 5 years where most craft brewers have been out there a long, long, long time. And we've had some pain, but we've managed through it. And I think we've really got it in a good place now from a scale standpoint. I don't -- I know, I could be wrong, I think we'll combine with BrewDog and what we're doing today, it's almost 18 million cases of beer that we'll be selling that's between the worldwide. So we're buying lots of cans, we're buying lots of hops, we're buying lots of ingredients here. And yes, some of it is across the water. We're buying lots of kegs, but how do we utilize that? We're just not a little craft brewer anymore from a standpoint there. Operator: Our next questions are from the line of Pablo Zuanic with Zuanic & Associates. Pablo Zuanic: Yes, congratulations on the very strong international growth and also very nice to see the share count being stable quarter-on-quarter. Look, I have three questions on Germany specifically, and I'll try to keep it brief. The first question I want to get your take in terms of the advantage of being vertically integrated versus the many distributors out there, I mean for a while, we saw that the distributors were growing faster. We saw consolidation, Curaleaf by Four 20, High Tide by Remexian, more recently. But now with lower prices, some of the distributors are being squeezed out and they don't seem to have a very stable supply chain. So I'm just trying to understand if you can remind people of the advantages in Germany, especially where the market is evolving or being vertically integrated versus the distributor model. The second question is that it would help if you can expand on your route to market? Like how many people do you have on the ground? How many people are visiting doctors? How many people -- what are the efforts in terms of reaching out to patients given all the restrictions. But just if you can give more color on your route to market in Germany. And the third, which is related to all of this, I could make the argument, playing devil's advocate, that pharmacy reach does not matter too much, right, that all these numbers that we hear about CC Pharma and Alliance now are not so relevant when the doctors and the patients are making the decision and the 80/20 rule applies, right? We know that maybe 50 pharmacies, especially online account for the bulk of sales and only 1 of 7 pharmacies sell medical cannabis. So why does pharmacy reach matter in the short term and in the long term? I know there's a lot there, but there are three questions on international that would help if you can cover. Irwin Simon: I hope I can remember all three, okay? And number one, to your point, and I stressed this before, from a growth standpoint of having our Cantanhede facility and that up and going the way it is today and growing some of the best cannabis that it ever has and having the permits to get out of Portugal into Germany is a major, major advantage to us, and this is what helped us in the quarter to get the sales. And again, as we're getting yields and flower to become that low-cost, that low-cost seller in there in the marketplace and deal with price compression. Number two, you heard me talk about now as we bring on our facility in Gatineau, Quebec, that is a GMP facility. And that from a supply standpoint, and I got to tell you, because originally, we were going to sell that and thank God, we didn't because from electricity costs, from labor cost, that is an excellent facility and it's an excellent facility for us to have and supply the international market, and that's what it will do because it's GMP, because it's a lower cost facility. And then our German facility, which originally we were selling 2 to 3 metric tonnes that are there and Rajnish and the team has done a great job of getting that up into additional metric tonnes and before that we were only allowed to sell into the German government there. So to your point, Pablo, yes, we have supply. Yes, we can be that lowest cost producer. And yes, the big thing is we can be consistent. In regards to the customers that we're selling to. I'm going to let Rajnish talk about what we have on the ground there and the infrastructure in a minute, but just going through the pharmacies, you may not agree that having a vertical integration. So number one, having CC Pharma. The big part of the CC Pharma today's business is not the cannabis business. But there's 3 things CC Pharma does. It has 16,000 pharmacies and a lot of these pharmacies, Pablo, are buying medical cannabis. So now they have the ability and at the end to sell, it has the ability to go to pharmacies, number one. Number two, there's a lot they can do in regards to online and selling online through CC Pharma, and that is something that we're working on. And again, as we look at expanding our product lines in Germany, whether it is vapes, whether it is pre-rolls, CC Pharma has medical license and an application that they can do these things for, and we're looking at numerous things with the CC Pharma. So today, having it, it's very important for us. It has a tremendous network too with other CC Pharma types of distributors that we can sell products through them too. So CC Pharma has a relevance to us, and it's a big relevant for us in the cannabis grow market where no one else really had a CC Pharma today. Rajnish, in regards to your sales organization on the ground, go ahead. Rajnish Ohri: Yes. So two things here. I mean, so there is a price compression in Germany, which is kind of changing the route to market and the route to market is diverting, becoming more integrated. The distributor is now getting squeezed out because of the margins, et cetera. So I think -- we don't see it now, but we do see it going forward that the route to market will become more direct to pharmacies and through the channels of prescriptions to doctors, et cetera. So CC Pharma and our medical team there is presently working along with the prescribers and also in the pharmacies to work and build this integrated supply chain to reach the patients. So that's number one. Number two, to your question of what's the feet on street we have today 2 teams which work on the street. One is the one which work with the prescribers. This is a team of about 20-plus people who are medical representatives and medical advisers, who work on with the prescribers. And then we have a team with CC Pharma, which is also about 7 to 8 people who are basically telecall services people who continuously to work with pharmacies to make sure that the prescriptions, which we reach there and the stocks are available for them. So there is a twin approach there, both at the pharmacy and at the prescriber level at the ground in Germany. And as we go and see this forward, I think -- and these are signs which we see in the market today that the route to market is going more direct than through the distribution. So with CC Pharma and Tilray Medical team, I think this change we are seeing, and we also see data coming to us, which is telling us that the pharmacy sales are improving, still small, but improving compared to what the distribution sales have been. Irwin Simon: And Pablo, not only that, what we have internationally today, I mean, basically, we have marketing teams, we have R&D teams, we have quality teams. We have a researchers working on our different cannabis streams and genetics over there from a medical standpoint that when doctors prescribe for pain, for anxiety, for cancer we can grow and support it. So again, what we're not is just somebody selling into the marketplace. I mean, as Rajnish said, we have a big infrastructure in Canada and Portugal, we have in Germany. And then we have a team that support it in London in regards to the marketing team, and there's a whole supply team. And the good news is we have moved a lot of our Canadian colleagues over there to help us with this grow. You were going to ask something else. Go ahead, Pablo. Pablo Zuanic: I mean, that's great color. Can I add just one more quickly? You mentioned that you're keeping an eye on the CMS program in the U.S. for a full-spectrum CBD. Does that mean that you would be considering or looking at buying a U.S. CBD brand? Irwin Simon: So we have a brand today called Happy Flower, okay? We produce CBD products internationally. So we have formulations. We have products. It just got to fit to what the U.S. standards are and regs are here. But, listen, I've always liked if it made sense to buy something that gives you a foothold in there. But like anything, we have the ability today to do our own with CBD products. Operator: Our next question is from the line of Kenric Tyghe with Canaccord Genuity. Kenric Tyghe: The majority of my questions have been asked, but just a couple of quick follow-ups. With respect to the beverage segment, you called out trough margins in quarter. Is that including or excluding the BrewDog integration? Just trying to get a handle on whether that's a trough on legacy or trough on go forward, and how we should think about that evolution of the margins? Irwin Simon: No. BrewDog, from lease margins, BrewDog was acquired, March 2, so there's nothing in here in regards to BrewDog. And there's nothing in here in regards to Carlsberg from a margin standpoint. And again, from a procurement, from the sales, from an infrastructure, from manufacturing, again, I'm not going come out there with numbers, but I would think there would be upside just putting volume. Kenric Tyghe: Great. And that was the gist of the question was just on that evolution from here forward with Carlsberg and BrewDog, but I can leave it there. Just a follow-up with respect to the brewpubs and that footprint. Just with how consumer trends and consumption patterns have changed. How are you thinking about that footprint going forward? And is it becoming more important to you as a sort of a strategic buffer on the consumption side? Any color around the BrewDog -- sorry, around the brewpub footprint would be useful. Irwin Simon: Listen, good question. It's something today within Tilray, we have 18 of our own brewpubs here in the U.S. So again, it's something we understand. In regard to the U.K., Ireland, Scotland and the other markets, listen, I'm big on brewpubs to look at them from a marketing tool and to build our brand out there. So bringing people together. And that's the whole thing on longevity today to bring people together. And a big part, and I plan to spend a lot of time looking at our brewpubs in regards to what we got to do to interact with our customers that come there, how do we serve them good food and good value. I've also talked about whether it's Carlsberg, Guinness or our other beers of how we bring other beers into there because if they don't want BrewDog, we want them to come to our brewpubs at least to enjoy our food, enjoy the environment, and maybe we can convince them to have BrewDog. Is that going to be a big part of our growth as a part of our strategic plan to open up another 100 of those? No. It's a big part of those to look to upgrade them, to put more TVs, more interactive types of communications in regards to getting more and more of our consumers to that and is something, yes. Is there an opportunity for us to franchise more and more BrewDogs, where we did not take them and make them franchisees? Absolutely, yes. So there's some exciting things here as we look to grow from a franchise model as we look to increase the sales with the ones we own and where we license the brand today in airports. And that's something that we're looking at too because there's -- with airports today, you license your brand name, you collect a royalty and you sell product. So that's how we're looking at these brewpubs. Operator: At this time, I'll turn the floor back to management for closing remarks. Irwin Simon: Well, thank you, everybody. Number one, it April Fools' and our numbers are not April Fools' joke. So that's the good news, okay. Our numbers are some real strong numbers out there. Congratulations to the team on the growth. And not one of these businesses, nothing has been easy out there, in regards to what we deal from a regulatory standpoint, what we deal in regards to pricing, in regards to tariffs and just looking at the consumer today. And again, if you stop and look at Tilray from 2019 to hitting over that $1 billion mark with the acquisition of BrewDog, it's a very exciting time for us. In regards to where we're going in 2027 and with 2 months left in our quarter of 2026, there's a lot to be proud of here. And as you heard me talk about the big overall that we're going to do in the Canadian market in regards our genetics, in regards to our strains, in regards to using AI to help us there, in regards to how we modernize those facilities and take out lots of costs. And Blair and the team have done a tremendous job in doing that. And again, as you come back and think about what we have in grow today and how we've converted these facilities to much more economical and dealt with the challenges of the cost of utilities in Ontario. So again, we've accomplished a lot in the Canadian market and the only market where recreational cannabis is legal in the world and at the same time, dealing with and growing our medical market and introducing more and more patients and consumers to the product. In regards to the U.S., listen, again, I'd like to see some better results coming out of our beverages business. But on the other hand, as you bring everything together since late 2020, and we're here where we are today, I see some good light at the end of the tunnel here of what we're building here and being the fourth largest craft brewer out there and the fourth largest craft beer business. There's been a lot of changes in the craft beer business, it's been a lot of changes in the beer business. And one thing I can tell you is I really feel we got the footprint right, we got the model right, and now we got the product right because we brought up a lot of SKUs. We have over 18 brands. We have over 900 distributors. We've had multiple people, multiple contracts out there that we had to deal with, whether it's buying kegs, cans, hops, et cetera. So as we bring all that together. In regards to our spirits business, you heard me talk about our depletions on Breckenridge being up. We've dealt with lots of distributor transition out there with RNDC, now being acquired by Reyes, which is good news for us, and it's something that we will consolidate into the new Reyes distribution system. In regards to some other changes in the market, it's something we're going to do. But what I'm really happy about and seeing our Breckenridge, some of the new stuff that we're really coming out with in regards to our tequilas, our drinks with moonshot -- our Mountain Shot, it isn't moonshot. Some of our non-alc drinks and some of our products there. But it's great to see some of the stabilization that's going to happen in regard to the distribution business. Listen, this industry is a difficult industry with a 3-tier system, and you can have the greatest products, but it's the distribution that you need. In regards to international, again, Rajnish and team have done some great things in regards to the international piece and the grower and dealing with the regulated market in regards to medical cannabis, dealing with permits when you ship out of the country or permits when you ship into the countries. And again, what we've had to do to get our Cantanhede facility up to the yields and up to the grow that we've done in Canada and up to being able to supply consistent product to the marketplace and back to Pablo's point before, that's something that Tilray now is going to be known for because if you think about it, look where our volumes are today and look where they were a year ago and how we've doubled in the quarter. So a lot to be proud of there. And again, there's a lot more that we're going to do in those marketplaces. We had to overcome Germany being only sold into the German government, which we're losing money and almost doubling the amount of production coming out of that facility. And now we're running Cantanhede probably at 50%, 60% capacity, and we have tremendous opportunities to grow more and more in our Cantanhede market. Really, the highlight is where we've come with CC Pharma. Where we are at 2%, 3% margins and closer to 5%, 6% margins now and really see the opportunity in that business and see opportunities from an integration standpoint and even seeing it grow throughout the rest of Europe. And last not -- well, our wellness business in regards to Manitoba Harvest, and the growth within that business and the growth in regards to some of the beverage businesses that's been in that business. Listen, we'll see what happens in regards to Delta-9, I think as you heard me say, there's three options out there, either 1 or 2 will happen. I'll be disappointed if it's 3. But again, we're out there in full force selling our products today that we have in the marketplace and sticking with it and out there lobbying the government to really take a hard look at that. So last but not least, on March 2, I just sort of want to step back one second in regards to Carlsberg as we announced our partnership with Carlsberg. And it's something I'm very proud of because I grew up in Carlsberg. It's a worldwide brand. It's one of the largest brewers out there. What a class organization to be associated with. I spent lots of time with the Carlsberg team. And it's tremendous what we can learn from Carlsberg. And what we have the ability to tap into their knowledge base, tap into their new products, tap into their marketing things. And I always say this here, when I grow up, I like just to be like Carlsberg. It's something that we aspire to, and having that for the U.S. and the U.S. being the biggest beer market in the world, Carlsberg is looking for some big things for us, and I promise we're not going to let them down. Last but not least, in regards to BrewDog. Listen, I looked at BrewDog numerous times throughout the years in the acquisition, I congratulate the founders for what they did in regards to building this brand and what they did in regards to opening up these beautiful brewpubs around the world today. And since 2015, and basically 10, 11 years what they've built. Unfortunately, not everything goes as planned. And Tilray, when it had the opportunity to participate in the administration to buy this without being able to do due diligence, the way we could, but we knew the brand, without being be able to go into data rooms and ended up buying this at a little over EUR 40 million is something that I'm excited about. But I always say it's not what you bought it for, it's what you do with it. And with that, there's a lot to do. And this changes a lot within Tilray in regards to our beverage business, our worldwide known of who Tilray is. You heard me say in my comments, that I've done lots of acquisitions, whether it's at Anheuser or here, and I've never had so many reach outs about the brand, BrewDog and the excitement that is. So we're pretty excited. It's just a month that we owned the business. We're in the midst of getting our hands around this. And one of the big things, this business as it was going through in administration was in the midst of either being shut down or sold in pieces or sold as a whole like us. So it's almost like we're starting this back up again, and getting it back up to capacity, getting the factories back up, making sure we have hops, where suppliers didn't get paid and there are ransom suppliers that we've got to do that. There was employees that had their resume on the streets that didn't know if they were going to have a job or not, and that's something that we've got to make sure. So stabilization, as I keep saying, is the key to this here. And with that, we will have in place great strategic plans to grow the business in the U.K., Ireland, we'll have great plans in place for Australia. In Europe markets, we'll have plans in place for a franchise and what we will do with our current brewpubs, and what we're going to do in the U.S. So there's a lot of exciting things with BrewDog that we can do and will do. And remember, there's a lot of heavy lifting there and how do we integrate it within our business. So with that, some exciting things happen at Tilray. Let me tell you, as I always say, there's 2x4s that hits you in the head every day. And that's something we live by and how do we deal with it. I want to thank everybody for getting on our call today and listening to us. Happy Passover, Happy Easter to everybody, and enjoy some good beer out there, enjoy some of our good cannabis and to March Madness. Hey, when you're watching March Madness this weekend, make sure you have one of our great beers that we produce out there. Thank you very much for listening to us today. Operator: This will conclude today's conference. You disconnect your lines at this time. Thank you for your participation. Have a wonderful day.
Operator: Greetings. Welcome to Terrestrial Energy's Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Tom Cook, Managing Director at ICR. Thank you. You may begin. Thomas Cook: Thank you, and good morning, everyone. Welcome to Terrestrial Energy's Fourth Quarter and Full Year 2025 Earnings Conference Call. With me today are Simon Irish, CEO; and Brian Thrasher, CFO. Alongside today's call, you can find our earnings release as well as the accompanying presentation on our website at ir.terrestrialenergy.com. An audio replay of this call will also be made available, which you can access on our website or by phone. The phone number for the audio replay is included in the press release announcing this call. As a reminder, some of the statements made during this call, including those relating to our outlook, expected company performance or business strategy may constitute forward-looking statements. Please note the cautionary language about forward-looking statements contained in our press release and earnings presentation, which also applies to this call. With that, I would now like to turn the call over to Simon Irish. Simon Irish: Good morning, everyone, and thank you for joining us today. It's a pleasure to welcome you to Terrestrial Energy's first earnings call as a publicly traded company. 2025 was an important year for the company. We made significant progress across the 3 key elements of business plan execution. We delivered important regulatory developments, secured federal support for swift licensing and operation of reactor and fuel supply pilot projects. We announced expansion of supply chain activities, progress with commercial deployments, and we strengthened our balance sheet through our business combination with HCM II. Before discussing developments in more detail, I'd like to briefly step back and frame the important context in which we're now operating. For industrial, innovation requires market context and for innovation -- for nuclear innovation, there is no more powerful context to what we see today and stretching far ahead. Referring now to Slide 3 of the slide deck posted to our website that accompanies today's call. Global energy markets have clearly entered a period of generational and transformative change. Electricity demand is accelerating at a pace not seen in decades, driven by demand growth from multiple sources, energy-intensive industrial innovations, artificial intelligence infrastructure, automation and electrification and the reshoring of manufacturing capacity. Furthermore, energy policy today clearly prioritizes national energy security, grid reliability and affordability. Energy security has become a dominant theme across many advanced economies, a shift that accelerated with the start of the war in Ukraine and its associated impact on European natural gas supplies and has moved to a new level today with recent insecurity of Gulf-based LNG and oil supplies. It is now clear that only nuclear energy has the potential to meet these huge demand deficiencies and policy objectives for secure, clean, reliable energy supply. We see these powerful fundamentals driving nuclear energy demand to continue to strengthen, and they create today's extraordinary context for nuclear innovation that is without parallel. Contemplating this opportunity, one quickly realizes there are many methods to supply nuclear energy from different sized plants ranging from the tiny to the enormous and a wide range of fission reactor technologies that cover the conventional -- the long conventional fission technologies of light and heavy water reactors to the generation class of advanced reactor technologies of the future to which our technology belongs. Here lies the secular opportunity today for the innovator. If nuclear energy supply is to meet these extraordinary demand expectations, it supply must be from nuclear plants, operating with different commercial profiles, ones that are smaller and more affordable to build, ones that are much, much more capital efficient for low-cost energy supply, and ones that are modular for quick construction and deployment at scale. This next generation of nuclear plants must be more flexible in operation and capable of providing heat for industry as well as electric power. They must be easier to site near point of demand, close to data center, chemical or petrochemical plant. Their colocation capacity delivers a new energy supply paradigm. Hundreds of megawatts of clean firm energy from a small parcel of land located close to demand and free from pipeline and transmission constraints, only innovation to deliver small and modular nuclear plants operating with next generation of nuclear technology has the potential to deliver these requirements. Turning to Slide 4. Terrestrial Energy was founded over 13 years ago, precisely with this paradigm in mind. We have been diligently moving forward with development of our IMSR plant design, anticipating the arrival of today's extraordinary market and policy circumstances. With this clear innovation focus, our IMSR plant is now heavily differentiated from other smaller modular nuclear plants in the advanced reactor sector in important, competitive and compelling ways. I will discuss some of these differentiators now. Turning to Slides 5 and 6. First, affordability and capital efficiency. The IMSR plant is smaller, 1/6 the size of conventional nuclear plant, modular in design, and it captures the fundamental and deeply compelling techno-economic benefits of molten salt reactor technology. IMSR plant generates power from steam turbines operating with a near 50% greater efficiency than those driven by light-water reactor technology. Its nuclear systems operate at low pressure and with high inherent safety, again, powerful economic virtues that reduce costs further as well as virtues that secure strong social license for deployment. We believe that competitive affordability will be a primary driver of success. Second, flexibility in operations. The IMSR plant is capable of high-temperature thermal energy supply for industrial process heat applications and can strongly load follow. Its output can be customized to a required precise mix of heat and power, and it can be integrated with other energy supply systems, including natural gas for customized resilience and speed to first commercial operations. We believe that this flexibility in operations contributes to an opportunity for a service addressable market for our company that we estimate to exceed $1.4 trillion. Third, scalability for fast fleet deployment. As supply chain factors heavily determine speed to fleet to fleet scale, our supply chain objective has been to source to the greatest extent possible, material and components available from today's nuclear supply chain. This strategy has delivered important competitive and strategic advantages, particularly with steam turbine and fuel supply. While some Generation IV nuclear plants showed some of the characteristics required for next-generation nuclear energy supply, only the IMSR plant uses standard nuclear fuel, uranium enriched to less than 5%. Ten years ago, we strategically chose to avoid HALEU fuel use, that is uranium enriched to between 15% and 20%, the bracket required by other Generation IV reactors in our sector. In today's enrichment constrained environment, this decision has removed from our deployment plans the considerable challenges and uncertainty of uranium fuel supply at commercial scale. In doing so, this decision has improved our market position, reduced regulatory complexity and cost the first plant as well as for fleet. We believe our supply chain strategy is delivering sector competitive advantages to fleet fast deployment at scale. Molten salt reactor technology is not new. It was first demonstrated over 6 decades ago and most recently in 2023, when China began operating its first molten salt reactor based on the technology demonstrated at Oak Ridge National Lab in Tennessee. The technology's long history of research and development yields a considerable understanding of performance and operation. Our strategic design objective was to use this existing and extensive body of knowledge to create the strong technical foundation of the IMSR plant design that exists today. Let me spend a minute talking about regulation. A core objective of Terrestrial Energy since inception has been to retire project risk through early and focused engagement with world-leading nuclear regulators. We were the North American sector trailblazer when in 2016, we applied the Canadian Nuclear Safety Commission to undertake its formal programmatic vendor design review of our IMSR plant design. In 2023, the Canadian Nuclear Safety Commission completed that formal review and concluded publicly that there were no fundamental barriers to licensing the IMSR plant design for commercial use. The work completed in Canada has matured our safety case. It bounds regulatory uncertainty and strengthens our regulatory engagement with the NRC in the United States, which started in 2017. Our business strategy is to deploy IMSR plants with competitive scale and speed and in a capital-efficient manner. To achieve this, Terrestrial Energy invites others to build, own and operate IMSR plant as is industry's convention today. We will, however, remain the key project partner supporting project licensing and plant construction with revenue-generative engineering services and working with established engineering, procurement and construction partners to deliver commissioned and operating plant. We will also provide IMSR core units, fuel, fueling services and full life cycle operational support. This approach leverages the capability of experienced industrial partners, providing speed to deployment at fleet scale. It also allows us to focus on our core capabilities and primary business objectives. With this business strategy in mind, I'd like to present the framework to assess progress. It has 3 pillars. The first drives IMSR engineering and regulatory developments, including our key project engagements with the Department of Energy. The second drives supply chain developments. And the third drives IMSR plant projects advancing to deployment. I'd now like to review 2025 developments, demonstrating our progress across these 3 pillars. Please refer to Slide 7. In 2025, we announced the NRC's completion and acceptance of our Topical Report on the IMSR Principal Design Criteria. This was a foundational ruling, representing an important step forward to IMSR operating license submission and demonstrating progress with our pre-application engagement with the regulator. Our regulatory program operates in parallel with our engineering and testing programs. In 2025, we received welcome support from 2 new strategic programs administered by the Department of Energy. These were established following presidential executive orders in May 2025 to accelerate advanced reactor development. We received 2 OTA awards, one from each program. The first from the Department of Energy's Advanced Reactor Pilot Program. This supports quick execution of Project TETRA, the Terrestrial Energy Test Reactor Assembly project, which assists with data collection required for future IMSR license application. The second was from the Department of Energy's Fuel Line Pilot Program, which supports our schedule for completion of our Fuel Line Assembly project, TEFLA, which is a pilot scale fuel production process, the antecedent to our commercial plant for IMSR plant fuel supply. On further supply chain matters, we continue to build on previously established relationships with leading industrial nuclear suppliers such as Westinghouse, Siemens Energy, BWXT as well as other experienced component manufacturers. These supplier relationships support fabrication of reactor components, development of fuel supply infrastructure and long-term project capabilities. In 2025, we announced further contracts with Westinghouse to support our IMSR fuel supply program. In the past year, we advanced important materials testing, selection and qualification work. We announced our graphite irradiation testing had entered its concluding phase at the NRG PALLAS' High Flux Reactor in the Netherlands. This is one of the West's most powerful test reactors. We would like to draw attention to the importance of such in-core testing for Generation IV reactor materials. These are activities essential for reactor materials qualification, supplier selection and licensing readiness for Generation IV reactor technology. Now turning to IMSR plant project developments. Early in 2025, Texas A&M University, supported by expertise in its nuclear engineering faculty, announced its selection of Terrestrial Energy to site a full-scale commercial IMSR plant at its RELLIS campus, following a competitive sector-wide evaluation process. This selection positions an IMSR plant on ERCOT, one of the fastest-growing electricity markets in North America and places the project in a leading engineering research and workforce development ecosystem. In 2025, we announced collaboration with Ameresco to partner with IMSR plant site identification and project development. Ameresco brings deep project development expertise and extensive experience with federal energy programs. This relationship expands our capacity to identify IMSR plant project opportunities across multiple industrial and data center markets and to develop them. As we move into 2026, our focus is again on disciplined execution against a series of clearly defined and planned steps, each advancing across the 3-pillar framework discussed earlier. With this framework in mind, I would like to provide guidance on further developments in 2026. Turning to Slide 8. We expect to announce the following developments in 2026. First, announce further agreements with Texas A&M for the deployment of an IMSR plant at RELLIS and for testing and development of key IMSR components and processes. These agreements will support the siting and development of the proposed IMSR plant. Second, and following the announcement of the RELLIS IMSR plant project in 2025, we expect to disclose details of between 1 and 3 additional commercial projects to deploy IMSR plants. Third, we expect to submit to the NRC for review at least 3 additional Topical Reports covering key and consequential areas to increase readiness for NRC license submissions to construct and operate IMSR plant. Finally, following the 2 Department of Energy OTA awards in 2025, we expect to provide project development details disclosing sites for both the TETRA and TEFLA projects. We expect to identify key engineering partners and organizations supporting regulatory readiness for these important projects. In closing, 2025 was a transformational year for the company. We were successful with our strategy to respond swiftly to the remarkable and generational change in demand for nuclear energy supply. We strengthened our capital position, advanced regulatory readiness and secured support from the DOE's federal programs in key areas. We advanced commercial and supply chain partnerships always aiming for fleet scale solutions and initiated projects and relationships to deploy IMSR plants. Terrestrial Energy's founding belief was that nuclear technology must evolve to meet the remarkable energy market requirements of this modern era. As a private sector innovator, we declared over a decade ago that the ruling objective for nuclear innovation is affordability, cost competitiveness and speed to market at scale. Design and technology decisions have profound and fundamental consequence. On returning from CERAWeek and reflecting on this objective, as we repeatedly do, we remain as convinced of this objective as on the day we founded the company. And over the last decade, we have consistently programmatically and diligently advanced our IMSR plant design. Today, our long commitment and conviction in this ruling objective of nuclear innovation positions the IMSR plant as powerfully and competitively differentiated in a nuclear tech sector pursuing a $1 trillion market opportunity. We are moving forward from this position, looking past the deployment of a single IMSR plant to a fleet of IMSR plants in the 2030s and the establishment of a standardized and scalable platform for IMSR plant delivery across multiple industrial and grid applications and across international markets. With that, I will now turn the call over to Brian Thrasher, our Chief Financial Officer, to review the financial results in more detail. Brian Thrasher: Thank you, Simon, and good morning, everyone. I will briefly review our financial results, liquidity and capital position for the year, and then we will open the call for questions. Let me begin though with the transaction that positioned Terrestrial Energy to enter this next phase of development. On October 28, 2025, Terrestrial Energy completed its business combination with HCM II Acquisition Corp. and began trading on NASDAQ under the ticker IMSR on October 29, 2025. The transaction resulted in trust redemptions of less than 1% and combined with the $50 million PIPE, secured more than $292 million in gross proceeds. We believe this outcome reflects strong support from investors for both our small and modular nuclear plant design as well as our business strategy in the context of the market opportunity today for nuclear innovation. Following the listing, we also announced developments with our fuel services agreement with Westinghouse, strengthening our supply chain readiness for IMSR plant commercial operation. In addition, we enhanced our senior leadership team during the fourth quarter to support U.S. commercialization efforts and deepen engagement with federal stakeholders. Turning now to our financial results as summarized on Slide 9. Terrestrial Energy reported a net loss of $28 million for 2025, an increase of $17 million on the prior year. This increase reflects growing expenses from our IMSR engineering program with its component testing, regulatory activities from our TETRA and TEFLA projects with the DOE from supply chain development as well as from organizational expansion as we resource for public company readiness for key technical capabilities and for projects. Research and development expenses, those expenses incurred for design and engineering of the IMSR plant increased to $10 million in 2025, an increase of $5 million from the prior year as we expanded materials testing and progressed graphite qualification work. General and administrative expenses increased to $14 million in 2025, an increase of $10 million from the prior year, primarily reflecting expansion in personnel, corporate infrastructure and professional services to accelerate our commercialization activities and support public company readiness. Within general and administrative expenses, legal, accounting and other professional fees increased to $5 million in 2025, an increase of $4 million over the prior year and excluding $22 million of transaction-related costs associated with the business combination, which are presented as an increase to additional paid-in capital. Also, personnel-related expenses increased as we move forward with our commercial development, grew our staff to support IMSR engineering, finance, supply chain development, management of IMSR plant commercial projects and public company reporting requirements. Additionally, stock-based compensation increased to approximately $3 million, an increase of $2 million over the prior year as management capabilities expanded during the year. Finally, we incurred approximately $1 million in additional costs in 2025 to advance public company readiness and scaling of our operations. These included directors and officers insurance, investor engagement activities, conference participation, travel and expanded software and operational systems. Interest expense, net of interest income of $3 million in 2025 increased by $2 million from the prior year, reflecting increased debt balances, partially offset by higher interest income. More specifically, interest expense of $4 million in 2025 compared to $1 million in 2024 is attributable to larger average debt balances in 2025, combined with the amortization of the debt discount on the legacy Terrestrial Energy convertible notes. The company earned $1 million of interest income in 2025 on the cash balance received from the closing of the business combination. Turning now to liquidity. At year-end, we held approximately $298 million in cash and short-term investments. This balance reflects the proceeds from the business combination with a $50 million PIPE investment completed in October, two financing rounds completed earlier in the year and the cash exercise of legacy Terrestrial Energy private warrants. This capital position provides the financial resources for a period of strong business growth and to deliver consequential progress with important milestones. These include milestones from progress with our IMSR engineering program and its regulatory and R&D elements that include the TETRA and TEFLA R&D projects with the DOE, from supply chain development and from progress with IMSR plant commercial projects. At year-end, summarized on Slide 10, the company's issued and outstanding share count was 105.8 million shares consisting of 81.8 million common shares outstanding and 24 million exchangeable shares outstanding. The exchangeable shares are exchangeable into common shares on a one-for-one basis at any time at the election of the holders. That concludes our prepared remarks. Operator, please open the line for questions. Operator: [Operator Instructions] our first question is from Jeff Grampp with Northland Capital Markets. Jeffrey Grampp: I was curious to start on the '26 kind of expectation milestone slide, you guys talked about announcing 1 to 3 additional commercial projects. I know you can't provide too many details on kind of future announcements, but to the extent you can provide a little more detail, do you expect those to be more kind of MOU, LOI type announcements, definitive deployments at identified sites or something else? Just, I guess, trying to level set, I guess, the maturity of some of the conversations you're having with prospective customers. Simon Irish: Well, Jeff, yes, we will reserve detail to the moment in which we disclose these developments, but sort of perhaps more generally, for an IMSR project is first defined by the location. It's got a ZIP code. And it's also defined by a process, which starts with the declared intention of the parties involved to proceed with that process ultimately to the commissioning of an IMSR power plant. So maybe I'll just leave it there in terms of providing additional detail on what that means. Jeffrey Grampp: Understood. Appreciate that. My follow-up, there was a recent announcement from the NRC regarding Part 53 licensing as kind of an emerging pathway, which I think would have some applicability to Terrestrial's design. Is that something you guys are considering pursuing? And if so, what kind of benefit could you see to that having to your commercialization pathway? Simon Irish: Well, it's certainly an option for us to consider in terms of what is the most efficient pathway to commercializing to life getting to operation of first plant. We are very familiar with that type of the Part 52 framework. It's graduated, it's risk informed, it's principles based, all the elements of the Canadian process, by the way. The Canadian process has been defined for a long time as graduated risk informed principles based. So it's certainly an option for us and many others in the industry. Our central case at this point in time for those first couple of plants is going to be a Part 50 strategy. So the 2 step, the construction permit moving on to the operating license. Operator: [Operator Instructions] With no further questions, I would like to hand the conference back over to Simon for closing remarks. Simon Irish: I'd like to thank everyone for joining us today on our first earnings call as a public company. Thank you for attention, and we look forward to providing you with further updates in the future. Thank you. Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Second Quarter 2026 Franklin Covey Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand it over to our first speaker, Boyd Roberts, Head of Investor Relations. Please go ahead. Boyd Roberts: Good afternoon, everyone, and thank you for joining us today on Franklin Covey's Second Quarter 2026 Earnings Call. We appreciate having the opportunity to connect with you. Before we begin, please remember that today's remarks contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, including, without limitation, statements that may predict, forecast, indicate or imply future results, performance or achievements and may contain words such as believe, anticipate, expect, estimate, project or words or phrases of similar meaning. These statements reflect management's current judgment and analysis and are subject to a variety of risks and uncertainties that could cause actual results to differ material -- materially from current expectations, including, but not limited to, risks relating to macroeconomic conditions, tariffs and other risk factors described in our most recent Form 10-K and other filings made with the SEC. We undertake no obligation to update or revise any forward-looking statements, except as required by law. Now with that out of the way, I'd like to turn it over to Mr. Paul Walker, our CEO. Paul Walker: Thanks, Boyd. Good afternoon, everyone, and thank you for joining us. It's great to be with you and to have the opportunity to share our results for the second quarter and provide an update on the business and our outlook for the remainder of the year. We're pleased with our results in Q2. Revenue and adjusted EBITDA grew year-over-year, met our expectations and were above consensus. As we've shared previously, fiscal 2026 is a year of execution and a return to growth. And we're encouraged by the continued progress and momentum we saw in the second quarter and throughout the first half of the year. Invoice amounts in the quarter grew 5%, driven by 7% growth in Enterprise North America, or 10% when excluding our government business, which was impacted by the disruption caused by a reduction in federal spending. Invoiced growth overall was also driven by a 7% growth in Enterprise International. We expect invoice growth to remain strong through the balance of the year. Because a significant portion of invoice growth is recognized over time, this positions us for accelerating reported revenue, adjusted EBITDA and cash flow in fiscal '27. In Enterprise North America, growth was broad-based. We saw strong sales of subscription and services to new logos, continued strong retention and meaningful client expansion, resulting in one of our highest revenue retention levels in recent periods. Services bookings also continue to be strong and are up 9% for the year as of this week, reinforcing the importance clients place on the business outcomes we help them achieve. In addition, deferred subscription revenue grew 16% year-over-year and the percentage of revenue under multiyear contracts increased to 62%, reflecting both client confidence and the long-term nature of our partnerships. In an environment where leaders are working to accelerate results while navigating uncertainty and disruption, Franklin Covey continues to be sought out as a key partner in addressing the human side of strategy, execution, change management including related to clients' implementation of AI and achieving measurable performance transformation. We expect the momentum we've experienced in the first half to continue to be strong through the second half of the fiscal year. Turning to our business outside of North America. Our International business delivered strong performance, partially benefiting from foreign exchange with invoiced amounts growing 7% and particularly strong performance in our direct offices where invoiced amounts grew a strong 14%. And in our Education business, reported revenue grew 16% in the quarter, driven by strong demand for Leader in Me services and materials. We feel very good about the momentum in Education and the business is positioned well for a strong second half and full year performance. Overall, we remain confident in achieving our full year revenue and adjusted EBITDA guidance and in the strength of the foundation we're building for accelerated growth in fiscal '27. Jessi will provide more detail on our specific segments in her remarks in a few moments. I'm going to focus the remainder of my remarks today, first, on Enterprise North America, which makes up more than 50% of total company sales and the area in which we have invested for accelerated growth. And second, I'll talk briefly about the strategic importance of what we do and why a growing number of organizations are partnering with Franklin Covey to drive the human side of strategy and transformation, particularly as a simultaneously leveraged AI to transform. So first, as it relates to Enterprise North America. Enterprise North America, which represents more than half of our total revenue, is at an important inflection point. The growth we're seeing reflects both the increasing strategic importance of what we do for our clients, and the traction from the go-to-market transformation we implemented last year. We're now seeing clear evidence that these investments are driving stronger new client acquisition, deeper client relationships, and greater expansion within key accounts. Key results embedded in the second quarter's overall 7% increase in invoiced amounts in Enterprise North America include the following: First, we had strong sales to new clients or to new logos, reflecting a combination of both subscription sales and services. Second, our balance of deferred subscription revenue grew a very strong 16% year-over-year to $59 million, building on the 8% growth in deferred subscription revenue last quarter. Third, we again had a strong logo or client retention quarter. Fourth, we achieved strong existing client expansion where expansion drove one of the highest overall revenue retention percentages we've achieved. Fifth, the percentage of our revenue, which is contracted for multiyear periods increased to 62%. With our sales engine accelerating as planned, I'd like to focus the remainder of my remarks on the strategic importance of what we do and the growing need organizations have for a partner who can help them unleash their organizations to achieve breakthrough results, and why we believe our position has strengthened in the current environment. Artificial intelligence is creating extraordinary new possibilities for organizations. But before addressing that directly, it's helpful to step back and consider a broader pattern we've seen over time. Franklin Covey has been a trusted partner to leaders and organizations through multiple periods of significant disruption, from the digitization of business processes to the global financial crisis to rapid shifts in how and where we work and where work gets done like during the pandemic. In each case, one principle has remained consistent. In times of disruption and transformation, the need for strong leadership, trust and disciplined execution increases. It doesn't decrease. We believe AI follows the same pattern. And as a result, there are 3 things that are important to understand about how AI interplays with our business. The first of these, as I noted, is that AI is actually increasing the premium on human leadership and execution. AI is accelerating change inside organizations. It has the potential to raise productivity, expand spans of control and increase the pace and complexity of decision-making. As routine work is automated and access to information becomes more widely distributed, the differentiators for organizations increasingly become judgment, trust, collaboration, alignment and disciplined execution. At the same time, we're seeing how AI has the potential to reduce the amount of routine and analytical work organizations do, we also see how AI is increasing opportunities that can result from strong leadership, high trust, winning cultures and great execution. The second area and the second interplay is that our model is built around behavior change and collective action tied to real measurable performance outcomes. Our model is not about just delivering content or software digitally. Our role is to help organizations strengthen the people side of execution, helping leaders clarify priorities, align teams, build capability and create accountability systems that translates strategy into measurable results. For many of our clients, Franklin Covey functions as a long-term performance partner to their leadership teams and their organizations overall. While a significant portion of our revenue is subscription-based, our model is fundamentally different from SaaS. Our subscriptions are related and related services are tied to enterprise-wide performance outcomes and long-term partnerships, not simply software usage. This positions us as a performance and advisory partner rather than a software provider. For example, this is reflected in our work with health care systems, where we partner directly with Chief Nursing Officers to strengthen leadership capability, trust and execution across care-providing teams. This drives higher employee engagement, lower nurse turnover and improved patient satisfaction and outcomes, which also directly impacts hospital reimbursement. This reflects the core of our model, the integrated combination of content, technology, services and advisory applied together to drive sustained behavior change and collective action across organizations. That capability and the measurable outcomes it produces is not something AI can replicate at scale. We also saw this in the second quarter with a large technology company that selected Franklin Covey to support the CEO's strategy to transform the organization to an AI-enabled operating model. While the strategy is technical in nature, successful execution of this transformation shift in their business will depend heavily on strong leadership, successful change management and high-trust fast-moving culture, all areas where we're a key partner. This work that we're involved in is about changing collective behavior across teams and organizations, something fundamentally different from simply providing access to ideas or content. The significant impact our engagement and solutions have is exactly what is behind the fact that even in and perhaps especially in times of significant change, we continue to retain a high percentage of clients and they continue to extend both the duration and size of their contracts with us. The third interplay with AI is that we have significant room for growth within our existing client base. Today, our solutions typically reach only a small portion of the employee population within our client organizations, generally in the range of 5% to 10%, which provides substantial room for growth over time, even in a more efficient or AI-enabled workforce. We saw this clearly in the second quarter where we delivered one of our strongest expansion quarters in recent periods, driven by increasing demand for enterprise-wide transformation and leadership capability. Taken together, these dynamics position us well in an AI-driven environment. At the same time, we're continuing to evolve our solutions to incorporate AI in ways that increase the value we provide to our clients. We're embedding AI-enabled coaching and execution tools into our platforms and we're helping organizations lead the human side of AI adoption. We're seeing this play out directly in our business through strong client expansion, increasing multiyear commitments and growing demand for enterprise-wide transformation engagements. These trends reinforce our conviction that as organizations navigate increasing technological change and complexity, the need for strong leadership, trust-based cultures and disciplined execution will continue to grow. Stepping back from all of that, as I conclude my remarks here today, I just would say that we're pleased with the momentum we're seeing in the Enterprise North America portion of our business and across the business as a whole. Driven by this momentum and the expected strength in Education, we believe we're well positioned to deliver meaningful invoice growth this year, and to establish the foundation for significant growth in reported revenue, adjusted EBITDA and cash flow in fiscal '27 and beyond. I'd now like to turn time to Jessi to share more detail on our second quarter results. Jessica Betjemann: Thanks, Paul, and good afternoon, everyone. Franklin Covey continued to see strong demand for our solutions in the second quarter, and as Paul discussed, the strategic investments we've undertaken to transform our Enterprise North America go-to-market strategy are continuing to gain traction. We expect fiscal 2026 to be a year of execution where our adjusted EBITDA and free cash flow will return to growth and where our meaningful growth in invoiced amounts will set us up for accelerated growth in fiscal 2027. In my remarks today, I'll start by providing some details of our second quarter financial performance, then I'll turn to our balance sheet and capital allocation priorities. And finally, I will provide additional context around our reaffirmed fiscal year '26 financial guidance. Total second quarter reported revenue was $59.6 million. Revenue, which was in line with our expectations for the quarter, was flat to the prior year as a 4% decline in reported revenue in the Enterprise division was offset by a 16% improvement in the Education division. Foreign exchange rates had a $0.7 million favorable impact on our consolidated revenue in the quarter. Importantly, our consolidated invoiced amounts grew by 5%, resulting in a 7% increase in deferred revenue at the end of the second quarter, establishing the foundation for accelerated growth in reported revenue in fiscal 2027. A summary of our consolidated financial results is on Slide 3 in the earnings presentation. Consolidated subscription and subscription services revenue recognized for the second quarter increased 3% to $50.9 million. We are especially pleased that consolidated subscription and committed services invoiced amounts for the quarter was up 16% to $39.3 million, continuing the growth we saw in the first quarter for the Enterprise North America and now including growth in Enterprise International. The total value of contracts signed in the second quarter grew 8% to $53.7 million, and was led by the Enterprise division, which raised the value of contracts signed by 12%. The foundation for increased future growth remains solid and is evidenced by the 7% year-over-year increase in our consolidated deferred revenue balance to $101.5 million, which will be recognized as reported revenue in the coming quarters. The total amount of unbilled deferred revenue contracted for the second quarter was also strong, increasing 9% to $10.6 million, with the total balance increasing 1% over the prior year to $64.9 million, which will convert to invoiced amounts and deferred revenue in the future. Gross margin for the second quarter was 75.9% compared to 76.7% in the prior year due to increased amortization of capitalized curriculum expenses and a shift in mix of services delivered and products sold during the quarter. Operating selling, general and administrative expenses for the second quarter were $41.2 million, which was 6% lower than the $43.7 million in the prior year, reflecting reduced associate costs and other cost reduction efforts taken in fiscal 2025 and in the first quarter of this year. Adjusted EBITDA for the second quarter was $4.1 million, an increase of 99% or $2 million compared to last year's second quarter, reflecting the stable revenue, gross margin and lower SG&A expenses I just mentioned. Foreign exchange rates had a $0.2 million favorable impact on our adjusted EBITDA in the quarter. During the second quarter, we continued to streamline our business in certain areas of our operations. We incurred $1.5 million in expense for this restructuring activity, which consisted of severance and related costs. We realized a net loss of $2 million compared to a net loss of $1.1 million in the prior year, reflecting the $1.5 million increase in restructuring costs, a $1.3 million increase in share-based compensation expense and $0.5 million increase in building exit costs, which primarily consists of legal expenses. These increases were partially offset by decreased SG&A expenses. Cash flow from operating activities for the first 2 quarters of fiscal '26 increased 28% to $16.4 million, reflecting the strength of second quarter operating cash flows of $16.3 million versus a negative $1.4 million of cash used in the second quarter last year. This was driven by improved receivables collections and higher invoiced amounts. These improvements offset lower operating income and increased capitalized development costs in the second quarter of fiscal '26 compared with the prior year. Free cash flow for the second quarter was $13.2 million compared to a negative $3.6 million of cash used last year. I'll turn now to a discussion of our business divisions. For the second quarter of fiscal '26, our Enterprise division generated 70% of the company's overall revenue, with the Education division generating 29% of the company's revenue. Second quarter Enterprise division invoiced amounts grew 7% to $52 million. Second quarter Enterprise Division's reported revenue was $41.6 million or 4% lower when compared to $43.6 million in the prior year. As shown on Slide 4, the North America segment invoiced amounts grew a consecutive 7% this quarter to $42.7 million, and excluding government contracts, it grew 10%. We are encouraged by the continued progress this quarter in invoiced amounts, which reflects the positive momentum coming from our investments to transform our Enterprise North America go-to-market organization, and we expect this to translate into increased reported revenue in future quarters. Last quarter, I highlighted an important change aligned with our strategic focus on solution selling, whereby clients now may contractually commit upfront for services, which will be delivered over time as we bundle content and predefined services together. In the second quarter, approximately $3.5 million in invoiced amounts was for such contractually committed predefined services. And while we continue to recognize the revenue upon delivery, because these services have been contractually committed upfront, any unused fees are guaranteed and will be recognized at the end of the contract term. On Slide 10 in the appendix to our earnings presentation, our roll-forward analysis of deferred revenue includes both subscription and committed services amounts and the timing for revenue recognition for committed services will depend on the delivery schedule of our clients. The North America segment's reported revenue of $32.5 million accounted for 78% of our Enterprise division sales in the second quarter of fiscal '26, and was 6% or $2 million lower than prior year, primarily due to lower subscription revenue recognized as a result of a lower invoiced amount and deferred revenues last fiscal year. Adjusted EBITDA for the North America segment increased $1.1 million to $5.9 million for the second quarter of fiscal '26 compared to $4.8 million last year, primarily due to lower SG&A costs resulting from the restructuring activities in recent quarters. Our balance of billed deferred revenue in North America was $59.3 million at the end of the second quarter, an increase of 16% from the prior year and unbilled deferred revenue was $61.1 million, an increase of 3% from the prior year. Importantly, the number of North America's All Access Passes contracted for multiyear periods increased to 59% in the second quarter compared to 55% last year, and the contracted amounts represented by multiyear contracts increased to 62% compared to 61% in the prior year. As shown on Slide 5, second quarter revenue from our Enterprise International segment, which is the combination of our International Licensee revenue and our International Direct Office revenue was $9.2 million. This accounts for 22% of our total Enterprise Division revenue and represented a 1% increase over the prior year of $9 million. International Direct Office revenue, which accounts for approximately 70% of total international revenue increased 7%, driven primarily by improved year-over-year revenues in France and China due to a foreign exchange currency benefit, while International Licensee revenue, which accounts for approximately 30% of total international revenue decreased 10% from the prior year. Invoiced amounts for our International Direct Offices grew 14% year-over-year. And while 6 points of this growth is due to foreign exchange, we are encouraged by the overall growth trend this quarter. Adjusted EBITDA in the second quarter of fiscal '26 for the International segment was $1 million compared with $0.5 million in the prior year, driven by increased revenue and lower operating costs, including lower bad debt expense compared with the prior year. Now turning to our Education division. As shown on Slide 6, revenue in the second quarter increased 16% to $17.5 million. This primarily reflects increased training and switching revenue from the delivery of more than 300 additional training and coaching days compared to last year as well as an additional symposium event and increased purchases of classroom and training materials by schools. Invoiced amounts in the second quarter of fiscal '26 of $8.5 million decreased slightly from the $8.6 million generated in the prior year, partially due to the timing of a large statewide deal, whose revenue began in the first quarter of fiscal 2025, but which is expected to fall into this year's third and fourth quarters. Education subscription-related revenue increased 19% in the second quarter to $12 million compared to $10.1 million in the prior year. Adjusted EBITDA for the Education division in the second quarter was $0.4 million compared to a loss of $0.3 million in the prior year due to increased revenue. Education's balance of billed deferred revenue decreased 4% to $36.1 million as a result of the strong increase in the number of as days associated with the Leader in Me subscriptions that were delivered in the quarter. We currently expect Education to have a strong year in fiscal 2026, with the pattern of large, invoiced amounts and recognized revenue to come in the back half of the year and especially in the fourth quarter. I would like to now spend a few minutes discussing our balance sheet and capital allocation priorities. We continue to pursue a balanced capital allocation strategy focused on 3 primary areas that are aligned with our strategic goals. First, maintaining adequate liquidity and flexibility. Our total liquidity remains strong at over $76 million at the end of the second quarter, with $13.7 million of cash on hand, even after having repurchased $17 million of our stock, combined with the company's $62.5 million credit facility, which is fully available. Second, investing for growth. We will continue to invest in strategic opportunities to drive improved market positioning, accelerated profitable growth and financial value, such as our continued investments in product innovation, business transformation initiatives and opportunistic acquisitions when available. And finally, continuing to return capital to shareholders as appropriate. In the second quarter, we purchased approximately 922,000 shares in the open market at a cost of $16.5 million. And in January '26, completed the $20 million 10b5-1 purchase plan we initiated in November of 2025. The company also acquired approximately 25,000 shares to cover income taxes on stock-based compensation awards issued during the second quarter for a value of $0.4 million. Year-to-date, the company has purchased nearly 1.6 million shares of its stock for $28.1 million. During the last 12 quarters, the company has used 130% of free cash flow to buy back shares. We have a $50 million share repurchase authorization from the Board of Directors with $20 million remaining after the 2 10b5-1 plans we had in place have now been completed. We remain committed to being disciplined stewards of capital whilst being focused on driving long-term value creation. Now turning to our guidance for fiscal 2026. We continue to affirm the revenue and adjusted EBITDA guidance for the year, as shown on Slide 7. Our projections reflect the positive momentum we are seeing and expecting in both the Enterprise and Education divisions, balanced with a disciplined view of the risks and opportunities ahead as we continue to execute in an uncertain macro environment. We continue to expect to achieve solid growth in invoiced amounts this year as demonstrated by the progress in Enterprise North America and the International segments this quarter. Our revenue guidance of $265 million to $275 million is after reflecting the lower deferred revenue generated in fiscal 2025 and the conversion lag of invoiced to reported revenue in the year as a portion of the invoiced growth will go on to the balance sheet as deferred revenue. We continue to expect fiscal '26 adjusted EBITDA in the range of $28 million to $33 million, capturing the benefit of our cost reduction efforts including additional restructuring actions taken this quarter while maintaining flexibility to manage through continued macro uncertainty. We expect revenue to be slightly higher in Q4 compared to Q3, with approximately 50% to 55% of back half revenue in Q4, reflecting normal seasonality, especially in the Education division and the timing of delivery of client services. For adjusted EBITDA, we expect approximately 60% to 65% to be generated in the fourth quarter, driven by the strong contributions from the Education division along with expected overall margin expansion as cost savings and operating leverage build through the back half of the year. With our transformation investments behind us and the expected increase in operating leverage, we believe the company would deliver EBITDA and free cash flow growth, with improved margins and free cash flow conversion in fiscal 2027 and thereafter. Grounded in strong client retention, expanding demand for our services and the resilience of our business model, we remain fully committed in creating long-term value for our shareholders and clients. Before I pass it back to Paul, I would like to thank the entire Franklin Covey team for their hard work and dedication to our business and for providing the unparalleled service to our clients. With that, Paul, I now turn it back to you. Paul Walker: Thank you, Jessi. That was great. And as we prepare to open the line for questions, I'll just reiterate what Jessi said in thanking our teams for their hard work. We're pleased with the momentum that we're seeing right now across the business and look forward to a great second half of our year. And with that, we'll ask the operator to open up the line for questions. Operator: [Operator Instructions] Our first question will come from the line of Alex Paris from Barrington Research. Alexander Paris: Congrats on the better-than-expected results in the first quarter. Now we have 2 consecutive quarters of growth in invoiced amounts in North America and Enterprise. So it's not simply a data point. We have 2 data points so we can draw a line. And I think you said that you expect that to continue to be the case through the balance of the year. Is that correct? Paul Walker: Yes. We did. Yes. Jessica Betjemann: Right. Alexander Paris: Good. And then just one quick point of clarification. Jessi, you said that revenue is slightly higher in the fourth quarter than the third quarter, 55% and 45%. Is that how we look at the second half of the year? Jessica Betjemann: That's right. Alexander Paris: Yes. And then adjusted EBITDA, it will be $60 million to $65 million in the fourth quarter. So I guess what is that... Jessica Betjemann: A little bit more on EBITDA as we talk about our restructuring and some of the cost operating leverage will increase towards the back half of the year, but more heavily weighted towards Q4, but then also because of the contributions of EBITDA coming from Education in Q4. Alexander Paris: Yes, makes sense. And it's a typical seasonal pattern anyway, right? Jessica Betjemann: That's right. Very similar to what we normally have. Alexander Paris: Good. The -- next question is really a question about the macro environment, Paul. I think in response to a question last quarter, you sort of said it was neutral. There's some both positives and negatives. I wonder if you could just kind of freshen up that response for us. Paul Walker: Yes. I'd say it's largely unchanged from what we saw a quarter ago. And but -- and so neutral in the current environment better than it was a year ago at this time. I remember we were reporting Q2 a year ago and there was quite a bit of uncertainty for lots of reasons. And while there's still uncertainty out there, I think our clients have adjusted to that, the current environment, and it feels a little bit more stable for us, certainly now than it did a year ago and largely unchanged from what we saw a quarter ago. Alexander Paris: Great. And then again, with this ramping up of invoiced amounts, we would expect growth in revenue, EBITDA and free cash flow in fiscal 2027 and beyond. And then to that point, I think the last time you gave longer-term guidance was on the Q4 '24 conference call, after making the announcement about the sales force transformation. Obviously, with tariffs and government shutdowns