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Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Ensign Group, Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Mr. Keetch. Please go ahead. Chad Keetch: Thank you, operator, and welcome, everyone. We filed our earnings press release yesterday, and it is available on the Investor Relations section of our website at ensigngroup.net. A replay of this call will also be available on our website until 5 p.m. Pacific on May 29, 2026. We want to remind anyone that may be listening to a replay of this call that all the statements made are as of today, May 1, 2026, and these statements have not been or will be updated subsequent to today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities laws, Ensign and its independent subsidiaries do not undertake to publicly update or revise any forward-looking statements or changes arise as a result of new information, future events, changing circumstances or for any other reason. In addition, the Ensign Group, Inc. is a holding company with no direct operating assets, employees or revenues. Certain of our independent subsidiaries, collectively referred to as the service center, provide accounting, payroll, human resources, information technology, legal, risk management and other services to the other independent subsidiaries through contractual relationships. In addition, our captive insurance subsidiary, which we refer to as the insurance captive, provides certain claims made coverage to our operating companies for general and professional liability as well as for workers' compensation insurance liabilities. Ensign also owns Standard Bearer Healthcare REIT, which is a captive real estate investment trust that invests in health care properties and enters into lease agreements with certain independent subsidiaries of Ensign as well as third-party tenants that are unaffiliated with the Ensign Group. The words Ensign, company, we, our and us refer to the Ensign Group, Inc. and its consolidated subsidiaries. All of our independent subsidiaries, the Service Center, Standard Bearer Healthcare REIT and the insurance captive are operated by separate independent companies that have their own management, employees and assets. References herein to the consolidated company and its assets and activities as well as the use of the words we, us, our and similar terms are not meant to imply nor should it be construed as meaning that the Ensign Group has direct operating assets, employees or revenue or that any of the subsidiaries are operated by the Ensign Group. Also, we supplement our GAAP reporting with non-GAAP metrics. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business, and they should not be relied upon to the exclusion of GAAP reports. A GAAP to non-GAAP reconciliation is available in yesterday's press release and is available in our Form 10-Q. And with that, I'll turn the call over to Barry Port, our CEO. Barry? Barry Port: Our local leaders and their teams continue to be an example of excellence in health care services as they earn the trust of patients, families and their local health care communities through high-quality outcomes. As each operation solidifies its reputation in respective markets, they're not only seeing more patients, but they're also being entrusted to care for increasingly complex cases, including a larger share of Medicare, managed care and other skilled patients. This is only possible because of the extraordinary clinical outcomes achieved by our dedicated and talented caregivers. As we've said many times, our consistent financial performance is a direct reflection of a relentless patient-focused culture, one that empowers our frontline teams to deliver exceptional care in a family-like environment where people genuinely care about one another. On the census front, our same-store and transitioning occupancy reached new record highs during the quarter of 84.3% and 85.1%, respectively. On the skilled mix front, our same-store and transitioning operations, skilled revenue and days increased by 9.6% and 5.1%, respectively, over the prior year quarter, and Medicare revenue increased by 9.8% and 9.2%, respectively. We also wanted to comment on some of the recent noise around managed care volumes. What we are seeing in inside affiliated operations does not support the concern of a broad-based slowdown in skilled nursing demand. While hospital and managed care volumes may ebb and flow as patients move through the system, that volatility tends to normalize for us, resulting in consistently strong occupancy and skilled mix trends as demonstrated by our current and recent quarter results. In fact, between Q4 and Q1, we saw growth across all skilled payers. Our same-store and transitioning managed care and Medicare census increased sequentially by 6.2% and 8.3%, respectively. The primary driver of these improvements continues to be the expanding trust from the communities we serve earned through consistent high-quality outcomes. Likewise, regarding commentary around increased clinical reviews and heightened scrutiny of post-acute utilization, this is not new. Our experience over many years is that this dynamic refines demand rather than reduces it. Our admission trends have remained consistently strong. As patient acuity continues to rise and payers look to move patients efficiently to lower cost settings, we have not seen any meaningful system-wide reduction in admissions or skilled mix. The patients who truly need skilled nursing are still coming. We're simply seeing a continued shift towards higher acuity admissions, which plays directly into our strengths. We have built our model around being the provider of choice in our local markets through strong clinical capabilities, deep hospital relationships and the ability to care for more complex patient types. As payers become more disciplined, that does not reduce our volume. In fact, in many cases, it shifts volumes more specifically higher acuity volume towards operators who can deliver outcomes. It is also important to remember that Ensign's model is highly diversified across many geographies, payers, referral sources and local community partners. We are not dependent on any single payer, region or utilization trend. Even when one plan tightens in a specific market, we have consistently offset that through other market share gains, stronger referral relationships, higher acuity admissions and growth across other channels. Our clinical leaders also continue to drive outstanding outcomes, which is particularly impressive given our growth over the past several years. According to the most recently published CMS data, same-store affiliated facilities outperformed their peers in annual survey results by 22% at the state level and 31% at the county level. This is especially notable given that many of these facilities were 1 or 2 star at acquisition. Additionally, our same-store operations outperformed industry peers in 5-star quality measures by 24% nationally and 20% at a state level. In fact, we ended the quarter with 85% of all of our operations at 4- or 5-star quality measures. These results reinforce our position as the provider of choice in our markets and demonstrate our ability to create long-term value through sustained clinical excellence. This clinical strength depends on attracting and retaining exceptional talent. We are encouraged by the depth of talent continuing to join our organization. On the retention side, we're seeing improvements in turnover, stable wage growth and reduced reliance on agency staffing even with increased occupancy. We are especially proud of the exceptionally low turnover among our directors of nursing, which has declined by 32% over the past 2 years. This level of leadership stability is a key driver of consistent high-quality care. In addition, we continue to acquire new operations with significant long-term upside and expect to maintain a healthy pace of growth. Since 2024, we have successfully sourced, underwritten and closed and transitioned 99 new operations across several markets, many of which are already performing at or above expectations. We also continue to benefit from powerful demographic tailwinds, which we expect to further support census momentum that we are seeing across our portfolio. While we are pleased with our current record same-store occupancy, we are equally excited about the remaining organic growth opportunity. At 84% occupancy, we still have meaningful runway with many of our most mature operations consistently achieving occupancy rates in the mid-90% range. This embedded growth remains one of the most compelling drivers of our long-term performance. Due to the strength of the first quarter and the acquisitions we announced yesterday, we are increasing our annual 2026 earnings guidance to $7.48 to $7.62 per diluted share, up from our original guidance of $7.41 to $7.61. We are also increasing our annual revenue guidance to $5.81 billion to $5.86 billion, up from $5.77 billion to $5.84 billion. The midpoint of our earnings guidance represents a 15% increase over 2025 and 37% growth over 2024. We remain highly confident in 2026 and expect our local teams to continue executing, innovating and integrating new operations while delivering strong results. Next, I'll ask Chad to add some additional insights regarding our recent growth. Chad? Chad Keetch: Thank you, Barry. During the quarter and since, we accelerated our growth by adding 22 new operations, including 21 real estate assets, bringing the number of operations acquired during 2025 and since to 71. These recent additions include 20 in Texas, 1 in Arizona and 1 in Wisconsin. In total, we added 2,662 new skilled nursing beds, 100 senior living units and 55 independent living units across 3 states. This growth brings the number of operations in our recently acquired group of operations to 17.4% of our entire portfolio. We were thrilled to complete these acquisitions and to expand our presence in some key markets in each of these states, particularly in Texas. Like in the recent Stonehenge acquisition we closed in Utah, this Texas portfolio is made up of very new, high-quality construction in populated and growing metro areas. As we've discussed in our recent past, in certain strategic situations, paying higher prices can be justified for performing assets that have newer physical plants. And while some of those deals may take a bit longer to generate the returns we expect, we've seen these deals pay off over time as our leaders implement the proper adjustments to key clinical and financial systems, along with establishing a culture of ownership and accountability. We continue to learn from and improve our transition process and believe that those lessons are showing through in the performance of our recently acquired acquisitions. In particular, as we continue to scale, we have leadership spread across many mature markets, enhancing ability to make larger deals smaller by breaking them into bite-size pieces, transitioning in the traditional ensign way but with a local cluster-driven plan that gives each operation the time and attention they deserve. The performance of our newly acquired operations, particularly in the last few years, shows that our building-by-building approach to transitions works for single operations, small portfolios and larger portfolios, particularly when the larger deals span several markets and geographies. While we will certainly continue to evaluate and consider any deal that's out there, we are also very comfortable growing the way we've grown over the last few quarters with lots of transactions across many states, including small deals to larger portfolios and where it makes sense, higher-priced strategic assets. As we look at the current pipeline, we continue to see opportunities that include everything from larger portfolios, landlords looking to replace current tenants, nonprofits looking to divest of their post-acute assets and a steady flow of traditional onesie-twosies. We have several new additions lining up for Q2 and Q3 of 2026 as our local leadership teams and their partners at the service center work together to source, underwrite and carefully select the right opportunities. We continue to have a lot of success in closing deals with sellers who are not just interested in receiving top dollar, but care deeply about the quality and reputation of the company they select to inherit their legacy, and they choose us because they believe in our mission to dignify post-acute care. During the quarter, we were pleased to complete the construction of a replacement facility at one of our high-performing skilled nursing operations in San Diego County. Grossmont Post-acute in La Mesa, California, which is located next to Sharp Grossmont Hospital, which was housed in an aging building that the landlord decided to replace with the new medical office space. After several years and lots of hard work, we successfully completed the construction and have moved all the patients and staff to a brand-new state-of-the-art building while also adding 15 beds to the original license for a total of 105 beds. In just a few months of operation, Grossmont has increased daily census of skilled patients from around 72 to 95. We will continue to look for opportunities to add beds to successful operations and where appropriate, to invest in newer construction in markets we know well. Our local leaders continue to recruit future CEOs for Ensign affiliated operations, and we have a deep bench of CEOs in training that are eagerly preparing for their opportunity to lead. This high-quality influx of leadership talent, combined with our decentralized transition model allows us to grow without being limited by typical corporate bottlenecks. We also continue to store enough dry powder on our balance sheet to fund a significant amount of growth, including adding even more real estate assets to our portfolio. Therefore, our unique acquisition and transition strategy puts us in an excellent position to continue growing in a healthy and sustainable way. Lastly, we are also pleased with the continued growth of Standard Bearer, which added 21 new assets during the quarter and since. Standard Bearer is now comprised of 173 owned properties, of which 137 are leased to an Ensign affiliated operator and 37 are leased to third-party operators. We were excited to add to our growing list of relationships with unaffiliated operators, which further diversifies our tenant base and helps our organization as a whole continue to advance our mission by working closely with like-minded operators that want to make a difference in the industry. Going forward, Standard Bearer will work together with our existing operating partners and new relationships we are developing in order to acquire portfolios comprised of operations that Ensign would operate and facilities that high-quality third parties are interested in operating under a lease. Collectively, Standard Bearer generated rental revenue of $36.1 million for the quarter, of which $30.8 million was derived from Ensign affiliated operations. For the quarter, Standard Bearer reported $21.6 million in FFO and as of the end of the quarter, had an EBITDAR to rent coverage ratio of 2.7x. And with that, I will turn the call over to Spencer, our COO, to add more color around operations. Spencer? Spencer Burton: Thanks, Chad, and hello, everyone. I wanted to share 2 outstanding operations that have achieved exceptional growth through clinical excellence, strong relationships with managed care organizations and proactive leadership development. The first operation is Sun West Choice Healthcare & Rehab, a 140-bed skilled nursing facility located in the Metro Phoenix area. Sun West illustrates the ongoing improvements that a strong same-store operation can achieve by recognizing its community niche and delivering high-quality outcomes with consistent customer service. When this operation was acquired in 2018, it faced serious clinical and staffing challenges as well as a poor reputation in its health care community. However, the Sun West team led by CEO, Doug Bowen; and COO, Michelle Norton, have methodically transformed their operation into a CMS 5-star facility of choice. Like many of our most mature operations, Sun West consistently remains essentially full with occupancy increasing only slightly from 95% in the first quarter of 2025 to 96% this quarter. However, revenues grew 10% over prior year quarter, driven by improved acuity-based reimbursement and a higher skilled mix. During the same period, skilled mix days increased 21%, fueled in large part by 37% growth in managed care. The Phoenix health care market is heavily penetrated by managed care plans, all of which emphasize strong outcomes, shorter length of stay and reduced hospitalizations. In this environment Sun West has focused on differentiating itself by building consistency in staffing with care staff turnover rates far better than the CMS average for Arizona. These managed care relationships, combined with sustained excellence in outcomes, particularly for high acuity patients, have allowed Sun West to develop specialty units for underserved and hard-to-place patient populations, including patients with severe dementia and behavioral needs. Today, these special units run at high occupancy and have strengthened the facility's clinical reputation, which in turn contributed to Sun West's 43% EBIT growth over prior year quarter. Our second facility highlight, Mystic Park Rehabilitation and Healthcare in San Antonio, Texas, has made significant progress since acquisition in late 2022. At the time of transition, the facility was facing serious clinical challenges and scrutiny from state regulators. Under the leadership of CEO, Osiris White and COO, Selena Cervantes, the operation has been fundamentally transformed. It now achieves a 5-star rating in CMS quality measures with survey points scoring 70% better than the state average. Recently published CMS data places Mystic Park in the top 10% for expected discharge function scores from CMS, reflecting significantly stronger than industry patient outcomes in skilled rehabilitation. Also, nursing staff turnover has declined to well below the state and national averages. Operational performance has followed these clinical gains. In Q1, skilled mix days increased 61% over prior year quarter, driving 19% revenue growth and a 163% increase in earnings during the same time frame. In addition to being an exceptional turnaround story, Mystic Park also illustrates how facility level excellence enables broader growth across our organization. For example, the leadership pipeline developed at the facility has supported the recently announced growth in Texas. Because of the stable team and strong systems at Mystic Park, Osiris, the CEO, was able to transfer to lead the newly formed North Houston market, which includes 4 of the 17 facilities acquired on May 1. Selena and the remaining Mystic team have selected a San Antonio-based AIT to be the next leader. And because he completed his training in the San Antonio market, he's well prepared to lead the facility's continued progress while benefiting from the team's strong experience and established systems. This model, stabilize, improve quality, develop leaders and scale remains central to our ability to grow while maintaining cultural and clinical standards. And with that, I'll turn the time over to Suzanne to provide more detail on the company's financial performance and our guidance. Suzanne Snapper: Thank you, Spencer, and good morning, everyone. Detailed financials for the quarter are contained in our 10-Q and press release filed yesterday. Some additional highlights for the quarter compared to the prior year quarter include the following; GAAP diluted earnings per share was $1.67, an increase of 21.9%. Adjusted diluted earnings per share was $1.85, an increase of 21.7%. Consolidated GAAP revenue and adjusted revenues were both $1.4 billion, an increase of 18.4%. GAAP net income was $99.7 million, an increase of 24.2% and adjusted net income was $110.2 million, an increase of 23.9%. Other key metrics as of March 31, 2026, include cash and cash equivalents of $539.5 million and cash flow from operations of $100.2 million. During the first 3 months of 2026, we spent more than $60 million to execute on our strategic growth plan. We made these investments from a position of strength as shown by our lease adjusted net debt-to-EBITDA ratio of 1.73x after taking these investments into consideration. Our continued ability to maintain low leverage even during periods of significant acquisitions is particularly noteworthy and demonstrates our commitment to disciplined growth as well as our belief that we can continue to achieve sustainable growth in the long run. In early April, CMS released the proposed 2027 skilled nursing facility payment rule, which includes a net market basket increase of 2.4%. This increase provides reimbursement stability and is consistent with the expectations included in our guidance. In addition, we currently have more than $592 million of available capacity under our line of credit, which when combined with the cash on our balance sheet, gives us over $1 billion in dry powder for future investments. We also own 179 assets, 155 of which are owned completely debt-free. They continue to gain significant value over time, adding even more liquidity to help with future growth. The company paid quarterly cash dividends of $0.065 per share. We have a long history of paying dividends and have increased the annual dividend for 23 consecutive years. As Barry mentioned, we are increasing our annual 2026 earnings guidance to between $7.48 and $7.62 per diluted share and our annual revenue guidance between $5.81 billion and $5.86 billion. We have evaluated multiple scenarios and based upon the strength in our performance and positive momentum we've seen in occupancy and skilled mix as well as continued progress on labor, agency management and other operational initiatives, we have confidence that we can achieve these results. Our 2026 guidance is based on diluted weighted average common shares outstanding of approximately 60 million, a tax rate of 25%, the inclusion of acquisitions closed and expected to be closed through the second quarter of 2026, the inclusion of management's expectations for reimbursement rates with the primary exclusion coming from stock-based compensation and system implementation costs. Additionally, other factors that could impact quarterly performance include variation in reimbursement systems, delays and changes in state budgets, seasonality in occupancy and skilled mix, the influence of the general economy, census and staffing, the short-term impact of our acquisition activities, variations in insurance accruals and other factors. And now I'll turn it back over to Barry. Barry? Barry Port: Thanks, Suzanne. As we wrap up, I want to again express how honored and grateful we are to work alongside the incredible leaders, caregivers and support teams across our organization who make these results possible. What they do every day goes far beyond metrics. It changes lives. And as we see in very personal ways, I want to share a quick example. Recently, our CFO's father, Joe, underwent a complex bypass procedure that required extended recovery at our very own Victoria Healthcare and Rehabilitation Center. The caregivers and therapists there didn't just provide excellent care. They surrounded them with the kind of coordinated compassionate support that helps them regain his strength, walk again and ultimately return home strong and safe. That team represents the very best of what we do, but what they do is not unique. Stories like Joe's are playing out every day for thousands of patients at hundreds of our affiliated campuses all over the country every single day. Patients like Joe may not choose to be in our care, but they absolutely need to be and increasingly so as acuity rises and recovery becomes more complex. The role of high-quality skilled nursing has never been more essential. The demand is real, it is growing, and it's happening in every market we serve. And that's what gives us so much confidence in our future. Our performance this quarter is not the result of short-term dynamics or simple luck. It's the result of a model built on clinical excellence, local leadership and a culture that puts patients first. And when you combine that with the demographic tailwinds ahead of us and the continued trust that we are earning in our communities, we believe the opportunity in front of us is as strong as it's ever been. Thank you again for your continued interest and support. And with that, we'll now turn to the Q&A portion of our call. Operator, can you please provide instructions for the Q&A. Operator: [Operator Instructions] Your first question comes from the line of Ben Hendrix with RBC Capital Markets. Benjamin Hendrix: Great. Very glad to hear that Joe is making a strong recovery. And then I just wanted to touch on some of the clinical review commentary. I really appreciate all the commentary and definitely appreciate the -- and understand the ebb and flow of skilled intensity and that the clinical review is nothing new. But just wanted to get your comments on any broad trends you might be seeing in clinical review intensity, just given that so much of the Medicare Advantage population is in plans that are focused on retaining margin and rebuilding margin this year. And like on a related note, when managed care plans kind of see facilities like Sun West see such massive increases in skilled mix and managed care mix. Does that ever trigger higher clinical review? Any comments you have there? Barry Port: Yes. I just think the comments around clinical review are being a bit overblown. It's really not a new phenomenon. It's something that's been embedded and in place for a long time, especially when, to your point, Ben, acuity is high. We're used to dealing with clinical review. We have an entire team that is dedicated to providing analysis and documentation to support the care that we're providing, both proactively and then also in response to any general inquiries. And that team has been in place for many, many years. And -- but we're just not seeing certainly, any of that -- at least of the recent comments translate into our business. We saw growth in our United business. We saw significant growth in several other payers in the quarter and across the year. Our occupancy reached record levels this quarter, and our managed care and Medicare census both increased sequentially from Q4 to Q1. So what we think is happening is that some of the hospital softness not related to the managed care piece that you asked about was episodic, respiratory weather related. And that tends to normalize by the time patients move through the system. On the Optum side, we view this less as demand going away, more as demand being refined. The higher acuity patients who truly need skilled nursing are still coming. And in many cases, we're capturing a larger share of those patients. Benjamin Hendrix: And just a quick follow-up on the EPS guidance. We're getting some questions around the guidance raise, specifically against that sizable M&A activity that you've recently announced. Just wondering if you could help us bridge to the guidance revision, specifically how much is driven by organic growth versus M&A? I believe some concern that maybe if M&A is contributing to the growth, is there an implication that maybe the organic is getting a little softer? Or is it just some conservatism in the number? Any comments there? Suzanne Snapper: Yes, I think it's a great question. I think when we look at this acquisition that we closed today, -- what we -- our commentary on it has been that the physical plants are really, really good shape, and Chad can add more color on that. But really the type of acquisition that we're taking is a turnaround acquisition. And so when we kind of embed turnaround acquisitions into our guidance like we have for years is that really you see that bump in revenue at a disproportionate rate to the bump in EPS. And that's exactly what we would expect. We're super excited about this acquisition, but we would expect most of it not just to hit the revenue line, not really to contribute to earnings at the same rate as our existing operations, and that's very consistent with what we've always seen when we're taking a turnaround operation. Chad Keetch: Yes. I mean that's a comment that just relates to over the next several months, right? I think obviously, long term, we expect them to be very, very successful and accretive like you said, like we've done for years. Suzanne Snapper: We're really excited about the guidance. The guidance raise. I mean, obviously reflects a strong Q1, but also that continued execution. Some seasonality in there for Q2 and Q3 because that's through the summer months. And we also usually have not as high as skilled mix during this month and then costs rise as a relative to the revenue that we do bring in because the acuity tends to slow down a little bit. Barry Port: We base our guidance on what we expect these to do, although I think you can also look backwards and listen to our commentary about how other recent acquisitions have contributed ahead of schedule. And I wouldn't be surprised if that happened. If it does, we'll revise again. But it's not necessarily conservatism. We try to reflect an accurate picture of where we think these will contribute. But obviously, we've had to update and revise as time has gone on when things have gone faster than we're scheduled to. Operator: Our next question comes from the line of David MacDonald with Truist. David MacDonald: Just a couple of questions. One, can you pull the deal pipeline apart for us a little bit? I mean if we look -- the average deal size feels like it's getting a bit bigger. Can you guys just make some -- just give us some sense of when you look at the pipeline of deals, has the average deal size relative to a handful of years ago gotten bigger? And then secondly, are you seeing opportunities to buy the real estate in more of those deals that are within the pipeline? Barry Port: Yes. Thanks for the question. I think there definitely is a trend of more and more, call it, midsized regional portfolios are coming to market for sure. So that's -- I would say there's more supply of that type of deal. But the other thing, I mean, it's not that we haven't had those in the past. I would say we have, I guess, emphasized this a little bit in our calls over the last several quarters, too. But we have approached these larger portfolios a little bit differently. If you go way back to 2016 or so, we did a larger portfolio in Texas called the Legend deal. And it was, at the time, the biggest deal we've done, and we tried to kind of do it like a merger and just sort of have that group to sort of fold into our organization and left a lot of their structure in place and those types of things. And that took us years to kind of unwind. Since then, we've been successful in several larger deals and doing what I kind of described in our prepared remarks by breaking it into bite-size pieces and using our cluster model and that local leadership structure to take a larger deal and make it 3 or 4 buildings per cluster market and not 20. And that's been something that I think has increased our appetite, I would say, for larger acquisitions. And so it's both things. It's -- we've seen more of those come to market, and I think we're more and more confident that we can do those successfully in our ensign way. And then on the real estate question, I think, I would say it's probably not necessarily a trend that we're seeing more real estate opportunities. And it wouldn't surprise me if we have a big acquisition here or in the near future or in the sort of midterm future that would include a lot of lease buildings, too. I think our priorities remain the same. Our first priority would be to own it and operate it if we can. And then second would be to do really attractive long-term leases. We have a lot of great real estate partners that we love to work with and including our REIT partners and others that are private real estate holders. So we're actively looking at doing those deals, too. And then the third priority would be to own it and lease to a third party like we did in the Wisconsin senior living deal. So hopefully that helps. David MacDonald: And yes. And then just one quick follow-up. On -- some of the labor, I guess 2-part question. One, can you guys just spend a minute on what you guys are doing on recruiting and retention that's driving such success on the labor side? And if I could sneak one more in. Just on the ERP system implementation, is there 1 or 2 areas that you would call out where that has made your life meaningfully easier or improved efficiencies meaningfully? Spencer Burton: On the labor question, I'll start with that one. And thanks for the question on it. We -- it's a focus for us as an organization, but really how it works is you've got more and more visibility, our data systems give us more real-time and more consistent ways to measure ourselves on labor metrics. And then you combine that with our model, which is CEO, COO caliber leaders in every operation that are then clustered into groups where there's consistent sharing of best practices and pure accountability. And then those are folded into markets where data is and practices are shared more widely. We've really seen, for example, in our overtime management, our labor management, we've seen a really nice kind of synchronization of local efforts, improved data visibility, best practice sharing and then service center, providing more kind of macro tools that allow people to do it more effectively on a local level. It's been really fun to see overtime improve, agency spending improve, turnover improve, and it continues to be a major focus for us. We're not satisfied with where we are yet, but we're really grateful for the improvements. Suzanne Snapper: And then on the second question, we actually just implemented our ERP system on January 1. So we're in that stage of working through the very first quarter and very first month closing everything out. So we're not to that efficiency stage. But obviously, the entire purpose of doing ERP system is to have more efficiency, have better data, have more information that we can actually, like Spencer just mentioned, pass to the field in a quicker, faster, more effective way at a more granular level. So we're really excited about the implementation. We know that right now, we're at the beginning phases and it might feel like a little bit more work than less work, but the opportunity that we can have from what we'll have in the long run from a system implementation like we just went through will really be something that we'll be able to use for years and years to come and really have an opportunity to make information easier, more accessible and just change the entire process that we do on the back end. Operator: Our next question comes from the line of Raj Kumar with Stephens. Raj Kumar: Just maybe kind of thinking about the kind of overall philosophy and maybe the kind of evolution of the model when we think outside of SNF senior living and kind of all the other stuff that Ensign does within the post-acute continuum. I guess when we think about certain areas of interest, does kind of I-SNP come to mind? I know you guys partner with plans, but in terms of kind of expanding the quality of care and the control around that, has there ever been kind of an area of interest for you? Just kind of curious on your thoughts on that, just given kind of your footprint in the post-acute spectrum. Barry Port: I'll start and Suzanne is much more knowledgeable about this. But the short answer is, yes, yes, it's something we're always looking at. It's obviously something we participate in, in several markets. It's something we watch closely. There are some pros and cons to the model, and we could get into that at another time. But we tend to, as you can tell, stick to what we know we are good at and then partner closely with our managed care providers who are probably more focused on this area than a pure-play operator could be. But that said, there are obvious opportunities there to kind of control certain aspects of payment and to kind of be more of a quasi-payer and convener when it comes to that model. Suzanne, anything you want to add to that? Suzanne Snapper: I was just going to add exactly that. There's always -- we're always doing what we call pilot programs in different markets and different places. They all look a little bit different. None of them are really a large portion of our total operations, but I think that that's what keeps us nimble and keeps us quick in looking to see if we do want to do something at a larger scale one time, we'll have already tested out in a pilot and have a proven concept for them to kind of expand upon that. And so definitely lots of versions of IQIPS or quality improvement programs and a whole bunch of -- yes, there's a whole bunch of different specialty programs that we have or capitation programs that we have. So we have a lot of those going on throughout the organization. I would characterize them as all small pilot programs that we continue to learn from. And then if one really pops, we start to expand. And again, it's not us expanding it. It's educating that how the program works and then the operations partners that we have in the field, really latching on to that because they can see the value that it creates service that it delivers to the patients. Raj Kumar: Great. Yes. I appreciate the color there. And maybe just from a modeling perspective, kind of integrating these large portfolio of assets. And so as you kind of think about seasonality from a skill mix and occupancy perspective and then kind of the impact of the onboarded portfolio to the kind of consolidated metrics, how should we kind of be thinking about that as we think about the remainder of the year? Suzanne Snapper: So I would say that our pattern would be typical to our normal pattern, right, that we've seen outside of the COVID years, where you really typically see a Q2, Q3 more seasonally light for skilled mix and then really a stronger Q4. Barry or Spencer, do you have any other color? Barry Port: No, I think that's right. Operator: Our next question comes from the line of A.J. Rice with UBS. Albert Rice: First, maybe, obviously, the company and the sector came through the one big beautiful bill discussion pretty well. We are obviously hearing some states are a little challenged in their budgeting. Others are doing fine. Just wonder if you could maybe speak to what you're seeing in your discussions regarding Medicaid rates and the outlook. Is it sort of steady state from your perspective? And maybe just give some flavor on that. Suzanne Snapper: This is Suzanne. Definitely steady state right now. I think what we're seeing is people looking beyond '26 and '27 where they're thinking about potentially how to navigate waters where it might be a little bit more, the funds might be not as fluid. And so I think one of the things that we're doing to make sure we're ahead of that is just being super active. We are meeting with the states, meeting with folks who are in our situations representing us and really taking an active role in where Medicaid could go for us and educating what we do for their residents -- our residents and obviously, the folks that are in the state. And so we feel really good about where it sits today on the Medicaid front because of people recognizing the services that we deliver and the need for those services. Albert Rice: Okay. You talked about the I-SNP opportunity. I know another area you were looking at sort of as a demo, it sounded like a few quarters ago was in the behavioral health area that that's obviously a place that there's some supply-demand constraints. I wondered if you could give us any update on what you're thinking about institutional behavioral health. And it sounds like there are some other demo areas that you're looking at. Is there anything else that looks particularly exciting that you would call out? Spencer Burton: So on the behavioral health, there is continued innovation. And you see this as you visit different markets, there's constantly this drive from our operators to figure out what our hospital partners, what the communities and what the plans need. We've continued to see demand for specialized behavioral health be really strong, and we've continued to develop those and add those units, get contracts even with state Medicaid systems and other managed providers where they know that they need people in a lower cost setting like ours. They know that we have the capacity to do it, and they're contracting with us or in some cases, even asking us to expand to meet their needs. So that continues to be a really strong area, but it's very locally driven with service center support versus a service center kind of mandate or strategy. As far as non-SNF-based behavioral health, we're not doing anything in that area to speak of. And then just to your question about other kind of innovative areas, absolutely. There's -- with almost 400 operations, there's so many ideas. Really, what we try and do is provide the framework to help people analyze, people understand the regulatory backdrop that they'd be operating against, understand true demand and supply and trends. And we're seeing a lot of cool, as Suzanne mentioned, these piloting type things that that's what allows us to grow, and that's what allows us to be so excited about the future is it's not us coming up with one strategy. It's almost 400 operators and their teams and their clinicians coming up with what the communities need and then we help them. And yes, absolutely, we expect to do more in the future. Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good morning, and welcome to NatWest Group's Q1 2026 Results Management Presentation. Today's presentation will be hosted by CEO, Paul Thwaite; and CFO, Katie Murray. After the presentation, we will take questions. Paul Thwaite: Good morning, and thank you for joining us today. As usual, I'm here with Katie. I'll start with a brief introduction before Katie takes you through the numbers, and we'll then open it up for questions. We started the year with strong momentum across our 3 businesses and made good progress against each of our 3 strategic priorities. First, we continue to pursue disciplined growth. In Retail Banking, we increased our share of the mortgage market as we expand our offering and announced new partnerships such as becoming the exclusive mortgage provider for Rightmove. In Private Banking & Wealth Management, our acquisition of Evelyn Partners makes a strong addition to the group. The transaction is progressing well, and we expect it to complete in the second quarter, subject to the usual regulatory approval. In Commercial & Institutional, we are the leading bank for U.K. start-ups, and we grew our share this quarter as we onboarded 24,000 new start-ups, a 25% uplift on the same period last year, supported by easier agentic onboarding. Second, we are leveraging our investments in simplification and have delivered over GBP 100 million of additional cost savings in the first quarter. We employ over 12,000 software engineers, and we are complementing that talent with artificial intelligence. So over 40% of our code is now written by AI, and we are scaling agentic software development. Typically, our development process for new customer propositions requires 12 engineers and takes 6 weeks. But in some scenarios, with a team of 3 engineers and 7 agents, we can deliver in just 6 hours, making us more productive and delivering faster for our customers. Third, we continue to manage our balance sheet actively, helping to free up capacity for further growth and allocate capital dynamically in this fast-changing environment. So let's turn now to the financial headlines. Customer lending grew 6.6% year-on-year to GBP 400 billion, whilst customer deposits grew 2.6% to GBP 445 billion. Lending growth of GBP 7.3 billion in the first quarter was well balanced across our businesses, including GBP 3.3 billion in mortgages and GBP 3.8 billion in Commercial & Institutional. We also provided over GBP 10 billion of climate and transition finance, taking the total to GBP 29 billion since last July, making good progress towards our GBP 200 billion 2030 target. Deposits increased by GBP 3.1 billion in the first quarter with growth in Corporate & Institutional, partly offset by an expected decrease in Retail and Private Banking as customers use their savings to make annual tax payments. Assets under management and administration grew 16.9% year-on-year to GBP 57 billion. 23,000 people invested with us for the first time during the quarter, with net inflows to assets under management of GBP 900 million. Taken together, client assets and liabilities have increased to just over GBP 900 billion, up 5.2% year-on-year, in line with our 2028 annual growth rate target of more than 4%. Income grew 6.9% to GBP 4.2 billion, and costs were up 4.8% to GBP 2 billion as we increased our operating leverage and reduced our cost/income ratio by 2.1 percentage points to 46.5%. Our return on tangible equity was 18.2%, driving strong capital generation of 65 basis points in the first quarter. Earnings per share grew 15.5% year-on-year to 17.9p. Tangible net asset value per share was up 15.1% to GBP 4, and we continue to maintain a strong balance sheet with a CET1 ratio of 14.3%. Since we announced our full year results in February, conflict in the Middle East has clearly increased geopolitical uncertainty. While sentiment is now more considered, we have yet to see any material impact on our customers. Both households and corporates remain resilient with historically high levels of savings and low levels of debt and arrears. In light of this uncertainty, we have revised our economic scenarios and now expect higher inflation with interest rates remaining at 3.75% for the rest of the year, resulting in slower economic growth and a modest increase in unemployment. This means we have taken an additional provision in the first quarter of GBP 140 million, which reflects our macroeconomic assumptions, not our credit performance, which remains strong. With rates staying higher for longer, we now expect full year income to be at the top end of the GBP 17.2 billion to GBP 17.6 billion range we set out in February. So we remain confident about the outlook and our 2026 guidance. That confidence is underpinned by the knowledge that we have built a resilient business, which is well positioned for a broad range of macro environments. We have a clear strategic focus on growth that delivers good returns with a prime lending portfolio that's well diversified and largely secured. We have invested and simplified so that we are now the most efficient large U.K. bank with a cost-to-income ratio that continues to improve, and we are actively managing our balance sheet. For example, we have taken the opportunity of a sharp move upwards in the yield curve to accelerate the increase in our structural hedge, supporting income growth in the years ahead. We have also increased our capital efficiency significantly in recent years, driving high levels of capital generation. All these factors have contributed to our strong performance in the Bank of England stress tests, giving us confidence in our outlook and guidance not just this year, but over the medium term. With that, I'll hand over to Katie to take you through the numbers in more detail. Katie Murray: Thank you, Paul. My comments for the first quarter use the fourth quarter as a comparator. Income, excluding notable items, reduced 1.1% to GBP 4.2 billion, and total operating costs were 9.2% lower at GBP 2 billion, delivering 11.6% growth in operating profit before impairment to GBP 2.3 billion. The impairment charge was GBP 283 million, equivalent to 26 basis points of loans, including the charge for our updated economic scenarios that Paul mentioned. This resulted in operating profit of GBP 2 billion, with profit attributable to ordinary shareholders of GBP 1.4 billion, and return on tangible equity was 18.2%. Turning now to income. Income, excluding notable items, was GBP 4.2 billion. Excluding the impact of 2 fewer days in the quarter, income across the 3 businesses continued to grow, supported by both volumes and margin. Net interest margin was 247 basis points, up 2 basis points due to deposit margin expansion and a small benefit from funding and other, with lending margin declining by 2 basis points, mainly driven by mortgages. As you heard from Paul, our 2026 guidance now assumes that the Bank of England base rate remains at 3.75% this year rather than coming down to 3.25%. Together with our revised economic scenarios, this means we now expect income, excluding notable items, to be at the top end of our GBP 17.2 billion to GBP 17.6 billion range, excluding the impact of Evelyn Partners. Turning now to customer assets and liabilities, or CAL. You will recall we introduced our 2028 growth target for CAL in February. I am pleased we are entering another year with strong growth, continuing our track record. Our CAL increased by GBP 8.4 billion or 0.9% in the quarter to GBP 900 billion. This includes lending growth of GBP 7.3 billion, deposit growth of GBP 3.1 billion and a reduction in assets under management and administration of GBP 1.8 billion as strong AUM inflows were offset by market movements. I'll touch on each of these elements in turn. We are reporting another quarter of strong broad-based loan growth across the group with gross loans to customers up by GBP 7.3 billion. Retail Banking and Private Banking & Wealth Management balances grew GBP 3.5 billion or 1.5%. This comprises GBP 3.3 billion in mortgage lending and GBP 200 million in unsecured lending. Mortgage stock share increased marginally to 12.6%, and we have a robust pipeline following record applications in March. Commercial & Institutional lending increased by GBP 3.8 billion or 2.4%. This includes growth in corporate and institutions, driven by good demand across a broad range of sectors, including project finance, renewables and utilities and funds lending, together with increased lending in commercial mid-market, notably in commercial real estate and the housing sector. You will also see we have provided a detailed breakdown of our financial institution exposures, including private credit in the appendix of our presentation. Turning now to deposits. Customer deposits increased by GBP 3.1 billion despite the expected higher seasonal tax outflows. Commercial & Institutional deposits increased by GBP 5.1 billion. This was partly offset by a slight decline in Retail Banking and Private Banking & Wealth Management deposits as a result of higher customer tax payments of GBP 10.3 billion. Retail Banking outflows were partly offset by growth in current account and ISA balances. Overall, our deposit mix remained broadly stable. Turning now to assets under management. Assets under management and administration closed the quarter at GBP 56.7 billion. We are pleased with positive AUM net inflows of GBP 0.9 billion, which equates to 8.2% of opening AUM, demonstrating continued client confidence and strong momentum. There was a reduction in assets under administration of GBP 1.4 billion, driven by gilt redemptions to support client tax payments. Overall, balances were impacted by negative market movements of GBP 1.7 billion. However, these were reversed during April. Turning now to costs. Other operating expenses were GBP 2 billion, an increase of 4.8% year-on-year and a decrease of 8.3% compared with the fourth quarter. Our cost/income ratio in the quarter was 46.5%. We are pleased with the progress we've made on our transformation, and we made decisions to accelerate investment spend and incur higher restructuring costs in the first quarter, which drove the overall cost growth year-on-year. The reduction from the fourth quarter is mainly due to ongoing cost savings as well as lower bank levies. We remain confident in the delivery of our full year 2026 cost guidance of around GBP 8.2 billion, though our cost profile will be uneven throughout the year. Turning now to our updated macroeconomic assumptions. Following a period of global macro uncertainty, we have revised our economic assumptions. In our revised base case, we assumed inflation now means CPI will peak at 3.5% in 2026 rather than fall to 2% by the end of the year. This means interest rates stay higher for longer, and we assume the bank rate remains at 3.75% throughout the year. We expect lower GDP growth of 0.4% and a modest increase in unemployment to a peak of 5.7%, above our previous assumptions of 5.4%. This remains at levels we are comfortable with in terms of lending risk appetite and credit quality. We will continue to review our assumptions as the situation progresses. Our balance sheet remains well provisioned with an expected credit loss of GBP 3.7 billion and ECL coverage ratio of 84 basis points. Our latest scenarios also show that even if we were to give 100% weight to our new moderate downside scenario, this would increase Stage 1 and 2 ECL by GBP 99 million or 2 basis points. Turning now to the impairment charge. The impairment charge for the quarter was GBP 283 million, equivalent to 26 basis points of loans. This includes a charge of GBP 140 million as a result of changes in economic scenarios and total post-model adjustment releases of GBP 34 million as elements were effectively consumed by changes in our economic scenarios. Excluding these, our underlying impairment charge was 16 basis points. There were no new signs of stress across our 3 businesses, and the current credit performance of our book remains strong. We continue to expect a loan impairment rate below 25 basis points for 2026. So our guidance is unchanged. Turning now to capital. We ended the quarter with a common equity Tier 1 ratio of 14.3%, up 30 basis points since the end of the year. Capital generation before distributions was strong at 65 basis points. This includes 69 basis points from earnings. Other regulatory capital movements added 16 basis points. Growth in risk-weighted assets consumed 21 basis points of capital, and our usual accrual for ordinary dividend payments reduced capital by a further 37 basis points. Risk-weighted assets increased by GBP 2.7 billion. GBP 4.3 billion of business movements broadly reflects our lending growth and increased market risk. This was partly offset by a reduction of GBP 2.2 billion as a result of actively managing our RWAs to create capacity for further growth. Other movements included FX and immaterial CRD IV model updates. We remain confident in our ability to continue generating strong capital from earnings and to manage risk-weighted assets and expect around 200 basis points of capital generation before distributions this year, whilst operating at a CET1 ratio of around 13%. Turning now to guidance. We now expect income, excluding notable items, to be at the top end of our range of GBP 17.2 billion to GBP 17.6 billion, excluding the impact of the Evelyn Partners acquisition. All our other guidance and targets remain unchanged. And with that, I'll hand back to the operator for Q&A. Thank you. Operator: [Operator Instructions] We'll take our first question from Andrew Coombs of Citi. Andrew Coombs: If I could just have one on loan and deposit growth and then I guess the second on average interest-earning assets. On the loan and deposit growth, again, it's a strong performance Q-on-Q, again, led by C&I. If I speak to any investor, particularly those outside the U.K., they always struggle to link the economic performance in the U.K. with the strong loan growth and loan demand that you're seeing. So perhaps you can just touch upon what drove the loan and deposit growth, particularly in C&I, where is that demand coming from? How sustainable do you