and war, that's -- it kind of changed it a little bit. I'm wondering, number one, when will you update that longer-term guidance with -- is that potentially a fall 2026 event? And then second -- answer that first, and then I have a follow-up. Paul Walker: Yes. Okay. Jessica Betjemann: Let me start with -- in the fall and our Q4 call is when we're going to provide the guidance for our fiscal year 2027. We'll be going through our planning cycle in the summer. And as we work through that, we'll be updating our 5-year plan at that time. And we'll make a call as to whether or not we provide some direction with the longer term. Alexander Paris: So obviously, you'll do one for yourselves. The question is what will you share with us this fall, right? Jessica Betjemann: Well, we'll work through that, Alex. Alexander Paris: Okay. No problem. And then -- but in the meantime, adjusted EBITDA margins in fiscal 2024 kind of peaked at 19.2%. And 2025 is significantly lower, 10.8%. And I think based on your guidance, we're expecting a little margin expansion in 2026 and then more in 2027. Is 20% adjusted EBITDA margin still a reasonable target? It's only slightly above the fiscal 2024 level over the next several years. And will you get there by 100 or 200 basis points a year sort of thing? Jessica Betjemann: Yes. I mean so we are planning to increase and improve our operating leverage. I think our goal is to have around 1 point improvement a year. And whether or not that can be accelerated or not, we'll determine that as we work through our long-term planning. But I think that is roughly what seems reasonable to me. Paul Walker: And we do believe that, that 20% that we nearly got to is still a good number out there. And all these investments were meant to permanently reset the cost structure of the company. We were -- it was to accelerate growth and certainly get us back up to that level. And who knows if we could ever get above that level, maybe. Operator: Our next question will come from the line of Jeff Martin from ROTH Capital Partners. Jeff Martin: I was curious if you could go into a little bit more on the Education side of the business, had a very good quarter. What you're seeing as states and districts and obviously, you're having some success there. So maybe an update there would be helpful. Paul Walker: Yes. Great question. Sean is here next to me. I'll ask him to make a comment, but it was a good quarter. And congratulations, Sean, on the great quarter. Go ahead and share a few thoughts. Michael Covey: Yes. So a few things on Education. We're feeling really good about the year and where it's headed for a few reasons. We have a really good pipeline of new opportunities, probably the best we've ever had in terms of large opportunities. We have 3 state-level opportunities. These are very large multimillion, multiyear deals. We've got large district opportunities larger than we've had before. So that's really positive. We've got really strong funding partners out there, and this is in the range of $20 million a year in help from partners that help schools get off the ground. And those partnerships remain in place right now. We feel good about -- we're aligned well with market needs. There's a lot of big issues right now after COVID, getting test scores up is like the #1 thing. The U.S. is still struggling with that, and we are aligned well and we've got great data around how we can increase math and reading scores. Teacher retention, a lot of teacher burnout. We're really good at that. And we've got great data that shows that we retain -- Leader in Me schools are 600% more likely to retain their teachers than non-Leader in Me schools. And then mental wellness continues to be a big factor, and we're well aligned to address those issues. So just given the pipeline we have, the large opportunities we have in place that we need to close, of course, in the third and fourth quarters, we're feeling really good about the year. Some of the headwinds are still there. The Department of Education, there's still some uncertainty with what the Trump administration is going to do, but it's better than last year, much better. And so that helps. The ESSER funds, expired COVID relief funds are gone. So that's a factor 2. And there's some declining enrollment in the public sector, they're moving to a lot of people -- a lot of kids are moving to charter schools, private schools and home schools, and we're well equipped to help with a lot of the -- I mean to deliver on those other channels as well. But I just feel like the tailwinds are stronger than the headwinds, especially the funding partners. We've got a great reputation in the marketplace. This is how we get state bills as we start with a single school then a district goes really well, leads to state confidence and then they get behind us. So all things considered, we're feeling good about the second half of the year and where we're headed overall. Jeff Martin: That's great color. Thank you, Sean. Paul, could you go into some detail with respect to -- I mean invoice growth is 7%, so obviously a positive inflection. How does that compare with what you were thinking internally maybe? And then what, if anything, do you see in the near future accelerating that growth from here? Paul Walker: Yes. Great. Yes, 7%. So 5% overall for the company invoice growth in Q2, which we felt good about that. And then as you mentioned, 7% kind of the engine pulling that as we alluded to last quarter and as we went through the transition of our sales force was Enterprise North America. So 2 quarters in a row, 7%. We feel good about that and feel that, that will continue to generate good invoice growth this year in the back half and for the full year at both the Enterprise division level, specifically but also for the company. And as we mentioned that, that invoice growth out ahead of our reported revenue growth will help us next year in generating more substantial reported revenue growth. So I do feel good about the continued momentum there on the invoice growth side. Operator: The next question will come from the line of Nehal Chokshi from Northland Capital Markets. Nehal Chokshi: Congratulations on this really strong free cash flow. And just a comment here real quickly before I get into my question. But with more than free cash flow deployed in share buybacks and given Franklin Covey shares are trading at basically 6x free cash flow, 4x fiscal year '24 free cash flow, really happy to see the bold move to aggressively buy back shares at this incredibly attractive valuation. So just applaud of that. Now I do have some questions. Excluding government, invoice value is up 10% year-over-year on Enterprise North America. It's a really nice core number that I'd like to focus on. Can you help break up that invoice value growth between, say, new customers and existing customers? Jessica Betjemann: I mean we have not been disclosing that level of detail now. But we did have -- I mean, overall, the new customers in North America combined, we had very strong performance this quarter that we continue to -- that we had in Q1 as well, but we don't provide the details of the invoiced amounts. Paul Walker: I'd maybe point you, Nehal, just -- agree what Jessi said, point you to 2 things, and I mentioned this in my remarks. But to Jessi's point, yes, we continue to see another good quarter with new customers and the overall invoice growth from new customers, we're pleased with that again in Q2 after a really good quarter in Q1. And then with our existing customer base, we actually had quite a strong expansion quarter. As you know, when we initiated our go-to-market transformation, there were 2 core bets in that move. One was that we could win more strategic, larger new customers and that we could move our way into the expansion opportunity that existed within our existing customers, where, on average, we're kind of 5% to 10% of the way penetrated into what we think is the addressable population inside the vast majority of our existing clients. And in Q2, we saw a really good expansion. And so really both sides of the house had good quarters as we think about that 7% or 10% without government overall invoice growth. Nehal Chokshi: Okay. Great. And presumably, you're expecting both new customers and ongoing expansion of existing customers to continue to power the year-over-year growth. It's not one -- exclusively one. Paul Walker: Holly Procter is here by the way, too. Holly, any thoughts on that? Holly Procter: Nehal, yes, we expect both the new logos to continue to grow and for us to make continued improvements on both retention and expansion. I'll call it just a couple of areas that we're seeing some great growth that will contribute on both sides of the house. The first is the specialization in health care. We've seen -- we made a big investment in the current customer base that we have around health care. There's real organic use cases that we can make a real impact around patient staff and nurse retention. So we've seen real lift there. The second is a new horizon for us, but we're also starting to gain great traction is around helping companies through their AI transformation. Both of those, we think, will fuel growth on both the new logo side of the house and the customer side. Nehal Chokshi: Got it. And then Paul, you mentioned that, on average, 5% to 10% penetrated of the addressable opportunity. That's on a user basis within an existing customer. Is that correct? Paul Walker: That's right. That's right. And then there's really -- yes, significant upside for us in attaching services on top of that. But yes, that's specifically referencing kind of the user base. Nehal Chokshi: Okay. And then that user base that you're referencing, is that just leaders? Or is that also knowledge workers? Or is that the whole labor force is given organization? Paul Walker: Yes. Yes, great question. So we have kind of a little formula, if you will, that adjusts for certain portions of populations that we aren't really well suited to address. So you get into factories and things like that, that's not exactly where we play. So depending on the industry, so it's leaders, it's knowledge workers. And in some organizations like tech, it's -- that's almost everybody in the company. And for other organizations that might have a massive manufacturing footprint, we may not be working with everybody all the way down the front line, although we do quite a bit of work in manufacturing with our 4 disciplines of execution solutions. So -- but yes, it's kind of a formulaic-based approach that we have. It's not the entire population of a company. Nehal Chokshi: Great. Okay. A couple more questions from me. So what was the driver of this strong free cash flow, $13 million, $9 million above your $4 million adjusted EBITDA. Can you help us understand that? Jessica Betjemann: Yes. We had a very strong positive swing in the net working capital. So a lot of it was with regards to the collections on AR. As you can see in the balance sheet, the AR balance went down. So that was a huge contributor to the improvement in our free cash flow. And we continue to expect that our free cash flow will be -- I know last quarter, we had negative free cash flow. We expect going forward, we'll continue to have positive free cash flow and especially be strong in Q4 when we have the strong net income and EBITDA in Q4 coming through. Nehal Chokshi: Okay. Great. So you kind of already answered my follow-on question, but just to be clear, I think historically, you guys have talked about free cash flow roughly matching EBITDA on a trailing 12-month or forward 12-month basis? Is that the way that we should continue to think about this? Or is there some deviation from that? Jessica Betjemann: Well, so I'm not particularly sure of the exact comment. I mean I think that we do have -- 2025, we had lower EBITDA to free cash flow conversion. We expect our free cash flow conversion to increase over time because we're not a heavy capital-intensive business. And the amount that we spend on CapEx and capitalized development is relatively steady going forward. So as our operating leverage and our EBITDA increases, we expect that we should have stronger conversion over time. Nehal Chokshi: Okay. But you're not expecting to get back to close to 100% conversion that you were reflecting in fiscal year '24? Jessica Betjemann: No. I mean I -- no. I mean definitely an improvement from the 42% level that we had in 2025, but it wouldn't be 100%. So there will be some strong. Nehal Chokshi: Yes. Understood. Understood. And then you talked about your fiscal year '26 guidance unchanged. And the way to think about parsing out that effective next 2 quarters of guidance in terms of typical seasonality. Can you just remind us what is actually typical seasonality for 2Q to 3Q and 3Q to 4Q? Jessica Betjemann: So what we are projecting in terms of the revenue and EBITDA for Q3 and Q4, that's basically -- that has been the normal seasonality. When you look at last year, we were pretty much in that same range of what we're expecting now as well. So it's been similar. Nehal Chokshi: Right, right. So like last year, it was about a $7 million Q-o-Q increase from the second quarter, third quarter, and then $4 million from third quarter to fourth quarter? Jessica Betjemann: Yes. Last year, if you were to look at Q3 revenue, for example, it was around 49% in Q3 and EBITDA was around 38%. So roughly within the same range of what we're seeing now. Operator: Our next question will come from the line of Dave Storms from Stonegate. David Storms: Just wanted to start with maybe some commentary around the new logo sales. I know in the past, right, new logos tend to come on as either pilot based first or maybe a specific project that the company is looking to accomplish. Could you maybe spend a little time talking about what you're seeing in the current marketplace and maybe tailored to the AI trends if you're having clients come on with a specific goal in mind or if they are maybe a little more highly oriented to start? Jessica Betjemann: Yes. And just to make sure I understood, Dave, the question is around how much of our new logos are pilots and then some examples on the use cases? David Storms: Exactly. Jessica Betjemann: Perfect. Very few of our new logos are pilots. It's really hard to pilot a solution like ours. You either want to drive behavior change and make a big impact in your org or you don't. And so we really don't see any pilots. On the AI solution, it's a great question. There's a ton of interest around this right now. There is not an org that we're partnering with or that we're interested in partnering with that isn't trying to figure this out. And one of the unique things about an AI transformation is it's both top-down and bottoms-up. So the question earlier around who does it touch inside the org, it touches everyone and nobody has figured out exactly how to get this right. And there's so much around the way that you deploy your leaders to navigate this type of large-scale transformation that's critical to get right. And so we're excited to help a lot of companies with this transformation. David Storms: That's great commentary. I really appreciate that. I also want to maybe spend a little bit of time, Paul, you mentioned that you had a really strong expansion quarter. And just thinking about how -- you also mentioned you had maybe 2 quarters of a neutral macro environment. Can we apply that same kind of mentality to maybe a logo recapture rate? Do you have any thoughts around maybe what you're seeing in the market about clients coming back now that the dust has settled a little bit? Paul Walker: Yes. I'll just make a quick point and then ask Holly to comment on that as well. That is actually a metric we do track. We have a mantra around here and its client for life. And when we lose a client, we agonize over that. And so it is actually a metric that we track internally. We don't disclose it. But we are intent on trying to get those clients back regardless of the reason they needed to leave or -- and so Holly, any commentary on or thoughts about what we're seeing there, what you and the team are driving? Holly Procter: Yes. We absolutely see a really healthy win back rate as Paul referenced. So as needs inside their organization shift, they go from trying to drive a high-trust workforce to try to prepare our workforce for AI transformation, then needs evolve over time, and there might be gaps between one deployment and the next deployment. So if we do a good job on the first round, we're excited to welcome them back on the second round. And then I think just a point on the environment, one of the things I don't think we talk about enough and a structural advantage that we have is the breadth of the market that we serve. Our addressable market is enormous, not just in the company type that we pursue, but it's across segments, across buyer types, across use cases, there's virtually no company that isn't trying to solve the issues that we attach to. And so in a world where there's a sector that's down, we can quickly pivot to go after a sector that's up with enormous upside for us. So we move very fast when the market has highs and lows. David Storms: That's great. If I could just sneak one more, and I would love to spend a little time on the International sector. I know it's not as big for you guys, but it does seem like it's having some strong growth even after accounting for foreign exchange. I guess is there anything to highlight here as to what's working? Is this just general tailwinds and you're catching it right? Maybe any thoughts there would be great. Paul Walker: Yes. One thought is -- it's just a couple of thoughts. So we are porting over into International much of the learnings and the strategies that Holly and team have been deploying inside Enterprise North America, that was always the plan. And so we -- now that we've got Enterprise North America, the structure up and running and through that change, where International has been fast followers there. And so I think we'll continue to benefit from that. Second, in the second quarter, China didn't continue to decline for us and was actually flattish. And so that helps from a year-over-year standpoint as well. And... Jessica Betjemann: Also France. Paul Walker: And then we brought France on as a direct office, i.e. a little over a year ago. And we're seeing good growth in France. We continue to see good growth from our German operation that we brought over from a licensee to a direct office a few years ago. And so there's some good performance across international directs in particular, in the second quarter. And we look forward to seeing as we -- as they embrace more and more of what we've been doing in Enterprise North America, I think there'll be good quarters out ahead of us as well. David Storms: That's great. Thank you for the commentary and good luck on the next quarter. Paul Walker: Yes. Thanks, Dave. Operator: Thank you. I'm not showing any further questions at this time. I would now like to turn it back over to Paul Walker for any closing remarks. Paul Walker: Thank you very much. Thanks, everyone, for joining us today. Thanks for your great questions, and we appreciate you and all that you do to understand our story and where we're headed as a company. We feel great about our momentum. Big thanks to the overall Franklin Covey team as well for their hard work, and we wish you a great evening. Thanks. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Quadrise Interim Results Investor Presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll. I'm sure the company will be most grateful for your participation. I'd now like to hand over to the team from Quadrise. Peter, good afternoon. Peter Borup: Thank you very much, and thank you very much for joining us for the interim reporting for Quadrise. As always, we start with a disclaimer. I will leave that to you and jump straight into the presentation. So the strategic challenges of Quadrise are clear and well known. So our focus is entirely on getting the MSC Cargill trial up and running. We have also since we last time met been having a meeting with OCP face-to-face that suggests we might be running a second trial with them leading into a commercial offtake agreement. But perhaps even more importantly, we have been upping and accelerating our efforts to build support from refineries. So we have feedstock supply available, or at least plausible for when we need to scale up after these trials. I have mentioned at previous occasions, latest at the AGM that we are looking at whether we can identify other shipping clients who would be willing to do commercial trials perhaps in other segments. And this is an ongoing effort where we've been speaking with a good number of people that we believe are willing to be upfront users or first movers rather than the traditional shipping approach where you are first adapters rather. And I think we know pretty much who this is. So we've had meaningful discussions. We are talking to the right departments and all these companies, but it's something that takes a little bit of time, but it's an effort that is ongoing. We're also aware that while our focus is entirely on the trial and on the scaling up the refinery efforts, we really need to look at the future as well. I think we have a great platform on the bioMSAR platform, but it's also one where much of the bio feedstock will vary. There's simply not enough feedstock in any one product to meet the IMO requirements should they ever be adopted. So as you will know, we have a stable product with the glycerine. We have been trying out the cash no oils, and we are trying out other feedstocks that are perhaps a little bit further away, but it's really important that we can speed up our, say, product or research to market time. And one of the ways of doing that is being -- modernizing our data infrastructure. It's actually quite good, but leading into building digital twins. We're already part of an EU project in that respect, but it's something that will help us fine-tune before we do the actual machine test, fine-tune exactly how do we make the feedstock, and prepare it for that test. And we can do that then in cyber instead of doing that on a machine. So hopefully speed up the whole process. We've been trying to sharpen our focus. Of course, we've conducted a lot of projects over the years. We're painfully aware that some of these are projects that are research-minded, so there can be longer periods of hibernation where nothing really happens and then they take off again. And that's just part of running a portfolio of different projects. But we also have more specific projects that you've heard about before and we're going to talk about today. And we just have to be very mindful that they continue to make commercial value to keep them alive. So that's an ongoing process. We have a clear focus on shipping clients. We have to make a choice. But it also means that in terms of power plants and industrial clients, they have to be really promising for us to invest time in it. Some of these other projects are far, far away geographically at least, but we are trying to focus on them by also using external clients to speed up the process to market. We'll come back to that on the individual projects. We are, of course, affected, and we are watching what is happening on the regulatory front. Fuel EU is moving along according to plan. We are very mindful that a number of countries are looking at the fuel EU rules and regulations to seek inspiration, and they are likely to be adopted there if IMO doesn't go ahead. Timing is uncertain. Localization is also a little bit uncertain. And clearly, as a former shipowner myself, there's nothing that shipowners fear more than having a number of different regulatory regimes, having the level playing field and having one set of rules has enormous value. What we're hearing from the IMO is that the talks are ongoing. The Americans have offered their view on how it to proceed, not very positive last Friday. Others have also offered their views. We're mindful that Liberia and Panama both suggested solutions that are close perhaps to the Greek position, which is lower fines, a broader base, more LNG involvement in the range of fuels that can be used. The feeling right now, certainly from my side, my personal view is that this is likely to take longer than just a 1-year suspension that the IMO decided last year in October in London. From the market point of view, we actually feel that the -- what happens at IMO might not impact Quadrise's technology that much. The main thing is that there are fuel EU rules, they're driving change. What we are mindful of is that there are a lot of other things on the agenda, also shipowners and most businesses the pace of technological change, not just in AI, but in many other technologies where exponential changes in these technologies is really changing the business landscape and no business can afford to ignore it or not be well briefed on it. Same thing we have on a broad term geopolitical transition that we have not seen at all at this level before in terms of a [indiscernible] role of international law, change in alliances, certainly uncertainty about many of the traditional alliances that we've been working with in the past, but also trading blocks changing quite rapidly. And that means that any company operating in this environment needs to look at their operational expenses before they look at anything else. So my clear impression from the last 6 months where we've been seeing a lot of shipowners and a lot of related businesses is that there's a strong focus on the green transition, but everybody understands that they need to make sure that their businesses are strong, so they are going to be around for the green transition. So the focus will be on cost to a very large extent. And that also matters for, of course, for the choice of technology that we can offer. We are still selling both MSAR and bioMSAR, but there's no doubt that the ability to deliver MSAR at below the cost of conventional fuels is a major for. And that's even before talking about the current conflict in the Middle East. What we are seeing is that many of the players we are dealing with are no longer competing on price or freight rates or even the availability of ships. It's about availability of bunker fuels, which is not a given, and that is impacting the value chain. Clearly, where sometimes we've been finding that we are dealing with much bigger players than ourselves, and that holds its own challenges because they have many, many concerns to take into account. In a case like this, dealing with primarily large players have some benefit because they will be first in line to get the bunker fuels. And I'm not saying it's easy for them either, but it's something that gives us some consolidation as we are trying to get trials in place with MSC and Cargill in the first place. We are -- if we look at the projects, first and foremost for us is the trials that have been planned for such a long time with MSC and Cargill -- we've had quite frequent meetings and discussions with both of them over the last 3 months. I think they're positive. They're down to a few items now. What also happens when things take time and, people are checking carefully the agreements they entering into is that certain things come up again. Most recently, we've been looking into whether VAT issues in the EU for the Antwerp trial would affect or would come into play with a tripartite agreement. It seems not to be the case. So that's been sorted out. We're now discussing or looking at the terms and conditions, which are standard for a big buyer of fuels. And my feeling is that we are getting very close now. We've had meetings again, face-to-face. We are experiencing that MSC is committed to the 2 trials that have been agreed, so one for MSAR and one for bioMSAR. But we're also experiencing that they are very helpful when we are talking to refineries, and others and pushing and endorsing not only the trial, but building a scale up in terms of feedstock supply afterwards. So I think that's quite positive. Some of the issues, some of the things that have to happen now, we have filed for a branch in Belgium, enabling us to start the production in Antwerp, and that might be a little bit early as we haven't signed yet, but we just want to make sure that doesn't hold it up. There'll be some certifications that have to be renewed, but it's -- the whole process has been simplified. But again, we want to do that already now, so we don't have to wait for that. So I think while I can't tell you that it's all been signed and dusted, we're ready to go. My feeling is that we're getting quite close. And our focus has shifted -- not shifted, but has now also been on how do we make sure that we can scale up after an expected successful trial. So no longer than 3, 4 weeks ago, Jason and I and Linda as well were in Singapore exactly to look for potential supplies from refineries, but also from buyer suppliers to make sure we're ready for that and had very positive meetings. Cannot really reveal who we've been talking to. But hopefully, we can talk more about that later in the year. With that, I will hand over to you, Jason, on OCP. Jason Miles: Thanks, Peter. Yes. So in terms of OCP, again, Peter and myself earlier this year, went out to Casablanca and met with the main people there. Quite surprising meeting because they were extremely positive in terms of the cost leadership program, which MSAR fits in with. So the current status is that the updated trial agreement is well underway. So basically, we're now sort of detailing exactly which site we're going to be at. The likelihood is it's not going to be the same kiln as we had before, which is slightly constrained with this OEM issue, which we documented before. But the key thing is, I guess, the time behind the amendment to the agreement, we make sure that there's an operational board, obviously involving Peter and the head of OCP there to make sure that it's got management buy-in and make sure we try and avoid the delays that we've seen so far. The trial itself, the actual duration depends a little bit on the scale of the kiln that we're operating on. So if it's a smaller kiln, it will be 30 days. If it's a bigger kiln, it's likely to be less. So really, the plan is to basically carry out that trial. And that's a longer-term trial is needed. We did -- the previous trial was done over a period of a week or so. OCP want at least a longer-term trial of a couple of weeks minimum to actually get the full operating data that they say is needed before they commit to commercial supply. So that's what we're doing. And in the meantime, our equipment remains on site and any costs that are being incurred, we're getting reimbursed for by OCP still, and that process has been working very well. In terms of the next project in the U.S. with Valkor for basically heavy sweet oil, which is essentially a low sulfur bitumen -- ultra-low sulfur bitumen product. We received obviously the first payment. We revised terms that people remember of the agreement last year. We basically received the first installment this year -- sorry, last year as well. We basically invoiced the second installment, which is due at the end of this month. So we're expecting payment of that 300,000. And then there's another 650,000 due at the end of the year. The samples that have been long overdue as well, they've been -- essentially the Valkor have been going through a change -- slight changes in their exact processing. So they've been holding back the samples until they know exactly which technology route they're going for, but that's now been finalized. So they're doing pilot runs at the moment to generate the samples that we expect to get fairly soon, so we can do the testing in the second quarter of the year. Their pilot plant that is due to go in, be operational in Q3 has been delayed slightly because of the site that they selected was not fit for purpose. So they had to move site to a new location. So that delayed some of the civil works that was planned to be up and running by now. But that's moving ahead. So they expect to be the installation to happen during Q3, and the plant to be up and running in Q4. In the meantime, we're preparing -- we prepared our unit. It's nearly complete now for shipment, and that will be done during the second quarter of the year to the U.S. with expected deployment then in what's obviously just part of the installation program in Q3. So really, the plan is then to carry out a paid for trial for -- to produce actual trial volumes of fuel for local consumers and it also initiates a marketing program that we've had in plan for some time with Valkor as well now that is actually live. But yes, Valkor they're fully funded. Obviously, they've got a position now in TomCo as well in the U.K. In terms of Panama, again, as you remember, we carried out a trial in July, which went very well. Essentially, we've got a letter of intent from Sparkle, basically stipulating what their demand will be. We know that there's other demand from other -- both plants, both within Panama and Central America region, specifically around Honduras. The fuel permitting process, we've got basically MSAR and bioMSAR have been basically approved as alternative fuels. So these are fuels that can be utilized when -- as they're trying to phase out potentially fuel or diesel. So that's been approved. The process for an import permit has also been detailed now. But obviously, we now need a live case where we can actually bring in the fuel with a partner. So we're discussing that with regional refineries and other logistics companies in the region with regards to commercial supply to Panama. And in the meantime, we've had some new arrivals to the team, including Matt Hyde from -- who's coming from BP, who's really helping with the sort of getting a deeper understanding of refinery economics there as well in that region. In terms of the bioMSAR program, which is ongoing, we've been doing a lot of testing with additional biofuel feedstocks, including doing things in the lab, but also doing testing at third-party facilities in Germany, where these engine facilities are used by quite a lot of parties. So it's a good endorsement for the fuel. We're also kicked off -- we also kicked off a collaboration with the University of Bath not just in terms of fuel research, but Peter mentioned before, some of the AI digitization as well. That's something that Bath can utilize in the future. And obviously, it's potentially a good talent pool for us going forward in terms of their engineering and the technical people as well. And in the meantime, as Peter mentioned before, there's a world beyond glycerin for the biofuel, which really comes from biomass-derived material, which is abundant, but obviously, there's different technologies to extract it. So we're working with the main technology providers there, but all of which has its own features and challenges, but we're working through to actually get some of their products to market faster than they would normally expect through some of their other technology platforms, which is why they're working with us. And then as part of the development program as well, we have an EU-funded project, which we're part of us amongst sort of 18 other companies ranging from universities through to people in the marine space as well and actually owners of vessels as well. So that's been going very well, and it's actually -- it's been quite active this year in putting together this digital twin, which again, Peter mentioned at the beginning, which is looking at 4 different types of existing vessels and 4 different types of new build vessels to see what's the optimum technology platform to decarbonize shipping, and it's looking at a range of different technologies of which MSAR is one of those on the biofuel space. So it's a good platform for us to market our technology. And then sustainable ships is something that we launched again with them today -- sorry, this year rather, with Linda and Alfie especially have been very active in getting that up and running, doing an online seminar. And that's brought through some quite good introductions already as part of that program. But it's a good way of comparing how MSAR competes with other -- MSAR and bioMSAR competes with other fuels. The next slide really just gives you a pipeline of the different fuel types that we're using and explains really what the bioMSAR is a mixing technology. It's a platform technology, which enables us to bring in a range of different biofuels into the finished product on the right, which needs to go through the appropriate engine testing, but ultimately can then be rolled out to the shipping fleet and really answer some of the questions around the abundance of biofuels. That's what we're really looking to nail and provide quite a unique difference in what we're offering because we can blend oil and water together. Some of these products like the sugars that we mentioned, some of the pyrolysis sugars and other means of other sort of components on here actually be water soluble as opposed to being easily blendable with oil. So we have the ability to blend both. And I'll hand over to David. David Scott: Thanks, Jason. So our results for the period are largely in line with the same period last year. Our loss has gone up a little. We've got some additional project and development costs in there this year. The main thing that is of interest based on the questions is our cash balance. So at the end of the period, at the end of December, we had $4 million in the bank. Now in addition to that, as Jason alluded to earlier, we're expecting another sum through from Valkor overall to take us through up to the USD 1 million that we're getting on the license fee, and that's expected in over the course of this calendar year. Now where that's going to take us to, we're going to have to see where we get to with our -- hitting our milestones and our projects for the period. So it's too early as yet to say how far that's going to take us to. We're based on our cash spend rate, which is historically about $3 million per year. We've brought in some new additions to the team. So that cash spend has gone up, but maybe only 10%, 15%. So that GBP 4 million is still way more than 1 year's worth of cash spend plus the Valkor money. So we're in a pretty healthy position cash-wise. The loss for the period -- loss per share for the period is in line with the prior period. And our tax losses of GBP 68 million will be there when we come to generate profits. And that's everything for me for the moment. Thanks. Peter Borup: Thank you. So there have been a few updates to the team. You will have noticed our RNS on Lauri stepping down from the Board and Michael Covington joining us. Michael brings in many years' experience in investment banking and private equity leadership also in energy. And just as importantly, he brings in a lot of energy, and drive and a willingness to contribute and participate on the board and in the daily work. So we're looking forward to that. We have also brought in Matthew Hyde, who has more than 30 years in refinery economics, most recently from BP. And that's a reflection of our decision to accelerate how well do we actually understand refinery economics because it's not something we can just do after a successful trial. Once we are having a production trial, we need to make sure we can scale up afterwards. so we can supply the material and the fuels to our clients. Right now, we're down to about probably a gross list of 25 refineries that has a good match to the kind of residues we are looking for. And then Matthew will need to analyze that further to find out which are the ones that will benefit the most from using the MSAR technology and the bioMTAR. So that's ongoing work, but also really important. And I feel we already -- we have already learned a lot compared to when he started. In summing up, -- we -- I feel we are making small steps forward in almost everything we are focusing on. And I'm really looking forward to being able to announce hopefully, the MSC agreement being done and then being able to move on to the next steps. And I'm also very mindful that it looms large to have the agreement signed now or the agreements signed, the next steps are going to call on something else from [Indiscernible] and we have to get into project management phase. We need to mobilize. We need to set up. We need to make sure that the crew on the ship or ships in question are ready for the trials, so we get the most out of them. And then we need to make sure that we scale up properly, that we have agreements in place with refineries -- and while we're starting in Anterp, it's quite clear that some of the next places we have to go, of course, shipping up like Singapore, it might actually be the Persian Gulf again at some point, but also the Mediterranean and the Americas. So that's what we are focusing on and trying to run a tight ship, of course, also on the resource side, still investing in our future, investing in the data platform and accessible data lakes. So that's where we're at. We have had a number of questions come in, I think 45. I'm going to hand over to David to take us through as moderator of the questions that have come in and the questions that you can still post on the platform. So with that, David. David Scott: So thanks to everyone who's submitted questions in on the INC platform. We're going to deal with the pre-submitted questions first, and we've grouped them into segments. So we're going to be going through each segment. After that, we will come in with the live questions that are coming in as we speak. And any questions that we don't want to address today will be dealt with on the INC platform in due course, likely early next week. So I'm going to start now with some of the strategy questions for Peter. And the first question is, what efforts are Quadrise applying to the market of new built dual fuel ships fitted with scrubbers? And how big is this opportunity? Peter Borup: Our focus right now is on talking to owners who have a willingness to move first. So owners who control their own ships. So one thing is owning it, but another one is actually controlling the daily operations. And of course, we're looking for ships that has the highest possible consumption per day of fuel because that's where we can really test them and where we really want to sell. So that is our priority. Secondarily, we are probably looking more for vessels with electronic fuel injection main engines because that works better with our technology. And that's even before looking at scrubbers or no scrubbers. But -- so I think we have a fairly good take of the segmentation there, both from the experience I have and Tony Foster and Linda Sorensen has in the shipping industry, but obviously, also because we have fairly good access to data from various databases on where the ships are with high consumption, and the fuel injection or electronic fuel injection, but also with scrubbers. So we can break that down, and we -- that's how we approach the marketing, if you will. Unknown Executive: Probably worth adding that the dual-fuel ships tend to prioritize LNG, right? There's a reason normally that people have built a dual-fuel ship that's to take advantage of LNG. So it wouldn't be our obvious first choice necessarily. But having said that, there are a number of dual-fuel vessels that are using fuel oil still if they can't get LNG. So -- but it's not the first choice, I would say. David Scott: Okay. So the next few questions are with regards to bringing in additional shipping companies. Do you expect to sign up an additional shipping company once the trilateral agreement is signed between MSC, Cargill and Quadrise? Can you update on how the search has progressed for additional shipping companies? And can you put a time scale on that? Peter Borup: So I -- we are hoping to add another trial. We are talking to tramp owners. We are talking to other types of owners. The time scale is a little bit hard to predict because right now, with all of them, I actually feel we have good access. So in some, we've started with the bunker departments. And then we referred to the technical departments. In others, we've been in with the technical departments first and then talk to the bunker traders or their ESG departments. We had a number of very good meetings in Singapore when we were there, too. So we are sort of spreading it out. We have been talking to family-owned companies, and to listed companies. But again, what we're looking for are people who have proven that they're willing to look at green transition fuels, who have invested in that because it comes often at a cost for them. If we can find owners who have vessels in place for Antwerp, that's another benefit. Predicting when something will be signed is way too early. All I can say is we're having fruitful and meaningful discussions. And some of the ones we've talked to will probably want to wait simply because they don't have ships in place or because the segments that they're operating in are under some pressure at the moment. So I don't want to put a time line on. All I can say is that I feel we are talking to all the right people, and I'm hopeful that we'll get another trial. David Scott: And are you seeing the interest being primarily BioMSAR or MSAR or both? Peter Borup: I would say both, right, at this stage. For some of the bigger players, I'm pretty convinced that the real interest will be for MSAR, but that's yet to be proven, right? But I just know what kind of cost pressure most of these owners are going to be on right now, and the uncertainty that they're operating in. And this is something that shipowners have done for centuries, right, dealing with uncertainty and volatility. So they know how to do that. But it always starts with making sure you have your cost under control. And MSAR is a great product for exactly that. David Scott: Okay. Up to Antwerp, what is the next plan to install MSAR or bioMSAR production? Can you confirm if this will be terminal blending or at refinery or both? Peter Borup: Yes, that's a great question. That obviously depends on our clients. But if you're looking at a very large line of network, or if you're looking at the temporary one, the obvious next place would be Singapore. That's where -- that's the biggest bunkering port in the world. It's a board that has done a lot to improve the transparency of their fuel markets, generally speaking. So they've had issues in the past with cappuccino bunker and all sorts of other substandard fuels, and they've dealt with it using transparency and different mechanisms. We had a fantastic number of meetings, both with governments and fuel providers in Singapore when we were there. I think a lot of what's going on is really, really exciting. But for a sheer size as a bunkering port, that's an obvious place for us to be. For the next places, we've looked at also refineries and suppliers in a number of different places, including in the Persian Gulf, but with what's going on right now, that's not -- doesn't seem to be a viable third place to set up, but we are mindful of the advantages once it becomes accessible again. But East and West Med, the Americas are obvious places. The trial that Jason spoke about with Sparkle is not just about a power plant, but it's also a strategic location for supplying fuel to shipping, right, at the natural bottleneck. So we are looking at these places, trying to identify what are the suppliers available on location that we could collaborate with. David Scott: You said in your interview this week about MSAR offers price competitiveness. So that's where our focus has to be. Is the intention to roll out MSAR commercially once the proof-of-concept data analysis is done and the proof of concept is signed off and successful by MSC? Peter Borup: We will roll it out as soon as we have a client willing to commit to it. Right now, a lot of the clients are willing to do this, their path to adoption will be much easier as a successful trial. So that's why the trial is so important. If somebody is willing to use it now, we have some experience with using the technology in the past in power plants. Now we have to prove it for shipping, but theoretically, there should be very few real issues. There's something about the mobility, et cetera. But if somebody was willing to take -- sign a takeoff agreement now, we would be willing to go ahead with that. But the trial is important for a lot of the owners we are talking to. So we do that first, and then we hope to be able to sign agreements or maybe trial supply agreements with shipowners as the trial shows some results. David Scott: And lastly, on this section, just one on sustainable ships. How is the Quadrise Fuels price model working as a sales tool? Peter Borup: I think it gets people interested. It also works as a sort of a uniform way of calculating because one of the things that we don't always talk about when we talk about biofuels or alternative fuels is that there are so many assumptions that goes in. So at what load do you run the engine, at what speed, what is the weather conditions like, at what end of the range? I mean, many of the -- certainly, many of the articles being written tends to overemphasize the high end of the range of any given product. So I think the sustainable ships platform offers a standardization of that, so we can compare better the different fuels. So I think it has helped us in getting people in the door, but it's also something we use on a daily basis when we are presenting to shipowners, or to people who are interested in the product in general to show what it would work like for a different ship type or a given conditions, or at a given time, right? Because let's not forget that fuel EU changes over time. So requirements will change in 30 and 32, I believe. And the same thing with the proposed IMO framework. So it's helpful for that reason alone. David Scott: Yes. So I'm going to go on to the technology section now, and these are primarily directed at you, Jason. So the first one is just on refinery setup. Is it true that new and updated refineries are having crackers fitted to extract more value from the input crude and that this will reduce the amount of residue available? Does this, therefore, mean that bunker and storage companies producing MSAR or bioMSAR are the path to success for Quadrise rather than refinery bio MSAR production? Jason Miles: Yes. I think in terms of existing refineries, I think those refineries actually installing, I guess, upgrading equipment in the minority. There's not many companies actually investing in downstream assets anymore. So -- but new -- certainly the case for new refineries. If you're building a new refinery, that tends to be a full conversion refinery and you don't produce any fuel oil at all. I think if you look at -- and people are doing this on the basis of a long-term plan that might be 5 or 10 years out, right, with the expectation that fuel oil or especially high sulfur fuel oil is in a decline. But in reality, it seems to be quite a popular product and it's still on the rise in terms of how it's being utilized. And there's still a very large market for heavy fuel oil. Based on our assessment, Peter mentioned before, we've got -- we've done an assessment of all the refineries available and there's at least 25 on our short list, which are really good candidates. And indeed, some of those actually have put cracking capacity in, but they still have a resid stream, which they have to blend the fuel oil, right? So not everybody is going not just because you put a cracker in doesn't mean that you have no fuel oil at all. Some still produce quite sizable amounts of fuel oil. So that's really where we see the refinery is key. I'd say that's the source of the lowest cost feedstock. But having said that, in the middle of that, refineries don't have a lot of tanks and not always involved in the bunker business. And that's where the storage companies and the bunker traders, et cetera, are also important to us as well. So I wouldn't rule them out as partners in the future because they are key to unlocking the logistics of getting it from the refinery to the end user of the shipowner. David Scott: What is the plan for supplying residual streams of bioMSAR at MAC2 to replace the HFO component and further reduce bioMSAR cost base? Also, do you plan to deliver biogenics to refineries to produce bioMSAR at the refineries, and minimize the cost base? Jason Miles: Yes. I think in terms of the, I guess, the residual streams, we're certainly looking at using the more viscous forms of fuel oil or a fuel or derivative. So the heavier the resid, obviously, the lower the cost. But it doesn't mean we can start using refinery resids at that particular facility because of the viscosity of it is just too high and the temperature that you need to handle it in makes it quite complicated from a logistics point of view. But we're certainly looking at the most viscous forms of fuel oil you can buy out there as one of the components. Yes. And in terms of other biogenic components, we're certainly looking potentially to supply those to refineries in the future where we can put a system in the refinery. Certainly, that would be an opportunity to supply them with a biofuel in the future to make the bioMSAR product as it becomes of interest. But the primary driver probably in the refinery is most likely to be the MSAR products initially. But every refinery likes to know that there's a biogenic pathway going forward as well, and we've got a range of different options and a pretty low-cost solution as well compared to some of the other things we're looking at. David Scott: Thanks. My next question is just on MSAR and bioMSAR production. Can MSAR be produced at refineries and then shipped to a bunkering location for further processing in the bioMSAR. So the question is, can we make bioMSAR out of MSAR? Jason Miles: The reality is it's a bit more problematic because MSAR has 30% water and bioMSAR has 10% water. So there's a limitation to how much bioMSAR we can turn into -- sorry, MSAR, we can turn into bioMSAR. So in reality, it's much better to produce the individual fuels. That's not to say it couldn't be blended in the future, but there are some physical limitations in terms of what you can do because ideally, what you'd want to do is replace the water with a biogenic component in the water phase. David Scott: Makes sense. Post BioMSAR, when could we expect other Biogenics to enter the bioMSAR offering at the commercial level? Jason Miles: I mean that's something we're testing at the moment. So there are -- Peter mentioned before, some available products, which are commercially sold today, but have the limitations in the case of methyl ester residues and cash in nutshell liquids and some of the other products out there that we could -- we're looking to introduce at an early stage. That requires some engine testing that we're still doing to confirm that. And obviously, then we need to present those engine test results to Wartsila and others and get a candidate vessel to actually utilize the fuel as well. So it's work in progress, but we're making very good progress in that regard in terms of offering another pathway for these products. David Scott: Okay. Just one here now on ISCC certification. Is ISCC certification a prerequisite to getting the trial agreement signed? Or does the fuel actively have to need to be produced, and the on-site setup audited in order to secure the ISCC certification? Jason Miles: Yes. So the ICC certification process, we're working on together with Cargill. We made some very good progress in that regard. And the new regulations that covers the EU, especially has simplified the process. So in terms of the application process, we're in good shape. The final part of that jigsaw is to actually get the -- an audit done once the plant is up and running -- basically once the plant is installed at MAC2 and being commissioned, that audit can take place, and that's the final rubber stamping. And to answer the first question that you had, I mean, the IC certification process is not holding up anything in that regard in terms of signing the agreements. That's purely the commercial and legal discussion being finalized between MSC and Cargill. David Scott: Yes. Okay. Thanks. There's a couple here on the financials. So I'll just deal with those ones. What is the other income of $12,000 in the interim accounts? So that $12,000 is grant income. So we received grant income for the SEASTARS project. Overall, it's about $50,000. So we've actually got that cash. And what we do is we release that in the P&L as the work against that program is completed. So as of December, we've released $12,000 against the P&L. And then a couple of questions just on where we're at with cash. I did cover that on the presentation, but just to reiterate, -- we've got 4 million at the year-end, which is still more than 1 year's worth of fixed costs despite the increases to the team and the headcount. On top of that, we're expecting USD 950,000 worth of some in from Valkor throughout the course of this year. So we need to work out where we're going to be over the next 6 months by reaching our milestones as to how long that's going to take us to. Then there's one in here as well. Shareholders have been advised that the last fund raise was sufficient to take the company through to commercialization. Given the cash holding and spend rate plus delays to revenue-generating contracts, does that guidance of sufficient cash to commercialization still hold true? And how appropriate was that guidance? So when that guidance was given, that was during -- after the last fundraise and during the last IMC, which is about 6 months ago. And that's where our projections were at that time. Obviously, things have been delayed a bit. So it's not a clear cut, but it's still too early to say. We need to see which milestones we hit over the next 6 months. The next section is on MSC, and I'm going to direct this to you, Peter. Can you provide -- can you provide detail on the delay associated with signing the MSC trial agreement and why trilateral agreement is now mentioned in the interim results RNS? Also specifically, what do you mean when you state in the RNS post-trial commercial considerations? What considerations constitute MSC putting in to paper? Peter Borup: Yes. So we have been talking about bilateral agreements, four lateral agreements and at some point, even bilateral agreements. And some of this is driven by attempts to make this work, right? So there was a concern about being subject to EU VAT in Antwerp. And that led us to look at if we could inject a bargain company in the agreement as well and hence, avoid it. It turns out not to be necessary. So we're back to a tripartite. It's not a fundamental change of the agreement at all. It's now we're back to the original tripartite, but still with a discussion over some of the terms and conditions that Cargill is going through as we speak. So that, I think, was the first question. On the second question, it was about the MSAR, was it? Of course, commercial considerations. Yes, that's really refers to the scale-up in the commercial contract, right? So my expectation is that, that will be for MSAR. My expectation is also that we need to have refineries ready, and we're hoping for MSC to use some of the leverage in helping us get in. But we're not leaving it at that. We are doing our homework. As I mentioned, we've hired Matt to help us do that homework, but we're also using 2 different consultancies who have different kinds of access and different perspective on this, and we can call on them when we need to get a little bit closer to any one of these refineries to make sure we can clinch such a supply. David Scott: Yes. Okay. Peter recently stated that the remaining parts of the draft agreements are now predictable, and we can expect signature soon. Was Peter referring to both tripartite and bilaterals, or just the tri-part idea? And have MSC and Cargill shared their view with the team that they will also expect the remaining parts to be predictable and signed off soon? Peter Borup: The outstanding contracts, a couple of bilateral ones and there's a tripartite as it looks right now, are all related. So it's the same issues that needs to be sorted out in order for us to finalize these. David Scott: So you would expect them all to be signed together? Peter Borup: I would expect it to be one signing, yes. I'm certainly hoping it will be, but I see no reasons why it shouldn't be. My conclusion that these are small is based on 30 years of doing shipping contracts and the issues that are remaining, I believe, is of a pragmatic nature rather than a principal nature. But with large companies, you want to make sure and you will involve your legal departments. So -- and that's where we're at, right? So what we can do now, I'm not going to give you a time frame because that's born to be something I regret. But what I can say is that we try to keep the pace up on this and try to make it a little bit simpler to get it expedited and push your own legal departments rather than us just waiting for it or answering us. So I think these are smaller -- I think these are -- of course, they're not small issues, but they are pragmatic issues, and we should be able to sort them out. But I'm also mindful that if you're running a fleet of 750 ships and you certainly can't get oil out of the Persian Gulf, that's probably going to be your prime area of focus right now, right? So we are competing with that. That's for sure, right? But that's one of the few things I can see should hold it up further. David Scott: Okay. Is the plan for MSAR rollout post MSAR proof-of-concept completion? Can you provide some detail on the plan once the MSAR proof of concept is confirmed as complete? Peter Borup: Well, it is that we need to be able to provide the manufacturing units in the locations where it's required. And it's going to be a gradual rollout. We're not going to open up all over the world all at once, but we will prioritize the big bunkering hubs, spoke a little bit to it earlier. So Singapore is an obvious choice. It's a very, very significant bunkering port. Maybe build out in Northern Europe, certainly in the Mediterranean at some point in the PG because on the Persian Gulf. Right now, that's off the table, obviously, and then the Americas. But that will also depend on the clients and what their preferences are, and they are also likely to perhaps change a little bit as the world changes around us. So we're flexible on that. As you know, we have collaborators who can help us scale up also on the production of these manufacturing units. Fundamentally, it comes down also to the partners we have both on the refining side and also in some places on the bio feedstock side. David Scott: Can you confirm if MSC has informed Quadrise that they'd be willing to use MSAR commercially under the interim law? And if so, how many vessels would that involve assumed agreements were reached? Peter Borup: We have not gotten into the detail like that, no. David Scott: Okay. Do MSC still regard MSAR as the main Quadrise fuel choice in the immediate future with bioMSAR use dependent on economic considerations going forward? Peter Borup: Yes, I think that's a very good question. It's probably one that MSC should answer, right? So my expectation is that there will be a strong focus on whichever one offers better saving over conventional fuel, and that would be MSAR. So I would expect that to be the case. David Scott: Okay. What is the status of MSAR supply to MSC, which we have been told is running independently of MAC2 facility with preferential supply in the Mediterranean? Peter Borup: We are assessing all the locations where we can provide this. But ultimately, it's up to -- it's also up to MSC and collaboration with us and other suppliers to determine where we can deliver the fuels. David Scott: Can you clarify the status of the interim loan oil for MSAR, and whether MSC have explicitly confirmed they would proceed to commercial use without a full loan oil following a successful proof of concept? If so, how have insurance implications been addressed to ensure this does not become a barrier to uptake? Peter Borup: Maybe, Jason, you could take the loan oil part. Jason Miles: I'll take the question if you want. I mean in terms of the interim loan oil was issued to Maersk from -- by Wartsila. So that's the status of the original interim loan, obviously, of which MSC is very much aware, right? So from their perspective, something is in place that covers that. And in terms of the, I guess, the trial itself, obviously, the test vessel is insured in terms of the product liability risk of using MSAR or bioMSAR that's fully insured as part of the development process. As part of doing the trial, obviously, you generate a lot of data and initial -- sorry, further approvals then in terms of the products that we're supplying, all of which helps to alleviate some of the initial risk that you get from insurers and others in terms of obstacles to actually move ahead. So our -- we're in very good contact with our broker and the underwriter on Lloyd's who covers this risk at the moment for us. And obviously, as data is approved upon as the tests progress, then that we should reduce the premiums in terms of using the fuel on various vessels. And we don't see that as a constraint going forward because it's being done with other fuels as well. David Scott: Yes. Okay. Have MSC indicated a desire to get our fuels used in their engines? Jason Miles: They have in the past. And obviously, Peter has been involved with discussions with M&A quite recently in Denmark in terms of what the approval process will look like. So that's something that we are progressing. So yes, I think -- but yes, for sure, M&A or Evolent is now called now are an important OEM that we need to bring up to speed as we get the data from the testing that we progress. moving to Morocco. David Scott: So we're going to move on to the OCP questions now. Can you remind us why the Morocco trial is actually needed given that there was already a successful trial in November 2023. Also, is the fuel to be used the same fuel that was shipped in December 2022? Jason Miles: Yes. So the additional test is needed because the first test that we did was designed essentially a proof-of-concept test by OCP. So that worked very well at Kariba. We basically tested both MSAR and bioMSAR. -- going in that over a short period of time. So the requirement from OCP was that that's gone well, very happy, but we need to have a longer-term test of up to 30 days depending on the kiln to get the data. So that's what we're planning for next is to complete that subsequent trial, anything between sort of 15 to 30 days is the plan at the moment. And we'll be utilizing -- we won't have to make fuel and bring it to Morocco. So all the fuels from the previous test, sorry, was utilized successfully without any problem. So it's not like we've got fuel sitting around there for that period of time, although that will probably still be stable if I'm honest. But yes, so we've been making new fuel in Morocco and using that for the test going forward. David Scott: Okay. For OCP, are you looking to set up Mediterranean fuel supplies previously? Or would the fuel now be made in Antwerp and shipped to Morocco? Jason Miles: Yes, probably have answered that one in terms of we'll be making it in Morocco as opposed to making it outside of the country at the moment. David Scott: I think this has probably gotten our post trial considerations. Jason Miles: Yes, yes, I guess this is with the OCP trial. But yes, in terms of post trial, definitely, that would be -- we'd be looking for most likely a refinery in the Mediterranean region in Africa. David Scott: Okay. And then one for you, Peter, on OCP. Haven't recently met OCP, what is your take on the general attitude to an interest using MSAR? Peter Borup: Also, I mean, we went to Casablanca for the meeting. I was quite positively surprised by their interest in using it. Also an approach that I think makes a lot of sense in involving the different business units to make sure they are motivated and they're measured on it. It's a reasonably small trial, obviously. But we have the equipment on location, if you will. And I think it makes a lot of sense for us to stick around and conduct the trial, and just make sure that the project management around it is something that we can all learn from and that it leads into a commercial takeoff agreement afterwards. David Scott: Okay. A couple of questions now on Valkor for you, Jason. Can you detail the plan on producing MSAR or bioMSAR at the Balcor facility? And how this gets to bunkering locations if MSC are prepared to trial the fuel? Jason Miles: Yes. So I guess the initial plan of Valkor is to produce an MSAR product because that's the simplest thing to do. We're using their heavy sweet oil, which is a very low sulfur asphalt type material to make a low-cost alternative to low sulfur fuel oil diesel potentially. So that's the initial plan is to produce an MSAR product. Obviously, the key thing about that is that as part of their production process, if they're able to demonstrate that the carbon intensity of the product is lower than low sulfur fuel or diesel as well, that's quite important because that gives you carbon credits we can utilize. But the initial market is to really focus on the sort of industrial and power type applications, first of all. The volumes aren't there yet or we don't expect the volumes to be there initially anyway to supply the marine sector other than maybe for the occasional trial volume. But in the past, we've discussed this with MSC at a high level. And in principle, they're obviously interested in testing it if it meets the specifications that we need to for marine fuels, especially around sort of levels of aluminum, silica, et cetera, which oil sands is important to reduce. But yes, so if it is supplied to the marine sector, we've looked into that. There are -- there's rail supply that's very reasonably low cost to get it from Utah, either to the West Coast or down to the U.S. Gulf Coast as well, which is the main markets for bunker fuel. But that's some way off at the moment. So initially, we want to stimulate a local demand, get up and running with that. And then obviously, as they expand, then we can start looking at the marine sector. David Scott: Okay. My next question is just on the status of the samples that we're expecting from Valkor, sort of why have they been delayed? And what's the current expectation? Jason Miles: Yes. I mean we've had some, I guess, some interim samples in the past, right, which have not necessarily been representative of their commercial products. So we were quite specific with them. We didn't want to waste time -- we're testing that if it wasn't essentially a good representation of what they'll be supplying. And in the meantime, they've also been changing some of the technology in terms of what they're installing, both in the oil sands plant and obviously, the downhole drilling program as well to overcome some of the issues they had initially. So that's now been settled. The pilot plant, as I mentioned in the presentation, is now up and running and producing a sample, hopefully, several [panamas] of samples that they're sending across to us. Imminently for testing, and then we obviously think can analyze that and provide a market spec for it as well that we can go out and start selling to end users. So that's all ongoing, but it has been delayed for sure, but not really down to us. David Scott: Okay. So that takes us on to spot. There's a couple of questions here. The first one is just on the Panama power market. Are you aware of the Panama 0 126 power tender where thermoelectric plants running on bunker or diesel that with long-term government contracts must convert to cleaner fuels within 36 months. Is this a target for BioMSAR, BioMSAR Zero with any of our Panama clients? Jason Miles: I mean the answer is yes. We're very much aware of that particular tender. Sparkle made us aware of it. And that's one of the reasons why it was important to get the approval of the Panamanian authorities for both MSAR and bioMSAR to be considered as alternative fuels basically to fuel oil and diesel, which they are. I think initially, the pathway will be still to go the MSAR route, first of all, to reduce the cost of generation there and be competitive, obviously, to LNG, which is the other source other than obviously renewable sources. But ultimately, bioMSAR is certainly seen as a viable means going forward as well compared to LNG and LPG, which are the main alternatives to them. David Scott: Okay. I don't think -- this is probably the last question because I don't think we've got time for many more after this. We were advised that the Panama fuel permits were expected to be received by the end of 2025. What has held them up? Are you working with the government on getting our fuels cleared to be used as cleaner fuels as per the Panama Zero 126 tender? Is this part of the permitting plan now? Jason Miles: Yes. I probably semi answered this in the last answer. But yes, I mean, in terms of the actual approval of the alternative fuels, certainly MSAR and bioMSAR are now considered by the authorities as such. In terms of getting the import permits, we actually need to have now the supply logistics nailed down in terms of which refinery, which terminal we're going to bring in, which partner potentially in Panama might we wish to use. And then we can apply either ourselves or through that particular partner for the import permit, which we've been given the procedure that we need to follow, all of which seems to be fairly straightforward, and meeting the guidelines that we're well used to in Europe and other places. So we're using internationally established guidelines to then get the fuel approved and imported. So we don't see any real holdups now in terms of other than bring the fuel in and make sure there's a commercial contract in place between buyer and seller. David Scott: Okay. Operator: That's great, David. Thank you very much indeed for moderating through the Q&A. Ladies and gentlemen, thank you for your engagement this afternoon. I know investor feedback is particularly important to you. And Peter, I'll shortly redirect those on the call to give you their thoughts and expectations. But before doing so, I wonder if I may just ask you for a couple of closing comments. Peter Borup: Yes. Thank you so much for listening in. Thank you for your support. Thank you for the many very good questions. I know there are a couple of questions that have come in on the platform live during our presentation. We will address them, as David mentioned earlier, on the platform latest by next week. So once again, thank you very much for listening in. Operator: That's great. Thank you very much indeed. Ladies and gentlemen, we will now redirect you for feedback. On behalf of the management team of Quadrise, we'd like to thank you for attending today's