think it is throughout the remainder of the year and into next year? And then the second question, I mentioned that loans are up Q-on-Q, deposits up Q-on-Q, but your average interest-earning assets are down 0.2% Q-on-Q. And it seems to be due to a reduction in the liquid asset buffer. So perhaps you could just touch upon that as well and what's driving the disconnect between the average interest-earning assets and the movement in the loan balances. Paul Thwaite: Thanks, Andy. Okay. Katie, why don't I take lending and deposits and then you come back on AIEA. Katie Murray: Okay. Paul Thwaite: Good stuff. So Andy, as you say, good, strong growth on both sides of the balance sheet, pleased on lending and deposits, especially as you know the context of quarter 1 deposits is always higher outflows because of tax payments. Why don't I give an overview, and then I'll drop down into C&I because I'm conscious you wanted some specific color there. So lending overall, I'd say it's pretty broad-based. You can see growth in mortgages. You can see growth in C&I. You can see growth in unsecured within Retail as well. And within C&I, you can see it through different business lines. I'd also add that the pipeline remains pretty strong as well in both businesses. So we're encouraged by that. So not only is the activity good, the pipeline -- I was going through it yesterday and -- Wednesday actually, the pipeline of activity looks strong looking ahead into quarter 2 and quarter 3. And as you know, we've consistently grown above market, growth on the lending side. I'll come back to some of the reasons why I think that's true. On deposits, 2 sides to this. As I said, we've got the tax outflows in Retail and Private Banking. They were up 28% year-on-year. So it's a big number, GBP 10 billion of deposits. And that was offset by growth in C&I, which was from a combination of things. Some of that was operational deposits, some of that was interest-bearing deposits. I think there, when you think about the size of our corporate and commercial franchise, the reality is we benefit as deposits flow onto corporate balance sheets. If you look into Retail, actually, personal current accounts were up, which is good. That's obviously healthy from a number of factors. And we are starting to see the impact of our -- what we call our Boxed proposition where we're providing savings products to companies like AA, Saga at Sainsbury's, et cetera. So that's also supporting Retail deposits. So that hopefully gives you a kind of big picture view. On C&I specifically, demand has been strong. I think we're very well positioned on what I'd call some of the structural drivers. So project finance, infrastructure, transition finance, utilities, funds lending, energy transition, et cetera. And I think what you can see is the growth in those parts of the market is bigger than, let's call it, the U.K. systems growth. So I think that helps to explain why our C&I franchise captures the opportunities there, but also outperforms the market. As I said, the pipelines are strong. So to your point on sustainability, I think those trends are -- they're structural trends, not kind of short-term opportunistic trends. So I think the lending growth and the lending pipelines will continue to support sustainable growth. So net-net, good balance sheet performance. C&I, yes, but also on the Retail side of the business as well. So hopefully, that gives you a bit of color. Katie? Katie Murray: Sure. Thanks very much, Andy. So you're absolutely right. When you look at AIEAs, they were sort of stable in the quarter. They were down kind of 0.2%. A couple of things within there. So reduction reflects the optimization of our surplus liquidity. We repaid around GBP 4 billion of TFSME at the end of Q4, and we deployed surplus liquidity to meet our customer loan demand, which we've just been talking about, in a quarter of seasonally lower deposit growth. If you look at the kind of the Q1 loan growth of GBP 7.3 billion versus the GBP 3.1 billion of deposit growth, there's a natural kind of mismatch within there. What I would say is we're 3% higher than AIEAs a year ago, and we do expect them to grow from here going forward as our customer lending increases. Operator: Our next question comes from Alvaro Serrano of Morgan Stanley. Alvaro de Tejada: Hopefully, you can hear me okay. Paul Thwaite: We can hear you clearly. Alvaro de Tejada: I actually had 2 questions related to spreads. And the first one is on mortgages. At least I had the expectation of a step down in spread on mortgages in Q1, given the roll-off of the COVID ones. But actually, the spread has held up reasonably well versus my expectations, at least. I think they contributed [ 324 ]. Can you -- maybe this one is for Katie, but can you maybe talk to if there's still sort of headwinds ahead and talk to the mortgage front book spreads? And then similarly on commercial, the spreads there, compared to base rates, have been increasing steadily the last 8 quarters or so as you grow the book. What kind of business are you underwriting there? And what do you think it can -- should it continue to improve? Or how do you see the outlook on pricing on corporates as well, commercial? Paul Thwaite: Okay. Great, Alvaro. Katie, do you want to start with mortgage? Katie Murray: Yes, absolutely. Thanks very much. Alvaro, so if we look at Q1, we continue to write mortgages at front book spreads that were below the back book as we did through last year, which we talked about a lot, very much in line with our strategy of delivering steady growth at attractive returns. So I'd say our year-to-date margins are in line with expectations. We did see a bit of volatility in March. We repriced every 2 days, so that's 11 kind of changes in 22 days, which I think is a great testament to the flexibility we've built into the system. And we can even see that ability to handle that increased mortgage demand as a result of that investment in the platform and digitization, which has meant we've been able to execute new business at margins which are ahead of the back book in April, which is great to see. You're absolutely right to mention the COVID mortgages. We are seeing a little bit of the book margins being impacted by that churn of the 5-year COVID era mortgages, and they're rolling off at spreads that are higher than we're currently writing. I would expect that to have worked its way through during the rest of this year. So we expect a little bit of pressure from this on the book margin over the coming quarters. But I guess as I go to where we are today, where we're writing the mortgages at front book spreads, which are below the back book, what we're seeing is it's starting to bring that back book margin down. We're kind of writing now, you've heard me talk a lot about this kind of below 70 basis points over the last number of quarters. That's kind of continued. And as I look at that number, I think that we will see the book margin to reprice to around 60 basis points over the course of this year. Interestingly, April margins have been above the back book, and we're pleased we were able to capture that. So I talked to you, remember at the year-end, Alvaro, around 1 to 2 basis points impact on our NIM walk per quarter throughout this year. You absolutely saw that already in our walk. This quarter, you should expect to see that. What I'd also really encourage you is don't forget to see that you have the deposit margin expansion that's going to more than offset that negative. Hopefully, Alvaro, that gives you what you need. Paul, are you going to do the commercial spread or shall I... Paul Thwaite: Yes, happy to. Katie Murray: Okay. Perfect. Paul Thwaite: Thanks, Katie, and thanks, Alvaro. On commercial spreads, a couple of general points first. I would say, Alvaro, actually, commercial lending margins, I would see them as fairly stable on a product-by-product basis. So that's how I'd think about it. There's obviously always a mix effect depending on where you write the business. But there's been no material deltas, changes over the recent past nor would we expect it going forward. So that's, I guess, one positioning piece. Secondly, in our commercial book, a significant proportion of customers are paying variable rates. So you will see that -- you will see kind of rates reprice in line with short-term rates and how that changes. So hopefully, those 2 points just contextualize what you'll be looking at in terms of the commercial lending book. If you drop down into the individual businesses or asset classes within the commercial and institutional bank, there's different dynamics. Obviously, at the very small end, margins are much higher, but the total value of lending there is small relative to the overall commercial book. So whilst we're growing that business, and it's higher-margin business, from a weighted average perspective, the impacts are relatively limited. In the commercial mid-market, that's a competitive space across the field. But depending upon the asset class, the margins can vary quite a lot. So if it's social housing, lower margins, but very high risk-adjusted returns; commercial real estate, thinner margins, more of a commoditized product. And then at the large corporate side, obviously, you've got the kind of revolver aspect to that, but also where you've got kind of project financing and infrastructure finance, a bit of the same dynamics as my example on social housing. At a spread level, margins are relatively tight. But given the capital treatment, the risk-adjusted returns are very attractive. So they're all very good areas to deploy capital at good returns. So nothing major to call out, I'd say, on commercial spreads, but that hopefully gives you a bit of the contours of how that business works. Thanks, Alvaro. Operator: Our next question today comes from Benjamin Toms of RBC. Benjamin Toms: The first one is on your income guidance, which you've upgraded to the top end of your previously provided range. Just wanted to kind of get some color, your thoughts on whether you'd characterize this guidance as being conservative. I'm just noting that consensus is kind of still quite a way above that guidance and whether you're comfortable with that gap? And then secondly, there's been some pretty fairly intense competition in the ISA -- cash ISA deposit market, and NatWest Group competing but one of your large peers is not. Can you just talk a little bit about how you weigh up collecting deposit volumes versus margins at a group level at the moment? Paul Thwaite: Great. Thanks, Ben. I'll take the guidance and income, Katie, and then you can talk a little bit around Retail savings and ISAs. Okay. So yes, as you said, Ben, we've strengthened the income guidance. We're guiding to the top end of the range, of the GBP 17.2 billion to GBP 17.6 billion. We're doing that for a couple of reasons. One, you can see the momentum in quarter 1. So the underlying performance has been good, which is great. And then you've got the kind of net effect of the change in economics. Obviously, we've changed our rate assumptions. You've seen that from 2 cuts. Assumed 2 cuts now to 0. But we've also assumed -- you have to follow the logic through. You would assume if you have -- if you don't have rate reductions, it would be reasonable to expect some small softening in demand. So we've assumed that. But net-net, we see that as positive to income. So that's kind of how we're positioning at the top end. We haven't changed the guidance for RoTE. We're maintaining the greater than 17% there, but we're increasingly confident on that. As I said in February, and I'll say again, it's always a greater -- that's always been a greater than guidance, and we always aim to beat our target. So we haven't changed that, but we're increasingly confident because obviously, the conditions for that are supportive. I should point out, I think, it's obvious, but that all excludes Evelyn. But net-net, Ben, I would say it's a good start. We're confident around '26, hence, the nudge up in guidance. We haven't changed '28. But obviously, you can see from the trends that it's -- the conditions are supportive towards the medium term as well. Katie Murray: Thanks very much. Ben, so I guess if I look at our ISAs and the kind of recent activity, I think the first thing I would really say is we see really strong relationship value in our fixed term deposits. We have high retention rates, greater than 80%, and some of those are retained in the higher-margin instant-access products as well as us also having an opportunity in the future to engage with these customers on investment products, and we've seen good growth there as well this quarter with a lot of new investors coming in, but we also expect that ambition to kind of grow and that's supported by the acquisition of Evelyn Partners, obviously, in this last quarter. During Q1, with the volatility that we saw in the swap markets, we actively managed our hedging across both our assets and liabilities, which enabled us to really price effectively on the fixed rate deposits. Overall, you can see our deposit mix has been stable, both at the group level and in Retail. When I look at fixed rate ISA specifically, the balances are small in the context of the group, low single-digit percentages of deposits. And in terms of overall deposit dynamics and margins, really very happy with the progress, particularly around things like current account growth, and we expect to see ongoing group deposit margin expansion in the coming quarters. So overall, a real comment on balance across the portfolio. Thanks. Paul Thwaite: I'd add one small thing on that, actually, Ben, because I've got the pricing tables in front of me. It's quite interesting when you look through. And as Katie said, we've been very thoughtful about how we manage the volatility in swap rates and how we play that back into pricing to maintain margins. And you can see you've got 3 or 4 of the larger banks ahead of us on pricing. But as Katie alluded to, the volumes have been encouraging. So I think we've been very thoughtful in how we're playing in that market. Operator: Our next question comes from Guy Stebbings of BNP Paribas. Guy Stebbings: I think, I just have one sort of broad question on the income guidance for this year and the assumptions sort of underpinning it. It's clear in terms of what you're doing on policy rate. But in terms of the long end of the curve, when you're thinking about the hedge reinvestment, could you confirm what the assumption is there? Then in terms of volumes, I'm just trying to work out whether you're assuming slightly more sort of conservative macroeconomic assumptions as per the ECL models, but that would be going against sort of the positive comments you're saying in terms of what you're actually seeing on lending volumes, et cetera. So can you clarify what sort of expectations are on volumes? And then on mortgage spreads, just in light of the comment you made there, I'm just trying to understand whether anything has changed. So you've talked about the stock of the back book trending down towards 60. I presume that's kind of entirely consistent with what you were expecting a few months back. And actually, your comment on April being above the back book is slightly encouraging. So could you just confirm if those mortgage spread trends are sort of in line, better or worse than what you were thinking a month or 2 ago? Paul Thwaite: Great. Thanks, Guy. Very clear. Katie, you got any preference on order? We've got hedge, volume... Katie Murray: I'll start off with spreads and hedge, and then why don't you jump back in on volume, yes? Paul Thwaite: Yes. Katie Murray: Perfect. Thanks so much. If I look at the hedge, first of all, a few things just to kind of share with you on that. So first of all, when we talked about the hedge at the year-end, we said that we would increase our structural hedge this year above GBP 200 billion as -- and then you've seen it, as deposit balances have grown and equity base will increase given the business growth. What we did earlier in Q1 was as we saw those yield curves move really sharply higher in the quarter, we did take a decision to accelerate the increase of our product hedge. So we added about GBP 5 billion additional in Q1. So that means that we've locked in income for the outer years and, of course, modestly reduced our rate sensitivity as a result of that. When I look at the kind of first 3 months of the year overall, we're reinvesting our product hedge at about 3.8%. That's against guidance I've given you at the year-end of 3.5%. I would now expect that reinvestment rate on average for the whole year and given what we've seen also in April to be around 3.9% on the product hedge and 4.7% on the equity hedge, which is up from 4.5% as we go through there. So as I look at those kind of current assumptions of rates, the growth that we've seen, I do continue to expect total hedge income will grow annually through to 2030 as you see the improved levels that we spoke about in February. If I then look to your mortgage spreads, you've got it completely right. Mortgage margin is very much in line with our expectations. They are currently a little bit better. I would encourage you not to bank that forever, but we're very happy with how the team are managing the book at the moment. We can see the reduction in book margins absolutely being driven by refinancing. If you think a little bit of our mix, 30% of the book will reprice this year and the roll-off is a little over 90 basis points on a blended basis. So that really drives the stock margin lower over the course of the year, completely in line with our expectations and very much in line with the income guidance that we've given you throughout this year and upgrading this morning. Paul Thwaite: On volumes, Guy, so this -- as you say, this kind of tried to thread the needle a little bit between, I guess, the logic of the kind of mechanistic logic of the economic assumptions versus activity year-to-date and pipelines. And I think that's what we're trying to balance. If you take the logic of the economic assumptions through, i.e., higher for longer, slight tick up in unemployment and slower growth, then the logic of that would be, you would see some softening in, for example, the mortgage market vis-a-vis our original predictions and likewise, some softening in business lending. So that's what the economic assumptions drive. Then when you look at the activity, as you rightly point out, what we've said is quarter 1 has been very strong on the kind of lending side. The pipelines in the respective businesses look strong. So the activity is there. I guess what we're trying to do is strike the right balance between optimism on that side, but also, I guess, the reality of how the economics play out over the course of the next 9 months might impact demand. And we factored that into how we've guided toward the changed guidance to the top end of the range. So hopefully, that just unpacks a little bit how we're thinking about it. Operator: Our next question comes from Jonathan Pierce of Jefferies. Jonathan Richard Pierce: Good. I've got 2 questions, please. The first, the other C&I noninterest income, it's been running at about GBP 230 million to GBP 240 million a quarter for the last 6 quarters, dropped down to GBP 170 million in the first quarter. It does feel like there was a bit of a one-off in there. I don't know if you can quantify how big that was and whether you've seen anything else coming through since the end of March? Secondly, more broadly on this impairment sensitivity, just trying to get a feel as to how much confidence you have of -- I've asked you this before, Katie, actually, in the IFRS 9 ECL models. I mean you're telling us today that the weighted average assumption for GDP growth is about 0.3%, 0.4% a year next couple of years. The downside is minus 0.4% this year and minus 1.6% next year. It's also got unemployment going up to 6.2% next year, I think. But you're telling us your ECL in that scenario would only increase by about GBP 99 million. Now I get that that's a general provision measure. But by definition, the ECL on those Stage 1 and 2 is reflective of losses you expect in the future on the performing book. So are you genuinely confident? And if so, why more qualitatively in this idea that even if we saw a recession, even if we saw unemployment moving into the 6s, your impairment charge ex any initial ECL build would not move up very significantly at all? Paul Thwaite: Good. Thanks, Jonathan. I'll take the first one. Katie, you can take the second one. Katie Murray: Sure. Paul Thwaite: So Jonathan, your characterization is right. So actually pretty stable income line in the last 6 quarters, dropped off -- the C&I noninterest income dropped off in quarter 1 '26. If you look at that compared to '25, it's, I think, GBP 20 million versus GBP 64 million. Not exclusively, but almost exclusively, it's explained by sterling rates, as you say, so kind of one-off. You've seen that across lots of desks and lots of banks. So we have a relatively small rates business. It's obviously -- it's indexed to sterling, given what we are as NatWest. So that really explains the delta that you're seeing there. And you'll see yes, GBP 64 million in quarter 1 '25 and GBP 20 million in quarter 1 '26. That's a big part of the difference versus the previous quarters. A couple of things I'd say, it's obviously very small in the context of the overall revenue line. And also given the more subdued volatility, we'd expect improvements as we go through quarter 2 onwards, not just in that line, but overall on C&I noninterest income. So I think you're seeing it and reading it pretty accurately there. Okay, Katie? Katie Murray: Sure. On impairments, thanks, Jonathan. But as I look at it, I mean, these are models that we test extensively. They go through both our own verification and independent verification, and they're also kind of reviewed very closely by kind of external parties. So I am comfortable in them. And I think that the thing that I do like with IFRS 9 is this concept, which is in and around the kind of PMA. So that kind of enables me where there are moments of discomfort. And you can see that we sometimes have them when you can see in different classifications, it's wider than just the kind of the sort of economic uncertainty. So when you see other numbers in there, you can go actually, that's a bit of the model they're kind of working on. So completely comfortable on the models is what I would say first. And you're right, if I look to the ECL on kind of Stage 1 and 2, if I went 100% kind of to the downside, it suggests an extra GBP 99 million. But I would remind you that Stage 1 and Stage 2, so there would be some Stage 3 losses. They are impossible for us to quantify as to what they would be. So we don't seek to attempt that. So I would probably suggest to you that the actual charge could be a bit higher if that was the case. Obviously, that's not our base case just now. In terms of what we're looking at. We -- at this stage, we are happy with the base case. We're happy with the guidance that we've done. We've obviously added a bit on the mezz, 110 net, a little bit out of PMA. That's just kind of mechanics of the calculation, which has taken us to the 26 basis point charge this quarter. But if I take out that mezz, we've overlaid, it's kind of 16 basis points. So what we can see is a good, well-diversified, well-performing book to date. We've given you a good estimate if we were to move. But at the moment, obviously, we're comfortable and happy to have that little bit of extra buffer as we enter a little bit of greater uncertainty than we've seen recently. So comfortable at this stage, Jonathan. Thank you. Operator: Our next question comes from Benjamin Caven-Roberts of Goldman Sachs. Benjamin Caven-Roberts: Just 2 for me, please. First, a follow-up on the cost of risk. I see you mentioned about 60% of mortgage balances now with customer rates above 4%. How are you thinking about the refinancing profile for that remaining portion and the extent to which those customers are moving on to rates a fair bit higher than what they had expected when entering those mortgages? I know you do stress rate assumptions as well when issuing the mortgage originally, but clearly, a lot of volatility in swaps and rate expectations right now. So just keen to hear your thoughts on that. And then secondly, thanks a lot for the extra disclosure on the financial institutions. If we look at that business and private credit altogether, how are you thinking about the growth of that book? Is it something you expect to grow more quickly or more slowly relative to the recent past? And have you changed your strategy at all in terms of the underwriting there? Paul Thwaite: Great. Thank you, Ben. Katie, you go for first question. Katie Murray: Yes. In terms of cost of risk, Ben, so you're absolutely right. There's -- and you've obviously -- you've got far in the pack this morning. So Slide 32 kind of lays it out really nicely. So I guess a couple of things I would talk about as we look at our prime mortgage book. So obviously, the level of security gives us a lot of comfort. Our sort of greater than 3-month arrears are below the sector average and quite significantly so. So it's well underwritten. And I guess the guide on the financing of the remaining 40% that aren't on customer rates over 4%, we do kind of use what's happened in the last couple of years to kind of help guide us on that. So what you've seen in that time, obviously, there has been wage growth across the different areas. People who are coming up are very aware that they're coming up. They are -- what we see has been really interesting over the last couple of months is our kind of a greater increase on the use of the 2-year versus the 1 year. If you look at our -- sorry, versus the 5-year, forgive me, if we look at our kind of 5-year fixed as a percentage of our fixed book, it's about 66% 5-year. But actually, if I look just at what's even been happening in the last little while, that's kind of flipped almost completely to that we're writing about 77% 2-year at the moment. So customers, they understand what they're doing. They are understanding what they need to do in terms of managing their exposure. We do see them looking to lock in refinancing early so that they can get the benefit of the rate, and they've certainly been preparing for this. And as we talk to them as they go through those transitions. Obviously, it's a big change when you go from your COVID rate to the new rate, but it's something people have definitely been looking for, and we've seen them managing it really, really quite well, I would say. And Paul, on the... Paul Thwaite: Yes, yes. So Ben, so yes, so I'm glad you liked and have seen the new disclosure. We hope that's helpful to everybody. In terms of the kind of outlook for the -- obviously, it's a very broad business when you look at the breakdown there. But in terms of the areas that you referenced, we have been growing the business, I guess, over a number of years, but it's been in a very disciplined way. If you look at limits there, they haven't really moved since this time last year, so quarter 2 '25. Likewise, we haven't materially changed our risk appetite. We're always very focused on being senior lender, good protection from first loss, making sure that the risk-adjusted returns are supported. So our strategy really has been not around growing limits, but prioritizing risk-adjusted returns versus volume-driven growth. As you know, we haven't been involved in any of the recent public names. Looking forward, what I would expect actually is to see some of the spreads to widen, so i.e., the same business, the same risk, but actually better risk-adjusted returns. That would be my assumption because as you know, a lot of that business is relatively short term in nature, so you get to reprice. So that's how we're seeing. Hopefully, that gives you a sense of it in terms of limits, but also, I guess, business strategy, which is returns led rather than volume-led. Operator: Our next question comes from Chris Cant of Autonomous. Christopher Cant: Two, please. On corporate banking, commercial banking, in the context of what we've got going on in the Middle East, are there any areas of your book that you'd be more nervous on, please? And I'm not thinking specifically just about oil price as an input here. I guess there is the potential for product shortages or oil-related product shortages regardless of price if this persists. So are there any sectors that you're nervous on when you're speaking to your corporate customers, what are they worried about? And on the comment around refi of the mortgage book, my understanding there is that customers essentially have sort of a bit of a free option to lock in, but then change products if rates shift after they've preemptively locked in. Are there any risks to you and to kind of NII later in the year given swap volatility. Just conscious, I guess, the value of that option being given to customers is arguably higher right now. So any comments on how you manage that, how we should think about that would be appreciated. Paul Thwaite: Thanks, Chris. I'll take the first. Katie, you take the second. On the -- I guess, the kind of core mid-market commercial bank, Chris, obviously, we're staying very close to all the various sectors and also the different regions there. It's very consciously a very diversified book. We gave you quite a lot of breakdowns on the relative sectors and segments. In terms of -- to your specifics around sectors or subsectors that might see greater impacts. Probably similar to some of the previous kind of challenges, I would say, sectors like agriculture, aspects of hospitality and leisure. So where you see some of the -- not just what you call pure energy input prices, but you have fuel, fertilizer, food, et cetera, where you see exposure there would be areas that we are -- we will pay more attention to. And as we've done in the past, we work closely with those sectors if support packages are needed. We're not at that stage yet, and we're seeing no deterioration. I think generally, what I'd say, if you think back through what we're seeing in the Middle East, what we saw through the tariff period, a similar time last year through Ukraine and even through the pandemic, customers are -- I'd say business customers are a lot more adaptable and resilient than maybe they were prior to the pandemic. Their ability to change their cost base and/or pass on costs, the kind of the way in which they've engineered their business models over time have given them more flexibility. So what we see is a faster response, but also greater adaptability, which ironically, I think is down to the fact that a lot of these businesses and sectors have had to face a lot over the course of the last 4 or 5 years. So that's how we see it. But there are probably 2 sectors that are kind of on our minds. Katie? Katie Murray: Sure. Thanks very much. And then your great question, Chris, we've kind of watched this happen historically, we've seen other peaks. But look, it's something that we manage incredibly tightly on this. We've got very sophisticated modeling that we have in play. We based on it looking very much at the kind of individual kind of customer behavior, looking at what happened in other periods of interest rate volatility, who would move, who would kind of stick. You heard me mention earlier today as well that what we've done and the investment that we've done within our mortgage system has allowed us to kind of be able to react really, really quickly. I mentioned that we repriced 11x over the course of 22 days during March. I mean that is a significant change from where we were a number of years ago. So very comfortable with the dynamic overall. What I would kind of add is that we do see that most people who do refinance with us do ultimately kind of stick with us as well. So there's that good kind of customer engagement, which is just -- is really, really critical. We're also kind of largely locked in already for our forthcoming roll-offs. But I would say all of these things are embedded in the guidance that I've talked about today about the book actively kind of repricing to 60 bps over the course of the year. And so while we manage it actively, but I don't see it will be something that would change what I've said to you this morning already on that number. Operator: Our next question comes from Sheel Shah of JPMorgan. Sheel Shah: First question on corporate deposits, please, because this is a line item that has remained under GBP 200 billion or so for the last 2 years, and we're finally seeing a lot of growth come through the business. And not only the growth, but also the rates that you're paying on these corporate deposits, looking at your other disclosure looks to be declining as well. So I'd be interested to get some insight as to what's happening there? And then secondly, on the cost base, I know the first quarter had some increased investment in restructuring costs, but you also mentioned on the call earlier that the cost profile will be uneven through the year. So just wondering how you're thinking about that across the remainder of the quarters? Paul Thwaite: Thanks, Sheel. I'll take deposits. Katie, cost, yes? So I'm pleased you've noticed the trajectory there, Sheel. Deposits in the commercial bank is a big area of strategic focus for the team and has been, I would say, increasingly over the course of the last 18 months. So part of the performance momentum there is around focus. Given also the growth we've seen in lending, there's been a natural need to increase deposits in the commercial bank. So focus has played a part. But we've also broadened the product range. We've also digitized parts of the product range as well. So we've got business focus. We've got enhanced proposition for different segments within the commercial and corporate bank. And as you'd expect us to have, we also have a much broader focus on transaction banking, which obviously brings high-value operational deposits. And to your point, depending on the nature of those deposits, high liquidity value, but also in relative terms versus interest-bearing deposits, good cost of funding. So it's a strategic focus supported by a number of operational and tactical activities that support our client base but also help the LDR. Katie? Katie Murray: Costs, sure, absolutely. So you're absolutely right. Q1 is a little bit higher than normal, reflecting some of our decisions to front-load investments and restructuring costs alongside staff and inflation-related increases from 2025. But you'd expect me to say this, it's our history. It's what we deliver every single year. We are really confident in hitting our cost guidance of around GBP 8.2 billion. That excludes the impact of Evelyn. I'm just going to take the opportunity just to talk a little bit about Evelyn costs. We'll share more about that as well when we kind of -- once we've kind of finished the acquisition and things like that, which is going well. But there are a few things that you need to be thinking about that will impact some of those Evelyn costs as they come through. Obviously, first, we've got day 1 transaction costs. That was included in our guidance of the 130 basis points of capital. We've obviously got the operating costs that will come through from the point of consolidation in terms of Evelyn's own costs. We're then familiar, we talked a lot about the cost to achieve in terms of the GBP 150 million total cost to achieve to drive the GBP 100 million of cost synergies. And finally, we are going to have ongoing amortization of the intangibles that will be created upon completion. That doesn't impact our capital generation going forward as we've incurred that as part of the capital impact of the 130 basis points. Obviously, I'll give you more detail when we get to the point of completion. But when you think of lumpiness, think of -- they're absolutely rock solid on their 8.2. That's where they'll land because they always do. But there will be a little bit as Evelyn comes in. So think about that in your models of those 4 different kind of categories. Hopefully, that's helpful to you, Sheel, as well. Operator: Our next question comes from Aman Rakkar of Barclays. Aman Rakkar: Hopefully you can hear me okay, sorry. Paul Thwaite: We can. Yes. Aman Rakkar: I had 2 questions then. So could I just trouble you on the deposit margin, please? I think that 2 bps deposit margin Q-on-Q contribution, I think it's the softest uplift Q-on-Q. And obviously, you've got multiple moving parts in that, notably a massive structural hedge tailwind, but presumably offset by compression on kind of actual deposit spreads in the quarter. So I was interested in your sense of the deposit margin contribution on a sequential basis in coming quarters, please? And to what extent do you think this kind of intense deposit competition dynamic, particularly for term deposits, I mean, lots of people writing term deposits at negative spread kind of feeds into that would be really helpful. And then the second question was a broader question just around actually the income dynamic beyond this year because it feels like there's a building confidence around the income profile beyond this year, principally because of the interest rate environment. It's not really materially moving the needle on this year's guide as much as it perhaps will do on the forward look, not least because of the structural hedge. But I'm thinking about the cadence for net interest income through the course of this year is presumably going to be quite robust, right, in terms of what it means for next year. So is that the right characterization? And kind of what do you as a management team do with that, the kind of building confidence on the income outlook in the medium term versus what is quite an uncertain near-term dynamic in the Middle East? Katie Murray: Perfect. So deposit margin, 2 basis points in this quarter. I think you need to just think a little bit about the overall movement in balances in the quarter. So you've got tax outflows, GBP 10.3 billion. They are predominantly in January. Some do dribble into February, but they are predominantly there. We're confident around the deposit margin expansion will be greater in the coming months as we move forward from here. If we then look at kind of income beyond 2026, we expect annual income growth through 2026 to 2028. We're confident in that growth trajectory. Obviously, disciplined growth across lending, deposits and AUMAs continue in line with our CAL target of greater than 4%. That will obviously be boosted by the Evelyn Partners acquisition when it comes online. The higher for longer interest rate environment, we've got -- now got the terminal bank rate of 3.75% alongside the actions that we took in -- already taken in Q1 to move higher in the yield curve, meaning that we are increasingly confident on the income tailwind from the structural hedge, supporting income all the way through to 2030. You've got other variables like customer behavior, competitor behavior around pricing and macroeconomics. We'll see how these develop. But again, you can see what we've got in terms of our economics in there. And given that kind of interest rate sensitivity that we have, we do see that as a net positive for income beyond 2026. So overall, confident and building on our confidence that we had when we spoke to you in February as well. Thanks very much, Aman. Paul Thwaite: Yes. And as to your final point, Aman, how do management characterize that? I think as Katie finished there, net-net, it feels like we're in a stronger position on income and returns, both '26, but also looking out to '28. Operator: Our next question comes from Amit Goel of Mediobanca. Amit Goel: Hopefully, you can hear me okay. Paul Thwaite: Yes, we've got you crystal clear. Amit Goel: So one, just kind of following up. I suppose just on Slide 30, just on that deposit margin and contribution, just trying to reconcile on each of the divisions, it seems like the cost is coming down, but on the group, it's flattish. So I just wanted to check what's driving that? And then secondly, just on Evelyn, just curious how the business -- I mean, if you've got any color in terms of how the business has been developing since the acquisition announcement and I guess, during the first quarter and beyond in terms of AUA. So just anything on that would be helpful. Paul Thwaite: You go first. Katie Murray: The first one, absolutely. So if you look at the businesses, what that is, is that's representing the customer rate on deposits or loans, whereas if I look at the group number, it's the overall cost, including hedging. So it's not perfectly like-for-like as you look across those 2 lines. Paul, Evelyn? Paul Thwaite: Yes. So Amit, obviously, I can't comment on a business that we don't yet own. So that wouldn't be appropriate. What I would say is in terms of the planning to closure is going very well. We're moving at pace. We hope to announce that in the coming months. The work on -- the appropriate work on integration is progressing really well. You can see from our AUMA performance as in NatWest, the AUM performance, the strength, net new money above 8%, again, despite the market movements, top quartile investment performance. The -- going back to the AUM, kind of 10% up on year-on-year, which is great. So there's a limit. There's obvious limits to what I can say. But in the work that we're doing so far, we're very encouraged. I've spoken at length around the scale and the capabilities that Evelyn will bring. I think if you look at the success we're starting to have around retail investments and premier investment in the NatWest space, the acquisition of Evelyn is only going to accelerate that. So to me, the demand signals and the performance signals are good. Once we've closed, as Katie alluded to earlier in relation to the cost question, once we've closed, we'll obviously share a lot more detail in terms of the overall numbers and the plans, and we are eager to do that as soon as we can. Thanks, Amit. Operator: Our final questions come from Ed Firth of KBW. Edward Hugo Firth: I just have 2. The first one is just on detail. I think at the time of Evelyn, we were talking about GBP 300 million of revenue and GBP 300 million of costs in the first year. Is that still the right number we should be getting? So that was just my first question. Paul Thwaite: Yes, nothing has changed since the original disclosures, Ed. That's the best way to think about it. Edward Hugo Firth: Perfect. Okay. And then the second question was related to Jonathan's question really about risk because I've just struck that in your sort of worst-case scenario, you're talking about a low few hundred millions of credit losses, I guess, something like that. I know it's more than GBP 99 million, but it's not huge. And that's on a GBP 30 billion tangible equity invest, and you're making pre-provision profits of GBP 10 billion a year. And so I'm just wondering, how do you think about appetite to risk? I mean, do you really feel confident that you're taking enough risk? Because it feels to me that potentially there's quite a gap there for you to be doing quite a lot more and growing revenue quite a lot faster than you are. And I guess related to that, can I just ask about Slide 33 again? I mean it's a great slide, and thank you very much indeed for giving it to us. And I wish all the other banks would as well. But it does strike me that particularly your funds lending looks quite a lot bigger than I would ever have imagined. And is that -- I mean, I don't know the market that well, but I guess you do. You're a market leader in that space. Is that -- would you imagine that you are sort of bigger than most people? Or would you think that you're just a player and that's pretty standing? Because unfortunately, other people don't give us that type of a disclosure. Paul Thwaite: Great. Okay. Thanks, Ed. Good to hear from you. Quite a few different questions there. So we've got the kind of the extreme downside kind of credit piece. Katie, why don't you have a shot at that. I'll cover funds. And then there's a bit, I guess, linked to the -- just on lending risk appetite as well. Katie Murray: Yes, I'll crack on impairment, and you can jump in after that. So Ed, what I'd probably do is guide you a little bit. If you go after the call, on Page 27 of our IMS today, we gave you, I think, helpfully as a nonstandard Q1 disclosure, the -- what the -- our new change in our scenarios would be. And you can see that on the downside scenario for Stage 1 and Stage 2, it's GBP 99 million additional. But if you went to the extreme downside, that's a GBP 1.7 billion hit. So really very different in terms of numbers. And you can also see that, that's obviously greater than the hit we would have had at the year-end in that space. So I would just -- I'd probably just rebalance your numbers a little bit on that. That's obviously just Stage 1 and Stage 2. We would -- I would kind of point out that, that extreme downside is really quite far away from our base case. But obviously, it's blended into the number. I think we gave about 14% probability kind of weighting. So quite far out there, but it is something to kind of consider as you look at the numbers. And Paul, shall I come to you for the other? Paul Thwaite: Yes, yes, fine. Thank you, Katie. So on funds lending, I'm glad you liked the disclosure, right, I would say. On funds lending, that's a really long-standing business for us in excess of 20 years. A large part of that business is in our RBSI, which is our Channel Islands business, been in our disclosures for all that period of time. Probably worth diving in into a little bit of the detail. I wouldn't say we were a leader in that business. I'd say we're a strong player where we choose to participate. It's worth bearing in mind of that funds lending business, 80% of it is, I guess, what you know as subscription lines or capital call facilities. So that's where you kind of got exposure to LPs, and we take security charge over the LPs. Typically, that's pretty short dated as well, just to give you a bit more context, 1 to 3 years. So when you look at that line, the best part of GBP 17 billion is sublines. The other part is NAV, which is a smaller part, kind of GBP 3 billion, GBP 4 billion. And that's where you're seeing it, in effect, in a senior creditor when you're lending on to a particular asset. Average LTVs, again, just to help you there, around 30%, and you've got an institutional investor base. So very long-standing business. It's been predominantly led out of our Channel Islands business, no historical losses. So a good business, but there'll be -- as you look across European U.S. banks, you'll see different levels of exposure. I'd say we're strong, but certainly not a leader. Katie Murray: And in terms of risk, do we feel we've got the balance very much we're taking to get to his last question? Paul Thwaite: Yes. I think I hear both -- I guess, Ed, I hear both sides of the story. From some investors, I hear they really value the low-risk business model, well-diversified credit base, high risk-adjusted returns that you see. And then you hear the other side is, could you take more risk. I think the way we've approached our different asset portfolios, both in retail and commercial, has stood us in good stead. It allows us to perform well with a low cost of risk. We generate a high cost -- a high amount of capital. Our RoTEs are obviously sector-leading. So it feels like that -- we've got the balance right. We do at times, increase our risk appetite. You go back over the course of the last couple of years, you can see some of the moves we've made in retail. We've broadened our addressable markets in mortgages and credit cards. But I kind of feel that a U.K.-centric low-risk business model, high capital generation serves us well. So it feels like we're in the right space. Hopefully, that gives you a bit of insight into how management think about it, Ed. Thanks. Operator: Thank you for all your questions today. I will now hand over to Paul for closing comments. Paul Thwaite: Yes. Thanks, Oliver. So I just want to close with, I think, a couple of key points, which I think are particularly important given the context we're in and I think demonstrate why we think we're very well positioned as a bank. The first one is our deposit franchise and the gearing that gives us to rates. Obviously, that's driven by our corporate franchise. It supports our revenue growth, especially in a higher for longer environment. The second thing I would point to is the growth track record that we've built and continue to build and the targets that we've put out there. We think we've got a good track record and further opportunities across our 3 businesses. You can see also the progress we're making around cost management and our cost/income ratio and continuing benefits of operating leverage. And then to link it to Ed's question, if you look at the loan book and you look at the Bank of England stress tests, we are the most resilient bank under stress. I think that's as a consequence of our diversified business mix. So the lowest stress drawdown of any U.K. bank. So you add all that up together, superior returns, high capital generation, which can drive stronger distributions. So from my perspective, we feel very well placed as we look into the circumstances that face us. Thanks for your time. I hope you have a good weekend. Cheers. Katie Murray: Thank you. Operator: That concludes today's presentation. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Morguard Real Estate Investment Trust 2026 First Quarter Results Conference Call. [Operator Instructions] This call is being recorded on Friday, May 1, 2026. I would now like to turn the conference over to Andrew Tamlin, Chief Financial Officer. Please go ahead, sir. Andrew Tamlin: Thank you, and good afternoon, everyone. My name is Andrew Tamlin, Chief Financial Officer of Morguard REIT. Welcome to Morguard REIT's first quarter 2026 earnings conference call. I am joined this afternoon by John Ginis, Vice President of Retail Asset Management; Tom Johnston, Senior Vice President of Western Office Management; and Todd Febbo, Vice President of Office Asset Management, Eastern Canada. Thank you all for taking the time to join the call. Before we jump into the call, I would like to point out that our comments will mostly refer to the first quarter 2026 MD&A and financial statements, which have been posted to our website. I refer you specifically to the cautionary language at the front of the MD&A, which would also apply to any comments that we would make on this call. Our first quarter results were in line with expectations and consistent with last year's results. We have seen some softness in the office net operating income from two larger tenants that have given back space in Ottawa and Vancouver in recent months, but this has been mostly offset by improved retail results coming primarily from our enclosed model asset costs. The REIT's net operating income for the first quarter was $25.6 million, which was down slightly from $25.7 million in 2025. While we are missing the income from the two failed Bay stores, which form part of the 2025 results, we have had some good success in adding other quality tenants in the last 12 months throughout the portfolio. Further, positive leasing spreads throughout 2025 have also helped to improve the retail net operating income. Our community strip portfolio continues to produce solid same-store growth of 2.2%, allowing for one asset with a failed Peavey Mart, which I'll discuss in more detail later on. Just touching on the two Bay stores that we received back in 2025, at this point, we are focusing on short-term options for these two spaces. It will take some time to sort through these former Bay tenancies at Cambridge, and we are dedicating more focus to the broader redevelopment going out at St. Laurent, rather than the specific Bay vacancy at the site for now. Notwithstanding the failure of the Bay, there are still lots of positives in the retail sector. There remains lots of good conversations involve -- involving well-known national brands. It still remains expensive to construct new retail space, and hence, a lot of retailers are looking at options of existing space. The decline in office net operating income is primarily attributed to 84,000 square feet in space that was returned to the landlord in two separate occasions in the last few months. These two assets were located in Ottawa and Vancouver. All of our other office assets are seeing either similar or improved occupancy from a year ago and is consistent with the general theme of companies imposing back to the office policies. We believe these two vacancies will be short term in nature as both buildings are well located in favorable urban areas in these two cities. Our teams are focused on leasing opportunities in these areas. Just commenting quickly on our Penn West Plaza -- at our Penn West Plaza asset, our occupancy for this asset is still in the range of 80%, which we are pleased with. We are expecting net operating income for this asset to be approximately $2 million higher in 2026 than 2025, all to be reflected in the final three quarters of the year. This relates to some inducements booked in 2025 to gain tenancies that have started to burn off. Our leasing teams have noticed increasing interest in tours from office space in major urban areas as companies continue to push their employees to get back in the office. We are cautiously optimistic that this will translate into future office leasing deals into 2026 and 2027. Looking at the remainder of 2026, we do expect our retail results to remain stable. While we have a full year of the missing Bay income to work through, we are still seeing positive retail fundamentals, and there are some retail developments that we were working on, which I will touch on in a few minutes. We are expecting to see some continued softness in the office members in 2026 as we work through the vacancies in both Ottawa and Vancouver. Turning to financing and liquidity. The trust is $61 million in liquidity at the end of the year -- at the end of the quarter, which is down from $68 million at the end of 2025. The trust also has $218 million in unencumbered assets, along with some up financing opportunities in 2026. The trust interest expense declined $400,000 in the first quarter of 2026, mainly due to some lower interest rates on mortgage renewals. So far in 2026, the trust rated two mortgages totaling $27 million, lowering the interest rate from an average of 5.4% on these mortgages to an average of 4.7% on renewal. The trust has approximately 22% of its debt is variable at the end of the quarter, which has increased slightly from 21% at the end of the year. We do expect to see some opportunities for up financing in 2026 as we are currently in discussions with a number of lenders about these mortgages -- mortgage renewals. In general, we have seen this market open up more in the last year with lower spreads, especially on attractive assets along with lenders being more open to looking at lending opportunities for office product. As mentioned in past quarters, the trust's operating capital reserve has been established to be $35 million in 2026, which is unchanged from 2025. This equates to $8.750 million per quarter. Actual cash spent for the quarter amounted to only $3.4 million, which is typical to have a slow quarter of capital spending during the Canadian winter. Our overall occupancy level of 84.8% at March 31, 2026, has declined from 87.7% a year ago, due primarily to the Bay failures at Cambridge and Ottawa in addition to the office vacancies that I mentioned previously. We do expect this percentage to start to rise in the coming quarters as additional leasing deals get booked. When looking at the 1 million in remaining square feet that's coming up for renewal in the last three quarters of 2026, we do feel good about the vast majority of this space. I note that there are two retail tenants between 10,000 and 15,000 square feet each, along with the 35,000 square foot industrial that we anticipate will not be renewing. We do not anticipate that the retail vacancies will have much of an impact on our overall net operating income, and we do anticipate finding a replacement tenant for the industrial building in short order. Looking quickly at 2027 for the same tenant threshold. It is a similar story with only a couple of smaller office industrial type tenants that are at risk, none of which will be overly impactful. As mentioned in past quarters, we are now embarking on a strategic merchandising program for St. Laurent, which will see the addition of some new nationally recognized brand names being added to the tenant roster along with expansion plans for other tenants on the existing rent roll. The current development spend in the amount of $6.2 million includes build-outs for tenants such as Sephora and H&M. These are all now open, and we have received very positive reviews about their impact. We ultimately expect to spend in the range of $25 million to $30 million as we look to add more discriminating tenants and also look to activate the former Sears space at St. Laurent. We are looking to announce the next phase of this project shortly, which will continue to offer traffic generating mix of tenants to this asset. The trust also has had two No Frills grocery deals, which have been undertaken. During the fourth quarter of 2025, a new No Frills grocery store opened at Parkland Mall in Red Deer, and we are now seeing the income for that space. This cost was $1.5 million and activated previously vacant space. There is also a new Frills opening at the center in Saskatoon, an early center with a cost of approximately $5 million. The trust believes that both of these new popular grocery options will be strong additions to these malls. The trust will also be retenanting the old Peavey Mart box at our open-air retail asset Airdrie. The new tenant will be a gym operator and will represent a combined spend of approximately $1.5 million and will be quite accretive to the income of the REIT starting in 2027. Wrapping up, we continue to believe that there are strong fundamentals in the retail leasing environment and that the office fundamentals have changed for the better. We are looking forward to continued positive leasing conversations for all of our assets. Most of our enclosed malls remain dominant in their geographical area and our strip malls, which are largely grocery-anchored, have performed steady. Beyond our retail assets with high-quality office buildings in Canada's largest markets with a high degree of government office tenants. We continue to be positive about our business and the objective of building value for our unitholders. We look forward to continuing to execute our strategy, and thank you for your continued support. We will now open the floor to questions. Operator: [Operator Instructions] Our first question comes from the line of Linda Wang from TD Cowen. Linda Wang: This is Linda Wang on for Jonathan. So my first question is for the $159 million convertible debenture that's maturing at the end of this year. I was wondering if you could please provide some details on the plan for this amount. Andrew Tamlin: Thank you for the question. We're looking at doing a new issue for those debentures at some point later this year. It will be at an interest rate higher than the existing rate, but we are forecasting really just to do a new issue approximately the same amount, give or take. We'll be monitoring the market and that will be instructive as far as when we're going to be doing that. Linda Wang: Okay. And then on the office vacancies in Vancouver and Ottawa that you mentioned earlier, I was wondering if you have a time line on the backfill of those spaces? And then also specifically for the office portfolio, if there's any other similar downsizing or any material nonrenewals for the remainder of the year? Andrew Tamlin: I would expect we'd be able to fill those vacancies in the next year or two. It's -- these are going to be pretty good areas and will be in demand. So they shouldn't be open for too long. And there is nothing else that we're really worried about from an office perspective. I've just mentioned a few retail tenants that will be vacating. But on the office side, we feel pretty good about everything in the next year or so. Linda Wang: Okay. Sounds good. And then on the HBC location, I believe -- and I believe John mentioned during the last call, and you mentioned earlier that you can expect like a short-term lease. I was wondering if you have any updates specifically relating to that? And then also any updates on the long-term plan? Andrew Tamlin: Do you want to take that, John Ginis? John Ginis: Sure. Thanks, Andrew. Hi, Linda. So with respect to Ottawa, starting there, St. Laurent, we have executed a deal to backfill the lower level of the former HBC box with Urban Behavior. They will took occupancy actually today, and they should be open and operational within a matter of 3 to 4 days. Just as a reminder, they have been an occupant of ours at the shopping center in our former Sears. They have been operating there for about 4 years and have performed quite well. So retaining them was true their benefit and our benefit as well. Andrew spoke in his introductory remarks that we are looking to announce remerchandising of the former Sears premises. We'll talk about that in Q2. For the upper level of the former Sears, we're working through a transaction right now to lease that space and again, hoping to announce that in Q2 as well. You want to pivot to Cambridge. Cambridge two-level space, albeit it is a single-level mall, so it's a little bit more difficult to lease both levels. We are currently working through a transaction to lease the lower portion of the HBC space there. I can't give any specifics right now, but we're working through some documentation as we speak. Linda Wang: Okay. And then one last question for me. On the renewal for retail space in Q1. I believe the uplift on renewal was negative 9% for the enclosed regional centers and plus 2% for the community strip centers. I was wondering if there's any particular reason that drove this to be lower than 2025 average uplift? Andrew Tamlin: Yes. We typically see a trend like that in the first quarter, and it's really a function of some of the Christmas-type tenancies that are coming off the roles. So it's -- I would call that more temporary than anything. Linda Wang: Okay. And then I guess for the remaining, like the upcoming quarters, we can expect similar uplift compared to 2025 then? Andrew Tamlin: I would be expecting uplifts. I can't -- it's tough to put a number to it, but, yes, what I would say is that I don't know that -- we're not anticipating is what we're seeing in the first quarter will continue for the rest of the year, and this is more of a short-term seasonal trend. Operator: There are no questions at this time. Mr. Tamlin, please continue. Andrew Tamlin: Okay. Thank you, everybody, for joining the call, and we look forward to talking to everybody in Q2. Thank you, and enjoy the weekend. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, and welcome to Poolbeg Pharma PLC Full Year Results Investor Presentation. [Operator Instructions] I'd now like to hand you over to Jeremy Skillington, CEO. Good afternoon, sir. Jeremy Skillington: Good afternoon, and thank you for the introduction. I appreciate everybody joining us this late afternoon. Finally, a bit of a sunny Dublin. It's -- bleak winter is over. And we're delighted here to be able to present on the back of our full year results announced this morning, company update, company presentation and let you know where we are with particularly POLB 001 clinical trials. So again, appreciate you joining us this evening. And I'll be sharing presentation duties tonight with Liam Tremble, our Principal Scientist, who will talk more of the POLB 001 clinical trial attributes. So just to give a setting, just a grounding, a reminder, Poolbeg, we're a clinical-stage company developing POLB 001 that we believe has the potential to transform the lives of cancer patients by delivering these cancer immunotherapies in particular safely and locally. There's a big unmet need. There's a lot of issues around Cytokine Release Syndrome associated with cancer immunotherapies, and we believe we have a solution for that. We'll talk a little bit more about the scientific and medical rationale for that later on. We're also developing an oral medication for obesity treatment, we'll touch upon later on as an oral GLP-1. Again, very exciting space to be in. We are an AIM listed company, listed in London. And we believe we've got a strong investment case. We've got a terrific team here behind us, both on the, as I said, the clinical business development, which will be critical, and I'll talk a lot about that and, of course, on the corporate and finance side as well. The clinical -- stage programs we're developing, getting into the clinic, these are clear large unmet medical needs and large, growing markets. We've done an in-depth analysis, particularly on POLB 001, again, we'll touch upon later on. So very excited about to get these moving forward. We have financial runway into 2027. So we've got several key clinical inflection points coming up. So we're funded through these clinical inflection points and into 2027. And that gives us scope then for partnering, for collaboration and licensing discussions. So again, we have had many discussions with potential partners over the last several months. Again, I'll touch upon those later on. So there's a strong interest in what we're doing. So a strong potential to secure partnerships. Of course, what comes with that is financial revenue, and we'll touch upon that later on. So right now, we're certainly in clinical development execution mode, particularly with POLB 001. But over the last 6, 9, 12 months, we've been gearing up on the partnering aspects, talking to a lot of big pharma companies, midsized pharma companies, and again, pitching and promoting Poolbeg. We've got high-value programs with strong IP. Those of us -- those of you who have kind of followed Poolbeg have seen the RNS that's talking about IP grants, very important in this industry. The proof-of-concept clinical trials we touched upon are ready to be done, touch upon the timing on that later on. And what we've built thus far with regard to the programs, we've got very high-quality and compelling human data in the POLB 001 setting. Again, touch upon that, Liam will cover. So again, our discussion with partners have gone exceptionally well. They're very keen, obviously. They see the value inflection point, and the derisking episode will be the clinical data that will read out in the summer of this year. A summary of what we announced this morning in our annual results. So we believe 2025 was a transformative year for Poolbeg. We really got ourselves kind of focused and driven and aligned with not just the market, but the clinical community as well, the Cytokine Release Syndrome community in the cancer immunotherapy space. We finished the year with GBP 7.7 million in cash, again, a healthy cash position. That allows us, as mentioned, to execute on our clinical development programs. The first bullet here, we have the TOPICAL trial, is fully prepared. And with that, that's the POLB 001 CRS prevention trial. We've appointed ACT as the clinical trial executor, the CRO that will run the trial. We've had fantastic discussions with Johnson & Johnson, and they have agreed to supply us with their approved bispecific antibody teclistamab. And they've given that to us at no cost because, obviously, they're keen to see the reduction in Cytokine Release Syndrome or CRS with teclistamab. And we've enrolled now -- we've lined up 6 U.K. cancer centers to be part of this clinical trial, and we've finished the protocol and we've gotten MHRA approval, which is very important to allow us to start dosing patients. Importantly, during 2025, we've got Orphan Drug designation from the U.S. FDA. So again, they recognize the scientific validity of what we are doing, what we are trying and reducing CRS. It is linked to patients who will receive these T cell engagers. And these are wonder drugs that are now demonstrating cures in these blood cancer patients such as multiple myeloma. So again, they're very good to get that. There's a lot of additional bonuses that comes with that, we'll touch upon later on. But certainly, from a partnering standpoint, that actually adds a lot of value to the program when it comes to talking with a big pharma company. So intellectual property is very important for this industry. It protects the programs as we get to the market. It doesn't allow any competitors to invade our space. We did get multiple patents granted last year. Many of you know, in the hypercytokinemia or the severe influenza space, we've been progressing down those roads for many years. But importantly, we got our first patent grants earlier this year in Australia when it comes to the cancer immunotherapy and CRS aspect. So very happy with that. And again, that helps bolster the discussions with pharma companies when they know that the program is protected. We also generated last year positive in vivo data, again, demonstrating that we can impact Cytokine Release Syndrome in an in vivo model. Liam will talk later on about a very exciting program we have in collaboration with Johnson & Johnson with the University of Manchester, that's looking into broader research into the immunology around Cytokine Release Syndrome. And then lastly, making progress on our oral GLP-1 program, which is now expected to start in the second half of this year due to the revised manufacturing lead time. I will highlight that last year, we were, again, very delighted to fund-raise GBP 4.865 million from the market. Tough conditions in the market, but I think the investors saw the potential of what Poolbeg is doing and what we can bring to the market. And speaking of this market, we've done some independent analysis where we see that preventing CRS in these cancer immunotherapies is a market opportunity of over $10 billion. And we'll talk about the details around that later on. When it comes to 2026, this year, again, we are at full pace right now. It's a full-steam-ahead situation. As I said, the first 4 months or so of this year has been, again, very productive from a Poolbeg standpoint. I mentioned the patent grant, and again, that's in the cancer immunotherapy space, which again adds validity to the program that we're doing. And again, we're hopeful that there will be many other opportunities to announce patent grants in other territories as we're going forward. We are, as I said -- have a wide patent application in various territories and they're moving through the processes there. It can be kind of a long process, but I think we're encouraged by the responses we're receiving from the various PTO organizations and the EPO organizations going through. Again, exciting this year, we've -- our LPS challenge study. This is our Phase Ib study that again was a very successful study run in the Netherlands. We were able to get peer-reviewed data published in that. And again, this peer-reviewed is important because as people look at the data, they look at the paper itself and they saw worthy of publication. We've gotten some very good feedback from that. And that springboards us then onto -- into the CRS prevention study we're talking about. When we see prevention of that inflammatory response in the LPS challenge, we're hopeful that we'll see a similar prevention of the inflammatory response when it comes to Cytokine Release Syndrome that's caused by these cancer immunotherapies. We're very excited. We had several discussions last year with Dr. Adrian Kilcoyne. He's an expert in the Cytokine Release Syndrome space. He's had many, many interactions with the U.S. FDA around developing clinical trial programs around CRS. He came onboard to join our Scientific Advisory Board and is now a very active member of our development team when it comes to planning what the future holds for CRS clinical trials. I mentioned we got MHRA approval this year as well. Very exciting. Again, it's a rigorous process where they take and review all of our data, clinical and preclinical. As I say, it's a very high bar for any drug to get into human clinical trials. So the MHRA gave us that approval in the past few weeks and we've announced at the RNS. And that gives us the green light to progress and move into the clinical studies that Liam will talk about. Again, we want to make sure, when we're talking to partners, we want to make sure -- or we make sure that they're aware that this is a significant market opportunity. So to achieve that end, we've had independent analysis done where we look at the market, the Cytokine Release Syndrome, the incidence that occurs in the various bispecific antibodies and CAR T cell therapies, these T cell engagers. And the impact it has on the health care system, the impact it has on patients, what it costs for the health care systems. So again, we were able to do an in-depth analysis looking at -- it's a multibillion-dollar peak U.S. sales potential stand-alone. So we spoke to 3 different payers talking about CRS and our program, and they're very enthused that this is a drug that they would happily reimburse if and when it gets onto the market because they see CRS is a cost drain for them as an insurance company. So they'd like to get rid of that. And as you know, we're talking about prevention of CRS. So I think it's a very important goal, a very important goal that we want to achieve here. And it's very well received by these insurance payers both in Medicare as well and Medicaid. Again, momentum in partnering has accelerated. As we get closer to the clinic, it's becoming more kind of apparent. What we have here is a very exciting program, as I mentioned, some of the large pharma companies and more midsized companies that maybe are in the more cancer supportive care area specifically. So they're all very excited to wait and see what this data hold, this clinical data hold as it reads out. And as I said, we've got multiple upcoming milestones in the near future. So again, I talk about momentum, I talk about running at full speed. So as I say, the POLB 001, the trial site initiation visits have been scheduled. So these are the 6 sites that we've -- are going to run this trial in the U.K. It's going to be led by Dr. Emma Searle at The Christie in Manchester, and she's brought some of her hematology colleagues onboard to be part of this clinical trial. So very excited to get that moving. As I say, the next step then is trial -- patient recruitment and dosing, so basically getting the patients onboard, these multiple -- these relapsed/refractory multiple myeloma patients, get them onboard and get them dosed, to get the clinical trial to -- the clinical trial up and running. But we always comment that like 80%, 90% of the work is done in advance of dosing patients. So we've come down the road quite a long way. So we're very excited to be at this stage right now. So again, we're looking to have this interim data, the POLB 001 CRS prevention data, in the summer. So again, it's linked to the patient enrollment. These are very short clinical trials Liam will speak to, so we should have data relatively rapidly out here. And then the second half of the year, we're looking for to commence our oral GLP-1 clinical trial. I'll talk a little bit about that later on. So fantastic, exciting time for the company. Again, very productive 2025, very productive first 4 months of 2026. So we're excited to be progressing this forward, and again, generating that key data, which will be the value inflection point, really derisking the program. And then transactions and collaborations, license agreements will follow from there. So we're very excited to be in the space. And again, thank you for attending this evening. Liam will present on the POLB 001 program. I'll return in the end and talk about the market opportunity and the oral GLP-1 program. And then we will open up the floor for questions. So again, thanks for your time right now. Liam, over to you. Liam Tremble: Brilliant. Cheers, Jeremy. So just I'm going to do a brief introduction to POLB 001. But before we jump into the asset itself, I want to give a little bit of context of where the field has come. So obviously, over the last number of decades, a massive amount of progress has been made for cancers. It's not been symmetrical. Some cancers have had significantly more progress than others. But if we look at something like multiple myeloma, it's really been a poster child for where significant progress has been seen. So for somebody diagnosed 23 years ago, 2003, 5-year survival, 10-year survival really wasn't that great. 30%, 5 years; 10 years, about 20%. And it's because the treatment options really weren't that effective. And a lot of these you might be a little bit familiar with: pomalidomide, chemotherapy, corticosteroids. They didn't do a massive amount for all patients. Fast forward 20 years and the progress has been exponential. If you're diagnosed now, 5-year survival rate is well over 80%, or estimated; 10 years, well over 60%. And I say estimated because the progress is so quick that the pace of clinical trials is faster than the survival data we have from those clinical trials. So at the moment, in multiple myeloma, we've obviously -- we've had immunotherapies be approved in the last number of years, so CAR T cell therapies, bispecific antibodies, but also a number of other therapies like antibody drug conjugates, proteasome inhibitors. It's quite common now for multiple myeloma patients to actually get quadruplet therapies as first line or even quintuplet now because the therapies are so effective. And a lot of the projections, so this is a disease with a median, so 50% of people get it age 69 or older. And some of these frontline therapies have median progression-free survival projected to be up around 15 years. So really in myeloma, you're at a position where people are discussing functional cures where really patients will pass away from old age rather than their disease. And that's what we're ultimately trying to achieve for all cancers. What's important about this is that when we get to this stage where multiple effective options exist, patient preference has a significant impact on market uptake of the drug. Patients don't always go for the drug with the best overall survival. They also consider things like time at home, treatment time, having to travel to hospitals. Some of the tolerability issues can be quite significant for these drugs. The immunotherapies, for instance, have a lot of severe infections that can happen for years afterwards. So they all have a very meaningful impact on what drugs patients actually decide to take. So for these CAR T cell therapies and bispecific antibodies, they really are revolutionary. For the CAR T cell therapies, are potentially curative in some patients. And it's really making sure that they are accessible to all patients. So if I zoom in on the bispecific antibodies, these are breakthrough immunotherapy as well. And they're extending into early lines of therapy. As I'll show you on some of the later slides, at the moment, they have to give micro-step of doses. And it's quite common for patients to be hospitalized for 5 to 10 days just for these initial doses because of the risk of CRS. So they have a significant amount of time in hospital just to get on to these therapies. And then obviously, they have downstream infection risks as well. So a lot of these therapies as well are restricted to specialist cancer centers who have the expertise and the tools to manage these patients. It depends on what country you're coming from, but in some countries, this is a very significant obstacle to accessing these therapies. Particularly in the U.S., people talk to things called treatment deserts. It's where patients can live hundreds of kilometers and miles from their nearest hospital who can administer these therapies, and really is a significant issue for a lot of late-stage patients. So CRS, as I mentioned, is a major barrier for some of these immunotherapies to become more widely available, with over 70% of some patients being affected on the immunotherapies, and hospital stays due to the risk of CRS may negatively affect the uptake of these therapies themselves. So the next slide. So just zooming in on that for 2 seconds. So on the left-hand side of this slide as well, we've shown a simple diagram to have these therapies and how 001, POLB 001, could change the treatment paradigm. So the current standard of care, on the left here, is typically a patient will come into hospital, they will get their immunotherapy. And the immunotherapy will actually activate their immune system. And what this induces is Cytokine Release Syndrome. And the risk of Cytokine Release Syndrome or indeed CRS after the onset can result in significant hospitalization for these patients. So it can persist for days to weeks. And in severe cases, it can mean that the patients have to discontinue the immunotherapy, so they have to opt for something else. And obviously, they lose time between these different choices. So it's really important that when patients do opt to go on to a therapy, that they can continue with it. If we bring in 001, potentially, we have something where they can take orally before they have the immunotherapy. They come into the hospital, they are administered it. And rather than the immunotherapy causing activation of the immune system, we still allow activation of the immune system, but it doesn't cause Cytokine Release Syndrome. And if we're able to avoid Cytokine Release Syndrome, then we can potentially prevent this hospitalization and make this step onto the treatment a lot more manageable and feasible for the patients themselves and for the health care systems that have to deliver it. So just zooming in on POLB 001 a little bit deeper. So it's a p38 MAP kinase inhibitor. What this means is that it selectively prevents excessive inflammation without immunosuppression. So compared to some other drugs, they completely block a pathway. Actually, p38 is kind of like a master inflammation switch where if you activate p38, you can get global expression of a lot of pro-inflammatory cytokines, which are things that cause CRS. If you don't p38, actually the production of these falls 80% to 90%. So the drug itself is an oral agent, again, particularly important where we positioned this as a prophylaxis. It really needs to be easy for the patients and the hospitals to administrate. And we have a strong patent portfolio with potential coverage out to at least 2044. So we do have a strong preclinical and clinical data package to date. So favorable safety and tolerability profile, which again we think is really important as we move into this indication. And we have potential inhibition of IL-6, TNF and other key inflammatory markers. IL-6 and TNF we mentioned because we know these are the main drivers or significant drivers of the Cytokine Release Syndrome itself. So as well, Jeremy will go into later in the presentation that there is a very significant market opportunity behind this drug. So over USD 10 billion market opportunity. There isn't anything approved in the preventative setting and there's a growing number of these drugs that induce CRS and they're going into earlier lines of therapy. So this problem is only becoming much, much more significant for hospitals across the world. So at the moment, these bispecific antibodies will only be delivered in specialist cancer centers until there's a way to make them safer and easier to deliver. And POLB could make that treatment safe enough to extend bispecifics to a much wider treatment population. Just there in the bottom of this slide, so we have engaged a lot of key opinion leaders on this who also believe in the program. And that's Gareth Morgan from the U.S. Just to show you some of the data that we've presented before. So the last clinical trial that POLB 001 was in was an LPS human challenge trial. So this is essentially where you use a pro-inflammatory stimulus, LPS. It's a component of the bacterial cell wall that induces a mild inflammatory response in patients. So we can give this to healthy volunteers. It stimulates the immune system very similar to the way the immunotherapy would. And they get something that approximate Cytokine Release Syndrome. So it's an incredibly strong model for us to test the efficacy of POLB 001 in. What we also saw in that trial was that POLB actually had an excellent safety and tolerability profile, as we expected. We were able to confirm potent target inhibition, that's the p38 MAP kinase. And we had a clear dose response relationship observed, which is really important from a drug development perspective. And then we also, from a CRS perspective, had a major reduction of key inflammatory cytokines. On this slide, we're showing IL-6 and IL-8. So just briefly, this LPS challenge trial was placebo-controlled and had 3 different doses of POLB 001. So the gray line, as indicated underneath, is the placebo. The green line is 30 mg of POLB 001 given twice daily. The blue line, again, twice daily 70 mg, and the red line is the highest dose of 150 mg POLB 001 given twice daily. And what we can see in the graph is that actually, if you just give placebo with the LPS challenge, you see this spike of IL-6 and as well, on the right-hand side, IL-8. But actually, as we introduce increasing concentrations of POLB 001, we see a suppression of these increases, which is exactly what we hypothesize it will do in Cytokine Release Syndrome. So the lowest dose produced a small decrease, but the 2 upper doses, actually you can see, they almost overlap, and this is probably the maximal inhibition through p38, where the inhibition is in the region of 85% to 95%, which is really promising as we move forward into further trials. So we have the potential to effectively prevent Cytokine Release Syndrome while preserving key immune system functionality. I think that's a key element that we always have from clinicians in that a lot of the existing drugs and that completely blocked pathway, they have their downsides. They often induce cytopenias or other adverse events, which really isn't preferable in an indication like this. So as Jeremy mentioned, we are really excited at the moment. We recently announced that we have all the approvals in place to start dosing patients, and the trial is moving forward at speed. So POLB 001 first-in-patients TOPICAL trial, and it's being conducted in the U.K. So it's a trial of prevention of immune cytokine adverse events in myeloma. It's being led by Dr. Emma Searle, who's a leading hematologist based in The Christie Hospital in Manchester. And it's being run by Accelerating Clinical Trials. Again, we've previously spoken about this to the market, that this is a specialist blood cancer organization who are equipped to run trials in the U.K., in these clinical trial centers that we're tapping into to recruit these patients. It's a really strong team who know the sites, who know the investigators, who are equipped to really accelerate this trial the way we need to. And the objective of the trial is to investigate the safety of POLB 001 and also the efficacy, in particular, its ability to reduce the incidence of CRS in patients receiving an approved bispecific antibody, teclistamab. Teclistamab being an immunotherapy that induces Cytokine Release Syndrome. So we'll have approximately 30 patients, and we will be recruiting a patient population of relapsed/refractory multiple myeloma patients and receiving this antibody. So we are really excited. All of the leading sites in the U.K. are really participating on this trial. So it's been led by Dr. Emma Searle, as I mentioned, at The Christie. But also we have UCH, we have The Royal Marsden, Birmingham, NHS North Midlands, Royal Stoke and Edinburgh. And so we have an exceptionally strong team that we're really optimistic that we can complete this trial quickly. Just a little bit more detail about the actual trial itself. So this is the design of the trial. On the top left, this schematic is showing the trial design. So I mentioned with the bispecific antibodies earlier in the presentation that they're getting step-up of micro-doses. So if you were to give a full dose of these bispecific antibodies, what would happen is you'll activate your T cells, you get other immune cells activated, you get overwhelming Cytokine Release Syndrome, which could potentially kill patients. The only way at the moment to deliver them safely is to give these micro-doses. And the micro-doses are there to give the body a small exposure to cytokines. And the body needs to get used to seeing these cytokines without inducing severe CRS. And once the body has seen the cytokines once or twice, actually then they can go forward with normal dosing. But these step-up doses are critical purely to mitigate the risk of Cytokine Release Syndrome. These typically happen over a 5 to 8-day period. During this period, patients are typically hospitalized, depending on the cancer center that they're in. And so what we're trying to do in the trial is we are going to pre-dose POLB 001 for prevention from before that first step-up dose until after the first dose. So here in the schematic, that would be indicated on day 1, 4, 7. So we'd be dosing. Actually 96% to 100% of all the Cytokine Release Syndrome happens in that period. And that's the period that's really hard for clinicians actually managing these patients at the moment and is mandating the hospitalization. So twice daily oral dosing of POLB 001. It's a single-arm trial, meaning no placebo. But we're really trying to get the evidence of efficacy as quickly as possible, so we want to give everybody our drug. 30 patients, as I mentioned. Teclistamab, really promisingly, is being provided by J&J. And it's an open-label trial in that all the patients know that they're getting POLB 001. So we're really excited that we have fantastic investigators. We have the collaboration with J&J. And we have the right team to really deliver this trial quickly. And the protocol has been finalized. All the regulatory approvals are in place and site initiation deals are scheduled, and patient recruitment and dosing to commence shortly. And we hope to be able to give further updates as we go. The key endpoints, as I mentioned: incidence of CRS, severity of CRS, confirmation of the safety and pharmacokinetics. That's more just to make sure that the drug, as I mentioned, is exposed to patients at the right level. And then obviously, CRS management and tocilizumab usage. CRS management, what we mean is the duration of hospitalization. So everything to do with the current challenges of managing CRS to be managed or measured in this trial. We have a great team of investigators. We have J&J. That's because there is a massive amount of excitement about this program. If we can find a drug that really solves the CRS problem, I think a lot of people realize the potential of it. So there's also been a GBP 3.4 million grant to the University of Manchester and The Christie. The program is called RISE. So RISE is about reducing immune stress from excessive cytokine release with advanced therapies. And it's being led by the University of Manchester and NHS Christie Trust, where we're the lead site on the TOPICAL trial, is the clinical lead. We are the lead business partner because we are experts in Cytokine Release Syndrome at this stage. And J&J are an industry partner providing teclistamab for it as well. So it's being led by a fantastic cell therapist who delivers solid cancer cell therapies to patients, Dr. Jonathan Lim. He's a Clinical Senior Lecturer and Honorary Consultant Medical Oncologist at The Christie and the University of Manchester. So we really have a multidisciplinary team. And the whole idea of this grant is actually to research things of this is an on-target effect of immunotherapy. So there's nothing surprising that these immunotherapies induce Cytokine Release Syndrome. It's predictable. We know the mechanism, we know the triggers. We know how to potentially prevent it. But that's a great opportunity to learn more, to really research this in the clinic. So POLB 001 is going to be a key element of the overall research grant for preclinical and clinical, but the TOPICAL trial itself will be a central focus of it. So we'll be generating additional clinical evidence as part of this on CRS from bispecific antibodies and CAR T cell therapies. Because as Jeremy will have mentioned before, there is a major commercial opportunity for the prevention of CRS related to CAR T cell therapies as well, not just bispecific antibodies. And so this is real significant recognition of the unmet need in CRS, and it's something that we're really excited for. We do expect if there's positive results from this trial, that the interest in the program is only going to grow. So we're really excited moving forward. And with that, I will hand back to Jeremy. Jeremy Skillington: That's wonderful, Liam. Thank you for that. I think it's a very nice segue as we do talk about the market opportunities. So as I mentioned at the outset, we've done a lot of work trying to assess what the global CRS market looks like. We've taken on board some consultants to get that independent perspective. And I'd say it's a very important acknowledgement when it comes to the partnering and partnerships, kind of what the value we're bringing to the table is here. So as I say, we're looking, from our analysis, about a $10 billion market opportunity. And I'd break that down as to how we came to that number briefly. But I just want to flag that for both bispecifics and CAR T, these are quite expensive drugs in their own right. But as Liam mentioned, we believe that these are life-saving drugs. Sometimes there's cures observed. But for CAR T, now it's more of a laborious approach where you take a patient's T cells out, you re-engineer them, and you introduce them back in, and they're bringing the immune system closer to the tumor. And these are quite expensive. But as I said, these are reimbursed in the U.S. by the American insurance companies. When you look at bispecific antibodies, it's slightly less, but it's still a significant cost to the insurance companies. Now what we did with this analysis is that we narrowed in on 2 different tumor types, 2 different blood tumor types: diffuse large B cell lymphoma and multiple myeloma. And if you look at the markets in the U.S. and the European 5, the incidence of these diseases, they total to about 500,000 patients between now and -- between 2023 and 2030. So the market is kind of large. Market is growing. But what we did when we looked at what would we charge, what would we charge the insurance companies for POLB 001, we looked at a very interesting and probably very appropriate comparator. This is a drug, Neulasta, which is used to treat neutropenia. So when patients get chemotherapy as an example, then they get -- they're obviously trying to reduce their tumor burden, but it also reduces a lot of their kind of white blood cells. So this Neulasta brings those back up. When that was launched many years ago, it was introduced in at about $18,000 per cycle. So we kind of took that realm, that POLB 001 could be in that. If you take roughly $20,000 by the 500,000 patients, then you're looking at a $10 billion market opportunity just for these 2 tumor types and for these 2 markets, the U.S. and the EU 5. And obviously, we could go broader than that. We've mentioned a few times that CAR T cell therapies, bispecifics are now moving more into solid tumors, so there's an opportunity there where CRS is also observed. And interestingly, looking into autoimmune diseases. But that's a story for another night. But as I say, we're looking to prevent CRS from happening in the first place. And I think that if we -- this is where we got J&J's attention, for example. And I'll talk a little bit later on about our partnering initiatives. But they got the attention. To prevent is obviously better than cure. It's an old statement that's well worn. But they see that if we can prevent CRS, then they can get their drug, their bispecific antibody, as an example, into community hospitals, getting it away from these dedicated cancer centers. Because you need people on hand to manage the CRS, but if the CRS isn't there, then we're in a fantastic situation. So as I say, it is a cost to insurance companies, cost to the health care system. We talk about Grade 3 CRS actually costing greater than $70,000 as a management, as treatment. But of course, let's not forget the patients who have to go through this issue. So there's many things at play here. But more recently, this is the most recent piece of work that we did that was very enlightening, where it's one thing about understanding the patient population, these multiple myeloma, diffuse large B cell lymphoma, but we needed to talk to ultimately the payers. These are insurance company. We looked at the U.S. because that's the large and major market. And we partnered with Acumetis Global. So they held 3 different payers that cover 75 million lives in the U.S. They introduced them to POLB 001, the target product profile, what it is, what it does, what it's intended to do, and asked about payments. "What would you be willing to pay for these drugs?" And I think there's a -- it's quite a long quote here. I won't go through it all. But it was very clear that there's a willingness to pay for a commercially meaningful price for POLB 001. Because they know the offset. They know that they can -- patients will spend less time in hospitals, so overall their insurance burden is less. It's obviously beneficial for the patients. But it takes the pressure off the health care system as well. And maybe it spreads a little bit thinner. Instead of these patients being in these dedicated cancer clinics, they can go kind of outside to their community hospitals. And that's really where people are attempting to go, have the treatments on your doorstep. And I think from a psychological standpoint, these patients are already going through cancer treatment, but if they can get it closer, their treatments closer to home, all the better off because they'll have family support networks around. So as they say, they see that POLB 001 is a compelling CRS solution with significant market potential. So that was obviously music to our ears when we -- we kind of believed in the program, but to see it in black and white that the payers would be willing to pay was very exciting and very gratifying, I must say. But again, from the market opportunity, and I've outlined this already, so 500,000 patients. There is that bottleneck where they can't get access to the drug rapidly because beds are being taken up in the CAR T setting. As I say, if you can remove CRS, then you can open up this. And we've talked, as Liam said, many key opinion leaders, thought leaders in the space, multiple myeloma docs. And they're all echoing the fact that if you can reduce or eliminate CRS, then a whole load of infrastructure falls away. Their lives are easier, the patients' lives are easier. And as I say, we now, we're confident that the insurance companies are willing to pay for the drug as it goes forward. So again, very exciting time for the company. Again, there is -- I see a question coming in about partnering, so maybe I'll address that right now. With my background, I'm a scientist by training, but in the industry, I spent a lot of time on business development in the partnering setting. So we spent the last, in particular, the last 9, 12 months really focusing, ramping up the partnering, as we're getting closer to the clinic, that laying the groundwork, talking to the big pharma companies, as I said, the midsize companies, about 001, what we do. We've caught a lot of attention. And I think that happens, and it's not by coincidence, that it's closer to the clinic, because then there'll be a data readout, and as I mentioned, a derisking readout. So again, people appreciate that there are more and more cancer immunotherapies coming to the market, and CRS is still an issue with them. Pharma companies are looking to fill their own pipeline as well with new programs coming through. And that's all linked to the patent cliff. I mean it's been shared that GBP 300 billion in annual prescription drug revenue will fall off because of patent cliffs. They'll be substituted by generics. So pharma need to kind of boost their bottom lines, so they get more drugs into their pipeline. But I think when we talk to the smaller companies and show that we can have POLB 001 in combination with any and all CAR T or any and all bispecific, they see this as a significant market opportunity. So over the last, as I mentioned, 9, 12 months, we've attended a lot of conferences. JPMorgan in San Francisco this year was particularly productive. Again, face-to-face meetings with decision-makers at pharma companies. We attended BIO in Europe, LSX as well. And these are, again, lots of partnering meetings talking about POLB 001. Just last weekend, Liam and our clinical colleague, Mina, attended the British Society of Hematology, meeting directly with our investigators, again, building momentum on that front. And then in the near-term future, we're attending the European Hematology Association meeting in Stockholm and then BIO Convention in San Diego. And again, that's where all the pharma kind of descend on a city. Obviously, the EHA is hematology-specific, so we'll be talking directly to the decision-makers in the hematology or myeloma spaces. And then BIO is on the business development front. And we've got meetings set up there as well. And again, they're very excited to see the clinical data as it comes through. So I think, obviously, from our past successes, you could say, great discussions with Johnson & Johnson providing their bispecific antibody free of charge. They want to see CRS reduced, and we're hopeful we'll be able to do that with this TOPICAL trial we've discussed. And as I say, the midsize pharmas are interesting because they've got smaller pipelines, but they see this cancer supportive care element that they could obviously get this drug to market relatively quickly. We can talk separately on that, but these are very short-term trials because we're only looking at that initial immune or inflammatory response. And as I say, lots of really productive discussions there. We have a virtual data room that's populated and open. And we've got people in the data room kind of exploring the, as I say, the preclinical and clinical data we have. And it's all a case of once we have that clinical data in hand, then we kind of trigger those negotiations around, a deal and a transaction, to generate revenue from there. So again, I'll reiterate from a POLB 001 standpoint, we're very excited with the progress we've made. And obviously, in the not-too-distant future, there'll be very exciting milestones to report. I think we've gone over a little bit on time, so I will just kind of go briefly through the GLP-1 program. People are very familiar with GLP-1, initially diabetes drugs, but now very applicable to obesity. These are primarily given by injection, and there's a big need or an unmet need to have an oral option for that. We've partnered with AnaBio here down in Cork. They've got drugs that -- sorry. They've got products on the market that use this encapsulation technology. And it's more in the food science space. But we're using this technology to encapsulate GLP-1, protect it from the stomach acids. And when there's a change in pH, that is released in the small intestine, which is the site of action here. So a huge market, huge opportunity. In our partnering discussions we've had at the partnering conferences, people have reached out to discuss this program. And as we're standing now, we've got a clinical trial that's designed, ready to execute. We are moving into that kind of manufacturing phase, the timelines for manufacturing, that's going on. Again, it's -- the manufacturing has been demonstrated before. We've done a lot of the validation studies on acids, et cetera. So now it's just to get that GLP-1 material ready for the clinical trial. It'll be run by a Professor Carel le Roux up in University of Ulster. He's very well recognized in the metabolic disease space. Again, it's a very straightforward clinical trial in that it's 20 volunteers. We're looking at safety and tolerability and pharmacokinetics, getting the drug onboard. And we'll test that from glucose tolerance test. Very simple study where we want to see the drug having effect on metabolism essentially in these volunteers. So it's designed to get the rapid readout and so very excited to see this program move forward as well. Again, there's a good deal of interest in that from a business development standpoint. I'll wrap up with this slide. I certainly want to leave time for questions and I see there are a few coming in. But again, a reminder, a very experienced team. We are executing right now. And I think we've done a very -- I'm very proud of the team. We've done a terrific job the last 12 months to move 001 to be here. We are on the precipice of dosing patients, so that's very exciting. These are very high-value programs. I think we've found the right disease for POLB 001 to go after, this acute inflammatory condition. Importantly, with the fundraise last year, we've got our financial runway into 2027. So that gives us time and scope to negotiate the best deal for Poolbeg once we have the data in hand. But as I said, the partnering discussions have been on many levels, as I say, large and small companies. We've got many discussions going on in parallel, data room open, reviewing the preexisting data. But as I say, people are waiting for this clinical data to read out. Because that's the value inflection point. That's the derisking episode where you're having data in this TOPICAL clinical trial in multiple myeloma patients -- relapsed/refractory multiple myeloma patients. This will be the key trigger for Poolbeg. So again, thank you all for your time again this afternoon, this late afternoon. And what we'll do now is that we'll switch to some of the questions that came in, and again, appreciate your time on that. Jeremy Skillington: All right, so we'll jump straight in. Oliver has a question. When are the CRS trials due to be completed? Summer '26. Can you pin this down, June, July or August? Although summer in the U.K. is virtually a 2-week period. Nice one. Good bit of levity there. Also once completed, will it be go or no-go decision? Or is there a potential for a phased decision tree solution if not the results you're looking for? I think, listen, that's a really good question. We could spend a while kind of talking about that. I think we mentioned earlier on, like one of our ambitions was to get the data as quickly as possible. That goes without question. And this is why with ACT, who are going to run the clinical trials with Emma, we're zoning in on 6 clinical trial sites. Now we're exploring options for more. And what comes from that then is kind of rapid enrollment. That's ultimately the goal here, get more patients onboard quickly, get more drug onboard quickly. Liam and Mina and the team have done a terrific job of kind of lining up that kind of analysis that comes after that. It's well understood that teclistamab drives CRS in greater than 70% of patients. But we're going to analyze that immune and inflammatory response at a molecular level. So these are looking at all of the cytokines that are there, signs and symptoms, but at the kind of blood and molecular level looking at that. So it depends is probably the answer. But it is once we have that certain number of patients going through where we can kind of interpret the data. We've done statistics, et cetera, that up to 30 patients would be the full trial. But as mentioned previously, this is an open-label trial, so we'll have access to the data pretty rapidly on that for each individual patient. So it's not blinded, so we know that each patient will get the drug. So it's a really good question, but as I say, we're planning and what we've built so far is going to get rapid enrollment to say 6 clinical trial sites, maybe more. And then your question around decision trees. I mean it's -- obviously, we got to wait to see what the data is. But I think if the data is strong, and the way we've built up the business development, partnership aspects, I think there'll be multiple suitors here. I think there'll be strong interest if the data's positive. Because it can be applied to multiple pharma companies, and I mentioned the cancer supportive care area. So as I say, we'll be running full steam on those negotiations when it comes to -- one of the interesting questions here is kind of the deal type. We feel that, on the one hand, with the big pharma may come in and just take over and run the trial themselves, there could be opportunity to partner with a smaller company where we would kind of help and assist, kind of run the clinical trial. Because it is our baby in one sense, but it is our expertise in what we're doing. So you're right. There'll be decision trees and discussion negotiations, multiple parties. We'll figure that out. Oliver had a second question here. Is 30 people enough for a trial for a commercial outcome? Again, maybe, Liam, you can talk to that just around the stats discussions that we've had around how we ended up with 30. Liam Tremble: Yes. So really happy to, Jeremy. Yes, so 30 patients is essentially more than enough for our purposes right now. About 70% of these patients are going to have CRS, so there's going to be a very strong indication of the level of efficacy. The priority from a clinical development perspective is to really get into your placebo-controlled trials as early as possible once you have an idea of the effect size. So we're going to see the effects in Grade 1 and Grade 2 and also the other elements of CRS management, like hospitalization, that will give us a really good indication of how to design later-stage trials. So 30 patients for this purpose is actually ample. Jeremy Skillington: Cool. These are kind of numbers that are not plucked out of the air. There's been kind of deep analysis into what are the right numbers. So again, credit to Liam and the team for their discussions with qualified statisticians to come up with those numbers. All right. Another question here. Could we see a deal after interim data? I mean again, it's a good question. Maybe I've already answered it. But when it comes down to what that data looks like, and as I say, rapid enrollment, we'll get an early read into what the data look like, if it's -- if we're seeing an impressive suppression of that inflammatory response, that CRS, then I think for certain companies, that might be enough to transact. For others maybe, and I've been through this in my past where there's always that next experiment or the next data point or the next dataset. Some companies are maybe a little more conservative when it comes to decision-making. Maybe I'm alluding to the fact these are more the bigger guys who have to work the chain of command. But I do think that, as I say, having interim data will be a key point. And if it's positive, I think there'll be strong interest. Richard had a question. Your projected time scale towards commercialization. Again, commercialization is always tricky in this industry. I mean getting on the market is one question. Again, that'll be done with a partner and we're driving that forward. As I say, we're experts in CRS, we're experts in running these initial clinical trials. The larger clinical trials we can do ourselves. But having a partner onboard to kind of fund that would be critical. But there are -- that'll be kind of a few years down the line. But as I say, once it's launched on the market, then it'll be -- we feel it'll be broadly applied to any and all bispecific CAR T. So again timeline, that'll be driven by the partner and say that we don't see ourselves as obviously driving that forward ourselves in isolation. Potentially through a partnership. Another question. If data lands well this summer, what does success look like? That's a really good question. I mean in my mind, and this goes back to my kind of business development training, I mean, we're looking at a nice, substantial transaction. We're looking at a partner to come onboard with capabilities, with funding, with funds. What happens in the industry when it comes to these licensing transactions, whether, as I say, maybe people want to buy the program, buy the company, just license the program, that'll be for another time and other discussions. But I think that what we're seeing what success looks like is certainly a juicy upfront payment when it comes to the work that we've put in. Because we've done a lot of work. We've derisked the program. It's a large market, it's an attractive market. We've filed important intellectual property, so we'll be protected. So we see significant value for our contributions there. And then, as I say, the structure after that is down to the individual company we'll speak with or decide to collaborate with, whether it's, as I say, just passing the baby across that a large pharma could develop, or co-develop ourselves. But that's all -- we believe, with strong data, that Poolbeg will have the leverage for those negotiations because the interest is so high. Appreciate that. I think we have time for one more question. How much interest are you seeing in the oral GLP-1 for potential partners? Again, appreciate the question. Good question. In our most recent partnering conference attendances at BIO-Europe, for example, we had companies reaching out to us. I was always pleasantly surprised, some of them are kind of in Asia, some of them in Europe. Some of them already had existing metabolic disease programs, and they were looking to kind of branch out, add to their pipeline. I think -- I don't want to be flippant and talk about no-brainer. But if you get GLP-1 that can be delivered orally, it opens up a whole host of markets and market opportunities. It's a huge and growing market. And moving away from injectables, the industry wants to go there, the patients want to go there. So if we can demonstrate that clinical proof of concept in the trial that I outlined with Carel le Roux, I think there'll be strong interest then in partnering the program out. And again, revenue from upfront payments, et cetera. So appreciate that. I think we've ran slightly over time. Appreciate people's patience. But yes, we can wrap up now. Just again, thank you again for attending.