Operator: Welcome to the earnings call of SUSS Micro SE following the figures of 2025. I would like to welcome the company's CEO, Burkhardt Frick; the CFO, Dr. Cornelia Ballwießer; the COO, Dr. Thomas Rohe; and IR, Sven Kopsel, who will guide us through the presentation in a moment, followed by a Q&A session via audio line and chat. And with that, I hand over to you, Mr. Kopsel. Sven Kopsel: Thank you so much, and welcome to our full year conference call after today's release of our annual report 2025, including our outlook for the new financial year. First of all, one personal note from myself after 3.5 years with SUSS in total, 4 annual reports, 2 Capital Market Days and yes, countless investor and analyst interactions, today marks my final conference call with SUSS. While I truly love the company, I have decided to take on an exciting new role in a different listed German company as of May. So April 24 will be my last day at SUSS, and my colleague, Florian Mangold, will continue to be available to you as your point of contact. Now back to the official part. As you probably know from earlier calls, this call is being recorded and considered as copyright material. It cannot be recorded or rebroadcast without permission and participating in this call implies your consent to this procedure. Please be aware of our safe harbor statement on Page 2 of the slide deck. It applies throughout the conference call. And now I hand over to Burkhardt, our CEO, for some opening remarks, followed by our CFO, presenting the financial development. Burkhardt, please? Burkhardt Frick: Sven, many thanks, and also thanks for your great contribution over the past 3.5 years. We really enjoyed you having on board, and I'm sure you will have an exciting future ahead of you. So thanks a lot from my side. Let's now start with an overview on the key financials for 2025. Our order intake ultimately came in at EUR 354 million, more on this shortly with a particular focus on the fourth quarter. Revenue recorded at EUR 503 million, once again, a double-digit growth and exceeding EUR 0.5 billion for the first time. Profitability with a gross profit margin of 35.7% and an EBIT margin of 13.1%, we came short of our initial margin expectations. However, we did meet our most recent guidance. Now a few more words on revenue. EUR 503 million marks another record revenue figure and an all-time high for SUSS. Even more important, we have increased revenue over the past 2 years from around EUR 300 million to EUR 500 million, an increase of EUR 200 million. SUSS is now a significantly larger and more capable company. We are a growth company, and we intend to resume this growth in the midterm. Regarding order intake, in November, I stated that we could achieve EUR 100 million in order intake in the fourth quarter. We now can confirm an order intake of EUR 117.5 million. The book-to-bill ratio was thus around 1. Both segments contributed to the improved order situation with AI being the dominant driver, both in terms of HBM and CoWoS. Further good news, this positive momentum has continued into the first quarter of 2026. Now on profitability. We explained the deviation from our original plans during the Q3 conference call. And as we said in the Capital Markets Day in mid-November, we introduced the new product generations and innovative solutions to achieve a substantial improvement in margins. That's why we are very much looking forward to the next 2 to 3 years and the multiple launches we have lined up. Now let's take a look at the performance of our 2 segments. First, Advanced Backend Solutions. Order intake was approximately EUR 25 million lower than in the previous year and was distributed fairly evenly across the 3 product lines: imaging, coating and bonding. Demand for our imaging systems, specifically for UV projection scanner used in CoWoS process remains strong. Demand for bonding solutions was lower than in previous year, but has improved since the fourth quarter. Revenue grew by 10.7% to around EUR 350 million, while bonding was below 2024. Imaging and Coating Systems contributed the most significant growth, each posting an increase of more than 50% compared to the previous year. Profitability was significantly lower than in previous year, primarily due to weaker product and customer mix, strong growth in Imaging and coating and the frequently mentioned increased temporary ramp-up support provided to our customers for already installed tools as well as the establishment of our new production facility in Taiwan. Now to Photomask Solutions. Order intake of approximately EUR 80 million was significantly down by EUR 43.5 million from the previous year. Out of this number, EUR 31 million was due to lower orders from Chinese customers. However, Q4 showed an improved trend versus Q2 and Q3. Revenue growth of 17.3% to over EUR 150 million is very encouraging. Thanks to our improved operational capabilities, we have further significantly reduced our backlog and accelerated the completion of customer projects. Higher sales volume and an improved product and customer mix also led to a 5% point increase in the gross profit margin and an 8% point increase in the EBIT margin. Now let's zoom in on the fourth quarter of 2025. I already mentioned the positive order intake of EUR 117.5 million, reversing the negative trend of the first 3 quarters. Of this amount, EUR 92 million was attributable, difficult word, to the advanced back-end solutions and EUR 25.5 million to Photomask Solutions. We once again received several orders for our UV projection scanner for CoWoS process as well as for HBM-related follow-up orders, particularly for one of our memory customers. Orders for our mask aligner from customers in mainstream applications have also improved significantly. It may still be too early to speak of a turnaround in this business, but this was certainly a strong intake quarter. Revenue of EUR 119 million was almost unchanged from the third quarter of EUR 118 million. This demonstrates our significantly greater stability when it comes to executing customer projects. Gross profit margin remained low at 34.9%, though it improved slightly compared to the third quarter, where we had 33.1%. EBIT margin was 9.8%, which was slightly lower than Q3, but still better than we originally had expected. To wrap up the first part, here's a look at our new production facility in Zhubei, Taiwan, which is already fully operational. Following the opening ceremony at the end of October, all relocation work has since been completed. As planned, we returned all existing locations to our landlords by the end of February. We delivered the first tool made in Zhubei, a UV projection scanner to our customer already in February. Production is now in full swing, as you see on this picture, about 10 tools were built in Zhubei during the first quarter in 2026. Further capacity increase is under preparation. Q1 '26 is, therefore, also the last quarter in which the P&L will be impacted by the implementation of the new site. And with that, I hand over to Cornelia for some details on our financial development. Cornelia Ballwießer: Thank you, Burkhardt, and also a warm welcome from my side to all of you. Here, you see our key financial figures. First of all, I would like to point out that the previous year figures have been adjusted due to accounting changes made in the connection of the preparation of the 2025 consolidated financial statements. These changes are explained in detail in the notes in our annual report, which has been published today. The adjustments for fiscal year 2024 in short are a sales adjustment amounted to plus EUR 0.5 million. Gross profit was adjusted by minus EUR 1.5 million and EBIT by minus EUR 0.5 million, and net income was adjusted by EUR 0.4 million. In a nutshell, the main changes are based on a more detailed approach to revenue recognition. In particular, installation service following the delivery of our tools and upgrades are no longer recognized on a point-in-time basis, but rather on a period basis. This is from shipment to final acceptance by the customer. The second significant change was made to the provision for the equity-based compensation, which is now recognized on a pro rata temporary basis over the entire 4-year period, the vesting period rather than at the time of the grant of the virtual shares at their estimated value. This resulted in an adjustment of plus EUR 1.2 million in EBIT. And now let's have a look on our financials here on the screen. The order book was EUR 266.8 million at the end of 2025. The vast majority of these orders will be produced, delivered and recognized as revenue throughout 2026. Expenses for selling, administration and R&D increased from roughly EUR 100 million to EUR 118 million in 2025. The main reasons were an increase in R&D, plus EUR 7 million spending to support several product and technology development projects and for IT and digitalization projects, such as the mitigation of our ERP system. But that's not all. There are some other systems we introduce. And the full cost impact of new hires made in 2024 has an impact or the full impact in 2025. Net profit amounted to EUR 46.1 million in 2025, down from EUR 110 million in 2024 when the sale of the MicroOptics business had resulted in a significant onetime gain. Cash and cash equivalents were at EUR 98.7 million and compared to 2024, reduced by EUR 33.5 million. And this mainly because of a significant lower prepayments from our customers and of course due to our CapEx in 2025. Net cash amounted to EUR 49.1 million in 2025. And this is because of the deduction of the leasing liability from the lease agreement for our new Zhubei site which caused this decline. Free cash flow from continuing operations was EUR 20.6 million (sic) [ EUR 22.6 million ] in 2025 and in total at minus EUR 26 million. The fourth quarter was cash flow positive at EUR 5.6 million, but that was not enough to bring the figure back to 0. As our dividend policy is based on free cash flow and is designed for a payout of 20% to 40% of this figure, a dividend of EUR 0.04 per share will be proposed to the Annual General Meeting in June. CapEx increased to EUR 23.2 million in 2025, driven in particular by our new site in Zhubei. Now let's move to the development of our main financial KPIs over the fiscal year. Please be aware of that the '25 quarterly figures are as reported. This means they are not restated. In our reporting, in 2026, all prior year figures will be restated. Burkhardt has already mentioned the significant improvement in order intake in the fourth quarter of 2025. While this can certainly be attributed to seasonal factors and a traditionally strong fourth quarter, it is all the more important that we are able to confirm this improved demand in the coming months. We have already discussed profitability in the past. This overview clearly shows that profitability came under pressure particularly in the second half of the year. The decline in the second half of the year is not unexpected. The weak order intake in the first 2 quarters and the shift in its composition as well as some nonrecurring items and extra costs are clearly evident here. To achieve a significant improvement, we are working on new higher-margin product solutions, which will only begin to gradually impact the P&L starting in 2027. In both segments, we have an order intake trend reversal with strong bookings in both divisions versus previous quarters, and this trend continues in the first quarter. Photomask Solutions benefited in the fourth quarter from product and customer mix, also in connection with upgrade and service business and from some currency gains. The fourth quarter of Advanced Backend Solutions, a lower top line in the fourth quarter than in the third in combination with very negative product mix affected gross profit margin and EBIT margin. There were a lot of UV scanner, but we had the lowest amount of bonus in the fourth quarter. As you know, the double rental costs for the new fab in Zhubei affected the result. And in addition, write-offs for clean room equipment in our old Hsinchu site, which cannot be used in our new fab in Zhubei. This impacted the result in the fourth quarter. And also R&D expenses rise in the fourth quarter to support future growth projects. The R&D expenses also left the mark on the fourth quarter, especially projects for left chamber improvements and for a CoPoS project. On this side, we see our order intake by segments and regions. The order intake by region shows a familiar pattern. The APAC region once again accounted for the largest share of new orders at around 77%, with Taiwan as a dominant contributor. The remainder was distributed relatively evenly between EMEA and Americas. Now I would like to present the main balance sheet developments. Total assets increased by EUR 7.6 million. For the noncurrent assets, the main driver was the Taiwan expansion with the right-of-use asset and CapEx for the interior layout of the building in Zhubei. And as well, there were some CapEx in Europe, around EUR 8 million, mainly in Germany. In current assets, we have a decrease by EUR 54 million to a total volume of EUR 386.7 million. Inventory declined by EUR 39.1 million on a year-on-year basis and amounted to EUR 171.6 million at the end of '25. Contract assets and trade receivables in total increased by EUR 20.6 million. Cash and cash equivalents decreased, as I said, by EUR 37.5 million and of course, due to free cash flow of minus EUR 26 million. And of course, of the dividend payments in the last year and some repayments of our financial debt together in the amount of around EUR 10 million. On the liability side, the main changes already happened in the second quarter with the inclusion of the leasing liabilities from the Taiwan site. In noncurrent liabilities, the main driver was this lease liability for the Zhubei site. Current liabilities decreased at the same time, minus EUR 60.2 million. Here, the major drivers were lower prepayments from our customers who supported last year's steep ramp. And now we have less orders from customers, which usually accept prepayments. Equity increased by EUR 32.5 million, and equity ratio was at 62.2% at the end of December '25, which means that we have improved the equity ratio by 5.6 percentage points. Net income contributed with EUR 46 million and other comprehensive income and dividend payments amounted to minus EUR 13.7 million. And finally, I would like to give you a brief overview of the new syndicated loan, which we announced back in mid-February. Despite the current healthy liquidity position, it is very important for us as a company to increase our financial flexibility to finance further growth and to maintain sufficient reserves to cover industry typical fluctuations. We achieved this with the new syndicated loan agreement and the volume has roughly doubled to EUR 115 million, thereof EUR 85 million for revolving credit facility and EUR 30 million for guarantees. The new contract has a term of 5 years with 2 optional 1-year extension periods. We are now even better positioned to support our growth plan and we have sufficient buffer against industry-specific fluctuations as well as against a general deterioration in economic conditions and economic cycles. Finally, we had significantly reduced the liquidity risk. And now I gave back to Burkhardt, who will present the outlook for 2026. Burkhardt Frick: Thanks, Cornelia. As you said, I now would like to come to the guidance overview. As said before, 2026 will be a transition year. After that, we expect to resume our growth path. Forecasted sales range of EUR 425 million to EUR 485 million, indicating a decline of 9.6% at the midpoint of the range. We see a broadly stable gross profit margin of 35% to 37%, but a declining EBIT margin of 8% to 10%. On the next 3 pages, I will provide a bit more color on all 3 KPIs. First, on the sales guidance of EUR 425 million to EUR 485 million. When we compare the starting points for 2024, 2025 and 2026, obviously, we are beginning the year with a significantly lower order book. You see a detailed comparison on the right side. As a result, visibility at the start of the year is lower. Therefore, we decided to expand the guidance corridor from previously EUR 40 million to EUR 60 million. The extent of the revenue decline compared to 2025 will highly depend on the volume of orders we will receive in the first half of 2026. Thanks to our improved operational flexibility and shorter lead times, we will be able to execute the majority of the orders between January and June within the same year and recognize them as revenue. On gross profit margin, we forecast 35% to 37%, and thus are broadly stable in our expectation. As said before, in the financial year 2026, we will be offering more or less the same portfolio as in 2025. For portfolio-driven substantial improvements, we will launch and ship our new product solutions in the next 2 years. A change in the product and customer mix could still affect margins during the year, depending on the order intake from the first half of the year and beyond. For example, higher demand for Bonding solutions would generally be beneficial for us. Then there are various effects that are likely to neutralize each other. On the positive side, fewer one-off events such as the establishment of a new site in Taiwan and a more normalized ramp-up support for our customers for already installed tools. On the negative side, the impact of the expected decline in revenue on the fixed cost coverage. Finally, our EBIT margin, which is forecasted to a range of 8% to 10%. We had already explained in the Capital Markets Day that the expected decline in revenue is likely to impact the EBIT margin development. In that regard, I don't think the guidance came as much of a surprise. A few analysts had already placed their estimates within that range. So here is what we do expect to happen. First, lower sales volume, combined with a broadly stable gross profit margin will weigh on profitability. We have made a conscious decision not to reduce the R&D budget despite the lower revenue forecast. On the contrary, we actually expect an increase in this area as we are setting the base for future growth in the coming years. At the same time, we expect only a slight increase in sales and administrative expenses, and I can assure you that we will continue to strictly manage those budgets. Now some words on the expected development in our 2 segments. First, Advanced Backend Solutions. Expected sales decline of roughly 10% versus '25 is expected. Slight increase in gross profit margin and a broadly stable EBIT margin as lower business volume will have an impact on profitability. We anticipate the following trends in the market demand. Imaging Systems, there we see a stabilization of the strong 2025 level provided there is continued CoWoS-related demand for additional UV projection scanners. Coating, we see a slight improvement expected provided that the mainstream business picks up alongside a continued strong packaging and OSAT business. And on Bonding, significant improvements versus 2025 are expected as HBM customers commit to add more capacity again after a temporary digestion period which we experienced last year. Secondly, on Photomask Solutions, we have similar sales expectations as in the backend unit with roughly 10% versus 2025. Profitability is expected to decline as a result of the lower sales volume. On the market outlook, I can comment that we expect an improved order situation as high demand for semiconductors, again, driven by AI requires additional front-end equipment, see also the strong ASML order trend and consequently, also additional mask cleaning equipment. Preparation of customers for the introduction of High-NA also can play a role. Potential for additional momentum from the launch of 3 new solutions like the high-end mask cleaner, the mid-end mask cleaner and the first wafer cleaner addressing the 200-millimeter market can also give us a boost. When looking at our guidance for 2026, some might think that this year represents a step backwards for SUSS. I personally don't see it that way. As said, 2026 is a transitional year or rather a year of preparation for further growth and a substantial improvement in margins by 2030. These goals, which we presented in November Capital Markets Day, remain unchanged and recently are even getting tailwinds. Thanks to a strong focus on R&D and the development of new innovative solutions and next-generation products for selected faster-growing markets, 2026 is an important year and a necessary stepping stone into our bright future. And with that, we are opening the floor to your questions. Operator: [Operator Instructions] We have already received some risen hands, for example, by Mr. Menon. Janardan Menon: Burkhardt, I just want to check whether you can give us any indication on how you would expect your sales and gross margin to trend through the year? Is it possible that Q1 is your low point for both sales and gross margin and then you will see a gradual improvement from there? Would that be a reasonable assumption? Or any other color how you see the first half versus the second half develop would be great. And I have a small follow-up. Burkhardt Frick: Janardan, that's a really good question. And of course, you are spot on. We see really us hitting in Q1 as a low point of the effects we saw last year. Remember, we had a 3-quarter declining order intake, and it started showing, of course, in the last quarter of last year, and it will extend into the first quarter. However, this is offset, of course, with a reverse trend in order intakes, which, of course, will take a couple of quarters to materialize in an improved situation. So we think we are approaching the bottom here and will climb up from there. Janardan Menon: Understood. And then I was in Taiwan recently, and there is some talk in the Taiwan market about TSMC looking to localize their equipment, especially on the backend where possible and working with some of the local companies. I was just wondering whether you have any thoughts on that. Do you see this as a potential threat? Or is this mainly in areas where SUSS is not involved right now? Burkhardt Frick: I see that as an opportunity because we are local at the doorstep of Taiwan with our main production site. That's, by the way, also where we are developing our next-generation EUV scanner also in Taiwan. So in that sense, you could even call us a local company. But at least on those products we are designed in, I think we have a fairly solid position. Janardan Menon: Understood. And last one, a short one. Is the prepayments that have fallen, is it mainly Chinese customers that give you prepayments? And is the cash impact because of lower China orders? Cornelia Ballwießer: Yes. Yes, it's the Chinese customers and Chinese demand is not that strong. But there are some other institutes like R&D institutes who make prepayments, but mainly from China customers. Operator: We have another question from Madeleine Jenkins. Madeleine Jenkins: I have a few. Just the first is on a slide you just showed on the different segments. And if I understand it correctly, you're saying that Imaging is going to be kind of roughly flat so as Coating and then Bonding is significantly higher than 2025. But then you've got your sales expectation down 10%. So I'm just trying to understand where exactly that weakness is coming from for that sales forecast. Burkhardt Frick: Madeleine, also good question. Of course, the lower expectations, they stem from the accumulated order intake we collected in the last quarters. So from this, we can, of course, pre-calculate what we have already in our books. The rest, of course, are orders which we have to collect in the running year, mainly in Q1 and Q2 and '26. And both together will, of course, create a forecast which we picked. We picked there a decline of 10% for both units because we see various effects, as I think detailed out in our presentation. For Photomask, it's the decline we saw from Chinese customers. And for the backend, it's really the combined effect of the low intake we have received so far. Now this trend, we see partially being now offsetted, but we need to know and, of course, experience how strong this new high order intake trend will last. Madeleine Jenkins: Perfect. Makes sense. And then my second question is just on HBM. I think you mentioned in your opening remarks that only one of the customers was really in the Q4 order book. Do you have any indication of when the second customer might come in? And also at your Investor Day, you mentioned the potential qualification of SK Hynix. Is that -- could you provide an update on that as well, please? Burkhardt Frick: Yes. As you know, the other Korean customer still sits on a lot of underutilized equipment. So we carefully planned in some kind of demand resuming in the second half of this year. But of course, that has to materialize. But I have some good news on the other -- the second Korean memory maker. There, we did receive some HBM-related orders. So basically, we can now claim that we are in all 3 major memory makers. Madeleine Jenkins: That's great. And just a final question quickly. On the wafer-to-wafer hybrid bonding side, there's a lot of talk recently on its kind of application in 4 F-squared in DRAM. I just wondered if you're kind of in any early conversations here. Do you expect to be inserted in supplier for this in the next few years as that transition is made? Burkhardt Frick: Yes. Hybrid bonding, as you know, Madeleine, is moving a bit sideways, a little bit away from die-to-wafer application because runways are extended for TCB bonding equipment and also some customers, they are struggling with the process. Therefore, wafer-to-wafer hybrid bonding also comes in because you can bond the wafers first and then do the die stacking. I think there's some momentum going on there. But I think it's still in a, I would say, more experimental phase where we do see some interest, but we haven't seen it materializing yet. As you also know, we are not at the forefront with wafer-to-wafer hybrid bonders. I mean there are 2 other customers -- sorry, 2 other suppliers ahead of us. But we have our systems at IMEC, where we are running tests, and we can provide very good data. So I also expect more momentum picking up on that side also where we can benefit from. Operator: We have another question by Michael Kuhn. Michael Kuhn: Firstly, on the transition year again, maybe you could provide us with an update on, let's say, which of the products, the renewed products or the all new products you expect to contribute to sales first? What kind of ramp-up costs you expect and whether you see, let's say, some cost portion that you incurred this year as kind of nonrecurring and also for the context of R&D, is that mostly on medium-term projects? Or is there also a bigger portion, maybe including some external providers for, let's say, final engineering steps ahead of the product launches? Burkhardt Frick: Michael, yes, that's quite a mixed bag there. So let me start with the R&D side. So yes, we have external and internal R&D. And I think we made very clear in our call here that we have not reduced our spend in R&D. In reverse, we increased the spending to make sure that we can stick to the launch timing of those products we have in our pipeline. The first products are coming out this year, and there are notably 3 Photomask products. One is the high-end mask cleaning, the MaskTrack Smart. There we received the first order also in the first quarter of a large memory customer. And so that's the first shipment we are preparing for the second half of the year. The mid-end mask cleaners, we also there, are working on the first systems because we have more than a handful of firm orders for that mid-end cleaner, which will replace also our aging mid-end platform, which we then take from the market. And the wafer cleaner, that's the third product, we also received first hardware, and we are doing our internal commissioning and evaluation before we send it to a launching customer. So there are 3 projects which are really in the final stage for rollout this year. And then there's a backend product, which is our EUV scanner, which is panel capable, 310 x 310 projection scanner, which will be launched in Q3, also, of course, with a large Taiwanese target customer who already has set up a pilot line to evaluate the panel application. So in that sense, 4 products, which are launching this year. Maybe we can squeeze in the fifth, but we have to see to get all these projects on the road. And that's also the reason why we deliberately in that sense, bit the bullet in high continued spend in R&D because we want to make sure we are not letting down the customers. And we anticipate, therefore, this gap or this drop in EBIT. But this is, in our view, just very short term until we can reverse the trend. Michael Kuhn: Understood. And then maybe a follow-up in that context on wafer cleaning. At the CMD, you mentioned you're obviously starting with 200 millimeter, but saw pretty strong demand also for 300 millimeter and also accelerate that project. Where do we stand here in the time line? Burkhardt Frick: Yes. I mean, as you rightly said, the launching product is a 200-millimeter product. We want to, of course, get some feedback first, a, from our internal evaluation and then, of course, also from the first customer feedback, which is then also an input for the design. But we are preparing the design phase for the 300-millimeter tool in combination with an external partner. And we probably will kick off that design in the second half of this year, and we should see first hardware in the first half of 2027. Michael Kuhn: And then last one on the new EUV scanner. My understanding is that the current product comes with a relatively low gross margin. So should we expect the new product to be launched in Q3 to have a, let's say, sizable effect on the gross margin then because it's probably a relatively big part of your top line right now? Burkhardt Frick: Yes. That was the point in also redesigning this platform, which really came to age. Unfortunately, of course, the current CoWoS run, I couldn't wait for that. That's why we have to ship the old version, and we probably have to keep doing so because the first product we are launching is the panel version, which goes into a pilot line and panel production is not going into volume until '28-'29 time frame. So -- but very shortly after this panel version, of course, also our wafer version of the UV scanner, the next generation is coming. But that launches in 2027. And that, of course, depending on the conversion rate will then also improve this very low margin for the current DC. Operator: We have another question from Mr. Schaumann. Malte Schaumann: First one is on timing for potential Photomask uptake in demand for Photomask orders. We have seen quite a strong Q4 order intake at ASML, obviously, with shipments mostly scheduled for 2027. Is that kind of supporting the assumption that you would expect an uptake in demand in the second half of this year for the Photomask cleaning business? Burkhardt Frick: Yes, Malte, that's a good assumption. Of course, we are loosely connected because lead times and cycle times are very different if you compare us with an EUV system of ASML. But ultimately, we should see these effects. And as a matter of fact, we already see those effects because despite our expected decline in China, we currently see Chinese customers speeding up again, especially for photomask tools. But we also see international customers considering to pull in orders. So we are in the middle of evaluating the impact of that, but that is a trend which started late in Q4 last year, and we see it continuing in this quarter -- in the running quarter. Malte Schaumann: Okay. And for the Chinese demand you alluded to, is that then linked to the new mid-end cleaner? Or would these customers still order the current equipment? Burkhardt Frick: Actually, both. Of course, due to the equipment in use in China, the mid-end cleaner is more suitable for that market. But we see still a fairly high amount of high-end cleaning demand picking up again in China, which we didn't anticipate. Malte Schaumann: Okay. A quick one on Hynix. Do you see or do you expect kind of more or less regular follow-up business when production lines get extended with the product you have placed at Hynix? Burkhardt Frick: No, we are only interested in one-off sales, Malte. No, sorry, but I make a joke here. So obviously, yes, that's the intent to see follow-up business. But I think for us, it was important to get back into the door. So we are not talking volume orders here, but at least we have our hardware place now in the most recent HBM R&D line, which we can then, of course, exploit and hope fully get follow-up business. Malte Schaumann: Okay. Then on the guidance, I mean, given the current strength in orders that has continued into the first quarter of the year, the low end of the guidance at the sales level, actually appears a bit low. Is that reflecting uncertainty at customer level you're recognizing? Or is that rather linked to the overall global situation, which is not that stable at the moment? Burkhardt Frick: Yes. We -- of course, one good quarter doesn't make a full year, as we all know. And although we really have a very strong expectation because the quarter is almost over for the first quarter in intake. We have to see how long this strong push remains. When we created the guidance and also set our budgets, we had quite some expectations, and there was also a certain concentration in the second half of the year. But now we got strong demand already in the first quarter. And we have to see if this is a continued trend because if the second half also remains strong, then of course, we can come up with better results. Also the mix will have an important contribution here. So -- it's too early to just base it on one strong first quarter in order intake, I must say, because in sales, we will not see a strong first quarter. Malte Schaumann: Yes sure. Okay. Last one on double costs or one-offs, which are baked into the earnings guidance for this year. So are you able to quantify an amount, which is linked to double rent ramp-up costs and the like? Cornelia Ballwießer: There are some one-offs regarding Taiwan, as you know, because in the first quarter, we have some double rent double cost. And yes, that's more or less what we included in our guidance. Malte Schaumann: And that is a low single-digit amount. Cornelia Ballwießer: Yes, it's 0.4, something like this. Operator: We're moving on to Mr. Ries. Johannes Ries: Also a couple of questions from my side. Maybe let's first start with Taiwan, a short recap. How high was this payment you had made for the leasing which reduced the cash significantly? Remind us, please, how high this impact was? And how high is -- how much capacity you have now finally in Taiwan only to a reminder because it gets more and more important. Thomas Rohe: So Thomas speaking. The investment in Taiwan was a low 2-digit million euro budget, which we invested into the clean rooms and all these kind of stuff. And the leasing contract is now for 20 years and about EUR 40 million of leasing agreement, which we have there. But the cash out is really only on a yearly base for sure, but the leasing has to be accounted in our books already for the complete period. And the capacity only to really make this clear, we are really fully loading the factory as much -- as soon as possible. Right now, we have a load of around, let's say, about 70% with the old sites, which moved all into the new sites. So we are really heavily working to fill it up completely by at least the end of the year. Cornelia Ballwießer: Sorry, I just want to add, as Thomas explained, of course, the leasing liability is booked. It's around EUR 40 million. But you asked for cash out, and cash out is around EUR 2 million to EUR 2.5 million this year. Johannes Ries: Okay. The reduction in last year, but you mentioned partly was the leasing reason that the net cash or the cash has come down heavily. So that's a booking effect. Cornelia Ballwießer: Yes. It's KPI net cash figure, but it's not -- yes, it does not really says something about the duration of the liability in this case. So it's just net cash. But cash out is over the 20 years. Johannes Ries: Clear. On the capacity, from a revenue, how much revenue you can handle with the capacity you have now in Taiwan? Is it -- I have something of EUR 150 million, EUR 200 million in my head. Is that right? Thomas Rohe: That's a really good question, but it heavily depends on the product mix. As you know, we are introducing scanners there, coaters and bonders. And so from that point of view, it's really hard to say how much really revenue we can generate with this. But in general, I would say right now because we have half-half between Germany and Taiwan. So from that point of view, it's roughly perhaps the right order of magnitude, probably a little bit higher. Johannes Ries: Okay. Half of the total revenue came already from Taiwan? Thomas Rohe: Not yet completely, but we are targeting for this. Johannes Ries: Super. On the OSAT business, we hear from the OSAT that they are Amkor and ASE that they definitely heavily increased their budget. How much you have already seen in your own order income is much more -- it's more to come in the coming quarters from this side? Burkhardt Frick: Johannes, it's Burkhardt here. We already saw it last year, and I think I also mentioned that we saw this strong uptick for our Coating and Imaging business, which was mainly on the coating side contributed by additional demand from OSATs. They are expanding in their existing sites in Asia, but also they are planning to expand in the U.S. as also some other companies are. So there also, we expect a continued strong demand. Johannes Ries: And you mentioned that the Coating and Imaging business, there's also scanner in, which is low margin, but there's one reason for the lower margin. I always in my head that the coating -- at least coating had a quite good margin. Has it changed? Or is it only that maybe the scanner has brought down this average margin of Imaging and Coating? Burkhardt Frick: Coating is kind of pretty in the center of our margin distribution. So it is not as good as the bonders, but by far not as bad as the EUV scanners. Johannes Ries: Okay. I expected this. And also for your forecast, you're expecting a stronger business with temporary bonding for this year, but the margin in Advanced Backend Solutions will nearly stay flat. What is the reason? Because last year, it was a pressure coming partly from the temporary bonding came down, we expect an increase. Why is not maybe -- why we couldn't see a little bit stronger margin development in Advanced Backend? Burkhardt Frick: It depends how many more orders we see, especially from the bonding side. When we set out these corridors, we assumed a certain mix. We now see strong intake also on the bonder side. But we have to see how sustainable this is, Johannes. As I said, one good quarter doesn't make a full year. If the other Korean HBM maker doesn't place orders in the second half of this year, then I think we did everything right in our prognosis. But a lot of things can be happening. And as we saw last year, where we had to go in and correct twice our guidance. This is something we don't want to repeat. Johannes Ries: It's clear. But the bonding business is still above average at the margin side. Burkhardt Frick: Yes, well above average. Johannes Ries: Last question, R&D, will it further increase this year and only feeling how much it could increase? It will further increase but how much? Thomas Rohe: So it will increase only slightly. There are no big change really planned for this year. That's much more than EUR 2 million or EUR 3 million in total in absolute values. But we try to keep the headcount stable and also the investment in R&D. Burkhardt Frick: Maybe to add, Johannes, since the top line reduces, so the R&D ratio increases even faster. Johannes Ries: That's a fair point. Very fair point. But finally now, because I will meet him in person in the weeks, but I think it's the last call maybe of Sven as IR. And I think maybe even in the name of all other participants, all colleagues, I really want to say thank a lot for his work and great support, and it was a pleasure to work with him. Sven Kopsel: Thank you so much, Johannes. It was my pleasure. Operator: We're moving on to Mr. Devos. Ruben Devos: I had one follow-up on the EUV projection scanner. I think you've provided already quite some indications, but I was looking or whether you were able to maybe quantify what the EUV scanners actually contributed to the top line last year and whether you could give us a sense of the 2026 order funnel because I mean, there's many growth parameters out there. I think in itself, the products could be quite sizable for you, not only this year, but in the next 5 years. So it would be very helpful if we know a bit where you are currently. Burkhardt Frick: Yes. It's, I think, fair to say that the revenue contribution of the EUV scanner alone was between EUR 30 million and EUR 40 million last year. And this year, this number will be larger. Ruben Devos: Okay. All right. That's very helpful. I think on the -- and then just thinking about your other, let's say, younger products out there, thinking about the hybrid bonders, but also the inkjet printers, like on a combined basis, are we thinking this is about 5% of sales in '26? Or how should we think about that? Burkhardt Frick: Yes, that is really a low contribution because we sold single units to customers who are evaluating those systems. So this is not what I call a volume state. We are at the very beginning of that. So we had last year 2, 3 systems we sold. This year, we probably also have a couple of systems, but it's in the very single-digit percentage range. Ruben Devos: Okay. Okay. And then just for the temporary bonder business, looking a bit further out, with HBM4E and HBM5 sort of requiring thinner dies and even more bonding complexity. Are the existing platforms already compatible with those, let's say, next-generational stack requirements? Or will there be a meaningful upgrade or new tool generation needed? Burkhardt Frick: Well, our current generation of temporary bonders is, as we speak, qualified for HBM4. Otherwise, we wouldn't have received those orders. But of course, we are continuously improving those -- our products and also listening to our customers, what else they need. So we have, in parallel, a flanking program to improve bond chamber performance to meet also future needs because we are working both with the volume side of those customers, but also with the R&D centers who already work on the next N+1, N+2 generation of HBM stacks. So we stay tuned. And then we work with our customers when are we phasing in which improvements. It can be a running change. It can also be introduced in the next-generation platform. So we do both. I hope that helps. Ruben Devos: Okay. Great. And then just a final question on, I think co-packaged optics, you also talked about in the CMD, specifically on co-packaged optics on the interposer as a potential future opportunity. I mean, in the last few months, excitement on co-packaged optics has quite strongly accelerated. So my question is like within that further integration complexity, do I understand it well that basically your EUV scanner and coating portfolio map well on to this? And what is generally the last -- the traction you've been seeing in the last 3 to 6 months on Photonics in general? Burkhardt Frick: Yes, you're absolutely right. There's a lot of hype there, and we are kind of positioned with our existing portfolio. But of course, we need to enhance or upgrade our portfolio to also serve the co-packaged optics market well. So -- but it's from our side, more kind of technical feasibility, what additional features are needed, which can be added to our existing portfolio to also play a role there. But it's too early to really turn this into concrete products. So right now, it's on our side in an R&D development stage. And as soon as we have something noteworthy to report, we will do so. Operator: I think Mr. Schaumann has a follow-up question. Malte Schaumann: One follow-up question on the orders in the first quarter of the year. I mean the environment is pretty dynamic. So a continuation of the trend can have several meanings. So maybe some more color on what does that actually mean? I mean, typically, Q1 is not the strongest quarter in terms of order intake. So despite that fact, should we expect kind of more or less stable order development from the fourth quarter and the first quarter, which would be already good? Or do you see even an acceleration? So some additional color would be appreciated. Burkhardt Frick: Yes. I was almost fearing that this question will come, but it comes late now. So the -- I mean, first of all, I can confirm that we are breaking with that trend that in terms of order intake, this first quarter in '26 is a really very good quarter since we are in the last 2 days of the quarter. Of course, we already know what's coming. We know most of it. And I can say that much that we will be well above the Q4 number of last year in terms of order intake. Operator: We have another question by Mr. Jarad. Hello. Can you hear us? I can see that you're unmuted, but I cannot hear you. Abed Jarad: Yes, sorry. I have a question regarding -- a follow-up question regarding the sales forecast. So maybe you can help me understand it better. But based on your order book of EUR 267 million and assuming like 18% of aftersales, your implied order intake needed in H1 to reach the midpoint is very, very modest. And you are saying that in Q1, order momentum was strong. Burkhardt Frick: Yes. Of course, we need to have 2 strong quarters to complete the year because only what we have an intake in the first 2 quarters, the majority of that, we can still turn around in products assembled, shipped and recognized. So the first quarter, if that is strong, definitely helps to secure the guidance we provided. If we have a second quarter, which is also strong, that pretty much gives us some assurance that we are safe with that guidance. But again, this is speculation, so I don't want to speculate. I can only see a strong order momentum carried over from last quarter into the first quarter. And based on these 2 quarters, we have made our sales projection. Abed Jarad: Okay. Maybe correct me if I'm wrong, did you just mention that Q1 order intake is above Q4? Burkhardt Frick: Yes, I did. Abed Jarad: Okay. Wouldn't this already put you on the midpoint of guidance? So EUR 267 million plus EUR 117 million, let's say, and 15% after -- even assuming conservative 15% aftersales, you are above guidance? Or am I -- like midpoint of guidance? Burkhardt Frick: Well, first of all, the EUR 117 million of Q4 already included in the order book. So I cannot follow your math there completely. But yes, of course, the first -- if we have a strong first quarter, that relieves some of the concerns because it's a continued reversal of the trend at a very high run rate. And if we can also get a decent second quarter in, then I would start agreeing with you, but we are not yet in the second quarter. Sven Kopsel: Maybe, Abed, if I may add one sentence, the order book number of our annual report also always includes service business. So if we get service business, for example, a contract for 2 years, the entire period, this 2 years period is included in the total order book number. So service is not getting on top completely. It's partially already included in order book. Operator: We have one more question in our chat box by Mr. [ Dion ]. He's asking, do you see competition of ASML in the scanner business? And do you think there could be a competitor in hybrid bonding as well? Burkhardt Frick: Yes. I think ASML was late to the party to also join the backend business with the recent announcements and also their focus in that arena. I mean they already have a scanner out there targeted for backend. But this one, we don't see as a competition in the CoWoS process we are currently involved in. However, that is, of course, competition for other markets, our real competition, which is Canon is facing. So that I don't see us as a threat. The other activities, I think it's too early to gauge where this is heading. But of course, I mean, there are other companies, whether it's AMAT or Lam and already TEL who is already active in this domain. So with ASML, this is just the last party -- the last company joining the party. And I think this ultimately will just help the ecosystem to get on common ground here. So I see this rather as an opportunity to collaborate than anything else. Operator: I guess we have one last question by Mr. Jarad. He is raising his hand again. Abed Jarad: Yes, my bad. That was a mistake. Operator: Okay. Thank you so much. Well, with no further questions, we have come to the end of today's earnings call. Thank you very much for your interest in SUSS MicroTec SE. And a big thank you also to you, Mr. Frick, Mrs. Ballwießer, Mr. Rohe and Mr. Kopsel for your presentation and your time. If any further questions arise at a later time, please feel free to contact Investor Relations at SUSS MicroTec SE. I wish you all a successful day, and I'm handing over to Mr. Kopsel once again for your closing remarks. Sven Kopsel: Yes. Thank you so much and nothing really to add. So take care and yes, get in touch if you have any more questions. Thank you. Take care.
Artur Wiza: Good afternoon, ladies and gentlemen. I'd like to welcome you very cordially to the conference dedicated to the results of the Asseco Group for 2025 today. At today's conference, we will summarize our operations for the previous year, for last year, and we'll also convey information pertaining to the backlog for the upcoming year, for the current year. During the first portion of the conference, we will have the presentation. The latter portion we will invite you for a Q&A session. We have the CEO, Mr. Adam Goral, and we also have Rzonca-Bajorek, who is the CFO of the group; as well as Marek Panek, who is the Vice President of the group. I'll go ahead and give the floor right now to Adam Goral. Adam Góral: [Interpreted] I would like to welcome you very cordially. I'm pleased that we're all here together. And above all, I see in the first row, we see people who decided to be here physically in attendance. And of course, with full respect for all those persons who are participating remotely. So I'd like to welcome everybody very cordially. So Artur didn't emphasize that this is a special meeting because in a year, we Rafal Kozlowski will have to be here. And for me, this is going to be a totally new situation, of course, with the hope and looking to the future because I'm going to move into the Supervisory Board where I should be the Chairman of the Supervisory Board. And so Asseco will always be with me, and this is my entire life, of course, outside of my family, but I treat this company as a member of my family. I'm going to have to be vigilant because I want Rafal to be a leader with his attributes. He's a little bit different. We're different from another. Of course, I have a guarantee of one thing that he represents espouses the same values and that he's perfectly well prepared to run this company -- and I'm sorry for saying that saying that I believe that it was well run. But I think the company was in good hands and was well run. And having in mind that I have a good hand towards other people and is managed by really great people. And so we come here in great sentiments. And these sentiments, of course, are somewhat toned down because I would like for the world to look a little bit differently. And there's a lot of bad people heading up some company -- countries. And even though you have wonderful results, people are aware of their responsibilities, their liabilities, and it's a shame that the world is -- has much turmoil, but we don't have any impact over that. Today, up until now, the various wars have not obstructed us. I don't really want to talk about it. So we have our leader on Friday, I was talking quite a bit with [ son ]. And when we hear that 12 times during the day that you had to go into like the bomb shelter, then you become aware of what it means to think about a war. It doesn't matter who started the war. It doesn't matter who's at fault, who's the guilty party. We have to think about these people who are suffering in Ukraine and those people who are suffering war at the hands of war. And so these wars, I'm not going to say they are helping us or acting as a boost, I'm sorry, during the pandemic period, I had hoped that these times would teach us something that the leaders of -- the global leaders would understand, would grasp the concept that there's not that much that needs to be done in order for us to be totally disappear. They have to understand that human life is of importance. And so that's all the more reason to be disenchanted. But thanks to the wonderful work of tens of thousands of people in the Asseco Group. I'm able to come here today in convey wonderful information. And the previous year was a great year. It was a record-breaking year. And the net profit of PLN 1.139 billion. We have the successful sales. We were able to sell at a good price. And so we had basically 119% growth. And so we made these decisions because we thought that Sapiens should have a new impulse. And today, jointly with Advent, we want to make sure that this impulse will continue to drive us forward. And we hope that, that 18% will have a huge loss of roughly PLN 500 million of that EUR 1.139 billion is due to Sapiens. The rest, which is also record-breaking is linked to the organic growth that we have achieved. And so I'm pleased that we are well positioned in Poland and Central Europe, and you've been able to look at that, and we had a more difficult period. And I'm, of course, under a great impression that as we've been having seen the organization being run by Jozef Klein, our leader. And so for me, the test of his person as a manager is an exceptional year. This was the difficult time when those countries and we are dependent on government projects. It didn't seem that it wasn't spending money on IT and it seemed that some of the substantial EU funds that were being allocated to the energy sector and then Jozef's ambitions led to a situation. Well, it was a very difficult point in time for him. So I'm pleased that they were able to survive and this very difficult period, they were able to draw conclusions, and they were able to perceive the weaknesses of the organization, and they utilize that time in order to eliminate those weaknesses. And today, they have a wonderful 2025. And today, we believe very strongly that they will continue to prosper in 2026. So that group in terms of what's linked to Asseco International, we have reasons to be proud. And in these difficult and challenging times, our teams in Israel. This is a global company, of course, has done very well has coped very well. And so we've known for years that we have exceptional wonderful people there. I remember because I'm going to have a request when we talk about our stock exchange. I don't entirely understand this that we're not able to vote on that 1.5% for my team. So take a look at this. I was a person who was looking at the interest of the investors, the management and the people working for this company. And if I'm going to be in the [indiscernible] I'm going to be in the Supervisory Board, I'm not going to be able to -- operationally, I'm not going to be able to scrutinize these things. Ralph is going to do it, but these 95 people, for us, for the investors, this is the safety in terms of people fighting for the value of this company. And this is the time to encourage you to look at this vote. Once again, it's really worth looking at closely. Do you know why we've been able to achieve such a great success in Israel, the first thing that I did was I met with guy and I gave him a certain number of shares. Of course, in the voting, I wasn't afraid that he's going to be -- he's going to be the richest person in the world. Of course, I wish that to him. Look at the business we've been able to do there. Of course, those equities might not have been the deciding factor, but he had an incredible amount of motivation to run the company in such a way because we say that we're controlling some company. But in our area, there's no bonafide control as a leader, I'm dependent on thousands of people. In terms of how they're operating. And if that later would want to do something, it would be possible to do that legally. And doing this simple maneuver, we were able to achieve a very simple and straightforward objective. And so the $143 million has paid back quickly. And I'm pleased that our investment in Israel is the largest Polish investment. And so we've only got good experience under our belt here. And some of you had given us heatings, warnings, but they're going to try to, let's say, maneuver you and somehow do something. We have a wonderful success there. Take a look at this case and think about my people, please. Think about them who are totally deserving. Of course, they've created this beautiful history of Asseco. And this is not a salary for the history. There is a portion of that is remuneration for -- but this is also remuneration for what they're going to do in the future. So I'd be grateful if you were to follow and embrace my thinking, I'll give the floor to Marek, and we'll drill down into some of the details, and we'll talk about the individual results. And then at the end, I'll take the floor -- I go ahead and bore you a little bit more because I continue to think about the future of this company, and I'm going to tell you a little bit about how I see the future. So I'll give the floor to Marek. Marek Panek: [Interpreted] Thank you very much. So having in mind what Adam said that we still have the final section of the meeting during which Adam is going to want to speak to the future. I today will try to speak more succinctly and I'll take less time than usual, especially since the trends we've observed over the last 3 quarters were sustained and nothing happened, nothing extraordinary happened in Q4. And I think this -- so it wouldn't be necessary to talk about. Let's talk about the profits. So Adam mentioned the net profit, which is PLN 1 billion nearly PLN 140 million. But look at some of the other 2 numbers. So we have revenue at nearly 16.7 -- so it's PLN 16.780 billion, and this is a 12% increase year-on-year. And then we have operating profit, which is in excess of PLN 1.6 billion, and the increase here was 11%. As a matter of tradition, I will show you the split of our revenue by operating segments in terms of geographies. And you can see this is not a mistake. That all 3 of our segments were growing at exactly the same pace of 12% year-on-year. And if you start on the right side, Formula Group, which is the largest, and this is some 60% of our revenue, we've been able to achieve nearly the PLN 10 billion watermark. And then we have international, which is some 27% of total revenue in the group. So we have PLN 4.6 billion. And then we have the Polish segment, which is the Asseco Poland segment, and we have nearly PLN 2.3 billion in revenue. As I mentioned everywhere, we have across the board a 12% pace of growth year-on-year. We'll also show you the revenue by product groups. Here, I will not discuss this in great detail. You can see that all of our segments across the board are basically growing. In some cases, we're growing more quickly. In some cases, we're growing less quickly. All of the solutions that we have for public institutions, which represent 25%, so 1/4 of the total revenue of the group, we have very dynamic growth of some 15%. We're pleased with what's happening in banking sector from the very outset of our operations as Asseco. This is a very important and significant bulk of products or segment of products that we've been offering. So we have nearly PLN 4.7 billion. So it's more than 8% increase. And so all these things are pleasing to us. We're pleased with the diversification of our business. So the top 10 customers in the revenue of the overall group is a mere 12% of the total revenue of the group. And so -- so the largest customer represents 2% of total group revenues. So we're not dependent on any single customers or clients. And let me say a few words about our solutions for finance. We'll talk about the other segments as well. So we have across the group, some PLN 3.7 billion. We have in revenue, an increase of nearly 5% year-on-year. And so you can see in the Formula Group up until now, it was always the leader and was the major contributor of revenue in the financial segment. Now it's #2. And that is a result of the fact that Sapiens has been extracted because it was sold as was stated previously. And of course, this formula system segment is still doing very well. So it's nearly PLN 1.5 billion at 11% growth. Then we have Asseco International, which came in at PLN 1.6 billion, which is 4% growth. And we have Southeastern Europe and PST, which is our company in Portugal, which is operating in the Portuguese market. And then we have Asseco Central Europe. So all of these businesses are growing well. Then we have on top of that, Asseco Poland. So this segment, Asseco Poland segment has a 10% uptick in growth. And here, we're the market leader in terms of banking and lease companies as well as brokerage houses. And so we're very pleased because this business for many, many years has developed nicely. If we think about our public institutions, the growth is much more dynamic than in the financial sector. So we have a 15% increase year-on-year. So it's more than PLN 4.15 billion. And so we have the International segment. Well, for a couple of reasons, that's grown so fast because it's the Czech and the Slovakian markets. And as you recall, we had a stagnation there in previous years. We've been able to rebuild our position. And so the revenue is substantially higher. And the same is true in Southeastern Europe. In the Balkan Group, and so 2024 was clearly a softer year. And so we have experienced dynamic growth on this revenue. In Poland, our growth is nearly 20%. So we came in at PLN 1.2 billion in revenue. So in Poland, we are the leader in terms of our solutions for public institutions. We're a major player in terms of public administration for the health service as well as for the power sector, where our position is a leadership position. And so we're very pleased that the business has grown at such a fast clip. And then we have Formula Systems, which you can see is the major contributor to the revenue. In public institutions, it's seen 11% growth with revenue coming in at PLN 2. billion -- nearly PLN 4 billion. And the final segment that I would like to cover today is ERP solutions. So these are our businesses within Asseco International. So as a matter of fact, it's Asseco Enterprise Solution, ERP solution in Poland, Germany, Slovakia, Czech Republic, we see 8% growth and revenue over PLN 1 billion. You might have noticed that another line disappeared Asseco Poland segment. But this is the reason -- the reason is that DahliaMatic that used to be reporting to Asseco Poland was transferred to Asseco Business Solutions and now is part of the Asseco International segment. Therefore, it made no further sense to show Asseco Poland segment. In Formula Systems, we also have our ERP solutions at a lower scale, but we are very happy to see a 14% increase and revenue over PLN 6 million. We continue our acquisitions 2 slides to cover this story. We are showing all the acquisitions completed last year, Asseco Poland segment and Asseco International segment and Formula Systems segment likewise. That was the greatest bunch. Altogether, we had 13 new entries joining the group last year. So we were keeping the pace from the previous years. Every year, we have a dozen or so new companies joining the group. And we continue our efforts as we speak. We are scanning the market. We are speaking to [ content ] companies, and we are looking for the best match. We have definitely more selective approach. We don't want to just build our mass, but we want to have entities that have specific features in terms of products and competence that they bring to the table. And obviously, we have to look at the price that we need to pay and the return that we can get on each deal. Now when we look at the formula, I have to emphasize that it was a special year for formula systems acquisitions and corporate governance involvement. In addition to the acquisitions that they made, you may recall because we've mentioned that already in Q1, this year, we reached the sort of final line. However, we've been working on it since 2024, namely the combination and Matrix and Magic were joined as one company. So today, they are the largest company in Israel and one of the top 10 IT service providers globally. That was a major project, and it turned out to be very successful. We've already heard that Sapiens sale was a long project, a difficult project, but at the end of the year, very successful. And another sort of tier that we are building here, Michpal, that's the new company that was listed on the Israeli Stock Exchange last year. This is mostly HR and payroll solutions, software companies and service providers. So we are happy to embrace that because we see a lot of growth potential here. So we see a lot of good prospects for the future. Guy has a lot of ideas. He has a healthy and sound pipeline of M&A projects, and I believe that he will be delivering that step-by- step. Thank you for your attention. Over to Karolina. Karolina Rzonca-Bajorek: [Interpreted] I will briefly cover the financials. On the first slide, you see the key numbers. Marek mentioned revenue. We are almost at PLN 17 billion. And we remember that Sapiens was sold in December last year. So it was already excluded from the individual items of our P&L. So it was shown in one line as a discontinued business. Therefore, this is all comparable when you look at these numbers. It's comparable to the prior periods. So over PLN 16 billion of sales. Our own proprietary services PLN 12.6 billion and a nice growth of 7% in both items. And Non-IFRS EBITDA and Non-IFRS EBIT, 8% and 9% up, respectively, and it's PLN 2.5 billion for EBITDA and over PLN 2 billion for Non-IFRS EBIT. And Non-IFRS net profit is PLN 742 million and CAGR, the best of the past 5 years, 9% up. And for some time, we've been showing P&L items between the years. And here, we are sharing this information again. You may see that there is less negative impact of the currency exchange compared to the prior years. It is still a negative impact, but not major, PLN 48 million in terms of revenue and PLN 4 million in terms of operating business and Non-IFRS. We are truly happy about our organic results, PLN 1.3 billion it's ours organic sales. Across the group. And that was translated into PLN 300 additional million operating profit, non-IFRS. And acquisitions is PLN 452 million at the revenue line and PLN 46 million at the operating income, Non-IFRS. Net profit, Non-IFRS, we show which segments were the greatest delta contributors on an annual basis. And we can tell that Asseco Poland is doing very well. The Marek company is showing exquisite performance, but you may scrutinize in the stand-alone financial statement, minus [ PLN 11 million]. So it's a [ interior ] contribution from Formula Systems segment. The main reason is that Sapiens was consolidated over the course of 12 months. But in Q4, we had a first restructuring processes and the cost of that charged the result for the Q4. And Asseco International contribution was PLN 49 million more compared to the prior year. When you look at the entire P&L statement, and we are happy about the dynamics, 11% growth year-to-year revenue and proprietary software and services, over 15% Non-IFRS EBITDA goes up and 20% nonoperating profit, Non-IFRS and 11% the standard operating profit. And here, there is a slight decline when it comes to profitability year-to-year. But please note that it was just Q4. And the reason is in the line that you will find below and namely M&A. This is all one-off events. PLN 67 million is the write-off at Formula Systems for ZAP company. Well, they were not doing as well as we were projecting at the moment of the acquisition. So we decided to actually write off that asset. Some costs were generated by the transaction that Marek referred to. So the merger of Magic and Matrix is PLN 67 million. And then we also have some write-offs from other companies and PLN 15 million was our own project, our own investment, goodwill and assets in Nextbank company. Now what is happening below the operating profit line? Well, you can tell that we are efficiently managing our debt. We were decreasing debt year-to-year. Interest income, the cost of interest is less year-to-year. And the currency line, it's mostly the formula. Formula is reporting in [indiscernible], but they were paid for the Sapiens deal in US dollars. And the translation of the currency balance, even with a small exchange rate decrease generated major foreign exchange impact. Well, we may say that this is just an accounting impact. M&A, I've already covered. And for some time, we've been affected by hyperinflation, and that is Turkish business. And the share in profit of associates looks very nice, but this is formula who is the main contributor. We had the indexation of the revaluation of the -- our investment in the company that was doing SPO, but this year. And therefore, we have the step-up and therefore, we are showing better numbers. In addition to that, we have profit on the discontinued business or discontinued operations. So this is the accounting result that we show on sale of Sapiens, PLN 500 million. This is what we show in the current report, and this is distributed to the shareholder of the dominating company. Now the Sapiens Group. I think that we need to align our projections when we look at the operating revenue and operating profit, well, the Sapiens was a major contributor to these lines. Therefore, for 2026, because of the sale of Sapiens Group, we will be probably PLN 2 billion short in terms of revenue on our operating business and probably around PLN 350 million profit on our operating activities. So Q4 was really charged with the cost of the sale transactions at the cost of restructuring. Therefore, I would rather look at prior year instead of Q4 2025. So that was the explanatory note to Sapiens. Now what is happening across different companies. As I said, we are truly happy to see the performance of the Marek company. In terms of the dynamics and profitability, both were very, very decent. Your notes, analytical notes, expressed some surprise about the net profit contribution. Let me just explain. But when we speak about deals like the sale of Sapiens, the taxes such as CFC are actually booked to Asseco Poland line. And therefore, it is really a charge to our net result. And this is a one-off effect. In case of the Sapiens sale, the Marek company had to pay -- or had to show almost PLN 24 million of additional tax, namely CFC. So the effective tax rate for the Marek company seems to be surprisingly high, but this is the one-off effect of that transaction. In terms of other operations in Poland, Asseco Data Systems is improving their performance, and I think that they are doing quite well and other major companies seem to be in good shape likewise. Now Formula. Here, we decided to show Matrix and Magic together in one line. And as Marek explained, in February, the merger was completed. Right now, they are going to operate as one company. Magic was taken off the stock exchange. It is actually the subsidiary of Matrix. Therefore, you need to look at them as one group. And in terms of other companies, we have consolidated Michpal that was listed on the Israeli Stock Exchange this year. And we have a new subgroup under Formula. The working name or actually the formal name is Formula Infrastructure. Now Asseco International segment, we are truly thrilled with the improvement that Slovakia demonstrated. Adam highlighted that. This is both true for the core business, the public sector business, our health segment in Slovakia. It seems that they really rebounded and they improved substantially. But it needs to be highlighted that in this line, we have our ERPs. So excellent performance of Asseco Business Solutions. We also have major improvement in profitability in Germany. So that's another reason to be happy. And now the Southeastern Europe -- so great performance in dedicated solutions, major improvement year-to-year, very good result in the banking sector. And the payment segment, very decent, too. We need to remember that they are actually charged with the write-offs in India. I believe that [ Piotr ] mentioned that during the conference earlier. And there are some risks that emerged in that segment because of the loss of one of the Turkish customer and the potential loss of another customer in Turkey. Both of them are actually switching to in-sourcing. Therefore, they will drop from our customer portfolio. If we look at cash, I think this is something that has been observed. We have very robust cash flow across the year in Q4 as well. And this is true across the board, across the group. So it's 122%. And if we look at EBITDA, this is something that we've been displaying for years. And Asseco Poland this is 124% it's 109% in international and Formula Systems, 128%. So we had specially good cash flow in the Matrix ID company. And let's take a look at the balance sheet. And you can see that the header is more up to date than previously. And you can see the amount of cash. So it's more than PLN 7 billion on the bank accounts of the companies in the group. and Asseco Poland, which is the mother company and from the sale of treasury shares, it's more than $1.5 billion. Then