Operator: Thank you for standing by. My name is Amy, and I will be the conference operator for today. At this time, I would like to welcome everyone to the FIBRA Prologis First Quarter 2026 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Alexandra Violante, Head of Investor Relations. You may begin. Alexandra Violante: Thank you, Amy, and good morning, everyone. Welcome to our first quarter 2026 earnings conference call. Before we begin our prepared remarks, please note that all information disclosed during this call is proprietary and all rights are reserved. This material is provided for informational purposes only and is not a solicitation of an offer to buy or sell any securities. Forward-looking statements made during this call are based on information available as of today. Our actual results, performance, prospects or opportunities may differ materially from those expressed in or implied by the forward-looking statements. Additionally, during this call, we may refer to certain nonaccounting financial measures. The company does not assume any obligations to update or revise any of these forward-looking statements in the future, whether as a result of new information, future events or otherwise, except as required by law. As is our practice, we have prepared supplementary materials that we may reference during the call as well. If you have not already done so, I will encourage you to visit our website at fibraprologis.com and download this material. On today's call, we will hear from Hector Ibarzábal, our CEO, who will discuss our strategy and market conditions; and from Jorge Girault, our CFO, who will review results and guidance. Also joining us today is Federico Cantú, our Head of Operations. With that, it is my pleasure to hand the call over to Hector. Hector Ibarzabal: Thank you, Ale, and good morning, everyone. As you know, we launched the tender offer for FIBRA Macquarie fully aligned with our long-term strategy. Our proven track record executing similar transactions gives us confidence in our ability to unlock value through our operating platform. We ended the first quarter of 2026 with solid operational results, supported by the quality and resilience of our portfolio as well as exceptional service to customers provided through the strength of Prologis platform. As the environment becomes more balanced, our outlook remains constructive. On the market side, in the context of ongoing uncertainty around trade and USMCA, selective but important customer activity continues to move forward, driven by operational needs. New leasing activity continues in line with 2025 quarterly levels with improved performance in border markets, particularly in nonautomotive manufacturing. Mexico City moderated from last year's peak due to softer e-commerce demand, although we expect a near-term recovery. Net absorption totaled 4.3 million square feet, well below 2025 average levels, primarily reflecting tenant consolidations in Mexico City and some tariff-related impacts in Tijuana. We do not expect these matters to become a trend in upcoming quarters. Market rents continue to grow modestly, led by consumption markets, while most border markets have stabilized. On the supply side, deliveries of 9 million square feet were 24% lower than the 2025 average. Vacancy in our 6 markets increased 70 basis points to 6.8%, mainly driven by move-outs in the consumption markets. However, we expect to see a stabilization in national vacancy in the following quarters, considering that the development pipeline has already declined to half of the peak levels seen in 2023. Furthermore, our portfolio continues to demonstrate outperformance, supported not only by the quality and location of our assets, but also by the execution of our teams on the ground and our close relationship with customers. Our strategy remains centered on Mexico's key industrial markets where we see the strongest long-term fundamentals. In addition, our sponsor Prologis provides meaningful advantages, including deep customer relations, market intelligence, clean energy and access to low cost of capital. On the disposition front, we will continue executing our strategy by exiting non-core markets. In the meantime, we have been creating value through operating and re-leasing them with excellence. I need to be clear, we are selling good assets in good markets. We have the balance to hold them as they are generating value, and we will wait until the most adequate buyer appears. In summary, despite external noise, our business remains resilient. Our strategy is clear, and we are well positioned for long-term growth. Before I turn it over to Jorge, allow me to close on a more personal note. This marks my final earnings call after more than a decade with FIBRA Prologis and since our IPO in June of 2014. It has been a privilege to be part of this journey from the beginning and to participate in every earnings call along the way. I also had the opportunity to help start the business in Mexico in the early 2000s, making this journey especially meaningful to me. I'm particularly proud that FIBRA Prologis is today the largest FIBRA in Mexico by market capitalization. And among the most successful in total return since our IPO, reflecting the quality of our assets and the discipline and long-term vision behind our strategy. Looking ahead, the company is in very capable hands. Jorge will assume the role of CEO. We have worked together for more than 30 years, sharing a strong alignment of values and a deep understanding of the business. I can think of no one better to lead the company going forward. Alexandra will step into the CFO role. She has done an outstanding job leading Investor Relations, building a strong market [ conditions ] and demonstrating deep financial discipline. This is a well-deserved opportunity, and I'm confident she will do great. I'm deeply grateful to our investors for the trust, our customers for their partnership and especially to our team for their permanent commitment and excellence. We have built a platform defined by quality, discipline and long-term vision, one that I'm confident will continue to perform. I step down at the end of June, closing a great cycle with great pride in what we have accomplished and full confidence in FIBRA Prologis' future. With that, I'll turn it over to Jorge. Jorge Girault: Thank you, Hector, and good morning, everyone. Despite regional and global uncertainties in the context of USMCA and Middle East tensions, we started the year with a strong note. With the integration of Terrafina into FIBRA Prologis balance sheet, we are harvesting the synergies of the strength of our platform by lowering cost of capital through our investment-grade rating and lowering expenses for 2026. All this in line with our goal of value creation for our investors and our focus on growing in a diligent and prudent manner. Before reviewing our financial results, I'd like to note that starting this year, we will report exclusively in U.S. dollars, our functional currency. We will no longer present figures in pesos in our financial information. We believe this change simplifies the valuation of our performance. Moving to financial results. FFO was $99.6 million for the quarter or $0.06 per certificate, basically flat year-over-year. AFFO totaled approximately $80 million for the quarter, in line with our expectations. Let me go to our operational fundamentals. Leasing activity was 3.6 million square feet during the quarter. Our period end and average occupancy were around 97%. Same-store cash and GAAP NOI growth was 9.9% and 10.7%, respectively. Net effective rent change for the quarter and 12 months was close to 60%. As you can see, we keep on harvesting the mark-to-market in our portfolio, which stands today above 30%. What this means is that we can grow revenues without additional investment. This is a result of our strategy, people on the ground focused on delivering value and obviously, market dynamics. Turning to the balance sheet. We continue to operate with a conservative financial profile. We're maintaining a healthy loan-to-value and we'll keep on extending our debt maturities. We will use our financial flexibility to our investors' advantage with a focus on delivering superior quality returns. Moving to guidance. We're keeping our guidance unchanged, which you can see on Page 8 of our financial supplemental information. In terms of our tender offer for 100% of FIBRA Macquarie CBFI's, launched on April 7, which will close by May 12, I would like to remind you that we have all required approvals in place. Also, following law of regulation, we will not further comment on the progress of this transaction. Like Hector said, FIBRA Prologis is the largest FIBRA in Mexico by market capitalization and ranks among the top 20 publicly traded companies in the Mexican Stock Exchange. It's also among Prologis' largest vehicles globally by AUM and GLA. Mexico as a stand-alone market is Prologis' second largest in terms of area, underscoring Mexico as a key market out of 20 contracts Prologis invest in. Since our IPO, we have delivered approximately 490% total return or 16% annually, outperforming our peers. This reflects our ability to leverage Prologis global platform and execute a disciplined strategy. I want to thank our people on the ground for their commitment and support on achieving these outstanding results. Before I finish, I want to thank Hector for your guidance, support, friendship and for putting your faith in me 32 years ago. You're a great leader and an exceptional human being. I am grateful for the trust and opportunity from Prologis leadership. I follow the path of remarkable leaders, Antonio Gutiérrez Cortina, who founded Caxion; Luis Gutiérrez, who took the company into the institutional arena and Hector Ibarzábal, who brought it all together and built the company we know today with passion and dedication that have carried across generations. Hector, you are one of my closest friends and someone I deeply admire. Thank you for everything. I will miss you. I will miss our daily interactions. I wish you the best in the years ahead, which knowing you have yet to come. I also want to thank and welcome and congratulate Alexandra Violante, who has led Investor Relations for the past 5 years with excellence and Montserrat Chávez, who after 15 years leading SG&A will now take the IR role. I am very proud that these promotions came from within our team, ensuring continuity while positioning us for what's ahead. To our stakeholders, my commitment is clear to leverage our unmatched platform, portfolio and balance sheet to continue creating value in the years to come. With that, let me turn it to [indiscernible]. Operator: [Operator Instructions] The first call comes from the line of Pablo Monsivais with Barclays. Pablo Monsivais: First of all, Hector, we're going to miss you. Thank you for everything. And Jorge, Ale and Montse, congratulations on your new appointments. If I can ask to what extent the dynamics that you're seeing on softer trends in the consumption market could support medium-term rent increases? Are we seeing the peak of the cycle for rent increments? Hector Ibarzabal: Thank you, Pablo, for your words and for having been with us all this long way. I think consumption markets are evolving. It is a fact that consumption is slowing the pace a little bit. But as I have mentioned in previous occasions, when consumption gets tighter, e-commerce has even a greater opportunity. E-commerce is the best instrument that people have to make sure that their buying power is getting the most for the money. So probably the 2-digit growth on market rents in Mexico City were peak, as you mentioned. But eventually, I'm confident that in the short term, they will recover. Jorge Girault: Pablo, again, thanks for your words. This is Jorge. Regarding the portfolio itself, as I mentioned, the mark-to-market today is about 30%. So as we roll, we keep on harvesting that mark-to-market. So market rents as we have seen, especially in the border has softened. So the space between where our markets are, our rent markets, our portfolio rents are and the market is still pretty substantial, and we are harvesting that business. Operator: The next question comes from the line of Gordon Lee with BTG. Gordon Lee: I'd just like to echo Pablo's gratitude to Hector. My best wishes for whatever comes next. I'm sure it will be exciting and also my best wishes for Jorge, Ale and Montserrat. Just very quickly, it seems -- generally, it seems from your comments and I guess from the decision to launch new projects by PLD, together with other comments from companies that are involved in the development side of things, both public companies and private companies that it seems like there's a little bit more activity or more appetite from potential new clients for new space. So I was wondering what -- if there's a common theme to that or what you would attribute it to? Is it just the passage of time and that passage of time forcing decisions? Is it the view that whatever happens with USMCA in relative terms, Mexico will, for certain products, be better off than other locations? Or what is it that you're seeing, if you're seeing that's prompting that sort of increased appetite at the margin for space? Jorge Girault: Thank you, Gordon, and thank you for your words. Again, it's a little bit of everything you said. As Hector mentioned in his opening remarks, supply has come down, which is something good from occupancy levels and from market dynamics. Some markets are requiring this new development. Mexico City and Guadalajara are requiring bigger footprints, if you may. And we see some clients that are taking decisions regardless of the indecision on USMCA. So it's a little bit of both, and some markets are getting this type of traction. I don't know, Hector, if you want to add anything. Hector Ibarzabal: Yes. I think that leading companies, they do understand that this uncertainty will be or is already the new normal. And they have operational needs. So they are commencing to move forward important projects, I would say, understanding that this condition will not necessarily be defined automatically by the execution of the USMCA whenever it happens. So I think that the leading trends from important customers are going to be itself a confident sign to the remainder companies to keep on moving. Mexico fundamentals are strong, location, supply chain, availability of labor, and that's going nowhere. So we're confident about the future, even though we need to surpass these volatility times that we're currently living. Operator: Your next question comes from the line of Alejandra Obregon with Morgan Stanley. Alejandra Obregon: Hector, thank you for all the learnings and collaboration over the years. And I guess my very best wishes to all the entire team for what's coming next. So my question is a little bit perhaps a follow-up on the prior 2 questions. If you can perhaps elaborate on these leasing spreads and incremental demand on the margin, whether it's more visible in any particular market, especially on the manufacturing ones, whether you're growing more constructive in any of these markets on a given particular driver? So that would be my first question. And if I can double-click on that same question, but for the non-core portfolio, whether you're seeing any, I'm going to say, upside or downside risks for the assets that you have inside of the non-core portfolio? Federico Cantú: Thank you, Alejandra, for your question. This is Federico Cantú. So as far as leasing spreads, we don't break them out per market, but we have very healthy spreads across all our markets and especially in our consumption markets, Mexico City being a standout. So as Jorge mentioned, we expect to continue to harvest that -- our mark-to-market at 33% over the coming quarters. And even without any rent growth, we still have that opportunity. As our teams continue to leverage our customer experience, our locations, top quality product, that is something that our teams are very good at doing. And as it relates to the non-core portfolio, as was mentioned, we have had very good activity. Our teams are close to our customers. We had good leasing activity. We had good retention as well as we -- our mark-to-market is still also positive in those markets where there is activity. And so again, we feel good about that portfolio as well to continue to add value over time. Hector Ibarzabal: Let me highlight, Ale, what is happening in the non-core portfolio. Somehow, I mentioned it in my opening remarks. We have been able to increase in renewing contracts on the Terra portfolio 45.2% rents. There is no way that, that portfolio is not creating value when you have this type of re-leasing activity. So we are confident that the differentiation that Prologis has on making the right attention to the customer, providing the service and doing the right CapEx in the facility, plus all the other initiatives like clean energy that we're providing represents a real differentiator that allow us to be always on top of competitors regarding our leasing conditions. Our portfolio is gaining value. Development cost is not decreasing. So we are very confident and we understand well how much value we have created through Terrafina. And this is the main reason for us to have approached the following M&A transaction. We are confident that we will be able to replicate what we are doing and what we have done with Terrafina. Jorge Girault: And Ale, I don't want to make the answer more longer still, but to your question on the border markets and consumption markets. I mean if you look at the Page 12 of the supplemental financial information, you will see that market like Tijuana, which is a border market and has been softer, had almost a 72% increase in rent change and other market -- and Mexico City has almost 76%. So you can see how -- yes, the border markets are maybe softer, but the rent change depends on the venue of the -- the tenure of the lease agreement when you leased it at what levels and so on. So it's a mix of things, and we feel can harvest that. Operator: Thank you. The next question comes from the line of Piero Trotta with Citibank. Piero Trotta: Hector, wish you all the best for new phase and wish you luck and congratulations to Jorge as well. My question is regarding the better occupancy on the non-core portfolio, which improved to around 97%. I would like to understand what is driving this or was driven by disposition? And a question related to that as well is if tenants are becoming more price sensitive and migrating towards assets with lower rental rates? Or does the flight to quality trend remain intact? That's it. Federico Cantú: Thank you, Piero, for your question. So yes, we've had very good occupancy in our non-core portfolio. As I mentioned, our teams continue to stay close to our customers. We've had new leasing activity mostly in the Bajío region, and we've renewed important customers. So we feel good about our prospects, as we've mentioned, to continue to maintain and increase value in this portfolio. And as it relates to price, I want to highlight here the great quality of our buildings, as Hector mentioned, our investment in the properties, our top locations. We -- there is some of that flight to quality, as you mentioned, but also I would like to highlight the great job and the outstanding job our teams do on the ground to leverage our position and get to market rents and these lease spreads, which are phenomenal. So I'd like to again highlight that. And we do that across all our markets, leveraging our brand, our position and the great quality of the buildings that we have. Jorge Girault: And Piero, let me just -- this is Jorge, level-set on the question regarding the price on rent. Since IPO back in June 2014, we have lost maybe 9 tenants because of price increases. Rent is not the highest component of cost of our clients. Some have to take the decision because of M&A or other -- or they need more space or less space, whatever and we cannot deliver that. So that's an important fact. And again, the portfolio core or not non-core, it's a good portfolio. It's a good market. We treat everyone the same. But obviously, we will keep to our strategy. And this is one of the reasons that we have been keeping a good occupancy. It's not nuclear science. Operator: [Operator Instructions] The next call comes from the line of [indiscernible] with Goldman Sachs. Unknown Analyst: Here. So first off, I want to thank Hector. Thank you for the partnership over the last few years. It's been very insightful for our franchise. And I wish you well in whatever the future brings to you. And for the rest of the team, Jorge and Ale, I wish success in your new roles. So I wanted to follow up on the non-core portfolio. I know that there's been a couple of questions, but just wanted to understand a few items about it. So today, it accounts about for 24% of your GLA, 20% of NOI. You mentioned that there's been numerous investments done, upside has been delivered. But as I recall previously, you mentioned that you intended to divest part, if not all of this portfolio. So is the intention now to retain it and continue to grow it? And if so, could we see meaningful upside considering that occupancy has already reached around 97%. Those are my questions. Jorge Girault: Thank you, Gerardo. This is Jorge. To answer your question in a summary manner is we will keep to our strategy of investing in 6 markets, [indiscernible] 3 border markets and 3 consumption markets that we have always had. We will eventually sell our non-core portfolio. That's what we have said. It will take some time, and we've been harvesting the quality of those assets in the good markets and increasing the rents. We have -- I mean, like Hector said, on the Terrafina portfolio, we grew the rents 45%. In the part that we want to sell, the number has been close to 40% on rent increase. So we have been creating value in this portfolio. It has been, at the end of the day, in hindsight, a good thing not to sell it for now. That doesn't mean that we won't. We will keep to our strategy. But we want to do it in time. And like Hector said in his commentary at the beginning, at the right time and to the right buyer. And this is why we are not guiding on disposition. That doesn't mean we won't sell. It will take us some time. There has been, as you know, a lot of noise in the market, and we will take our time to sell and bring value to our investors, but that's the plan. Operator: At this time, there are no further questions. Mr. Ibarzábal, I would like to turn the call back over to you. Hector Ibarzabal: Thank you very much. I really appreciate your attention. Your time is very valuable. For me, it has been an impressive journey. And the most outstanding thing that I have done in the past besides the results that we have commented is all the close relations and all the many friends that I have been able to gather along the way. I'm not going anywhere far. So I wish you all the best, and I'm pretty confident that the new team will do it even better than what I was able to do. Thank you very much, and see you soon, guys. Operator: Thank you. That concludes today's conference call. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the Q1 2026 Earnings Call of Puma SE. [Operator Instructions] I would now like to turn the conference over to Manuel Bosing, Director, Investor Relations. Please go ahead. Manuel Bosing: Thank you very much, Maura. Hello, everyone, and welcome to the PUMA conference call for the first quarter. Joining me today are our CEO, Arthur Hoeld; and our CFO, Markus Neubrand. Before we start, please take note of the cautionary statement regarding forward-looking information. Arthur and Markus will guide you through today's presentation covering our business recap, financial update and way forward. After the presentation, we will open the floor for your questions. [Operator Instructions] With that, over to you, Arthur. Arthur Hoeld: Manuel, thank you very much, and welcome and good afternoon from my side as well. Before we start to get into the business topics and the updates about Q1, I, of course, want to take a moment to also reference another announcement which we made this morning. Markus Neubrand, our CFO, has decided with the Supervisory Board to step down from his office as of today, end of the month, and will remain in the company until end of September. I would like to use the opportunity and say a sincere thank you to Markus for the support I got personally from him during my on-boarding phase at PUMA, and also for guiding not just the financial team, but the organization through what was not the easiest of times for our company. He was instrumental in terms of developing the reset program with us and also getting the company now into a transition mode for the years to come. So Markus, thank you very much. We'll handle the call together, almost as always, like this, the last couple of quarters, and I wish you all the best for your personal future as well. At the same time, we have announced the arrival of a new CEO, which is Mark Langer. Mark will start with us early next month, i.e., on Monday next week. And I'm very much looking forward to welcome an industry veteran, someone that is very familiar to most of you in his new role as of early May. With that being said, we'll now start to get into the results. And I would [ briefly ] like to touch upon the top line results. Markus will, of course, in detail, explain what you have also already seen in the announcement this morning. So first of all, Q1 was a result that is in line with our expectations, and we would like to call this a very solid start into the year of 2026, a transition year as we called out. We've made significant progress this year already in our operating model, which is necessary to build the foundation for our future growth here at PUMA. Despite the macroeconomic and geopolitical uncertainties, we do remain confident on our track to achieve our plans for this year and beyond. When we look at the first quarter, sales are a minus 1% versus last year currency adjusted. The decline in demand is partially offset by continued clearance of our inventory progressing ahead of our plan. Wholesale declined due to a lower demand, primarily in EMEA, with DTC continued to show support by strong outlet performance, i.e., the clearance business there, and a modest growth in e-commerce despite us continuing to have reduced promotion levels versus previous year. The footwear division declined to continued challenges we see in the style area, but we're also very encouraged by solid development with our NITRO franchises in running and in HYROX, i.e., training. Our profitability has improved versus last year, and our EBIT stands at shy of EUR 52 million right now. Improved gross margin and a lower OpEx is certainly something which is worthwhile noting, and Markus will go into more details later on. Let me start also by focusing what is pivotal and what is most important for a sports brand like PUMA, and that's the success of our athletes and our teams in the first quarter. We have talked about an all PUMA final at the Africa Cup of Nations in January. We've also seen an all PUMA final at European Men's Handball Championships between Denmark and Germany. Great start to the year, which was then continued when you look at track and field with another world record, the 15th set by Men's Handball in pole vaulting, where is now at a staggering 6 meters and 31. At the World Athletic Indoor Championship, 21 PUMA athletes grabbed medals, and that was by far the best performing brand that we've seen in championship, including our Swiss Simon Ehammer setting a new world record in heptathlon. Amanal Petros set a new German record in the half-marathon in Berlin, again underlining the great achievements and the great potential that the NITRO technology has for us as a brand. Ferrari has seen three consecutive podium finishes in the first three races of the new Formula 1 season, and Joanna Wietrzyk has set a new world record in the HYROX women's racing in Warsaw only recently. Finally, a quick look at football, which is, of course, pivotal this year. Man City took the Carabao Cup against Arsenal a few weeks ago. And as you've also noticed, they have advanced to the FA Cup final and are at the moment, leaders of the table in the premiership. So all in all, a great start to the year, a great sporting start for PUMA as a brand. But at the same time, we can also record that our recent product launches have really achieved, and in some instance, even overachieved our best hopes. We have 11 teams qualified for the FIFA World Cup in North America in a couple of weeks' time. We've launched those kits with the so-called Rolling Nations event in New York just a few weeks ago, and had more than 10,000 visitors live for that event. From an HYROX perspective, we're very, very pleased that we've been the first one to market that has launched a specifically developed product around the event in Las Vegas, and product has been sold out, but will of course, get restocked in the very near future. We've seen continued great results with our NITRO technology here with the launch of the Deviate NITRO Elite 4 at the London Marathon, but also being displayed in Boston recently. Mathias Gidsel has launched its very own first handball shoe, and also here a sellout result, which was unprecedented for us in that area. There was a lot of great news from a sports perspective, but also from a style perspective. When you look at our street culture, we're very intrigued by the continued success we have with low profile. In this case, with the launch of H-Street, a campaign was featuring the PUMA ambassador and K-pop artist, Rosé. And at the same time, we're looking ahead into the future, where we are revitalizing Suede, a key iconic footwear piece for PUMA in the future with different activations, including our House of Suede at the Paris Fashion Week. So, there's a lot of things which have happened, which give us confidence that we are on the right track. But everything, of course, is framed within the three-year program that we have outlined to all of you at the middle of last year. Our transformation started with a reset in 2025 and is now in execution mode in 2026, a year of transition. And at this point in time, I would just like to briefly recap again our objectives for 2026 that do remain unchanged. It is, on the one hand, a continuation of a three-year transformation journey that our company and our brand will undergo. We will definitely accelerate PUMA's brand momentum and that brand momentum will fuel future commercial success. It is very key that we continue to remind ourselves that commercial success will follow brand success, and that's exactly the order in which we're working towards. That also means we're going to shift towards a higher quality revenue with improved focus on profitability, including better placements in our retail environment and with our customer collaborations. We will continue to work on our financial discipline and will deliver reliable results in the quarters and in the future. All will be underpinned by us building a high-performing team around the world, and some key efforts, not just from a structural perspective, have already been taken in 2025. When you look at the continued execution of our right-sizing efforts, there are a few which are worth mentioning. We have a continued focus to elevate our distribution quality, particularly in key markets like North America. As previously shared, our mass merchant business in the U.S. will see a steep double-digit decline until end of this year, and the work has started already. In a moment, I'll also elaborate on the take-back of overstock at wholesale partners, we've made some significant progress. In our very own channels, we have significantly reduced level of discounts and will further decline, will, however, always remain on industry standards. Our industry does see significant promotional activities, and PUMA will, of course, at key moments, key commercial moments, be on par with our competition to also make sure we liquidate our inventories. We see continued efforts to improve our cash management. We've made an immediate reduction of our purchase orders, and these are fully implemented already for before winter '26 season. We have a dedicated work stream in place to analyze our account receivables, and we have put tangible actions in place to optimize those. We are equally continually focused on our cost base, for short-term tactical cost reallocations, which will be part of the ongoing transition, but equally, and I'll show you a detail of that one, with the full elevation of our range size and the complexity in our organization. And finally, a continued assessment of our operational efficiencies in line with the ongoing efforts to improve PUMA's operating model. To name here is our reorganization of our home market, Europe, which is in full swing and has been communicated to all affected teams in the first quarter already. Looking at specific examples, here is our progress on the continued right-sizing efforts. We talked about the overstock reduction at wholesale partners, and I can report that we have in North America, achieved a mid-double-digit decline of inventory levels at selected wholesalers. I will call it a very solid progress in the first quarter of 2026 to also liquidate our excess inventory. The target for us remains that we normalize to healthy levels and they were rebuilding as sustainable business with our strategic partners based on the better segmentation, consumer activation and also life cycle management. Last year, we have announced that we're going to rightsize also our range size and the complexity that comes with it. Historically, PUMA has had a fairly complex and specifically for the size of our organization, partly inefficient range. We have immediately reviewed starting in July and August last year, and we've taken decisive actions which already impact and affect spring/summer '27 as a collection. Significant progress has been made by the teams to increase the efficiency of the range and to also normalize our SKU content to a healthy level for the size of our PUMA business. It's worth mentioning here that our storytelling product and distribution approach, which we have concerted and aligned together, have really led to a better point of view as a brand and ultimately will allow us to have a more succinct brand identity, both in terms of the customer presentation but also in terms of how we energize our consumers around the brand again. And then finally, we have an ongoing reduction of our corporate positions by 20% from the end of '26 versus the beginning of 2025, so in the span over 24 months. As a reminder, 500 positions have been successfully reduced in the first half in '25 as part of the Next Level Cost Efficiency program. Middle of last year, we then identified another 900 positions to be reduced until the end of this year. And here is the status of where we are with the execution of that program. 50%, i.e., 450 positions were already identified, communicated and executed, i.e., the affected employees have already left the organization latest by the end of Q1. Out of the remaining 50%, that's another 450 positions, 80% were already identified and communicated with the departure of the affected employees ongoing. So it's only 20% remaining, and they are entirely identified with communication in different stages, depending on the local requirements and processes that we, of course, adhere to. And then last but not least, it's also worthwhile mentioning that we continue the leadership changes in our senior lineup. We have briefly mentioned the switch from Markus to Mark, from a CEO, positioning. But underneath also we continue to have adjustments in our leadership organization. Four new additions have been communicated recently. Emily Mueller-Lennox will return to PUMA and will start her duties as Vice President of the Business Unit Kids under Maria's leadership. Also in Maria's team, we have recently announced and appointed a new Vice President of Creative Direction. Creative direction for us is pivotal for the turnaround of the PUMA brand to strengthen our brand identity and really to discuss a next level from a creation to product execution perspective. James has vast industry experience between innovation and product excellence, and it's really exciting to see him on board now. Two further leaders have been announced, starting with Maria's organization, Laurent Fricker will start in June to take up the position of VP, BU Style. And in that capacity, he will be overseeing our Select and our Prime business. That's a business which we last year separated from our core business to make sure we're going to have really a different and a prosperous business in that pivotal area, also from a commercial perspective. Last but not least, moving to commerce. Bertrand Blanc will take up the position of Vice President Wholesale in Matthias' team starting next Monday already, and his key missions to ensure that we are rebuilding a healthy and sustainable business with key strategic partners across our markets. Finally, we are also in the final stages of closing our hiring for the new VP of e-commerce, who would then complete the lineup in Matthias' Center of Excellence across all channels. That's it for me from now, and I would like now to hand over to Markus. Thank you. Markus Neubrand: Thank you, Arthur, and hello to everyone, also from my side. Following Arthur's business recap, I will now walk you through the key financial metrics for PUMA's first quarter, highlighting the impact of the right-sizing efforts Arthur outlined on our financials. We began our transition year 2026 with a solid first quarter. On sales, we saw a decrease of 1% currency adjusted, which is a notable improvement from the previous two quarters. Sales development was influenced by both reset activities and clearance. On one hand, we continue to see a negative impact on sales from our reset measures, which included reduction of undesirable business and lower promotions in our full price stores and e-commerce. On the other hand, we saw positive effect from clearance of elevated inventories. The clearance was executed through selected wholesale partners and our own factory outlets. Overall, without the negative impact from reset initiatives and the positive effect from clearance, we recorded an underlying decline in sales in the low to mid-single digits. We expect that both clearance and reset impact will continue but further decrease throughout the year. Now, let's look at the sales breakdown by channel. Wholesale decreased by 2.8%, mainly due to a lower demand from wholesale partners in EMEA. Direct-to-consumer sales grew by 3.8%, driven primarily by a 5.7% rise in owned and operated retail store sales, which mainly resulted from inventory clearance in our outlets. E-commerce also saw a 0.6% uptick, supported by new APAC marketplaces and reduced promotional activity. Overall, the D2C share increased to 28.3% from 27.5% last year. Looking at our regional performance in the first quarter. EMEA sales declined by around 10% currency adjusted. This was broadly driven by weaker underlying demand in the region, and due to our reduction of undesirable wholesale business. In addition, sales in the Middle East, which attributes less than 2% of our sales, were impacted by the ongoing regional conflict. The Americas delivered currency-adjusted growth of around 6% with double-digit growth in Latin America, supported by improving underlying demand and 2% growth in North America. Inventory clearance supported sales development in both regions, especially in the U.S. market, where it offset the lower mass merchant business. Sales in Asia Pacific increased by around 8% currency adjusted, driven primarily by strong D2C performance across both owned and operated stores and e-commerce. On the product side, we continue to see strong demand for low profile and especially the Speedcat family. Greater China grew 9% on the back of a strong Chinese New Year performance, and the rest of Asia Pacific increased by around 7%, reflecting strong D2C momentum in Southeast Asia. Turning to performance by product division in the first quarter. Footwear sales declined 2.3% -- within footwear, running and training continued to show strong momentum, supported by NITRO styles and the rapid expansion of HYROX-related products, which partially offset declines in other categories. Apparel sales increased 0.9%, driven primarily by training and golf categories. Football also delivered a solid performance, supported by strong demand for federation kits ahead of the FIFA World Cup. Accessory sales up 0.3%, mainly supported by the golf category. Let me now walk you through our operating performance in the first quarter. As mentioned earlier, sales are down 1% currency adjusted with a reported decline of 6.3% due to FX headwinds, especially in U.S. dollar, Turkish lira and Argentine peso. Gross profit margin improved by 60 basis points to 47.7%, which I will elaborate a bit more in just a minute. Royalty and commission income increased by 13%, mainly reflecting a stronger Formula 1 business, supported by an additional raise compared to the prior year. Operating expenses, excluding one-time effects, decreased by 5.5% to EUR 848 million. I will come to more details in a later slide as well. Driven by higher gross profit margin and lower operating expenses, adjusted EBIT increased to around EUR 64 million, up 5% year-on-year. One-time effects were down year-over-year and amounted to EUR 12.6 million, mainly related to personal expenses connected to the cost efficiency program. EBIT, therefore, came in at around EUR 52 million, up almost 20% year-on-year. Financial results at around minus negative EUR 60 million improved significantly. This was mainly due to favorable currency movements, particularly U.S. dollar and Mexican peso, which more than offset the slight increase of interest expenses on bank debt. Income taxes increased to around EUR 10 million, driven by higher earnings before tax. Consequently, profit from continued operations came in at EUR 26.5 million, a significant improvement compared to Q1 2025. Let me now explain the development of our gross profit margin in the first quarter. Overall, gross profit margin increased 60 basis points to 47.7%. The most significant driver you see here is promotions and inventory reserves. While promotions had a negative impact on gross profit margin, the reversal of inventory reserves recorded in the second half of 2025 contributed to a significant positive impact. In addition, we recorded lower freight costs compared to the higher base in Q1 2025. A more favorable channel mix, reflecting a higher share of direct-to-consumer also supported the margin development. These positive effects were partly offset by product mix and regional mix as well as currency effects, which weighed on the margin compared to last year. Now, moving over to our operating expenses, which fell 5.5% to EUR 848 million, excluding one-time effects. The reduction was driven by savings from the cost efficiency program and lower marketing expenses. Marketing decreased compared to high levels in Q1 2025. This was based on phasing effects and not a structural reduction, as we continue to invest in brand and growth opportunities. Together with favorable currency movements, these factors offset the higher cost and channel mix due to the mentioned increase of the D2C share and increase in other OpEx costs. Let me now walk you through the development of our EBIT margin in the first quarter. EBIT margin improved from 2.2% in Q1 2025 to 2.8% in Q1 2026. The main positive driver was the increase in gross profit margin by 60 basis points, as mentioned before. Royalty and commission income also contributed 20 basis points, driven by a stronger Formula 1 business. Although OpEx fell in absolute terms, OpEx ratio increased by 40 basis points since costs did not decrease as sharply as sales. One-time effects, on the other hand, contributed a 20 basis point increase to the EBIT margin as these effects declined compared to the previous year. Let us now take a closer look at working capital. Inventories declined by around 9% to EUR 1.9 billion, mainly driven by lower purchasing volumes in line with the expected lower sales base for the year and inventory clearance. Trade receivables decreased by around 20% to EUR 1.2 billion, mainly due to lower sales levels. Trade payables were down around 26% to around EUR 1 billion, also reflecting reduced purchasing volumes in the quarter. Overall, working capital decreased by almost 10% year-over-year to EUR 1.8 billion, reflecting continued progress on inventory cleanup and disciplined purchasing and evidencing overall improved working capital management. Looking specifically at inventory development, inventory levels continued to decline in the first quarter and are slightly ahead of plan, supported by lower purchasing volumes and ongoing clearance activities. As communicated previously, we expect inventories to normalize by the end of 2026, assuming disciplined purchasing and continued execution of our clearance plans. Turning to free cash flow. Free cash flow was reported at minus EUR 201 million for the end of Q1, consistent with the typical seasonal pattern in our business, free cash flow remained negative in the first quarter. However, it demonstrates a notable improvement over the previous year. This year-over-year improvement was mainly driven by more efficient working capital management, including inventory clearance and lower and more prudent purchasing volume, as we discussed earlier, higher earnings before taxes, lower capital expenditures, while we continued our investment focusing on D2C channel to enhance our long-term competitiveness. As said during our full year 2025 presentation in February, we expect free cash flow to be positive in 2026. Finally, let me comment on net debt development. Net debt increased seasonally to EUR 1.3 billion, up year-over-year from around EUR 1 billion at the end of Q1 2025. This increase mainly reflected higher bank liabilities supporting the operating business and financing working capital. Cash position stood at EUR 326 million, up around 15% year-over-year. In addition, we had unutilized credit lines of around EUR 800 million, resulting in total financial headroom of around EUR 1.1 billion. This means that we maintained sufficient financial headroom to support the transformation journey and strategic investments. Given the currently elevated level of net debt, deleveraging is a clear priority, and we target to reduce net debt over the coming years. Before I hand back to Arthur, as he mentioned earlier, this will be my last earnings call as CFO of -- at PUMA's. It has been a privilege working with the team through the transformation journey, and PUMA is well on track. With that, I will now hand back to Arthur for the way forward. Arthur Hoeld: Of course. Thank you very much again. Let me now turn toward our outlook for the full year 2025. We will be building on the momentum from a very solid start to the new year, and we are going to reiterate our full year outlook. It is important to highlight that our outlook does not reflect potential implications from the ongoing conflict in the Middle East or the U.S. Supreme Court decisions on U.S. tariffs. In the Middle East, our priority has been the well-being of our staff, ensuring their safety remains of paramount focus for us. From a business perspective, direct exposure to the region is relatively limited, with sales accounting for less than 2% of the total group revenues. On the risk side, we do see two layers, however. At this point, the impact on sales and supply chain is manageable, and we're prepared for different scenarios. The greater uncertainty, however, lies in broader consumer sentiment in response to the evolving economic and geopolitical environment globally. On tariffs, following the Supreme Court ruling over U.S. tariffs have come down. That said, visibility on refunds is still limited, and the situation may shift quickly again. For our top line, for full year '26, we expect a currency-adjusted sales decline in the low to mid-single-digit percentage range. We are expecting that our second half in 2026 will be stronger than our first half. And additionally, sales growth in the second quarter of '26 is anticipated to be clearly below the first quarter. With regards to our sales channels, we do anticipate a decrease in wholesales, while our direct-to-consumer business is expected to maintain growth. We anticipate a substantial improvement in gross profit margin, while OpEx are not expected to materially lower in absolute terms as we do continue to invest in strengthening our DTC channels, as Markus has already referred to. Our EBIT is forecast to range between minus EUR 50 million to minus EUR 150 million. This includes one-off effects, which are projected to be significantly lower compared to last year '25. CapEx is expected to come in at around EUR 200 million and will focus mainly on our digital infrastructure and the investments in our DTC channels. Looking forward, again, of course, I would like to bring it back to sports -- and the sports company that we are. Well anticipated is the FIFA World Cup with 11 PUMA teams competing. It's the best representation this brand has since 2006, where at the time, the PUMA team was listing the trophy. From HYROX perspective, there are several high-profile events coming up, most notably the largest event to date in New York, with more than 50,000 participants and the World Cup in Stockholm, where the HYROX World Championship will take place again with significant amount of PUMA product being competing in the events. And last but not least, Formula 1 will return to Miami after a break with many, many other exciting races coming up where we definitely see the potential of PUMA as a brand that is well established in the Formula 1, in the motorsport scene, which seems to have a growing dynamic with consumers worldwide. I would also like to reiterate and repeat again that for our brand, our North Star remains to become a top three sports brand in the future again. We are committed to return to above-industry growth and equally committed to return to healthy profits in '27 and beyond. At this point in time, we'd like to thank all shareholders, partners and first and foremost, all employees in joining us on the journey. To wrap it up, there are three major messages for the first quarter in '26. Our financial results came in as expected, both from a sales and from a profitability perspective, as we've outlined. We are well on our transformation journey. We are progressing as planned with a solid start into a transition year 2026. And for the full year, our outlook is confirmed and we remain committed to achieving our plans as outlined. With that, I would like to hand it back to Manuel. Thank you. Manuel Bosing: Thank you, Arthur. Thank you, Markus. We are now ready to start the Q&A session. Operator, please open the lines for questions. Operator: [Operator Instructions] First question comes from the line of Will Wood from Bernstein. William Woods: The first question, I'm trying to understand the phasing of your sales throughout the year. You maintain the kind of guidance of low to mid-single-digit decline, but obviously, Q1 was much better at negative 1%, and you said that you expect improvement throughout the year. Can you give any commentary on how Q2 is going? And how much of the Q1 performance was driven by the boost of clearing inventory versus the underlying growth in the business? And then the second question is on, obviously, as we move into H2 and 2027, I appreciate it's still early days, but it's -- I think the focus will shift from resetting the brand and the transition year to rebuilding the brand heat into 2027. How are you feeling about the product pipeline into 2027 at the moment? Are you happy with the spring/summer range, et cetera? And any commentary there? Markus Neubrand: Thank you both for your questions. I will start answering the first one and then hand over to Arthur. Regarding the cadence of the revenue growth by quarter throughout 2026. as Arthur outlined, I think on the way forward, we expect the second half of 2026 to be stronger than the first half of 2026. Therefore, it's fair to assume that the top line development in the second quarter will be more muted compared to Q1. We expect Q2 to expect it to come in clearly below the Q1 results in terms of sales growth. Talking about, and I think then also part of your question that you want to understand regarding Q1 development. The inventory clearance, as outlined also in our prepared remarks in Q1, had a positive impact on our sales growth and the positive impact on the inventory clearance was more pronounced than the negative impact from the reset activities relating to the cleanup of the division undesirable business and reduced promotional level. Arthur Hoeld: And to your second question, Will, in