you have Formula Systems. Here, we need to remember that more than $750 million was obtained from the sale of Sapiens. And this is also on the accounts of the company or in the segment at the end of last year. If we look at the proportional recognition, as is the case in the full recognition, we have certain reconciliations year-on-year. And so we can look at the contribution of the organic businesses and so PLN 734 million and then EUR 110 million from acquisitions. And then if we look at the operating profit Non-IFRS and so we have 3 from acquisitions, PLN 216 million from organic results. We have to remember about some of those impairments. I talked about them previously, the M&A adjustments. And so they're in this proportional recognition. What's also important here, as I've mentioned, that some of these impairments are through Formula, but we also have the Asseco Poland as well. And if we look at the proportional results, we can see that the growth rate is better and the profitability and the improvement in profitability is better. And this is a result of the fact that the Polish segment and Asseco International saw market improvement. And we also show the main companies. I don't think I will discuss that because we've already discussed that. And if we think about the proportional recognition of cash flow generated, it seems that it's very decent, 27%. And so we have 124% in Asseco Poland and 114% in International and 127% in Formula Systems. And so then we have the balance sheet set up on proportional recognition. So the cash available to the shareholders or the holders of the parent company. And so it's PLN 3.3 billion, then EUR 1.5 billion in Asseco Poland and then Formula and Asseco International. So this information has been indicated that a portion of this will be paid out in the form of dividends of some $200 million has been communicated and that this will be paid out in the formal resolution of the shareholder meeting. Well, of the Board of Directors will be made after the -- this will probably be in May once the financial statements of Formula Systems are approved. Then if we look at the backlog, I think we've got a satisfactory growth rate. This information coming from your releases. And so -- if we look at own proprietary services and software and 19% in Asseco Poland is like 17%. And so it's more or less equally divided on public systems and financial sector. So hence, we've got 9% for Asseco International and 14% in Formula Systems. And if we look at this on a proportional basis, we have 16% in Asseco Poland and 10% in Asseco International and 14% in Formula Systems. And then I mentioned the dividend. I said that we have very decent cash flow, and we have a very stable position -- cash position if we look at our balance sheet. And these robust results give us the ability and the wherewithal to pay out a dividend of PLN 1.051 billion, which translates into PLN 13.05 as a dividend per share. Of course, treasury stock doesn't participate in that and 3% of our shares are in the form of treasury stock. And so the PLN 13 per share as dividend per share. And if we look at the consensus opinion here, it's probably around PLN 11 was, I think, the figure that was stated in the consensus. Why did we make the decision to pay out PLN 1.51 billion. The first tranche would be paid out in terms of the cash proceeds from the sale of treasury stock. So we had received more than PLN 1 billion. And so PLN 500 million with plus would be a little bit -- that would be half of that would be from the sale of treasury stock and the rest. And so we took a look at the free cash flow. We factored in on our balance sheet. We looked at the results, and we came to the conclusion that all of this taken together would give us the ability to pay a higher dividend from our current results and cash flow, and that's what fed into this defining the specific figure or calculating the specific figures. Adam Góral: [Interpreted] So thank you very much, Karolina and Marek and my friend who's been listening to us that these are wonderful results, and you guys are even smiling, so I'd like to apologize. It's because of my gravity because I was talking about the world itself. And let's forget about the world for a little bit. Because we have enormous reasons to be joyful and satisfied because these results are wonderful, and they're linked to our efficacy, to our wisdom and to the cogent execution of our strategy. These are things that have happened. I've never lived in the past. So only future is of interest to me. And so of course, we're living in interesting times. So there's the AI battle, which is not easy to monetize in terms of what -- it's not having an easy go at monetizing what is achieved up until now. So this world is giving us wonderful opportunities, and new hopes. We have this battle for the world in terms of AI with us. Of course, this world isn't monetizing things because they're thinking that we're operating too slowly and informing the world, quite the contrary, that we do appreciate what AI is doing because we've reconciled ourselves that this is happening with the tools, but there's a large number of our people who are following this world or tracking that world that we're going to utilize that in a wise fashion. And Asseco's strategy is unchanging. [ Rafal ] is something that will continue along with my new wonderful partners, and we agreed that at the outset, we will continue to make sure that we're going to specialize in the producing software and services related to the software we're going to write. And this is going to be the predominant or prevalent portion of our revenue. And where it's sensible, we won't, of course, resign from integration. We want to make sure there are several regions where we are very strong. We don't want to lose those footholds. We will continue to build and make sure that we're building our sector position, sectoral position. This is something that I'm very proud of. In the near future, I'll have a meeting with my teams responsible for the various sectors and each sector is coming in with its vision for the upcoming 3 years. Of course, our strength is [ individually ] our knowledge of our customers, our customer knowledge and our customer knowledge is something that's been proving its position, its importance in Asseco for some 35 years. So I've been the leader for some 35 years. So this year, we're celebrating the 35th anniversary. We're not going to make a major celebration as a result, isn't that true? But it's a wonderful Jubilee celebration. And the fidelity in terms of our education, the awareness processes that customers utilize. This is our greatest value in the marketplace. And having in mind these new times, well, our fortune is predicated upon the following that we are present in many institutions. Well, these are nonstandard solutions. So AI trying to learn those types of solutions is something that will take a lot more time for that to be replaced or for that to be done. And so this knowledge that we mentioned on the first slide in terms of the teams of people, we talk about our human intelligence. This is going to drive the future of the company. And here, we have an advantage. And I'll show you another slide in a moment. We talk about our experience in a given area is also a great source of value. On top of that, we are utilizing and we are utilizing AI. I will show you where we are because we've made enormous inroads for many years, we've allowed ourselves to be dispersed. We've been a little bit chaotic. So 1.5 years with [ Garrick Brown ] who was -- has been running business intelligence for many years in a wonderful way and in our business division. And so we've appointed him to be a leader in terms of AI. And then I'll show you what we've achieved thus far. Our goal, we want to utilize these tools to enhance the quality of our operations, our activities. We want to be more efficient. We won't use them to restructure. We want to do more with the exact same team. That's our concept. And I'll give you some evidence that we are far along the path in terms of implementing this concept. So in some cases, we have a little bit more time as opposed to those areas where the standard plain vanilla solution is the name of the game. So when we talk about the learning process, that standard, that plain vanilla approach for those companies that are selling the plain vanilla approach, this is going to be something that's going to be precarious for them because those companies will have greater problems. We -- by utilizing our tools wisely, we're going to speed up the pace at which we're utilizing those tools. So our sectoral knowledge, which is a type of capital, this is an edge that we hold. So we have more than 30,000 employees I don't like the word employees, but that's what we wrote on the slide because these are my business partners in some more than 50 countries, the knowledge about the banking sector, about the health care sector, about the government sector. And we have people from various countries. No country has been capable of creating a solution for the government that would be a plain vanilla solution that one size fits all. This gives us some time to learn these AI tools and utilize them at the right point in time. So 12 years is the average seniority in Asseco Poland, somebody could say, well, you guys are old. Well, take a look at the last item, more than 8,000 people applying to participate in our internship programs in 2025. So in the on-boardings, we need these young people, and I convey that to them. I impart that knowledge to them. We can be -- I've never lived by success. I only see problems, and I'm interested in solving problems because I know that we're going to be better as a result. But if people are, let's say, somehow have -- they're just quite. So we're bringing on board these young people. So 12, 15 years ago, I delivered a lecture at the Warsaw University where we're being promoted and touted and Artur hadn't yet joined us. And I was showing thousands of articles, lots of publications about us that everybody knows everything about us. And I was asking the most outstanding IT experts at the University of Warsaw Do you know something about Asseco? And they didn't know anything about Asseco. So I'd like to thank Artur here. From that point in time, we've made huge inroads because our brand recognition that the young people want to join us. And we have young people. Sometimes I'm surprised they want to learn COBOL because we have solutions at PKO BP, which is a COBOL solution. And so I'm pleased to see that young people want to learn COBOL. So you should learn it, but you should make sure that you're diversified in terms of your knowledge business. You can't lose from sight those tools that are timely today. And you have to have that knowledge about other types of tools. And so you should take pains to ensure that you have those things mastered. So that's why I'm calm at ease that this company is going to be healthy, but somehow not entirely quite, not calm. We're #1 in Poland and Europe, many countries. We always talk -- say one thing about that, but the other talk -- the other things we talked about in 10 years, we want to continue being a wonderful company. We want to be a competitive company. Of course, I fully believe that we will be such a company, and that's clearly the case. Why am I trying to be reasonable about AI? As a businessman and entrepreneur, I've been through a time when IT was about distributed architecture. We were one of the very first Polish companies that were centralizing IT systems. And some people were saying, "Oh, you will get lost, the Polish system will never survive." but we made it. We were able to centralize whatever had to be centralized. And then there was a moment of the Internet frenzy. Unfortunately, we were not the main players in that field because we didn't offer the tools. But please note that we were able to grab quite a place for ourselves and build it up. And then the cloud came up. And from the very beginning, I was cautious about it because cloud mean when you have a public cloud, it means that you give single individuals huge power over everyone else. And today, I'm really happy to see the Polish government taking measures and looking at the local content. This is what we are really trying to do. Other countries have done it earlier. I've been fighting for it over 30 years because I've always been of the opinion that Polish people should depend on themselves or [indiscernible]. Let's do it the same way other nations do it. Today when we look at our Diplomatic Corp and our economic diplomacy in different countries. I also noted a major progress. You can actually rely on the Polish ambassadors. They really want to help you. And it started back when we had the first government of Civic Platform and land justice was keeping it up. And now the coalition is doing it again. We have great ambassadors for our beautiful growth and development. I'm really proud that Artur is actually setting up the meetings and people show up. People want to help us sell because they show that we were able to grow. And I know for a fact, but if we take good care of all these things that I mentioned, we will not get lost in the new world where the AI becomes a major player. Now look at [ Adam Goral ] and his team. In June last year, they made a promise, Adam, in December, we will cover your entire internal production process with AI solution. It's been covered. We have been implementing it internally. No not much is going to change with our customers because when we approach our customers, we want to solve their core problems. We don't talk about the products. We say, okay, we help you increase your sales with IT solutions. A we enhance your security or we help you control and curb your costs. So we sell that. The tools are secondary. Why am I saying that we are cautious and we try to be wise about it. The only value that we truly have is our customers and the value that we are able to bring to them. If the customers are disappointed with the solutions that will be driven by AI, we will be doomed. And some AI-based solutions are not stable, are not mature. So this cautious approach, but I'm advocating here. Is something that is not appreciated by the evangelist of the new tools. They think that we should take a different approach. You may have noticed, but there are other peer companies that are similar to us, and they've been dropping in value 20%. This is like pressure on us to get our act together and act faster here. But I have a message to everyone who wants to make money on AI. No worries here. We are going to do it in a smart way. We are going to take advantage of everything that you have developed there, but we will do it in a way that brings the real and true value to our customers, and we are not going to experiment on our customers. So the entire AI process is somewhat atypical for our organization. That's the way we do it. We opted for the federated model, and this is how we do our business. We really wanted to enhance enterprise in all our locations. We didn't want to kill the local spirit. So 3, 4 years ago, we worked everywhere on these themes. Today, we are trying to integrate that and centralize that, not to overlap and double the costs. We are trying to develop the model where Slovaks do not feel fully dependent on Poles. We want to make sure that Balkans curb some room for themselves. And I believe in that model. So the advantage over the companies that have holdings is such that they have to actually scrutinize each of their group companies. They didn't integrate it. But we are pretty well integrated across different sectors. And therefore, once we have AI solutions, it will be much easier for us to implement that than for those who have completely distributed and dispersed business. Therefore, I do have faith. I think that this is my new passion, and that's something that we are going to deliver. I don't want to bore you with the stories of all the sectors that we support and cover. I'm proud of the leaders we are disruptive, but in a healthy way and our ambitions run high. But there are 2 things where my ambitions have not been met. One is cybersecurity. We have a small company concept, and we are not yet happy with them. They are not efficient. Despite the fact that they have smart people on board, they can do a lot, but we are honest about it. We haven't been able to develop the business model that would be fully aligned with Asseco philosophy. And another area is solutions for defense and armed forces. And we have very strong references because we are supporting Frontex. But nevertheless, something is missing here. I believe in my leaders, and I believe that we will see some progress in these areas. Right now, we have a great project in Togo on the radar. You may remember the project that we successfully completed during the pandemic in Togo. We have a Togo company shared with the government. Togo is a very pro-European country, and the leaders are very well educated. And I'm really thrilled because we signed a contract for the development of the system for the Togo Armed Forces for their army. So that also has to do with the cybersecurity and solutions that address the needs of the armed forces. But now we are also trying to find a good partner for cybersecurity business. We are looking for a company that would be better than our current capabilities. Today, we are talking to a company that is of great interest to us. But at the end of the day, there is a price. You pay for the history, but you are buying the future. So we have to be reasonable about it. So this is something that I'm going to really look at and take good care. I think that in our countries in Eastern Europe, these areas have not been truly developed yet in terms of business. I believe that if we find the right leader, we would be able to build a very strong regional position. So that's what I have in my screen. Okay. So once when I am going to be on the Supervisory Board, I'm really going to harass -- sorry for my word, but everyone who will be responsible for these areas that I have just mentioned. But they know how I handle that. I have a lot of patience and -- but I believe that we will be able to build a new position for our business. And the time comes when we have to assess our partnership with our friends from the Netherlands. I'm saying that they are our friends. It hasn't been a long time, but I have to say that we are really pleased I am grateful. Probably the transaction would have never occurred if we were not able to keep the Polish control, so to speak, in terms of the power and being able to decide about the strategy. They come from the background that has a different strategy. When we were buying companies, we were integrating and building our integrated position. Their philosophy is that each company that they acquire, they have as a separate company within the group, and they actually have a separate settlement for each investment. This is a different approach. But now they are looking at the way we are doing it because they truly appreciate the fact that we are in a very special point in time. AI is definitely affecting or impacting our world and our companies have to respond adequately. And I would like to really acknowledge our gratitude to them. I would like to thank them for their openness, for being so generous with their knowledge, the expertise that they have with acquisitions and with handling of the companies once they are acquired. They also have a lot of expertise in finance management. So I have to say that they were really open about it. We were actually borrowing some of their solutions and methods. Some KPIs that they have been using. This is not very surprising to us because they were looking at cash flow, and we were also very mindful of our cash flow. For them, cash was #1 and so has been for us. But they also have other KPIs that really help, but they keep people motivated. They also have KPIs for software companies that are able to identify certain weaknesses. We've been also looking at that, but I'm really happy that we were able to tap into the expertise of these KPIs because to be honest, we were relying more on our intuition here. And based on that knowledge, I think that Rafal can claim the greatest contribution here. Asseco growth. And this is the project that started a lot of commotion within the group because everyone thinks, okay, we've been doing it for years. We know everything about software. But suddenly, it turned out that others approach the same thing from a completely different perspective. So I have to say that it was a very informative and educational experience. And I really wish that we would have this 1.5% approved. I don't feel sorry about the 3% that I didn't get, although they told me openly that Adam, you have to get the 3%. But I say, okay, I can go about it because otherwise, it's like not appreciating the succession that you need. There is a change in generations, right? If you've been doing business with someone and they always deliver and never failed you, you really want to continue doing business with them. So in my generation is still there and is still quite efficient. Rafal has his own peers of his own generation, and he's navigating that very well. But my role is to make sure that we have proper continuity with this succession. So they came to us and they said, well, 3% is the right way to go. I told them, look, our market is not really ready for that. So they were disappointed that we were not able to take a good vote on that. So they don't understand our mindset and our investors. But they continue to respect our country and our market and our capital market. And we believe that together, we were able to vote in the favor of this 1.5%. Once we finally close 2025. Now 2026 makes us optimistic. I always say that it's great. I always say that we are good. And Artur was saying that we are phenomenal. We were great. We were phenomenal. I've already said that on several occasions when I was speaking about our company and our business. So I've been learning too. So very optimistic. Today, journalists were asking questions. They were saying, Adam, we would like to meet you again. I said, look, now Rafal is the key man. I am a very open person. I think that Rafal is more restrained. But if he's more restrained make sure that he's more down to earth, because media has never failed us. And even if I was saying way too much, they didn't publish everything when I said afterwards that, well, perhaps that shouldn't be published. It's not very much shame of that, but we are just humans. And to rank people who are onboarded in the company, I always tell them, look, we don't have a single individual in this company who has never made any mistake. The shame is to repeat the same mistakes again and then to lie about it. If you made a mistake and if you lie about it, then as a result, 100% can get sacked because of it. If you don't lie, if you're open about it, everyone will help you repair and remedy your mistake. That's the way we need to keep it at a [ side]. We have to be positive. You may say, okay, it's hard, but you have to multiply it by 10, saying what you can do to make it better. We are critical, but not in terms of complaining, but we are critical in terms of, okay, that needs to be improved. This is what has to be done about it. It's not about just complaining and saying, I don't know what to do about it. And we are not afraid to make mistakes. And we believe that customers are definitely sacred. They pay our bills. So if something prevents us from providing good service to the customers, we have to fight with that. You have to show it to us, but this is wrong and young people are coming full of power and energy. I love the onboarding experience. I always tell them that they have to address me as Adam. I have a great assistant and she's 24 years, and she's addressing me Mr. President. And I say, look, one order that I always give, I'm Adam. Look, I'm not saying farewell. I'm not really leaving for good, but I'm -- it will be tough because I've always loved meeting you. So I don't know. I will have to learn what to do not to get into Rafal's way. Rafal is definitely sharing and representing the same values. I know that he's prepared. He knows everything how to do the job, but he's a different person. I want him to be himself. I just cannot get in his way. And I know that things will be fine. And I would like to thank all of you for still coming to our meetings because we've been together on so many occasions, but probably you don't find me surprising. I said at the beginning that there are wars out there, and this is not a reason to be happy. But then there is another aspect. It's important to actually speak to people face-to-face. The more the people we have in the room, the merrier it is. It's easier to smile when you have real people sitting in front of you. I know that we have 100 people who are watching us online, but those who came here and are with us in person, it's really nice. Well, perhaps for those 100 that are just watching us online, we were not top performers. If there is anything we need to improve, please let us know. Operator: [Interpreted] So after this wonderful presentation and summary, we have the opportunity to move on to the Q&A session because there are questions coming to the forefront from some of our participants, our online participants. And so the idea is we'd like to move on now to the Q&A session. And at the end, we'll wrap up by bidding ado. So let's begin with the first question in terms of this year's recommendation for the dividend. Should we treat that as an extraordinary dividend? What is the dividend policy for the upcoming years? And in subsequent years, should we anticipate that there would be a higher amount or quantum of transfers to the shareholders? Unknown Executive: [Interpreted] If we will not acquisitions are still our passion. It's more difficult to buy things. There's an enormous amount of competition. We have certain boundaries. The only limit, I think I mentioned that in terms of relations with our new partners that the decisions, acquisition decisions, we make those decisions together. This is a limitation for Marek. This is something we wanted. We wanted to buy things at the optimum price. So we've had major success even if we were a little more intuitive than our new business partners. We've been very effective. I would like for Marek's team to have access to knowledge about how others do that. And I'm pleased that we have that access. So Marek has several potential acquisition targets. We're working on that now. But in Asseco, we always want to buy for organic growth. That's our obsession. One of the very kind journalists, Adam, you know you had Balkans, other areas, but those were different times. At that point in time, we were buying companies at normal prices. So today, if somebody is coming forward to us and we have tens of people, business owners talking with me per annum. And so Marek, of course, is talking with them because Marek, of course, introduces me as well. And so somebody is coming forward and what they've created, which is far away from our standard is pricing that at a multiple of tens over the profit, but they don't want to buy the brand. And I'm not interested in that because we have -- we can pay a lot for the past, for the history. But the fact that we're going to build the future together, well, because if you're using a very high multiple, let's say, 30 or 20 or 40, whatever, then we all understand what that means. And since there's a lot of competition, there are funds out there that have a pressure to spend money and Asseco is not going to participate in that type of battle. We want to attract business owners who understand that based on what you've created in Poland, you can create a wonderful European position because we've proven that we're capable. Our model has proven itself. We know how to attract business owners from other countries. And so if we can find partners like -- and we're looking for those types of partners and hypothetically, we have them, -- but of course, we can always haggle a little bit about price multiples. We are buying -- not to buy. We want it to be effective to generate a return. And jointly with our leaders, we want -- we're going to give them a lot of authority to build things. So if we don't have those type of projects, you can always count on a hefty dividend. And of course, if we have those type of M&A projects, then we won't have that cash. And so the dividend will be a little lower. And so this is a question to our colleagues from Business Solutions. In Asseco Business Solutions is the biggest impact of the national inventory system KSeF was it exerted in Q4 2025? Or will we see it in subsequent quarters? So perhaps I'll field that question because I'm in the Supervisory Board. And I think I might not be entirely precise. I think we can count on KSeF, this national invoicing system. I don't think I'm apologize for saying perhaps I don't know the figures. I don't think it was the biggest quarter for us, Q4 2025. So at the beginning of 2025, we were counting on the national invoicing system. The results were phenomenal because all of you in ABS are proud of what we have done. What Rafal did on an international basis, that integration of our teams with Germany, and Germany is doing very well and competing with Poland, trying to catch up. And of course, this will take a little bit of time. And so we're working strongly on Slovakia and Czech Republic because we want to have integration, I believe in that strongly. So I think in ABS, we will continue to deliver results through the national invoicing system,. And if we talk about recurring revenue, and this is something that's been prepared that we're going to have increase in recurring revenue. For people who might not know the Polish market, today, we have the opening the next wave of companies that will utilize the national invoicing system called KSeF. And so those companies, there's going to be many more companies starting to use that. And so this is coming down. It's going to be applicable to medium-sized companies and smaller companies. What are the problems with implementing or adopting the share system? And what are the obstacles to implementing this program? So based -- this is a little bit of gossip. Basically, what I'm hearing is as follows: the open-end pension funds, we can't give anything away free of charge because we're paying for the past, so we can't vote in favor. So I can embrace that -- I can accept that opinion. But I'm asking these OFEs for them to think about this because even if something is so highly regulated, that's against the development of the Polish capital market, and I'm always going to be an advocate because had it not been for the Polish Stock Exchange, we would not have moved for it because in 2024, nobody would have lended money to Adam Goral for his -- to build his fantasies because I wouldn't be able to prove to any bank in 2004 that I was going to be capable of doing something had it not been for the Polish Stock Exchange. There would be no Asseco. I'm sorry to say, I regret that we don't have a sufficiently large number of IPOs and business owners have started to stop seeing that there's opportunities linked to being on the exchange. So like PKO BP, baby was waiting for us with a credit to when we wanted to buy back shares. Well, the times are different nowadays. And we have to remember that times do change. So of course, I understand the regulations. Well, let's change things that are illogical. My friends from the Netherlands and Canada linked to Constellation, they don't really understand what's behind this because for them, the fact that we will vote this through, well, it's not a guarantee because we're making decisions together in fact. The fact that we voted through gives greater certainty to all of us as investors. So I would precede those. We understand those who can't do it because of the laws, but I hope that we'll have people, if we looked at the results of voting, I was nearly satisfied. We were only missing some 700,000 shares. So that's not very many. So maybe somebody want to come to the shareholder meeting, we're going to vote on that. And then we could vote it through. Let me tell you, honestly, I don't understand why they're behaving this way. We, as investors, why don't we want for one group of Poles that have worked hard and toiled hard for them 95 people for them to receive a total of 1.5% of the company. Of course, 1.5% PLN 200 million. Of course, it's PLN 200 million. That's 95 people that will be the recipients. We haven't -- we're not creating [ oligarchs ]. We want people to have interests aligned and be participating in the risk we have. And if we want to be active on the Polish Stock Exchange, if you want to have more IPOs, we have to have and utilize mechanisms that are utilized on mature stock exchange. I'm not sure if this is of importance, if it will have import. We've been -- we've received rewards or awards by like, for example, the Parkiet newspaper that gave us an award for the growth we've been able to achieve in terms of our market cap and so on and so forth. But I also asked and perhaps these words will exert an impression on somebody and they will vote through proposal through. Well, people are for those person, we want to take care of the stock exchange. The people who are taking care of our business interest, we want more and more of these people to think about the interest of the investors for them to buy for the value of the company and the shareholder value. Operator: [Interpreted] The next question, is it possible to think about the sales of the -- remaining 18% shareholder -- share stake in Sapiens? Well, you remember that after the sale of Sapiens, this is a strange case. We lost control because we sold almost all of the shares. We hope that we have an 18% minority stake, which we hold indirectly in Sapiens. Unknown Executive: [Interpreted] And so this is a good position to think about how to earn thinking about the new shareholder, what the new shareholder is doing in Sapiens, what the restructuring processes are in telling, and we surmise that advent because that's a new investor, if it makes the decision in a couple of years to sell Sapiens, then of course, we will, of course, join forces with them in that sale. Operator: [Interpreted] The next question, what will you earmark the money -- the proceeds from the sale of Sapiens in terms of -- because only a portion is going to the dividends. Unknown Executive: [Interpreted] But well, we don't have the right. You know Guy, even though he was started as a manager, we gave him shares. He's an investor. He's a business owner. He's an entrepreneur. And please note that everything that he did was with our consent and he's nearly made no mistakes over the last 16 years. He was buying at the right prices. We've all forgotten because you were -- perhaps you were right. We were buying shares in the holding, which was running a company that was slightly lost. This is not the Sapiens that was sold just recently. This was not the Magic. This was not the Matrix company. All of that was growing and expanding, not talking even forgetting about the new purchases. So in terms of investing in running these type of companies, he knows and he's very cognizant of. He knows it very well, and he talked -- he didn't give me much time sometimes for some decisions. That's true. But I always had that time to make a decision. I received the materials that were needed and so on and so forth. I continue to believe in him, and we're going to pay out a very hefty dividend. I think we can officially say -- so it was already announced at $200 million. And so we're also counting on a dividend. Well, Guy is working how to neutralize this fact, the sale of the majority stake. He has ideas. We won't talk about those ideas because I analyze this is a new topic in terms of building a position in a given area is still within the framework of IT. He's not running into other areas. And initially, this is something that really appeals to me in Israel. So we wish peace to that corner of the world. We hope that peace will be achieved. And major investments are in the works, infrastructural investments. And we would like to have a company, a group of companies prepared to participate in these projects because we have a very strong position there. We haven't agreed on this, but if there were no interesting targets on the marketplace to purchase, well, then we can always buy back some shares in formulas, we can increase our shareholding. We have some opportunities. I'm not saying that we as Asseco, but utilizing that money that's there. So we can have different types of ideas. Today, we're not being precise on that subject. But I wanted for this decision to be a joint decision about Sapiens because we were of the opinion that we were coming close to a wall that we might not have better ideas. And looking at Advent we're learning a new approach to these type of situations. We believe strongly that Advent is going to be effective and that our 18% stake will have the same value of what we sold. And -- this is something that we wish to those people who are now managing. We wish that from the bottom of our hearts. Operator: [Interpreted] The next question is about TSS and Constellation as your potential competitor in M&A in terms of consulting on M&A. Is that something that's beneficial to Asseco? Unknown Executive: [Interpreted] So Marek, he likes to argue. So this is my area. And of course, we're competing with TSA in Constellation and M&A. And that's not changing after the transaction, but we have written down what we're going to do together and how we're going to behave if we identify a conflict of interest. And so betraying what it looks like from the kitchen. So if we identify that there is a conflict of interest that we're competing on a given project, then we won't engage in these type of consultations in that case. So even members of the investment committee from the TSS that would not participate in these meetings. They would not have any role to consult on those projects. And so we can do that according to our own recognition, according to our best knowledge and our experience. But this is an area where there is competition. Well, this is high business culture. somebody might think about it whether or not you needed that. But take a look, had we not been together. We wouldn't know anything about it. We would compete with one another anyway. Today, I wouldn't preclude a situation, in fact, that we will not want to buy something and we'll inform them of that fact. And we'll give them that target for them to think because it's perhaps the case they might want to buy it because this could be aligned to a concept they harbor. This is something we're going to be able to master. Marek, there are some individual examples and we've developed -- we've cultivated them. There are some cases. It's hard to be surprised because TSS and Constellation are highly active players and the market of potential targets is finite in size, that universe is finite in size. So in many cases, in 5 cases, we had conflicts of interest. And if this is something that we can live with out of a number under 20. Operator: [Interpreted] The next question is to Marek. In terms of potential targets in cybersecurity, are there any Polish companies in that universe? Marek Panek: And the answer is brief, yes. And this is where I would stop. Operator: [Interpreted] And the final question that we have from remote participants, are you thinking about developing a motivation program where the strike price would be closer to the market price as opposed to, let's say, PLN 1. Unknown Executive: [Interpreted] Well, yes, in our concept, I don't know if somebody has noticed, we have 1.5% stake. Those are shares linked to my -- to me. I've selected some 95 persons who, in my opinion, will clearly drive the future. I would like to give shares to 33,000 people. There is no person in our company, in our group who will not drive the future. But just as such, that we had to make some choices. And so for group consists of 95 people. And I believe that these people have earned and deserve to take a role in the future. This is one program. And in that program, these objectives, we can discuss what those objectives should be. But this is going to be PLN 1 because we need these people as investors, but there is a program PLN 0.25. That is a program to change or slightly new bonus program and the bonus program this is experience that I've known from Constellation for years, and this is from [ Topicos]. And so Rafal Kozlowski is today coming forward to each one of our leaders in people who are heading up businesses. And the proposal is that a portion of their bonus would be paid out in shares, in equities, and they will be purchased at the market price. And so these shares would be purchased at market price. And so we'll have a program of that sort as well. I don't know the details, but [indiscernible] who set up Constellation in that overall concept. This is a person from the financial market. He himself with his family. I don't want to -- it was a 7% or 9% over 30 years. These were shares. These were these bonuses. That's how he was able to compile that position that were purchased at various points in time. We want -- our team doesn't have an obligation to follow that program, but we would also like to implement that program. And this will be an additional portion because the 95 people, this will give us a guarantee if you assist me in making sure that we can vote this through at the shareholder meeting, and then we'll make sure that, that other program is going to be available and that we want to remunerate people in the form of shares, of course, at the market price. So we'd like to thank you. Are there any other questions here in the room? Would anybody else like to we don't have a question from the room. So we'll wrap up the Q&A session. And we'd like to thank you very much. And so we've started this year very well. So it portends well. In the near future, we'll come back, but they won't take me to participate in the quarterly conferences. So I think Rafal will be Okay. You can -- so you can take him. I'd like to thank all of you, all those people who are participating remotely, the people here physically in attendance. And so I would like to thank you enormously because we are a very close-nit group, and we've lived many years together in a beautiful way, and you've all had a very positive contribution to the development of our capital market. You've never disappointed me. So I didn't have the 95% share. You've never disappointed me and the votes were always consistent with what I was thinking or what I came forward to propose. And so I'm very grateful because you have a real participation in what we as Asseco have achieved this great achievement. Let me tell you, this is a commercially viable approach. It's worthwhile to turn over that 1.5% equity stake to 95% [indiscernible]. So let's continue vying for our position for there to be peace across the world because then it will be very easier -- much easier for us than to smile then. So thank you once again, then Bye-bye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good morning, everyone, and thank you for participating in today's conference call to discuss Synergy CHC Corporation's financial results for the fourth quarter and full year ended December 31, 2025. Joining us today are Synergy's CEO, Jack Ross; CFO, Jamie Fickett; and Greg Robles with Investor Relations. Following their remarks, we'll open the call for analyst questions. Before we go further, I'd like to turn the call over to Mr. Robles as he reads the company's safe harbor statement. Greg Robles: Thanks, Liz. Good morning, and thanks for joining our conference call to discuss our fourth quarter and full year 2025 financial results. I'd like to remind everyone that this call is available for replay and via a live webcast that will be posted on our Investor Relations website at investors.synergychc.com. The information on this call contains forward-looking statements. These statements are often characterized by terminologies such as believe, hope, may, anticipate, expect, will and other similar expressions. Forward-looking statements are not guarantees of future performance and the actual results may be materially different from the results implied by forward-looking statements. Factors that could cause results to differ materially from those implied herein include, but are not limited to, those factors disclosed in the company's SEC filings under the caption Risk Factors. The information on this call speaks only as of today's date, and the company disclaims any duty to update the information provided herein. Now I would like to turn the call over to the CEO of Synergy, Jack Ross. Jack? Jack Ross: Thank you, Greg. Good morning, everyone. Thank you for joining us today to discuss Synergy's performance for the fourth quarter and full year 2025. While 2025 was a year of transition in many areas of our business, it was also a year of meaningful strategic progress that sets an important foundation for sustainable long-term growth. Before discussing our performance, I want to briefly address the 8-K we filed regarding our international license agreement covering the UAE and Turkey. As many of you recall, in mid-'25, we expanded our international license partnership to include UAE and Turkey for a baseline licensing fee with additional royalties tied to product performance. However, the licensee has elected to terminate the agreement, given the increasing instability and uncertainty across the region. As a result, the $2.5 million licensing revenue associated with the agreement had to be reversed in the fourth -- sorry guys. I have technical difficulties here. Just one second. Okay. While unfortunate, this outcome reflects the macro volatility outside of our control rather than any change in our conviction around the potential of FOCUSfactor internationally. We continue to view the UAE and Turkey as an attractive multiyear growth market for both our supplements and functional beverages. The groundwork we laid in 2025 hasn't been lost, the demand remains intact. The brand is strong and our international strategy continues to be focused on scalable, capital-efficient expansion. Before I turn the call over to Jamie, I want to touch on another development that further supports our international growth strategy. During 2025, we established our wholly owned subsidiary in Mexico. And in December, we initiated our first product shipments to Costco, Mexico. On the beverage side of our business, during the first quarter of 2026, we have generated over $600,000 in gross revenue surpassing the entire 2025 revenue, which now equates to $2.5 million run rate for 2026. We have shipped our focus in energy RTDs in shots to new key distribution locations, including EG of America, the parent company of Cumberland Farms convenience stores, Wakefern Foods, Indian Nation wholesale, Mackoul Distributors, Mancini beverages, [indiscernible] and Pine State Beverages to name a few. We have millions of cans of RTDs and shots in stock and ready to ship, and we expect 2026 to be a foundational growth year for our Beverage division. We continue to execute on our supplement side as well, having just shipped 3 new SKUs to all 1,600 Kroger locations. One initiative that we did not achieve in 2025 was turning back on the TV advertising, which is hugely important for our existing store growth. We will be diligently working towards executing this in 2026 to drive same-store growth within our key retailers. If the results that we achieved in the past hold true, we expect to see at least a 15% lift in same-store sales once the TV advertising is up and running. With those updates, I'd like to turn the call over to our Chief Financial Officer, Jamie Fickett. Jamie? Jaime Fickett: Thank you, Jack. I'll now review our financial results. Beginning with the fourth quarter, net revenue was $6.07 million compared to $10.27 million in the year ago quarter, a 41% decrease versus the prior year. The decrease was due to the termination of the license agreement of $2.9 million. Without that reversal, net revenue was $8.97 million, a 12.7% decrease. Gross margin for the fourth quarter was 36.6% compared to 63.3% in the same quarter last year. The decrease in gross margin was primarily driven by the termination of the license agreement of $2.9 million and the write-off of obsolete inventory of $1.04 million. Without those 2 items, gross margin would have been 68.8%, an increase from prior year. Operating expenses for the fourth quarter were $15.53 million compared to $5.14 million in the year ago quarter. The increase in operating expenses was largely due to one-time items of an allowance for bad debt of $6.6 million and the write-off of prepaid media credit of $0.9 million. Without those 2 items, operating expenses would have been $8 million. The majority of the increase was due to professional fees for our corporate development. Loss from operations for the fourth quarter of 2025 was $13.31 million compared to income from operations of $1.35 million in the fourth quarter of 2024. As discussed, this is largely due to onetime items of allowance of bad debt of $6.66 million, termination of the license agreement of $2.9 million, write-off of the obsolete inventory of $1.04 million and the write-off of a prepaid media credit of $0.9 million. Without those one-time items, loss from operations would have been $1.85 million, which is impacted by the increased professional fees for our corporate development. Net loss on the fourth quarter -- net loss for the fourth quarter was $14.82 million or $1.35 per diluted share compared to net income of $105,700 or $0.01 per diluted share income in the fourth quarter of 2024. This is largely due to one-time items of allowance of bad debt of $6.66 million, termination of the license agreement of $2.9 million, write-off of obsolete inventory of $1.04 million and the write-off of prepaid media credits of $0.9 million. Without those one-time items, net loss would have been $3.35 million, which is impacted by the increased professional fees for corporate development. EBITDA loss for the fourth quarter was $13.28 million compared to EBITDA income of $1.68 million in the fourth quarter of 2024. Adjusted EBITDA loss for the fourth quarter was $4.48 million compared to adjusted EBITDA income of $2.79 million in the fourth quarter of 2024. Now turning to our full year results. For the full year of 2025, revenue was $30.38 million compared to $34.83 million in the year ago period. Without reversing the $2.9 million in license revenue, our net revenue would have been $33.28 million in 2025. Gross margin for the full year of 2025 was 66.8% compared to 67.9% in the year ago period. Without the previously discussed inventory write-off, gross margin would have been 70.3%, an increase over prior year. Operating expenses for the year were $28.76 million compared to $17.84 million a year ago. Without the one-time items previously mentioned, operating expenses would have been $21.24 million, which is impacted by the increased professional fees for corporate development. Loss from operations for the year was $8.46 million compared to income from operations of $5.8 million a year ago. The decrease is also due to the one-time items as discussed. Without them, the full year income from operations would have been $3 million, impacted by increased professional fees for corporate development. Net loss for the year was $12.3 million or $1.27 per diluted share compared to net income of $2.1 million or $0.28 per diluted share a year ago. This is also due to the one-time items as discussed, offset by a gain on the settlement of our notes payable of $2.15 million. Without those items, the full year net loss would have been $3.03 million, which again is impacted by the increased professional fees for our corporate development. EBITDA loss was $6.19 million in 2025 compared to EBITDA of $6.46 million a year ago. Adjusted EBITDA and income was $800,000 compared to adjusted EBITDA income of $7.35 million a year ago. Moving to our balance sheet and cash flow. As of December 31, 2025, we had cash and cash equivalents of $2.6 million compared to $687,900 as of December 31, 2024. Inventory was at $3.7 million at the end of the fourth quarter compared to $1.7 million at the end of 2024. At the end of December 31, 2025, we had $33.3 million in total liabilities compared to $33 million in total liabilities December 31, 2024. At December 31, 2025, we had a working capital surplus of $1.78 million as compared to a working capital deficit of $1.12 million as of December 31, 2024. For the 12 months ended December 31, 2025, our cash used in operating activities was $2.6 million compared to cash used in operating activities of $4.8 million at December 31, 2024. The decrease primarily reflects higher noncash charges, including bad debt write-offs and stock-based compensation as well as improved cash collections and accounts receivable, partially offset by the increased inventory investment and the gain on the settlement of debt. Now I will turn the call back to the operator. Operator: [Operator Instructions] And our first question will come from Sean McGowan with ROTH Capital Partners. Sean McGowan: Can you hear me okay? Jack Ross: We can. Sean McGowan: On your comments on the RTD year-to-date being better than all of last year, it kind of implies that the fourth quarter was, I don't know, maybe $200,000 or something and -- so what is still going on there that kept out from being a lot higher in the fourth quarter? Jack Ross: We -- as you know, we just raised the money to actually build the inventory in August and to actually get the inventory built takes time, meaning 8 to 12 weeks to build the inventory. So we just really received the majority of the RTD inventory in-house in December. So that's what affected that. Sean McGowan: Okay. And looking at some of the other lines, was, let's say, compared to the third quarter, was Flat Tummy up? Jack Ross: No. Flat Tummy continues to decline. The weight loss business is being heavily impacted by the GLP1s. It seems that the whole industry has moved to those. So we'll be making a strategic decision on Flat Tummy in the near future. Sean McGowan: Okay. And then on the core supplement group, what's going on there? Jack Ross: The core supplement group, I think, is relatively strong. We continue to add key retailers like Kroger, we mentioned, although the TV advertising is very key to that same-store growth. We have our competitors. We all know who the competitors are pounding the TV airways every single day and night and we need to get that TV turned back on. Sean McGowan: Okay. And what do you think the outlook is going to be with a lot of these one-time things behind you regarding gross margin? Jack Ross: Jamie, you want to talk to that? Jaime Fickett: Sure. We anticipate gross margin to maintain its current level or increase. Again, it was impacted largely by those one-time items. But other than that, our gross margin remains stable. Sean McGowan: Do you mean -- when you say at the current level, you mean excluding those one-time items? Jaime Fickett: Yes. Sorry, like as I read in the script. We look at it normalized. Sean McGowan: Okay. And has there been any other changes to your approach to kind of go-to-market strategy on the RTD as you look to roll that out? Jack Ross: No. I think again, it's a sales cycle, Sean, right? So these things are all driven by planograms. So you really get twice a year where you can really call gain meaningful distribution and we'll call it the major chains. Certainly, you can add smaller chains in the meantime. But we continue with the sales cycle. We do expect -- this is big news. We do expect to have some Costco roadshows coming up in different regions, and we expect to have a BJ's road show coming up. So it should be some meaningful growth there on the beverage side. Operator: [Operator Instructions] And our next question will come from Edward Woo with Ascendiant Capital. Edward Woo: Congratulations on the growth in Mexico. You guys recently formed a subsidiary in Mexico. Are there other international markets that you plan on creating a subsidiary to ship directly in those markets? Jack Ross: Edward, good speaking with you today. No, we don't have any other any other plans on open and international markets directly at this time, although Mexico is a massive opportunity for us to build out the retail network there. So having that subsidiary there allows us to do that. But as you can see, we've started a lot of initiatives last year and for Synergy 2026 is about executing against those initiatives. If those TVs turn back on, get the same-store sales growing, get the opportunities in Mexico that we've already identified up and running and continue to grow our beverage business, that's the focus for 2026. Operator: At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Ross for closing remarks. Jack Ross: Thank you, everyone, after joining the earnings call today. We look forward to speaking to you shortly as we report our first quarter 2026 results. Thank you. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Philippe Palazzi: Good evening, everyone. I'm pleased to hold this presentation today together with our CFO, Angelique Cristofari. Just keep in mind that the figures we are presenting today are financial data that have not been yet approved by the Board of Directors and as well, they are not audited. Angelique will provide further details later on regarding the financial framework behind all these figures. I will start with a short introduction on where we stand in our transformation journey, followed by our key financial indicators for the full year '25. Then I will provide you with a brief reminder of our Renouveau strategic plan ambition, and I followed by an overview of key '25 business achievement per brand. Then Angelique will walk you through our financial performance for '25, and I will close the presentation by providing you with some perspective and insight on the French retail market. We'll take your questions at the end of the presentation. Let's start with a quick update on the turnaround plan status. Casino turnaround is a long-term 3-phase mission, restore, recover and grow. After an intense period of transformation, we're entering in the phase of recovering. Our strategic plan, Renouveau 2030 defined in Q4 '24 had been updated and expanded by 2 years last November with the objective to generate value over the period '26, 2030. We have also launched in November '25, the adaptation, the strengthening of our balance sheet structure. Angelique will provide you with more details during this presentation. Let me first start by introducing our '25 financial data estimate. First and foremost, '25 marks a new momentum in a strong increase in profitability for the group. '25 financial data estimates are fully in line with our value creation plan and confirm that the turnaround is well underway. Regarding our sales performance and for the first time since the financial restructuring, we are posting a positive like-for-like sales growth. Net sales reached EUR 8.3 billion with a like-for-like growth of plus 0.5% versus PY. Regarding our profitability, adjusted EBITDA before lease payment is growing by 14% versus last year and reached EUR 655 million. This result reflects the efficiency of our cost optimization, our store fleet rationalization measures and last but not least, the improvement of our retail gross margin. The adjusted EBITDA after lease payments reached EUR 198 million, representing a growth of EUR 86 million. Finally, our free cash flow reached minus EUR 120 million, an improvement of EUR 519 million versus PY. Let me give you a brief reminder of our Renouveau strategic plan ambition before to enter into the key business '25 achievement per brand. If I have to summarize our long-term strategy in one sentence, I would say, differentiate brands as possible and centralize resources as necessary. We are a group of 7 well-known brands that are all unique and complementary, which is Casino, Cdiscount, Franprix, Monoprix, Naturalia, Spar and the last one, Vival. We are now fully engaged in delivering Renouveau 2030 ambitions to offer our customers the best brands in convenience retailing. We have just updated and expanded our Renouveau strategic plan by 2 years and our vision, mission and direction remain unchanged. Our 2030 strategic plan is based on 5 key strategic levers supporting unchanging core vision for the group, strength of our brands, our culture of service, our strength as a group, the energy of our people and our societal and environmental values. These levers are all connected, interconnected and declined per brand to specific actionable measure. The entire company is focusing on execution on a day-to-day basis. Before providing you with the key business '25 achievement per brand, let me give you a brief summary of our Group '25 focus. Here are 6 core execution focus of 2025. First, brands and store concept investment, focusing on actions on creating, testing and launching pilots and rolling out store concept as well as refining brand personality. Investing in our franchisee development with now circa 85% of our store portfolio is franchised, streamlining our store portfolio to eliminate loss-making store with profitability as a key driver versus market share at any cost, managing COGS improvement, rationalizing and massifying private label volumes, increasing national brands assortment overlapping across brands, implementing Aura Retail and Everest alliances and continuing cost reduction, notably through the rollout of several group shared services such as IT, accounting, payroll, legal, name it. Last but not least, cash management with a definition and a follow-up of a detailed CapEx program and optimization of our remodeling costs. I will now guide you through an overview of the key business '25 achievement per brand. Let me start first by Monoprix. For you recall, Monoprix business unit represents 624 stores by the end of 2025, of which 283 are owned stores and 341 are franchised. Let me present to you in one slide the main Monoprix achievement in 2025. Monoprix sales reached EUR 4 billion in 2025, representing a like-for-like growth of plus 0.6% and an adjusted EBITDA growth by 10.9% versus PY. The results reflect the good performance of Monoprix, especially in fresh products, nonfood categories such as fashion and home decoration. What are the main Monoprix achievement in '25? First, several initiatives have been launched in the key quick meal solution market. Monoprix defined, tested and launched the new concept La Cantine in 12 stores by the end of '25, posting encouraging double-digit growth. During Q2, Monoprix introduced a new quick meal solution assortment with circa 250 SKUs rolled out in all of our stores. Second, regarding the food category, Monoprix was focusing on developing fresh category with the rollout of 25 new fresh counter and 14 stores with a new fruit and veg concept. The team continued to strengthen Monoprix singularity and personality brand, thanks to the introduction of over 800 innovation to the assortment this year. As far as the nonfood is concerned, Monoprix sustained growth in the beauty and fashion category by defining, testing and launching a new beauty concept rollout already in 14 stores and by developing a new collection supported by our 11 partnership with designers in '25 in home and fashion category. Fourth, we have also worked to continue our digitalization to position Monoprix as an omnichannel brand. To name a few, we extended our partnership with Amazon to 22 additional cities. We developed quick commerce solution with Uber Eats and Deliveroo covering today 92% of our store network in France. We finally developed our new e-commerce site, [monoprixshopping.fr], dedicated to fashion and decoration categories. In parallel, we kept on working core retail fundamentals, improving product availability and reducing shrinkage, increasing the number of conveyor belt checkouts plus 10 points versus last year, giving more shelf space to highly profitable nonfood category. We took the opportunity by closing 28 magazine and newspaper departments in our store. Regarding the Monoprix and Monop' store network management, 26 new stores opened over the period, while 20 underperforming ones were closed. 30 owned stores were switched to franchise. And last but not least, we started store remodeling with 7 stores in 2025. Let's now continue with Franprix. For you recall, Franprix business unit represent 999 stores by the end of 2025, of which 296 are owned stores and 703 are franchised. Let me present to you in one slide main Franprix achievement in '25. '25 obviously was for Franprix, a year of unlocking potential. Franprix sales reached EUR 1.5 billion in '25, almost flattish with -- sorry, adjusted EBITDA growth by circa 20% versus PY. The execution of the Renouveau strategic plan includes several important achievements. First, the rollout of our performing oxygen concept in 89 stores in '25, summing up to 107 stores at year-end. As far as our quick meal solution is concerned, we have proceeded with important space reallocation for snacking, development of a new stacking assortment and menu such as breakfast at EUR 1.9 or pizza menu at EUR 5.5, positioning Franprix as the cheapest among all our own competition in the market and launching a set of exclusivity such as Krispy Kreme. We also launched several customer-focused commercial initiatives. The new loyalty program, bibi! with circa 50,000 additional subscribers in '25. We launched as well the PF initiative that includes essential articles at highly competitive price. The rollout of daily in-store services such as Nannybag, Franpcles, et cetera. And finally, the rollout of Leader Price as a core private label of Franprix and Tous les jours as a brand as an entry price range. We also developed specific B2B promotional offers under the concept of buy more, pay less to help our franchisee in boosting their sales and profit. And finally, in terms of store network management, we maintain a disciplined approach with 20 new store opening, 85 store exit and 6 own store converted to franchise. Now let's continue with Casino, Spar and Vival brands. For you recall, Casino, Spar and Vival business unit in France represent 4,528 selling points by the end of 2025, of which 236 are owned stores and 4,292 are franchised, which is 95% of the stores are franchised. Let me show you in one slide, like for the previous brands, '25 achievement. Casino, Spar, Vival sales reached EUR 1.28 billion in '25, representing a positive like-for-like growth of plus 0.6% with an adjusted EBITDA decreased by circa minus 37% versus PY, mainly driven by HM/SM disposal dis-synergy that we carry them since '24. The execution of the Renouveau strategic plan includes several important achievements. We launched in '25 2 new store concepts. We defined, tested and launched the new concept of Spar called Origins in 5 stores by the end of 2025, posting encouraging double-digit growth. We defined a new Casino brand identity in Q4 2025. And the first store -- the first 2 store, I must say, will be inaugurated not later than tomorrow in Saint-Etienne. And in case you are close by, please, you will be welcome to visit us. In the key quick meal solution market, we continue to roll out of our Coeur de Ble concept with 53 corners deployed in '25, summing up since '24 to 62 stores up to date. We complete our snacking assortment by introducing 70 new SKUs in '25. We also launched several customer-focused commercial initiatives. We continue to roll out our Coup de pouce loyalty program launched in '24 with circa 128 new subscribers in 2025. In parallel, the team continues to strengthen Casino, Spar, Vival singularity and personality, thanks to the introduction of new assortment tailored to the trade areas as well as corner of Naturalia, for example, in 20 stores. As for Franprix, we introduced B2B promotional offer, buy more, pay less type of, and we launched new IA functionality of Casino Pro. Casino Pro is a tool for franchisees in ordering too but help them to better manage their store performance. In terms of store network management, we opened 151 new selling points, 1,052 stores were exited and additionally, 78 owned stores were converted to franchise. Now let me switch to Naturalia. For you recall, Naturalia business unit represent 213 stores, of which 152 are owned stores and 61 are franchised, means 29% on franchise. Let me show you in one slide what have happened in '25 for Naturalia. It was a year of growth acceleration for Naturalia. Sales reached EUR 300 million, representing a positive like-for-like growth of plus 8.6% and an adjusted EBITDA increase by circa 57% versus PY. Main achievement for Naturalia was the rollout of our performing La Ferma concept in 25 stores in '25. End of December to date, 36 stores are already rolled out. Naturalia had launched a new organic quick meal solution concept in 35 stores and a new beauty concept in 47. Teams have also worked to continue Naturalia digitalization by adding 7 new stores with our partner, Uber Eats and launched several commercial initiatives. In terms of store network management, 6 underperforming stores were closed and 1 store was opened in 2025. Let's finalize an overview per brand of '25 by Cdiscount. '25 was for Cdiscount the year of customer acquisition. Cdiscount GMV reached EUR 2.75 billion in 2025, representing a growth of plus 3.5% versus PY, EUR 1 billion of net sales and an adjusted EBITDA of EUR 67 million. Starting with our solid B2C performance, we saw sustained 3P momentum with a GMV increase by 7.7% in '25, reaching plus 8.1% in Q4. Our marketplace business grew representing now 67.3% of our total GMV, a 2% point increase over '24. We continue to expand our customer base, acquiring 2 million new customers in 2025. Our major investment plan has been fully deployed, providing support for both sales uplift, brand equity and obviously, customer acquisition. Moving on to our B2B activities. We've seen significant progress in enhancing the experience of our sellers, resulting in a notable or noticeable 20% reduction in support tickets. Furthermore, our Retail Media business has experienced strong growth with net sales up 13% compared to last year. Finally, we developed in-house conversational chatbot deployed with more than 900,000 customers, leveraging generative AI to enhance search and improve conversion. Let me now share with you a few group initiatives, starting with our store portfolio streamlining and how we strengthen our relationship with our franchisee. We continue streamlining our store portfolio to eliminate loss-making store and coordinate selective expansion with profitability, as I said, as a key driver versus market share at any cost. From Jan to end of December, 1,178 stores left our network portfolio. During the same period of time, we also opened 207 stores, and we switched 112 stores to franchise. In parallel, we continue to strengthen our franchisee relationship by organizing, for example, annual franchisee event, sharing monthly newsletter, implementing B2B Net Promoter Score and involving our current franchisees in the franchisee selection process for new store openings. Finally, we support franchisee store performance by providing them with user-friendly store performance report versus their local competition, for example, or versus the average network performance. As far as cost reduction is concerned, we have put a lot of effort in efficiency improvement, cost reduction and CapEx monitoring. In the first half of '25, we successfully launched 7 group shared service centers covering key functions like IT, accounting, payroll and [others]. We kept on increasing the assortment overlap for national brands across all our business units. We are continuously managing our CapEx with detailed calendarization and reduction of our concept remodeling cost per square meter. Finally, we strengthened our process to recover overdues receivable, ensuring better financial discipline. And last but not least, 2 purchasing alliances are now operational, supporting our retail gross margin improvement. The Aura Retail purchasing alliance with Intermarche and Auchan in place since March 2025 for large 20/80 supplier, the European Everest purchasing alliance since August '25 for international purchases. By the end of '25, 37 supplier were rolled-out. Let me now hand over to Angelique. Angelique Cristofari: Thank you very much, Philippe, and good evening to you all. Let me first provide the context and financial framework behind these key financial data estimates for 2025. This publication is intended to provide the market with financial information relating to 2025, subject to the formal approval of the financial statements for the year. As such, this information does not stem from a full set of financial statements since it has neither been approved by the Board of Directors nor audited by the statutory auditors. However, the process related to the preparation of the consolidated financial statement has been completed. This financial data have been prepared on a similar basis as that used for preparation of the consolidated financial statements in accordance with the IFRS reference framework and are based on the information known by the group as at the date of this presentation. These data have been reviewed by the Board of Directors at its meeting held today. The approval of the financial statements on the basis of the going concern assumption remains subject to a favorable outcome of ongoing negotiations among the stakeholders involved in the group financial restructuring. Here is a summary of our full year financial data estimates. As you can see from the table, the trend is reserve positive with a net sales like-for-like growth over the full year period at plus 0.5%, driven by solid initial reserves results of the rollout of new concepts in the food business and the sustained momentum of the nonfood activity. So a significant improvement in profitability with a 14% growth in adjusted EBITDA driven by, first, the implementation of action plans such as reducing shrinkage and improving receivables collection. Second, the benefit of purchasing massification under alliances. Third, the measures to streamline the network, as Philippe mentioned, and fourth, our cost discipline. Our consolidated net loss group share would come out at minus EUR 402 million, mainly due to the net financial expenses in continuing operations. Free cash flow before financial expenses remains negative at EUR 120 million, representing a strong improvement versus last year, mainly derived from the growth in operating cash flow and the change in working capital. Net debt stood at EUR 1.5 billion, up EUR 290 million compared to December '24, still impacted by cash outflows from discontinued operations. The group liquidity position was EUR 1 billion at the end of December '25. It includes operational financings for which the group has obtained from its creditors, an extension of the maturity to May 28 of 2026. The group aims to reach an agreement with its creditors and FRH, its main shareholder within this period and at the latest by the end of June. Let's now go into the market environment. According to Circana data for 2025 and more specifically the FMCG category, value sales across all channels were up plus 1.9% in '25 with inflation up plus 0.6%. The positive news last year is that volumes rebound in 2025 with plus 0.9% growth versus '24 after 4 years of decline in France alongside a slight premiumization trend. Combined with moderate inflation, these factors are driving revenue growth. In this context, the convenience store segment continued to outperform other store formats in '25 in both value, plus 6.3% and volumes, plus 4.9%. This supports our strategic positioning in line with changing consumer trends. As for Monoprix, its performance followed the general trend among supermarkets category. However, in Q4, market trends were marked by a significant decline in festive products in all segments over the key 4-week period ending January 4. It was minus 4.4% in value and minus 3.4% in volume. A similar trend was also observed in our operational performance for December '25. First of all, a quick overview of our group sales figures. Full year 2025 net sales totaled EUR 8.3 billion, up 0.5% like-for-like. This performance must be split into, first, a return to growth for our convenience brands, up plus 0.7% like-for-like with 0.6% at Monoprix and Casino, Spar, Vival, while Naturalia increased by plus 8.3%, but Franprix slightly declined. Second, a minus 0.7% decline for Cdiscount on net sales, sorry, which, however, reflects an improvement over the year with a strong acceleration in Q4 with plus 3.7%. On the GMV side, as Philippe mentioned, Cdiscount was up plus 3.5%, also supported by an acceleration in Q4 with plus 6%. Let's now focus on Monoprix. Monoprix net sales amounted to EUR 4 billion in '25, up plus 0.6% like-for-like, of which minus 0.5% in Q4. Nonfood sales representing about 30% of net sales were up plus 2.1% and once again supported the trend driven by Fashion & Home, which is outperforming the market. Food sales representing about 70% of net sales were stable, reflecting a contrasted performance with positive momentum in fresh products, plus 1.3%, offset by unfavorable market trends in festive products in December, as mentioned before. The brand recorded a plus 0.4% increase in footfall in '25. And in terms of adjusted EBITDA, Monoprix totaled EUR 424 million in '25, up EUR 42 million year-on-year. This change is driven by the reduction in shrinkage, the margin gains resulting from the alliance with Aura Retail, the cost savings, which partially offset the rise in store staff costs. Franprix net sales came to EUR 1.5 billion in '25, slightly decreasing by minus 0.4% like-for-like, of which minus 1.4% in Q4. The good performance of stores converted to the oxygen concept was offset by negative impacts from price cuts rolled out in September '24 and the nonrenewal of a promotional operation in Q1 '25. However, footfall rose by plus 3.8% in 2025, of which plus 2.5% in Q4 as a result of commercial offer developments. Loyalty program acceleration, as Philippe mentioned, the [prix francs] campaign with prices cut and frozen on 30 private label products, the development of services such as Francples for key duplication service or the Nannybag luggage security service. Adjusted EBITDA for Franprix totaled EUR 136 million in 2025, up EUR 22 million year-on-year, driven by strong cost management and lower impairment of receivables as a result of actions to streamline the store network. Casino Brands net sales amounted to EUR 1.3 billion in '25, up 0.6% like-for-like, of which 0.3% in Q4. 