terms of rebuilding brand heat and our perspective on the range on spring/summer '27, I do believe we are making progress there. We're making progress in terms of building on our strength, which is definitely the NITRO platform, across running and training. Specifically, we will launch new products in both areas, and we have received pretty positive feedback in the same vein as for our new football boot collection. Where we do see progress as well, but where of course the work is still ahead of us, is in the style and the lifestyle area, where we see continued success, and we believe continued success from a low-profile perspective also into '27, but our efforts are clearly now around making the Suede a more iconic proposition in '26 -- '27 with brand activities starting in '26 again, and then also further dimensioning our offer with lifestyle running as one of the key future pillars. These efforts have started to be built into spring/summer '27, but they will be by no means complete yet from a product nor from a marketing activation perspective. Thank you. Operator: The next question comes from the line of Thierry Cota from Bank of America. Thierry Cota: Two questions from me. First, on the OpEx, they were down 5.5% in Q1. I was wondering whether you could give us the drop at constant currency, and if you think that around 5% drop is a good estimate for the whole year? And secondly, on the balance sheet, I think you've said that you wanted to have a clean inventory at the end of the year. I was wondering what that means in terms of percentage of sales, is it around 23%, which I think was the level in '24, a good level. Do you think you can reach that? And the working capital, likewise, do you think could drop back by the end of the year to the mid-teens, please? Markus Neubrand: Thank you, Thierry, for your two questions. Let me start with the second part first regarding the inventory development. As mentioned during my prepared remarks, we firmly committed to normalize our inventories by the end of this year. If you look at the inventory as a percentage of sales, it's expected to further come down over the following quarters to more normalized levels below 25% of sales until the end of the year. The decline will be driven by inventory clearance and adjusted purchasing volume as we outlined, I think that earlier, -- in my prepared remarks. The first question when talking about the OpEx development, as mentioned also in my prepared remarks, FX was a positive, I think contributor and then also to the overall OpEx decrease. But also on a currency adjusted on a constant currency basis, our OpEx decreased also in Q1. I think please understand, I think we're not disclosing, I think, that level of detail for the full year and what that means in terms of OpEx development here. I need to go back to the statement also Arthur made a our outlook, where we -- I think that also for the OpEx overall will not be materially lower. And I think then also compared to 2025, as we continue also to invest into our D2C business and into our brand. Operator: The next question comes from Monique Pollard from Citi. Monique Pollard: What I first wanted to understand is, you talked in the release about the strong demand for low profile and Speedcat in China, and you referred to in the questions above, the benefits you are seeing from low profile and how that can be a driver for success into 2027. Just wondered if you could highlight for us any other markets where you're seeing meaningful demand for low profile. I guess, you know, the tie-up with Rose, that you're seeing good benefits in some other pockets of Asia and whether there are any other markets. And then the second question was on the Americas' growth. So, you know, strong growth up 6.1% and Latin America in particular, very strong in the period, up 10.5% -- just wondered if there's anything that's driving that growth that you can call out outside of, obviously, the clearance activity that you've talked to. Arthur Hoeld: So let me start with the low-profile answer to your question. We do see significant traction of the business continuously in pretty much all Asian markets, that is Korea, that is Japan, but specifically Southeast Asia, where we have restocking activity at this point in time going on. However, also on the other side of the globe, in North America, we do see customers, primarily customers which are more style focused and have a stronger women's basis. Who do significant results to the tune that PUMA at this point in time, with some retailers is the #2 brand from a sellout perspective. So we definitely recognize a continued continuation of the trend of low profile where only very few brands are playing, but it also it is worthwhile noting that our reset activities last year are definitely paying off now. So by right-sizing the market, right-sizing the volumes that are out there, we are extending and prolonging the life cycle of these silhouettes, which are very much the benefit of our product range and our product offer. When you then talk about the Americas, I think it's two different answers I would like to give you. In Latin America, both from a brand but also a distribution perspective, we have been well-positioned over the years. The job the team has done there, the cleanliness of the market, the distribution, and the power of presenting our brand, our product propositions, has historically already been very good, and we're now, of course, continuing to harvest the fruits. In North America, I think it's worthwhile mentioning that some of the reset activities, of course, have led to a significant impact from a wholesale perspective. But as I said, there are pockets of growth also with partners over there. And then our DTC business is, of course, also benefiting from inventories that we're liquidating for our factory outlets and a decent business in our own e-commerce channel despite promotional reductions. Thank you. Operator: The next question comes from the line of Piral Dadhania from RBC. Piral Dadhania: My first one just relates to NITRO as a product platform. I think you talked, Arthur, around some of your plans on the lifestyle side for the remainder of '26 and '27, in response to previous questions. Could you just help us understand what the plan is in relation to commercialization of NITRO, both in running and also using it in other footwear styles and subcategories? And then my second question is one which you may or may not be able to answer, and it just relates to any update in terms of the Anta acquisition of minority stake in PUMA. Have you got any visibility on the timing of when that deal may close? Arthur Hoeld: Thank you, Piral. Let me start with the second question because the answer is rather short. There are no news versus what we announced earlier in the year. We are awaiting the closure of the transaction, and that timing remains to be seen. So no further news to share on that topic. From a NITRO perspective, the NITRO platform will be relevant across most performance categories in Puma. That means we are not only having products available in the running segment, well known, but also our latest HYROX proposition is fully based on a NITRO platform. The specific indoor handball shoe that we've launched in collaboration with Mathias Gidsel, the world's best player in this field, was also based on a NITRO technology, a Nitro platform. So, NITRO is more than, quote-unquote, "Just a running platform." It will really be the major footwear technology that we are promoting across all different performance segments when it comes to '26 and 2027. Thank you. Operator: Next question comes from the line of Adam Cochrane from Deutsche Bank. Adam Cochrane: Two questions, if I may. The first one is, in terms of the lead time on your new product purchases when you're talking about your new ranges for spring/summer '27, given the input cost inflation that we're hearing about because of oil prices, when do you actually have to start ordering these product the suppliers? And are you hearing anything on potential cost inflation on those future ranges? And the second question is, can you just give us an idea of how far you are through in terms of the clearance activities, just as a way that we can try and benchmark, is it 25% of the way through, 50% at the end of the first quarter? And on that regard, there's quite a big gross margin gain from the inventory provision reversal. Is that something that might happen again in future quarters? Or is that just something that is, as you sell the product? Or do you just revalue the inventory as at the end of the first quarter? Markus Neubrand: Adam, thank you for your questions. Let me first answer the second part, I think, regarding the clearance progress of the inventories. As we mentioned, I think we are slightly ahead of plan, made good progress in Q1 with the reduction of our inventories and with the clearance, I think which also resulted in the decrease of the inventories, I think since we peaked, if you look at the chart in the middle of 2025. With the targeted clearance also through selective wholesale partners and our factory outlets, we, of course, also then recognize -- also then -- need to revalue our inventories, which leads also to inventory reserves. On the other side, as we also outlined the gross profit margins, you've seen also that our promotions, I think that also in wholesale have been more pronounced, I think which you can see. I think that, of course, as the mechanism, I think as we're working through the target reduction. This process will continue throughout 2026. I think as we are firmly committed to normalize the inventories until the end of the year. When we provided also the guidance for the full year, we outlined that we expect the gross profit margin to improve. And one of the key drivers, I think that also the substantial improvement of the gross profit margin in 2026 will be driven by lower promotions, but also, of course, with the targeted reduction of that excess inventory, which will also the reverse of inventory reserves, I think will contribute to that gross profit margin development. Then coming to your first question related to the Middle East crisis and the oil price driven, I think, then increase of the input costs. If we look at, first, let me start for autumn/winter '26, all of the orders, I think until end of autumn 2026 have been placed. And I think we see no cost inflation on our product costs. For spring/summer '27, I think that's where we know and I think as in the early stages. So that's where we start to present I think and to take orders now within the next months from our accounts. And now as we speak, we are in discussions with our vendors. And we see selective, I think then also increases in the product cost, but not material in spring/summer '27. And Autumn/Winter '27, of course, is still too early to see, nothing that, of course, how the situation overall evolves. Operator: The next question comes from the line of Andreas Riemann from ODDO BHF. Andreas Riemann: First one to Arthur on SKU reduction. So by how much did you reduce SKUs? And would you say that you are going forward plan to sell a global product to all markets? Or is part of your offer still a local product that reflects local preferences? That would be the first question. The second one for Markus. The financial result improved actually materially and you speak about currency benefits. So have you changed your hedging strategy? And is that sustainable? Or was Q1 rather a one-off? This is the second question. Arthur Hoeld: Thank you very much, Andreas. So to start with the first question in terms of range size reduction, we have reduced our range size by a significant mid-double digit. So the process between spring/summer '25 and now spring/summer '28, the collection that we're at the moment developing has been significant, and we are committed to also then executing that. What this means, of course, there will be a more significant global footprint from PUMA, i.e., also more mandatory part of the collection that we would like to see in each and every market. That's also part of our life cycle management across both style, but also the performance areas. What that does not mean, however, is that we're reducing or even abolishing our policy to offer locally relevant products. We continue to have regional creation centers in Asia and North America and India to make sure we're going to cater for the needs of the local consumer to complement and to complete the range offer. So it will be a mix and a blend between a stronger global offer, a stronger global life cycle management and the additions, the well-needed additions in order to cater for demand from a local perspective. Thank you. Markus Neubrand: Thank you, Andreas, for your question on the financial results. Yes, a significant improvement, as outlined year-over-year in the Q1 of 2026. Let me first start with the -- also what I mentioned in prepared remarks. Our interest expenses on bank debt has been slightly increasing, of course, given the elevated levels and higher levels of bank financing compared year-over-year. The biggest factor, and I think that I also outlined in the prepared remarks, is driven by positive favorable currency movements. And here, particularly the U.S. dollar and Mexican peso had a positive impact, I think also on -- I think then also our financial results. I think that means from a translation, but also valuation of derivatives, I think that impact our financial results. So given the nature also of FX, of those developments, I think where it would be rather prudent not to, and I think then continue to project, I think, such favorable currency movements for the quarters to come. Operator: The next question comes from the line of Warwick Okines from BNP Paribas. Alexander Richard Okines: Just a couple of trying to understand the shape of the year, please. So firstly, just back on the Q2 sales comments you made. Is the main reason for the lower or the bigger sales decline in Q2 compared with Q1? Is the main factor here, less promotional support? Or are there other factors? 'Cause presumably the drag from the reset is moderating? And then the second question is just if you could comment a little bit more about the EBIT shape for the year. It's helpful for you to have commented about inventory reversals continuing for the rest of the year. But maybe just to comment on how you see the phasing of your EBIT losses through the next three quarters. Markus Neubrand: Thank you very much for your questions. Q2, and I think as I mentioned earlier, is expected from a sales growth perspective to come in clearly below Q1. And the key reason is the impact of the reset and here specifically the reduction of the undesirable business, I think which is more pronounced in the second quarter compared to what we expect, I think, then also what we've seen in Q1. The clearance, I think, as I mentioned earlier, of the excess inventories, of course, continues throughout the year. Coming to the second part of your question, of course, now from a sales perspective, also what does it mean also from an EBIT development for the remainder of 2026. It is fair to say that we started 2026 clearly on a positive note from an EBIT perspective. There's still a lot of moving parts for the remaining of the year, including, of course, the top line development, as I just outlined, but as well also the level of one-time costs as we will make sure to set the right foundation in 2026 to return to growth in 2027. If we then also look at the geopolitical and macroeconomic uncertainties that we -- especially with the Iran conflict that we see and the tariffs, the Iran conflict, the negative impact is expected on sales and margin and even more importantly, on consumer sentiment, tariffs as of now, there will be a positive impact on margin, but to which extent is still unclear and can, as we know, change on a daily basis. Therefore, we confirm our reported EBIT guidance for full year 2026 to be within the range -- guided range of minus EUR 50 million to minus EUR 150 million. Operator: [Operator Instructions] The next question comes from the line of Jurgen Kolb from Kepler Cheuvreux. Jurgen Kolb: Thanks very much for everything and probably also welcome back, Mark. I guess you're listening in, so welcome back to the market. On the two questions, first of all, on the run shoe business, I think you mentioned that the running shoes, the NITRO foam is selling strong and is quite successful. Maybe you could talk a little bit about your progress on getting the shoes into the specialty store chain, and in which markets are you actually seeing the strong sell-through or a marked improvement? Secondly, on current trends, I guess you indicated the Middle East conflict, obviously, the main or the difficult to forecast effect is from the consumer behavior. Have you noticed any underlying trend changes from the consumer? I know it's probably difficult for you because there is so much going on in your stores and with the wholesaler in terms of clearing inventories and what have you. But in terms of any observations that you have could be quite interesting to note if there's anything currently going on. Arthur Hoeld: Jurgen, thank you very much for the question. So when you talk about the running shoe specialists, what we have embarked upon last year is that specifically in Europe and in North America, we have drastically ramped up our specialist sales force. That means specialists PUMA people who visit running accounts, who will be then promoting the PUMA brand, but also our NITRO technology. Only in Paris this weekend, we had 110 specialty accounts from all over the globe, spending two days with us, getting excited about our collections, but also giving us feedback in terms of where they see our efforts. That's primarily where we see growth happening, but equal spilling over into the mainstream accounts that would be in Europe, and Intersport, and others basically. So that's what we project in '26 and in '27, then the major part of the growth to be coming from. We don't have any specific region where NITRO is either overexposed or underperforming. We do see this as a global development for us actually. And when you talk about underlying consumer sentiment, it is difficult to, of course, project where the market is going and consumer sentiment is on the one hand, driven by significant inventory and promotional activities again. We, of course, also do see that there is energy in the market there is energy in the market, both in Europe and U.S. in terms of consumers continuously seeking the sporting goods industry and seeking out sneakers. From our very own perspective, we are very much focusing on the major areas that we've discussed earlier to improve both our brand trajectory, but also our product offer simply based on the effect that despite any economic headwinds or despite industry dynamics, we see significant headroom for PUMA to grow versus competition from our current perspective. Thank you very much. Jurgen Kolb: And just one very, very quick update on an add-on question. Your contracts with the container shipping companies and the freight contracts there, when does it end? And are you already in negotiations for the next contract? Markus Neubrand: Jurgen, good question, and I'll take that one. The contract, I think that we have, I think, with our carriers on the inbound side, runs until the end of June of this year. And yes, as we currently speak, I think that's where we're already in advanced negotiations with our partners on the inbound transportation side. Jurgen Kolb: I assume costs are not going up. Markus Neubrand: I think looking at what is currently, and I think if you look at the market, with the oil prices and you know and I think how the mechanisms are in those contracts, there are surcharges. And I think that also what we've seen, I think, since the start of the Middle East crisis, also that there have been bunker and fuel surcharges being raised. So that's actually where we see, of course, also then an impact also from the Middle East crisis, I think then also to come through. But as Arthur mentioned, overall, I think that also we have plans in place. I think looking at our supply chain, I think then also and evaluating different scenarios how to mitigate these impacts. Operator: There are no further questions at this time. I hand back to Manuel Bing for closing comments. Manuel Bosing: Thank you very much, Maura, and thanks to everyone for your questions. We appreciate your interest in PUMA. We'll stay in touch, and we look forward to speaking with you again soon. This concludes our call for Q1 2026. Thank you, everyone, and goodbye. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.
Daniel Fairclough: Good afternoon, everyone. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you for joining this call to discuss ArcelorMittal's performance and progress in the first quarter of 2026. Leading today's call will be our Group CFO, Mr. Genuino Christino. Before we begin, I would like to mention a few housekeeping items. As usual, we will not be going through the presentation that was published on our website this morning. However, I do want to draw your attention to the disclaimers on Slide 20 of that presentation. Following opening remarks from Genuino, we will move directly to the Q&A session. [Operator Instructions] And with that, I will hand the call over to Genuino. Genuino Christino: Thanks, Daniel. Welcome, everyone, and thanks for joining today's call. As usual, I will keep my remarks brief and much of what I say will echo the messages from recent quarters. That reflects the consistency of our performance, the clarity of our focus and the discipline with which we continue to execute our strategy. What we are delivering at the bottom of the cycle positions us very well for the near future, particularly as more favorable policy conditions translate into a stronger operating environment with improving margins and returns. Alongside the impact of our growth strategy, this supports the free cash flow outlook and the delivery of consistent capital returns to shareholders. But first, I want to address safety. Our multiyear safety transformation program is now delivering more consistent and improved outcomes across our organization. Leadership expectations are clearly defined, risk management practices are being applied more uniformly and our focus on process safety has expanded across installations. Advanced analytics, including AI are strengthening these efforts, for example, enabling early identification of workers entering hazardous areas and triggering fast alerts and interventions that human monitoring alone. Most importantly, the sustained focus on safety is translating to tangible improvements in performance across the group. We provide a more detailed account of this progress in the sustainability report published last week, which I encourage you to review for a fuller picture of how we are advancing our safety objectives. Now I want to focus this quarter on 3 key points. First and foremost, our results consistently demonstrate clear structural improvements. In the first quarter, we delivered EBITDA of $131 per tonne, up $15 per tonne year-on-year and around 50% higher than our historical average margins. This clearly demonstrates the strengthening of our underlying earnings power over recent years. Importantly, this performance does not yet reflect the significantly stronger price environment seen in recent months, which we expect to be more fully evident in our second quarter results. Underlying free cash flow performance was robust. Excluding the seasonal working capital investment and the strategic growth CapEx, underlying free cash flow was running at an annualized rate of over $2 billion. Again, considering where we are in the cycle, this represents a strong outcome. Consistent and disciplined execution of our strategy is driving improved performance and providing the capacity to continually invest with discipline and focus and materially enhance the future earnings potential of ArcelorMittal. This brings me to my second point, our compelling growth opportunities, which clearly set us apart from our peers. We are allocating capital to the highest return opportunities. This includes projects that are actively enabling the energy transition, expanding our iron ore mining capacity and adding new value-added capabilities. We recently approved an EAF investment in Dunkirk. The decision was enabled by the more supportive policy backdrop, the cost visibility from a competitive long-term energy contract and the support of the French government. Our EAF projects are expected to deliver incrementally high EBITDA to provide an acceptable return on the capital deployed. So we have reflected Dunkirk together with the previously announced EAF projects in Sestao and Gijon into the expected EBITDA impact from strategic projects. This now stands at an incremental $1.8 billion from 2026 onwards. My final point is on the positive outlook, which is underpinned by trade policy. Given the change to trade policy, the steel sector today offers much more defensive characteristics, particularly in Europe than it did in the past. More effective trade protections are leading to increasingly regionalized market structures, enabling domestic producers to recapture market share from unfairly subsidized imports. The biggest shift occurring in Europe. We are very pleased with the agreement achieved in the new Tariff Rate Quota tool in Europe. As a result, we can expect this to be in effect from 1st of July 2026. Together with CBAM, this underpins our positive outlook for our European business. We are seeing stronger customer engagement, higher order inquiries and customers shifting more towards domestic supply. This is apparent in the material improvement in steel prices and spreads since the start of the year. As a result, despite the volatility of energy markets caused by the conflict in Iran, we continue to expect our production and shipments to improve across all regions in 2026. And we should see a clear improvement in our EBITDA in all Steel segments next quarter. As I conclude, the message is simple. We are consistently delivering structurally improved results while executing our strategy with discipline. Our high-return growth opportunity to differentiate us from our peers as does our track record of capital returns through the consistent application of our policy. That framework has already delivered a 38% reduction in our share count and a doubling of the dividend over the past 5 years. At the same time, we have advanced the business strategically, enhancing resilience and structurally improving returns on capital, all achieved while maintaining a strong investment-grade balance sheet. With that, Daniel, I believe we can begin the Q&A. Daniel Fairclough: Great. Thank you, Genuino. So we have quite a long question -- list of questions already. So we will move to the first, which we'll take from Alan. Unknown Analyst: A couple of questions from my side. The usual question is probably a good place to start. If you can walk us through the usual profit bridges Q1 versus Q2? And where do you see the greatest delta in prices and volumes? And how are your divisional costs evolving sequentially, including the CO2 cost implications in Europe? That's the first question. Genuino Christino: So I will ask Daniel to start with the bridge. Daniel, do you want to kick it off? Daniel Fairclough: Yes, sure. Thanks, Genuino. And it's a very simple bridge, which you've already alluded to, I think, in your opening remarks, you referenced that we expect all of the Steel segments to improve in the second quarter relative to the first quarter. And the drivers behind that improvement are common across the segments. So it's a theme of improved volumes and improved prices. So that's applicable to Europe. It's applicable to North America, and it's applicable to Brazil. Genuino Christino: Yes. Perhaps then I will add, Daniel. I mean the point on carbon cost, I mean, as you know, I mean, we have the new benchmarks, right, from beginning of the year, and that's ETS 4.2. So I'm sure you know what it means in terms of reduction of free allowances, right? But I think what is important here, and we have in our results is that now with CBAM, which so far, based on what we can see, is proving to be very effective, right? I mean we see that prices since the introduction of CBAM has moved up by this year, just look at the index almost EUR 100, right? And you don't see that yet in our results. You see, of course, the costs in Europe already, right, as we accrue the higher CO2 costs, but you don't see yet the benefits of CBAM, that's I would say. So that should come, of course, from quarter 2 onwards. Unknown Analyst: And my second question is, if you're able to give us some qualitative color on the European customer behavior, how receptive are they to the new pricing frameworks both CBAM and the upcoming safeguard? And are you worried about inventory levels in Europe? Or are you seeing any client retrenchment because of the Middle Eastern conflict? So any color you can give us on your customer profile in Europe today would be much appreciated. Genuino Christino: Yes. Well, I made some comments in my prepared opening remarks, right? We are seeing more activity. The order book is good. So when I compare where we were last year, I would say the order book is stronger. We see customers trying to develop the relationships -- so that is all supportive, Alan. That's good. So -- and that's why, I mean, we feel, of course, confident to confirm the guidance that we discussed at the time of Q4 results, higher shipments in Europe year-on-year, right? And I would expect our second half actually to be stronger than the first half, which is, as you know, unusual. Typically, our second half is weaker. But because of everything that we are discussing here, I would expect shipments in the second half to be actually stronger. Yes. So I think it's all moving in the right direction. Daniel Fairclough: Great. So we'll move now to take a question from Bastian at Deutsche Bank. Bastian Synagowitz: My first one is also a follow-up actually on maybe your guidance, particularly on the steel production side in Europe specifically, which was, I guess, very low in terms of production in Q1. And you talked about the maintenance, but shipments were down quite a lot as well, which I guess one could say is a little bit surprising given the impact from CBAM we've seen already as well as maybe some withdrawal from imports. So I'm wondering how far we will see a real catch-up in the second quarter driving very strong year-on-year growth and whether you would be able to even give a bit more detail on that, that would be great. That's my first question. Genuino Christino: Yes. Sure, Bastian. Yes, you're right. So we are, of course -- and as we discussed in Q4, we had maintenance in some of our facilities, right? And we have just 1 or 2 days ago, restarted one of our furnaces in Poland. And we continue to work on our furnace in France and Spain. So we're going to be in a position to bring back the capacity as and when we see the demand, right? And as a result, the furnace in Poland is already -- we are ramping up that as we speak. I mean inventories, and I have not really touched on it, so I should do it now. I mean we know that imports were quite elevated in Q4, right? We saw imports coming down in quarter 1, right? But evidence suggests that imports, at least at the beginning of quarter 2 elevated. So you still have players to try, of course, to get materials here before the new TRQ starts from 1st of July. Having said that, we don't believe that inventories are too high. I mean, of course, they are higher than, I would say, normal levels, but not so high. So our expectation is that the new TRQ comes into place, this inventory should normalize relatively quickly. Bastian Synagowitz: Okay. And in terms of what this means for, I guess, the overall cycle, I guess there are some players in the market, which do expect that imports in the second quarter will basically go up before they fade in the second half. Is this the view you do share as well? And I guess, what is your view maybe particularly also on the pricing side, prices have been very strong already. But is your view that rely comes third quarter, we will see further price dynamic most likely kicking in, in Europe? Or will it take longer to maybe digest and work through, I guess, inventory overhang, whatever disruptions we could see? Genuino Christino: Well, Bastian, I mean, what we are seeing, I mean, we saw prices actually moving up during the quarter, right, actually accelerating from beginning of the Iran war, also in response, right, to cost pressures. So I think it's fair to say that imports in quarter 2 should still be high, right, as we discussed because just it's normal, right? So players are trying to get the materials here before the new TRQ. But again, it's not ideal, of course. We're going to need to work through that. But we don't expect that to really be to take the market long to absorb that. And of course, on prices, as you know, we cannot comment, right? We can -- I can only refer you to what we are seeing. If you look at the index, it's right? I mean we have a nice -- not only prices increasing during the year, but it's spreads, right? So when you look at the spreads also evolving positively, also as a result of introduction of CBAM at the beginning of the year. I think we need to look at the European market. As we have always been saying, right, it is the combination of the 2 CBAM and TRQ that is very, very powerful here, right? And we have one piece, and we're going to have the second piece now from 1st of July. Bastian Synagowitz: Okay. Great. Maybe a very quick one on India, which you didn't mention in your early second quarter indication. I guess we have seen decent performance actually in Q1. Prices also picked up, but then there is obviously the energy situation. So I guess, what is the trajectory for India into the second quarter? Genuino Christino: Yes. It's also good. You're right. So because of the DRI, we are more exposed to gas in India. But as you know, I mean, we have -- we are fully hedged, Bastian. So we don't expect cost pressure coming from gas in India. So we are fully hedged. And the price environment has also improved, which already benefited Q1, right? And we would expect also a good second quarter for our Indian operations. Daniel Fairclough: So we'll move to take the next question from Reinhardt at Bank of America. Reinhardt van der Walt: First one, maybe just we've spoken a lot about inventories, and it seems like it's creating a bit of an uncertain picture around when this domestic demand will kind of kick in. What are you seeing across the European steel industry in terms of capacity mobilization -- outside of the actions that you've taken, do you think that the European industry is ready for the challenge of producing that additional volume? Genuino Christino: Well, Reinhardt, I'm not going to talk much about what the competition is doing, right? I think what we have been saying very consistently is that ArcelorMittal is in a good position, right, to take our market share of the reduced imports and we can do more, right? So to the extent that others cannot, so then we're going to be in a good position as we talked about, we have a lot of flexibility here. So we have the finances that we can bring back. We have the possibility to bring back blast furnaces. We have more downstream capacity. So we're going to be in a good position here to make sure that the market is supplied that we don't have any shortages in the -- as a result of this. Reinhardt van der Walt: Understood. That's very clear. Just maybe a second question on the Dunkirk EAF investment. You're looking to do any kind of downstream additions there or to get any changes in your product mix maybe out of that capacity as you go through the capital allocation? Genuino Christino: So can you repeat the question? I'm not sure that I got it. Reinhardt van der Walt: Yes, sure sir. So as you're converting over to EAF, are you looking to add any downstream investment as well, any kind of finishing capacity as part of that project? Genuino Christino: No, not really. We're going to be able to, of course and that's why the CapEx can be reduced to some extent because we're going to be able to still use some of the equipment there, right? And downstream will, of course, be intact. We're going to be able to -- so basically, what you're changing is the upstream, right? So instead of the blast furnace and the converters, you're going to have the EAF, the ladle furnaces and then we're going to just follow the normal process of that plant. So we should be in a position to achieve the same mix, which [indiscernible] as you know, it's quite high. We have a very quality high order book there, which we, of course, it's very important for us to protect. And that's exactly the idea here that we should be in a position to produce the same grades as we can today with the blast furnace. Daniel Fairclough: So we'll move now to take a question from Boris at Kepler Cheuvreux. Boris Bourdet: The first question is about the new capacity restarts at both in France and Dabrowa in Poland and plus EAF capacity in Spain. How much capacity are you bringing back with those new furnaces? And the second question would be on North America. Are you still facing the same headwind about the tariffs, Section 232? And can you share with us the expectations you might have for the coming renegotiation of USMCA agreement? Genuino Christino: Yes. So we have a couple of questions there. So the first one on the capacity in Europe. So all these furnaces, they are 2-plus million tonnes. So they are relatively large-sized furnaces. As I mentioned before, so we started [indiscernible], and we are getting ready in force and also in Spain, right? And we'll, of course, announce when we are ready to bring these furnaces back up, right? But we're just doing all the work so that we are in a position to restart them when we need them, right? In North America, look, I mean, the USMCA, I mean, it's early days. I think we have to wait to see really how it starts, right? It's probably wouldn't be right for me to speculate. The only thing I can say is that we hope that the outcome will be one that we feel that we can operate as a single block, right? I think for us, for our business, what would be ideal is that we have Mexico, we have Canada, putting the same barriers against the imports that we have similar protection as we have in the United States, right? And then the material then can flow. So that's what I would say. I think we have to wait there, Boris. Boris Bourdet: Okay. And just the current headwind that we still something like $150 million per quarter due to that. Genuino Christino: Yes, there is no change there. The headwinds remain basically the same, Boris. Daniel Fairclough: Great. Thanks, Boris. So we'll move now to take a question from Tristan at BNP Paribas. Tristan Gresser: I have two questions. The first one is a question on North America and Section 232. We've seen recently that there could be some relief for Mexican, Canadian producer to build new capacity in the U.S. to supply the auto market. Do you believe this could be retroactively applied to your first Calvert EAF? And if not, is that a consideration for the potential second one? Genuino Christino: Yes, Tristan. So I think it's important to be clear, right? So that today, we are not receiving any tariff relief, right? And all imports into the U.S., including from Canada and Mexico continue to pay Section 232, 50% tariffs. I think you know our position on tariffs, which is very consistent. For over 20 years, we have been arguing that the global steel industry has been suffering from overcapacity and continuously pushing for fair trade, whether it is in the U.S., Brazil, Europe, Canada or other parts of the world. So we do fully support the Section 232. But we also support being able to operate, as I was saying before, as one regional market across North America and that there are no tariffs on steel that is melted and put in Canada and Mexico. And as you know, we have been seriously considering the second EAF in Calvert as the U.S. is an attractive market to make steel. And in terms of potential tariff release, as you know, tax has been now published, designed to stimulate additional investments in the U.S., and we are analyzing it. So it's a lot of details has now been published, and we're just going through that. And the answer is not really a clear yes. We still need to study it. And I just want to also just take the opportunity as a lot has been written on this topic. I would actually like to also take the opportunity to confirm that we are contributing steel to the White House Ballroom. So approximately 600 tonnes have been delivered to date. As you know, we have a track record of both supplying strong high-quality steels to U.S. customers and donating steel to iconic buildings and projects around the world that showcase its strength and flexibility. Just to give an example, when the Freedom Tower was one of the strongest steel in the world, they came to our facilities. So we are pleased to add the White House to the list of iconic American buildings where our steel will stand strong for years in this country. So we just need to wait a bit more. We're going to go through the details, and then we're going to be in a position to update everyone. Tristan Gresser: Okay. Okay. No, that's clear, but that's a potential thing to consider. My second question is on the green steel economics in Europe. I was a bit surprised to see that you were only targeting $200 million of EBITDA for your 3 EAF projects. Because if I understood correctly, Sestao in Spain is potentially adding another 1 million tonne of new volumes. Gijon is replacing 1 million tonne and Dunkirk is replacing 2 million tonnes. So that's close to 4 million tonnes of EAF steel. And it does not look like there are much of productivity gains or green steel premiums baked into that. So maybe if you could discuss a little bit the high-level assumptions you're making and perhaps the delta is on the cost base and if you expect a big increase there from moving from BF to EF. Genuino Christino: Well, Tristan, there are a couple of points there, right? I think it is important to appreciate that we are talking about -- we are just giving you the incremental EBITDA, right? So it's incremental to what we are adding today. So -- and as you know, the idea here is that we're going to be except for Sestao, where we are really increasing capacity. In Dunkirk, we're going to be replacing one furnace. So we are not really looking to increase capacity. So what you have is really what is incremental. And then I think it's also important to take into account the amount of the investments, right? And that's why we were so focused as a company to make sure that we have the right conditions, right, so that we can justify this investment. That's why the focus on making sure that we have visibility in terms of CBAM, visibility in terms of imports [indiscernible]. We have visibility in terms of our energy contract, which we now have for this project, as you know. So I would encourage you also to look at what is the net amount of this CapEx, right? And then in the case of Dunkirk, not only you're going to have the 50% support through the white certificates, but we're going to also be in a position to avoid the reline of the furnace that we're going to be replacing. So that's why in the end, we feel that we're going to be in a position to earn a return on our investment. And when it comes to the assumptions, we don't want to be too specific about it, Tristan. As you can imagine, this is also commercially sensitive. We have our teams going out and marketing already for the future of this contracts, the green steel. I mean, as you know, for some time, at least we believe that this will be limited, right? And I think this is -- it's -- our teams are out there. So we don't want to be talking too much about the assumptions. Daniel Fairclough: So we'll move to take the next question, which I think will be from, yes, Ephrem at Citi. Ephrem Ravi: I'm just trying to understand the Page 12 AMNS future growth optionality figures. There's 15 million tonnes from Hazira, 8 million tonnes from Andhra, which gives you 23. My understanding was that Hazira was after 15, there is an optionality of Phase 2a to 18 and then Phase 2b to 24. And then obviously, the Greenfield in Andhra is sort of separate. So is the Phase 2 being delayed? Is that how we should sort of interpret that in favor of pushing ahead with the Greenfield in Andhra in order to balance the balance sheet and skill sets? Genuino Christino: I think you're right. I mean, of course, we have to phase it, right? And absolutely right. So we have in front of us the 2 options. And it continues to be an option for us, right, to take Hazira further, and that will most likely happen over time as well. But right now, yes, that's the sequencing that we see, right, and which is to start Andhra. And yes, and Hazira will remain an option for us as well as after we complete this first phase in Andhra, we can go also for another phase, right? So the 40 million tonnes vision for the Indian operations remain intact. Ephrem Ravi: And then you've said that obviously, your current energy situation is manageable, hedging and support of policies framework for insulates margins. Can you give us a sense of time line for that in terms of how long -- because, I mean, energy prices could remain high for 6 months, 12 months, 2 years. So if they remain for how long would your hedging policies cover it? And at what point do you think you and the industry will have to start thinking about energy surcharges in your steel? Genuino Christino: Yes. Well, specifically in India, we are -- our program goes -- it's a multiyear program, Ephrem. So I think we are in a good place there. So it's a multiyear. And even in Europe for gas, we will also have a multiyear plan program. So I think we are -- as I said, I think we are in a good place. Daniel Fairclough: Great. Thanks, Ephrem. So we'll move to the next question, which we'll take from Cole at Jefferies. Cole Hathorn: I'd just like a little bit of color on the metals on iron ore, just the ramp-up on volumes and how you see that into the second quarter? Just any color you can provide? And then I'd also just like to follow up on imports into Europe ahead of the trade barriers. I mean we've seen a lot of logistics disruptions globally. Do you think that there's a possibility that everyone is expecting a lot of imports into Europe, but considering the supply chains, we just don't see them delivered in time or customers potentially pull back on some of those orders just considering they might not meet the delivery dates. Just any thoughts on that? Genuino Christino: Yes. So maybe I'll take this one, Daniel, and then maybe you can comment on iron ore. So you're right. So I think what we are seeing, of course, is at this point in time, what we are seeing is more a cost issue, right? We are seeing freight rates going up. And of course, some of the journey is also taking longer because of the conflict. But it's not something that we believe should be delaying the arrival of the materials. So I think that's why as we discussed, we feel that the second quarter should still end up with elevated levels of imports, right? And as a final quarter and then from Q3 onwards, the new TRQ comes into play. And I would say that this window is now closed, right, as we are here almost the beginning of May, the window to imports, they are basically under the existing safeguards regime are getting close to an end. And the fact that we don't have yet the quotas for the new TRQ split by country, I mean, it makes it even a little bit harder for imports, right? So that's what we are seeing. Dan, you want to talk about the iron ore? Daniel Fairclough: Yes. Sorry, Cole, would you mind just repeating that question? Cole Hathorn: Just a little bit of color on the iron ore production that you're expecting into 2Q and any of the phasing through the year, just so we can think about that in the model? Daniel Fairclough: Yes, sure. So thank you. So we did have obviously a good start to the year in Liberia, another record production shipment quarter. So I think as we -- and that will just continue over the next 3 quarters. So we've signaled in our initial guidance at the beginning of the year that we expect to be at full capacity in the second half and to achieve at least 80 million tonnes of shipments. So yes, I would just be -- that's how we would be factoring it into the model. Some further improvement in the second quarter. I expect that we will navigate the rainy season through Q3. We continue to improve on our ability to navigate that. And then I would expect we should finish with a strong fourth quarter performance. Cole Hathorn: And then maybe just following up on iron ore. You've been very clear that the energy situation is manageable across the rest of the business. But are there any things we should be thinking about in iron ore costs just for diesel, et cetera, on the mining side? Genuino Christino: I think the only thing I would call out, Cole, is freight, right? I think the profitability of mining in Q2 will depend, of course, much more, of course, where prices finally land and freight, right? So oil will have an impact as well. But based on what I see today, I would be more focused on prices and freight. Daniel Fairclough: So we'll move to the next question, which we'll take from Andy at UBS. Andrew Jones: I've got a few follow-ups to previous questions. Just on that potential tariff carve-out in North America. My understanding is it's based upon volumes sold just into the auto sector. So if you ship slabs from Mexico into Calvert, would you -- is it your understanding you potentially get some relief on those if they then be sold into auto? That's the first one. I've got a couple of ones to follow. Genuino Christino: Andy, as I said, I mean, we just got all these details, right? And the teams are busy going through that. So I don't want to anticipate the analysis. If you don't mind, I think we will address that with you next quarter. I'm sure we'll have more color and information to provide on that. Andrew Jones: Yes. Okay. No worries. And just a couple of modeling ones. On the Ukraine contribution, I mean, that was obviously a drag in the first quarter. Can you quantify that on EBITDA? And do you see anything changing into 2Q? Genuino Christino: Yes. Yes, it was -- Q1 was a challenging quarter for Ukraine, right? So energy prices, in particular, really very, very high. So as we discussed before, so Ukraine, they have been managing relatively well, right? So in the whole of 2025, as we discussed, at EBITDA level, they managed to be basically neutral, still free cash negative, of course, because of CapEx. Q1 EBITDA was negative as a result of the high energy costs. Energy has come down, so which is good news. So we do expect to do better in the second quarter, right? But as we know, the situation remains very challenging. But at least on that front, we expect to do better, and that has been really one of the key drivers of the result. Andrew Jones: Okay. That's clear. And just finally on Mexico, the operating issues that you had last year, there was a little bit of overspill into 1Q. Like how material was that? I think you -- I think maybe in the fourth quarter, you called out 65 million hit. I mean what was the equivalent number in 1Q? Was it material? Genuino Christino: Yes. So the evolution in Mexico is very good, right? We started the blast furnace, which is producing long products. So we were not yet at full capacity in Q1 in long. So we're going to be at full capacity in quarter 2. So I would expect our production and shipments in North America to continue to improve as we move forward, right? But it's no longer, of course, the same magnitude that we had in prior quarters. So I think it's a very good evolution. As we discussed at the time of Q4, you see profitability in North America almost doubling, and we should continue to see progress going forward in the second quarter. But production is now up and running, and it's only now the full capacity of this furnace that you should see in quarter 2. Daniel Fairclough: So we'll move now to take a question from Timna at Wells Fargo. Timna Tanners: I wanted to actually double-click as the kids say these days on North America just a bit more, if I could. I think we obviously, as you pointed out in the last response, seen a nice benefit. It was the biggest contributor to Q1 over Q4 from rising prices. You have some locked up in annual contracts. Can you talk to us about how auto annual contracts fleshed out a bit or give us high-level color on that? And then also, do you think that you could see the same order of magnitude in the U.S. into Q2 given the pace of price increases? And then also I wanted some more color on how Calvert was ramping up? Genuino Christino: Yes. So automotive, I mean, as you know, in U.S., our contracts, they are really the negotiations happen throughout the year. It's a little bit more spread out compared to Europe. In Europe, we have a concentration really at the beginning of the year. In U.S., it's more, I would say, more like 30% Q1, 30% from quarter 2 and then the rest is 25% is Q3. And so I think we are doing well. And as you know, we don't really comment so much on the outcome of these negotiations. But I have to say that they are going in line with our expectations. It's good. The ramp-up at Calvert, the EAF is progressing. So in quarter 1, we were a little bit running above already 20%, 25%, and we are progressing. We believe that by the end of quarter 2, we should be at much higher levels. And we remain optimistic that we're going to be getting close to ending this ramp-up phase by the end of this year, Timna. And then if I have... Go ahead, Timna. Timna Tanners: No, I just wanted to ask about if you would be able to quantify the extent of the price increase in Q1 over Q4, if that could be sustained given recent price strength continuing into Q2? Genuino Christino: Yes. Look, we're not going to be quantifying that, but I mean, I think you know very well how prices have moved up in the U.S. I mean they continue to rise, and you should see that reflect in our results. We talked about automotive, the annual contracts and how much is resetting, right? So yes. Timna Tanners: Okay. And one further one, if I could, please. We're hearing a bit about switching away from aluminum to steel. In the U.S., of course, it's been a more extreme change in prices between the 2. But even in Europe, to the extent that the BYDs are getting built and have more steel amount in them versus aluminum. So it would be great to get any observations that you're seeing on switching away from aluminum to steel and automotive. Genuino Christino: Yes. So when we look at -- I think you're right. I think this is -- to be honest, it has been at least now less of an issue. We continue to be very focused on that, showing the benefits of steel to our customers. I think we have been very successful there, Timna, as you know. So I think we continue to make improvements there. So it's not something that I would highlight to you as a big concern that we have at this point, right? But of course, we remain very focused on R&D, making sure that we have the right grades, we achieve what customers want. So we have successes. And so when we look at the level of intensity, steel intensity on average, we see relatively stability. Daniel Fairclough: So we'll move now to a question from Tom at Barclays. Tom Zhang: Just one quick follow-up for me, just on Ukraine, you talked about obviously high energy costs having an impact in Q1. Are you seeing anything from CBAM impacting Ukraine? I guess one of your Ukrainian peers has called out CBAM as being