2025 net sales performance was positively impacted by strong momentum for seasonal stores as well as the efficiency of the supply chain with an improvement of service rate at 94.9%, plus 2.5 points versus 2024. Adjusted EBITDA amounted to EUR 29 million in '25, down EUR 17 million year-on-year. Excluding the impact of EUR 21 million in dis-synergies on operating costs and EUR 12 million in logistics dis-synergies, adjusted EBITDA would have increased by EUR 16 million, supported by the important streamlining of the store network and cost savings. As for Naturalia, sorry, net sales came to EUR 310 million in '25, up plus 8.3% like-for-like, of which plus 8.4% in Q4. The brand definitely benefited from a good momentum in the organic market and the success of its La ferme concept plus the effectiveness of measures taken in terms of product offering and assortments. E-commerce sales also performed well in '25 for Naturalia with double-digit growth of website, plus 19.1%, while the partnership with Uber Eats on quick commerce continues to be rolled out, covering 72 stores at the end of '25. Naturalia continues to benefit from a strong growth in footfall, up plus 8.2% in '25 and a solid loyalty customer base since 74% of its revenue is generated by loyalty cardholders. Adjusted EBITDA amounted to EUR 22 million in '25, up EUR 8 million year-on-year, driven by volume, FX and cost discipline. As for Cdiscount, the brand has enjoyed positive momentum in '25, thanks to its relaunch strategy initiated 18 months ago. Global GMV has returned to growth in '25, supported by marketplace GMV with plus 8% growth, while the direct sales GMV decreased by minus 1%, but keeps recovering with a return to growth in Q4, plus 3%. Cdiscount net sales came to EUR 1 billion in '25, down 0.7%, of which plus 3.7% in Q4, confirming the sequential improvement underway since 2024. Adjusted EBITDA came to EUR 67 million in '25, down EUR 4 million year-on-year due to higher marketing costs as part of this reinvestment plan, which was partially offset by strong commercial momentum, operational efficiency and cost savings. By contrast, adjusted EBITDA after lease payment increased by EUR 5 million, primarily supported by a significant decrease in lease payments resulting from the rationalization of warehouse capacities. By walking through the P&L statement, we would arrive at a consolidated net loss of EUR 402 million, including a net loss from continuing operations of minus EUR 571 million and the net profit from discontinued operations of plus EUR 168 million. The net loss from continuing operations was mainly impacted by EUR 64 million trading profit resulting from an adjusted EBITDA of EUR 655 million, but EUR 591 million of depreciation and amortization. Second, a reduction in other operating expenses, which amounted to minus EUR 258 million in 2025, including EUR 87 million related to assets disposals, mainly real estate assets, minus EUR 275 million asset impairment losses, including EUR 218 million in goodwill impairment and minus EUR 41 million from risks and litigations. A negative impact of EUR 369 million from net financial expenses, including a net cost of debt of EUR 192 million, interest expenses on lease liabilities for EUR 145 million and the financial cost of CB4X for Cdiscount of EUR 25 million. As regards the discontinued operations, the net profit of EUR 168 million was mainly due within the HM/SM segment to favorable settlements of liabilities related to reorganization costs, termination of operational contracts and store closures. It thus reflects costs that are ultimately lower than initially estimated. In 2025, we then reported a free cash flow deficit of EUR 120 million, an improvement of EUR 519 million versus 2024. This change reflects the growth in adjusted EBITDA after lease payment for EUR 86 million, a positive impact of EUR 403 million due to change in working capital. As you know, 2024 was marked by the financial restructuring with a return to normalized payment terms leading to a higher level of disbursement in '24. On 2025, we saw the implementation of the suppliers shared service center with a new organization requiring a complete overhaul of processes. Changes in working cap was also impacted by faster inventory turnover due to seasonal effects end of '25. Generally speaking, the basis of comparison had been adversely affected last year as well by the payment of EUR 153 million social security and tax liabilities placed under moratorium in '23, of which EUR 142 million coming from working capital and EUR 11 million from taxes. Excluding this effect, the free cash flow before financial expenses last year would have been negative for minus EUR 486 million, and the free cash flow would then have increased by EUR 360 million positive year-on-year. Now starting from the minus EUR 120 million free cash flow of the previous slide, our net debt position has been mainly impacted by the net financial expenses, of which EUR 118 million interest paid for the reinstated term loan. EUR 19 million cash flows from discontinued operations and asset disposal, including a negative impact of EUR 152 million in cash related to discontinued activities, but a positive impact of EUR 170 million from real estate disposals. As a result, our net debt has increased by EUR 290 million to EUR 1.5 billion end of 2025. On this slide, we can see our debt maturity profile. As you know, most of our debt accepted our main RCF matures in March next year. And for operational financing, we have secured last week an extension of the maturity from our banks until the end of May 2026. In the meantime, ongoing discussions with creditors are continuing with a view to reaching a comprehensive agreement that would, in particular, extend the maturity of the operational financing to a longer term and also revise downward the cost of debt. You can also see on the right the cost of our main debt instruments. In light of this maturity and cost of debt, last November, the group has launched a work to adapt and strengthen its financial structure, as most of you know. Now let's give you some insight on our liquidity position at the end of December last year, which standed at EUR 1 billion, including EUR 11 million of undrawn overdrafts. All the other credit lines were drawn as of December 2025, as you can see here, the main RCF for EUR 711 million, EUR 149 million of overdraft facilities, EUR 95 million of the Monoprix exploitation's RCFs and EUR 60 million of the French state-guaranteed loan, plus EUR 36 million of Monoprix Holding's bilateral lines of credit and EUR 20 million of another bank available line. Just as a reminder, under the loan documentation, available cash is defined as cash and cash equivalents, excluding the float and any trapped cash. Now moving on to our financial covenants. The financial covenants under those financing agreements include EUR 100 million minimum liquidity on the last day of each month. Hence, EUR 1 billion end of December was satisfying. And the same covenants also applies to each month of the subsequent quarter. Here, important for you to know that our liquidity position estimate for the end of Q1, which is tomorrow, is EUR 0.8 billion, of which EUR 0.2 billion is attributable to factoring, reverse factoring and similar programs. The total net leverage ratio at the end of each quarter must also comply with specific thresholds. As at December '25, this ratio was 4.66 based on EUR 194 million covenant adjusted EBITDA and EUR 900 million covenant net debt. It is below the threshold of 7.17, we were to comply with, and it doesn't take into account, sorry, any pro forma restatement as granted by the documentation. I would add that the ceiling of this ratio is set at 7.41% for March '26, and our EBITDA forecast for Q1 is to ensure compliance with this March test. Let's now focus on the project to adapt and strengthen the financial structure of the group. In order to support the execution of the strategic plan and in light of the maturity of our various indebtedness, we have initiated work to adapt and strengthen our financial structure since last November '25. The key terms of the proposals made by either the controlling shareholder or the creditors were made public in February and March and are detailed in the presentation available on the group website. It's important to highlight that such -- should such a transaction to adapt and strengthen the financial structure be completed, it would result in a significant dilution for existing shareholders. The company has last week secured an extension of the standstill agreement from the RCF, TLBs and operating financing creditors until May 28, 2026, while the standstill granted by the Quatrim creditors is in the process of being extended from end of April to end of May. Banks have also agreed to extend the maturity of the operational financing to the end of May 2026. As of today, unfortunately, no agreement has been reached between Casino, FRH and the creditors regarding the adaptation and strengthening of the Casino Group financial structure and discussions are continuing. So that concludes my presentation. Thank you for your attention, and I give the floor back to Philippe for his closing remarks. Philippe Palazzi: Yes. Thank you, Angelique. I will go to a conclusion. That means I would like to provide you with an overview of our market perspective and upcoming challenges that Casino Group will face in the coming months. First of all, I'm convinced that we are at the right place and at the right moment. Convenience retail market, as you have seen in the Angelique presentation, shows a positive trend aligned with change in the consumer habits, especially in the growing segment of quick meal solutions. There are still white spot for expansion in our targeted zone in France. Organic specialized distribution and e-commerce penetration are still growing, offering important opportunities for the group. Main French retailer operate -- move towards growing convenience retail sector on which there is significant investment, especially in Paris. [Recovery] will increase drastically in the upcoming months, most likely leading to a territory and price war. Moreover, traditional retailer position is exposed to risk from the aggressive expansion of nonfood discounters and ultrafast fashion e-commerce platform such as Temu or Shein. Finally, from a macroeconomic perspective, we'll also face consumption decline mainly to political instability in France, low consumer confidence, recent conflict in Middle East and the oil price increase. It's now the moment to conclude. I would say that we are in a dynamic convenience market at the right place, with the right brands at the right moment, but in a market increasingly competitive where players are fighting for price leadership. '25 financial data estimates are fully in line with our Renouveau 2030 business plan and confirm the relevance of our positioning and the successful execution of our strategic plan. We'll focus during the coming months on execution and constantly adapting our model to market evolution as well as to market revolution. I would like to thank you for your attention, and we will now answer your questions. Thank you. Angelique Cristofari: Okay. Then the first question is, when will the group pay the rest of the Quatrim bond given the high interest burden? So you may have noticed that EUR 21 million were repaid last Friday to the Quatrim secured bondholders. Hence, the nominal amount of the Quatrim bond is now EUR 120 million versus what it was end of December. The gross asset value of our real estate asset presently stands above EUR 200 million at the end of last year. And we are ahead of schedule, which means that thanks to this disposal program, we have reduced the coupon at 7.5% since April 2025 instead of an initial coupon of 8.5%. This bond matures on January 27, and it benefits from a 1-year extension option exercisable by the company, which will be -- we will see in the future how this is extended. We also have a question from ODDO. What to expect on margins from Casino and Cdiscount, which were somehow below expectations going forward? On margin, Casino and Cdiscount are not below our expectations. In the next year, we expect that Casino free cash flow should be 0 in 2030, as was shared through the Renouveau 2030 plan, and it should be for Cdiscount a EUR 67 million free cash flow. Philippe Palazzi: Yes. I think the question -- I will take that one. The question is it seems that somehow CapEx is below target slightly, but above all is it enough to growth in the context of increasing competition in proximity. I mean cash flow reached EUR 252 million in '25, slightly below our plan of EUR 263 million. It was just phasing effect we had at this time. As you recall in the presentation that I mentioned that we are very careful in the cost per square meters and as well as to make sure that we implement the right CapEx at the right store and at the right place. This year, we have accelerated at Monoprix as well all the investment, the CapEx investment we are doing in turnaround stores. You know that every store by the end of the plan of Monoprix will be touched till 2030, every single store will be touched on that one. If you take '25, 2030 is more than EUR 1.7 billion that will be invested into our network. And yes, to answer your question, is highly sufficient to fight against competition and even leading the pack. Angelique Cristofari: Yes. We have a question on net debt. So can you elaborate on the position as of December '25 and real estate disposals? How much of the cash from those disposals? Is this level of net debt a kind of run rate? Or shall we make some retreatment to have an idea of the real net debt, excluding divestments? So the consolidated net debt stood at EUR 1.5 billion end of December, increasing by EUR 290 million, as explained during the call. This variation was mainly impacted by real estate disposal for EUR 170 million, but financial expenses for minus EUR 382 million. Cash flows from discontinued operation for EUR 152 million and free cash flow before financial expenses of minus EUR 120 million. So net debt end of December '25 was yet impacted by the real estate disposals and discontinued activities, notably as indicated. Ongoing discussions to change the group financial structure will impact what is the level of group indebtedness and cost of debt going forward. So it's a bit early to answer what is the run rate for the net debt. Philippe Palazzi: And apparently, there is no more questions. But we would like to thank you for the time today and for your question. And we're going to see most of you quite pretty soon. And next financial update will be end of the quarter as well, first quarter. Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to today's Investcorp Credit Management BDC's Quarter ended December 31, 2025 Earnings Call. It is now my pleasure to turn the floor over to Andrew Muns, Chief Financial Officer. Andrew Muns: Thank you, operator. Welcome, everyone, to Investcorp Credit Management BDC's earnings call for the quarter ended December 31, 2025. I'm joined today by Suhail Shaikh, President and Chief Executive Officer of the company. I would like to remind everyone that today's call is being recorded and that this call is the property of Investcorp Credit Management BDC. Any unauthorized broadcast of this call in any form is strictly prohibited. An audio replay of the call will be available on the Investor Relations page of our website at icmbdc.com. I would also like to call your attention to the safe harbor disclosure in our press release regarding forward-looking information and remind everyone that today's call may include forward-looking statements and projections. Actual results may differ materially from these projections. We will not update forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit the company's registration statement on the SEC's EDGAR platform or our Investor Relations page on our website. The format for today's call is as follows: Suhail will provide an overall business and portfolio summary, and then I will provide an overview of our results, summarizing the financials. This will be followed by Q&A. Please note that today's discussion will focus on our financial results. As stated in our press release, we do not intend to comment further regarding the review unless or until it determines that further disclosure is appropriate or necessary. As such, we will not be taking questions on the strategic review process during today's call. Management will be pleased to address questions related to our quarterly financial statements and business operations. At this time, I would like to turn the call over to Suhail. Suhail Shaikh: Good morning, everyone, and thank you, Andrew, and thank you, everyone, for joining our December 31, 2025 quarter-ended earnings call. As a reminder, ICMB provides flexible capital solutions to middle-market companies, primarily through first lien senior secured debt. Our disciplined underwriting approach focuses on downside protection while generating income for shareholders. We will begin with an update on the business, a review of our fourth quarter results and portfolio activity, and then Andrew will walk you through our financials in greater detail. Before we dive into the details, here are the key takeaways from the quarter. We formed a special committee of independent directors to review strategic alternatives and maximize value for shareholders. We successfully refinanced the $65 million notes due April 1 with new unsecured notes maturing in 2029. NAV per share declined to $4.25, primarily driven by fair value adjustments and dividend payout in excess of net investment income. Nonaccruals increased to 6.9% of the portfolio at fair value with Easy Way added to nonaccrual. We remain focused on liquidity, capital preservation and disciplined underwriting in a still uncertain market environment. As announced in our earnings press release, the Board of the company has formed a special committee of independent directors to review strategic alternatives to maximize value for shareholders and in parallel has decided to not declare a quarterly dividend for the current quarter. In addition, on March 30, we successfully refinanced the $65 million 4.875% notes due April 1 with new $65 million unsecured notes provided by our advisers affiliate. The unsecured notes bear a floating rate coupon of SOFR plus 550 basis points and are due on July 1, 2029. The market environment, macroeconomic and geopolitical uncertainty continues to shape the operating backdrop. Credit markets have remained open, but deal activity in our segment of the market has stayed below historical norms as sponsor-driven transaction volumes have yet to recover in a meaningful way. Our focus on disciplined underwriting and active portfolio management has not changed, and we remain in active dialogue with management teams and sponsors of our portfolio companies. Turning to our fourth quarter results. ICMB reported net investment income before taxes of $0.3 million or $0.02 per share before taxes, a decrease of $0.02 per share from the previous quarter. The sequential decline in NII was primarily driven by a reduction in income-producing assets, including the placement of Easy Way term loan on nonaccrual and an increase in professional fees and other expenses that is typically experienced in the December quarter. Nonaccruals increased to 6.9% of the portfolio at fair value compared to 4.4% last quarter, driven by the addition of Easy Way, as mentioned above. Easy Way is a manufacturer of customizable outdoor furniture products sold through retail channels. Net assets declined approximately 16% sequentially from the prior quarter, with net asset value per share decreasing to $4.25 from $5.04 in the previous quarter. This was largely the result of fair value adjustments and the payment of a dividend in excess of NII. These fair value adjustments primarily reflect changes in market valuation levels and updated exit timing assumptions in the current environment rather than broad-based deterioration across the rest of the portfolio. The portfolio remains diversified across 18 industries with no single investment representing more than approximately 3% of fair value. I would also like to note that our software exposure represented less than 3% of fair value at quarter end. Our focus during the quarter was on liquidity management. Hence, our new investment activity remained muted. During the quarter, ending December, we invested $1.5 million in the first lien term loan of Axiom Global, an existing portfolio company to fund the dividend to existing shareholders. Axiom is a leading provider of flexible expert legal talent for enterprise customers. We have been investing in Axiom across our platform since February 2021. Our yield at cost is approximately 8.8%. In the same period, we fully realized 3 portfolio company investments totaling $8.2 million in proceeds with an IRR of approximately 10.6%. This included the full realization of 2 term loan investments in existing portfolio companies, CareerBuilder and LABL, L-A-B-L as well as our preferred equity investment in Advanced Solutions International, which was recapitalized during the quarter. I'll now turn the call over to Andrew to review our financial results in more detail. Andrew Muns: Thanks, Suhail. Let me begin by providing you with highlights of our quarterly performance. For the quarter ended December 31, 2025, the fair value of our portfolio was $172.7 million compared to $196.1 million on September 30. Our net assets were $61.3 million, a decrease of $11.4 million from the prior quarter. This quarterly change in net assets consisted of a $9.4 million decrease from operations and a $2 million decrease related to our dividend, which was paid in excess of NII for the quarter. The weighted average yield of our debt portfolio was 10.6%, a small decrease of 31 basis points from the September quarter. As of December 31, our portfolio consisted of 37 borrowers, approximately 81% of these investments were in first lien debt and the remaining 19% was invested in equity, warrants and other positions. 98% of our debt portfolio was invested in floating rate instruments and 2% in fixed rate instruments. The weighted average spread on our floating rate debt investments was 4.5%, which is relatively unchanged from the prior quarter. The average investment size per portfolio company on a market value basis was approximately $4.7 million or 2.7% and our largest portfolio company investment on a fair market value basis, Bioplan at $11.4 million. Our largest industry concentrations by fair market value were professional services at 14.5%, IT services at 9.2%, insurance at 8.9%, diversified consumer services at 8.6% and commercial services and supplies at 7.9%. Overall, our portfolio companies are spread among 18 GICS industries as of quarter end, including our equity and warrant positions. Gross leverage at the end of the quarter was 2.02x and net leverage was 1.78x compared to 1.75x gross and 1.59x net, respectively, for the previous quarter. We paid down approximately $14 million of debt in February. On a simple pro forma basis, had this pay down occurred on December 31, our net leverage would have been closer to 1.8x, while our reported year-end net leverage remains 1.78x. This pay down improved our asset coverage ratio from 150% to 155%. With respect to liquidity, as of December 31, we had approximately $15 million in cash, of which approximately $10.4 million was restricted cash. In addition, we had $41.1 million of unused commitment under our revolving credit facility with Capital One, of which approximately $8.7 million was available under our borrowing base. Additional information regarding the composition of our portfolio and quarterly financial results are included in our Form 10-K. And with that, I would like to turn the call back over to Suhail. Suhail Shaikh: Thank you, Andrew. As we reflect on the quarter, we are operating in an environment with elevated uncertainty both across both the macro backdrop and broader market sentiment. Our priorities are clear. preserving capital, maintaining disciplined underwriting and actively managing our nonaccrual positions. To summarize, we have formed a special committee to pursue strategic alternatives focused on maximizing shareholder value. We refinanced our April notes and extended our maturity profile, and our portfolio remains predominantly first seen with broad industry diversification. While we expect market conditions to remain challenging in the near term, we believe our focus on liquidity and risk management positions ICMB to navigate this period and pursue opportunities as they arise. We appreciate your continued support and look forward to updating you on our progress next quarter. That concludes our prepared remarks. We will now open it up for questions regarding our quarterly financial performance and business operations. As noted earlier, we will not be commenting further on the strategic review. Operator, please open the line up for Q&A. Operator: [Operator Instructions] Our first question comes from Justin Scott, [indiscernible] Research. Unknown Analyst: First of all, I'd like to applaud the forming of the special committee. I know you can't take any questions on it, but I think we can all see that, unfortunately, it's an economic necessity for the fund. Just back of the envelope, fees and expenses of running this fund have now $0.48 a share. The additional interest on the shift from the previous loan notes costing the fund 4.9% to the current ones, 9.1%, add another $0.19 per share. So $0.67 per share of fees and expenses and additional interest, which is 15.8% of the net assets or 42% of the share price. Obviously, no matter how hard your team tries, those are unattainable investment skills to generate a return for the fund. So I fully understand why you had to do it. Obviously, most of the investors are in here for income, but applaud the decision. And I know you can't comment about the options you're looking into. One thing I'd like to ask is whether anything is being done to trying to put this tactically, closer align the interest of the manager with the shareholders, given that the fees that the manager takes and now with the new loan, the interest that the affiliate of the manager is earning is a very substantial part of the assets of the fund and whether during the interim period as you're doing the review, whether the manager will consider reducing their fees somewhat. Suhail Shaikh: Justin, thank you for your question, and thank you for your opening remarks as well. Look, I think, as you can see from our financials, we have been [ waiting ] fees on an ongoing basis, even when the fund is performing slightly better in a slightly better environment. So that tool always exists for us and if we have to. But I think what I more importantly note is, you should think about the managers sort of alignment with the shareholders. If an affiliate of the manager just provided $65 million of capital to refinance the notes. Affiliate of the manager also owns about 25% of the shares. So I think we are -- we consider ourselves fully aligned with shareholders, and we'll use whatever means necessary to keep that alignment going. Hopefully, that answers your question. Unknown Analyst: It's just that you are earning a substantial amount of money during the period when the fund is open, and I just concerned about that affecting the motivation. Basically, the adviser is going to be earning about $10 million in interest and fees during this period. And I think time is not on your side, and I guess I'm saying don't dilly-dally, so to speak. Suhail Shaikh: Understood. Operator: [Operator Instructions] I currently don't see anyone with questions. [Operator Instructions]. Suhail Shaikh: If no more questions, Luke, I think we can conclude the call, and thank you again for everyone joining in. And we look forward to talking to you again next quarter, and we'll see you then. Thank you, Luke. Operator: Thank you, everyone. And this concludes today's conference call. Thank you for attending.
Operator: Good day, and welcome to the Lamb Weston Holdings, Inc. Third Quarter 2026 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Debbie Hancock, Vice President of Investor Relations. Please go ahead. Debbie Hancock: Good morning, and thank you for joining us for Lamb Weston Holdings, Inc.’s Third Quarter Fiscal 2026 Earnings Call. I am Debbie Hancock, Lamb Weston Holdings, Inc.’s Vice President of Investor Relations. Earlier today, we issued our press release and posted slides that we will use for our discussion today. You can find both on our website, lambweston.com. Please note that during our remarks, we will make forward-looking statements about the company's expected performance that are based on our current expectations. Actual results may differ materially due to risks and uncertainties. Please refer to the cautionary statements and risk factors contained in our SEC filings for more details on our forward-looking statements. Some of today's remarks include non-GAAP financial measures. These non-GAAP financial measures should not be considered a replacement for, and should be read together with, our GAAP results. You can find the GAAP to non-GAAP reconciliations in our earnings release and the appendix to our presentation. Joining me today are Mike Smith, our President and CEO, and Bernadette Madarieta, our Chief Financial Officer. Mike and Bernadette will provide prepared remarks, and then we will be available to take your questions. I will now turn the call over to Mike. Mike Smith: Thank you, Debbie. Good morning, and thank you for joining us today. I want to start by thanking the Lamb Weston Holdings, Inc. team around the world for their hard work in what continues to be a dynamic market. Their expertise, disciplined execution, and willingness to embrace change and act with urgency have been instrumental in the progress we are making. In the third quarter, we delivered another solid performance, the fifth quarter in a row of in-line or better results, demonstrating that we continue to do what we said we would do. This strength supports our updated fiscal 2026 outlook, including a tighter guidance range and a higher midpoint of net sales and EBITDA. This was led by ongoing momentum and a strong sales performance in our North America business, where customer wins, share gains, and strong retention delivered 12% volume growth and 5% net sales growth in the segment. Over the past year, we have made considerable progress in this business across our operations, and most importantly, with our customers. This has enabled us to grow while restaurant traffic and consumer sentiment have been soft. Overall, QSR traffic was up 1% in the third quarter. Bernadette will speak to this in more detail. In North America, our focus this year was on strengthening our customer partnerships and consistently executing. We finished our customer contracting season with a higher retention rate and solid new customer acquisition. At our production facilities, we have delivered improvement in our run rates and core operational KPIs. We are generating cost savings ahead of plan across our business. And our employee engagement scores have improved significantly. Our International business, as expected, was challenged by an evolving market environment resulting from a significant surplus in the European potato market due to expanded potato acreage and a robust crop of potatoes during the last growing season; local sourcing in developing regions such as the Middle East, China, and India, which is affecting exports from Europe to those markets; and persistently lower restaurant traffic in key countries. We are taking decisive actions to manage our business in the near term and protect profitability. During the third quarter, we announced the closure of our Monroe, Argentina plant, and consolidated production from the Latin America region in our new, modern Mar del Plata, Argentina facility. As we previously announced, we began temporarily curtailing a production line in the Netherlands at the beginning of the fourth quarter. Further, the company does not plan to resume production in one of our previously curtailed Australia locations. While we believe the competitive backdrop in certain international markets may result in less capacity expansion than was anticipated, we are focused on controlling what we can control, acting with urgency across the company, and being disciplined in our capital investments. It has been a year since I joined you for my first earnings call as CEO. Over that time, we have taken significant actions to improve our performance. We developed and in July began executing our Focus to Win strategy to drive targeted decision-making and actions. This strategy is a departure from Lamb Weston Holdings, Inc.’s previous focus on growth and scale. Instead, we are taking a more thoughtful approach to where we are, geographically and from a capability perspective, positioned to win long term, including where our customer proposition is strongest, and making sure any investments we make are evaluated through this customer- and return-centric framework. As we near a year working with this paradigm, the changes are significant and inform our decision-making and how we compete for business on a daily basis. As part of these efforts, we set a target of $250,000,000 in cost savings by fiscal year-end 2028. Our first goal was to achieve $100,000,000 in savings in fiscal 2026. As of the end of third quarter, we have already delivered on those full-year savings and are tracking ahead of our program target. These savings have afforded us the opportunity to make selective investments in support of our customers. We believe these targeted reinvestments have been the right long-term choice for our business. They have been particularly powerful as they are paired with the improvements we have made in execution to deliver higher consistency and quality for customers, and our continued commitment to product innovation. Altogether, these have combined to drive substantial improvement in our positioning with customers, which is reflected both in strength in retention and new customer acquisition. But to be clear, the actions we have taken and will continue to take on cost and capital deployment opportunities are structural. As we move forward, we believe they make us a more competitive organization while also positioning us for improved operating leverage in a more favorable price mix environment. We are also evaluating additional opportunities for improvement and savings across the organization, the details of which we will share in the future. Perhaps most importantly, we believe we are just getting started. Our new executive chair, Jan Props, brings extensive experience and an intense focus on operating execution from his time at AB InBev. Jan is highly focused on helping us evaluate opportunities to improve in international markets, where his experience in a leading global company is providing valuable perspective on how to navigate a dynamic environment. We will also soon welcome Jim Gray, our incoming CFO, who will bring an additional fresh perspective to our work. We also have a refreshed board, with seven new members since July, with expertise in food, consumer goods, agriculture, supply chain, and finance. This group is focused on improving performance, driving better returns on capital, and driving long-term shareholder value creation. As I have said before, business turnarounds are not linear. But nine months into Focus to Win, we are making clear progress against our key business objectives. We have significantly improved our position with customers, we are improving our North America operations, and are controlling the controllables internationally in a dynamic market, while we work to deliver on the cornerstone of our strategy, prioritizing markets and channels. With that, let me get to some specifics to illustrate the progress we are making. First, strengthening customer partnerships is central to executing our strategy. We have made meaningful progress in deepening and strengthening our relationships with customers this past year. As part of the analysis we did last year, we evaluated and streamlined our U.S. commercial go-to-market strategy and structure. Importantly, our direct sales team has positively impacted our selling on the street, including execution of pricing and working through challenges directly with customers. This is a key market differentiator and a core component of our customer partnership model. Our team is 100% focused on fries and the attractive financial role that they serve our customers. We have also augmented our direct team with a broker model in key channels where we saw this to be the most efficient way to immediately accelerate our near-term competitiveness. Second, in our Achieving Executional Excellence pillar, we are focused on continuing to build an agile and best-in-class supply chain that allows us to operate efficiently and consistently while balancing supply and demand. This includes curtailing production when needed, closing production facilities that do not meet our customer and efficiency standards, and restarting production seamlessly as we did in North America. Finally, within our efforts to set the pace for innovation, I want to highlight our Grown In Idaho brand. We invested in a landmark category study highlighting how consumers think, feel, and shop for frozen potatoes. This work led to a reinforcement of the Grown In Idaho brand essence. As a result, we are launching a new brand positioning that is rooted in “real,” and created for people who value where their food comes from. Shortly, you will begin to see this brand show up on shelf with new packaging and a new, clear message tied to “made with real Idaho potatoes.” Moving to slide eight, as you know, over the past several months, we were engaged in contract negotiations for the 2026 potato crop. In North America, contract negotiations are nearly complete. Overall, we expect a low- to mid-single-digit percent decline in raw potato price in the aggregate and have largely secured the targeted number of acres across our primary growing regions. Planting is on schedule for the early potato varieties. We expect planting for the main harvest to be completed by April. In Europe, fixed price contract negotiations for the 2026 crop are underway and progressing as planned. Based on our current indications, overall pricing is pointing toward a mid-teens decline in our contracted agreements from 2025. Fixed price contract planning across the European growing regions will continue through April. We will provide our customary update on the outlook for the North American and European potato crops when we report fourth quarter earnings in July. In addition, we do not currently anticipate a material impact from recent fuel and fertilizer inflation to impact our fiscal 2026. In closing, our Focus to Win strategy is taking hold. Our focus is solidly on our customers as we strive to strengthen our partnerships around the world. It is on executing exceptionally well, delivering on our cost savings work. We are identifying and driving opportunities created from heightened accountability around our goals and by building a culture of continuous improvement in cost and capital management, agility, and improving our capital efficiency. I will now turn the call over to Bernadette to review the quarter and our outlook. Bernadette Madarieta: Thank you, Mike, and good morning, everyone. I am starting on slide 11. Third quarter net sales increased 3%, including a $47,000,000 benefit from foreign currency translation. On a constant currency basis, net sales were essentially flat with last year. Volume increased 7%, led by solid execution in North America including customer wins, share gains, and strong retention. This more than offset softer demand in key markets in our International segment. Price mix declined 7% at constant currency, reflecting the targeted investments in our customers for price and trade support that Mike mentioned earlier; adverse product mix as consumers shift towards value-oriented channels and brands and chain restaurants, which typically carry lower prices; and softer industry demand in key international markets as well as increased competitive export dynamics, which most notably affected our EMEA business. Let me provide context on what we are seeing in traffic trends. In the U.S., QSR traffic turned positive for the first time since late fiscal 2024, up 1% for the quarter. QSR burger traffic grew in February, although it was down 1% for the full quarter. QSR chicken remained a bright spot with continued growth. Internationally, most markets saw low-single-digit declines in restaurant traffic. In the U.K., our largest international market, QSR traffic declined approximately 1%, showing improvement versus recent quarters. Looking at our segments, North America net sales increased 5%. Volume increased 12%, driven by recent customer contract wins, share gains, and strong retention across our customer base, as well as the relatively lower volume comparisons this quarter last year. Price mix declined 7%, with roughly half of the decline coming from price and trade support. The remaining half reflects mix, as growth with both new and legacy chain customers continues, and as consumers shift from branded to private label products. In our International segment, net sales declined 1%, including a $44,000,000 benefit from foreign currency. At constant currency, net sales declined 9%. Volume declined 2%, primarily due to softer demand in key markets and a more challenging comparison. Last year, third quarter volume grew 12%. Outside of EMEA, volume grew in China and Latin America, and year to date volume is up across every region outside of EMEA. Price mix declined 7% at constant currency, reflecting price and trade support for customers and unfavorable geographic and customer mix as lower-priced regions and customers are growing. We also expect some impact from the conflict in the Middle East, and excess international capacity remains a factor. We will continue managing these dynamics with a disciplined approach. On slide 12, adjusted EBITDA declined $101,000,000 compared to last year, to $272,000,000. Adjusted gross profit declined $93,000,000. The primary drivers were unfavorable price mix; a $33,000,000 net pretax charge to write off excess raw potatoes in the International segment due to lower-than-planned sales and a stronger-than-expected crop yield; and higher fixed factory absorption costs in Europe and Latin America, as underutilized production facilities carried higher costs. And finally, a year-over-year headwind. Last year, we realized the benefit of processing directly from the field in the third quarter. This quarter, given lower inventory levels, we realized the benefit beginning in the second quarter, which created a tougher comparison against last year's unusually strong third quarter gross margin. These headwinds were partially offset by higher sales volumes, benefits from our cost savings initiatives, and improved operating efficiencies in North America. Input costs excluding raw potato prices increased year over year, driven by tariffs; edible oils, notably canola oil; as well as increased fuel, power and water, labor, and transportation costs. As Mike mentioned, we expect potato input costs to decline in the upcoming crop year. Most of our tariff exposure relates to imported palm oil. Recent trade agreements eliminated that tariff, which is a positive development for our cost structure going forward. We will see some tariff expense in the fourth quarter, as we sell through existing inventory that was purchased before the change. In the third quarter, we recognized approximately $4,000,000 of tariff expenses, and unless the agreements change, we do not expect to incur this cost after the fourth quarter. Turning to SG&A, adjusted SG&A increased $9,000,000 versus last year. The cost savings we delivered in the quarter were more than offset by normalized compensation and benefit accruals tied to performance achievement, along with the write-off of $13,000,000 of capitalized costs from projects no longer under development. To help show these dynamics and the underlying drivers of SG&A performance, turn to slide 13, which outlines SG&A trends and the actions underway. In the last year, we reviewed our SG&A efficiency, including input from outside advisors. Building on that work, we developed targeted action plans to reduce SG&A through our cost savings program that will continue to drive improvement over time. As a reminder, adjusted SG&A includes several strategic items: revenue-linked advertising and promotion; royalties from growing our retail business; miscellaneous income and expense items such as asset write-downs; and noncash depreciation and amortization. Revenue-linked expenses have remained relatively flat as a percent of sales, while amortization has increased as we have implemented new cloud-based and ERP platforms. Adjusted SG&A as a percentage of sales peaked in fiscal 2023, driven largely by the European joint venture consolidation and ERP implementation costs that were incurred ahead of go-live. On a normalized basis, excluding amortization, asset impairments, and normalizing incentives at a one-time payout, fiscal 2023 SG&A as a percentage of sales was 8.5%. Since then, we have taken action to streamline our cost structure. SG&A now stands at 7.8%, a 70-basis-point improvement versus fiscal 2023, and about 70 basis points above the 7.1% level we saw in fiscal 2019, before COVID and our major global expansions. The increase relative to 2019 primarily reflects investments to enhance our IT capabilities. While we have made meaningful SG&A progress, we continue to identify and execute against additional SG&A efficiency opportunities within the framework of our cost savings program. We will provide an update on our plans and progress as we proceed. Turning to segment EBITDA on slide 14, in the North America segment, adjusted EBITDA declined 4%, or $13,000,000, to $290,000,000. This was fully driven by customer price trade support and mix, while the underlying fundamentals of the business—volume growth, lower manufacturing costs per pound, and lower segment SG&A—partially offset the increase in price mix. In our International segment, adjusted EBITDA declined $76,000,000 to $19,000,000, primarily reflecting lower sales, namely in Europe where restaurant traffic and softer exports from excess industry capacity remains challenging; higher manufacturing cost per pound, including the $33,000,000 net pretax charge to write off excess raw potatoes; higher fixed factory burden from underutilized production facilities in Europe and Latin America; and input cost inflation outside of raw potatoes. To mitigate these headwinds, we took the actions Mike spoke about, to temporarily curtail production of a line in the Netherlands and permanently close a production facility in Argentina. These impacts were also partially offset by our cost savings initiatives. Turning to the balance sheet and cash flow, slide 15 summarizes the strong cash flow that continues to support our strategic and financial priorities. Cash generation has improved meaningfully this year. Year to date, we generated $596,000,000 of cash from operations. That is up $110,000,000 versus last year. This improvement reflects strong working capital execution, driven primarily by lower inventories in North America and, to a lesser extent, the timing of accounts receivable collections. Our focus on execution and capital stewardship enabled us to deliver $339,000,000 year to date in free cash flow—an increase of $417,000,000 year over year. Capital expenditures were $257,000,000 year to date, down $37,000,000 from last year. We now estimate full-year cash spend to be approximately $400,000,000, aligned with our focus on maintenance, modernization, and environmental projects. Our liquidity remains strong. We ended the quarter with approximately $1,300,000,000 of liquidity. Net debt was $3,900,000,000, and our net debt to adjusted EBITDA leverage ratio was 3.4 times on a trailing twelve-month basis, consistent with last year's third quarter and aligned with our balance sheet priorities. Turning to slide 16, we remain committed to returning cash to our shareholders through our dividend and opportunistic share repurchases. During the first three quarters of the year, we returned $205,000,000 to shareholders, including $155,000,000 in cash dividends and $50,000,000 of stock repurchases. We did not repurchase shares during the third quarter. After the quarter ended, however, and through March 30, we have repurchased approximately $43,000,000 of stock, or 1,100,000 shares, at a weighted average price of $41.50 under a 10b5-1 trading plan. And earlier this week, the Board approved the next quarterly dividend of $0.38 per share, payable on June 5. Turning to our outlook on slide 17, we are raising the low end of our net sales guidance and increasing the midpoint. We currently expect net sales in the range of $6,450,000,000 to $6,550,000,000, including an approximate 1.8% foreign exchange benefit, or about $95,000,000 year to date. Adjusted EBITDA is now expected to be in the range of $1,080,000,000 to $1,140,000,000, which includes our current assessment of the additional risk associated with the ongoing Middle East conflict. In North America, we expect high-single-digit volume growth in the second half, which also includes the benefit of an additional week of sales in the fourth quarter. As I noted earlier, third quarter growth was elevated because we were lapping an unusually low quarter last year. In our International segment, full-year volumes are still expected to grow. However, we anticipate year-over-year declines in the second half, as we lap unusually strong performance last year and as the fourth quarter is further pressured by the evolving conflict in the Middle East. For reference, sales to the Middle East represent a high-single-digit percentage of the International segment's volume year to date. Price mix in the fourth quarter will remain unfavorable at constant currency. We expect the price declines to moderate slightly in the quarter, supported in part by the recent price increase we implemented in early March to offset inflation. The price increase affects our noncontracted North American business. On mix, we assume ongoing pressure to persist for now, reflecting continued growth with chain restaurant customers and a shift toward private label offerings with retail customers. In our International segment, we expect to continue to face headwinds from the dynamics we have discussed. Adjusted gross margin is expected to decline seasonally in the fourth quarter—down 250 to 300 basis points from the third quarter's 20.9%—including our current estimate of the potential impact from the conflict in the Middle East. Adjusted SG&A continues to benefit from our cost savings initiatives. In the fourth quarter, SG&A dollars are expected to increase slightly from the third quarter, due primarily to an extra week of expenses as well as incremental innovation and technology investments. We expect a full-year tax rate of approximately 28%, with fourth quarter in the mid-teens. The full-year tax rate includes approximately $20,000,000 of adjusted tax impact from losses in jurisdictions where we do not expect to receive tax benefits. We now anticipate full-year depreciation and amortization of approximately $395,000,000, compared with the prior estimate of $390,000,000. The team continues to execute well in what remains a dynamic environment. We are entering the final quarter with a strong balance sheet, disciplined cost management, and a sharp focus on operational performance. Before I hand it over, I do want to acknowledge the leadership transition. This is my final call as CFO, with Jim stepping into the role tomorrow. I am fully committed to ensuring a smooth transition, and I am incredibly proud of the work this team delivers every day. With that, I will turn it over to Mike. Mike Smith: Thank you, Bernadette. As we shared today, we are committed to doing what we say we will do, recognizing that the environment is evolving quickly. North America is executing well, and we continue to have room to grow that business. Internationally, we are taking actions to manage our costs and position us in a fluid market. Our international focus is fortified with Jan being on board. And finally, we are remaining disciplined in our capital investments and evolving Lamb Weston Holdings, Inc. into a business that can enjoy strong and growing returns on capital. Before we turn the call over to Q&A, I want to thank Bernadette. During her time with the company, she has been a dedicated partner and leader, including the past five years as CFO, during a period of tremendous change in our industry. We appreciate all she has contributed to Lamb Weston Holdings, Inc. and wish her continued success moving forward. We will now open for questions. Operator: If you would like to ask a question, if you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will take our first question from Tom Palmer with JPMorgan. Tom Palmer: Good morning, and thanks for the question. Maybe you could just start out asking on utilization rates—I know you have done a lot of work in terms of your plant footprint here over the last several quarters, including the updates today internationally. So U.S., I think you had the new lines or the previously shuttered lines ramping back up. Where do you sit in terms of ideal rates there? And then with all the actions you are taking internationally, is that going to get you into kind of more of that targeted, you know, 90-plus percent range? Thanks. Mike Smith: Appreciate the question, Tom. Overall in North America, we are in the low 90s. With some of the adjustments that we have made, to your point, we are excited that we have been able to bring back online some of those previously curtailed lines. That allows us to be more flexible with our customers to make sure that we deliver for our customers at those high fill rates moving forward. I will tell you, though, it also allows us to be more thoughtful about the volume that we bring on board moving forward. When I look at the International business, we have curtailed some lines. We have closed the Monroe facility down in Argentina and moved that volume into the Mar del Plata facility. And we will continue to evaluate based on supply and demand and the outlook of the business. I will tell you, not all of our plants make the same items. They have different technologies and different capabilities, so it is not as easy as turning off one line and bringing another one back on. So we want to make sure that we are delivering the right capabilities to our customers as they expect from Lamb Weston Holdings, Inc. moving forward. Tom Palmer: Okay. Thank you. And then on the pricing environment in Europe, I know it is hard to be overly specific. I think there are kind of two nuances this year. One is just the competitive environment generally, but I think secondarily, spot potatoes, as I understand it, are really cheap, and that is causing some maybe heightened pressure given you guys contract in terms of margin. When we think about next year and the 15% decrease, if that is how the industry is buying, I am trying to think more, like, do you get more on an even scale with the industry next year as you look at it, and maybe we could see more of a margin recovery on that basis. Mike Smith: Yes. It is a combination of multiple factors. It is the capacity imbalance that we are seeing in Europe. It is slower demand, and it is that potato crop. So when you think about capacity in Europe, it is not only excess capacity in Europe, but also they typically would export to markets like the Middle East, China, and India, and there has been some new capacity that is there. There is also the restaurant traffic softness that we are seeing across Europe. But to your point, the third element of that is the crop. Now the great thing about our business is each year you have a reset on that crop. Typically in Europe, we will contract in that 70% to 80% range of fixed price contracts. The other kind of 20% to 25% range is in open price contracts. With the reset for this year, we are contracting less acres, and we believe that based on the demand in the market, the rest of the growers will be doing the same thing. Tom Palmer: Okay. Thank you. Operator: If you find that your question has been answered, you may remove yourself from the queue by pressing star two. We will go to our next question with Peter Galbo with Bank of America. Peter Galbo: Hey, Mike, Bernadette, good morning. Mike Smith: Hey. Hey. Good morning. Peter Galbo: Mike, my first question is on just North America price mix. There are a few moving pieces there, I think, as we get through Q4 and into next year. The mix headwind, I think, from more chain, but then you mentioned today, I think, a March price increase. And then with potato costs kind of being deflationary in North America for this summer. I just want to kind of gauge as we get through the first half of next fiscal year where pricing is kind of set, the risk that we continue to kind of see slippage in price mix maybe into the back half of 2027 and beyond, just given the factors that we are outlining today? Mike Smith: A few things, Peter, on that. Our expectation is that we are going to continue to have some price mix pressure into fiscal 2027. Obviously, with those decisions that we have made around pricing in the current fiscal year, we will have that lapping effect into fiscal 2027. We do see price mix moderating, including some of the benefits of the actions that you talked about. Keep in mind that we see inflation, and we have had inflation over the last several years outside of potatoes. We need to make sure that we do the best we can to cover that. We will provide guidance on fiscal 2027 like we normally do with our Q4 earnings, and we will be able to give more clarity on what that might look like for fiscal 2027 at that time. Peter Galbo: Okay. Thanks for that, Mike. And if I go to the reduced CapEx guidance, I think you talked a bit more about maintenance CapEx, and thinking back a few years ago, even to the Investor Day, there was discussion around not just capacity expansion, but some kind of elevated structural CapEx for things like wastewater treatment. Have you been able to mitigate a lot of maybe what some of those structural step-ups would be? Are those no longer kind of in play? I am just trying to understand the $100,000,000 decline with a quarter to go, and then maybe how we might think about that going forward. Mike Smith: I think just as a reminder, obviously, we were spending a lot on capital when we were doing the greenfield expansions. And, obviously, we have enough capacity in our footprint and do not need that spend. I would say what you are seeing right now is a reflection of that disciplined decision-making. We will continue to have those environmental wastewater capitals. We have to do that as regulations change in some of the states in which we operate. But we are really trying to manage our capital spending and make sure that we make the right decisions that have strong returns. That being said, there is some timing elements to some of the capital this year that will flow into next year. But we will come back next quarter and talk about what that fiscal 2027 looks like. Bernadette Madarieta: Yeah, and, Peter, just to confirm, we have spent the $100,000,000 that we anticipated spending on environmental expenditures this year. So we are on the path of spending those environmental expenditures over that five-year plan that we have laid out. Peter Galbo: Okay. Very clear. Thanks, guys. Operator: Once again, if you would like to ask a question, we will take our next question from Matt Smith with Stifel. Good morning. Mike, wanted to pick back up on the North America top line comments. Volumes are quite strong in the quarter and accelerated on a sequential basis. As you exit this year, can you talk about the volume trajectory based on recent business wins and share gains? And with the utilization rate back in the low 90s and QSR traffic sequentially improving, do you deemphasize going after volume to improve your leverage at this point and get more choiceful about volume? And just how does that play out as you look forward over the next year or so? Mike Smith: I appreciate the question, Matt. We have been focused on driving those customer partnerships, and that is really focused on the quality, the consistency, innovation, and value, and making sure that our customers are getting the product on time and in full when they need them. And the great thing that I am seeing across our organization is we are really creating a culture throughout our organization of putting that customer first, regardless of what function you are in. Obviously, we have made some great improvements with those customers, and we are seeing the volume flow through. As I mentioned earlier, as that volume continues to come through and we see our utilization rates in more of those normalized ranges, it does allow us to be more thoughtful about the business we pick up and about how we manage volume into the future, for sure. Matt Smith: Thank you for that. And a follow-up on the inflation and cost outlook. You talked about the fourth quarter seeing continued cost pressure. Are you expecting incremental potato write-offs? Or was this a full evaluation of the stock you have and you think you have cleared the decks at this point? Meaning the carry-in crop 2027, your inventory levels will be in a reasonable place. Thank you. Mike Smith: We do not anticipate additional raw write-offs. I think the third quarter write-off reflected current expectations of demand view and what we are seeing for this crop season. We continue to evaluate that based on what we see in the Middle East. But as of right now, we do not anticipate any additional write-offs based on where the demand is flowing and the best estimates of our business. Matt Smith: Appreciate that. I will pass it on. Operator: We will go next to Robert Moskow with TD Cowen. Robert Moskow: Thanks. Maybe just if you could give any kind of an update on what you are seeing in North America competitors' supply chain footprint. I think they are coming towards the end of some long-term expansion projects, some of them greenfield. Do you think that those are on track? Are they still ramping at this point, or did they fully ramp and we do not have to worry about further capacity coming online for the next twelve months? Mike Smith: I cannot speak to their production and what our competitors are doing. I know that their facilities are up and running. And I will tell you, based on the work that we are doing around our customers, we are winning, and our customers are continuing to choose Lamb Weston Holdings, Inc., and we are seeing that volume growth across our business. Overall, we are starting to see some of the price mix moderating, including some of the actions that North America recently took. But the teams are winning. I think our utilization rates are getting back to where they need to be in the low nineties, and that allows us to be very thoughtful about that volume that we take on in the future. Robert Moskow: K. K. Thank you. Operator: And we will take our next question from Alexia Howard with Bernstein. Good morning, everyone. Can I just ask to begin with about the potato write-off in Europe? Are there actions that you can take to avoid that happening again by better demand planning? Is that something that we should not anticipate going forward, or is it something that continues to be a question mark? Mike Smith: It is a good question. We have made some adjustments in how we are procuring raw in Europe for this next crop season that will, hopefully, allow us to be a little bit smarter and give us a little bit more flexibility in that moving forward. I think you have seen that this year in North America. We have procured the right amount of potatoes. We have stronger supply and demand signals and some capabilities internally that are making us stronger and allow us to do a better job of predicting what those demand signals will be in the future. Alexia Howard: Great. Thank you. And then just to hone back in on North America, obviously, the new customer wins recently have been lower-priced private label or chain customers on the restaurant side. Now that the capacity utilization is back up into the nineties, it sounds like you can be more selective in who you pick up going forward. Does that mean as we look out into fiscal 2027, we could see positive price mix trends, or is this the new normal? And what gives you the right to win in some of those more profitable accounts that might be out there? Mike Smith: I think we are probably a little bit too early. We are going through our annual operating plan right now, so we will come back at Q4 and share what that might look like for fiscal 2027. The one thing I do want to remind the group about is the new business that we have picked up with some of those large chain customers or even some of the private label business in retail in North America. Those have been new propositions to the industry. They were not currently purchasing frozen fries, and so it has created some mix headwind, but it is new business that just makes the industry stronger overall and fills the capacity that is out there in the marketplace. Alexia Howard: Thank you. I will pass it on. Operator: And we will go next to Scott Marks with Jefferies. Scott Marks: Hey. Good morning. Thanks very much. First thing I wanted to ask about, just within North America, if we think about the current 90% utilization rate, how much in the way of other curtailed lines do you currently have in North America? And how much incremental capacity do you have available to bring back online should conditions warrant such action? Mike Smith: For the most part, we have restarted most of our curtailed lines. And so this allows us to still have flexibility to meet customer demand, but also, as I have said earlier, just be more thoughtful about that business that we bring on in the future. Scott Marks: Okay. Clear on that. And then as we think about internationally and just some of the dynamics going on across the world, wondering what you can share with us in terms of what you are seeing from competitors in terms of their own capacity or where or how they are choosing business in a different fashion versus what they may have done historically. Mike Smith: I cannot speculate on what competitors are doing and so forth or others in the industry, but I can tell you the pace of announcements has slowed. We have heard of some short-term industry capacity curtailments, specifically in Europe, as they manage through the crop and the slower demand. But we think, or we believe, that the competitive backdrop in some of these international markets may result in less capacity being built than was maybe previously thought, just given the market or industry dynamics. Scott Marks: Appreciate it. I will pass it on. Operator: And we will go next to Marc Torrente with Wells Fargo Securities. Marc Torrente: Hi, good morning, and thank you for the questions. I guess, first, on the cost savings program, it now looks like you expect to exceed the prior $250,000,000 target. Maybe any more color on where the incremental savings are coming from—more on COGS or SG&A side? And where do you think you can get those expense levels to over time? Mike Smith: We are on track to exceed the plan, like we talked about, even here in fiscal 2026. I would say we are driving a cultural shift and a different mindset around costs in our organization, and we really have a strong focus on continuous improvement. A lot of that incremental cost savings that you are seeing is actually hitting the cost side—supply chain side of things—more so than any other areas. Obviously, we have identified some additional costs as Jan comes in and does his onboarding, as well as Jim, given Jim is going to be the one who is leading this for our organization. We will allow them to take a look at where the opportunities are, and at the right time, we will come back and share what any future cost savings plans might look like. Marc Torrente: Okay. Great. And then the topic of portfolio management has been brought up recently. Maybe just more on how you are thinking about your positioning, where to win and opportunities in certain regions, and, I guess, general strategic approach going forward? Thanks. Mike Smith: A big piece of our Focus to Win plan is prioritizing markets and channels. And we are doing that. As Jan comes in, he has a really strong background in those international markets. He has been the CEO and led organizations in a number of the markets in which we operate. He is going through his onboarding process right now. He is assessing our different businesses around the globe, and he will be on the call next quarter and be able to give his perspective and insights into what he is seeing. But we continue to look at our business overall and are really focused on what are the markets where we have the right to win long term and what adjustments we need to make within our markets to make sure we are successful and drive our business and meet our customers' expectations long term. Operator: And we will go to our last question, Carla Casella with JPMorgan. Carla Casella: Hi. Thanks for taking the question. Your tariff discussion was very helpful. I am just wondering if you can also talk to the Middle East conflict and the costs you could potentially see in higher transportation or key raw materials, and if you are seeing any disruption there on the cost side. Mike Smith: I think the impact in the Middle East is ultimately going to depend on the length and severity of the conflict. There are three areas of risk that I see in the Middle East. One is, obviously, lower volumes to the region. I think Bernadette shared in the prepared remarks that the Middle East makes up a high-single-digit percent of our International segment. And, obviously, if volumes—or if it becomes a prolonged conflict—that does potentially have some impacts on inventories. But for me, as I look at this, it is more around the increased volatility in some of the commodities—things like packaging, fuel, and so forth. And that impacts markets around the globe. Obviously, we are working through our annual operating plan right now. We will come back next quarter and talk about what the fiscal 2027 outlook looks like and communicate at that point what those risks could be. But we feel good about the opportunities and the abilities that we have in order to pass through some of those costs as they come through. Bernadette Madarieta: And, Mike, the only other thing I would add on the cost side is that as part of our broader risk management framework, we do hedge portions of our key inputs to reduce volatility. That does not eliminate all of the price risk, but the combination of our hedging program and diversified sourcing in our commercial agreements gives us that balanced level of protection. Carla Casella: Okay. Great. Thank you. Operator: That will conclude our Q&A session. I will turn the conference back to Debbie Hancock for any additional or closing remarks. Debbie Hancock: Thank you, Lisa, and thank you to everyone for joining us today. The replay of the call will be available on our website later this afternoon. I hope everyone has a good rest of your day. Operator: That concludes today's call. Thank you for your participation. You may now disconnect, and have a great day.
Operator: Thank you, everyone, and welcome to the Beyond Meat, Inc. 2025 Fourth Quarter Conference Call. [Operator Instructions] Please note this event is being recorded. It is now my pleasure to turn today's conference over to Raphael Gross, partner of ICR, Inc. Please go ahead. Raphael Gross: Thank you. Hello, everyone, and thank you for participating in today's call. Joining me are Ethan Brown, Founder, President and Chief Executive Officer; and Lubi Kutua, Chief Financial Officer and Treasurer. By now, everyone should have access to our fourth quarter and full year 2025 earnings press release filed today after market close. This document is available on the Investor Relations section of Beyond Meat's website at www.beyondmeat.com. Before we begin, please note that during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Forward-looking statements in our earnings release, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. We refer you to today's press release, our quarterly report on Form 10-Q for the quarter ended September 27, 2025, and our annual report on Form 10-K for the fiscal year ended December 31, 2025, to be filed with the SEC along with other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements today. Please note that on today's call, management may reference adjusted EBITDA, adjusted loss from operations and adjusted net loss, which are non-GAAP financial measures. While we believe these non-GAAP financial measures provide useful information for investors, any reference to this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures. And with that, I'd now like to turn the call over to Ethan Brown. Ethan Brown: Thank you, Raph, and hello, everyone. We entered a challenging year for our brand with an equally challenging quarter. We used this period, however, to accomplish a series of foundational building blocks for the company. First, we retired the majority of our 2027 convertible debt notes, and second, we raised significant capital, 2 measures that fundamentally changed and strengthened our balance sheet. Third, we invested in an enterprise-wide transformation initiative with a focus on rightsizing our operations and expanding our margins. Fourth, and as you will see reflected in our Q4 2025 numbers, we took another hard look at the assets, products and inventories, we believe, are not needed going forward and took action to disposition them. Fifth, we continue to lead the category in bringing clean plant-based meats to the consumer while hammering away at persistent misinformation promulgated by the incumbent industry. Finally, we laid the groundwork for repositioning Beyond Meat to Beyond the Plant protein company so that we can bring the strength of our brand, technology and expertise to adjacent categories. Having touched on the significant actions we took to strengthen our balance sheet through the elimination of approximately $900 million in debt and the addition of approximately $149 million in cash on our previous earnings call, I will forgo further detail here. Instead, I will focus my comments on a quick financial review of Q4 2025 before turning to our transformation work, product narrative and our brand repositioning and entry into adjacent markets. What I hope will be clear from these comments, especially for the investor who desires to drill down a level deeper than headline numbers, is that we are highly focused on reducing baseline operating expense and cash use, increasing conversion efficiency in our production facilities and addressing category headwinds straight on even as we take significant steps to diversify beyond it. Financial results for the fourth quarter 2025 reflect persistent weak demand in the plant-based meat category, resulting in lower volumes, the impact of which ripple throughout our P&L. This negative pressure was coupled with a number of significant nonroutine charges, many of which, though not all, stem from our transformation activities. Sales were $61.6 million, down 19.7% from the year ago period. Lower sales led to lower overhead absorption, which together with higher trade, negatively impacted gross margin. More significant, however, were large nonroutine or unusual items. These include such items as increased provision for inventory obsolescence, partly reflecting the strategic discontinuation of certain lower-profit products and accelerated depreciation related to the cessation of our operational activities in China, the net result was a reported gross margin of 2.3%. Similarly, despite progress in reducing the baseline cost of operating our business, significant nonroutine items, including large noncash charges, increased our reported operating expenses to $134.2 million versus $47.8 million in the year ago period. These included $48.1 million in noncash charges related to the write-down to fair value of certain of the company's long-lived assets; a $38.9 million litigation-related accrual; and higher noncash stock compensation expense of approximately $13.3 million related to our convertible debt exchange transaction. Stripping out these nonroutine items and the impact of the transaction-related change in noncash stock compensation, one can see that the run rate operating expense of our business is down considerably year-over-year. Finally, also reflecting the aforementioned transaction, net income of $409.9 million in the fourth quarter of 2025 compared to a loss of $44.9 million in the year ago period, reflecting a $548.7 million gain on debt restructuring. To summarize, our fourth quarter 2025 results reflect both continuing challenges in the category as well as substantial noise in our reported numbers due to, among other factors, several of our transformation initiatives. I will now turn to this transformation activity, where we are encouraged by the progress of our transformation office led by our interim Chief Transformation Officer, John Boken. As I noted, we've seen further reduction in underlying operating expenses, excluding the nonroutine items and transaction-related stock compensation increase for both the fourth quarter and full year 2025 on a year-over-year basis, and we are pursuing other cost reduction measures going forward. Also setting aside certain nonroutine charges, we believe we are making progress against our goal to sustainably return to healthy gross margins. As previously shared, we've largely completed the consolidation of our production network and continue to improve asset utilization at our manufacturing facilities. Further, we're now in the process of optimizing our new continuous production line at our facility in Columbia, Missouri and are investing in automation. These and other measures are already showing up in a year-over-year improvement in conversion costs across our network, a key component of our COGS reduction initiatives. Further, through our transformation office, we are seeking to reduce material costs through RFP actions, the cultivation of secondary sources and formulation improvements. We are further consolidating our warehouse network and reducing logistics expenses. We are exiting less profitable product lines, and we are making substantial progress on driving down inventory. Finally, we remain very focused on cash management and significantly reduced our baseline cash use in the fourth quarter compared to prior periods, excluding extraordinary items. I'll now turn briefly to our ongoing efforts to dispel the persistent cloud of misinformation regarding our products. As I have noted countless times in these calls, the incumbent industry did a masterful job of seeding doubt in the mind of the consumer. For the time being, we operate in an upside down world with proteins from peas, lentils, fava beans and brown rice, mixed with avocado oil and a limited number of other clean ingredients, is disingenuously, though broadly cast, as less than healthy. I believe this confusion will ultimately clear. In the interim, we remain focused on innovating around taste and health and helping to communicate the latter via various accreditations and certifications including our now 20-plus certifications from the Clean Label Project. For our latest center to plate innovations, such as Beyond Steak Fillet or Beyond Ground Fava, consumers can now order directly from Beyond Test Kitchen, our direct-to-consumer platform. These products, they're great taste, simple and clean ingredients and the impressive macro nutrient content are winning accolades from consumers even before they reach retail stores. Beyond Steak Fillet boasts 28 grams of protein, fava beans, wheat gluten and mycelia, and only 1 gram of saturated fat from avocado oil, while boosting 0 cholesterol and only 230 calories. Beyond Ground Fava delivers 27 grams of protein from fava beans and potato, 4 grams of fiber from psyllium husk, has no saturated fat or cholesterol and is only 140 calories. Moreover, Beyond Ground Fava is made from only 4 ingredients: water, fava protein, potato protein and psyllium husk and performed extremely well in niches such as tacos, Bolognese and protein bowls. Finally, I'll now turn to a key and central communication. Notwithstanding the many changes occurring through our transformation office that I've discussed above, what I noted late last year that going forward, you should not expect more of the same, I was most of all referring to the broadening of the aperture that you see as we move from Beyond Meat to Beyond The Plant Protein Company. I believe that no company has innovated with plants under more scrutiny than Beyond ever. We're now bringing the results in hard-fought expertise and capabilities, our commitment to health and clean ingredients and our brand to adjacent categories where we believe we can be disruptive and win. Our first foray in this broader delivery of the power of plants to consumers is our exciting new drink platform Beyond Immerse. The Beyond Immerse platform, a clear and slightly carbonated beverage, is designed to provide the consumer with protein, fiber, antioxidants and electrolytes, effectively immersing the body in the nutritional benefits of plants. We launched Beyond Immerse as we now plan to do with all new retail innovation on the Beyond Test Kitchen to early fanfare and excitement, generating over 3 billion media impressions and selling out of our first limited-run inventory quickly. Beyond Immerse is formulated to support muscle health and recovery, gut health, immune function and hydration. Each serving contains 10 or 20 grams of protein, 7 grams of fiber, and only 60 or 100 calories depending on the level of protein. Beyond Immerse is made without added sugar, sugar alcohols, artificial sweeteners or flavors, stabilizers, carrageenan and many other ingredients present in many popular protein drinks. Easier to drink than a thick protein shake and made without whey so it's dairy free, the product is designed for the casual to competitive athlete as well as the busy student or professional who wants protein, fiber, antioxidant and electrolytes at the gym, home, work or on the go. Moreover, we believe it is particularly well suited for GLP-1 users. I personally find it satisfying post workout at breakfast or late afternoon when I'd like a boost between meals. It's been fun to watch consumers enjoy it. And like all things Beyond, we continue to innovate and iterate based on what we believe is a state-of-the-art science and consumer use and suggestions. Far from stepping away from our mission to change the source of protein at the center of the plate from animals to plants, we reaffirm it and take to these promising adjacencies to introduce our brand to a much larger number of consumers and currently participating in a plant-based meat category. We do so not to dabble but with a firm and serious belief that our technology, our brand and our commitment to human health and the power of plants allows us to successfully deliver unique and compelling value within the certain segments we've identified. In the end, it is our aspiration that though indirect, this expansion will lead more consumers back to Beyond at the center of the plate as they enjoy our brand, clean ingredients and commitment to their health in a less controversial, more convenient products like Beyond Immerse. As such, I close today's comments as I have many others that we remain focused on building tomorrow's global protein company of size and significance. With that, I'll now turn the call over to Lubi. Lubi Kutua: Thank you, Ethan, and good afternoon, everyone. I'll begin with a review of our fourth quarter financial results before providing some brief comments on our outlook and additional matters regarding some of our recent disclosures. Total company net revenues decreased 19.7% to $61.6 million in the fourth quarter of 2025 from $76.7 million in the year ago period. The decrease was primarily driven by a 22.4% decrease in volume of products sold, partially offset by a 3.5% increase in net revenue per pound. Ongoing softness in volume of products sold primarily reflects weak category demand in many of our key geographies and channels and lower sales of chicken and burger products to QSR customers, both in the U.S. and abroad. Net revenue per pound increased primarily as a result of changes in product sales mix, favorable changes in foreign exchange rates and price increases of certain of our products, partially offset by higher trade discounts. Breaking this down by channel, U.S. retail channel net revenues decreased 6.5% to $31.7 million in the fourth quarter of 2025 compared to $33.9 million in the year ago period. The decrease was primarily volume driven, which again largely reflects weak category demand, while net revenue per pound was flat. Although volume headwinds persist, we are beginning to see some benefit from recently announced distribution gains in the mass channel, which is helping to mitigate the general softness. In U.S. foodservice, net revenues decreased 23.7% to $8 million in the fourth quarter of 2025 compared to $10.5 million in the year ago period. The decrease was primarily driven by a 25.1% decrease in volumes of products sold, partially offset by a slight year-over-year increase in net revenue per pound. Although category dynamics in the foodservice channel also remain weak, much of the decline in our business was due to the lapping of sales of chicken products to a U.S. QSR customer in the year ago period. Turning to International. International retail channel net revenues decreased 32.5% to $8.8 million in the fourth quarter of 2025 compared to $13.1 million in the year ago period. The decrease in net revenues was primarily driven by a 33.5% decrease in volume of products sold, partially offset by a 1.5% increase in net revenue per pound. The decrease in volume of products sold was primarily driven by reduced burger sales in the EU and certain retail channels in Canada. Although our Canadian business generally remains healthy, year-over-year comparisons were negatively impacted in part by stocking activity in the year ago period in anticipation of potential tariffs. Finally, in International Foodservice, net revenues decreased 31.8% to $13.1 million in the fourth quarter of 2025 from $19.3 million in the year ago period. The decrease in net revenues was driven by a 34.1% decrease in volume of products sold, partially offset by a 3.4% increase in net revenue per pound. The decrease in volume of products sold was primarily attributable to reduced sales of our chicken and burger products to certain QSR customers. The increase in net revenue per pound primarily reflected favorable changes in foreign currency exchange rates and changes in product sales mix, partially offset by higher trade discounts. Moving down the P&L. Gross profit in the fourth quarter of 2025 was $1.4 million or gross margin of 2.3% compared to gross profit of $10 million or gross margin of 13.1% in the year ago period. Gross profit and gross margin in the fourth quarter of 2025 included $2.4 million in noncash charges related to SKU rationalization initiatives and $1.5 million in expenses related to the shutdown of our China business. Additionally, gross profit and gross margin in the fourth quarter of 2025 were negatively impacted by increased cost of goods sold per pound, partially offset by increased net revenue per pound. Reduced production volumes in response to weak demand continue to represent a meaningful headwind in terms of fixed cost absorption even as we have been encouraged by improvements in our variable conversion costs. Overall, by cost bucket, the increase in cost of goods sold per pound primarily reflects higher materials costs and increased inventory provision, partially offset by lower manufacturing expenses, including depreciation and lower logistics costs. Operating expenses were $134.2 million in the fourth quarter of 2025 compared to $47.8 million in the year ago period with a significant year-over-year increase on a reported basis, reflecting the inclusion of certain large noncash charges. Specifically, and of note, operating expenses in the fourth quarter of 2025 included $48.1 million in noncash charges related to the loss from write-down of assets held for sale, reflecting certain PP&E assets which were no longer deemed core to our strategic objectives going forward, a $38.9 million litigation-related accrual and $13.3 million in incremental share-based compensation expenses related to the convertible debt exchange. Excluding these and other lesser items, the decrease in operating expenses compared to the year ago period was primarily driven by decreased marketing expenses. Below the line, total other income net was $542.6 million in the fourth quarter of 2025 compared to total other expense net of $7 million in the year ago period. The increase was primarily due to a gain on debt restructuring, resulting from our debt exchange and to a lesser extent, a gain from remeasurement of warrant liability, partially offset by a loss from remeasurement of derivative liability and an increase in interest expense. Net income was $409.9 million in the fourth quarter of 2025 or $0.84 per common share compared to a net loss of $44.9 million in the year ago period or a loss of $0.65 per common share. Adjusted EBITDA was a loss of $69 million in the fourth quarter of 2025 compared to a loss of $26 million in the year ago period, although I would note that adjusted EBITDA in the fourth quarter of 2025 includes the previously mentioned loss from write-down of assets held for sale. Turning to our balance sheet and cash flow highlights. Our cash and cash equivalents balance, including restricted cash, was $217.5 million as of December 31, 2025, and total outstanding carrying value of debt was $415.7 million, which includes the total undiscounted future cash flows of the new 2030 notes in accordance with TDR accounting guidelines. Net cash used in operating activities was $144.9 million in the year ended December 31, 2025, compared to $98.8 million in the year ago period. Capital expenditures totaled $12.3 million in the year ended December 31, 2025, compared to $11 million in the year ago period. Net cash provided by financing activities was $223.4 million in the year ended December 31, 2025, compared to net cash provided by financing activities of $45.8 million in the prior year. In 2025, net cash provided by financing activities included $100 million in draws from our delayed draw term loan facility, partially offset by related debt issuance costs and aggregate net proceeds of approximately $148.7 million from sales of common stock under our ATM program. As a reminder of the key highlights -- as a reminder of the key highlights of our Q4 debt exchange, we exchanged over 97% of the $1.15 billion aggregate principal amount of the 2027 convertible notes for approximately $209.7 million in aggregate principal amount of new second lien 2030 convertible notes and approximately 318 million new shares of common stock. This leaves approximately $29.5 million of the 2027 convertible notes outstanding today. In combination with the nearly $150 million in net proceeds we raised from our ATM program in Q4, we believe these actions have meaningfully strengthened our balance sheet and support our continued efforts to execute our business transformation plan. Let me now touch briefly on our outlook. We continue to experience elevated levels of uncertainty and therefore, low visibility within our core category of plant-based meat. Accordingly, we believe it remains prudent to provide only limited and very near-term guidance until we begin to see more clear signs of stabilization within our operating environment. With that context, we are providing the following revenue guidance for the first quarter of 2026. We expect net revenues to be approximately $57 million to $59 million. Finally, I'll close by making a few remarks on some of our recent disclosures regarding the company's internal controls over financial reporting. As part of our fourth quarter and full year 2025 financial close procedures and in addition to a previously identified material weakness related to the account for nonroutine and complex transactions, we identified an additional material weakness related to controls associated with the accounting for inventory provision, including amounts recorded for the provision of excess and obsolete inventory. We are clearly disappointed with these findings and are actively working on plans to remediate the identified deficiencies. In part, while assessing the impact of these material weaknesses in our financial statements, we identified certain errors related to our previously issued interim condensed consolidated financial statements for 2025, which we determined were immaterial to those interim financial statements. We intend to correct those prospectively when we file our quarterly reports in 2026, and we have also furnished as corrected amounts for certain key affected financial measures in today's press release. We want to assure all our stakeholders that we are fully committed to our efforts for remediating the identified issues and strengthening our controls as applicable, and we have already taken measures to advance these objectives. Lastly, as we noted in our earnings release, we are unable to file our annual report on Form 10-K for the fiscal year ended December 31, 2025, within the prescribed deadline as we require additional time to complete our fourth quarter and year-end financial close procedures. We are working diligently to address these matters. However, at this time, we are unable to estimate when the Form 10-K will be filed. As a result, the company will be considered an untimely filier and will no longer be eligible to use Form S-3 registration statements until it regains timely filer status by filing in a timely manner, all reports required to be filed under the Securities Exchange Act of 1934 as amended for a period of 12 calendar months. And with that, I'll turn the call over to the operator to open it up for your questions. Thank you. Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Ben Theurer with Barclays. Benjamin Theurer: A few ones -- so maybe to kick it off a little bit on like the outlook for new products and product lines which you've talked a little bit about the beverage opportunities here. And then obviously, you've talked about a pipeline of potential new products under the new branding umbrella. So I really want to understand, Ethan, from you, is that to be seen as like really pivoting away from kind of like the initial mission of Beyond was to really look to diversify the portfolio. And we would like to understand where you are in terms of researching and developing those products to get a better understanding in terms of the time line when we can expect those products to come to market? That would be my first question. Ethan Brown: Thank you, Ben. I appreciate it. So I think, first and foremost, no, it is not in any way abandoning the original mission and focus that we have had. It's simply broadening the aperture of our business and meeting consumer where they are today. And if I could just comment a little bit on why we're making this pivot and then get into kind of the timing and focus of the pivot. If I thought that Beyond, in our original value proposition, were struggling during a period when the role of science and public discourse and social media, media and government was pronounced and effective when our pricing and economic stability and buying power are all favorable and the American political landscape were characterized by a sense of common ground versus the vision, and Beyond were really suffering, I would be very concerned for our long-term prospects and for the plant-based meat category overall. But none of that is true, right? This is a very difficult period for the world, it's a difficult period for our country, and I think one of the things that is most significant for our business in terms of what's impacting it is this kind of surround sound of pseudoscientific jargon and positioning and promotion that really overwhelms what is decades and decades and decades of science. And I think nothing in our lane is more obvious than -- is more obvious representation of this troubling trend and the resurgence of red meat. And I've spent over 17 years now seeking and listening to the council, some of the very best cardiologists in the country at some of our most prestigious institutions, and I can only look at these current trends with a mixture of sadness for the folks that are going to be impacted by it and increased in patients for those that are seeking to profit from it. I was very glad to see the American Heart Association today take a stand, I think a major newspaper, I actually got a clipping of it, summarize it as that new nutrition guidance from the American Heart Association advises getting proteins from plants rather than meat, choosing low fat or fat-free dairy and using olive, soybean and canola oil instead of beef tallow and butter. So you have a kind of an independent institution backed by science that is saying the exact opposite of where our culture is going on diet. But the good news is that this is a pendulum, it's going to swing and it's going to swing back, and I'm very comfortable that Beyond will prosper when it does. But I'm not going to wait around for that. And because of the work we've done, particularly over the last 10 years, to really lead the category and developing extremely clean, healthy products, we're really well positioned to look outside the category and take that technology, take that science, take that brand into segments that are -- and categories that are many, many, many times the size of the plant-based meat category. So you have a great brand. We just for example, again, got the Time Magazine list best brands in the world. You take the science that continues to win awards and accolades for some of the development work we've done around the plant-based protein for the center of the plate and you take a massive trend within the consumer that is around protein and fiber and things like that, you say, okay, where can we apply all this? And the first, we did a lot of work over the last year understanding which adjacent markets we can get into. And the first one that we've identified and been public about and others will follow is the beverage category. And we launched an initial version online earlier and sold out very quickly that initial inventory. And what we're doing is, as we did with Beyond Ground Fava, learning from the consumer what they like and don't like and making adjustments. And that process is going great. And so the product that we're going to be launching soon, I think, is going to be one of the best protein drink markets, protein drinks on the market. It satisfies so many different needs for the consumer, whether it's protein, fiber, antioxidants, electrolytes, does so in a really clean way. And fascinating for me as we get into these other categories and I start looking at some of the key competitors in those categories, the really big ready-to-drink protein companies, they're putting things in their products that we could never put in our products because of the scrutiny we're under, because of our guidelines around clean ingredients. When you're looking at, I think, one of the top ones is sucralose, there's carrageenan, has [ sulfamic ] potassium, another one has artificial flavors and all of the above. Another one has hexametasulfates as well as all of the above, it just goes on and on, things that we put in, they'd be kind of front page news from our friends in the incumbent industry. So we're going to take that relentless innovation. We're going to take that to clean ingredients. We're going into those categories. And so I think the drink category is the one that's most clearly on the horizon for us, the one that I'm willing to most speak most publicly about. And so I think this summer, you'll see us be pretty active there. Benjamin Theurer: Okay. Got it. And then this is maybe more for Lubi. If we kind of like look at the balance sheet and like in connection with the cash flow statement, clearly, throughout the quarter, you got a little bit of a relief on where we are on the cash balance. But if we kind of look at just the underlying trends within cash from operations, it continues to be somewhat in that range, 40 million, 50 million-ish negative on a quarterly basis shaping out at about 140, 150 for the year. So what are the things that you can kind of like work on, just given where the environment is. And I mean, your outlook for 1Q clearly points to not necessarily a top line-driven recovery in 2026. So all that operating leverage continues to be probably a headwind or the lack of operating leverage put it this way. So what are the levers you can pull to kind of like maybe further reduce with any incremental cash burn with durations that you're facing? Ethan Brown: I can just give a quick answer and then turn it to Lubi. One, I think you'll see that we're doing some really interesting things with inventory. So that's going to give us some favorability. And then second, I think you just got to back out some of these onetime charges that have been so difficult for us. And once you do that, you see a dramatically slowing use of cash. So you do it this quarter, for example, you are down significantly from where we were a year ago, if you back out those onetime charges or some of the extraordinary stuff related to convertible debt exchange. And I think you'll only see that as we go forward, it will continue to be favorable for us. Lubi Kutua: Yes, Ben, I appreciate the question. Yes, I would probably echo a lot of what Ethan just mentioned. We have been focused now for a while on our working capital management and in particular ensuring that our stocking levels of inventory are appropriately sized given where the business is. I think the team has done a really good job in managing the inventory down, but I think there's more to come in that regard. The other important thing to -- and again, Ethan mentioned this, is in the last couple of quarters, we have had some fairly large what we would consider sort of nonordinary course business expenses, right, in the fourth quarter? In particular, these were related to the debt exchange. The business -- we continue to execute our transformation plan, all right, for this business. And so from time to time, we will see some of these unusual items, all in sort of service of trying to reposition this business more appropriately towards our goals to profitability. But I would expect that in 2026, some of the larger items, certainly that we saw in recent quarters should not recur. Recall as well that last year in 2025, we unfortunately did have a couple of reductions in force and the associated severance payments that are related with that -- related to that. And then just lastly, I would say that we are focused on trying to expand our gross margin. Ethan, in his prepared remarks, mentioned that we're standing up our sort of first continuous production line or we do end-to-end production, and we're going to be -- that's going to give us an opportunity to internalize additional volume that's previously outsourced and increase our internal asset utilization. So I think all of those measures taken together should help to reduce that rate of cash consumption. Operator: Next question comes from Kaumil Gajrawala with Jefferies. Kaumil Gajrawala: I guess first question -- congratulations on the financing and all of that. Maybe are there things that you can now do that maybe you're prohibited from doing before as you sort of execute the turnaround? And then also, I guess, in the context of the of the refinancing in the -- as it relates to the filing and some of the financial disclosure issues, does that change anything related to the transactions that you've done? Or is there anything that we just need to be aware of if for some reason the 10-K comes out even later than planned, just things that we should know about that could happen. Ethan Brown: Thanks. I'll take the first one and then pass it on to Lubi. I don't think we're going to be making any outsized investments as a result of the cash we brought on. I think we're just continuing to focus on EBITDA positive target and minimize cash use. But there are some things that we now have the ability to do. So if you look at last year, we cut way back, and I think part of the issue with our fourth quarter results on the top line, we didn't market a lot. And we were just in cash conservation mode as we were doing our debt exchange, which was incredibly expensive. And so I pulled back considerably on marketing. So this year, we won't do that, particularly as we as we get into some of these exciting categories where marketing is important. And then just on like the automation and on continuous lines and things like that, you will see us make CapEx investments that will allow us to drop down more cash out of just general sales and operations. But I do think if you take a step back and look at our P&L for the quarter, as we were talking about on operating expense, there's just a lot of noise in these numbers, and I tried to touch upon that. Like I think if you look at gross margin, for example, we did have lower volumes, which led to some of this lower fixed overhead absorption. But we did have these charges, right? We had some of the SKU rationalization charges. We had expenses related to shutting down our China business. Then we had much higher inventory provisions than normal, things like that, so that's masking these kind of lower conversion costs throughout our plants, lower logistics costs and things of that nature. And so if you take a step back to, okay, the company is converting materials at a lower rate than it has before, right, and then you go to OpEx and you say, okay, strip out all those onetime charges, the company is operating this business at a much lower rate than it was before. And so now it's just incumbent and cash is too, same thing. If you take out all of those onetime charges, cash consumption is lower. And so if you start to put that picture together, you say, what this company really needs to do this fix this top line. And I've tried for years to do that through the existing category. And I think the headwinds are going to be here for a little bit longer. And it's something we got to get outside the category to address, and that's why you see us in some of these adjacencies. So it's difficult for people to see if they just look at the top line numbers, but take a step back, what the missing piece really is becoming now is just getting a top line to be where we need to be, and we're very focused on that. Lubi Kutua: Yes. And Kaumil, maybe if I would just add a couple of things to that. So as far as what putting the sort of balance sheet restructuring behind us now enables us to do. I think Ethan sort of covered that well and the raising of the additional proceeds from the ATM allow us to, I think, spend a little bit more on the marketing front, which we do think will be important to stabilize the top line and as we start to expand into some of these adjacent categories. But I think the other thing as well is just the focus, right, that we are able to reallocate to the primary business. As you guys know, I mean, we had been talking about the debt restructuring for quite some time on these earnings calls. And so that did consume quite a bit of the management team's focus. And so it's a relief to put that behind us and really focus now on the very important steps and measures that we need to continue to make to turn the business around. Your question regarding the disclosures around the material weakness and the impacts that's had on our financial statements. I would say it doesn't necessarily change anything immediately. But obviously, we're very focused on ensuring that we can file our 10-K as quickly as possible, notwithstanding the fact that we were not able to do so within the prescribed time line. Kaumil Gajrawala: Got it. And then as it relates to the benefits product, what does the supply chain look like for something like that? Can you leverage your current PP&E assets to produce it? Do you use third-party co-packers? It sounds like it just sounds different from the core of what you're doing that, yes, it's cool, likely to be promising, but how does that impact the actual practicality of production and such? Ethan Brown: Yes. That's a very, very good question. Before I answer, I want to just note one thing on the core business that I moved over to too quickly. If you look at the results on a segment-by-segment basis, in U.S. retail, we were down 6.5%. And to me, that's actually encouraging. Because if you look at the overall numbers, they were down more than that, right? But if you start to see stabilization in the U.S. retail in our core business, which I think we're going to see, though I can't say exactly when, then everything we're doing on these adjacencies is kind of additive, right, if you can turn around that retail position in terms of the retail number. And so I was very encouraged by that, and it has to do with some of the new distribution we've been able to obtain in some of the larger mass stores. So as we layer in things like drinks, I think getting the reconnected to the U.S. retail consumer seems like it's within reach. On the supply chain side, I guess, the first thing I would say is that despite our past, we actually have a lot of beverage expertise. We have some of the -- I think, some of the best minds and beverage on our Board with Seth and Justice and Jim and Boston Beer, Kathy and Coke, so it's not like we're coming into this without a lot of experience. It's just something we haven't done before as the company. And so the supply chain is actually pretty similar from an ingredient perspective. We're dealing with protein. We're dealing with fiber. We're dealing with flavor, things like that. So that is not a stretch for us at all. And the production, if you think about turning plants into needs for the center of the plate and you think about blending together protein and fibers and flavor in a drink, the latter is much easier. And so this is not something that we're worried about from a logistics perspective. Co-packing is readily available throughout the United States. It has much less arduous terms from a scale-up perspective. Often, we have to go teach the co-packer how to make our products. That's obviously not the case here. And I think what you're really going to see is our ability to understand all the characteristics of plant materials, the proteins, the fiber and how to optimize their taste for the consumer is going to shine in these drinks, and that's what I'm excited about. Operator: The next question comes from John Baumgartner with Mizuho. John Baumgartner: Maybe first off, Ethan, just to build on that last line of thinking. Just sticking with the expectations for the beverage expansion and the adjacencies more broadly. Can you walk us through how you plan to scale it, how you'll manage distribution, the specific channels that you'll enter? How you will allocate budget to enter these categories? Just how do think about milestones you ramp up and the impact on cash burn? Ethan Brown: Sure. So we're taking a pretty careful approach. So you'll see the same pattern that we've just done with drinks now initially launching D2C getting feedback from the consumer making adjustments. And then you'll see us go into a particular regional distribution, likely emphasis on natural and then into mass. And so we'll take a step by step. That as we see success or failure, we'll adjust how much we're spending. But so far, and this is very early days, the indications we're getting from the drink are very positive. In terms of distributor interest and things like that, all of it is speculative at the moment. So I don't want to promise anything. But I think what you'll see is a kind of measured approach from us, and we'll spend a certain amount, make sure that we're still on track, then it's an additional amount. But one of the neat things is that we're not necessarily creating entirely new brands, right? Like so the drink is called Beyond Immerse, but we're relying on the fact that Beyond is a very well-known brand. So we don't have to kind of reinvent the wheel. And we have a strong consumer base that's particularly interested in what we're doing. And so that gives us an advantage relative to someone who's just starting out, right? We're able to sell additional product to a consumer that's already buying Beyond. I don't know, Lubi, if you have any comments. Lubi Kutua: No. I think you covered it well, Ethan. What I would say is to your question around potential impact on cash burn, I think one of the things that's attractive about the beverage category -- can be attractive about the beverage category, particularly at scale, is the margin profile, right? So obviously, as we are in relatively limited distribution and producing at much smaller quantities, the economics won't look quite as favorable as if we are successful and begin to scale up. But certainly the margin profile for that category of products would be attractive. And so with the supply chain that we have in place and these co-packer agreements, et cetera, we actually think that the impact on the total cash use will not be overly burdensome. John Baumgartner: Okay. And then I'm curious about your vision for the Beyond Meat portfolio going forward as you work through this SKU rationalization. I guess where have you chosen to retrench in terms of product or new products? And what have you identified as the foundation for the core going forward? Is it steak? Is it burgers? How should we think about that? Ethan Brown: Yes. So as I mentioned in my comments, we have 20-plus products that are clean label project certified. And I really focus on those. And the Beyond portfolio, for example, and because just in my own taste and my own health. And areas where maybe there's less differentiation than I'd like to see. You can make sure what that might be, some of the breaded items, things like that, less interested in that, more interested in where we can deliver really unique value to the consumer. And so Beyond Steak Fillet is a good example. That's 20 grams of protein. It's 1 gram of saturated fat from avocado oil. It's got mycelium, which is a terrific ingredient; it's got fava beans, et cetera. So focusing on things that really help tell the story around Beyond and tell the clean ingredient and healthy narrative are the ones that we're focusing on going forward. Operator: The next question comes from Peter Saleh with BTIG. Peter Saleh: Great. Maybe Ethan, I guess the first question I had was on the beverage lineup. You mentioned initially getting some feedback and then making adjustments. So maybe can you talk a little bit about the initial -- what feedback you may have gotten and any adjustments you've made? And then if you could just help us out here, what is the target customer here for this beverage lineup. And then I have a follow-up as well. Ethan Brown: Sure. So I think one of the things we're learning about beverages is unlike where we have a really clear North Star, what does this taste like a beef burger or not, the reason there are so many definitions in markets that people have different tastes, right? And so what we're trying to do is find that sweet spot where we can appeal to a broad group of consumers, taste profiles. And so I think what we found is the 10-gram we put out kind of home run. The 20-gram, a lot of people are going to love it or didn't like it much. And enough people, thankfully, love it, that we're able to keep going. But that was more polarizing than the 10 gram. And so what we've done is tap back some of the intensity of the flavors in the 20-gram and some of the sweetness in the 20 gram. And the product that they've developed, and we're probably on our sixth or seventh iteration since we launched, is just phenomenal. Again, I put -- I stand behind us. I think it's going to be one of the best protein drinks on the market, to the holistic picture, the protein content, the fiber, antioxidants, the electrolytes, the environmental footprint, the ease of consumption. I'm probably drinking too many a day, and I've watched people in our office, in my home. It is all of a product. And so I'm looking forward to it. But that was the type of feedback we reacted to it. And there's nothing wrong with that, right? Like even with the Beyond Ground Fava, which we just got an award that's under embargo right now for the innovation there, was that 4 ingredient, 27 grams protein product, we just like to iterate with our consumers. Like it's a new model, I think, in food that we're very, very fast in what we do and letting them weigh in and tell us what they like and don't like. Peter Saleh: Great. And then just, Lubi, on the gross margin for 2026, is there anything you can provide or share with us at this point? And should it mirror '25, should be much better, lower? Anything on the cadence, that would be helpful. Lubi Kutua: Yes, Peter, unfortunately, like we're not providing guidance for gross margin for the year. And I think just to provide a little bit of context around that is one of the reasons why we continue to provide only near year-end guidance on revenue is the fact that our category right remains -- our core category, plant-based meat remains sort of very volatile and volumes remain soft. And obviously, with that being, obviously, at this stage, the vast majority of our business, right? The impact that softer volumes has on margins can be pretty significant, right? And so I mentioned in my prepared remarks that we -- that the lower fixed cost absorption continues to be a headwind on margin. And so I think it's just extremely difficult for us to sort of forecast gross margin to any degree of certainty when there's so much variability on the top line. So we -- obviously, we have initiatives in place that are aimed at expanding margins, right, including like the continuous line that I mentioned. But ultimately, we need to see some stabilization on the top line in order for us to have sort of greater confidence in terms of where margins will shake out. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Ethan Brown for any closing remarks. Ethan Brown: Thanks, everyone, for the questions. Appreciate all the interest, and got to go look back over the last year, I do want to complement the team this transaction that Lubi and his group executed was just enormous undertaking. And so there's a lot of work that went into that. And I think he's particularly pleased to have that behind him. But as we look forward, we're excited to see what's going to happen as we pivot our brand into some areas that are maybe not as challenged in our core category. We're going to be talking with you guys pretty soon, and I think we'll have more information then as to how things are going. Thanks very much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon, and welcome to today's earnings call for Omeros Corporation. [Operator Instructions] Please be advised that this call is being recorded at the company's request, and a replay will be available on the company's website. I will now hand the conference over to Jennifer Williams, Investor Relations for Omeros. Please go ahead. Jennifer Williams: Thank you, and good afternoon, everyone. Before we begin, please note that today's discussion will include forward-looking statements. These statements reflect management's current expectations and beliefs as of today and are subject to risks and uncertainties that could cause actual results to differ materially. For a detailed discussion of these risks and uncertainties, please refer to the special note regarding forward-looking statements and the Risk Factors sections in our annual report on Form 10-K, which was filed with the SEC today. Today's call will include a discussion of certain non-GAAP financial measures. A reconciliation of these non-GAAP measures to the corresponding GAAP measures is included with Omeros' earnings press release issued earlier today, which is available on the Investor Relations page of our website and has been furnished with the Form 8-K we filed with the SEC earlier today. With that, I'll turn the call over to Dr. Greg Demopulos, Chairman and CEO of Omeros. Gregory Demopulos: Thank you, Jennifer, and good afternoon, everyone. Joining me today are David Borges, our Chief Accounting Officer. Nadia Dac, Chief Commercial Officer; Dr. Andreas Grauer, Chief Medical Officer; Dr. Cathy Melfi, Chief Regulatory Officer; and Dr. Steve Whitaker, Vice President of Clinical. Two major successes made the fourth quarter of 2025 a turning point for Omeros. On November 25, we closed our previously announced asset purchase and license transaction with Novo Nordisk for our Phase III ready asset, zaltenibart. Then on December 23, we received FDA approval for narsoplimab now commercialized under the brand name YARTEMLEA for the treatment of hematopoietic stem cell transplant-associated thrombotic microangiopathy, or TA-TMA. Through the zaltenibart deal, Novo Nordisk received exclusive global rights to develop and commercialize zaltenibart, Omeros' proprietary human monoclonal antibody targeting mannan-binding lectin-associated serine protease-3 or MASP-3 and a small number of target-related very early-stage antibodies and antigen binding fragments. MASP-3 is the key activator and is widely considered the premier target of the alternative pathway of complement. Omeros retains rights to its MASP-3 small molecule program, including the ability to develop and commercialize small molecule MASP-3 inhibitors across a range of therapeutic areas, including, but not limited to, ophthalmology, neurology, gastrointestinal disorders, dermatology, musculoskeletal diseases and oncology. Omeros also retains rights to its grandfathered MASP-3 antibodies with temporal and indication restrictions on commercialization and for use in advancing its small molecule therapeutics. The transaction resulted in an upfront cash payment to Omeros of $240 million with an additional $100 million in achievable near-term milestones. We're also eligible for another $410 million in onetime development and approval milestone payments and up to $1.3 billion in onetime sales and commercial milestones. All told, the deal is valued at up to $2.1 billion in upfront and milestone payments. On top of that, Omeros is set to receive tiered royalties up to the high teens on net sales of commercialized products. As part of the transaction, we entered into a transition services agreement, or TSA, with Novo Nordisk. Under this TSA, we are providing and being reimbursed by Novo Nordisk for our employee costs and other expenses associated with services to facilitate the transfer and to maintain the continuous operation of zaltenibart studies and programs. Novo Nordisk will also reimburse Omeros for its inventories of zaltenibart drug substance and drug product. Our partnership with Novo Nordisk is mutually beneficial, underscoring the value of Omeros' science and development expertise while providing us with substantial and ongoing working capital and enabling Novo Nordisk to lever its extensive experience and global reach to unlock the full potential of zaltenibart. Novo plans to advance zaltenibart across PNH and multiple other indications. The ultimate beneficiaries will be patients. Omeros' second landmark achievement in the fourth quarter of '25 was FDA's late December approval of YARTEMLEA, Omeros' lead MASP-2 inhibitor, making YARTEMLEA the first and only approved treatment for TA-TMA. MASP-2 is the effector enzyme of the lectin pathway of complement in TA-TMA and often fatal complication of stem cell transplantation is driven by lectin pathway activation. The FDA-approved indication for YARTEMLEA is broad, covering all TA-TMA in both adults and children at least 2 years of age. Unlike C5 and C3 inhibitors sometimes used off-label, YARTEMLEA by blocking upstream MASP-2 preserves the infection fighting functions of the classical and alternative pathways of complement. This important mechanistic benefit is reflected in YARTEMLEA's approved label, in which there are none of the safety-related obligations usually required for complement inhibitors. Specifically, no box warning, no risk evaluation and mitigation strategy or REMS program and no required vaccinations. As previously disclosed, we began preparations for the U.S. commercial launch of YARTEMLEA well before receiving approval, allowing us to hit the ground running. We've hired and deployed our entire field force of account managers and directors, market development managers, market access leads and medical science liaisons across all territories. Having supplied our distributors within the first 3 weeks of January, first sales occurred shortly thereafter. Within 24 hours of placing an order, both adult and pediatric TA-TMA patients are now receiving YARTEMLEA, including patients who have recently failed prior off-label C5 or C3 inhibitor regimens. Patients are receiving YARTEMLEA in both hospital and outpatient settings and third-party payer reimbursement has been received. The per vial price for YARTEMLEA is approximately $36,000. Each vial represents a single dose. Across the pivotal clinical trial and the expanded access program, median utilization was 8 to 10 vials per treatment course. We expect the majority of the TA-TMA patients course to be administered in hospital outpatient departments where the drug typically is purchased and billed by the hospital. With our field force fully deployed, we remain focused on the 80 highest volume transplant centers across the country. Those 80 centers represent approximately 80% of annual stem cell transplants in the U.S. At this early stage, our primary launch objectives are fourfold: First, to educate the entire transplant care team, including transplant physicians, nurses, pharmacists and reimbursement teams regarding the recently harmonized TA-TMA diagnostic criteria, thereby driving awareness, early diagnosis and treatment of the disorder. On that front, beyond the 80 highest volume transplant centers, our field force has actively met with and detailed centers representing nearly 90% of the allogeneic stem cell transplant procedures performed nationally. Second, to support transplant centers in quickly obtaining their pharmacy and therapeutics or P&T committee approvals, adding YARTEMLEA to their formularies and streamlining their ordering processes to continue ensuring seamless access to YARTEMLEA in both the hospital and outpatient settings. Our progress has exceeded our expectations. YARTEMLEA has obtained P&T committee approval and is now on formulary at 50% of the top 10 U.S. transplant centers, 40% of the top 20 centers, 35% of the top 40 centers and approximately 30% of the top 80 transplant centers across the country. Third, to work with third-party payers to continue ensuring timely reimbursement consistent with the YARTEMLEA label and published diagnostic criteria. To date, third-party payers have approved all pre-authorization requests for YARTEMLEA, meaning that insurers have agreed to prospectively cover those patients. Fourth, to finalize the Health Economics and Outcomes Research or HEOR analysis using the uniformly strong clinical efficacy data and favorable safety profile of YARTEMLEA to demonstrate its compelling cost effectiveness to health care providers and payers. We plan to publish the HEOR analysis for YARTEMLEA soon, and the results strongly support YARTEMLEA's clinical, economic and real-world value. We look forward to providing additional detail regarding the launch of YARTEMLEA during our upcoming earnings call for the first quarter of 2026. Beyond the U.S., our marketing authorization application for YARTEMLEA in TA-TMA is pending with the European Medicines Agency. We continue to expect a decision midyear. For commercialization of YARTEMLEA outside the U.S., we are evaluating potential partnerships, both broad ex-U.S. arrangements and regional collaborations. We believe that these opportunities are substantial. As we have discussed in previous calls, the underlying biology of TA-TMA, endothelial injury and cellular damage spans a broad range of therapeutic areas. For YARTEMLEA, we are evaluating expansion opportunities in additional indications, including acute respiratory distress syndrome or ARDS, solid organ transplant-related TMA and other endothelial injury-related disorders. We also intend to advance our once-quarterly dosed MASP-2 antibody, OMS1029, which is Phase II ready as well as our MASP-2 small molecule program designed for once-daily oral administration. We expect that both our long-acting antibody, OMS1029 and our small molecule inhibitor programs are well suited for chronic indications, including those in nephrology and in neurology. Let's now examine our fourth quarter and full year 2025 financials. For the fourth quarter, Omeros reported net income of $86.5 million or $1.22 per share compared to the third quarter's net loss of $30.9 million or a loss of $0.47 per share. Fourth quarter results include a net gain of $237.6 million resulting from the zaltenibart transaction with Novo Nordisk. In the fourth quarter, Omeros also incurred a $136 million noncash charge associated with the mark-to-market adjustment on the embedded derivatives related to our 2029 convertible notes and term loan. Excluding this charge, our fourth quarter non-GAAP adjusted net income was $222.5 million and our fourth quarter non-GAAP adjusted income per share was $3.14. Further strengthening our balance sheet in the fourth quarter in November, we used a portion of our $240 million upfront payment from Novo Nordisk to repay in full our $67.1 million secured term loan. Last month, we used another portion of the upfront to repay at maturity the remaining $17.1 million principal balance on our 2026 convertible notes. As a result, all indebtedness under our senior secured term loan and 2026 notes has been extinguished, leaving us with only a $70.8 million principal amount outstanding in 2029 convertible notes. As of December 31, 2025, we had $171.8 million in cash and investments, an increase of $135.7 million from the quarter ended September 30, 2025. We anticipate that the YARTEMLEA program will be financially self-sustaining this year, and we expect the company to achieve positive cash flow in 2027. Let's turn now to development programs beyond our complement franchise. Our PDE7 inhibitor program evaluating OMS527 for cocaine use disorder is fully funded by a grant from the National Institute on Drug Abuse or NIDA. Animal cocaine interaction studies designed with NIDA toxicologists were completed and showed no drug interaction or safety issues, supporting the scheduled inpatient human study in cocaine users. FDA subsequently requested additional preclinical information before initiation of the inpatient study. Together with our collaborators at NIDA, we are scheduled to meet with FDA in the coming quarter to discuss that request. Our targeted complement activating therapy or T-CAT platform has also made substantial strides. Our T-CAT platform represents a novel class of pathogen targeting recombinant antibodies designed for broad use against diverse pathogens, including multidrug-resistant organisms or MDROs. MDROs are predominantly bacteria that are resistant to antimicrobial agents and are rapidly becoming a global threat. In 2024, sales of anti-infectives were $46 billion in the U.S. alone and $135 billion globally. Over the next 25 years, more than 39 million people worldwide are estimated to die from MDR bacteria alone. Unlike marketed antimicrobials, T-CAT is designed to kill pathogens regardless of resistance profile without promoting resistance. In well-established in vivo animal models considered predictive of efficacy in humans, T-CAT recombinant antibodies demonstrated effectiveness in treating life-threatening infections caused by both gram-negative and gram-positive bacteria, including those designated by the World Health Organization as priority pathogens. Patents have now been filed and a publication on our T-CAT platform is expected in the coming weeks. Finally, our oncology platform continues to progress rapidly. IND-enabling studies are underway for OncotoX-AML, our biologic agent designed to treat acute myeloid leukemia or AML. AML is an aggressive and often fatal bone marrow and blood cancer. OncotoX-AML has shown broad application across AML genotypes, including historically difficult-to-treat mutations like TP53, NPM1, KMT2A and FLT3. These genetic mutations are collectively found in approximately 90% of AML patients. Across human tumor-bearing animal and in vitro human AML cell line studies, OncotoX-AML has consistently shown superior efficacy to current AML standard of care treatments. In a pilot study assessing the efficacy and safety of OncotoX-AML in nonhuman primates, a single course of OncotoX-AML resulted in selective, reversible and dose-related killing of myeloid progenitor cells, the cells that can mutate and lead to AML by up to 99%. OncotoX-AML was tolerated with no safety signal of concern. Together with our clinical steering committee comprised of AML experts from leading academic cancer centers, we are designing our first-in-human clinical trial targeted for late next year. That concludes our financial corporate and development update. And I'll now turn the call over to David Borges, our Chief Accounting Officer, for a detailed discussion of our financial results. David? David Borges: Thanks, Greg. Net income for the fourth quarter of 2025 was $86.5 million or $1.22 of net income per share compared to a net loss of $30.9 million or $0.47 net loss per share in the third quarter of 2025. Fourth quarter results include a net gain of $237.6 million on the sale of zaltenibart to Novo Nordisk, which I will discuss in more detail in a moment. Results also include a $136 million noncash charge associated with the mark-to-market adjustment on the embedded derivatives related to our 2029 convertible notes and term loan. Excluding this charge, non-GAAP adjusted net income for the quarter was $222.5 million and non-GAAP adjusted net income per share was $3.14. This charge represents a noncash remeasurement adjustment and excluding it, provides a clearer view of the company's operating performance during the quarter. As of December 31, 2025, we had $171.8 million of cash and investments on hand. This balance includes the gross proceeds of the $240 million upfront payment received from Novo Nordisk in connection with the sale of zaltenibart and the full repayment of our $67.1 million term loan in the fourth quarter. In connection with the repayment of the term loan, all liens and covenants associated with the credit agreement, including the $25 million minimum liquidity covenant were eliminated. In February 2026, we repaid at maturity the remaining $17.1 million principal balance on our 2026 notes. Following these repayments, our only remaining debt is a $70.8 million in principal amount of unsecured 2029 convertible notes, which are not due until June 2029. Costs and expenses from continuing operations for the fourth quarter before interest and other income were $29.1 million, an increase of $2.7 million from the third quarter of 2025. Research and development expenses in the fourth quarter were primarily focused on YARTEMLEA and zaltenibart. Interest expense in the fourth quarter was $8.7 million. The primary components of interest expense include the DRI royalty obligation, the 2029 notes, the 2026 notes and the term loan. Excluding the DRI OMIDRIA royalty obligation, which represents pass-through interest from Rayner to DRI and has no economic impact to us, as well as noncash amortization of debt issuance costs, discounts and premiums, contractual cash interest expense was $3.2 million compared to $4.2 million in the prior quarter, a decrease of $1 million. The decrease was primarily due to the repayment of the term loan in November 2025. In connection with the closing of the sale of zaltenibart to Novo, we recognized a net gain of $237.6 million. This reflects the $240 million upfront payment less $2.4 million in transaction costs. Concurrent with the closing of the transaction, we entered into a transition services agreement with Novo Nordisk to facilitate the transfer of acquired assets and liabilities and support the continued operation of relevant studies and program activities. Costs incurred by the company under the transition services agreement, including third-party expenses and internal FTE costs are expected to be reimbursed by Novo. Interest and other income totaled $1.1 million in the fourth quarter compared to $616,000 in the third quarter of '25, primarily reflecting higher average cash balances. In connection with the repayment of the term loan in November '25, we recognized a $17 million noncash gain related to the derecognition of the remaining unamortized premium. This was a onetime accounting adjustment associated with the repayment of the loan. And during the fourth quarter, we reported $135 million noncash loss on the mark-to-market adjustment on the embedded derivative related to our 2029 convertible notes. The change in valuation was primarily driven by the increase in our stock price during the quarter, which rose from $4.10 per share at September 30, '25 to $17.18 per share at December 31, '25. This embedded derivative reflects certain features of the notes, including the conversion option and interest make-whole provisions available to noteholders. Because the valuation of this derivative is influenced by our stock price and other market inputs, it can introduce significant volatility in our reported results from quarter-to-quarter. This adjustment is noncash and does not affect our operating performance or liquidity. As a result, we present non-GAAP adjusted net income and net loss to exclude the noncash nature of these volatile swings. Income from discontinued operations in the fourth quarter was $6.6 million, an increase of $16.2 million from the third quarter. The increase primarily reflects the absence of a large noncash remeasurement expense recorded in the third quarter following a downward revision of the forecast for U.S.-based OMIDRIA royalties. Now let's look at our expected first quarter 2026 results. We anticipate that overall operating expenses from continuing operations in the first quarter of '26 will be comparable to the fourth quarter of '25. Research and development expenses are expected to be lower as zaltenibart-related expenses will be reimbursed under the transition services agreement with Novo. Sales and marketing expenses are expected to increase in the first quarter, reflecting costs associated with building our commercial infrastructure, including the hiring of a field sales force, marketing expenses and other commercial launch activities for YARTEMLEA. As YARTEMLEA is in the early stages of launch, we are not providing revenue guidance at this time. We typically do not provide guidance following a new product launch while the market access and physician adoption are developing until -- and until we're able to estimate revenue with greater accuracy. In the near term, we're focused on building physician awareness, expanding disease education and working with third-party payers to ensure timely reimbursement. Interest and other income are expected to be slightly higher than in the fourth quarter of 2025, primarily reflecting higher average cash balances. Interest expense is expected to be approximately $8.1 million, reflecting the reduction in our outstanding debt and excluding any potential noncash adjustments related to the OMIDRIA royalty obligation. Income from discontinued operations is expected to be in the $5 million to $6 million range, again, excluding any noncash remeasurement adjustments related to the OMIDRIA contract royalty asset. And finally, one thing to keep in mind is that our reported results will continue to reflect mark-to-market adjustments on the embedded derivative tied to our 2029 convertible notes. These adjustments generally move with our stock price and can create significant volatility from quarter-to-quarter. Because these adjustments are noncash and unpredictable, we present non-GAAP adjusted net income and loss measures, and they do not affect our operating guidance. And with that, I'll turn it back over to Greg. Gregory Demopulos: Thanks, David. Operator, please, would you open the call to questions. Operator: [Operator Instructions] Your first question comes from the line of Brandon Folkes with H.C. Wainwright. Brandon Folkes: Congrats on all the progress. Maybe just 2 from me. How should we think about the progress of formulary additions across the top 80% of transplant centers in 2026? Obviously, you got off to a strong start there. So just sort of how should we think about the progress for the rest of the year? And then secondly, I know it's very early on in the YARTEMLEA launch, so kind of asking this with an asterisks. But any color on the real-world vial usage to date? Sort of any early data suggesting a different number of vials in the real world versus what we saw in the clinical data? Gregory Demopulos: Brandon, thanks. With respect to the first question, we're quite pleased with the P&T committee approvals that we've received so far that YARTEMLEA has received. It was really ahead of schedule, which I think indicates the strong interest and frankly, the recognized need for the drug. I expect -- I think we expect that we will continue to see additional P&T approvals over the next several months. And our objective, of course, is to have P&T committee approvals across all of the top 80 and frankly, beyond the top 80 sites. But I'll check with Nadia. Nadia, do you have any additional thoughts on that? Nadia Dac: Yes, I completely agree with everything you said, Greg. And I will underscore how pleased we are with the speed with which these P&T decisions are being taken, which isn't always the case in a launch. Here, they're seeing the value and the urgency to treat patients with YARTEMLEA's value proposition. And I will add that in places where we don't have P&T approval yet, if it's still underway, it's not standing in the way of getting YARTEMLEA to the patients. And so we are seeing the use of YARTEMLEA in the hospitals even without a P&T approval in place. Gregory Demopulos: I would just underscore that latter point from Nadia, which is despite in some of these centers not having P&T approval yet, we continue to see requests and sales of YARTEMLEA, use of YARTEMLEA for the benefit of the patients in those centers. So it's really been very encouraging and frankly, validating on what we believe the importance and the need for YARTEMLEA is in these patients, both adult and pediatric, really both in the hospital setting and in the outpatient setting. Your second question, Brandon, was tied to vial usage. And I assume you're asking whether it's once weekly, twice weekly, but let me just make sure I understand the question. Brandon Folkes: Yes. Ideally. Just anything you're learning early on in the launch, which may be different to what we saw in the clinical data? Gregory Demopulos: Yes, not really different. We are seeing once weekly and twice weekly usage right now, at an estimate, the split is about 70% once weekly, 30% twice weekly, twice weekly being more common in the pediatric patients than in the adult patients. We do expect that shift to move more heavily toward twice weekly dosing. Really what needs to occur and what our field force is doing is educating the transplant teams on their ability to dose twice weekly. It is allowed under our label. And I think that, that information is being really well received by the transplant teams across the centers nationally. And so I would expect that we would see that split to move more heavily toward twice weekly dosing. But again, I'll ask Nadia her thoughts on this. Nadia Dac: Yes, absolutely. And one of the execution tactics and the messaging that the field is focused on is the sense of urgency and not to wait because our label allows twice weekly dosing. And so in several instances, we're seeing that there is an urgency to treat and move a little faster if they need it for the patients. And the other thing that's very encouraging is the published policies that we've seen to date with third-party payers are, they're supporting prior authorization to label. And so it's not restricting the use of twice weekly dosing as needed. Gregory Demopulos: Does that help, Brandon? Brandon Folkes: Very helpful. Congrats on the early launch progress. Gregory Demopulos: Thank you. Operator: Your next question comes from the line of Olivia Brayer with Cantor. Samuel Rodriguez: This is Sam on for Olivia. I have a quick one on -- you mentioned that you plan to be financially sustainable this year and then cash flow positive by 2027. Is that implying that you received the $100 million from Novo and you had to pay the 29 notes? And then under YARTEMLEA launch, what feedback have you gotten from the sales force when educating the teams? And has there been any like pushback or like what kind of roadblocks or things have you seen that you expect to like smooth out by the rest of the year? Gregory Demopulos: Sam, with respect to your first question, the comment about self-sustainability was really directed at the YARTEMLEA business in 2026, meaning the business itself would be self-sustaining in 2026. 