quite a big disruptor for Ukrainian steel going into Europe. I think it's not exempt at the moment. There's been a few articles saying maybe some order cancellations. Yes, are you seeing any kind of impact there? Genuino Christino: Yes. I think there was the expectation that Ukraine will be exempted, right? And they are not. And we believe that is right. There shouldn't be exemptions, right? At the same time, prices are increasing in Europe. So if you have the right cost base, of course, then you should be competitive. In our business, of course, we are focused in Ukraine on the domestic market, right, and also selling pig to different parts of the group. There's good demand for pig, which we continue to sell. Tom Zhang: Sorry, I didn't quite catch that. Did you say it shouldn't be or it should be exempt from CBAM? Genuino Christino: It shouldn't be an exemption. Tom Zhang: Shouldn't. Okay. So you're focusing more on the domestic market. And you would say there was some kind of earnings impact that I guess, persists into Q2 if an exemption doesn't come through. Then just second question, just on sort of buyback thoughts really. I mean I know your capital allocation policy hasn't changed. We haven't seen any buybacks for nearly a year now. If I look at your free cash over the last 12 months, it is positive. And I guess you're talking about earnings ramping up through the rest of the year. Is that sort of back on the cards potentially to restart that buyback program? Genuino Christino: Well, I think you're right. So you know our policy, right? And we had, by the way, in Q1, our first quarterly dividend which was paid. We remain very optimistic that we're going to be free cash flow positive this year. And then the policy will kick in. And based on the visibility that I have today, I see no reason why we would not go above the minimum 50% as we have been doing in the last couple of years. And if I can remind everyone, the policies has been really great. I mean we bought more than 38% of our stock. And I think we are close to restart that. Tom Zhang: Okay. Great. And sorry, you just said I'm so optimistic free cash flow positive this year, then the policy will kick in. Does that mean the policy only kicks in once you sort of see the full year numbers in? Or is it more dynamic than that if you have visibility, you could start sooner? Genuino Christino: Yes. I mean it is more dynamic. Daniel Fairclough: Great. So we have time for maybe 2, 3 more questions. So the first, we will take from Max at ODDO. Maxime Kogge: So first question is you published last week a sustainability report where you cut your carbon emissions objective to minus 10% from minus 30% previously by 2030. I think the new objective is very dependent actually on being delivered on time in 2030. So my question is what would be, in your view, a more realistic time line for the 30% reduction? Is it the mid-30s, late 30s, even beyond? And how should we think about the sequencing of the next EAF projects in Europe? Are you waiting for Gijón to be delivered and ramped up before potentially launching investments? Or will it come perhaps even later? Genuino Christino: You want to start with this one, Daniel? Daniel Fairclough: Yes. Thanks, Genuino. So I think you're right to observe the change to our 2030 target. We well flagged that, I think, in recent reports and communications. What's, I think, important to take away is that, that 2030 target is based on the announced projects. So it's a number that we are confident we can achieve and that's why we updated it. In terms of the timing of the next EAF projects, I think if you look at our communications on our messaging, we've also been quite clear that our EAF projects are going to be sequential. So we don't expect significant overlap on any of our blast furnace to EAF project. So the focus right now is completing Gijón. We've just announced Dunkirk, and that will occupy us for the medium term. And then the intention and time is to obviously communicate on what the project that will then follow will be. So let's really focus on getting a smooth start to Dunkirk at this stage, and then we will update on the next project in due course. Maxime Kogge: Okay. And just the second and last one is about the German stimulus plan. So expectations in recent weeks have come down actually amid the red tape, other priorities perhaps an infra for the new German government. So what's your latest view on the topic? You were quite vocal previously on it saying that it could increase demand in Europe by around 2% per year over the next 10 years. Is that still your scenario? And when do you expect that to really kick in already next 2 2026 or it's more of a story of 2027 or even 2028 based on your latest understanding? Genuino Christino: Well, I mean, to be honest, I mean, we don't see any significant change there. I mean when we look at the impact of the program. We start actually to see some activity, right? So I don't believe that the overall numbers that we talked about, they will change. I mean we -- at least that's not the intelligence that we have. We will, of course, have to -- we'll keep monitoring that. But I think we are progressing as the progress is happening there. Daniel Fairclough: Great. So we do have time for 2 more questions. So we'll take the first from Dominic at JPMorgan. Dominic O'Kane: Just 2 quick questions. You've spoken and given us a lot of granularity on Europe. And again, just maybe coming back to the U.S. given how tight we see that market at the moment, do you think there's any possibility that you actually run harder through Q2 than normal? So obviously, we often see a summer slowdown. Do you think there is potential that given the state of lead times that you may run harder than normal? And second question, just on -- so any kind of obvious cash flow items we need to be aware of for Q2 modeling for the net debt bridge. Genuino Christino: Dominic, so in U.S., I mean, as you know, I mean, we are running our facilities full. I mean Calvert, we have been running at high levels, and that will continue, right? So where you're going to see improvements in terms of production shipments is going to be more really in Mexico and a little bit also in Canada, right? And the focus in U.S. for us right now is to ramp up EAF as we talked about, that will bring more results, so it should contribute to results. And the second part of the question, can you repeat that for me, please? Dominic O'Kane: But just in terms of modeling for net debt in Q2, are there any... Genuino Christino: I would not -- Daniel, I would not focus so much in quarter 2, right? I mean I guess my message is more really when I think about the year as a whole, as you know, we have -- typically, we will have a larger release of working capital in the second half. That should continue to be the case despite all the improvements that we are discussing, we are seeing, right? And we explained that because we built some strategic inventories at end of last year that we're going to be releasing. So despite all the good developments that we are seeing in terms of prices, volumes in the second half, our expectation is that for full year, working capital should not really be consuming a significant amount of cash, which should then support even more the free cash flow generation. Daniel Fairclough: Is that helpful, Dominic? So I think the focus there just to reiterate is normally, the working capital movement in Q2, Q3 is not a major delta in the cash flow bridge, where it is a major delta is normally Q1 and Q4. So normally, we invest in working capital in the first quarter, and this year has been no different. And then normally, we see a nice release of working capital in Q4 and Q2, Q3 normally that's broadly a wash. Great. So I think we will now move to the last question, which we're going to take from Matt at Goldman Sachs. Matthew Greene: I have one question on your Indian operations, perhaps in 2 parts. Genuino, you mentioned costs are largely hedged, that's fine. But given India's reliance on gas imports primarily from the Middle East and some of your peers flagging shortages, could you outline where you're sourcing your gas from today and whether you've received any force majeure on future deliveries? And then just a follow-up, given your use of gas-based DRI and captive power, what measures can you realistically take to manage gas availability or reduce gas intensity across the Indian operations? Genuino Christino: So I think we are in a good place there as well. I mean we have different sources of gas. So we are not really dependent only on Middle East. So we are in a good place. So we have not had any force majeure. So we have received all our gas. We have no indication as we speak in end of April, beginning of May, no indication of force majeure. So I think we are -- as we discussed, I think we are in a good place there. So we are not expecting any disruptions because of availability for sure on the price and also on availability, it's not something that we are overly concerned at this point. Daniel Fairclough: Great. So I'll hand back to Aditya Mittal for any closing remarks. Genuino Christino: Yes. So thank you, everyone. Before we close, let me briefly reflect on the key messages from today's discussion. First, our first quarter performance again demonstrates the structural improvement in the earnings power of ArcelorMittal. Margins are well above historical levels with the further benefits of more favorable policy still to accrue. Underlying free cash is annualizing at over $2 billion. Second, we have a clear and differentiated growth pipeline. Our strategic investments are supporting our results and materially enhancing our future EBITDA potential. Finally, the positive outlook for our business is underpinned by more supportive trade policy, especially for Europe. More effective trade protections are fostering a more regionalized market structure, providing a robust platform for higher capacity utilization and profitability and higher and more consistent returns on capital employed. Alongside the impact of our growth strategy, this supports the free cash flow outlook for ArcelorMittal and the delivery of consistent capital returns to shareholders. With that, I will close today's call. And if you have any follow-up questions, please reach out to Daniel and his team. Thank you again for joining us, and I look forward to speaking with you soon. Stay safe and keep those around you safe as well. Thank you.
Operator: Good morning, and welcome to Fairfax's 2026 First Quarter Results Conference Call. [Operator Instructions] Your host for today's call is Peter Clarke, with opening remarks from Derek Bulas. Derek, you may begin. Derek Bulas: Good morning, and welcome to our call to discuss Fairfax's 2026 first quarter results. This call may include forward-looking statements. Actual results may differ perhaps materially from those contained in such forward-looking statements as a result of a variety of uncertainties and risk factors, the most foreseeable of which are set out under risk factors in our base shelf prospectus, which has been filed with Canadian securities regulators and is available on SEDAR+. Fairfax disclaims any intention or obligation to update or revise any forward-looking statements, except as required by applicable securities laws. I'll now turn the call over to our President and COO, Peter Clarke. Peter Clarke: Thank you, Derek. Good morning. Welcome to Fairfax's 2026 First Quarter Conference Call. I plan to give you some highlights and then pass the call to Wade Burton, our President and Chief Investment Officer of Hamblin Watsa, to comment on investments and Amy Sherk, our Chief Financial Officer, to provide some additional financial details. We had a great start to 2026 with operating income from our insurance and reinsurance companies adjusted to an undiscounted basis and before risk margin of $1.2 billion in the first quarter of 2026, up from $686 million in the first quarter of 2025. All components of our operating income were strong and up significantly from the first quarter of 2025. Underwriting income was $382 million, interest and dividend income of $561 million, and our profits of associates were $271 million. In the quarter, we had net losses on investments of $386 million primarily mark-to-market losses on bonds versus net gains on investments of $1.1 billion in the first quarter of 2025. That's a swing of almost $1.5 billion quarter-over-quarter. As we have always said, we expect investment gains to perform well over the long term, but will fluctuate quarter-to-quarter. Our net earnings for the first quarter of 2026 were $696 million. And all in, our book value per share at the end of the first quarter was $1,250, up 0.5% from year-end 2025 and adjusted for our $15 dividend. During the quarter, we purchased 375,000 shares for cancellation for $631 million. We expect to close two significant transactions in the second quarter of 2026. The sale of half our position in Poseidon for $1.9 billion, a pretax gain of approximately $837 million, and the sale of Eurolife's life operations for approximately $935 million for a pretax gain of approximately $350 million. In February of 2026, the Special Committee of Kennedy Wilson accepted the $10.90 per share offer from Bill McMorrow and us to take the company private, a 46% premium to the price it traded prior to the offer. We are waiting regulatory and shareholder approvals. We expect to close the transaction sometime in the second quarter. With the conflict in Iran, unfortunately, members of the Fairfax family again find themselves in harm's way. GIG management is ensuring all employees in the Gulf region have the support that they need to stay safe, and this is our first priority. It is still uncertain how long this will last, but Gulf continues to operate as usual under these most difficult conditions and losses related to this conflict have been minimal. Our thoughts and prayers are with all the employees at Gulf. I will now give you some additional detail on the components of our net earnings for the quarter. Our consolidated investment return was 0.8% driven by interest and dividend income, strong profits of associates, offset by net losses on investments, again, primarily on mark-to-market losses on our bonds. Consolidated interest and dividend income of $662 million was up 9% year-over-year, benefiting from our growing investment portfolio. Profits of associates of $371 million in the quarter was driven by Eurobank, the Waterous Energy Fund III and Poseidon. Our associate companies continue to post very solid stable results. In the quarter, we had net losses on investments of $386 million from mark-to-market losses on our bond portfolio, primarily from U.S. treasuries due to the increase in interest rates in the first quarter and losses on equity exposures of $82 million. Offset by other net gains of $60 million, primarily gains on foreign exchange, offset by mark-to-market losses on our preferred shares in Digit. The net loss of $82 million on our equity and equity-related holdings were driven by unrealized losses on Fairfax TRS of $342 million, offset by net gains on Orla and Strathcona. As I said earlier, and please remember, our net gains or losses on investments only makes sense over the long term and will fluctuate from quarter-to-quarter, for that matter, year-to-year. More on investments from Wade. As I mentioned in previous quarters, our book value per share of $1,250 does not include unrealized gains or losses in our equity accounted investments and our consolidated investments, which are not mark-to-market. At the end of the first quarter, the fair value of these securities is in excess of carrying value by $3.9 billion, an unrealized gain position or $190 per share on a pretax basis. This is a significant increase from a year ago at $67 per share and year-end 2025 at $150 per share. In the first quarter, net earnings included $184 million unrealized loss due to increasing interest rates in the quarter. This consisted of unrealized losses on our bonds of $364 million that I previously mentioned. Offset by the increase in discount under IFRS 17 on our insurance and reinsurance reserves of $180 million. For the first quarter of 2025, this number was a net gain of $120 million. Our insurance and reinsurance businesses wrote $8.7 billion of gross premium in the first quarter of 2026, up 4.1% versus the first quarter of 2025. Our North American Insurance segment's gross premium was relatively flat year-over-year decreasing $18 million or less than 1% from the first quarter of 2025 due to a softening insurance market. Crum & Forster's premium was down 2.7%, driven by its surplus and Specialty segment and Seneca's property business, offset by increases in its accident and health business. Northbridge's gross premium was down 4.8% in Canadian dollars, reflecting a competitive marketplace. In U.S. dollars, its premium was down only 0.4% due to the strengthening of the Canadian dollar. Zenith premiums were up 10% for the first quarter of 2025 -- '26, sorry, due to earned rate increases and new business in workers' compensation. Our global insurer and reinsurer segment was up 2.5%, with gross premiums of $4.8 billion in the first quarter of 2026 over the first quarter of 2025. Allied World's premium was up 3.7% in the quarter, with gross premiums of $2.2 billion. The Reinsurance segment was up 10.4% from new and renewal business, most notably crop, while its global insurance premium was down 2.6%, primarily from its North American Insurance segment, offset by growth in its global market segment. Odyssey's premiums were down 1.2% in the first quarter of 2026, with gross premium written of $1.5 billion. It's U.S. reinsurance business was the driver of the decrease primarily due to property treaty, reflecting reinstatement premiums from the first quarter of 2025 on the California wildfire losses that did not reoccur in 2026. Its insurance business at Hudson and Newline was relatively flat. Brit's gross premium was $810 million, up 3.8% in the first quarter of 2026, versus the first quarter of 2025. Excluding California wildfire reinstatement premium in the first quarter, gross premium was up 6.8%. Over half the growth came from the recent expansion of its Brit Re platform in Bermuda. Ki, the algorithmic follow-on Lloyd's syndicate developed within Brit, is in its second year operating as a stand-alone business. Ki's gross premiums was up 11.7% in the first quarter of 2026, driven by property treaty, casualty business, offset by open market North American property. Ki announced in the first quarter, it is adding a fifth capacity partner to its platform that will begin in the second quarter of 2026. Our international insurance and reinsurance operations gross premiums were $1.7 billion, up 16.4% in the first quarter of 2026 versus the first quarter of 2025 benefiting from high single-digit underlying growth and favorable movements of foreign exchange. Gulf was up 30% in the quarter, Bryte up 28%, Fairfax LATAM 9%; and Fairfax Central and Eastern Europe up 17%. Fairfax Asia gross premiums was up 3% year-over-year and on a net basis, was up 31%, with reduced cessions due to a new reinsurance program implemented in 2026. International operations currently account for about 20% of our overall gross premiums. Looking ahead, these operations offer strong long-term potential for sustained growth. Thanks to skilled management teams, emerging insurance markets and robust local economies. Our combined ratio was 94.1% in the first quarter, with underwriting income of $382 million, compared to 98.5% combined ratio and underwriting income of $97 million in the first quarter of 2025. The big driver of the difference year-over-year was lower catastrophe losses in the first quarter of 2026, with approximately 1.8 combined ratio points versus 12.7 points on the combined ratio in the first quarter of 2025, primarily from the California wildfire losses. This was offset by lower prior year favorable development in the quarter over last year. Our global insurers and reinsurers posted a combined ratio of 92.5%, Odyssey Group led the way with a combined ratio of 91.1%, Brit's combined ratio was 93%, Allied World had a combined ratio of 93.4%, and Ki's combined ratio was 94.7%. That included 3.8 points of separation costs. Our North American insurers had a combined ratio of 96% for the quarter. Northbridge had a combined ratio of 94.1%, Crum & Forster had underwriting income of $52 million for a combined ratio of 95.5% while our Zenith, our workers' compensation specialist, we are dealing with the effects of multiple years of price decreases in the workers' compensation space, although this is reversing, had an elevated combined ratio of 103.7% trending down in the first quarter of 2025 of 106.3%. Our international operations delivered a combined ratio of 95.8% for the quarter with underwriting income of $46 million with all our international segments producing underwriting income. Colonnade in Eastern Europe had an excellent combined ratio of 89.8%. Bryte continues to produce strong results with a combined ratio of 94.9% and Fairfax Asia had a combined ratio of 96.3%, led by Singapore Re at 85%. Gulf insurance, the largest company in our international operations, got off to a good start in 2026 with a combined ratio of 95.9% in the first quarter, notwithstanding the difficult conditions from the war in Iran. In the first quarter, our insurance and reinsurance companies recorded favorable reserve development of $86 million or a benefit of 1.3 points on our combined ratio. Each of our major segments recorded favorable reserve development. We are focused on setting our ongoing reserves at conservative levels especially on long tail lines. Through our decentralized operations, our insurance and reinsurance companies continue to produce strong results. Writing annualized gross premium of over $33 billion, with underlying margins remaining attractive, in the main, in spite of softening rates. In certain lines, it is becoming more competitive, but we benefit from our size and scale. And more importantly, we have exceptional long-term management teams that are all focused on the bottom line and have the experience to manage the cyclical nature of the insurance business. I will now pass the call to Wade Burton, our President and Chief Investment Officer of Hamblin Watsa to comment on our investments. Wade Burton: Thank you, Peter, and good morning. March 31, 2026, ends another good quarter on the investment side. Performance continues to be excellent. Equities are up 2.9% on the quarter, 28.9% for the last 12 months and 20.5% through 3 years. Similarly, our bonds have outperformed, up 0.3% on the quarter, 5.6% for the last 12 months and 4.9% through 3 years. Our fixed income portfolio was safe and earning strong interest income and our public equities associates and consolidated noninsurance investments continued to perform well. We ended the quarter with $49.8 billion in fixed income investments and $26.6 billion in equity and equity exposed investments. The fixed income portfolio includes $5.6 billion in mortgages, $6 billion in corporates, all very short term, mainly investment grade and no, I'll repeat, zero traditional private credit exposure and $38.2 billion in government bonds and treasuries. Duration is 2.2 years, average maturity is 3 years and our yield is approximately 5%. A lot of safety and flexibility is built into the fixed income portfolio, which is our response to the playing field as it sits. The economic and interest environment has many conflicting factors, so we're playing it safe, keeping lots of flexibility and making a good return as we wait. As I said, we have $26.6 billion invested in common shares, equity and associates, consolidated noninsurance equity investments and preferred shares, all doing well, especially the bigger investments. Peter already discussed the Poseidon sale. Otherwise, it was a quiet quarter, so I thought it would be a good quarter to give a discussion about how we look at investments in publicly traded common stocks versus investing in private companies. The underlying process is the same. We work to uncover true economic profits and/or profit capacity. We think about where those profits are going. We focus on balance sheet and balance sheet flexibility, then we think about the price we pay for those profits. The same underlying process for both public and for private. In both cases, we know management is a key factor. As Buffett pointed out, a great manager, can't save a leaky boat, but what we have learned is that they make a huge difference paddling boats that do float. The advantages of buying public common stocks is, one, the ability to capitalize on the moves of the stock market, and two, liquidity. The ability to enter and exit an investment quickly is a good thing. The advantages of making direct investments in private companies is we control the profits. That is we can choose to reinvest the profits in the businesses we've invested in or we can take the profits out and invest them elsewhere. In general, the flexibility to invest in either public or private companies is a huge advantage for us. It allows us to be opportunistic agnostic and truly seek the best possible investments. For example, today, with the Shiller P/E at all-time highs, you would not expect we'd find a lot of $0.50 in the stock market, and we aren't. But we have been able to make outstanding acquisitions on the private side, including Meadows, Peak and Sleep Country. We have the advantage of a history of being terrific long-term partners, 40 years of fair and friendly transactions with a long, long line of very happy partners, along with permanent no-call capital makes us an attractive home for many companies. To do all of this well takes a skilled and focused investment team, and I'm so proud of the team we've built over the last 10 or 15 years. Our people are decision makers, they are analysts and value investors. We have skilled defensive players and skilled offensive players, all have experience in public and private investments. And having the independence to make decisions is so important, and they're all doing it. We call them in where we need them on the bigger investments. And with that, it is amazing to watch them come together as a group. And having this team in place is especially important now given how big and globally spread out we are and how big we hope and plan to be in the next 50 years. I will now turn the call over to Amy Sherk, our CFO. Amy Sherk: Thank you, Wade. I'll begin my comments by discussing some of our key transactions. On March 9, 2026, AGT completed a CAD 450 million offering of its common shares at CAD 23 per share. Immediately prior to closing of the offering, Fairfax exercised its AGT equity warrants at CAD 22.50 per common share for aggregate consideration of CAD 340 million in exchange for settlement of a CAD 340 million loan receivable from AGT. Concurrent with closing, the company also acquired CAD 200 in AGT common shares in a private placement for CAD 23 per share. The company's ownership in AGT was diluted from 66% to 56% as a result of these transactions and we, therefore, continue to control AGT. The following 3 transactions were already discussed by Peter, so I will just provide some additional details. On March 10, 2026, the company announced that it entered into agreements to sell an aggregate equity interest of approximately 23.1% of Poseidon for aggregate proceeds of approximately $1.9 billion. Following the sales, Fairfax will retain an equity ownership of approximately 22.2% of Poseidon. The pretax gain on closing is estimated to be $837 million, and the company expects to continue to apply the equity method of accounting to its investment in the common shares of Poseidon following the sale. On October 13, 2025, the company announced that it had entered into a term sheet with Eurobank, pursuant to which Eurobank will acquire the company's 80% equity interest in the life insurance operations of Eurolife for cash consideration of approximately $935 million or EUR 813 million. The estimated pretax gain on closing is approximately $350 million. Accordingly, the company continues to classify assets of $3.3 billion and liabilities of $3.5 billion related to Eurolife life operations as held for sale at March 31, 2026. On February 16, 2026, the company and Kennedy Wilson entered into a definitive merger agreement pursuant to which Kennedy Wilson will be acquired in an all-cash transaction by a consortium led by certain senior executives of Kennedy Wilson together with the company. The consortium will acquire all outstanding common shares of Kennedy Wilson not already owned for $10.90 per share in cash, and the company has committed to providing the consortium with funding of up to $1.65 billion, principally to fund the transaction's cash purchase price. These transactions are expected to close in the second quarter of 2026. A few comments on our noninsurance company results in the first quarter of 2026, non-insurance companies reported operating income of $37 million in the first quarter of 2026 compared to an operating loss of $41 million in the first quarter of 2025, primarily reflecting strong share of profit of associates at Fairfax India, partially offset by nonrecurring expenses at AGT related to its initial public offering in the first quarter of 2026. Our noninsurance companies, including Sleep Country, Recipe, Dexterra, Meadows and Peak continued to perform well in the first quarter of 2026. Looking at our share of profit from investments in associates, we reported increased consolidated share of profit of associates of $372 million in the first quarter of 2026, compared to $129 million in the first quarter of 2025. Share of profit in the first quarter of 2026 principally reflected share of profit of $129 million from Eurobank, $117 million from the Waterous Energy Fund III and $77 million from Poseidon. I will close with a few comments on our financial condition. Maintaining an emphasis on financial soundness at March 31, 2026, the company held $2.5 billion of cash and investments at the holding company, had only $300 million drawn from its $2 billion unsecured revolving credit facility and an additional $2.1 billion at fair value of investments in associates and market-traded consolidated noninsurance companies owned by the holding company. Holding company cash and investments support the company's decentralized structure and enable the company to deploy capital efficiently to its insurance and reinsurance companies. At March 31, 2026, the excess of fair value over carrying value of investments in noninsurance associates and market-traded consolidated noninsurance subsidiaries was $3.9 billion compared to $3.1 billion at December 31, 2025, with the increase principally related to the announced sale of 23.1% of the company's investment in Poseidon, which we have already talked about. The pretax excess of $3.9 billion is not reflected in the company's book value per share, but is regularly reviewed by management as an indicator of investment performance. The company's consolidated total debt to total capital ratio, excluding noninsurance companies, increased to 27.8% at March 31, 2026, compared to 26.2% at December 31, 2025, reflecting increased total debt, principally due to the issuances of unsecured senior notes of $476.6 million or CAD 650 million in February 2026 and decreased common shareholders' equity. Subsequent to March 31, 2026, on April 15, the company redeemed at maturity $91.8 million principal amount of its 8.3% unsecured senior notes. And on April 29, 2026, the company announced its intention to redeem on May 29, 2026, all of its outstanding CAD 450 million full amount of 4.7% unsecured senior notes, which are due on December 16, 2026. Common shareholders' equity decreased to $25.8 billion at March 31, 2026, from $26.3 billion at December 31, 2025, primarily reflecting purchases of about 375,000 subordinate voting shares for cancellation for cash consideration of $631 million or $1,684 per share, payment of common share dividends of $329 million and other comprehensive loss of $227 million, primarily related to unrealized foreign currency translation losses net of hedges due to the strengthening of the U.S. dollar against various currencies. The company does view these unrealized foreign currency movements as market fluctuations, similar to our unrealized gains and losses on its equity and fixed income portfolios. This was all partially offset by our net earnings attributable to shareholders of Fairfax of $696 million. Lastly, book value per share was $1,250.14 at March 31, 2026, compared to $1,260.19 at December 31, 2025, representing an increase per basic share in the first quarter of 2026 of 0.5% adjusted to include the $15 per common share dividend paid in the first quarter. That concludes my remarks for the first quarter of 2026, and I'll turn it back to Peter. Peter Clarke: Thank you, Amy. And Denise, we are now happy to take any questions that you might have. Operator: [Operator Instructions] The first question today does come from Stephen Boland with Raymond James. Stephen Boland: Peter, I guess this is for you. I know you addressed this at the annual meeting and some of the events around that, but I just want to talk a little bit about softness. When I look at the premium that was reported between the North American and international this quarter, flat for North America, a little bit up in international. Is that the dynamic we're seeing? And what is the messaging going to the subsidiaries from head office? Or is it just intuitive that the subsidiaries are beginning to avoid where price -- pricing just isn't profitable down the line. Is there any messaging coming from the head office on that? Or you let the subsidiaries do what they do? Peter Clarke: No, that's a good question. And I think just to start off, there really doesn't have to be any messaging to our companies. They're very -- the presidents are very experienced and they've managed through cycles before. And it's very clear, we're all on the same page that underwriting profit is a focus and underwriting discipline. So there's no -- if you need to reduce your premium and pricing is inadequate, that's totally fine from us. And we take a long-term approach, long-term view. We're building the company over the long term. And so again, I think the presidents all do the right thing, all are focused on underwriting profit. And that message is very, very clear from Fairfax as well. Operator: The next question comes from Tom MacKinnon with BMO Capital Markets. Tom MacKinnon: Just a question with respect to Gulf. Net premiums written in 2025 were, in fact, flat to modestly down versus 2024. We got a spike up here in the first quarter of 2026. Is there any more color you can share with us? And I noticed that you've been increasing retention with respect to Gulf as well. Are there any concerns here about increasing retention in an area where there's heightened risk as well? So if you can provide any kind of more color on that, I'd appreciate it. Peter Clarke: Sure. For Gulf, yes, 2025 premiums were down. I think we disclosed that they lost a large health contract in Kuwait at the end of '24, which affected their premiums in 2025. And that treaty, in particular, they did cede a lot of business. They only retained a portion of the business. So that affected their net retentions. So coming into 2026 off a lower base, they are expanding again in the accident and health business, and it's coming off a lower base. So that's why you'll see the bounce back in the premiums and is partly responsible for the net retention increasing. So it's really driven by that one large contract that wasn't renewed in late 2024. Operator: Next question comes from Bart Dziarski with RBC Capital Markets. Bart Dziarski: I wanted to ask around the Poseidon transaction. So congrats on the announcement there, and just hoping you can give us some more color in terms of why now, why sell a portion and not the whole stake? And then what you expect to do with the proceeds once the transaction closes? Peter Clarke: No. Thanks for the question, Bart. No, Poseidon, it has been an excellent investment for us. I think we first invested around 2018, and our compounded annual return was 25% per year. Our cost was about $9.50, $10, and we carried it at $15.50, I believe. So we sold half the position for $230 had a very nice gain, $837 million, and we're very happy to hold the remaining 22%. Our partner, ONE, that took it public -- private, sorry, last year was wanting to increase its ownership. So we were fine selling about half of our position. Operator: The next question is from Jaeme Gloyn with National Bank Capital Markets. Jaeme Gloyn: Just want to quickly touch on the reserves and development this quarter. It looks like a little bit of a step down from this time last year and sort of the pacing that we've been seeing. Can you talk about a little bit more detail on perhaps what's driving that? Is there a shift in how you're looking at the portfolio? And I just want to sort of understand that trajectory if it's at these levels or this is sort of a little bit of a one-off. Peter Clarke: I think, Jaeme, I think when we look at reserves, first quarter is not really a big quarter for us to move reserves. In the fourth quarter, we do a thorough reserve analysis, actuarial review of all our reserves. So most of the actions are taken in the fourth quarter. So in the first quarter, it's usually a lower movement on the reserves than others. I think maybe last year, the favorable development was higher than normally expected. So quarter-to-quarter, especially in the first half of the year, I wouldn't really put any real focus on that number. Operator: That comes from Tom MacKinnon with BMO Capital Markets. Tom MacKinnon: Okay. Peter, you note the -- a bit of a shift here in terms of more premium growth coming out of international, I guess, than the North American and the global insurers and reinsurers. And now you're -- obviously, the international running around a 96% combined and the rest of the North American and global reinsurers running around 93%. So as you kind of shift more business into the 96% combined and versus the 93% combined, how do you feel about this $1.5 billion outlook for underwriting profit going forward? Peter Clarke: No, that's -- you're right. There has been -- in this quarter, at least, and there's been a shift between the mix of business between our larger companies, which are primarily a large portion of their business comes from North America. And that's really where we're seeing the softening of rates, and it's much more competitive. So as you said, we don't see as much growth there. They were about 1.5% for that -- the larger companies, they were up 1.5% in the first quarter. And then our international operations, where they're not seeing the price decreases as much, more attractive business, we would hope that, that the combined ratio will drop over time. Gulf, for example, they're still running a little bit above 95%. But historically, they've run in the below 95% low 90s. So I think we'll see that combined ratio for the international group continue to go down as well, helping the overall mix of business. We write about $33 billion now, and we benefit from that greatly. Like I said, 80% is still with our larger companies, but that 20% of international business, it's about $6.5 billion of premium, and that's quite significant, and it gives us the scale and diversity to manage these cycles. So... Operator: [Operator Instructions] We currently have no questions. Peter Clarke: Well, Denise, if there are no further questions, thank you for joining us on our first quarter conference call. Thank you very much. Operator: Thank you. That does conclude today's conference. We appreciate your participation. You may disconnect and have a great rest of your day.
Operator: Good day, and welcome to the Imperial Oil First Quarter 2026 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Peter Shaw, Vice President of Investor Relations. Please go ahead. Peter Shaw: Good morning, everyone. Welcome to our first quarter earnings conference call. I am joined this morning by Imperial Senior Management Team, including John Whelan, Chairman, President and CEO; and Dan Lyons, Senior Vice President, Finance and Administration; Cheryl Gomez-Smith, Senior Vice President of the Upstream; and Scott Maloney, Vice President of the Downstream. Today's comments include reference to non-GAAP financial measures. The definitions and reconciliations of these measures can be found in Attachment 6 of our most recent press release and are available on our website with the link to this conference call. Today's comments may contain forward-looking information. Any forward-looking information is not a guarantee of future performance and actual future performance and operating results can vary materially depending on a number of factors and assumptions. Forward-looking information and the risk factors and assumptions are described in further detail on our first quarter earnings release that we issued earlier this morning as well as our most recent Form 10-K. All these documents are available on SEDAR+, EDGAR and our website. So I'd ask you to refer to those. John is going to start this morning with some opening remarks and then hand it over to Dan, who is going to provide the financial update, and then John will provide his operations update. Once that is done, we will follow with the Q&A session. So with that, I will turn it over to John for his opening remarks. John Whelan: Thank you, Peter. Good morning, everybody, and welcome to our first quarter earnings call. I hope everyone is doing well. And as always, we appreciate you taking the time to join us this morning. Since our last earnings call, we've seen significant volatility in commodity markets, driven by geopolitical events in the Middle East. This has served to tighten the supply-demand balance for a range of commodities globally, resulting in a materially different outlook for this year and potentially beyond. It also reinforces the strategic importance of commodity and product supply from Canada to the rest of the world. Our long-standing business model uniquely provides significant leverage to upside conditions, while also protecting against downside scenarios. This is a substantial long-term structural benefit that allows us to return additional surplus cash to shareholders at higher prices, while adhering to our investment plans and strategic priorities over a range of price scenarios. There continues to be a dynamic global backdrop. However, our corporate strategy and investment plans remain consistent. We continue to maximize the value of our existing assets and progress material, high-quality organic growth opportunities, leveraging our competitive advantages of technology, scale, integration, execution excellence, and very importantly, our people. Speaking of technology and scale, we also continue to advance our business transformation restructuring plans. As a reminder, we expect to capture significant long-term efficiency and effectiveness benefits as we further leverage rapidly advancing technology and ExxonMobil's global capability centers. Now from a financial perspective, cash flows from operating activities were $756 million in the quarter. Excluding the impact of working capital, cash flows from operating activities were over $1.2 billion. Moving to operations. I want to highlight several achievements. At Kearl, production was in line with our second best first quarter ever despite the impact of a third-party natural gas supply outage. At Cold Lake, we achieved our highest first quarter production in over 8 years, supported by new technology-advantaged low-cost volume that is transforming the asset. In the Downstream, our renewable diesel facility at Strathcona captured significant value compared to more costly imports. In terms of capital allocation, our approach remains consistent with our long-standing priorities, which begins with investing in the business to sustain and grow value. Next, a reliable and growing dividend remains a key priority. Our annual dividend has grown for 31 years. And then as we generate surplus cash above and beyond our commitments, we look to return that to shareholders in a timely manner. And as you've seen in the release, we intend to renew our Normal Course Issuer Bid at the end of June. Overall, I'm excited about the opportunities in front of us, including our long-term in situ growth potential. We continue to construct the Enhanced Bitumen Recovery Technology pilot at our Aspen lease which can unlock significant new low-cost volume growth for Imperial and its shareholders. With that, I'll pass things over to Dan to walk through the financial results in more detail. D. Lyons: Thanks, John. Starting with financial results for the first quarter, we recorded net income of $940 million, down $348 million from the first quarter of 2025, primarily driven by higher incentive compensation charges as a result of our higher share price and unfavorable upstream realizations based on lower average prices across the quarter. Elaborating on the incentive compensation item, the total charge in the quarter was $143 million after tax. This mark-to-market charge was driven by a historic share price increase of almost $65, over 50% in the quarter. When comparing sequentially, first quarter net income is up $448 million from the fourth quarter of 2025 primarily driven by the absence of identified items and by higher prices, partially offset by lower volumes and the incentive compensation charge I just mentioned. Now shifting our attention to each business line and looking sequentially. Upstream earnings of $470 million are up $472 million from fourth quarter due to the absence of identified items when those items -- when excluding those items, net income is up $52 million, primarily due to higher prices. Downstream earnings of $611 million are up $92 million from fourth quarter. Excluding identified items in the fourth quarter, net income is up $47 million, mainly due to lower operating expenses. Our Chemical business generated earnings of $24 million, up $15 million from the fourth quarter. Excluding identified items in the fourth quarter, net income is up $4 million. Moving to cash flow. In the first quarter, we generated $756 million in cash flow from operating activities, excluding working capital effects. Cash flows from operating activities for the first quarter were $1,239 million, down $521 million from the first quarter of '25. Cash flows from operating activities were also impacted by unfavorable deferred tax effects of about $350 million, primarily driven by much higher commodity prices late in the first quarter as compared to the fourth quarter of 2025. As a U.S. GAAP LIFO reporter, we tend to see transitory negative inventory-driven deferred tax impacts when prices rise and transitory positive impacts when prices fall. This is driven by our reporting earnings on a LIFO inventory basis, while our deferred taxes are calculated on a weighted average cost inventory basis consistent with Canadian tax regulations. Now shifting to CapEx. Capital expenditures in the first quarter were $478 million, $80 million higher than the first quarter of 2025 and $173 million lower than the fourth quarter of 2025. In the Upstream, first quarter spending of $362 million focused on sustaining capital at Kearl, Cold Lake and Syncrude. In the Downstream, first quarter CapEx was primarily spent on sustaining capital projects across our refinery network. Shifting to shareholder distributions. In the first quarter, we paid $350 million of dividends. And earlier this morning, as John noted, we announced our intention to renew our NCIB in June, and we declared a second quarter dividend of $0.87 per share, in line with our long-standing philosophy of returning surplus cash to shareholders. Now I'll turn it back to John to discuss the company's operational performance. John Whelan: Thanks, Dan. I want to take the next few minutes to share key highlights from our operating results. Upstream production for the quarter averaged 419,000 gross oil equivalent barrels per day, up 1,000 oil equivalent barrels per day versus the first quarter of 2025. First quarter crude production was the second highest quarter -- first quarter result in company history, just 1,000 barrels per day below the all-time first quarter record set in 2024. I'll now cover highlights for each of the assets, starting with Kearl. Kearl's quarterly production was 259,000 barrels per day gross, up 3,000 barrels per day versus the first quarter of 2025. As a reminder, first quarter volumes at Kearl tend to be lower on a seasonal basis relative to the second half of the year. In addition, during March a third-party regional gas supply outage required us to temporarily reduce production levels to match lower natural gas availability. Now that we're in the second quarter, the team is focused on the planned turnaround at Kearl. Work this year will extend the turnaround interval at the K1 train from 2 to 4 years, similar to the work completed last year at K2 train. This is a great example of the work we're doing to maximize the value at Kearl, leading to higher volumes and lower unit cash costs. Consistent with the framework we outlined at our 2025 Investor Day, we are advancing growth at Kearl across multiple fronts, including higher recovery, productivity and reliability enhancements, and the turnaround optimization work I just mentioned. Later this year, we're adding a secondary recovery project at Kearl, designed to capture additional bitumen from the ore already being processed through the plant, supporting incremental capital-efficient volumes growth. Moving next to Cold Lake highlights. Cold Lake's quarterly production averaged 155,000 barrels per day, up 1,000 barrels per day versus the first quarter of 2025. We continue to see the benefits of our strategy of transforming Cold Lake production to advantaged technolog,y, with ongoing strong results from our Grand Rapids solvent-assisted SAGD project and continued ramp-up of the Leming SAGD project. We remain confident in our strategy at Cold Lake to deliver advantaged volumes at lower unit cash costs by leveraging technology. To round out the upstream, I'll cover Syncrude. Imperial's share of Syncrude production for the quarter averaged 72,000 barrels per day, which was down 1,000 barrels per day versus the first quarter of 2025. During the quarter, Syncrude experienced unplanned downtime associated with Coker 8-3, resulting in lower volumes and additional maintenance. The interconnect pipeline was utilized to enable the export of an additional 8,000 barrels per day of bitumen and other products over the quarter. With the additional maintenance required at Syncrude this quarter, the decision was made to postpone the planned second quarter turnaround work on Coker 8-2 until the summer. Now let's move to the Downstream. In the first quarter, we refined an average of 384,000 barrels per day, equating to utilization of 88%. Compared to the first quarter of 2025, refinery throughput was down 13,000 barrels a day. During the quarter, we experienced unplanned downtime, and Strathcona was impacted by the disruption of synthetic crude feedstock caused by the Syncrude Coker outage until alternative supply was put in place. As I mentioned in my opening remarks, our renewable diesel facility at Strathcona captured significant value compared to more costly imports during the first quarter, even as we continue to optimize around hydrogen availability. We are now executing the planned turnaround at Strathcona that began in early April and is scheduled to be completed in just over a week's time. The work is focused on the crude unit, which achieved the longest ever run length of 10 years before this planned turnaround. From a strategic perspective, we continue to invest in our structurally advantaged downstream business with a view to maximizing earnings and cash flow across the value chain. Investment in 2026 includes digital infrastructure enhancements and targeted projects to strengthen logistics and feedstock flexibility. Petroleum product sales were 441,000 barrels per day, down 14,000 barrels per day compared to the first quarter of 2025 due primarily to a reduction in opportunistic supply sales, partially offset by increased retail sales. Overall, across our Canadian network, we saw very similar demand for each of our primary petroleum products in the first quarter of 2026 relative to 2025. Turning now to Chemicals. Earnings in the first quarter were $24 million, down $7 million from the first quarter of 2025 due to lower product pricing, partially offset by reduced feedstock costs. In closing, I would like to reiterate that despite the dynamic geopolitical environment, our priorities remain clear and consistent. We are focused on continuing to profitably grow volumes, further lowering unit cash costs and increasing cash flow generation. We remain committed to maximizing the value of our existing asset base, progressing our volume and cost targets, driving greater efficiency and effectiveness, and delivering unmatched industry-leading shareholder returns. Operationally, our focus remains on execution excellence and being the most responsible operator. This includes safely and effectively completing the planned turnaround at Strathcona as well as the planned turnaround at Kearl in May. Both are important to sustaining reliability, capturing value from our assets and supporting long-term performance. Looking ahead, our restructuring is firmly in the implementation phase and progressing well. We are taking a robust and disciplined approach with a focus on maintaining safe, reliable operations. This work is being advanced in an orderly manner with clear line of sight to the expected benefits over time, including improved efficiency, improved effectiveness, competitiveness and long-term value creation. Finally, our capital allocation priorities remain unchanged. We expect to continue generating cash beyond the needs of our capital plan and our dividend, and our commitment remains to return that cash to shareholders in a timely manner. As noted in the press release this morning, we intend to renew our Normal Course Issuer Bid in late June. As always, I want to thank our employees for their commitment, professionalism and teamwork. Their dedication to safe operations, execution excellence, and customer and community service is what makes our achievements possible. And I'd like to thank all of you once again for your continued interest and support. Now we'll move to the Q&A session. I'll pass it back to Peter. Peter Shaw: Thank you, John. [Operator Instructions] So with that, operator, could you please open up the lines for questions? Operator: [Operator Instructions] And the first question is from Dennis Fong with CIBC World Markets. Dennis Fong: The first one for me is just really around the Upstream. Can you maybe discuss, we'll call it the progress around the pipeline of SA-SAGD projects at Cold Lake? I know that there's kind of a long duration strategy around kind of growing or layering in projects between now and 2050. As the world kind of obviously evolves in terms of diversifying supply chains globally, can you talk about opportunities to maybe accelerate some of that pipeline of projects as well as your appetite for that? John Whelan: Thanks, Dennis. I can -- I'll make a few comments on that. I think maybe I'll step back first and talk about our capital plans in light, as you say, of the current situation and commodity prices. Every year, we review our corporate plan, and we consider that over a range of inputs and a range of price scenarios. And we pace our investment strategy to maximize value at the end of the day. And looking at that both in terms of our existing assets and progressing advantaged growth. So we are -- remain very focused on Kearl getting it to 300,000, Cold Lake getting it to 165,000 barrels per day, and in the downstream flexibility and logistics projects. And of course, we're advancing our EBRT pilot. So I think at the high level, I wouldn't -- you shouldn't expect or anticipate major changes. We weren't waiting for a price signal to drive pace. We're looking at maximizing value for shareholders over a long-term view, and we believe we're progressing our growth opportunities at the appropriate pace to do just that. So that's kind of at the highest level. If you think at Cold Lake, I mean, we continue to work through this transformation of the asset. As I mentioned, Grand Rapids SA-SAGD is continuing to perform very well, above 20,000 barrels a day. We're ramping up the Leming SAGD, which is going back into the -- where the original pilot was, that's ramping up towards 9,000 barrels per day. And then in the future plans, we have Mahihkan, which we've started to invest in, and that's still on track to bring on 30,000 barrels a day of advantaged technology volumes starting up in 2029. So we continue to progress those at a pace we think that makes sense. And stepping back from that at Cold Lake, if you think about the percentage, we talk about this transforming the asset. In 2020, all of our production there was coming from CSS and steam flood and not from what we're today characterizing as advantaged technology. In 2025, that was 20% was coming from advantaged technology, largely the SA-SAGD at Grand Rapids. You go ahead 5 more years, that's going to be up to 45%. 5 years after that, it's going to be 60%. And by the time you get to 2040, which is less than 15 years from now, about 2/3 of our production will come from advantaged technology at Cold Lake. So we continue to progress at a pace we think that makes sense. Dennis Fong: Great. Really appreciate that color and context there, John. My second question shifts the focus back towards the downstream. And I was hoping you could provide us or at least remind us about the flexibility in terms of your refining assets, as well as kind of revealing any opportunities to capitalize on dislocations in the market, whether it be locally or globally, as well -- and kind of maybe specifically focusing around distillates and jet fuel, just given how desirable those products happen to be. John Whelan: Yes. I'll make a few comments. I'm going to ask Scott to chime in as well. We feel really good about the -- obviously, our downstream business, the margin capture that we're able to get. Canada remains advantaged globally in terms of margin that we get. And then Imperial remains advantaged within Canada. So we really like our position. We do -- so we're really looking to maximize sales locally. However, given the current environment, we do look at the export market as well and look to overall maximize the margin, our margin capture in that regard. So there are some constraints about what we can export when you look at logistics and so on. But we do continue to look across the whole portfolio and how to maximize overall capture, but we're really pleased with the advantage we have in Canada. And I think you saw us do that in the first quarter in terms of margin capture as we benefit from producing renewable diesel, the flexibility we've had to produce into the highest value products and into the highest value markets. So kind of high level, that's how I think about it, and I'll ask Scott to add some color to that. Scott Maloney: Sure. Thanks, John. I appreciate the question, Dennis. First, on the gas to diesel and jet splits within our refineries, we look at that from an optimization standpoint every single month. And so as we think about the feedstocks we're sending to our refineries, we're doing that based on the value we can achieve on the finished products that are manufactured. And so certainly, in this time period, we've been maximizing our production of diesel and jet molecules over gasoline. And that is a balance because a large portion of our production goes to supply customers within the Canadian marketplace, and we can efficiently supply those customers within the Canadian marketplace with our coast-to-coast logistics network, moving the barrels from our refineries in Eastern and Western Canada to those customers. And so that's where we see the highest uplift. And as John mentioned, we do opportunistically look at exporting additional production on top of that. And certainly, that is an opportunity in this sort of marketplace when you're seeing margins increase in other markets. Operator: And the next question will come from Greg Pardy with RBC Capital Markets. Greg Pardy: And as always, thanks for the detailed rundown. John, I wanted to come back to the -- just the progress in terms of the restructuring that's going on. Maybe to better understand perhaps at what stage you're at in terms of transferring workflows from IMO into some of the ExxonMobil excellence centers and so forth. And then also, just in terms of the technology we're talking about in terms of those advancements and how that's being incorporated, maybe what stage are we at? And what are the things that you're looking for in terms of key benchmarks of success? John Whelan: Thanks, Greg. Yes, as we -- if I step back in from this restructuring, it's all driven around, as you pointed to, leveraging rapidly advancing technology environment and the growth that we've seen in these global capability centers that ExxonMobil has. And that basis, that case for action remains really strong. And both of those things that drove the decision, and we feel very good about that. And it advances our long-standing strategy about maximizing value and leaning into technology and leaning into our relationship with ExxonMobil. I would say I feel very good about the progress we're making, and we are advancing that transition on track today. If I think about that, if you look at it, we're basically -- it's pretty ratable in terms of the -- we're doing 2 things. We're outsourcing work and we're capturing efficiencies. And as I've mentioned before, about 40% of the reduction in positions or the value is actually pure efficiency. And about 60% is outsourcing work to these global capability centers where we already have work being done for us today. So we have very rigorous plans on the transfer of that work to those global capability centers and the positions where we will capture efficiencies. And each department and group within Imperial has detailed road maps on how they're progressing that. It's going to be pretty ratable. We have had people leave the organization late last year. We've had people leave the organization in the first quarter of this year in the range of about 130 people in the first quarter of this year. And that's going to continue pretty ratably quarter-by-quarter and year-by-year this year and next year. So that's progressing well and on track, and you'll see it kind of pretty ratably over that period. The technology, I think a couple of things. There -- part of it is what we put in place that has enabled us to move at this pace. And then the second part of it is, as you move that into these global capability centers, we're going to be able to deploy technology more quickly at scale in the future. So a lot of it was putting the digital programs that we've spoken about in the past, putting in place digital -- our data lakes, getting our data organized and in a structure that could be used in an efficient way regardless where the work is being done, putting digital twins in place and then automating some of our work. So that enabled us to continue on this path. And then as we move these workflows into global capability centers, we see greater opportunity, AI, machine learning and so on to further automate those workflows. And we're going to be able to do that more quickly and at scale when that work is being at a global capability center and being done in a broader sense across ExxonMobil's network. Hope that answers the question for you. Greg Pardy: No, no, it does. I mean I think it's usually these announcements, they come out and then the focus is on cost of the future. But obviously, there's a transition to go through. So it's good to understand some of the context there. So let me just pose maybe a related question. Then in terms -- from your perspective as the CEO, the capability of Imperial to go execute Aspen in the future and recognizing there's a pilot there and there's a bunch of work to do and so forth. It certainly sounds from where you're sitting that the only change in terms of where corporate strategy might be headed is not necessarily in terms of what you're going to deliver, but just where it's going to be delivered from and at what cost. Is that the right way to think about it? John Whelan: Absolutely. That's exactly the way to think about it. Nothing is changing in our company in terms of the governance of our company, the skill sets we will have on the ground to support the assets we have today to support growth into the future. We will have -- we're still going to be an organization of 4,000 people after we go through this transition. And our growth plans, I really believe this sets us up to continue to deliver industry-leading performance and actually builds the foundation for us to grow. And of course, if you think about an Aspen project, we're not sitting here today with the project team waiting for that project to come, right? We build up capability when we see those projects coming in. Of course, a lot of it is done by contractors, but we will need additional capability. We're going to be in a better position to build up that capability because we're going to have support networks globally that are there that we can leverage and ramp up. So it doesn't change anything with our governance, doesn't change anything with our strategy. I'm as bullish or more bullish than I've ever been on our future in situ portfolio, the technology, and we have the ability to double our production with that future in situ portfolio. And when the time is right, when the technology is ready and the investment environment is there, we have the capability to do that. Operator: And moving on to Menno Hulshof with TD Cowen. Menno Hulshof: I'll start with a question on Kearl. In your opening remarks, you touched on some of the initiatives you're pursuing to drive production above 300,000 barrels a day on a sustained basis. And you talked about turnaround optimization. But can you elaborate on where things stand on the key pieces within enhanced bitumen recovery and the overall performance of the equipment? John Whelan: Yes. That's right, Menno. I mean I'm going to ask Cheryl to chime in here, but we've got these three focus areas that we've had, which is around productivity and reliability improvement, the turnarounds and then the one you mentioned around enhanced recovery. And we have specific projects focused on enhanced recovery. And so we're working all three of those components. Those are the things that will unlock and get us to 300,000 barrels a day, $18 a barrel. And I'm going to let Cheryl talk about a couple of the enhanced recovery projects that we have -- that we're progressing right now. Cheryl Gomez-Smith: Sure. Thanks, John, and thank you for the question, Menno. John references three items. I'd probably say there are more. This is a space where this is kind of our ultimate end equation. So when I think about Kearl and where we're headed with 300 kbd, I have very strong confidence in our future. And you've heard me say this before, which is we're anchored and we're building on a strong foundation. We're leveraging scale, such that our incremental production really leverages this fixed high-cost structure. We're doing recovery projects. We've got two in the hopper right now. One is called KFCC, and that's going to come online at the end of the year, and that captures additional bitumen from ore already processed. The second one is called CST or coarse sand tailings, that's in development. Think of this as where you get aeration in the system and it makes bubbles so the bitumen droplets, you're able to recover more bitumen. The other end in this space is the turnaround optimization that John mentioned and then technology solutions. And this really hits on that productivity and reliability space. You've heard me mention about we're continuing to upsize our hydro transport lines. We're looking at mine automation where we're looking for more remote, semi- and automated mining that really takes the physical operations out, continuing with our fleet optimizations on the autonomous side. And then the other thing I find is interesting with Kearl is just by design, your haul distances get longer as mine develops. So there's cost headwinds. Our intent is to more than offset those via scale optimization and technology solutions. And the final thing I'll leave you with, and this is one of the key milestones I'm very proud of. By late this summer, Kearl is on target to hit our 1 billion barrels of production. So this is a significant milestone and very much looking forward to it. Menno Hulshof: Yes. Thanks, Cheryl. That is a big number. Second question, maybe on the recent increase to the SCO premium. What is your marketing team seeing day-to-day in terms of rising SCO demand to meet diesel and jet supply shortfalls? And how long do you think premium pricing could persist? John Whelan: I'm going to ask Scott to take that one. Scott Maloney: Yes. So I mentioned before that certainly, we're optimizing our refineries to manage additional diesel and jet production. We feel like there's ample feedstocks in the marketplace to do that. And with the demand profile within Canada in particular, there's even some imported jet from other markets into portions of Western Canada. So we see some ongoing ability to continue pushing jet production and sales into the Canadian marketplace and believe we have enough feedstocks to do that. John Whelan: Yes. And I would just add, obviously, synthetics are trading higher because they're a good way to make diesel and jet. And that's probably -- we're not going to predict the future synthetic premium, but that may persist for a little bit as these margins stay quite high. Operator: And we'll take a question from Neil Mehta with Goldman Sachs. Neil Mehta: Yes. And this might be for you, Dan, just your perspective on return of capital, which has really been the hallmark of Imperial over the last couple of years. And as we've gotten into a firmer commodity environment, certainly, the NCIB will get turned on, but how do you think about buying back stock here and the potential for an SIB and if there's any price sensitivity around shrinking the share count because the stock has done really well. So any perspective around that would be great. D. Lyons: Sure, Neil. Bottom line is no change in the way we look at this, consistent with John's kind of remarks and earlier on. We're committed, obviously, to the reliable and growing dividend. We paid our April 1 dividend at the higher rate of $0.87, which is a 20% increase from the prior. And as you noted, we said we're going to renew our NCIB at the end of June when we can. And we'll certainly plan to proceed with that. And then the question is, okay, is there an SIB in there somewhere, too? And the answer is it's just going to depend on where cash goes, right? I mean, right now, at current prices, if those persist, we'll have a lot of cash, right? So that would certainly be a possibility. But we'll just have to see what happens. So I'd say no change in our philosophy. We remain committed to returning cash to shareholders. And as we generate the cash based on commodity prices, we'll continue to return that really as we have in the past. So no change to our philosophy. I would say we're not really set -- our prices has a great run. And as I said in my opening remarks, it had this -- the mark-to-market was so big. It showed up as a factor because of the rapid rise in the share price. But we believe that reflects value, and we see the share buybacks as an efficient way to return cash. So we'll continue to return cash. Neil Mehta: Yes. Thanks, Dan. It's been a great run. So just a follow-up on the questions about what you want to accomplish during the turnarounds that you referenced earlier for both Strathcona and Kearl. Can you talk -- can you give us pull back a little bit and talk about specifically what are the 2 or 3 things you want to accomplish at both of those turnarounds and that we should be focused on? D. Lyons: I mean I'll make a few high-level comments and then Cheryl and Scott can chime in. But being at Strathcona with the turnaround of the crude unit, again, it's had a 10-year run. So there are some -- we monitor obviously the integrity of the unit. And there are some elements, components that need to be changed out at that point. They've come to the -- towards the end of their life. So part of that is just the maintenance that comes with it. But 10 years is a long time to run a unit, and we look to continue to optimize that. There's that. But at certain point, you do need to go in and make some adjustments. Then at Kearl, I mean there is, again, the same thing. We've been -- there are some elements that components and things that we do need to change out. They come to end of life. In general, we try to have redundancy when we do that. We don't have that full redundancy to do it everywhere. But a big part is some of the upgrades that we're doing. Cheryl mentioned it already, I mentioned it, but it's some of the upgrades we're doing to allow us to get that turnaround to go from a 2-year interval to a 4-year. So that's metallurgy improvement, size of transport lines and things like that, that will allow us to go longer. So that's at the high level. Maybe, Scott, anything further on the Strathcona? Scott Maloney: Maybe just one other comment. Yes, just to confirm, it is an extended turnaround interval length. So that is something that we're pretty proud of actually getting the units to run this long. But it is a normal turnaround from a work scope perspective. We don't plan to add any new equipment or things like that. The one other comment I'd share is that with our new renewable diesel unit located at our Strathcona refinery, that continues to run during this turnaround. And so we continue to manufacture renewable diesel, and that's really been a bright spot for us in the first quarter. And so that has not been impacted by the turnaround activity in Strathcona in the first quarter to date. Cheryl Gomez-Smith: Sure. And I'll answer -- I'll give a little bit of context for Kearl. So the K1 scope that we've got this year is essentially the same scope that we had for K2 last year. So the work we completed on K2 gives us confidence that we head into the turnaround in May. And a couple of key items there, we have some modifications on the primary separation cell and then we've got some hardening on our surge bin. And those are really the key items to enable the 4-year turnaround. We do have a couple of incremental items to work for K1 around the flare. But in general, I would say the majority of the scope is exactly what we did last year for K2. Operator: And we'll take a question from Doug Leggate with Wolfe Research. Douglas George Blyth Leggate: I guess this might be for Dan. Dan, royalties in Canada are typically priced off WTI, which obviously has gone into overdrive here. And WCS has blowed out quite a bit. I wonder if you could walk us through how we should think about that. You're getting obviously, royalties priced on one number, but you're getting realizing prices at a different number, particularly on the heavy oil and the [ WCS ]. Obviously, your production is more heavy than light. So can you walk us through that? And I guess if I could ask a follow-up here. This is a really -- I know it's a stupid question before I ask it, but I'm going to ask it anyway. And it's about technology on things like SAGD, where does it sit? Does it sit at ExxonMobil? Or does it sit at Imperial? And the stupid bit of my question is, one can't help feeling that we're coming into a very different era for oil prices with UAE pulling out of OPEC and maybe there's a restocking cycle and underinvestment and all the rest of it. Imperial has never operated outside of the U.S. -- outside of Canada, my apologies. Is there ever a situation where the heavy oil opportunities in places like Venezuela might change that? Or does it all sit with ExxonMobil? D. Lyons: Okay. So maybe I'll take the first one on royalties. You're right. I mean it's pegged -- the royalties are pegged. The royalty rates, I should say, are pegged to WTI, but the actual royalty payment is tied to your realizations on bitumen. And that's been the case for a long time. And I would say, on balance, we feel the royalty regime in Canada is attractive. And in particular, for Kearl, which is pre-payout, even at the very highest royalty rate, which is over 120 Canadian WTI, we cap out at 9% gross, which -- so we have really great leverage to the upside on prices. So yes, we don't see it as a significant issue. I mean the spread has widened out a bit. It's like maybe $15. I haven't looked today, but 15-ish, so which is historically not very wide. So it's the rates that are set on the WTI, but the actual payments are based on your realizations of bitumen actual prices. So it's really to us, overall, given the way the rates work, a good regime, and we don't see it as a headwind. We see it as more of a tailwind in a high price environment, especially for an asset like Kearl. John Whelan: And let me take the technology question, Doug. I think -- here's how I think about it. We basically have access to all of ExxonMobil's technology and they have access to ours. So in terms of -- at the high level, is Imperial looking to expand its footprint beyond Canada? We're not. We're focused on Canada. But we basically have sharing agreements on the technology. And Imperial has largely the heavy oil-related technologies, SAGD, SA-SAGD, the technologies we use at Kearl, the paraffinic froth treatment and so on. That has been developed by Imperial. So Imperial has kind of been the center of excellence around heavy oil technology. So if ExxonMobil were to decide to look at Venezuela or whatever, they could utilize some of our heavy oil technology involved in that. Right now, we at Imperial are not looking to go outside of Canada. The flip side of that is we get to take advantage of ExxonMobil's technology. So we talked a lot about renewable diesel here today. We're using a low-temperature proprietary technology that allows us to use that our renewable diesel can be used year-round in cold weather environment. That's an ExxonMobil-developed technology that we have full access to and we're able to use to give us a competitive advantage with our renewable diesel project. Some of the metallurgy we use at Kearl on our hydro transport lines has come from metallurgical technology advancements that ExxonMobil has developed. We just used the ExxonMobil Proxima carbon fiber material in one of our bridges at Kearl. So we have full access, and we use much of their process optimization technology in our downstream and in our upstream as well. So we have full and free access to their technology. We use it in areas when it comes to heavy oil, that technology development has largely occurred through Imperial and will continue to occur. We just announced last year how we donated our technology center here to SAIT, which was a $37 million donation, the largest ever donation to an educational institution in Alberta. But we'll continue to have research at that research center going forward in specific to heavy oil optimization as well as tailings work and so on. So that's kind of how we see that. Douglas George Blyth Leggate: Maybe not such a dumb question, John. That's very informative. D. Lyons: We love your questions, Doug, just for the record. Operator: And that does conclude the question-and-answer session. I will now turn the conference back over to Peter Shaw, Vice President of Investor Relations for closing remarks. Peter Shaw: Thank you. So on behalf of the management team, I'd like to thank everyone for joining us this morning. If there are any other further questions, please don't hesitate to reach out to the Investor Relations team, and we'll be happy to answer your questions. With that, thank you very much, and have a great day.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's First Quarter 2026 Investor Call. This call and the associated webcast are the property of Liberty Global, and any redistribution, retransmission or rebroadcast of this call or webcast in any form without the express written consent of Liberty Global is strictly prohibited. [Operator Instructions] Today's formal presentation materials can be found under the Investor Relations section of Liberty Global's website at libertyglobal.com. [Operator Instructions] Page 2 of the slides details the company's safe harbor statement regarding forward-looking statements. Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the company's expectations with respect to its outlook and future growth prospects and other information and statements that are not historical facts. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed in Liberty Global's filings with the Securities and Exchange Commission, including its most recently filed Forms 10-Q and 10-K as amended. Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectation or in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Mike Fries. Michael Fries: All right. Thanks, operator. Hello, everyone. I appreciate you joining the call today. As usual, Charlie and I will handle the prepared remarks and the presentation, and then I have my core leadership team on the call with me and on standby for Q&A as needed. We've got a lot of ground to cover, so I'm just going to jump right in on the first slide, which provides some key takeaways from the quarter. To begin with, we delivered strong operational performance, and we'll go through it all in a moment. But one big headline here, this was our fourth straight quarter of steady broadband improvement across each of our big 3 markets with fixed and mobile ARPUs remaining largely stable. Now Charlie will walk through how this translates into our financial results, but the punchline is, we will be confirming all of our 2026 guidance today. There are lots of reasons for this commercial momentum, including our multi-brand strategies, our network investments, AI implementations around personalization and churn and call centers. And we'll talk about all that a bit today. But really, what we'll do in our second quarter call is do a deeper dive on our AI initiatives. So stay tuned for that. Equally important for this audience is the fact that we are making real progress on the value unlock initiatives announced this past February. The acquisition of Vodafone's 50% stake in our Dutch JV is on track to close this summer, and we see no obstacles to getting that deal done on time. And that, of course, is just one of the main building blocks underlying our strategy to spin off our Benelux assets in the second half of next year. And I'll walk you through each of those building blocks in just a moment as well as the value we could and should create for you all by spinning off the Ziggo Group. Now quickly on Netomnia, that transaction in the U.K. is now officially in the regulatory process. And while the noise from 1 or 2 competitors has escalated recently, we're pretty confident this deal will be approved. It's a very positive development for the U.K. fiber market, which is in desperate need of rationalization, as you all know. And it's a great outcome for VMO2 for all the reasons we reviewed on the last call. And finally, you won't be surprised to hear that we are highly focused on capital allocation at the corporate level. Over the last 2 years, we brought our net corporate costs down by 75%. We talked about that on the last call. And we've articulated what we believe is a clear investment strategy around telecom and growth, and we strengthened our balance sheet. After funding the $1.2 billion needed to close the Vodafone transaction and executing on around $700 million of asset sales from our growth portfolio, we should end the year with around $1.5 billion of corporate cash. And as noted here on the slide, through April, we've generated around $300 million in proceeds. So we're sort of on our way. And then finally, just one quick remark on the broader telecom environment in Europe. As you would know, the sector has performed well in the last 12 months or so. That's driven in part by improved operational performance, reduced CapEx and a general rotation out of software and into industrials. You're all familiar with those trends. I would add to the list what appears to be an improving regulatory climate in Europe when it comes to telecom broadly and more specifically when it comes to consolidation. Now we await the formal release of the EU merger guidelines, for example, but these changes are expected to redefine the rules, and that's going to be a big positive together with an increasing commitment to sovereignty to our sector and the broader telecom industry. So I'm sure you're aware of that, but important to note. Now moving on to the next slide, let me start by saying that there will come a point in time when I don't need to put this chart in the deck. But for now, I think it's helpful to summarize our operating structure, specifically our 3 core pillars of value creation, Liberty Telecom, Liberty Growth and in the center Liberty Global itself and to highlight the strategies we're executing to create and deliver that value. Liberty Growth on the far right houses our portfolio of media, infra and tech investments totaling $3.4 billion today. And here, we're focused on rotating capital, investing in high-growth sectors with scale and tailwinds. We'll try to spotlight a few of those in each quarter. And today, we'll lay out the thesis for the experienced economy. In the center sits Liberty Global itself with $1.9 billion of cash and a team with decades of experience operating and investing in these businesses. And as we reported last quarter, we've restructured our operating model and reduced net corporate costs by 75% since 2024 to around $50 million this year. And these 2 asset pools alone, by the way, our cash and the market value of our growth investments, exceed the current price of our stock by around 30%, which means, of course, that everything in our core Liberty Telecom business on the left, nearly $22 billion of revenue, $8 billion of EBITDA and 4 incredible converged telecom champions are receiving no value at all on our stock. In fact, negative value, if you give us credit for our substantial reduction in corporate costs. Now as we said over and over and over, our primary goal here in Telecom to drive commercial momentum and importantly, to unlock value for shareholders. And that was the impetus behind our Sunrise spin-off, which you all know about and which we believe has worked extremely well for investors. And that's why in the last call, we described the formation of the Ziggo Group, a combination of our Benelux assets in Holland and Belgium and our intention to spin off our interest tax-free to shareholders in the second half of 2027. So where are we on that specific initiative? I referenced earlier the building blocks that form the foundation of our expected value unlock for the Ziggo Group. And you can see the most significant ones outlined on the left-hand side of the next slide. Let me just say that each of these steps, each of these blocks, if you will, are centered around strategic catalysts, free cash flow growth and deleveraging. And they each represent a foundational element of the value creation plan here. This is the primary blueprint we've been executing, of course, with dozens of overlays and work streams, but it should give you greater confidence and awareness of our plans here. Let's start with Belgium. The first step was, of course, separating Telenet from its fixed network, which is now a 2/3, 1/3 JV called Wyre. This restructuring accomplishes or has accomplished 4 key things. First, it isolates a significant fiber CapEx and debt capital needed to upgrade the HFC network in Flanders into an off-balance sheet vehicle. Second, it precipitated a comprehensive network cooperation agreement between Wyre and Telenet on one hand and Proximus and its fiber asset, Fiberklaar on the other hand, which I'm pleased to say was just signed yesterday and will result in a single network ours or theirs in about 75% of Flanders. That's a great, great outcome. Third, it creates a cleaner, more consumer and B2B focused Telenet, ServCo, with a significant free cash flow turnaround story supported by declining mobile CapEx and mostly AI-driven OpEx reductions. And then fourth, it facilitates a reduction in Telenet's leverage from both the rebalancing of debt between Wyre and Telenet and the sale of a portion of our stake in Wyre at a premium, by the way, which will be used to repay debt at Telenet. So really critical steps to getting where we want to be. Moving to the Netherlands. For me, the first strategic catalyst here was bringing in a new management team, one that could set the tone for a return to growth and for winning results in the Dutch market, and Stephen and his team have delivered exactly that. And the second strategic catalyst was, of course, reaching an agreement with Vodafone to buy their 50% stake in our Dutch JV. This deal, as I just said, is scheduled to close in less than 3 months. Now -- not only is that deal accretive from a financial point of view, but it strategically unlocks about EUR 1 billion in synergies we referenced and it provides the structural elements necessary to complete a tax-free spin-off next year. Each of these steps accelerates our commitment to reducing leverage at VodafoneZiggo, which we'll accomplish through asset sales, a return to EBITDA and free cash flow growth and synergies. Now on the top right of this slide, you can see a side-by-side of Sunrise and the combined Ziggo Group. If you look at 2025, the Ziggo Group is bigger. It's about 2 to 2.5x larger in revenue and EBITDA and a bit more profitable. But importantly, you'll see that in 2028, we're estimating free cash flow of around EUR 500 million and leverage of 4.5x, which presents a comparable financial profile to Sunrise when we spun it off in Q4 '24. The chart on the bottom right provides an illustrative bridge to the EUR 500 million of free cash flow, which is estimated to be EUR 120 million this year. And the biggest components of that, as you can see, are the nonrecurring nature of some costs this year in Holland, combined synergies, Telenet's mobile CapEx reduction and organic EBITDA growth. We think the Ziggo Group represents a compelling equity story and it's anchored around 4 selling points. Number one, this is a strong regional business with 2 of Europe's most rational telecom markets that are best-in-class brands. Number two, we have clear network strategies here with declining CapEx as 5G investments subside and fiber costs are moved off balance sheet in Belgium and a cost-efficient DOCSIS 4 rollout in Holland. So declining CapEx and great visibility to the network strategies. Number three, rising free cash flow and declining leverage, and that's supported by organic growth, synergies and EUR 1.2 billion to EUR 1.4 billion of local asset sales I've already described, towers, property, et cetera. And then number four, our commitment to pay dividends from free cash flow as we've done with Sunrise. So we have lots of work to do, but this plan and this path forward is clear for us, and we look forward to updating you each quarter on our progress. Now what does it all add up to? I'm sure many of you are wondering what sort of value creation do we think is achievable here. The chart on the next slide is actually simpler than it looks, but it moves left to right, and it demonstrates how we have and how we intend to create value through this unlocked strategy. Let's start on the far left. The day we announced our intention to spin off Sunrise in February 2024, our stock closed at $18. Of course, 9 months later, we completed the spin-off and using Sunrise's current stock price, we feel we delivered a tax-free dividend that's valued today at $13 per Liberty share. So together with our $12 stock, you get to $25 or about a 40% value appreciation in the last 14 months or so. So far, so good. About 2 months ago, we announced the second step in our value unlock strategy with our intention to consolidate Benelux and spin off the Ziggo Group in the second half of next year. So what might that be worth? And these numbers are illustrative. Lawyers, maybe, say that, of course. But if we -- if you move to the right and the third column, I think you'll see the answer. We believe a publicly listed Ziggo Group, if it were to trade at, let's say, the same implicit valuation of Sunrise today and essentially an 11.5% free cash flow yield could be worth up to $14 per Liberty share based upon the 2028 free cash flow estimate of EUR 500 million that we just discussed. And without debating the point, we believe this could be conservative. As you would know, many of our peers, KPN, Swisscom, Orange, Zegona, they trade at free cash flow yields of 5% to 7%, albeit with different leverage profiles. So let's stick with the 11.5% free cash flow yield. The primary question then is where will Liberty itself trade post spin. Remember, we believe that the entire Liberty Telecom Group has negative value on our stock today. We're around $4 per share despite our announced intentions regarding Ziggo, with our cash and growth assets worth $16 and our stock at $12, that's the only conclusion we can reach. Now to arrive at $14 post the Ziggo Group spin, we simply added our pro forma cash balance after the Vodafone deal and asset sales, together with the value of our remaining growth assets, including our residual stake in Wyre, and we get to $14. By the way, these numbers assume that the market continues to assign no equity value, that's 0 equity value to our remaining telecom businesses in the U.K. and Ireland. Of course, we think there is substantial equity value in these businesses, but we don't need to agree on that to get to these numbers. So to recap, if you follow the light blue boxes, from February '24, the day we announced our plan to spin off Sunrise to today, we created $7 on what was an $18 stock. So that's 40%, and we believe for those who had held on to the Liberty stock and the Sunrise stock, that number gets to 41% with the Ziggo Group spin. If you do the same thing with the dark blue boxes for those who bought their shares after the Sunrise spin-off, we think we can take $12 today to as much as $28 by the second half of next year when we spin the Ziggo Group. Now while there are no sure things in life and plenty to do between now and then, trust me, the building blocks we think are in place, and we feel good about the plans and these estimates here. Now one of the reasons for that good feeling is the progress Stephen and his team have made over the last 5 quarters. This next slide summarizes some of those initiatives and some of the progress beginning early last year when we repositioned broadband pricing, we changed the operating model and rejuvenated our campaigns, even expanded our footprint through the deal with Delta Fiber. As a result of that, we saw steady improvements right away in broadband, where we've been losing over 30,000 subscribers every quarter. Those changes continued into '26 when we rejuvenated the Ziggo brand with a new campaign, The Everything Network, that was supported by our UEFA rights, by the way, which we just extended. We also launched broadband into our no-frills flanker brand, bringing a simple and value-driven connectivity product to that critical segment. And you can see at the bottom right, the broadband net adds have been moving in the right direction for 4 straight quarters. In fact, our first quarter result was the best in 3 years, driven by all the initiatives I just referenced, pricing adjustments, new campaigns, product expansion and network improvements. And by the way, we have the largest reach of 2-gig broadband services in the country. And we just launched field trials with DOCSIS 4 in anticipation of launching 4 and 8 gig products later this year. So operationally, VodafoneZiggo is in great shape and improving, exactly what you want to see as we plan for a public listing next year. Now the next 2 slides summarize Q1 operating performance across our 4 markets. I'm going to do this quickly since the CEOs are on the call and they can provide color if needed. I think the main headline here is that we continue to see good broadband trends pretty much across the board and stable fixed and mobile ARPUs. Starting with VodafoneZiggo, like I just talked about, our broadband performance improved for the fourth consecutive quarter and postpaid mobile net adds also improved sequentially. We continue to invest in our fixed and mobile markets in Holland with both the Vodafone and Ziggo networks receiving outstanding awards in the Umlaut test. With ARPUs of nearly EUR 57 in fixed and EUR 18 in mobile staying steady, this has been a good outcome. Turning to Belgium. Telenet delivered its highest quarterly broadband result in 10 years, driven by successful cross-sell campaigns and strong performance with our BASE, our flanker brand there. Postpaid mobile results remain subdued in Belgium as the market is pretty competitive. And here, too, our base brand is outperforming, while both mobile ARPU at EUR 16 and fixed ARPU at EUR 63 remained largely stable ahead of upcoming price adjustments in Q2. Now turning to the U.K. on the next slide. Despite a market that remains highly competitive, Virgin Media O2 delivered a third straight quarter of broadband improvement with just 6,000 losses compared to 43,000 losses a year ago. And this was supported by strong commercial and retention initiatives and, of course, lower churn. Importantly, and despite pressure on the overall market pricing, here, our fixed ARPU remained relatively stable at GBP 46.50, supported by more and more personalized and AI-driven pricing. And with the Netomnia deal working its way through the regulatory process, we continue our fiber-to-the-home expansion with 8.7 million fiber homes available today. In U.K. mobile, we launched O2 Satellite. You might have seen that making us the first operator in the U.K. to switch on direct-to-device satellite connectivity. In addition, our mobile network transformation is progressing with new RAN upgrade agreements and the transfer of the second tranche of spectrum from Vodafone 3, that's hugely important to us. O2 now has the largest 5G stand-alone footprint in the U.K. Net postpaid losses of 60,000 were materially better than last quarter as churn from the Q4 price adjustment, we've talked about that, subsided, and ARPU of around GBP 17 was broadly stable. In Ireland, lastly, we continue to execute strategically with growth in wholesale and off-net traffic more than compensating for retail pressure on-net. Fixed retail ARPU of EUR 61 remained stable despite no price rise in '25. And importantly, our fiber rollout, this is critical, remains on track to be substantially complete in 2026, with nearly 20% of the retail base now taking a fiber product, and that will also drive free cash flow in 2027 and beyond. Now just one slide on our Liberty Growth portfolio, currently valued at $3.4 billion and centered around 4 key verticals you know: infrastructure and energy, technology and AI, services and, of course, media and sports. Our strategy here has been consistent for some time. We are exiting positions that are no longer strategic and using that capital to both invest in new opportunities as they arise and as needed, provide capital for transactions that will unlock value in our telecom assets. That second point is really important. Historically, we've divested investment positions totaling something like $1.6 billion since 2019, and we've targeted another $700 million in sale proceeds this year, of which, as I said, $300 million is already accounted for. Now a few comments on sports and live events. Of course, we're already invested heavily here through Formula E, but we also believe there are significant structural tailwinds that warrant us evaluating additional opportunities, and we're doing that. And these points are probably well known to all of you, I'm sure, but there's clearly a generational shift from physical goods to experiences, that's live events, sports, travel and entertainment. Many of these markets are fragmented and most are protected from AI disruption. So it's an interesting space. It's also a clear momentum in the sector, right? Just look at sports, global revenue in sports growing well in excess of GDP over the last 10 years and by almost everybody's estimation, poised to increase and accelerate from here. What's our right to play, you might be asking? Well, we know how to consolidate fragmented industries, both in telecom, but also we've been doing that for decades and recently with All3Media before exiting at a premium. We've got strong relationships across these sectors. Really, the deal flow is the easy part. And when you factor in our expertise in things like treasury, operations and technology, it's a pretty strong combination. And we have a good track record in sports, specifically with Formula E, the fastest-growing motorsport globally and one of only 8 global sports leagues, which is a great segue to my last slide. I always get excited when I talk about Formula E, sometimes too excited. But I think this moment is perhaps our biggest yet. Like over the last 10 years, and you've been following this, we have constantly innovated, investing significant energy and time in the car, the technology and the racing. Well, the wait is over. Last week at the [indiscernible] circuit in France, Formula E unleashed the next-generation race car, GEN4, we call it, and the motorsports world is still reverberating. First of all, you have to see it in person. Yes, it is a beast, but it's a beautiful, beautiful race car. The step-up in power and performance is incredible. 600 kilowatts of power represents a 71% increase in base output over the current GEN3 Evo car. The acceleration is insane, 0 to 100 kilometers in 1.8 seconds. That's meaningfully faster than an F1 car and top speed in excess of 335 kilometers an hour, nearly 210 miles per hour. We estimate -- because it's an estimate at this point, that lap times will decrease by 10 seconds on average from the current generation car. That's a lifetime in racing. It's also the first single-seater race car with active all-wheel drive all the time, which will provide incredible acceleration in torque out of the turns. And of course, it meets all of our expectations from a sustainability point of view. It's made from at least 20% recyclable materials. It's 98.5% recyclable itself and allows us to continue claiming that our race-related carbon footprint for the entire championship would fit into F1 team, by the way. Speaking of F1, yes, we might have taken a few shots at them since the GEN4 launch. It might be deserved also, you're obviously aware of the issues they're dealing with currently and that they're going through with the hybrid engine. And it just reinforces our view that going halfway on anything does not make history. And we love the position that we're in technologically, competitively from an entertainment and motorsports point of view. But hey, just don't take my word for it. In the next slide, you can see -- go ahead and scan social media, the motor sports press. There is widespread consensus. I know I'm quoting this GEN4 car is a "monster." It's "ushering" in the most extreme era of electric cars, and it's expected to change perceptions of Formula E forever. Even Max gives it a thumbs up, as you can see on the bottom right. So anyway, super excited about GEN4 car in front of the E. And with that, Charlie, I'll turn it over to you. Charles Bracken: Thanks, Mike. My first slide sets out the Q1 financial results for our Benelux companies. Now as you can see on this slide, we're now presenting Wyre's financial performance for the first time separate to Telenet to give investors clarity on their respective financials before we complete the full separation of the 2 companies and their capital structures later this year. VodafoneZiggo reported a revenue decline of 1.8% in Q1, driven by a lower customer base and ongoing repricing impact. Now this was partially offset by the price indexation and higher revenue from Ziggo Sports and adjusted EBITDA declined 6.4%, driven by higher marketing costs and some incremental investments in network resilience and service reliability, in line with our guidance in March. At Telenet, revenue was broadly stable in Q1, reflecting our strategic decision not to renew Belgium football rights, which was partly offset by a strong broadband performance, which was driven by effective cross-selling into the video customer base. Adjusted EBITDA grew 8.9%, driven by lower content costs following the exit from the football broadcasting rights. And at Wyre, revenue declined by 1%, impacted by the implementation of a new pricing model, which was partially offset by strength in wholesale growth. Adjusted EBITDA declined by 4.6%, and this was driven by an investment in build capability as we start to accelerate Wyre's fiber build-out capability. Turning to the U.K. and Ireland. Virgin Media O2 delivered a total service revenue decline of 3% on a guidance basis. Now this was impacted by competitive pressure in the consumer fixed market and lower B2B revenue as the newly rebranded O2 business rationalizes its product portfolio to support its long-term growth in the mobile segment. This was partially offset by wholesale revenue growth, which was supported by growth in MVNO revenue and adjusted EBITDA declined by 3.4% as a result of the lower total service revenues and a noncash provision for legal matters recorded in the quarter. This was partially offset by cost reduction initiatives. At Virgin Media Ireland, revenues declined by 1.4% in Q1, impacted by intense competition in the consumer fixed and mobile markets as well as a decline in advertising revenues at VMTV. This was partially offset by a strong wholesale performance. Meanwhile, adjusted EBITDA declined by 7.1%, driven by these top line pressures and was also impacted by a one-off benefit in Q1 last year. Turning to the next slide. We remain committed to our disciplined capital allocation model as we rotate capital into higher growth investments and strategic transactions. Starting on the top left, Telenet reported EUR 10 million of free cash flow during the quarter and is expected to deliver at least EUR 20 million of free cash flow for the full year. Additionally, Liberty Corporate delivered adjusted EBITDA of negative $2 million, putting us firmly on track to achieve our full year 2026 guidance of negative $50 million. Turning to the bottom left. CapEx has meaningfully stepped down at Telenet in Q1 on a guidance basis, driven by the 5G upgrade nearing completion at the end of 2025 and lower spend on digital platforms. Capital intensity remains elevated at the other OpCos, reflecting investments in our fixed networks and also 5G upgrades. Moving to the Liberty Growth walk in the top right. The fair market value of our growth portfolio remained broadly stable versus 2025 year-end at $3.4 billion. This was driven by modest investments in AtlasEdge, egg Power, NextFibre and EdgeConneX, offset by the partial disposals of our ITV and some of our EdgeConneX stake as well as a positive fair market value adjustment at EdgeConneX, along with the recent decision to move Liberty Blume out of our Corporate & Services segment and into the growth portfolio. Turning to our cash walk on the bottom right. We ended the quarter with a consolidated cash balance of $1.9 billion. Q1 distributable free cash flow was impacted by high CapEx levels related to the fiber-to-the-home rollouts at Wyre and Virgin Media Ireland. In addition to working capital movements at Telenet, that's worth noting, we continue to anticipate that Wyre will draw on its stand-alone facility following BCA approval, and will fully repay the short-term funding provided by Liberty Global consolidated cash by Telenet. As a reminder, we are aiming to end 2026 with around $1.5 billion of corporate cash despite the expected outflows associated with the incremental Vodafone stake and also, to a lesser extent, the Netomnia acquisition. And finally, turning to our full year guidance targets for 2026. We are reconfirming all guidance metrics of VMO2, VodafoneZiggo and Telenet as well as our guidance for corporate costs. And that concludes our prepared remarks for Q1, and I'd like to hand over to the operator for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Carl Murdock-Smith with Citigroup. Carl Murdock-Smith: That's great. Two questions, please. Firstly, I wanted to ask on Virgin Media O2 about the wholesale service revenue growth. In the release, you say that, that included GBP 15 million of fixed pre-enablement and installation income. Am I right in saying that, that increase was due to a change in accounting treatment, meaning that it's now recognized as revenue, whereas previously it wasn't? I recognize that it's low margin, but that has provided almost a 1% boost to service revenue overall in Q1. So my question is, did you know about that change in treatment when you issued the guidance in February? Or does it provide potential upside to the revenue guide of 3% to 5% decline, particularly as you come in at the very high end of that range in Q1? And then secondly, I just wondered if you could expand slightly on the O2 satellite news and your kind of level of excitement around that? How much customer interest are you anticipating? And more broadly, just what is your view on the role of satellite in telecoms as a complement or competitor going forward? Michael Fries: [indiscernible] go over to Lutz first, but let me just say that as we look at the satellite space generally, we think, of course, satellite broadband, Starlink broadband has a role to play on the planet. There will be plenty of people who will utilize that broadband service and need that broadband service. We believe the direct device mobile opportunity is far more limited by technology, by market access, but we do like the idea of having a satellite service attached to our mobile network. We think it adds just another level of service and commitment to customers. And of course, the U.K. is the first market to where we have done that. So Lutz, I'll turn it over to you for satellite and then someone -- Charlie, I guess, will answer the wholesale question. Lutz? Lutz Schuler: Yes. Carl, so we are very satisfied with the launch of O2 Satellite, not disclosing numbers. But the fact that we have, at the moment, not the iPhone available, we will have it available in a week from now, and we have already quite high demand is leading us to the assumption that this is really a reliable service, an interesting and attractive service for customers. And also in combination with our improved mobile network, our 5G stand-alone coverage, we are really creating the right perception for customers, which means we have the most reliable mobile network from everybody in terms of coverage and data speed. And so therefore, we are very happy with that. Michael Fries: Charlie, do you want to address the wholesale? Charles Bracken: Just on the wholesale revenue, I mean, I think it was basically in budget, and that is a very difficult business to forecast by its very nature because it's -- but I think it was a pretty strong quarter. Lutz, do you have anything to add on that? Lutz Schuler: I mean I can give some color, right? I mean this -- I think, Carl, you're right. It was not -- we didn't account it the same way before. The reason for