2027 is our target for company positive cash flow. So I'm hoping that, that helped and cleared up any misunderstanding. Samuel Rodriguez: Yes. That's awesome. And then on YARTEMLEA, what kind of bumps in the road have you encountered? And what can you do to like smooth those out? Gregory Demopulos: Yes. Again, we'll get into this more in our Q1 call, which will be in about 6 weeks. But I can tell you that our sales team is really very excited, very enthusiastic about the responses that they are receiving from the medical centers that they're detailing. And as I said, we are -- we've been in already sites that represent about 90% of the allogeneic transplants done nationally every year. So the response has been from those centers really uniformly positive. I think that -- there's an education process that's going on. But the eagerness to learn the recognition of the urgency and the need for YARTEMLEA and the benefits with the really quite favorable safety profile, I think, is resonating very strongly with the sites, really all the sites that I am aware of have been very receptive. But again, I'll turn it to Nadia and see if she has more information on that. Nadia Dac: Yes. The receptivity has been extremely positive. Our value proposition is viewed as significant and addressing an unmet need. And I will say that all of the effort we put into the prelaunch period of educating on TA-TMA, the signs of symptoms to identify it and the urgency to treat, we're seeing the payoff of that education. And so now with the first and only approved product for TA-TMA, that sense of urgency is playing out. And if I were to pick on anything that we want to smooth out, what we're working on as a commercial team is to make sure that we have even more education out there that supports our on-the-ground efforts and seeing how we can do more through nonpersonal efforts because as we see, the patient can come from anywhere, 175 centers. So we want to make sure that we're supporting any of the HCPs out there that are looking for treatment and wanting to learn more about YARTEMLEA. Gregory Demopulos: And I would agree with what Nadia said that really we're focused on educating. But I've been personally quite impressed by the steep upswing of that education across all of these sites. They understand it, they get it. And as Nadia said, they're quite receptive to the value proposition here for their patients. I mean this is a drug that works well. And when you look at the safety profile, that's quite a favorable benefit risk profile that I think YARTEMLEA represents. Samuel Rodriguez: And if I can squeeze one last one in. Regarding the EMA decision by midyear and like partnership discussions, do you expect any impact from MFN and like ex U.S. pricing? Gregory Demopulos: Yes. It's too early right now to discuss what we expect with respect to pricing in the EU. We are really sort of laser-focused on achieving that approval. There is, as you know, no approved treatment other than narsoplimab or YARTEMLEA anywhere in the world, and that includes Europe. So I think it is a needed product. We see the interest in it to be high as was clearly evident at the recent EBMT meeting, the European Blood and Marrow Transplantation meeting. The interest in YARTEMLEA there was very high. And our focus is getting it approved, making it available for European patients as we've already made it available through our expanded access program. Operator: Your next question comes from the line of Steve Brozak with WBB. Stephen Brozak: I'd like to go back to something you raised on the last series of questions in terms of the value proposition. I mean, given your compassionate use programs and all the drug that you've given out and all the literature that's been published, I'm certain that the hem-oncs are very, very familiar with YARTEMLEA. But can you go into as much detail as possible as to the value proposition because these are sick patients, of course. But a lot of resources have been expended on them financially and obviously, in the medical care. Can you tell us about that? Because I'd like to put into perspective the criticality of what has just been done and what you're now doing. And I've got a follow-up after that, please. Gregory Demopulos: Steve, yes, with respect to the value proposition, I think I mentioned or I know I mentioned in the prepared remarks, the work we're doing on HEOR, on the Health Economics and Outcomes Research, and we'll be publishing. We plan to publish those analyses soon, but they're compelling. I think they make a very clear case for the economic, clinical and really, as I said, real-world benefits of YARTEMLEA. So we think that there is obviously a strong case to be made, and we are making it, and we'll be publishing that. So did that answer your question? Or was it something additional? Stephen Brozak: No, no. It's answered the question, but frankly, I was looking more for dollars and cents as to the scale order of magnitude when you're seeing these transplant patients, those are not just critical procedures, but they're also very, very expensive. Can you give us an idea of what we're looking at as far as what patients or the insurers, the hospital systems are spending right now? And also, I know this has been the classical unmet need, but what were some of the products that were used before in the order of magnitude and frankly, they were spending and where they really weren't working. If you could give us anything there, and I've got one more again after. Gregory Demopulos: Sure. Well, look, the overall transplant cost and related costs run about $1 million. So you spend a lot of money, you spend a lot of time, energy, there's a lot of patient involvement, patient family involvement. And then TMA hits, right? And it is really unpredictable. You cannot -- there's no test that will tell you this patient versus another patient is going to have a TA-TMA. So I think what I want to be careful about is speaking directly to numbers. With respect to your question about what has been used previously. Well, we know that off-label C-5 and to a much lesser extent, C-3 inhibitors have been used. You know the costs associated with those. Those are quite public. What we do know and what we're seeing in the published literature out of Memorial Sloan Kettering directed to adults, out of Emory directed to children, really now controlled trials with specifically in these cases, C-5 inhibition. But what we have seen and what have been -- what has been published is the markedly increased infection rate associated with C-5 inhibition, I mean up to a sixfold increase in infection-related mortality as reported in this set of publications. So that carries, I think, a significant cost beyond the cost of the agents themselves. So we think that where we are priced, the economic value proposition for narsoplimab or YARTEMLEA is really quite clear. And then when you layer on the clinical benefits of that, it becomes really something that I think is pretty compelling. Is that addressing your question, Steve? Stephen Brozak: Absolutely. Okay. A follow-up. You've been very transparent in saying that the hem-oncs, the hematological oncologists have been accepting YARTEMLEA. Question I've got for you is, since it is obviously a critical mishap, how fast are you in being able to respond? Because part of this is obviously being able to get the drug to the patients, but how quick can you respond to these clinicians who are obviously watching their patients deteriorate, but that those first few days are critical in understanding it. How -- what feedback can you give us there? And I'll hop back in the queue. Gregory Demopulos: Sure. Well, as we have set up our distribution channels, we can deliver drug. We are delivering drug within 24 hours of the request. So we can reach the site very quickly, which, of course, is the objective, right? Our preference would be not to wait until the patient is severely or critically ill, as you just noted, but to move it upstream temporarily, right, to be able to treat patients earlier, jump on it quickly, jump on it hard, meaning appropriately dosing. And in that way, really bring the full effect of narsoplimab or YARTEMLEA to these patients. That's the objective. That's what we've -- that's the purpose behind establishing really 24-hour delivery of the drug. Request comes in, drug goes out. And I think the effects of that we're seeing, and I think we'll continue to see. Nadia, do you have something you'd like to add to that? Nadia Dac: Yes, absolutely. So even before the shipment goes out, if there's any questions or any support that they need with the prior authorization, we have our team on the ground that will either go there in person or jump on a Zoom and address those questions, whether it be our reimbursement manager, our account manager or our MSLs. So we have a model that is designed to act immediately, and we have multiple examples of that. In addition to the 800 number that we have, our in-person phone calls that come in, we jump on that immediately and then drug is delivered within 24 hours. Gregory Demopulos: And with respect to what Nadia just said about pre-authorizations, as I mentioned in the prepared comments, all pre-authorization requests have been approved by the third-party payers. So we're quite pleased with -- we're quite early in this launch. Our launch was really January. And here we are at the end of March, talking pharmacy and therapeutic committee approvals. And to the extent that we have we're very pleased. And we think those are going to continue to move through. Remember, I've given you those that are already approved. I did not mention those that are actively in process for being approved. And those numbers are even substantially higher than what I just gave you. So we're really quite pleased by that and look forward to sharing additional information at our Q1 call. Speaker. Stephen Brozak: Congrats on, obviously, the developments of 2025 and what you've just told us about Q1. Operator: Your next question comes from the line of Serge Belanger with Needham. Serge Belanger: Greg, you mentioned all requests for access to YARTEMLEA have been granted. Just curious if these were via medical exceptions or there's formal formulary coverage for the product at this point? And then since we're at the last day of the quarter, 1Q here, is it too early to talk about how many patient starts we've seen so far that have started treatment on the product? Gregory Demopulos: And the second question I broke up a little bit was how the response has been to the drug? Serge Belanger: No. The second question was since we're on the last day of the first quarter, whether it was too early to start -- to get an idea of how many patient starts you have seen so far on the product. Gregory Demopulos: You're asking about numbers. Right. We aren't going to provide those today, Serge. We'll be talking about those, obviously, in the Q1 call. But I think we've given you color as to how we see the launch going with respect to your first question, let me turn that over to Nadia. Nadia Dac: Yes. So the question is about the PA approval and whether those were handled by medical exception or by policy. The answer is both. And what's really encouraging is, as many of you probably can see, there are published policies already for YARTEMLEA in the public domain and that they are PA to label. And in the places where we don't see a published policy yet, they are being handled by medical exception, also PA to label. Our intent going into the launch, we built a strategy where we would have policies that are PA to label, and that is playing out. And we have a strong national account manager team that is following up with any of the payer requests for in-services, presentations and the value narrative that we spoke about earlier is going to be very critical to those conversations. But we are very encouraged and really strong success to date. Serge Belanger: Great. And Greg, regarding the $100 million milestone that you described as near term from Novo. I guess just how confident are you in this -- in receiving this milestone? And can you give us color on what triggers it? Gregory Demopulos: Yes. We are, by agreement with Novo Nordisk, not able to specify what those -- that collection of milestones ties to. But I will tell you that we're confident around the receipt of those. Again, I can never guarantee these things, but I think our level of confidence is high. Operator: There are no further questions at this time. I will now turn the call back to Dr. Demopulos for closing remarks. Gregory Demopulos: Thank you, operator. Thank you all for joining this afternoon. 2025 ended strong, and 2026 has continued that momentum. The strategy we set for the company is playing out, and we are well positioned now for success. We look forward to speaking with all of you again in about 6 weeks when we'll provide a more detailed update on our YARTEMLEA launch. We appreciate your continued support, and have a good evening. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the nCino Fourth Quarter and Fiscal Year 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Harrison Masters, Vice President, Investor Relations. Harrison Masters: Good afternoon, and welcome to nCino's Fourth Quarter and Fiscal Year 2026 Earnings Call. With me on today's call are Sean Desmond, nCino's Chief Executive Officer and Greg Orenstein, nCino's Chief Financial Officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies and the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations, entail certain assumptions made as of today's date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry and global economic conditions. nCino disclaims any obligation to update or revise any forward-looking statements. Further, on today's call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com. With that, I will turn the call over to Sean. Sean Desmond: Thank you, Harrison, and thank you all for joining us today. I want to start by saying how proud I am of the entire nCino team for the results we achieved in fiscal '26 and especially in the fourth quarter. We exceeded our financial guidance across every key metric and delivered an exceptional ACV result, up 17% year-over-year, which we believe was largely driven by customers embracing our AI strategy and product innovation. The team executed incredibly well, and we're seeing the momentum in the market as more prospects are engaging with and choosing nCino and existing customers are expanding and deepening their commitments with us, in large part because of how we are embedding AI throughout the nCino platform. I'll get into the details shortly, but with over 170 customers of all sizes, including global, enterprise, regional and community banks and credit unions having already purchased AI intelligence units as of the end of fiscal '26, we believe nCino is rapidly becoming the de facto AI platform for financial institutions across the globe. For those of you just getting familiar with our story, nCino plays a mission-critical role for our customers and the global financial services market. Financial institutions will continue to struggle with legacy fragmented systems that limit growth, hinder financial performance, restrict their ability to leverage data as a competitive advantage and create poor user experiences. nCino solves these problems with AI-powered intelligent automation on a unified, scalable platform. We are the only platform for managing lending, onboarding, account opening and portfolio management across all major lines of business for financial institutions across the globe. This is why the nCino platform serves as a system of record for the most critical operations of banks, credit unions and IMBs of all sizes in now over 25 countries. Throughout fiscal '26, I talked about the confidence I had in our team, our technology and strategy and our market-leading position. I also said the foundation was in place and that our fiscal '26 performance would come down to execution, including against our AI strategy. This past year's results only strengthen my conviction about what's ahead for nCino as we walk hand-in-hand with our customers into a new era of AI where data, context, guardrails, security, trust and a deep understanding of how financial institutions operate matter more than ever. As banks further embrace automation and think about using AI as an accelerant to do this, they're choosing nCino because nCino is their process. We connect their data, operate as their system of record and enable them to comply with numerous rules and regulations. nCino is an essential Tier 1 mission-critical platform that amplifies their ability to more profitably generate revenues in a regulatory compliant manner. At the start of fiscal '26, I laid out a few strategic initiatives where I believed we had an opportunity to excel with focused execution. I'm very proud of what the team delivered in these areas, and the fourth quarter put an exclamation point on what was a tremendous year for the company. First, in the U.S. enterprise market, we delivered our best sales quarter in over 4 years, which included a mortgage expansion with a top 40 bank and cross-selling commercial to our largest consumer lending customer. Second, in EMEA, we leaned in with new leadership, a new go-to-market strategy and a clear execution plan. We delivered our largest deal of the year with a marquee net new customer win in Austria, and I'm thrilled with the momentum the EMEA team is seeing. I'm also thrilled with the momentum we continue to see in Japan, as highlighted by the fourth quarter signing of one of the largest banks in the world for a commercial lending transformation. I want to congratulate the Japanese team for tripling their total ACV in fiscal '26 from fiscal '25. Third, it's gratifying to see our existing customers continue to validate our AI strategy as they move to our new platform pricing framework to access our growing AI capabilities. We saw expanded commitments from some of our largest accounts, and our ACV net retention rate improved to 112% or 109% organically and in constant currency, up from 106% in fiscal '25. Consistent with what we saw throughout fiscal '26, we closed a number of early renewals in the fourth quarter, including a fresh 5-year commitment from our largest customer by ACV. And those customer commitments go beyond dollars. Critically, they come with trust. More and more customers are choosing to share data with us because they want the insights and benchmarking that only nCino can deliver. Today, almost 500 financial institution customers representing over $11 trillion in assets have granted nCino the right to process their data into a proprietary and anonymized data set, one that powers the development of our products, fuels best-in-class industry insights and sharpens the accuracy of our intelligent services. This proprietary data set that nCino has carefully aggregated and curated for the better part of a decade gives nCino a unique unmatched global perspective on how to more profitably and efficiently operate a financial institution, how work moves seamlessly through the bank, where bottlenecks form, where exceptions happen and what great looks like at scale. We have already put this data set to work through our product called nCino Operations Analytics, which helps customers pinpoint inefficiencies, track cycle times and win rates and benchmark performance against anonymized peers. That benchmarking provides valuable and actionable insights as customers get a true baseline, a clear path to ongoing operational and process improvements and real-time demonstrable ROI as they adopt our AI capabilities. It also informs how we build AI and deploy agents that are practical, relevant, reliable and trustworthy in real bank environments. And it goes a step further. Because of our API foundation and integration gateway, we can seamlessly connect data across a bank's technology stack as well as the key third parties. That broad 360-degree view of a financial institution's customers has been nCino's calling card in the market since we started the company. Before I turn things over to Greg to talk through our financials in more detail, I want to spend a few minutes addressing the elephant in the room as we have all heard the narrative that AI will replace SaaS. For some categories of software, that may very well be true. But the highly regulated business of banking is different and nCino's position and value proposition in banking is different from what you're seeing across the broader SaaS landscape. Bottom line is we believe AI will be a tremendous tailwind for nCino as it becomes central to how financial institutions operate and compete and how we're scaling and operating the company. Here's how we see the world evolving and how nCino fits in. AI is moving quickly from help me write and help me search to help me complete meaningful productive tasks so I can focus on other work to grow my business more efficiently and profitably. And in a financial institution, the work is not generic. It's onboarding, it's underwriting, it's credit reviews. It's monitoring, assessing and managing risk. It's opening accounts. It's work where the data is sensitive, strictly adhering to the rules is essential. Regulatory compliance is nonnegotiable and the cost of being wrong can be extremely high, not only financially but reputationally. To make all this work, AI needs a foundation to run on. In banking, that foundation is the data and regulatory infrastructure nCino provides. That's why we feel extremely confident about our position. We are the system of record and user experience for many of the most important processes in a financial institution. And every capability has been built with regulatory compliance in mind. As AI becomes more capable, that makes our platform even more relevant because AI needs a place where it can safely understand context and then take action in an efficient, controlled, secure, trusted and regulatory compliant way. You'll hear a lot of discussion in the market about AI commoditizing the application layer. We understand why people raise that point because it's undeniable that AI-driven software makes writing code easier and cheaper. But in the highly regulated mission-critical world of banking, deploying that code in a safe and compliant way is harder. Because of this, we believe AI agents actually increase the value of our underlying platform and system of record. An agent can't operate in a vacuum. It needs trusted data, industry context and guardrails, and it needs to be traceable and auditable. And the platform that connects the user to the data and records the actions taken becomes the natural home for these AI-driven experiences. nCino is that platform. All this leads to how we're approaching AI agents. Our role-based agents, what we call digital partners, were designed to work alongside banking professionals inside the nCino platform, guided by what we've learned from almost a 1.5 decades of usage patterns across our lending customer base and what those patterns mean for speed, consistency and results. Now let me connect that strategy to what we're seeing in the business today. First, adoption is real and usage is growing. While much of the SaaS industry continues to debate how best to respond to the agent economy, community, regional enterprise and global banks, credit unions and IMBs are already using nCino's AI capabilities in production today, not just as a pilot or beta, but as part of how they do lending and banking work. Customers are not just buying AI access, they're using it, and we can see that directly in the increasing consumption of intelligence units on our platform, with banking adviser usage up over 25x in March compared to usage in October. For years, we have said that nCino is not only in the software business, we are in the change management business and moving every customer from contract signing to implementation to pilot to using nCino's AI and production as an integral part of the day job is the sole focus of our forward deployed engineering team. We also continue to see the halo effect we talked about before. nCino's AI innovation and product strategy is showing up as a clear differentiator in competitive conversations. I have mentioned over the past couple of quarters that it's helping drive earlier renewals, and it's becoming another reason new customers are engaging with and choosing nCino and current customers are expanding their relationship with nCino. Second, when we talk about AI, we try to keep it simple. We care about outcomes. The question isn't how many features or how many agents exist. The question is, how much time and money did the financial institution save? How much risk was serviced earlier and mitigated and how much did consistency, efficiency and profitability improve, all while helping to ensure the financial institution operates in accordance with various rules and regulations and provides an enjoyable and compelling user experience for its customers. That's why when we look at banking adviser and our digital partners, we focus on practical wins. In the past, a single relationship review meant painstakingly pulling documentation from systems, manually identifying the relevant data points, followed by hours and hours of analysis. With agentic credit reviews, released as part of the analyst digital partner family last quarter, nCino summarizes in seconds what changed, highlights the drivers, cites the underlying data and helps draft the follow-ups. And the work stays inside nCino with the right permissions, the right documentation and the right audit trail. The bank gets faster answers, more consistent reviews and more capacity for higher-value work, like being in front of customers and growing relationships. This focus on outcomes is exactly why we transitioned our pricing model, and I'm pleased to report that as of the end of fiscal '26, we have already moved approximately 38% of our ACV away from seat-based pricing to platform pricing. Third, our data is not just a competitive moat. It is the foundation for a new category of proprietary intelligence capabilities, benchmarking, predictive risk, operations analytics and other capabilities and products you will hear about as the year progresses that we believe will create entirely new value for our customers and new revenue streams for nCino. We strongly believe that proprietary domain-specific real-world data is the most valuable asset in an AI economy and no other company has the data nCino has. And that data moat compounds with every customer we add in every line of business we expand into. Finally, I want to emphasize something that is especially important in banking. Trust. In a regulated environment, close enough isn't good enough. AI has to be deployed in a way that respects policies and data privacy, aligns with the bank's risk tolerance, which varies from institution to institution and produces results both the institution and regulators can confidently rely on. One of our stockholders recently conveyed, they were reminded how embedded nCino is within a bank's internal and external controls, risk management and governance processes when a top 5 U.S. bank explained to them that they have over 500 exemption workflows configured in nCino that guide every deterministic step of the lending process and that they rely on that process to manage risk, regulatory compliance and audit trials. That's why we're building AI into the nCino platform, where our customers already have the industry context, the controls and the ability to measure outcomes over time. As the Agentic operating system for financial institutions, nCino will be the backbone delivering AI with the same compliance guardrails, the same regulatory audit trails, the same institutional policy logic and the same lending decision framework they have grown to trust and rely on. And that's also why we believe our approach will uniquely scale, not by asking banks to bolt generic AI onto complex processes, but by delivering banking-specific AI that reflects how banks actually operate on a platform that has demonstrated time after time the ability to scale to support some of the largest financial institutions in the world. So stepping back, we feel really good about where we are. While still early, we're seeing strong excitement and increasing momentum in AI adoption and growth in usage as measured by intelligence unit consumption. Our sales pipeline looks great, and we believe our AI agents make nCino even more valuable and sticky to our customers because we connect the user, the process and the data in a trusted, controlled, regulatory compliant environment. In summary, we believe the agent economy expands our addressable market. The outperformance against our financial guidance, the acceleration of ACV bookings, the reacceleration of subscription revenue growth and the improvement and strength of our retention KPIs are all reflections of the impact AI is already having on the business, and we're just getting started. As I wrap up my prepared remarks, I want to welcome a new member to the nCino leadership team. I cannot be prouder of how our sales and marketing teams performed in fiscal '26. And to build on that momentum, we are further investing in our go-to-market organization. Today, we are excited to announce that nCino has hired Keith Kettell as our new Chief Revenue Officer. Keith is a seasoned operator who brings deep financial services, enterprise sales, large global company and scaling expertise to the company. We believe Keith's experience and vision are a great addition to the company to help us further accelerate our subscription revenues growth and take nCino to the next level. With that, I'll hand the call over to Greg to walk through our financial results. Gregory D. Orenstein: Thank you, Sean, and thanks, everyone, for joining us this afternoon to review our fourth quarter and fiscal year 2026 financial results. Please note that all numbers referenced in my remarks are on a non-GAAP basis, unless otherwise stated. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call. Turning to our fourth quarter results. Total revenues were $149.7 million an increase of 6% year-over-year and $594.8 million for fiscal '26, an increase of 10% over fiscal '25. Subscription revenues were $133.4 million in the fourth quarter, an increase of 7% year-over-year and $523.1 million for the full year an increase of 12% over fiscal '25. Organic subscription revenues were $132.2 million in the fourth quarter, up 6% year-over-year and $505.9 million for fiscal '26, an increase of 8% year-over-year. As a reminder, our fourth quarter organic subscription revenues comparison is negatively impacted by an approximately 3% headwind resulting from onetime subscription revenues that occurred in our international business in the fourth quarter of fiscal '25 as the result of a contract buyout. Please see Slide 14 of our fourth quarter earnings presentation for additional details on the components of our subscription revenues over performance. International total revenues were $32.9 million in the fourth quarter, down 1% year-over-year or down 6% in constant currency. International total revenues were $131.5 million in fiscal '26, up 13% year-over-year or 11% in constant currency. International subscription revenues were $28.4 million in the fourth quarter, up 1% year-over-year or down 4% in constant currency in light of the difficult comparison from the onetime contract buyout last year previously noted. International subscription revenues were $109.5 million in fiscal '26, up 19% year-over-year or 16% in constant currency and 5% organically. We had our largest international gross bookings year in company history and with ACV as a leading indicator of future subscription revenues growth, we look forward to our international subscription revenues growth rate once again being accretive. Professional services revenues were $16.3 million in the fourth quarter, a decrease of 1% year-over-year. Full year professional services revenues were $71.6 million, flat year-over-year. As we have previously highlighted, we are emphasizing professional services gross profit growth over professional services revenues growth and expect to see this reflected within our financial results by the second half of fiscal '27 due in large part to our ongoing initiatives, leveraging AI to accelerate our implementations. Non-GAAP operating income for the fourth quarter of fiscal '26 was $34.7 million or 23% of total revenues compared with $24.4 million or 17% of total revenues in the fourth quarter of fiscal '25. Please see Slide 14 of our fourth quarter earnings presentation for additional details on the components of our non-GAAP operating income over performance. Non-GAAP operating income for the full year was $129.4 million or 22% of total revenues compared with $96.2 million or 18% of total revenues in fiscal '25. Non-GAAP net income attributable to nCino for the fourth quarter of fiscal '26 was $42.8 million or $0.37 per diluted share compared to $22 million or $0.19 per diluted share in the fourth quarter of fiscal '25. Non-GAAP net income attributable to nCino for fiscal '26 was $122.7 million or $1.07 per diluted share compared to $84.5 million or $0.72 per diluted share in fiscal '25. As expected, churn year-over-year continue to trend down towards historic norms and settled to a 3-year low in fiscal '26 of $18.2 million or 4% of prior year subscription revenues. We ended the quarter with cash and cash equivalents of $88.7 million, including restricted cash. Free cash flow was $12.5 million in the fourth quarter of fiscal '26, up from negative $10.4 million in the fourth quarter of fiscal '25. Free cash flow for fiscal '26 was $82.6 million up 55% compared to $53.4 million in fiscal '25. We repurchased approximately 1 million shares of our common stock in the fourth quarter at an average price of $25.84 per share for total consideration of $25 million under the $100 million repurchase authorization announced on December 8, 2025. When added to the stock repurchases made through the third quarter last year, we repurchased a total of approximately 5 million shares of our common stock in fiscal '26 at an average price of $25.18 per share for total consideration of $125 million. In addition to the $75 million that remains available under the December 2025 share repurchase authorization, today we announced a $100 million accelerated share repurchase program. We expect to fund this repurchase program with available free cash flow and with a portion of the $200 million term loan expansion of our existing credit facility, which we also announced today and which was funded by some of our largest customers. A portion of the proceeds from this term loan will also be used to reduce the outstanding balance under our revolving credit facility. We ended the year with 620 customers that contributed greater than $100,000 to fiscal '26 subscription revenues, an increase of 13% from fiscal '25. Of these, 114 contributed more than $1 million to fiscal '26, an increase of 9% from fiscal '25 and 14 contributed more than $5 million to fiscal '26 subscription revenues flat with fiscal '25. ACV as of January 31, 2026, was $602.4 million, an increase of 17% year-over-year. On an organic constant currency basis, ACV grew 13% year-over-year in fiscal '26. ACV net retention rate in fiscal '26 increased to 112% or 109% on an organic constant currency basis, up from an ACV net retention rate of 106% in fiscal '25 and reflecting growing demand for our AI-powered platform and solutions among our customer base and success implementing our new asset-based pricing framework. Subscription revenue retention rate in fiscal '26 was 110% or 106% on an organic constant currency basis compared with a subscription revenue retention rate of 110% in fiscal 2025. Note that the subscription revenue retention rate was negatively impacted by the difficult compares in the third and fourth quarters this past year. Additionally, a significant amount of the existing customer expansion that drove the ACV net retention rate improvement occurred in the fourth quarter, so the subscription revenues from those deals are not yet reflected in the subscription revenue retention rate. Turning to guidance. For the first quarter of fiscal '27, we expect total revenues of $154.5 million to $156.5 million, with subscription revenues of $137 million to $139 million, an increase of 8% and 10%, respectively, at the midpoint of the ranges. Non-GAAP operating income in the first quarter is expected to be approximately $38 million to $40 million. Please note that effective for fiscal '27, we will be providing annual guidance for free cash flow in lieu of quarterly and annual guidance for non-GAAP net income attributable to nCino per share as we believe annual free cash flow is a more meaningful measure of our financial performance. For fiscal year '27, we expect free cash flow of $132 million to $137 million, up 63% year-over-year at the midpoint of the range, which reflects our guidance range for non-GAAP operating income less certain assumptions, including approximately $15 million of interest expense, $6 million in cash taxes and $1.5 million of fixed asset purchases. Please recall that our cash collections from customers is highest in the first quarter, which does introduce seasonality to free cash flow. Turning to ACV. For fiscal year '27, we expect net additions of $60 million to $65 million on a constant currency and organic basis, which would bring our fiscal '27 ending ACV to $662.5 million to $667.5 million, representing 10% ACV growth at the midpoint of the range. After a few difficult years for the banking industry, large deals have again become a healthy part of our business, and our sales performance during the fourth quarter included several multi 7-figure net new and upsell wins. While we are confident in our go-to-market organization and the repeatability of the sales activity that drove these multi 7-figure wins in fiscal '26, these large deals can be inherently difficult to predict in both their timing and eventual sizing. In order to continue to prudently manage expectations on the booking side of the equation, our ACV guidance framework reflects win percentages that are higher than the approach we took for ACV guidance in fiscal '26, but lower than the win percentages we actually achieved last year. Also, recognizing that the fourth quarter has historically been, and we expect it to continue to be the largest gross bookings quarter for us each year, similar to this past year, you should not anticipate quantitative revisions to our ACV guidance throughout the year. For fiscal '27, we expect total revenues of $639 million to $643 million, with subscription revenues of $569 million to $573 million, representing growth of 8% and 9%, respectively, at the midpoint of the ranges. Excluding U.S. mortgage, our guidance assumes 10% to 11% year-over-year subscription revenues growth. Please reference Slide 15 in our earnings presentation for assumptions around our subscription revenues guidance. As you will note, consistent with the guidance philosophy we instituted last year, our guidance assumes approximately 1% growth in U.S. mortgage subscription revenues. While we recognize mortgage industry volume forecasts are currently indexed higher than what this growth rate reflects, for guidance and internal business planning purposes, our intention is to continue to be prudent around expectations for U.S. mortgage. To help you reconcile our subscription revenues guidance with our fiscal '26 ACV result, please consider the following: one, a portion of the ACV booked in fiscal '26 contributed to subscription revenues last year. Two, recall that we define ACV as the highest annualized subscription fee under a customer contract and when subscription fees increase during a contract term, the revenue recognition rules require that they are straight line, which leads to subscription revenues being less than ACV for such contracts. Three, churn experienced in fiscal '26 would have generally been from legacy contracts under our old seat-based activation model, where ACV more closely approximated subscription revenues. And four, subscription revenues from mortgage overages are not included in ACV. We expect non-GAAP operating income for fiscal '27 to be $165 million to $170 million. Finally, I'll leave you with a few additional comments to assist with your modeling that should be construed as supplemental to our formal guidance. First, international subscription revenues are expected to be accretive to overall subscription revenues growth in fiscal '27, beginning with the first quarter. Second, we expect to reduce stock-based compensation expense in fiscal '27 as a percentage of total revenues by approximately 100 basis points year-over-year from the 12% reported in fiscal '26. As a reminder, during our initial Investor Day in September 2023, we referenced a long-term stock-based compensation expense target of 6% to 8% of revenues. Third, effective January 2026, nCino is self-insuring for medical benefits, which may introduce some volatility to health care expenses in fiscal '27 as we make our way through the first year of the program. But ultimately, we expect this approach to be a more cost-effective alternative to traditional third-party insurance. And finally, our subscription revenues outlook includes revenues from both contracted and planned ACV bookings that we attribute to our AI products. Our customers are validating our AI strategy, reinforcing that it is innovative and compelling and the month-over-month increase in the consumption of intelligence units is trending quite well. At the same time, our experience has taught us that overall, financial institutions are going to adopt AI at a very deliberate pace. Accordingly, and consistent with our guidance philosophy, while we expect to sell incremental bundles of intelligence units this year, our fiscal '27 subscription revenues guidance does not yet contemplate this. In closing, I want to thank my nCino colleagues for all of their hard work and efforts successfully executing on our fiscal '26 operating plan. We entered fiscal 2027 with a ton of sales momentum and our sales pipeline, which Sean noted looks great, is up meaningfully from this time last year even after achieving the best gross bookings fourth quarter in company history. The intelligence unit usage trends we are seeing are very exciting and reinforce that our AI capabilities and AI strategy are resonating incredibly well with the market. We have the data, the products, capabilities and global reach, a unique and unmatched AI strategy, a reputation for innovation and for taking care of our customers and a phenomenal customer base that trusts nCino to successfully guide them on this AI journey. It is an incredibly exciting time to be part of nCino, the company leading the financial services industry into the world of AI-powered banking, just as we led the financial services industry into the world of cloud banking. As evidenced by our financial guidance, we feel really good about our headcount and expense plan and our ability to continue generating increasing non-GAAP operating income and free cash flow. Our financial guidance also reflects reaccelerating subscription revenues growth, and we believe the pieces are in place for that upward subscription revenues growth trend to continue. We remain confident that we are on track to achieving Rule of 40 around the fourth quarter of this fiscal year. And while the high end of our financial guidance for fiscal 2027 suggests a Rule of 40 mix of around 10% subscription revenues growth and 30% non-GAAP operating income margin in the fourth quarter, we are keenly focused on driving that mix more towards subscription revenues growth. With that, I will open the line for questions. Operator: [Operator Instructions] Our first question comes from Alex Sklar with Raymond James. Alexander Sklar: Sean or Greg, on the positive sales pipeline commentary and the ACV outlook, can you just frame what you saw in terms of the change in close rates or win rates in the back half of the year versus prior years? You referenced coming in above? And then how you approach the ACV outlook from a pipeline coverage perspective versus last year? Sean Desmond: Yes. Thanks, Alex. First of all, we did highlight early in the year our renewed focus on the execution discipline of pipeline growth and our emphasis and prioritization around demand generation in the marketing machine, right? So I think some of that played out in the back half of the year as our pipeline increased, conversion rates were healthy, but we just had a larger pipeline, and we're seeing that continue into this year over last year as well, and that's why we're so excited about the outlook. Overall, by solution, by geography, it's pretty balanced. And obviously, we're seeing nice momentum in our international business that we highlighted on the call. But I think a lot of it is around the discipline of just pipeline management overall. And when you have a larger pipeline, conversion rates can stay pretty steady and you'll have a larger ACV outcome. Alexander Sklar: Okay. Great. And then, Sean, you gave a lot of great color on the Banking Advisor adoption, 170 customers now on the platform. I think you have over 100 skills now versus 2 a year ago. Can you just frame where you're actually seeing the greatest usage across that portfolio of capabilities and skills? And then in terms of the magnitude of a 25x growth in credit usage versus October, maybe help frame how many of those customers are approaching kind of the upper end of their purchase credit allotment? Sean Desmond: Yes. Listen, first and foremost, our executive leadership team as well as the entire company is maniacally focused on adoption of Banking Advisor and our Agentic solutions. And I think we've been very thoughtful about selling our customers large enough blocks of intelligence units upfront to give them the runway that will enable them to navigate the adoption curve and see the benefits and kind of settle into the new experience, which is really important as you're managing the change. The last thing a customer wants is to feel nickel and dimed when they're adopting something new, right? So we didn't want to put them in a position where we sell blocks in small portions where immediately they have to re-up. And I think we can draw some parallels and analogies to the personal experiences that we have, right, with whatever chat interface you might use. The last thing you want is in the first month to be asked for an increase in your monthly subscription, right? So what we're focused on, first and foremost, is that adoption. And we're pivoting a lot of the energy of the field towards sitting side-by-side with customers and getting them comfortable with that. And then I would expect over time, as this settles in, we'll look into the next block of intelligence units. But in particular, your question around what are we seeing traction in, listen, our agenda credit reviews are really exciting, which falls under our analyst digital partner umbrella. Locate and file has been a mainstay since day 1 that we launched banking advisor, and we're seeing a lot of traction with credit monitoring as well as auto spreading. Operator: Our next question comes from Joe Vruwink with Baird. Joseph Vruwink: Great. Just to stay on some of the AI debates. Lending is a very complicated process. And part of that complexity, I'm sure we can appreciate ties to all the different systems and data and decisions that go into it. I guess the risk is that AI models can be good at orchestration. Are you seeing that type of capability and it starts to eat into nCino's differentiation? Or does it cause you to think about how the platform is currently architected and maybe doing some things differently to match up against what AI makes possible? Sean Desmond: Yes. Thanks, Joe. I appreciate the question and certainly understand a lot of the narrative that's going on in the market today. And some of the realities have changed with the AI capabilities, no doubt. For instance, we all know the coding has never been easier, right? And what we need to focus on is the reality that there's a difference between standing up an overnight user experience and deploying that code and maintaining that code in a highly regulated industry. That's still hard if you weren't built from day 1 in a compliant way for the regulators, if you don't own the workflow, if you don't own the data and you don't have the trust relationship, then these AI tools aren't going to stand you up overnight. All that being said, we've acknowledged that workflow is relative old news. And what we're focused on is an Agentic operating system future where we can instrument the platform with agents that tap into our own embedded intelligent workflows and mine that data and provide a differentiated experience. And we believe that is very unique. And the right question right now is not necessarily who's best positioned to deliver overnight because I've yet to see somebody to take a customer live even in the past year that was threatening that posture this time last year. What I think the right question is who's best and most uniquely positioned to capitalize on AI and banking, and we think that's nCino. Joseph Vruwink: That's helpful. On the Intelligent credits, do you have any metrics you can share maybe around efficiency gains or P&L impact that customers using the credits have seen so far? Or maybe is there a spectrum of outcomes you're seeing between heavy and light users? Can you kind of present to your customer base that here are examples where greater consumption is actually translating into greater benefits and you start to build referenceability in kind of that way. Sean Desmond: Yes. And thanks for highlighting the focus on outcomes that we have here at nCino. Listen, I don't really wake up in the morning excited about people adopting AI. I get excited about them getting real outcomes. And when I talk to bank CEOs, around the world, they care about what impact we can have on their top line and what impact we can have on their bottom line, right? It's all about revenue efficiency and cost savings. And so I think we're seeing really good gains and traction, specifically around credit monitoring, which is why I highlighted that credit analyst. And in some cases, we're seeing months to days and days to minutes in terms of getting [indiscernible]. We plan on highlighting at site some direct outcomes sharing their experiences on leveraging those units. But safe to say that as I wake up every morning with the CEO agent stack of my own that highlights intelligent units consumption, there's a direct correlation between the outcomes our customers are getting and the intelligence units they're drawing down on across the spectrum of banking advisers. Operator: Our next question comes from Michael Infante with Morgan Stanley. Michael Infante: On pricing, obviously, it sounded like a really strong result with 38% of revenue now on the new pricing model. Any incremental commentary you can share just in terms of price realization for the fiscal 4Q renewal cohort versus your plan? And in the instances where customers did push back. Can you sort of speak to some of the instances or initiatives you have in place to retain those customers, either in terms of ancillary product of attach of things like banking adviser and/or lower price realization? Sean Desmond: Yes. On the pricing front, first and foremost, I want to highlight that we started on the pricing journey nearly 3 years ago. And I really point that out because we're not reacting to anything here. We had a vision for how outcomes would be the end game for software companies like nCino. And so we prepared for this. The pricing has now been out there for a little over a year. And what I would tell you is that we are exceeding our internal plans and targets, and that momentum even picked up in Q4 versus the prior quarters. And while nobody likes a price increase and nobody likes change, I think that we're very prepared for that. And by and large, those customers are going very well. I'm proud of our account teams in the field. Those aren't necessarily easy conversations. But what I would say is they're more focused on education and enablement and drawing direct lines to the outcomes that our customers are going to get over time versus the old per user per seat model. So the value exchange is becoming apparent to our customers. And because of that, we're seeing early renewals. We're exceeding our targets, and we're leaning in heavily. It's been really accretive to our business. Michael Infante: Helpful, Sean. And then maybe just a quick follow-up on gross margins. I know it's fairly early in terms of thinking about banking advisory monetization. But do you expect the consumption of those incremental credits to be gross margin accretive? Should we be focusing on incremental gross profit dollars? How are you sort of thinking about the inference cost and customer usage intensity when usage exceeds expectations? Sean Desmond: Yes. Listen, I would absolutely expect these to contribute toward gross margins and really both, right? I mean what we're doing in terms of instrumenting our customers with the ability to come to decisions faster over time. we expect the value exchange to play out, right? And I think they're going to be in a position where they can exchange some of the labor cost and add their labor force to more high-value activities and put their employees in front of the customer, right? And that's where they want to be. And we're going to automate the things that happen in the middle and back office, and that's going to drive margin efficiency for our customers. Ultimately, that will flow through to nCino as well. Gregory D. Orenstein: And Michael, just to add, I mean, one of the benefits of seeing the usage tick up quite well is that it gives us the opportunity to stress test our gross margin model as we ramp up, and so we've been able to see that over the last few months is again 25x from October to March. And again, so far, we feel good about it. Operator: Our next question comes from Chris Kennedy with William Blair. Cristopher Kennedy: Can you provide an update on the credit union initiative? Sean Desmond: Yes, something we're very excited about. We mobilized the team, as you know, early last year that wakes up and sleeps, eats and breathes as well, just that credit union market. I'm proud of the way they've run toward the opportunity, have established relationships and credibility in that space and understands the problems we're solving for those customers. I think that's a matter of really being able to tell the same nCino value proposition story in a way that resonates more deeply with the credit union space, and that's given us the opportunity to even envision how we can think about road map in a different way and how we kind of augment the platform and the experiences that we deliver and think beyond some of the traditional experiences we serve up. So we've got good momentum there. The team is fully activated. The pipeline is growing as we head into this year, and we plan on selling the entire platform to our Credit Union customer base. Cristopher Kennedy: Great. And then just as a follow-up, historically, you've given ACV by category. Can get an update between mortgage, commercial and consumer? Gregory D. Orenstein: Yes, Chris, we don't have that for this call, maybe at another public forum, we'll be able to provide that breakdown for you. Operator: Next question comes from Ryan Tomasello with KBW. Ryan Tomasello: I guess starting with the organic subs guide. You're talking about 10% to 11% growth ex mortgage for the year. I appreciate the commentary on international being accretive this year, but I was hoping you can just put a finer point on the drivers there. Ex mortgage, particularly with respect to the U.S. business ex mortgage in terms of subs growth outlook. Gregory D. Orenstein: Yes. Thanks, Ryan. I mean, overall, I think business perspective, whether it's by product or geo, I think we feel really good about the sales momentum that we're seeing in the market. Our customer base generally is quite healthy. Balance sheets are healthy, lending activity has been up. And I think that is driving, again, demand for nCino -- for our products. And I would also go back to AI is a big driver for that as well. You can't leverage AI. You can't leverage this revolutionary technology unless your house is in order. And that's the business that we're in. We're in coming in and transforming your bank so that you can operate on a platform and to be able to leverage not just your data, but the data that nCino has across our whole customer base that's given us the rights to leverage that data as part of our product offering. I would point you to the appendix in the back of the earnings call presentation that we put up, you'll see a nice walk in terms of our year. And the other thing I'd highlight again is the continued downward trend in churn, which, as we know over the last couple of years, has been unusual for us, right, heightened churn, but that coming back more towards historic norms has been a big positive to getting our growth trajectory back towards an upward motion and one that we can build on. Ryan Tomasello: I appreciate that, Greg. And then just following up, just kind of on the subs cadence for the year. The 1Q guide round numbers looks like 9% to 11% organic subs growth versus 9% to 10% for the full year. Just trying to reconcile that with your comments earlier, Greg, about being confident in being able to continue to drive this acceleration in subs growth and just how we should think about this cadence throughout the year with respect to that Rule of 40 target. Gregory D. Orenstein: Yes. Thanks, Ryan. I think you should assume that mortgage comps in the second and third quarter are a little bit tougher. And so that from a trajectory standpoint is something that you should take into account in your modeling. Operator: Our next question comes from Aaron Kimson with Citizens. Aaron Kimson: Sean, can you talk about why now is the right time to bring Keith in to run sales? And what is type 2 priorities will be in fiscal '27? It seems like the sales team is executing well. Sean Desmond: Sales team is executing phenomenally well. And we are -- we have been marching towards a point in time where we were going to appoint a Global Chief Revenue Officer. That's going to help us scale to $1 billion and beyond in terms of where we're going on the revenue growth side. And that has been in the works for some time. What I would share with you is that we had a model in place where Paul Clarkson, who ran our North America sales operation is stepping aside for personal reasons, and Keith is coming in to consolidate the global org and we'll have a tight partnership not only in North America, but in EMEA and Asia PAC and with our partner organization, and Keith has a lot of experience in these areas. He's been somebody we've known for a long time in our network, not only his days at Salesforce, but also at Alloy. And we're super excited about his leadership. He's not only a great experienced leader who's operated in this vertical and has deep relationships with our customer base, but also is a great culture fit for nCino. So yes, the sales organization is operating fantastically well in large part due to Paul Clarkson's leadership. And Paul is stepping aside for personal reasons and Keith is the perfect guy to step in at this point in time and take us to the next level. Aaron Kimson: Understood. And then as a follow-up, it's good to see the mortgage win with a top 40 bank where they also use your commercial lending, small business lending and treasury products. Are you getting to a point in mortgage sales cycles now where you have a better idea of how the move up market with nCino mortgage is going now that you're 3 quarters in there from when you really rolled it out after the Investor Day last year at nSight and at the larger FIs, you finding that existing relationships and other parts of the bank are helping you get a foot in the door on the mortgage side of the house or that the buyers are just generally separate in those big organizations? Sean Desmond: The answer is yes. We are learning from experiences there. As you know, we made the jump from our mortgage solution in the IMB space full on towards some of the largest banks in the world. And we're excited that we have a top 30 bank in the U.S. on the platform, and that naturally gets the attention of the peer group and the cohorts to the point where we start getting some inbound calls for nCino to participate in forums at that level. We're also getting traction in the community and regional bank space as well as the credit union space with the mortgage solution. And I think our teams now have some of the experience and quite frankly, some of the attitude and confidence that it takes to go aggressively sell that across lines of business. It's not uncommon that I would be meeting with our customer base, whether it's a CEO or Chief Lending Officer, or somebody in the C-suite that would proactively bring up on their side and recommend that we talk to the mortgage leader in their business. So that is happening and it's happening pretty organically. Operator: Our next question comes from Saket Kalia with Barclays. Saket Kalia: A nice finish to the year. Greg, maybe for you. I think we said we've got about 38% of ACV on platform pricing now, which is great to hear. I'm curious, have any of your top 20 banks made that transition yet. And were there any learnings from those customers in particular that you feel you could build upon? Gregory D. Orenstein: Yes. Thanks, Saket. The answer is yes. I mean, I think with every deal, you learn something new. We certainly try to. But to Sean's point, this is something that we started in terms of this pricing transition going back about 3 years. First off, internally and testing with our customers. Again, one of the great things about the wonderful customer base we have as we work very closely with them to get their thoughts and input. And so the rollout has frankly exceeded my expectations, not just from the uplift that we've talked about, but as well just in terms of the execution and you would have heard Sean's prepared remarks, our largest customer by ACV renewed for a 5-year deal, and that would have been on the new platform pricing model. So we do have some of our larger customers already on it. And again, I think it's gone quite well, quite pleased -- we're quite pleased with the execution there. Saket Kalia: That's great to hear. Maybe for my follow-up. It was great to hear you reconfirm the Rule of 40 expectation. Is it may be fair to say that, that rule of 40 is achievable based on the ACV that you've already booked here in fiscal '26? Or is it dependent on some of the new bookings that you anticipate this year as well? Gregory D. Orenstein: It would include some new bookings. Again, the slide I referenced earlier, Saket, in the appendix, I think it's Slide 15, you'll see a nice walk that we tried to lay out, so you could see the contribution from bookings last year and what we came into the year with, which is quite a bit of visibility. But we do have -- we do have some work to do this year. And again, I think as we look at our pipelines, as we look at the activity in the market, and frankly, as we look at the excitement that we see in here and feel around AI, we come into this year feeling good about the plan that we have. And it's actually Slide 16, if you look in that deck. Operator: Our next question comes from Charles Nabhan with Stephens. Charles Nabhan: Just 1 quick one for me. Looking back over the past couple of years, you've done several acquisitions. Wondering if you could provide us an update on the progress you've made on Sandbox and DocFox, any positives or negatives? And just an update on the traction you're getting on those solutions in the market. Sean Desmond: Of course, taking those each on its own from a Sandbox standpoint, that has actually become the foundation and the backbone of our integration gateway and the MCP layer that we expect to control how agents access data in the nCino moat, right? So that's very strategic. We're not necessarily selling -- looking to that as a stand-alone revenue engine, but as a strategic foundational platform that sets us up to be the agentic operating system of the future for banks. So we're really excited about that. And from a DocFox standpoint, we remain very compelled by the opportunity with complex commercial onboarding that continues to come up in nearly every conversation as an adjacent problem our customers are solving to the one that we solve so well around commercial loan origination. And so those opportunities in the pipeline are growing. We have acknowledged in past calls that it was going to take us the better part of the prior fiscal year to complete the technology integration work. And now we're looking to convert some of that pipeline here in the first half of this fiscal year. So we're really excited about onboarding coming into full focus as it's kind of been mainly in the background and the R&D room. Now it's coming into the sales machine. Operator: Our next question comes from Adam Hotchkiss with Goldman Sachs. Adam Hotchkiss: Sean, where are bank CIOs leaning in most to AI from your perspective, whether that's nCino or otherwise? And how does that differ across financial institution side? I'm just curious if smaller to midsized banks or maybe more likely to lean into packaged AI use cases. And are you seeing any appetite for some of the larger banks, in particular, to try to do anything? And how is the -- I'm just trying to understand ultimately what banks are out there trying versus not trying from an experimentation perspective and then how nCino fits into that? Sean Desmond: Sure. And in our landscape and as you've acknowledged, I appreciate the tee up there and market segmentation. Undoubtedly, the further down market you go, the bigger the appetite those customers have for prepackaged solutions that we would serve up the agents, right? And we would actually build and deploy the agents. And what's so powerful about our platform as we render those in the existing workflow, right? At nCino, AI lives in the workflow, so the context is already there. The user doesn't have to change their behavior and the trust and compliance are inherited and the data moat is leveraged. So those banks absolutely get that. As you go upmarket, the same value proposition applies but you absolutely have, what I would say, more curious in experimental groups within the organization who are being chartered with, hey, if we build our own agents, what would that experience look like, right? And those customers, just the same need context, they want trust and compliance and they want to tap into nCino data. So we have thoughtfully architected a platform as we evolve in our journey that would enable customers to do both. And we're seeing enterprise banks that are asking us to actually sit side-by-side and co-develop some of these agents and look at those experiences. So it's all exciting. I do think that what comes up most for me when I'm talking to customers about the outcomes they want to go back to that credit monitoring experience is very powerful. The ability to reduce the time spent analyzing the scores and reams of documentation and data to get to a proactive monitoring position over time, and that's not only upfront to do a deal, but that's maintenance. That's pretty common. And then, of course, you know that we have banking adviser skills embedded across the experiences. So that's one that stands out. They are looking for low-hanging fruit. They are looking for quick wins, and we can serve those up, and that's exactly how we've architected our digital partners. Adam Hotchkiss: Okay. That's really helpful, Sean. And then Greg, just on the Slide 16 that fiscal '27 growth algorithm, I really appreciate the detail there. Any way to think about how that contribution mix between contracted in the prior year and forward bookings compares to ultimately what you did in fiscal '26 just from a mix perspective would be helpful to understand. Gregory D. Orenstein: Yes, Adam, I think you can assume it's comparable. Operator: Next question comes from Terry Tillman with Truist Securities. Terrell Tillman: I'll keep it to 1 question, but as typical, there's probably multi parts to it. On the early renewals, it seems like that's a good sign of the interest in the new innovation. But could you all quantify how much early renewals impacted or benefited the strong 4Q ACV? Or the in-year ACV target? And the kind of the second part of this is with the early renewals, I think you did say that one did a contractual renewal at 5 years. But what is the duration looking like on early renewals versus the original contract? And then just do they tend to consume or sign up for more banking adviser or skills versus the non early renewals? Just double-clicking more on early renewal activity would be great. Gregory D. Orenstein: Yes. So in terms of the renewal trajectory and momentum, I'd point you to the ACV you mentioned that we disclosed going from -- it was 102%, I think back in fiscal '24 up to 106% and then up to 112% or 119% at constant currency organic basis, Terry. So again, really like that trend. And I think that's reflective of, again, the customer relationships that we have and also, again, just the breadth of our product that we can go back to our customers and sell them more. And again, a lot of those discussions actually AI, whether it ends up being an AI discussion or not, being able to go talk about AI provides an opportunity for us to explore where else we may be able to add value to our customer base. And so all that's exciting, and I think all that's helping to drive the momentum that we saw last year and that we came into this year with. Operator: Our next question comes from Koji Ikeda with Bank of America. Unknown Analyst: This is [ George McGrehan ] on for Koji Ikeda. And I know that you guys already talked about the relationship between sub revs and ACV. But I kind of wanted to ask this simplistic question, and apologies if it's a bit redundant, but if you could humor me. So fiscal year '26 sub revenue came in higher than ending fiscal year '25 ACV. But the initial guidance for fiscal year '27 sub revenue doesn't quite get us to ending fiscal year '26 ACV. What's kind of the relationship there? And how would you kind of describe the level of conservatism in this fiscal year '27 sub revenue guide? Gregory D. Orenstein: Yes. Thanks for the question. Just going back to some of the earlier comments, there's a few things to keep in mind when you're trying to reconcile the ACV performance in our sub-rev guide. One is, again, a portion of the ACV that we got actually contributed to subs revs last year. So you need to take that into account. Again, the way that we've always defined ACV is the high point of a contract. And when there's increased pricing during a contract, right, the rev rec rules require you to straight line that. And so your actual revenue is going to be short or fall short of what your ACV is and what that exit contracted amount is would be another thing to take into account. The third thing is churn that we experienced last year would generally have been from our older seat-based pricing model. And the ACV and subscription revenue would have been more aligned under that historic model that we had. And then finally, again, as you think about subs revs, keep in mind that our mortgage overages don't fall into ACV. And so those are some of the deltas to take into account when you're trying to reconcile the ACV performance we had in fiscal '26 and the initial guide that we've given for sub revs for fiscal '27. Operator: Our next question comes from Eleanor Smith with JPMorgan. Eleanor Smith: I think I'll keep it to 1 as well. I know many products can be implemented in a matter of weeks or months. But when you land a large new customer as you did in Japan this quarter, how long does it take to implement a large customer like that? And when do you begin recognizing revenue? Sean Desmond: Sure. And listen, I think on average, it's a reality with the efforts we've put into rotating a lot of our energy in our field, PSO organizations toward our forward deploy engineer as well as applied intelligence groups to reducing overall implementation times. And that's showing up and they're compressing nicely, and we're getting customers live in time frames that are actually exceeding my expectations. Specific to the large Japanese deal, that's a multinational deployment that is probably unique in its own regard with respect to some of the coordination that needs to happen upfront before we even start thinking about deploying nCino. So there's some of that that's happening right now. once we get hands on keyboards with nCino, I expect that we'll hammer through that project in months. But there's a lot of upfront prep work when you're bringing a global organization together across 26 countries that needs to happen, that will probably elongate the time that we can announce something very exciting with respect to a go-live on that particular bank. Gregory D. Orenstein: Yes. Ella, with respect to the rev rec, just recall with platform pricing, it's going to be straight lined over the term. And it would generally start a month or two after contract signing, when we would start billing just based on the terms of the contract. Operator: Our next question comes from Nick Altmann with BTIG. Nicholas Altmann: Just on the renewal base. I know you guys mentioned 38% of the ACV base is renewed to the new pricing. But can you just talk about where you expect that mix to trend as it relates to the 2027 ACV guide and whether that contemplates some continuation in the early renewal activity that you guys have been seeing? Gregory D. Orenstein: Yes. Thanks, Nick. Yes. As it relates to fiscal '27. I mean, we would expect a similar performance as we had in fiscal '26 in terms of the renewal cohort that comes up. Recall historically, the average contract length of our bank operating customers is upwards of 4 years. And so break that down generally a quarter over that 4-year period. We are seeing accelerated renewals. And so I think we're ahead of plan for that. So again, we would expect a similar performance. Keep in mind in terms of the comp because it's a similar performance, you won't see that onetime kind of step-up that we had this past year, which was the first year really of the step-up. And so just keep that in mind from a compare standpoint as move into fiscal '27. Operator: Our next question comes from Ken Suchoski with Autonomous Research. Kenneth Suchoski: I'll keep it to 1 as well. I wanted to dig into the long-term moat of the business a little bit because it seems like people are -- investors are questioning the terminal value of these -- of software companies more broadly. You mentioned how banking is a highly regulated business and how that's different. Could you just talk a little bit about how nCino works -- if and how nCino works with regulators and how that might impact the ability to remain entrenched and prevent new companies from coming into the space? And then secondly, it sounds like data is going to be one of the key sort of aspects to the moat longer term. So are we at the point where the network effects of the data are strong enough to keep nCino in the lead? Or is there this sense of urgency across the business to try to build up that aspect of the moat? Sean Desmond: Thank you. And yes, we do believe that the future long-lasting durable software companies that are going to be the generational companies that can survive inflection points like these are going to be able to deliver AI embedded within existing business processes and in particular, in this banking vertical to lend context and within the guardrails of regulation. And beyond regulation, you have to consider things like security, there's trust and there's that data moat that you talked about. And we believe that what's unique about nCino is we started accumulating this data 14 years ago, right? So we are absolutely not sitting here reacting and aggressively trying to build up our data moat overnight because that was the original vision of nCino. When I joined this company in 2013, I had a conversation with our founding CEO on the power of sitting at the intersection of the things that we do and where we do them. And if we could serve that data up with meaningful insights that would be very compelling. And we just happen to now be in the era of AI. So while other companies are scrambling to deliver user experiences overnight with no foundation of data, we're actually continue to build on 14 years of buildup. And we just -- we're not arrogant about it, but we believe our data moat is unparalleled and unique, and nobody else has the type of contextual view on how capital flows through workflows in financial institutions. So we're excited about that, and we believe that's going to propel us we'd lean into it. As far as the regulation, I would first point you to the fact that we have hundreds of bankers that work at nCino, they come from that world, right? In many cases, sitting in those chairs side-by-side with the chairs of the regulators for careers before software. And that's very unique in terms of how you think about product management. And now in the world of prompt engineering and imagining experiences very quickly, doing that without that human riding shotgun with you is where I'd be nervous, right? That's where you start getting into hallucinating on public cloud data that you think regulation lives in the public cloud. It does not and the bankers understand that. And that's why we're excited about that, and we maintain the relationships with these types of people in the space. Operator: Thank you. I would now like to turn the call back over to Sean Desmond for any closing remarks. Sean Desmond: Thank you all for joining us today. We do look forward to seeing many of you at nSight, which is our annual user conference in May, where we will be showcasing many of these agentic experiences we're talking about with customers on stage delivering outcomes. Hope to see you there. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Good morning, everyone, and welcome to the Cal-Maine Foods, Inc. third quarter fiscal 2026 earnings conference call. All participants are in a listen-only mode. To ask a question, please follow the operator instructions during the Q&A. Please note this call is being recorded. I will now turn the call over to Sherman Miller, President and Chief Executive Officer of Cal-Maine Foods, Inc. Please go ahead. Sherman Miller: Good morning. Thank you for joining us today. I want to remind everyone that today’s remarks may include forward-looking statements. These are based on management’s current expectations and are subject to risks and uncertainties described in our SEC filings. Let me start by sincerely thanking our teams across the organization whose execution, focus, and commitment to excellence drive the operational and financial performance that underpins everything we do. Their hard work and dedication continue to set us apart, and these results are a direct reflection of their efforts. In February, we shared the sad news of the passing of longtime board member Jim Poe. Over more than two decades, Jim made a lasting impact on the company, and we extend our heartfelt condolences to his family and loved ones. Today, we announced the appointment of Dudley Woolley to the board to fill the vacancy left by Jim. Dudley brings deep expertise in risk management and governance along with a strong track record of leading growth-oriented organizations and driving operational performance. We look forward to the perspective he will add as we continue to strengthen our business, enhance earnings visibility, and focus on long-term value creation. Before Max walks you through our results in detail and provides additional color on our financial performance, I would like to spend a few minutes discussing how we think about the long-term direction of the business and how the strategy we are executing is designed to create durable value over time. When investors evaluate Cal-Maine Foods, Inc., they often focus on the consistency of our execution. That reputation has been built over time, not in any single quarter. It reflects the accountability, operational excellence, and continuous improvement embedded across the organization. At Cal-Maine Foods, Inc., our objective is straightforward: to compound intrinsic value per share over time, through thoughtful portfolio evolution, efficient operations, and prudent capital allocation. While short-term earnings will naturally fluctuate in a cyclical industry, our focus remains on strengthening the long-term earnings power and resilience of the business. In practical terms, that strategy centers on several priorities. First, we continue to expand our specialty egg mix. Specialty eggs represent a larger portion of our portfolio; they support structurally stronger margins, more stable demand characteristics, and improved returns on invested capital. Second, we are continuing to evolve our pricing structures. Over time, we are increasing the share of our business that operates under structured pricing arrangements. We believe this helps improve the stability and predictability of realized pricing across the cycle. Third, we are expanding our prepared foods platform. Prepared foods broadens our addressable market, leverages our vertically integrated chilled egg inputs, and establishes a complementary long-term growth platform alongside our core shell egg business. At the same time, we continue to reinforce the operational strengths that have long defined the company. Investments in biosecurity, productivity, and vertical integration strengthen our cost leadership and support reliable operating performance across cycles. Together, we believe these actions will steadily improve the quality and durability of our normalized earnings power while strengthening the company’s long-term competitive position. Against that backdrop, let me highlight a few key developments from the third quarter and the first three quarters of our fiscal year that reflect how the strategy is translating into execution. Unless otherwise indicated, all comparisons are to the comparable period of fiscal 2025. In 2026Q3, specialty eggs drove a greater portion of shell egg sales, accounting for 50.5% of total shell egg sales compared to 24.4%. Prepared foods accounted for 9.5% of net sales compared to 0.8%. Specialty eggs and prepared foods combined accounted for 52.9% of net sales compared to 24.0%. In the first three quarters of 2026, specialty eggs drove a greater portion of shell egg sales, accounting for 42.7% of total shell egg sales compared to 29.2%. Prepared foods accounted for 9.3% of net sales compared to 1.0%. Specialty eggs and prepared foods combined accounted for 45.7% of net sales compared to 28.6%. Importantly, the egg market in 2026 provided a real-time test of our strategy. Periods of price softness can create noise around near-term performance, but they also provide an opportunity to demonstrate that our results are not simply a function of spot market conditions. Instead, our performance reflects how effectively we manage mix, pricing structures, cost, and capital across the cycle. What we are really seeing is a market that is still being impacted by high-path AI, but to a much lesser extent than last year. The disruption has not gone away; it is still a reality, but it is not driving the same level of supply shock or panic-driven purchasing. Supply has improved, and retailers and foodservice operators are not rushing to build inventory, which has put downward pressure on wholesale prices, with retail adjusting more gradually. The key data points for December to February make that clear. The average layer hen flock is up about 2.2% year-over-year and depopulations are down 70.6% year-over-year. While high-path AI is still present, the magnitude of disruption is meaningfully lower and that is what is showing up in pricing. On the demand side, consumption remains stable to improving, with a few timing dynamics influencing near-term trends. In retail, volumes are up about 3% year to date. What is important is that our market is broad-based. Growth is showing up across both value and premium segments. In foodservice, demand is beginning to recover, with increased traffic and egg servings increasing, particularly in quick service. More broadly, eggs continue to benefit from strong structural tailwinds. They align with high-protein and health-focused diets, fit well with convenience and portable meal formats, and remain a nondiscretionary item once a consumer is in the channel. So overall, demand is holding up well, and what we are seeing in the market today is much more about supply recovery and timing shifts than any fundamental change in consumption. You can see our strategic framework reflected in the acquisition of the shell egg, egg products, and prepared foods assets of Creighton Brothers and Crystal Lake that we announced during the quarter. This transaction expands the geographic scale of our shell egg platform and adds nearby liquid egg capacity that supports our internal sourcing strategy for egg-based ingredients. We believe that over time, integrating shell egg production, egg products, and prepared foods more tightly within our value chain will help strengthen supply security, improve operational efficiency, and reinforce the economics for our prepared foods platform. With that, let me turn the call over to Max to drill down into our financial results and discuss our capital allocation framework. Max? Max Bowman: Thanks, Sherman, and good morning, everyone. As a reminder, we published our third quarter earnings release and the 10-Q this morning. Additionally, we published a brief earnings presentation on our website. These documents contain detailed information on our financial results. I will touch on the highlights for 2026Q3. Unless otherwise indicated, all comparisons are to the comparable period of fiscal 2025. For 2026Q3, net sales were $667.0 million compared to $1.4 billion, down 53%. Conventional egg sales were $283.2 million compared to $1.0 billion, down 72.1%, with 70.1% lower selling prices and 6.7% lower sales volumes. Specialty egg sales were $289.1 million compared to $328.9 million, down 12.1%, with 16.9% lower selling prices and 5.8% higher sales volume. Our average breeder flocks grew 13%, total chicks hatched rose 41.7%, and the average number of layer hens expanded 2%. Prepared foods sales were $63.6 million compared to $11.8 million, up 441.2% year-over-year, and compared to $71.7 million, down 11.2% quarter-over-quarter. Our majority-owned subsidiary, Kupini Foods, delivered strong momentum with sales increasing by 283%, contributing positively to the overall prepared foods portfolio. In prepared foods, Q3 represents a trough driven by the timing of previously announced planned network optimization and expansion activities. The near-term margin pressure is largely volume-driven, reflecting temporary downtime and under-absorption of fixed cost, along with some mix headwinds as the network transitions and we increase the use of cost-type pricing arrangements that enhance stability. As capacity comes back online, we expect a progressive recovery beginning in Q4, with margins trending back toward baseline through fiscal 2027 and 2028 as scale and network efficiencies are realized. We expect prepared foods capacity to increase more than 30% over the next 18 to 24 months. Importantly, demand remains intact. This is a function of execution timing, not structural weakness, and these investments position prepared foods as a more durable, high-margin growth platform. Overall, gross profit was $119.3 million compared to $716.1 million, down 83.3%, primarily driven by 56.5% lower shell egg selling prices, partially offset by a decrease in the price and volume of outside egg purchases, as our percentage produced-to-sold increased 3.1 percentage points to 91.5%. Operating income was $35.9 million compared to $635.7 million, down 94.3%, an operating income margin of 5.4%. Net income attributable to Cal-Maine Foods, Inc. was $50.5 million, down 90.1%. Diluted earnings per share were $1.06 compared to $10.38, down 89.8%. Cost of sales decreased 21.9%. Lower costs associated with egg purchases and egg products more than offset the increase in prepared foods cost due to the acquisition of Echo Lake Foods as well as the increase in our farm production and processing, packaging, and warehouse costs. SG&A expenses increased 4.2% due to the addition of Echo Lake Foods and increased professional and legal fees. This was partially offset by lower employee-related costs. Net cash flow from operations was $103.6 million compared to $571.6 million, down 81.9%. We ended the quarter with cash and temporary cash investments of $1.152 billion, down 17.3%. We remain virtually debt free. We repurchased 329,830 shares of common stock under our current share repurchase authorization during the quarter for a total of $24.3 million. The repurchase program permits us to purchase up to $500.0 million, of which $350.8 million remains available. For 2026Q3, we will pay a cash dividend of approximately $0.36 per share to holders of our common stock pursuant to our variable dividend policy. The dividend is payable in May 2026 to holders of record on 04/29/2026. The final amount paid will be based on the number of outstanding shares on the record date. From a financial perspective, our priorities remain centered on strengthening the durability and predictability of Cal-Maine Foods, Inc.’s earnings profile while maintaining a structured and flexible capital structure. Our capital allocation framework is designed to support long-term per-share value creation while preserving the financial resilience necessary to navigate a cyclical industry. First, we will prioritize investment in high-return organic growth opportunities. This includes investments that expand specialty egg capacity, improve productivity and operational efficiency, and support the continued development of our egg products and prepared foods capabilities. To that end, our prepared foods expansion initiatives are progressing on schedule and in line with plans previously communicated. At Echo Lake Foods, the network optimization and capacity expansion project is underway and expected to add approximately 17 million pounds of annual scrambled egg production capacity throughout fiscal 2027. In addition, the previously announced high-speed pancake line continues to advance as planned, and it is expected to contribute an additional 12 million pounds over the course of fiscal 2027. Separately, our joint venture, Kupini Foods, is investing $7.0 million through fiscal 2028 to expand production capacity by approximately 18 million pounds through the installation of new equipment and production lines. Collectively, these initiatives remain on track and are expected to increase Cal-Maine Foods, Inc.’s prepared foods production capacity by more than 30% over the next 18 to 24 months as the projects are completed and ramp up as planned. Second, we pursue selective acquisitions that strengthen the company’s strategic positioning and meet stringent return thresholds. Our acquisition of certain assets of Creighton Brothers and Crystal Lake is a good example of this approach. The transaction expands the geographic scale of our shell egg platform while also adding nearby liquid egg capacity that we believe will strengthen our integrated value chain. Third, we return excess capital to shareholders through our variable dividend framework and, when appropriate, opportunistic share repurchases. Underlying this entire framework is a commitment to maintaining balance sheet strength. A strong liquidity position provides the flexibility to invest across the cycle, respond to strategic opportunities, and navigate industry volatility. This systematic approach allows us to balance growth, resilience, and shareholder returns while preserving the long-term optionality that is critical in our industry. Over time, we believe the combination of portfolio evolution, disciplined capital allocation, and balance sheet strength will continue to enhance the company’s normalized earnings power per share and support durable value creation for shareholders. That concludes my review of the financial results. I will now turn the call back to Sherman. Sherman Miller: Thanks, Max. Looking ahead, we believe Cal-Maine Foods, Inc. is well positioned to benefit from durable shifts shaping the egg category. By building on the structural strength of our core shell egg platform while expanding across specialty eggs, egg products, and prepared foods, we believe we are strengthening the resilience and quality of our business over time. This progression is expected to help enhance the durability of our earnings profile and position Cal-Maine Foods, Inc. to deliver sustainable growth and long-term value creation. With that, I will turn the call back over to the operator to begin the Q&A portion of today’s call. Operator: We will now begin the question-and-answer session. To ask a question, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. We ask that each participant limit themselves to one question and one follow-up. Once your questions have been answered, please reenter the queue if you would like to ask additional questions. We will pause for a moment while we compile our Q&A roster. Our first question comes from Heather Jones with Heather Jones Research LLC. Your line is open. Heather Jones: Good morning. Thanks for the question. Congratulations on the quarter. I want to start with specialty pricing. That was where much of the upside was relative to our estimate for the quarter. The California price had rallied nicely over the course of a few weeks, but it has recently begun to pull back, though still not back to the Q3 lows. Would you expect Q4 specialty price to be similar to Q3, or is there some other dynamic that we need to consider there? Sherman Miller: Good morning, Heather. Thank you for the question. Specialty eggs continue to be extremely exciting for us, and as we move into Q4 and beyond, we see that as a huge part of our differentiation and our ability to diversify. The specialty prices, as we have mentioned before, have a smaller piece of that category tied to the market, and if that market moves up and down, there is some flex. But for the most part, those prices are a lot more stable. Max, you might want to give a little bit more color on that. Max Bowman: Yes. As Sherman said, Heather, our specialty pricing does not fluctuate that much. We call out that the vast majority of our specialty pricing is either grain-based or a fixed-price type arrangement—cost-plus—so it stays pretty flat. There is a component that, as you call out, ties to the cage-free California market. It varies from quarter to quarter, but roughly I would say about 12% or in that range. Depending on how that price reacts this quarter and coming quarters, that will largely drive a lot of that movement, but we expect specialty price to stay pretty consistent. Heather Jones: Okay. Thank you for that. And then on my follow-up, it is just on the prepared foods business. I think I caught you saying that you expect the margin for that business to trend back to baseline through 2027 into 2028. Are you not expecting it to fully get back there until 2028? And when you say baseline, there were some quarters where it was north of 20%, but I believe your baseline is 19%. Is it unlikely to get back to where it was a few quarters ago, and how should we update our thinking on baseline? Max Bowman: I will take that one. We think Q3 represents a trough quarter. What you are seeing is anticipated impacts of some of the network expansion and capacity initiatives that we have mentioned. In the quarter, we saw lower volumes and then margin pressure as we go through these reconfigurations. When you have lower volumes, the first thing that happens is under-absorption of fixed cost, and that was one of the major headwinds for the quarter. As we roll into Q4 2026, we expect to see some of that rebound begin to come back online. It will be tempered a little bit, as sales mix tied to the end of the school year will partially offset some of that margin recovery, and that is just a normal seasonal dynamic. It is not an execution issue. We are currently, because of these reconfigurations, having a slightly less desirable product mix that is impacting our margins, but that will improve over time too. All these things are transitional and not reflective of underlying demand, which we still believe to be strong. We continue to migrate from market-based pricing towards grain-based and longer-term pricing arrangements. This moderates near-term pricing upside, but we are looking at the long-term durability and stability of our business, and we think it enhances that. As we begin to see this recovery in Q4 2026, we will see higher capacity and better utilization of that capacity. That margin recovery will really start showing up toward 2027 and into 2028, when the volumes we have talked about through the additional investment that we are making in Echo Lake as well as Kupini will be fully online. When you speak of the 19% to 20% margin, that was the margin we had called out at Echo Lake. Kupini is coming along, and the other elements of our prepared foods we continue to work on as well. We think we are taking some short-term pain now for better long-term positioning and gain in the future. We feel more positive as we go into 2027 and early 2028 that we will really see the fruits of that, along with the 30% growth that we had talked about from these investments. Sherman Miller: Thank you, Max. The only thing I will add, Heather, is just getting the nuts and bolts in the right place for long-term performance and growth and having streamlined operations and really strategically placing the four Echo Lake facilities in the right manner—to have our flour products to the northern two facilities and the egg-type products in the southern two facilities, which happen to be very close to Creighton Brothers, which can supply the eggs long term. So a lot of good progress there. Heather Jones: Okay. Thank you so much. Operator: One moment for our next question. Our next question comes from Pooran Sharma with Stephens Inc. Your line is open. Pooran Sharma: Thank you and congrats on the quarter here. I wanted to focus on pricing for the conventional eggs. It did come in a little bit higher than we were modeling, and you have stated in the past that your new hybrid pricing model gives you a better floor. Looking at the price ratio between your conventional egg pricing and what we track with the USDA, we just have not seen it this high in over a decade. Could you help us and the investment community understand how to think about your cost of production for your conventional eggs based on some of the disclosures you have in your filings, and then marry that with what kind of high-level rate of return you generally expect from these types of assets? Sherman Miller: Good morning, and thank you for the question. I will start off and then pass it to Max. I think you pegged it very well. You are seeing reduced volatility, and as we mentioned with hybrid pricing, there are trade-offs. On the top side there is an opportunity, but on the bottom side there is as well, and that is what you are seeing in this quarter. Market realization certainly benefits from this as well as, as we have mentioned before, having longer-term arrangements. So any top-side slippage is certainly balanced with downside uplift. That depends heavily upon the type of arrangement, and the real win here is us working with customers to not only benefit the type of eggs you are talking about, but also specialty eggs and prepared foods that we also value very highly. On the cost side, there is certainly a lot going on geopolitically around the world. Grain is one of the things that has come up in the news over the last few weeks, particularly tied to fertilizer, and our consultants assured us that probably 90% of the inputs have already been locked. So fertilizer costs for this planting season should not cause too much disruption, but fuel transporting not only grains but everything else is certainly in the news and is real. The reassuring piece is that we have been here many times before, and we navigate that not only by using our scale, but also by using things like our warehousing and our inventory and managing through situations like this. Max, what would you add? Max Bowman: Pooran, when you talk about hybrid pricing, you are talking primarily about our conventional eggs. As you know, we only report one segment today, so we do not give complete margin information and returns on conventional versus specialty. But hybrid pricing does exactly what you called out and what we have said before. What we hope to get is more stable and resilient, continuous profit. I am not saying it will always be a profit, but certainly we are taking some off the top for high returns from conventional and trading that for longer-term, more stable earnings. As we grow, that is a piece of the puzzle, and where we look for really good growth and even better returns would be from our specialty and our prepared foods business. We look at the conventional business as our baseline. It is important because of its size and scale that it is strong and operates profitably and consistently, and that is what the hybrid pricing does. Then we continue to invest in prepared foods and specialty where we hope to get higher returns. We do not disclose individual returns for conventional and specialty at this time, but we have said in the past that our return on invested capital is double digit, well above our cost of capital. We feel good about the returns as we sit today, not only from conventional, but the opportunities in specialty and prepared foods. Pooran Sharma: I appreciate the detail there, Sherman and Max. From a capital allocation front, you still have a strong balance sheet. In our recent conversations, you had called out liquids as an area of focus. As you are looking across the M&A landscape, does that remain an area that you want to continue to build, or are you looking at it more opportunistically in terms of what is out there in conventional, specialty, or more prepared foods assets? Sherman Miller: I will start by commenting on Creighton Brothers. As we pointed out, there is liquid egg capacity there, and it is very close to our prepared foods operations that ultimately will be producing egg products in the southern two plants. Our capital allocation hierarchy still remains intact to pursue selective, accretive M&A where returns are compelling. We believe that we have more ways to grow than ever before, including conventional eggs, specialty eggs, prepared foods, the ingredients that you mentioned, and also brands tied to prepared foods. On the ingredient piece, we want to, over time, closely align our needs within Echo Lake. As we mentioned before, there are some arrangements that we are working through that we inherited, but we think that Creighton Brothers is certainly a very strategic move in making that come to pass. Max Bowman: In the materials we published, we have an investor deck with a few slides that recap our capital allocation for the last twelve months ending at the end of our third quarter. There is a lot of balance there, and it shows that in a lot of ways, we are putting our money where our mouth is. It represents about $1.0 billion of capital that was allocated. About 38%, or $384.0 million, went to dividends to our shareholders. About $299.0 million, or 30%, went to acquisitions, including Echo Lake, Clean Egg, and Creighton Brothers that we just announced. Remember, we have been in a time when acquisitions are sometimes considered tougher because of the very good markets we have been in, yet we have been able to deploy capital toward these acquisitions that we believe really advance our goals for the long term. On the CapEx side, we allocated about $117.0 million, or 17%, including about $35.0 million of maintenance CapEx. Our share repurchases were about 15%, or over $150.0 million. That gives a good view of where we are spending our money. As Sherman says, our focus is really long-term shareholder value. We look at things opportunistically, and we want to do the things that we think clearly enhance our earnings quality and portfolio growth and resiliency. Pooran Sharma: Great. Thank you for the detail. Operator: One moment for our next question. Our next question comes from Leah Jordan with Goldman Sachs. Your line is open. Leah Jordan: Thank you. Good morning. I wanted to ask about demand. You talked about it being resilient in the quarter, but could you provide more color on the trends you are seeing within your branded portfolio specifically? What are the growth opportunities you still see there, including any potential opportunity to gain more contracts or exclusivity over time? Sherman Miller: Good morning, Leah. Thank you for that question, and I will certainly get to the branded. At a higher level, retail egg volumes are up about 3% year to date through late February. The incredible thing about that is it is broad across segments—from conventional, cage-free, free-range, and pasture-raised. Foodservice is also showing early signs of recovery, with January marking a clear inflection point—traffic up about 1% year-over-year with dollars up about 4%. Eggs continue to be well positioned with the long-term consumer shift toward high-protein diets, supported by their strong nutritional profile, and affordability is a huge plus for us right now as a tailwind. On our branded side, we continue to grow through establishing production to support it. As Max has mentioned, the projects that are coming online now and in the next few months set us up to be able to continue to grow that. We have seen growth this quarter and are planning future growth as well. Max, what would you add? Max Bowman: I would say that our specialty, not just branded but specialty, was up 6% for the quarter. That is higher than the overall market for specialty. As Sherman says, it is broad-based across cage-free, free-range, and pasture-raised. Importantly for us, from a volume perspective, it was a record specialty quarter, which I think is notable, particularly considering that lower conventional prices sometimes temper specialty growth because the consumer goes for the cheaper egg, yet we were still able to get some growth. I did not mention our nutrient-enhanced or our branded relationship with EB, but that is something we continue to work to grow and think there is opportunity for some more regional growth into the fourth quarter and beyond. The projects we have called out—the 1.1 million cage-free hens we are adding at five locations—are progressing. A couple were done; one will finish late in this fourth quarter, and another will finish in August of this year, after this fiscal year. We still see growth in our specialty business ahead and think there is great opportunity there. Leah Jordan: Thank you. That is very helpful detail. For a follow-up, switching over to feed, given the shift in grain markets in recent weeks, could you provide more color on how you are thinking about your feed costs over the coming quarters and as you start to plan into FY 2027? Any mitigation you have there should we see costs continue to rise? Sherman Miller: Yes. We continue to measure and mitigate risk, and that includes utilizing our grain warehousing, basis locks, or hedging strategies where applicable. These grain-based agreements help offset the effect of grain price changes. The planting intentions report yesterday was viewed by some as fairly neutral. Compared to last year’s predictions, it is very close to what actually got planted—corn down about 3.5 million acres and beans up about 3.5 million. We really focus on the carryout; a 14% stocks-to-use is bearish. Geopolitical effects can change things in a hurry—from the Middle East to fertilizer and fuel costs—but we have been through this many times and continue to utilize all of our tools to mitigate risk the best we can, and we will continue to do that. Max Bowman: I think you have covered it, Sherman. Leah Jordan: Great. Thank you. Operator: One moment for our next question. Our next question comes from Benjamin Mayhew with BMO Capital Markets. Your line is open. Benjamin Mayhew: Hi, good morning. Thanks for the questions. First, can you help us better frame up the current supply environment, particularly in the specialty egg category? Competition seems to have picked up there quite a bit year to date, with more promotional activity seen. What is your view on the sustainability of the supply growth rates we are seeing? Sherman Miller: Ben, good morning. Thank you for that question. As we mentioned a few minutes ago, specialty is an area we continue to grow. The first step is having supply, so as some of these projects come online, that certainly indicates that we are going to be prepared for that type of growth. The last few years have been very light on promotions—there was a shortage of eggs and promotions were not needed. Going forward, we promoted across all sets for the last few years, so we will continue to fall back into that routine and see good results coming from it. Max, anything to add on that question? Max Bowman: I think that pretty much covers it. Benjamin Mayhew: And thinking about your organic growth investments, how do you view the trade-offs between investing in productivity enhancements up and down your value chain versus adding more capacity at this point? Given the current market environment, how are you thinking about deploying your capital there? Sherman Miller: Back to capital allocation, capital is allocated to the opportunities that most clearly enhance our earnings quality, portfolio resilience, and long-term shareholder value. There are more ways than ever for us to consider that. We consider five buckets: conventional eggs—we continue to grow, and the Creighton Brothers acquisition had additional conventional eggs that fit very nicely, especially in the liquid piece; specialty eggs—those organic projects have been going on, as well as we have had M&A through Creighton, where we also picked up about 500,000 cage-free hens; prepared foods—we have $36.0 million of expansion projects going on there as well as continuing to look for M&A and opportunities; and ingredients—a big opportunity for us to make sure that our production is aligned. We do not just focus on specialty eggs, but we know we must have the supply needed to grow those, and I believe we are in the right position to do that. Max Bowman: You covered it. The only thing I will add about productivity is our culture with roughly 50 operating locations. We are always ranking those one against the other, trying to learn what one is doing that is really good, or if there is one underperforming, how we can get that underperformer to duplicate the results of the top third of our business. It is a constant analysis of productivity and looking for ways to bring our whole enterprise up as we identify things across it. Scale and the opportunity to look at 50 locations gives you a lot of opportunity for continuous improvement. That is always part of our focus. Benjamin Mayhew: Great. Thank you, guys. Have a great rest of your day. Operator: One moment for our next question. Our next question comes from Ben Klieve with Benchmark. Your line is open. Ben Klieve: Hi, thanks for taking my questions and congratulations on a nice quarter. My first question is a follow-up to the conversation around the hybrid pricing model in conventional eggs. Could you elaborate on the behavior of your retail partners as commodity egg prices came down intra-quarter—sub-$1.00 at various points? Have those retailers that moved to contract-based pricing over the past year or two reconsidered that move in the face of low commodity prices, or has the willingness to move from market-based to contract-based remained consistent? Sherman Miller: Good morning, Ben. Thank you for that question. This quarter was certainly a test for whatever strategy a retailer had, with the market ranging up to $2.69 all the way down to $0.85 within the same quarter in the Southeast market. Strategies were definitely tested. As we have mentioned, there is protection for our customers on the upside, and on the downside there is protection for us. Depending on their go-to-market strategy—whether it is high-low or everyday low price—different arrangements favor one retailer versus the next. Overall, the strategies performed exactly like they were designed to, and you are seeing some of that benefit in our market realization this quarter. Ben Klieve: Very good. My follow-up question pivots to prepared foods. You educated us on the state of this market, and after Echo Lake you announced another acquisition a few weeks ago. Can you educate us on the size of the addressable market and the degree of fragmentation within it? Are you looking to continue this acquisition pace, or have you reached a reasonable level of market share within this space? Sherman Miller: Ben, we certainly have not topped out here. Crystal Lake, which came with Creighton Brothers, as noted in our announcement, was more a distribution of Echo Lake products, so I would not really say it is doubling down at this point. We do continue to grow that both organically and through M&A as opportunities present themselves. We will be very strategic and make sure that we stay concentric while we do that in the breakfast channel. We will not get too far outside of our core competencies. Ben Klieve: Very good. I appreciate you taking my questions. Congratulations again on a nice quarter. I will get back in the queue. Sherman Miller: Thank you. Operator: I am not showing any further questions at this time. I would like to turn the call back over to Sherman. Sherman Miller: Thanks, everybody. It was an exciting quarter for us, and we are very grateful for everybody’s attendance today and your continued interest in Cal-Maine Foods, Inc. Operator, we are ready to conclude the call. Operator: This concludes the question-and-answer session. A replay of today’s call will be available via webcast in approximately two hours after this call. The webcast will be available on demand for a year. It can be accessed by going to the company’s website, Investor Relations section. In addition, a transcript of today’s call will also be posted on Cal-Maine Foods, Inc.’s website, Investor Relations section. Thank you for joining us today. You may now disconnect.
Operator: Good day, and welcome to the Conagra Brands Third Quarter Fiscal 2026 Earnings Q&A Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the call over to Matthew Neisius, Senior Director of Investor Relations for Conagra Brands. Please go ahead. Matthew Neisius: Good morning, everyone, and thank you for joining us. Once again, I'm joined this morning by Sean Connolly, our CEO; and Dave Marberger, our CFO. We may be making some forward-looking statements and discussing non-GAAP financial measures during this Q&A session. Please see our earnings release, prepared remarks, presentation materials and filings with the SEC in the Investor Relations section of our website for descriptions of our risk factors, GAAP to non-GAAP reconciliations and information on our comparability items. I'll now ask the operator to introduce the first question. Operator: Our first question comes from Andrew Lazar with Barclays. Andrew Lazar: Maybe, Sean, to start off, I really like your thoughts on if the industry does end up facing another round of broad-based inflation, I guess, whether you think Conagra and the industry at large would be able to count on pricing as but one lever to help offset it as it has in the past or if this time is different, just given consumers are particularly value conscious at this stage? And I ask it because I think some industry players clearly are needing to remain highly focused on debt paydown and protect profitability even if it prolongs sort of the volume recovery dynamic. Sean Connolly: Yes. Great question. Here's how I would tell you to think about that. First, as a reminder, believe it or not, it was all the way back at the beginning of our fiscal '24 when we pivoted to a focus on restoring volume growth in frozen and snacks, even if it meant eating some inflation and enduring some margin compression. Well, that strategy has proven to be quite effective because you've seen our volume trajectory improve every quarter since with the exception of that brief period last year where we had the temporary supply constraints. So we're very pleased and pleased to see our total portfolio growing again this quarter. As for what comes next, our plan at this point is to stay agile. If inflation is benign, you'll see us likely continue to focus on continued volume momentum. If for some reason, inflation was to go the other way, we'll keep our options open. After all, we are a company that is intensely focused on maximizing cash flow. And we've already proven that we can move the volume needle to growth in frozen and snacks when we need to. So net, we'll be agile. But right now, I would say it's too early to speculate on a particular course of action. There's 3.5 months to go before we guide for fiscal '27. And obviously, a lot can unfold by the hour these days, and certainly a lot can unfold in the next 3.5 months. One thing we can be sure of is that we will drive a lot of productivity while we optimize all our other levers to mitigate any inflation that might come our way. And remember, we did take pricing this year on a bunch of products, our canned foods and our cocoa-oriented products and the elasticities have been quite encouraging. So let's see how the dust settles, and then we'll take the smartest course of action to deal with whatever we're seeing at the time. But as I sit here today, I see a lot of positives. The business has strong momentum, especially in frozen and snacks. Shares are excellent. Cash flow is strong. Productivity is robust, and people are highly engaged in delivering some of the most exciting innovations we've had. So a lot to feel good about. Andrew Lazar: Great. And then just, Dave, real quickly, maybe I guess what sort of visibility do we have at this stage on costs going into fiscal '27, just based on where you might already have some hedges in place. I'm not asking, obviously, for your overall inflation estimate or whatever for next year. But just how much visibility do you think you have or based on where you already know what you've got in place? David Marberger: Yes, Andrew, let me give you a little color there. So for our fiscal '27, our material spend coverage is generally consistent with the prior years at this point. So we're roughly 60% covered, and this is total materials, 60% covered for Q1 and roughly 40% covered for the full fiscal year. Areas where we have a bit more coverage than historically would be steel, freight. Remember, we contract line haul. That's a big percentage of our freight. And so that's on contract. And then some of our crop-based ingredients, we have better coverage and then a little bit less coverage on diesel fuel. We're covered through the end of this fiscal year there, but not as covered as we've been in the past. And just as a reminder, proteins probably have the lowest coverage of anything. So for next year, we're only about 15% covered. We're more spot market when it gets to the animal proteins. So hopefully, that gives you a little bit of a feel. Operator: Our next question comes from David Palmer with Evercore ISI. David Palmer: Those were precisely my questions. So let me just follow up on that a little bit. When you look at your portfolio, you've obviously been prioritizing volume over the last fiscal year, and that has helped. And there are some other notable companies in the space that have been aggressive in this prioritizing volume first, just like you. I wonder where we are now in terms of where you think your pricing power is? Do you feel like you're in a better spot now with regard to relative price points to private label in some of your categories versus main competitors and others in terms of your just volume momentum overall? And I really am asking because in the past, you've said things like we'll be okay if inflation is not over 3% in terms of getting to our algo. And I just wonder if today, if we do go over 3%, if you'll be able to drive profitable growth going forward? Sean Connolly: David, it's Sean. First of all, private label, just since you brought that up, we underindexed in terms of private label development in our categories, particularly in our -- almost nonexistent in our biggest business, which is Frozen Meals. But our strategy has been what I've called the horses for courses strategy where our growth businesses have been focused on getting back to volume growth, that's frozen and snacks, and that is happening. Our Staples business is focused on cash maximization. That's a lot of things like our canned food business. And we have taken inflation-justified price on those categories, and we've seen good elasticity. So it's a surgical approach that we've taken historically. And -- but make no mistake about it because we've dealt with the most protracted inflation super cycle that I've certainly seen in my 35 years of doing this. And after a few years of every company taking justified pricing, investors said, "Look, you can't shrink your way to prosperity, show us that you can get the volumes moving again." And we have done that. And our portfolio responsiveness, I think, has outpaced our peers, which shows you we are delivering good value, and we are delivering exciting innovation. But as I mentioned to Andrew, as to what's to come, we'll see what the field gives us when we've got to snap the chalk line here. And if things settle down with the war and things like that and things look more benign, I think it makes sense to stay focused on keeping the momentum that we've got in volume. But if, for some reason, things broke the other way, and we're looking at a whole slog of new costs, we can pivot as well because to the degree you do take price and you sacrifice a little volume, it's more of a volume sabbatical than it is a permanent volume rebase, and you tend to see the volumes come back when inflation moves again and you see those prices get rolled back. So as I said, we've got to stay agile, but feel really good to see that we have a portfolio that is responsive to proper pricing and wise investments and strong innovation when we need it to be. But look, investors always want to see top line and bottom line growth. Sometimes the macro environment can make it challenging to do both at the same time. We'll stay agile, and we'll post you as we get to next quarter in terms of what we're seeing and what the exact plan is. Operator: Up next, we have Megan Clapp with Morgan Stanley. Megan Christine Alexander: I just wanted to start with maybe a question on the fourth quarter. As you look at the third quarter, you obviously had some nice momentum, a return to org sales. There were a lot of moving parts just with the retailer timing and some of the year-over-year dynamics. So as we think about the fourth quarter, maybe you can just help us with some of the building blocks as we think about top line and should shipments generally match consumption. And then on the op margin line, can you just help us kind of understand the building blocks to the sequential improvement that's embedded as well? Sean Connolly: Megan, it's Sean. Let me start by tackling the shipment versus consumption question because I saw a couple of early reports this morning that I think might have that wrong. I would not spend a lot of time overthinking shipments versus consumption because with our company, because of the supply interruption last year and then some merchandising timing shifts in frozen this year out of Q2 into Q3, our shipment patterns have moved around a bit compared to what they normally do. But over fiscal '25 and fiscal '26 combined, we are basically shipping almost exactly to consumption, which is what we always do as a company. It's just been a bit lumpier quarter-to-quarter because of those dynamics. And so with respect to this quarter, I wouldn't get overly exercised around there's an implication in Q4. It's actually more the reversal of Q2 which was where we had a bunch of holiday shipments last year, those -- and merchandising shipments this year moved to Q3. So not a lot of drama there, and that's the shipment versus consumption piece of the year to go. Dave, do you want to tackle anything else? David Marberger: Yes. And just to add to that, Megan, we do expect positive organic net sales growth in Q4. That's obviously implied with our full year guide to the kind of the midpoint of the range for organic. Consumption and shipments should be more in line in Q4, talking to what Sean just explained. And we have -- we're excited about our innovation slate and you start shipping some of that innovation, so you start to see some of that in Q4. So they're really the building blocks for the top line. As it relates to operating margin, yes, we expect an inflection from Q3 to Q4. Really, the big drivers of that A&P as a percentage of sales will not be as high in Q4 as it was in Q3. So it will be more in line with that kind of 2.5% average. The 53rd week actually gives some leverage in terms of overall operating margin. And then just some of the seasonality of trade, timing of productivity, timing of inflation, all those kind of things give us additional kind of benefit in op margin relative to Q3. So I would say they're the kind of the key building blocks. Megan Christine Alexander: Okay. That's helpful. And just as a follow-up, the op margin, you're now expecting at the high end of the guide. Could you maybe just talk about what's driving that? And as we look at the exit rate on the fourth quarter, I think it implies something above 12%. Understanding there's a lot of moving parts right now, but if inflation kind of stays in this low single-digit range as you would hope it moderates to and normalizes over time. Like, should we think about that exit rate as being informative of kind of a starting point going forward at this point? David Marberger: Yes. Regarding the last part of your question, I'm not going to comment on fiscal '27. What I can say is -- and if you just look at when we gave guidance at the beginning of the year, 11% to 11.5% operating margin when there were so many things going on at that time. And since then, there have been so many dynamics, I feel really good that we're actually now going to guide to the higher end of that range. And that all starts with our inflation call, which was core inflation and tariffs. We're pretty much on that call. Our productivity programs are really doing well. The investments we've made in our supply chain and technology and in process are really, really delivering. And so they're really the key. As Sean talked about, we have taken price increases, particularly in our canned products and the elasticities have been in line. And so when you kind of look at it, it's how we planned the year. There obviously have been some puts and takes. But generally speaking, we feel really good that we're coming in as we expected to on margin. And we expect that productivity to continue into next year. Obviously, we have more work to do on inflation. There's a lot of dynamics. Things are changing all the time. But I talked about the coverage we have. We are locked in on certain key areas, which is good for us. So we feel good that the building blocks for next year's plan are there, but we have to wait the next 3 months to give specific guidance, obviously. And then it's not operating margin. But on the free cash flow front, we continue to feel really good. We took our conversion up to 105% from 100%, and we took it up at CAGNY. And this is all from focus that we have in this company on free cash flow. It's part of the culture. It's part of the incentive plan for everybody in this company that's compensated, free cash flow is in their incentive. And so we're very focused on it in areas like cash tax efficiency, areas like Ardent Mills, where although our equity profit is off $0.10, our cash is on plan. So they're going to continue the dividend at plan despite the equity earnings being down. And then inventory. We build up inventory levels coming out of COVID, our safety stocks were high, and we've continued to ramp that down. And if you look at our balance sheet, we have $2 billion of inventory. And with Project Catalyst and us being able to leverage AI and other technology, we think we have a long runway to keep taking inventory out and be more competitive. So we're pretty bullish on that front. We'll talk more about that when we give guidance. But obviously, that has a cost impact as well. So I would say they're the building blocks and foundations how to think about margin kind of ending this year going into next year. Operator: Our next question comes from Peter Galbo with Bank of America. Peter Galbo: Dave, maybe if I could just start on Ardent Mills, the change or the revision to that line item, I think it's the second one of the year. And historically, in that business, when there has been a lot of wheat volatility, you've been able to take advantage. And I think in Q4, you're kind of calling that maybe it's the opposite. So I just want to understand kind of what's happening there, particularly in the fourth quarter. And then just any early read on kind of how we might start to think about the run rate of Ardent for '27? Sean Connolly: Sure, Peter. So just taking it from the top, as I've talked about, broadly speaking, Ardent has 2 sources of revenue and profit. They have their core business margin where they mill flour and sell that at a profit. That business is consistent and that business is tracking. And then they have what we call commodity trading revenue. And that's where there's a lot of activity, hedging and different arbitrage where Ardent can be in a position to make a lot of money. And what really drives the upside there are overall wheat prices and the volatility of the markets. And through the -- really through the first 3 quarters of this year, the wheat prices have been low and there's been less volatility in the wheat market. So not as much opportunity for Ardent to take advantage on the commodity trading side. Obviously, with the start of the war, wheat prices have gone up in the futures and volatility has increased. And so you don't see those benefits immediately. And so with our forecast for this year, we've called the number where we are now. But clearly, there is more volatility that the Ardent team is working through now. We will work through it as well to just determine what kind of impact that could have on next year. We don't have line of sight to that at this time. But there is more volatility at this point since the war. Peter Galbo: Okay. That's helpful. And Sean, I think on Dave's initial comments on inflation for next year, he mentioned a bit on contracting on certain crop-based ingredients. There's a lot of, I think, concern in the market just given where fertilizer costs have gone and you all are a pretty big procurer of vegetables. So just how you all are thinking through that, what the conversations are like with your growing partners and whether that's really an issue for this growth season or whether it's more of a '27 growth cycle event? Sean Connolly: Well, fertilizer, it would be more of an F '28 event than F '27. But I would say conversations are very productive. I think everybody is in the same boat, Pete. I mean, it's kind of like the news of the hour around here that we're responding to. And so it's just super dynamic. We got to stay on top of it. It changes day-to-day, and you got to be agile. That's why I started my comments today to Andrew in saying we will be responsive to the hand we are dealt, and we will choose the smartest course of action. And that's just kind of the nature of operating in incredibly dynamic times. Operator: Our next question comes from Tom Palmer with JPMorgan. Thomas Palmer: Maybe I could just start off with a clarification on some of the inflation and freight commentary. You noted that you're covered in terms of contracts. I think in the past, when we've seen rates run up, not totally dissimilar to now, we have seen spot running well above contracted rates and maybe contracted rates not holding in the way that you might think of a contract holding. I guess, to what extent you're seeing that now, especially when I look at some of that margin pressure in the refrigerated business this quarter? David Marberger: Yes. So spot was actually running low for a lot of our fiscal year. Spot has now spiked up and is above sort of contracted rates. A high percentage of our freight, as we kind of look into next year, is contracted line haul, so a high percentage. So a smaller percentage is spot. That market has spiked up like you just alluded to. But we've incorporated all that for our fiscal '26 guide. And then as I mentioned, next year, we're covered through a good part of next fiscal year with our freight contracts, and that's a high percentage. We do have some spot, but a high percentage is contracted. Thomas Palmer: Okay. And then following up on Ardent, you mentioned earlier on the strong free cash flow conversion, some of that was aided by not lowering the distributions from Ardent even as earnings have maybe not come in quite the way you expected. If we think about a potential rebound next year in Ardent's earnings, to what extent should we think about that flowing through to free cash flow generation, so essentially increasing the distributions versus more just fully covering the distributions in terms of the earnings? David Marberger: Yes. So Tom, we look at this on a kind of a year-by-year basis. We have a lot of discussion with our joint venture partners on capital allocation priorities. As a kind of a general rule, Ardent Mills does an outstanding job managing their balance sheet. They keep their leverage low, and they're really efficient with their cash flow. So this year, they were in a position to be able to hold to plan despite some of the volatility I described earlier on the commodity trading revenue. So as a general rule, we set -- we have a sort of a payout ratio level that we set going into the year. And then we look at how the year plays out and then we modify from there. But generally speaking, we feel very good about the cash generation of Ardent Mills and getting timely distributions. Operator: Our next question comes from Robert Moskow with TD Cowen. Robert Moskow: A couple of questions. One, Dave, can you remind us what the tariff component of your cost inflation is this year? I think it's like 2% or so. And how should we think about it for fiscal '27? Does it lap? Will it turn to a 0? And is that -- does that automatically get you some relief in your inflation for next year? David Marberger: Yes, Rob. So generally, kind of, going into the year, our overall inflation was 7%, 4% was core and 3% were gross tariffs before mitigation. And we track mitigation as part of productivity, and we estimated 1% in mitigation. And so as we look -- and that's pretty much played out. There's been some volatility, obviously, with the IEPA tariffs, but then we have the new tariffs that have come in. And so not a material change, I would say, to the original estimate, a little bit favorable, but then our core inflation has been a little unfavorable. So we're still at that kind of total 7%, call it. As we look to next year, because we had mitigation that we're going to wrap, there is going to be some headwind from a kind of wrap perspective in tariffs. And so we originally said 1% mitigation, which would imply $80 million of headwind. We don't think it's going to be that much. It might be more like half of that, but we are going to have some headwind with tariff just because we're wrapping on the mitigation that we had this year that now flows -- won't flow into next year. Thomas Palmer: Okay. I'll follow up on that. And then more broadly, I mean, the retail consumption data, Sean, looks really strong on a 2-year volume CAGR basis for frozen. But then when I just look at your shipments and I try to do that same 2-year CAGR just for Refrigerated & Frozen division, it's down on a 2-year basis, and that's trying to normalize for the supply chain disruption. Is that just because this division has, like, refrigerated brands that have been down over that 2-year period that are -- that you're not including in that Nielsen data? Sean Connolly: I'm not sure exactly what you're looking at, Rob, but that could be a piece of it. I mean, there are some of the refrigerated businesses that are nowhere near the strategic priority as our frozen business, as an example. So we -- those could be categories where as we follow our horses for courses approach that it's more of a value over volume. But I would say, in general, on the core frozen business, you've seen strength on a 1-year and you see strength on a 2-year, and staggering market share data around 88% of that business holding or gaining share, which I know was a central focus for investors last year when we had the supply interruption. It's like, will this bounce back? Will it bounce back strong? And it has bounced back. So our refrigerated businesses, some of those businesses are more about cash contribution. There are some particularly high-margin businesses in there. And so much -- some of those refrigerated businesses, we treat more like some of our center store businesses like cans, where we manage them for cash and not as much for volume growth. That's probably what you're seeing there. Dave, do you want to add to that? David Marberger: Yes. Just -- Rob, just -- and I'll let you kind of follow up checking numbers. But if I just look at my -- the Q3, obviously, this quarter for shipments for R&F volume was plus 3.9%. Q3 a year ago was minus 3%. So on a 2-year basis, volume is actually up in shipments. Robert Moskow: Yes. I was referring to overall dollars are down. So -- but yes, I agree with you, Dave. David Marberger: Thanks. Operator: Our next question comes from Chris Carey with Wells Fargo. Christopher Carey: I wanted to see if you maybe could just take sort of a 2-, 3-year view on the margin trajectory for your key U.S. businesses. The Grocery & Snacks business has seen pressure, but there's clearly been more pressure on the refrigerated and frozen side. When you kind of digest that past few years, what are the key challenges that have impacted the business? Obviously, there's been inflation, but I wonder if there are other things under the hood. And as you look out over the next several years, how tangible -- how is your ability to kind of claw back some of those margins? And maybe you can comment on your medium-term productivity initiatives as well. So I'd love any thoughts there. Sean Connolly: Yes. Chris, let me give you my thoughts on that. We are the biggest frozen food manufacturer in North America, if not the world. And we have, as a company, seen in this now 5-, 6-year deep inflation super cycle, we've seen a massive increase in the cost of goods that we've had to deal with. And after about 4 years of taking inflation-justified pricing in order to kind of protect margins, that's where we said on our growth business is you can't shrink your way to prosperity. And that's led by frozen. So we did pivot the strategy to stop taking at some point, all this inflation justified pricing in frozen to get volumes moving again. But that means we had to eat some of that higher cost. And as a result, that business, in particular, because it's so strategic to us, we got volumes moving. They're moving extremely well again this quarter, but we've had to eat some cost. And a lot of that cost has been in animal protein because, as you know, animal proteins have been up. So that is exactly what has driven the margin compression in the frozen business, and it was a choice we made to protect our leading market shares and protect our sales. And if you looked at even the velocities across our portfolio that came out yesterday, I think we've got the best velocities by a good chunk in the group. So now the question comes, what's next? Obviously, we've got the war curveball that we're dealing with. But as I said last quarter, we absolutely -- assuming we can get some element of normalcy, we absolutely expect margin expansion going forward, particularly in frozen. And the building blocks haven't changed. It starts with productivity. In fiscal '26 between core productivity and tariff mitigation, that number is just over 5%, which is very strong. Second, at some point, we're going to get inflation relief, hopefully back to our -- closer to our typical 2%. Certainly, getting the war behind us would help with that. Third, we've got the advancement of our supply chain resiliency investments, including the chicken plants, and that's going to enable us at some point to repatriate outsourced volume, which will be a good guy for margin. And then fourth, we are taking price, and we have taken price surgically, and we've seen encouraging elasticities. And then the fifth thing is, as you've heard me talk in the last couple of quarters, we've kicked off this Project Catalyst, which is an ambitious initiative to reengineer our core work processes, leveraging technology. And that's going to be a benefit to both the P&L and the balance sheet. In the P&L, it will be a benefit to sales. It will be a benefit to profit. In the balance sheet, we see opportunity there in terms of reducing working capital, increasing cash. And that's a real tangible and exciting opportunity. So yes, it's margin and it's more than margin in that particular project. So put those things together, and we feel very good about the margin outlook from here. Obviously, it wouldn't hurt if the world settled down a bit. But we'll deal with that because that's not something we control. We got to respond to that. Christopher Carey: Okay. All right. Great. And just, Dave, the free cash flow conversion has been a really good story. You upped that at CAGNY and a small increase again today. Are we run rating at a new level for free cash flow conversion? Do you see a level of sustainability up here over 100%? And then just it's kind of a confirmation of a prior question. The dividends are staying on Ardent or I think the cash component of Ardent has maintained despite the income statement component coming down. Does that get reset next year? Or can you maintain a level of dividends? And by the way, I know you're not guiding to Ardent and nor am I suggesting, but is there some sort of like mark-to-market that needs to happen there? So that's kind of just a quick follow-up, and same things on cash. David Marberger: Yes. Okay. Well, let me start with the free cash flow conversion. So we're not going to guide to that now. What I would say is we always target a 90% or better free cash flow conversion as the base. Given our earnings and our ability to convert that to cash just in the normal course, we feel 90% is the appropriate target. So to get above that, we need to find additional cash-generating ideas. We've done that with cash tax efficiency this year with different planning that we've done that's really helped us there. And the big thing has been working capital specific to inventory, and I talked about it earlier. We have a significant amount of inventory, and we believe we have great opportunity to really reduce that inventory in future years. We -- our inventory increased coming out of COVID because we had a lot of demand and we increased our safety stocks. And now we're methodically reducing it with our supply planning systems and our process. But when we leverage some of these new tools with AI now, we think that we can continue that acceleration of inventory reduction, and that's the kind of thing that's going to take you above 90%. So again, I'm not going to specifically guide on that today, but we're laser-focused on inventory. And a big part of that, too, I've done this a long time, to be able to take inventory down, you have to have alignment between supply chain, sales and finance. And it may sound simple, but sometimes that doesn't always happen. And we have great alignment here, and it starts at the top in terms of a commitment to taking inventory out. So we're investing and we feel pretty bullish on our ability to take that out. As it relates to Ardent Mills, I would just -- when we set equity earnings for Ardent, we always have a payout ratio on those earnings, and that's how we start the year. And that payout ratio is pretty high. It's not 100%, but it's pretty close. And then we go from there. And so this year, the earnings fell, but we kept the dividend to plan. So our payout ratio is above 100%. But you always reset it every year so that the dividend payment and the equity earnings to start the year are pretty much in sync, and then we evaluate their balance sheet as we go each quarter. Operator: Our next question comes from Scott Marks with Jefferies. Scott Marks: First thing I just wanted to get clarity on, in terms of the volume growth in the business, wondering if you can help us understand how much of that was driven by some of the retailer inventory adjustments? And how much of it would you attribute to just recovery from the supply chain disruptions a year ago? Sean Connolly: Well, we certainly undershipped last quarter, Scott, and we caught that back up because the merchandising events moved into Q3. And so the shipments associated with those moved into Q3. So we're -- on a 2-year basis, as I mentioned before, we basically shipped consumption, and there's not a material gap there at all. In terms of the takeaway portion of it, it's strong on a 1- and a 2-year basis. And if you look at the mix of TPDs versus velocities, the hero there has really been the velocity piece, and that's driven in large part by just the strength of the innovation we've seen. So very pleased with the consumer takeaway that we've seen, particularly in frozen and snacks, which is obviously you could see in -- some of the data has been quite strong. Scott Marks: Understood. Appreciate that. And then a follow-up just quickly. I know last quarter, you've been talking about the new big chicken facility, talking about bringing in-house some production and that had been on track. Just wondering if you can share an update on that, how that's progressing versus expectations. Sean Connolly: Yes. We sell a lot of chicken, and we use a lot of chicken in our products, and it's a combination of baked or roasted, whatever you want to call it, and fried. Both have been strong. Both projects are tracking right where we need them to be. We still do have production on the outside. That will continue for a little bit. But then at some point, when we're -- all our work is complete, we'll have an opportunity to bring that back in as a good guide to our margins. David Marberger: Yes. And just on the baked side, we did complete that project, and we're starting to bring that volume back this year. And so as we go into next year, that should be a tailwind in terms of having full year on that. And then the fried, we've made investments, and that's going to go out longer. Operator: Out next question comes from Carla Casella with JPMorgan. Carla, is it possible your line is muted? It's open on our end, but I'm still unable to hear you. Matthew Neisius: I think that might be the last question. So why don't we go ahead and wrap today? Operator: All right. This concludes our question-and-answer session. I would like to turn the call back over to Matthew Neisius for closing remarks. Matthew Neisius: Thank you, Bailey, and thank you all so much for joining us today. Please reach out to Investor Relations if you have any follow-up questions. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.