that was not to beef up our service revenue. And as you see, right, we are coming currently more at the upper end of the guidance. The reason for that is, that will be a growing and a continuous service revenue stream because we will more and more connect customers either from other networks or from other ISPs. So therefore, when you look at that way, I think that change makes sense. But as you said yourself, right, we are coming in at the upper end of our guidance. And you could drag that number a little bit. It is [indiscernible] of it if you want to accrue for it, but it won't change anything in the guidance. And I mean, we wouldn't change it. It's only one quarter, but so far, we are happy with what we have. Operator: Our next question comes from the line of Polo Tang with UBS. Polo Tang: I have 2. The first one is just on U.K. competitive dynamics for Lutz. So could you maybe talk through how the recent price rises in April have landed because the percentage increase is quite large, and I think it's double digit for most subscribers. So I'm just wondering if there's been any change in terms of churn. Separately, your postpaid mobile losses are continuing. So how optimistic are you that this can stabilize through the year? Second question is just a broader question on use of cash going forward. So you've talked a lot in this -- in the prepared remarks about ventures and the focus on sports and media. I think press reports suggested you were considering buying a European NBA franchise. So are you pivoting the group more towards media and sports? Or is the plan still to break up the group and return cash to shareholders? So any color on that would be great. Michael Fries: Sure. I'll start with that, Polo. They're not mutually exclusive. That's point one. Point two is our primary commitment, and I think it should be clear, but I'll repeat it here, is to create value for shareholders. And we believe, as I've said a few different times, the biggest opportunity to do that is to highlight and find ways to illuminate value in our telecom business. So that is our priority. That is number one. And as I mentioned a moment ago in my remarks, when we look at the use of capital, that factors in squarely to that -- to the strategy. So as I said, we will use capital and rotate capital into growth opportunities should they be presented to us, but also into the telecom business if it helps to unlock value for shareholders. And then I think I went on to say that second one is an important point. So that's the first part of the answer. I'd say, secondly, we are opportunistically looking at and being presented with sources of opportunities. Sorry, somebody has got this -- somebody is ringing. Anyway, with opportunities in the sports space and in the media space generally. And there's a reason why the portfolio was $3.4 billion large because we have been very active as an investor. And maybe it's been quiet, and we don't spend as much time on our earnings calls doing it, but it's arguably the biggest component of our stock price today are the investments that we've assembled strategically and purposely over the last, let's say, 5 to 7 years. And we're divesting ourselves of a huge chunk of those investments and rightly so because we need cash to do the things we've been talking about today. And then we will opportunistically look at new investments if they make sense. But don't get me wrong, we are committed to the unlock strategy, and that is priority #1. Lutz, do you want to talk about competitive nature of U.K.? Lutz Schuler: Yes. Polo, so in mobile, you see in our numbers that we have been shrinking in service revenue around 3% but this is before the price rise. And right, a reason for the net losses in Q1 was the higher price rise we decided for. Now we are seeing this landing very well. We have the first month of the second quarter behind us, Polo. And our explanation for that is that those who didn't want to pay it less and -- before that has materialized. Now we don't see any spike in churn. And obviously, we also have to wait for May, but the findings here are so far so good. On the fixed side, the competitive situation is also unchanged, I would say. So all are very aggressive, as we all know, and also other competitors have to follow. But here, remember, I said at the last call, we have to optimize our prevention machine as we used to do it with the retention machine, which we have done now. So therefore, we are quite proud about the fact that we have almost stabilized -- managed to stabilize our fixed customer base in Q1, and we expect something like that in the future. And yes, it comes at the cost of some ARPU which is 1.6%. But in the scheme of things, that is a balanced approach. And let me finish with -- remind you when we've given the guidance, right, 70%, 80% of the service revenue decline is attributed to our expectation on the fixed consumer service revenue market. And that means that we are planning for a recovery in mobile service revenue, Polo, and we are going to see this as we speak from the price rise in Q2. Operator: Our next question comes from the line of Robert Grindle with Deutsche Bank. Robert Grindle: I see the progress on the long-form agreement with Proximus, but approval for the collaboration is still outstanding. What happens if you're delayed for another 6 to 9 months? Do you progress the build of planned? Or is the project pushed back? And I think Charlie said the Wyre revenues were impacted by a new pricing model. Could the Wyre Telenet ServCo financials change from here? Should there be a change in the wholesale rates associated with any approval? Or will this financial base you've given us now be effectively unchanged? Michael Fries: Thanks, Robert. We've got John Porter on the line, who's worked tirelessly on this Proximus transaction [indiscernible] outstanding result for Telenet and for us. Do you want to speak to the regulatory process from here, John? Unknown Executive: Sure. Well, we've been in lockstep with the Competition Authority and the BIPT over the last 2 years. They are right up to date on every aspect of the transaction between ourselves and Proximus. We have very positive inclination from them and believe that they will expedite the final review of the transaction. There is then a necessary 30-day review at the European Commission. That is not an approval process. It's just a chance for them to reflect on the transaction and see if it has broader implications. So we are cautiously optimistic that we will complete this transaction over the next, say, 6 to 8 weeks. And it's a virtual impossibility that it would go longer than that because I think we'd all down tools. But I think that we are -- the main critical path has been achieved between ourselves and Proximus and everybody is ready to get going. Charles Bracken: And let me just step in on the -- I'll just say, we're separating the 2 companies. There is a little bit of tweaking. For example, there is a bit of movement on the wholesale rate to Telenet, and there's also some management fees that are being reevaluated. So I think we'll get a more stable view on the numbers in Q2, but I would say it's pretty good news for the ServCo. I'd also say on the financing side, just a real shout out to our treasury team, the $4.35 billion of underwritten financing that's clearly in place and we could draw has -- now been fully syndicated, which is a great success, very successfully syndicated, and with the completion of the BCA approval, we'll be drawing that down and indeed paying some of the money that we decided it was more efficient to bridge from our balance sheet rather than draw revolvers to do so. So I think it's all around good news for the eventual Ziggo Group spin because I think the Telenet part of the equation is very much on track for the free cash flow target we set them in 2028. Operator: Our next question comes from the line of Joshua Mills with BNP Paribas. Joshua Mills: Two from my side. One was just going back to Slide 6, where you lay out the strategic plan for the new Ziggo Group. My question is around the leverage. So there's a lot of moving parts there. Can you just remind us what the pro forma leverage position of this business would be today if you put it together? And how much you're expecting to bring in the Wyre stake sale and then the other asset sales to make up the EUR 1.2 billion to EUR 1.4 billion. I just want to understand the assumptions underpinning that, what you're at today and then how you get down to the 4.5x. That would be the first question. And then the second question is just around the Dutch business. We've seen continued improvement in the broadband performance. Can you give a bit more color as to what's driving that on the customer side on perception? Is it people happier with price? Is it, that they have noticed a change in the network quality? Any detail you have would be great. And as a final add-on, your competitors have highlighted potential benefits from the data breach at Odido. I think in the Q1 and probably going into Q2, Q3 net add trends there. How much of an impact have you seen from that on your own business in Q1 and Q2? Michael Fries: Thanks, Joshua. Look, Stephen will prepare answers to the Dutch questions. On the asset sales, the EUR 1.2 billion to EUR 1.4 billion, those consist primarily of towers and technical facilities, et cetera. And we're not really providing a breakdown of those numbers today because we're in active sale process. So we're not going to provide expectations or estimates of what we think that is. But we think that's the range of total combined asset sales, which would be used to pay down debt. Charlie, do you want to address the pro forma leverage? It really depends on what point in time you look for that number and what's happened with the Wyre stake. Do you want to address that, Charlie? Charles Bracken: Yes. I mean it's actually a very complicated question because clearly, the Belgian assets that are going to go into the Ziggo Group do not include because there will be a full separation of the Wyre assets. With the $4.35 billion of underwritten and now syndicated debt, we will therefore be paying down debt at Telenet or Telenet ServCo, but Telenet will be what we'll call it going forward. And it remains because of the investment profile, Ziggo -- but Ziggo is relatively highly elevated. So there's a lot of moving parts in answering that question. I would just reconfirm what Mike said is we're very confident in a path to get down to the -- around 4.5x by 2028. It does depend on some asset sales, but we feel pretty good about those being delivered. And with those asset sales and indeed continuing organic EBITDA growth, particularly in Holland, I think we should be there or thereabouts on target. I'm very happy to take it offline to get some of the detail because there's a lot of moving parts about why... Michael Fries: And it's in the low to mid -- yes, the combined group is going to be in the low to mid-5s. Telenet itself will be in the mid-4s. VodafoneZiggo will be higher, and then we'll start layering in the various deleveraging steps, additional steps as well. So there's a clear path, but perhaps in next call, Joshua, we'll give you a little bit more detail. But that is the general trend. Joshua Mills: That's great. And this isn't assuming any injection of cash from the -- sorry, there's no assumption of... Charles Bracken: [indiscernible] no cash from corporate, but I think it is important to note that we are putting our money where our mouth is. There's no distributions to Liberty Global in terms of equity distributions. We're reinvesting the free cash flow of Holland back in the business this year and indeed in Belgium. So that is a commitment to our bondholders and also to the fact that we are very confident in this growth profile. Do you want to answer the question? Stephen van Rooyen: Yes. And in terms of the operational performance of the broadband business -- yes, can you hear me? Yes. So in terms of the operational performance of the broadband business over the last 12 months, if you follow the story, we've done a number of very clear interventions. The first is -- we got our pricing right for the broadband products that we're selling. We were mispriced in the marketplace. We fixed that a year ago. When we talk about the back book repricing, we're pleased with the progress we've made on that. You haven't seen that in the ARPU. So we've managed that, I think, pretty well. Second thing we've done is we've gotten top of churn. We've been much more proactive in how we manage our customer base, which I think has had an effect on bringing churn down. We're now down 3 points year-on-year. We've invested more in marketing, by repositioning the business. The business was underspending on marketing and was out of sync with how, in my view, connectivity should be sold. We've invested, as you saw, in upgrading the speeds of the network. So you've seen us launch with the only 2 -- we're the only national 2-gigabit service. So we've taken speed as a headwind off the table for us. And then more generally, I think we've done a pretty good job of just tightening how we take the business to market. And you've seen that flow through sequentially each quarter as each of these initiatives have landed. And we have a series of initiatives coming through the rest of 2026, which we anticipate to continue to help us with the momentum behind the story. Unknown Executive: The Odido question, Stephen? Stephen van Rooyen: I'm sorry, I missed the Odido question. Can you repeat that? Michael Fries: The question was, are you seeing any benefit from their cyber attack? Stephen van Rooyen: Yes. It happened late in the quarter. It happened around week 10. So we saw some impact from that, but it's -- we didn't see a lot of it in the quarter. Because of the size of the mobile base -- we felt a bit more of it in the mobile base. But nothing that I think is material in the Q1 results because it only represented a handful of weeks. Joshua Mills: Great. And -- I mean I was more talking about the Q2 results. Obviously, it happened later in the first quarter, but are you seeing any impact so far in Q2? Stephen van Rooyen: No, we're happy with our progress on Q2 so far, but it's quite early. I have to come back to you when we do the Q2 results in a couple of months. Operator: Our next question comes from the line of James Ratzer with New Street Research. James Ratzer: I had 2 really both around Belgium. So in Telenet, you obviously had a very good quarter in terms of broadband net adds. And I'd love you can just give a bit more color behind what's driving that? Is that now growth out of footprint in Wallonia? Is that coming on your kind of BASE brand within Flanders? Or is it something else? I'd be interested to kind of get just a bit more color on the drivers there of broadband subs growth. And then secondly, just going back to the point that was raised earlier about Wyre revenue growth, which was down year-on-year in Q1. Is that a kind of one-off for this quarter, Charlie, you were mentioning around pricing and it goes back to growth in the following quarters. I'd just love to understand a bit more about the kind of dynamics there between kind of P and Q because I've been thinking that with kind of pricing there, we should see Wyre as a top line growth company. Michael Fries: John, do you want to take the Belgium question? Unknown Executive: Yes, I can take it. So on the first -- on the broadband, the BAU has been strong, particularly in the BASE brand, and their growth is about 50-50 between the Telenet footprint and growth in the South. So we are steadily growing and that growth in the South is increasing incrementally. There is a, what will be a year-long enhancement of that growth as we migrate out of DVB-C and into full IP for our video distribution. So we are the last operator in the market to have DVB-C where you don't require Internet to get television, but we are shutting that down over the next year. So we're expecting to see continued strong growth. But as you can see, the last -- the quarter ending '25 and the quarter -- the first quarter of the year, very strong, and those are the main drivers. On the Wyre revenue, there, we implemented a wholesale deal, a new wholesale deal on the HFC, which is making -- essentially structuring the higher speed tiers to be more accessible. The wholesale price is going down a little bit, and that's what you're seeing flowing through. That is -- will be part of the overarching deal done with Proximus, and we'll be able to give you more detail on that down the road. But the drop will not continue to drop, but it is the new HFC wholesale pricing. James Ratzer: So from those new prices, do prices then rise with inflation from this slightly lower level looking into 2027, '28? Unknown Executive: There is an inflationary component to both the fiber wholesale and the HFC wholesale. Operator: Our next question comes from the line of Matthew Harrigan with StoneX. Matthew Harrigan: This is very much a contextual question rather than kind of blocking and tackling valuation anomalies. But you made a quick reference to more benign regulatory environment in your markets. But what's even more interesting on a macro basis is the emphasis on your industrial base and defense. And clearly, telecom is a vital pivot in defense. Is there any possibilities for your telecom business or I guess, particularly your venture portfolio in that end, I'm sure Charlie [indiscernible] to be manufacturing drones, but it still feels like something that could be an interesting tailwind, particularly since you're involved in so many areas of verticals? Michael Fries: Matthew, listen, the whole sovereignty debate, it's no longer a debate. It's a verifiable conviction. It's net positive for us in the telecom space. Now we won't all benefit equally, but every telecom player will benefit from the European Union and the countries within the European Union's focus with their own cybersecurity, their own data protection, their own data centers, their own AI infrastructure. So inevitably, whether it's AtlasEdge or our investments in EdgeConneX on the infrastructure side in our Liberty Growth portfolio, whether it's our OpCos themselves and their ability to provide services and B2B services and connectivity to governments and others, I think it's a net positive for telcos in Europe, which is why I mentioned it along with the loosening regulatory framework, which I think will also be a net positive. We may or may not be part of any of that consolidation, but we know that consolidation itself brings benefits to customers as well as operators and investors. So I think it's a real positive step. In terms of defense itself, we're not -- unlike perhaps some of our peers who are more closely aligned with the government, we are not involved in any specific defense type investment opportunities or infrastructure. But if we were approached, we would certainly consider it if it was consistent with our overall strategy. I don't see us veering off, if you will, into that. But -- does that answer your question, Matt? Matthew Harrigan: Absolutely. Operator: Out next question comes from the line of Ulrich Rathe with Bernstein Societe Generale Group. Ulrich Rathe: Two questions. First one is, Mike, you talked about the improving regulatory climate with regards to consolidation. Other management teams in the sector have flagged mixed signals they perceived to come out of Europe. So could you talk through what specifically you have in mind there, what insights or uses you have to share [indiscernible] more positive assessment? And the second question is on the EUR 1 billion synergies that you talked about in Ziggo. Can you talk about the sort of rough makeup of that in terms of operation and other source of synergies? Michael Fries: On the synergies point, I don't know if we've been specific, so I'm going to pause. But typically, you wouldn't be surprised to learn that it's consisting of 3 or 4 key line items. There's a financial synergy. That's more, I would say, a free cash flow type synergy from -- that we haven't -- well, from taxes essentially, there's operating costs that we think are achievable and we can create more efficiencies around. There's procurement and CapEx type synergies. So it's not going to be -- and when we get closer to legal day 1, we'll clearly provide more detail to you. Right now, we're still in the midst of closing the deal. But there's lots of things we can be doing and will be doing in those 2 operations and within and among them to create those synergies. And if I had to put my team on the spot right now, they'd say that's probably a low number. On the regulatory side, we did just get the EU merger guidelines released, and they are quite positive, at least in comparison to the kind of posture and position that the European Union would take previously when it came to in-market consolidation, right? I mean they're looking at a much more, I guess, moderate and pragmatic approach, and they're seeing that benefits could certainly accrue for mergers versus just always seeing the negative in those mergers. There's always been a structural bias against scale. And now they're seeing -- actually scale could increase investment, could increase innovation. And it's actually spelled out in the document that was released recently. So that to us is when it's in writing, if it's just a speech, I don't give that much credit. But when they put it in writing as they have with these new EU merger guidelines, that is a -- that is a positive step. Now it needs to be put to the test, and there will be plenty of deals that will put it to the test soon, I imagine. But never before have they written down in black and white, the sort of statements that we're reading today in terms of -- which are consistent with the arguments we've been making that consolidation in market is the first step to repair in European telecom space. Operator: Our last question comes from the line of David Wright with Bank of America. David Wright: Yes, last question. So a couple, please, guys. Just on the -- I guess it's for Ziggo, but DOCSIS 4.0, I think you may have said, Mike, that there are some trials ongoing. If we could just get some estimates of maybe the sort of trajectory of commercial launch for 4.0 in Holland. When do you expect the first sort of significant retail launch, et cetera? And is it something that you think you could even price a little as you move into the real sort of mega tiers of speed? And then the second question, maybe a little more conceptual. We're observing a lot of discussion around the kind of InfraCo, ServCo split, and you guys have obviously sort of embraced that. And there's obviously a clear sort of capital allocation justification and the ability to separate the 2 businesses that are quite structurally different. But I just wondered, does having a separate InfraCo make a more agile ServCo in terms of just day-to-day operations? Is the business just more able to respond and sort of change shape in the sort of digital age? It's a little more conceptual. Mike, if you have anything to add on that, I'd appreciate it. Michael Fries: Sure, sure. Stephen jump in here if I get it wrong, but I believe our 4- and 8-gig trials are the latter part of the year, maybe even late Q3, Q4. But what we did was get the field trials underway to demonstrate that it works. It works well, that the technology we're using is really state-of-the-art even in relation to the U.S. operators. But as we get closer to going public in the latter part of this year, then we'll have more information, but it's happening. And we think it's going to be a big positive for the market and for our business for sure. On the ServCo side. Look, I mean, Belgium is the test. What does it do when you end up taking the fixed network, you still own the mobile network, but taking the fixed network and putting it into a separate entity, I think, and John will agree, I'm sure it forces you to be more efficient, more agile and your margins change, all of a sudden, there's a wholesale fee in your P&L that you have to account for. In principle, Telenet will continue to be a very competitive brand and a very competitive B2C company and B2B company. It's -- with respect to its network, its fixed network, it will be renting instead of owning that network. But the relationship that's developed with Wyre is highly integrated, highly -- with mutual benefits, both directions. And so on balance, I think -- and this is the only place we've done it, it really is Belgium. I think on balance, and John can chime in, I think it does create a bit more energy in that ServCo, a bit more focus on margins and competition with a little less to worry about and a slightly better CapEx profile. And that CapEx profile frees up free cash. Telenet will generate significant free cash here shortly as it has, and we'll have to figure out how to reinvest that free cash, whether it's deleveraging or in actually new products and services. But anything more to add to that, John? Unknown Executive: Yes, a bit. I mean the CapEx we are spending, we are now concentrating on customer experience. I mean we pivoted our strategy, obviously, away from network and product differentiation because we have to, into customer experience. And the timing is right because, of course, with a lot of AI initiatives around the company and a new greenfield CRM platform, the focus is well and truly on straight-through digital journeys for our customers, which delivers better experience and a better bottom line. So it's been -- I think I -- certainly, your hypothesis is valid. Michael Fries: Listen, we appreciate everybody joining us on the call. It's been a good -- thanks, David. It's been a good start to the year. I hope you agree, and we're really encouraged by the progress that we're making. And trust me, we are laser-focused on value creation and value unlock, starting, of course, in the Benelux, where we're not only performing well, but the strategic road map. And as I point out, the building blocks are all in place. So we'll keep you abreast and updated on those things, and we'll speak to you soon. Thanks, everybody. Have a great weekend. Operator: Thank you. That will conclude today's conference call. Thank you for your participation. You may now disconnect your lines.
Daniel Fairclough: Good afternoon, everyone. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you for joining this call to discuss ArcelorMittal's performance and progress in the first quarter of 2026. Leading today's call will be our Group CFO, Mr. Genuino Christino. Before we begin, I would like to mention a few housekeeping items. As usual, we will not be going through the presentation that was published on our website this morning. However, I do want to draw your attention to the disclaimers on Slide 20 of that presentation. Following opening remarks from Genuino, we will move directly to the Q&A session. [Operator Instructions] And with that, I will hand the call over to Genuino. Genuino Christino: Thanks, Daniel. Welcome, everyone, and thanks for joining today's call. As usual, I will keep my remarks brief and much of what I say will echo the messages from recent quarters. That reflects the consistency of our performance, the clarity of our focus and the discipline with which we continue to execute our strategy. What we are delivering at the bottom of the cycle positions us very well for the near future, particularly as more favorable policy conditions translate into a stronger operating environment with improving margins and returns. Alongside the impact of our growth strategy, this supports the free cash flow outlook and the delivery of consistent capital returns to shareholders. But first, I want to address safety. Our multiyear safety transformation program is now delivering more consistent and improved outcomes across our organization. Leadership expectations are clearly defined, risk management practices are being applied more uniformly and our focus on process safety has expanded across installations. Advanced analytics, including AI are strengthening these efforts, for example, enabling early identification of workers entering hazardous areas and triggering fast alerts and interventions that human monitoring alone. Most importantly, the sustained focus on safety is translating to tangible improvements in performance across the group. We provide a more detailed account of this progress in the sustainability report published last week, which I encourage you to review for a fuller picture of how we are advancing our safety objectives. Now I want to focus this quarter on 3 key points. First and foremost, our results consistently demonstrate clear structural improvements. In the first quarter, we delivered EBITDA of $131 per tonne, up $15 per tonne year-on-year and around 50% higher than our historical average margins. This clearly demonstrates the strengthening of our underlying earnings power over recent years. Importantly, this performance does not yet reflect the significantly stronger price environment seen in recent months, which we expect to be more fully evident in our second quarter results. Underlying free cash flow performance was robust. Excluding the seasonal working capital investment and the strategic growth CapEx, underlying free cash flow was running at an annualized rate of over $2 billion. Again, considering where we are in the cycle, this represents a strong outcome. Consistent and disciplined execution of our strategy is driving improved performance and providing the capacity to continually invest with discipline and focus and materially enhance the future earnings potential of ArcelorMittal. This brings me to my second point, our compelling growth opportunities, which clearly set us apart from our peers. We are allocating capital to the highest return opportunities. This includes projects that are actively enabling the energy transition, expanding our iron ore mining capacity and adding new value-added capabilities. We recently approved an EAF investment in Dunkirk. The decision was enabled by the more supportive policy backdrop, the cost visibility from a competitive long-term energy contract and the support of the French government. Our EAF projects are expected to deliver incrementally high EBITDA to provide an acceptable return on the capital deployed. So we have reflected Dunkirk together with the previously announced EAF projects in Sestao and Gijon into the expected EBITDA impact from strategic projects. This now stands at an incremental $1.8 billion from 2026 onwards. My final point is on the positive outlook, which is underpinned by trade policy. Given the change to trade policy, the steel sector today offers much more defensive characteristics, particularly in Europe than it did in the past. More effective trade protections are leading to increasingly regionalized market structures, enabling domestic producers to recapture market share from unfairly subsidized imports. The biggest shift occurring in Europe. We are very pleased with the agreement achieved in the new Tariff Rate Quota tool in Europe. As a result, we can expect this to be in effect from 1st of July 2026. Together with CBAM, this underpins our positive outlook for our European business. We are seeing stronger customer engagement, higher order inquiries and customers shifting more towards domestic supply. This is apparent in the material improvement in steel prices and spreads since the start of the year. As a result, despite the volatility of energy markets caused by the conflict in Iran, we continue to expect our production and shipments to improve across all regions in 2026. And we should see a clear improvement in our EBITDA in all Steel segments next quarter. As I conclude, the message is simple. We are consistently delivering structurally improved results while executing our strategy with discipline. Our high-return growth opportunity to differentiate us from our peers as does our track record of capital returns through the consistent application of our policy. That framework has already delivered a 38% reduction in our share count and a doubling of the dividend over the past 5 years. At the same time, we have advanced the business strategically, enhancing resilience and structurally improving returns on capital, all achieved while maintaining a strong investment-grade balance sheet. With that, Daniel, I believe we can begin the Q&A. Daniel Fairclough: Great. Thank you, Genuino. So we have quite a long question -- list of questions already. So we will move to the first, which we'll take from Alan. Unknown Analyst: A couple of questions from my side. The usual question is probably a good place to start. If you can walk us through the usual profit bridges Q1 versus Q2? And where do you see the greatest delta in prices and volumes? And how are your divisional costs evolving sequentially, including the CO2 cost implications in Europe? That's the first question. Genuino Christino: So I will ask Daniel to start with the bridge. Daniel, do you want to kick it off? Daniel Fairclough: Yes, sure. Thanks, Genuino. And it's a very simple bridge, which you've already alluded to, I think, in your opening remarks, you referenced that we expect all of the Steel segments to improve in the second quarter relative to the first quarter. And the drivers behind that improvement are common across the segments. So it's a theme of improved volumes and improved prices. So that's applicable to Europe. It's applicable to North America, and it's applicable to Brazil. Genuino Christino: Yes. Perhaps then I will add, Daniel. I mean the point on carbon cost, I mean, as you know, I mean, we have the new benchmarks, right, from beginning of the year, and that's ETS 4.2. So I'm sure you know what it means in terms of reduction of free allowances, right? But I think what is important here, and we have in our results is that now with CBAM, which so far, based on what we can see, is proving to be very effective, right? I mean we see that prices since the introduction of CBAM has moved up by this year, just look at the index almost EUR 100, right? And you don't see that yet in our results. You see, of course, the costs in Europe already, right, as we accrue the higher CO2 costs, but you don't see yet the benefits of CBAM, that's I would say. So that should come, of course, from quarter 2 onwards. Unknown Analyst: And my second question is, if you're able to give us some qualitative color on the European customer behavior, how receptive are they to the new pricing frameworks both CBAM and the upcoming safeguard? And are you worried about inventory levels in Europe? Or are you seeing any client retrenchment because of the Middle Eastern conflict? So any color you can give us on your customer profile in Europe today would be much appreciated. Genuino Christino: Yes. Well, I made some comments in my prepared opening remarks, right? We are seeing more activity. The order book is good. So when I compare where we were last year, I would say the order book is stronger. We see customers trying to develop the relationships -- so that is all supportive, Alan. That's good. So -- and that's why, I mean, we feel, of course, confident to confirm the guidance that we discussed at the time of Q4 results, higher shipments in Europe year-on-year, right? And I would expect our second half actually to be stronger than the first half, which is, as you know, unusual. Typically, our second half is weaker. But because of everything that we are discussing here, I would expect shipments in the second half to be actually stronger. Yes. So I think it's all moving in the right direction. Daniel Fairclough: Great. So we'll move now to take a question from Bastian at Deutsche Bank. Bastian Synagowitz: My first one is also a follow-up actually on maybe your guidance, particularly on the steel production side in Europe specifically, which was, I guess, very low in terms of production in Q1. And you talked about the maintenance, but shipments were down quite a lot as well, which I guess one could say is a little bit surprising given the impact from CBAM we've seen already as well as maybe some withdrawal from imports. So I'm wondering how far we will see a real catch-up in the second quarter driving very strong year-on-year growth and whether you would be able to even give a bit more detail on that, that would be great. That's my first question. Genuino Christino: Yes. Sure, Bastian. Yes, you're right. So we are, of course -- and as we discussed in Q4, we had maintenance in some of our facilities, right? And we have just 1 or 2 days ago, restarted one of our furnaces in Poland. And we continue to work on our furnace in France and Spain. So we're going to be in a position to bring back the capacity as and when we see the demand, right? And as a result, the furnace in Poland is already -- we are ramping up that as we speak. I mean inventories, and I have not really touched on it, so I should do it now. I mean we know that imports were quite elevated in Q4, right? We saw imports coming down in quarter 1, right? But evidence suggests that imports, at least at the beginning of quarter 2 elevated. So you still have players to try, of course, to get materials here before the new TRQ starts from 1st of July. Having said that, we don't believe that inventories are too high. I mean, of course, they are higher than, I would say, normal levels, but not so high. So our expectation is that the new TRQ comes into place, this inventory should normalize relatively quickly. Bastian Synagowitz: Okay. And in terms of what this means for, I guess, the overall cycle, I guess there are some players in the market, which do expect that imports in the second quarter will basically go up before they fade in the second half. Is this the view you do share as well? And I guess, what is your view maybe particularly also on the pricing side, prices have been very strong already. But is your view that rely comes third quarter, we will see further price dynamic most likely kicking in, in Europe? Or will it take longer to maybe digest and work through, I guess, inventory overhang, whatever disruptions we could see? Genuino Christino: Well, Bastian, I mean, what we are seeing, I mean, we saw prices actually moving up during the quarter, right, actually accelerating from beginning of the Iran war, also in response, right, to cost pressures. So I think it's fair to say that imports in quarter 2 should still be high, right, as we discussed because just it's normal, right? So players are trying to get the materials here before the new TRQ. But again, it's not ideal, of course. We're going to need to work through that. But we don't expect that to really be to take the market long to absorb that. And of course, on prices, as you know, we cannot comment, right? We can -- I can only refer you to what we are seeing. If you look at the index, it's right? I mean we have a nice -- not only prices increasing during the year, but it's spreads, right? So when you look at the spreads also evolving positively, also as a result of introduction of CBAM at the beginning of the year. I think we need to look at the European market. As we have always been saying, right, it is the combination of the 2 CBAM and TRQ that is very, very powerful here, right? And we have one piece, and we're going to have the second piece now from 1st of July. Bastian Synagowitz: Okay. Great. Maybe a very quick one on India, which you didn't mention in your early second quarter indication. I guess we have seen decent performance actually in Q1. Prices also picked up, but then there is obviously the energy situation. So I guess, what is the trajectory for India into the second quarter? Genuino Christino: Yes. It's also good. You're right. So because of the DRI, we are more exposed to gas in India. But as you know, I mean, we have -- we are fully hedged, Bastian. So we don't expect cost pressure coming from gas in India. So we are fully hedged. And the price environment has also improved, which already benefited Q1, right? And we would expect also a good second quarter for our Indian operations. Daniel Fairclough: So we'll move to take the next question from Reinhardt at Bank of America. Reinhardt van der Walt: First one, maybe just we've spoken a lot about inventories, and it seems like it's creating a bit of an uncertain picture around when this domestic demand will kind of kick in. What are you seeing across the European steel industry in terms of capacity mobilization -- outside of the actions that you've taken, do you think that the European industry is ready for the challenge of producing that additional volume? Genuino Christino: Well, Reinhardt, I'm not going to talk much about what the competition is doing, right? I think what we have been saying very consistently is that ArcelorMittal is in a good position, right, to take our market share of the reduced imports and we can do more, right? So to the extent that others cannot, so then we're going to be in a good position as we talked about, we have a lot of flexibility here. So we have the finances that we can bring back. We have the possibility to bring back blast furnaces. We have more downstream capacity. So we're going to be in a good position here to make sure that the market is supplied that we don't have any shortages in the -- as a result of this. Reinhardt van der Walt: Understood. That's very clear. Just maybe a second question on the Dunkirk EAF investment. You're looking to do any kind of downstream additions there or to get any changes in your product mix maybe out of that capacity as you go through the capital allocation? Genuino Christino: So can you repeat the question? I'm not sure that I got it. Reinhardt van der Walt: Yes, sure sir. So as you're converting over to EAF, are you looking to add any downstream investment as well, any kind of finishing capacity as part of that project? Genuino Christino: No, not really. We're going to be able to, of course and that's why the CapEx can be reduced to some extent because we're going to be able to still use some of the equipment there, right? And downstream will, of course, be intact. We're going to be able to -- so basically, what you're changing is the upstream, right? So instead of the blast furnace and the converters, you're going to have the EAF, the ladle furnaces and then we're going to just follow the normal process of that plant. So we should be in a position to achieve the same mix, which [indiscernible] as you know, it's quite high. We have a very quality high order book there, which we, of course, it's very important for us to protect. And that's exactly the idea here that we should be in a position to produce the same grades as we can today with the blast furnace. Daniel Fairclough: So we'll move now to take a question from Boris at Kepler Cheuvreux. Boris Bourdet: The first question is about the new capacity restarts at both in France and Dabrowa in Poland and plus EAF capacity in Spain. How much capacity are you bringing back with those new furnaces? And the second question would be on North America. Are you still facing the same headwind about the tariffs, Section 232? And can you share with us the expectations you might have for the coming renegotiation of USMCA agreement? Genuino Christino: Yes. So we have a couple of questions there. So the first one on the capacity in Europe. So all these furnaces, they are 2-plus million tonnes. So they are relatively large-sized furnaces. As I mentioned before, so we started [indiscernible], and we are getting ready in force and also in Spain, right? And we'll, of course, announce when we are ready to bring these furnaces back up, right? But we're just doing all the work so that we are in a position to restart them when we need them, right? In North America, look, I mean, the USMCA, I mean, it's early days. I think we have to wait to see really how it starts, right? It's probably wouldn't be right for me to speculate. The only thing I can say is that we hope that the outcome will be one that we feel that we can operate as a single block, right? I think for us, for our business, what would be ideal is that we have Mexico, we have Canada, putting the same barriers against the imports that we have similar protection as we have in the United States, right? And then the material then can flow. So that's what I would say. I think we have to wait there, Boris. Boris Bourdet: Okay. And just the current headwind that we still something like $150 million per quarter due to that. Genuino Christino: Yes, there is no change there. The headwinds remain basically the same, Boris. Daniel Fairclough: Great. Thanks, Boris. So we'll move now to take a question from Tristan at BNP Paribas. Tristan Gresser: I have two questions. The first one is a question on North America and Section 232. We've seen recently that there could be some relief for Mexican, Canadian producer to build new capacity in the U.S. to supply the auto market. Do you believe this could be retroactively applied to your first Calvert EAF? And if not, is that a consideration for the potential second one? Genuino Christino: Yes, Tristan. So I think it's important to be clear, right? So that today, we are not receiving any tariff relief, right? And all imports into the U.S., including from Canada and Mexico continue to pay Section 232, 50% tariffs. I think you know our position on tariffs, which is very consistent. For over 20 years, we have been arguing that the global steel industry has been suffering from overcapacity and continuously pushing for fair trade, whether it is in the U.S., Brazil, Europe, Canada or other parts of the world. So we do fully support the Section 232. But we also support being able to operate, as I was saying before, as one regional market across North America and that there are no tariffs on steel that is melted and put in Canada and Mexico. And as you know, we have been seriously considering the second EAF in Calvert as the U.S. is an attractive market to make steel. And in terms of potential tariff release, as you know, tax has been now published, designed to stimulate additional investments in the U.S., and we are analyzing it. So it's a lot of details has now been published, and we're just going through that. And the answer is not really a clear yes. We still need to study it. And I just want to also just take the opportunity as a lot has been written on this topic. I would actually like to also take the opportunity to confirm that we are contributing steel to the White House Ballroom. So approximately 600 tonnes have been delivered to date. As you know, we have a track record of both supplying strong high-quality steels to U.S. customers and donating steel to iconic buildings and projects around the world that showcase its strength and flexibility. Just to give an example, when the Freedom Tower was one of the strongest steel in the world, they came to our facilities. So we are pleased to add the White House to the list of iconic American buildings where our steel will stand strong for years in this country. So we just need to wait a bit more. We're going to go through the details, and then we're going to be in a position to update everyone. Tristan Gresser: Okay. Okay. No, that's clear, but that's a potential thing to consider. My second question is on the green steel economics in Europe. I was a bit surprised to see that you were only targeting $200 million of EBITDA for your 3 EAF projects. Because if I understood correctly, Sestao in Spain is potentially adding another 1 million tonne of new volumes. Gijon is replacing 1 million tonne and Dunkirk is replacing 2 million tonnes. So that's close to 4 million tonnes of EAF steel. And it does not look like there are much of productivity gains or green steel premiums baked into that. So maybe if you could discuss a little bit the high-level assumptions you're making and perhaps the delta is on the cost base and if you expect a big increase there from moving from BF to EF. Genuino Christino: Well, Tristan, there are a couple of points there, right? I think it is important to appreciate that we are talking about -- we are just giving you the incremental EBITDA, right? So it's incremental to what we are adding today. So -- and as you know, the idea here is that we're going to be except for Sestao, where we are really increasing capacity. In Dunkirk, we're going to be replacing one furnace. So we are not really looking to increase capacity. So what you have is really what is incremental. And then I think it's also important to take into account the amount of the investments, right? And that's why we were so focused as a company to make sure that we have the right conditions, right, so that we can justify this investment. That's why the focus on making sure that we have visibility in terms of CBAM, visibility in terms of imports [indiscernible]. We have visibility in terms of our energy contract, which we now have for this project, as you know. So I would encourage you also to look at what is the net amount of this CapEx, right? And then in the case of Dunkirk, not only you're going to have the 50% support through the white certificates, but we're going to also be in a position to avoid the reline of the furnace that we're going to be replacing. So that's why in the end, we feel that we're going to be in a position to earn a return on our investment. And when it comes to the assumptions, we don't want to be too specific about it, Tristan. As you can imagine, this is also commercially sensitive. We have our teams going out and marketing already for the future of this contracts, the green steel. I mean, as you know, for some time, at least we believe that this will be limited, right? And I think this is -- it's -- our teams are out there. So we don't want to be talking too much about the assumptions. Daniel Fairclough: So we'll move to take the next question, which I think will be from, yes, Ephrem at Citi. Ephrem Ravi: I'm just trying to understand the Page 12 AMNS future growth optionality figures. There's 15 million tonnes from Hazira, 8 million tonnes from Andhra, which gives you 23. My understanding was that Hazira was after 15, there is an optionality of Phase 2a to 18 and then Phase 2b to 24. And then obviously, the Greenfield in Andhra is sort of separate. So is the Phase 2 being delayed? Is that how we should sort of interpret that in favor of pushing ahead with the Greenfield in Andhra in order to balance the balance sheet and skill sets? Genuino Christino: I think you're right. I mean, of course, we have to phase it, right? And absolutely right. So we have in front of us the 2 options. And it continues to be an option for us, right, to take Hazira further, and that will most likely happen over time as well. But right now, yes, that's the sequencing that we see, right, and which is to start Andhra. And yes, and Hazira will remain an option for us as well as after we complete this first phase in Andhra, we can go also for another phase, right? So the 40 million tonnes vision for the Indian operations remain intact. Ephrem Ravi: And then you've said that obviously, your current energy situation is manageable, hedging and support of policies framework for insulates margins. Can you give us a sense of time line for that in terms of how long -- because, I mean, energy prices could remain high for 6 months, 12 months, 2 years. So if they remain for how long would your hedging policies cover it? And at what point do you think you and the industry will have to start thinking about energy surcharges in your steel? Genuino Christino: Yes. Well, specifically in India, we are -- our program goes -- it's a multiyear program, Ephrem. So I think we are in a good place there. So it's a multiyear. And even in Europe for gas, we will also have a multiyear plan program. So I think we are -- as I said, I think we are in a good place. Daniel Fairclough: Great. Thanks, Ephrem. So we'll move to the next question, which we'll take from Cole at Jefferies. Cole Hathorn: I'd just like a little bit of color on the metals on iron ore, just the ramp-up on volumes and how you see that into the second quarter? Just any color you can provide? And then I'd also just like to follow up on imports into Europe ahead of the trade barriers. I mean we've seen a lot of logistics disruptions globally. Do you think that there's a possibility that everyone is expecting a lot of imports into Europe, but considering the supply chains, we just don't see them delivered in time or customers potentially pull back on some of those orders just considering they might not meet the delivery dates. Just any thoughts on that? Genuino Christino: Yes. So maybe I'll take this one, Daniel, and then maybe you can comment on iron ore. So you're right. So I think what we are seeing, of course, is at this point in time, what we are seeing is more a cost issue, right? We are seeing freight rates going up. And of course, some of the journey is also taking longer because of the conflict. But it's not something that we believe should be delaying the arrival of the materials. So I think that's why as we discussed, we feel that the second quarter should still end up with elevated levels of imports, right? And as a final quarter and then from Q3 onwards, the new TRQ comes into play. And I would say that this window is now closed, right, as we are here almost the beginning of May, the window to imports, they are basically under the existing safeguards regime are getting close to an end. And the fact that we don't have yet the quotas for the new TRQ split by country, I mean, it makes it even a little bit harder for imports, right? So that's what we are seeing. Dan, you want to talk about the iron ore? Daniel Fairclough: Yes. Sorry, Cole, would you mind just repeating that question? Cole Hathorn: Just a little bit of color on the iron ore production that you're expecting into 2Q and any of the phasing through the year, just so we can think about that in the model? Daniel Fairclough: Yes, sure. So thank you. So we did have obviously a good start to the year in Liberia, another record production shipment quarter. So I think as we -- and that will just continue over the next 3 quarters. So we've signaled in our initial guidance at the beginning of the year that we expect to be at full capacity in the second half and to achieve at least 80 million tonnes of shipments. So yes, I would just be -- that's how we would be factoring it into the model. Some further improvement in the second quarter. I expect that we will navigate the rainy season through Q3. We continue to improve on our ability to navigate that. And then I would expect we should finish with a strong fourth quarter performance. Cole Hathorn: And then maybe just following up on iron ore. You've been very clear that the energy situation is manageable across the rest of the business. But are there any things we should be thinking about in iron ore costs just for diesel, et cetera, on the mining side? Genuino Christino: I think the only thing I would call out, Cole, is freight, right? I think the profitability of mining in Q2 will depend, of course, much more, of course, where prices finally land and freight, right? So oil will have an impact as well. But based on what I see today, I would be more focused on prices and freight. Daniel Fairclough: So we'll move to the next question, which we'll take from Andy at UBS. Andrew Jones: I've got a few follow-ups to previous questions. Just on that potential tariff carve-out in North America. My understanding is it's based upon volumes sold just into the auto sector. So if you ship slabs from Mexico into Calvert, would you -- is it your understanding you potentially get some relief on those if they then be sold into auto? That's the first one. I've got a couple of ones to follow. Genuino Christino: Andy, as I said, I mean, we just got all these details, right? And the teams are busy going through that. So I don't want to anticipate the analysis. If you don't mind, I think we will address that with you next quarter. I'm sure we'll have more color and information to provide on that. Andrew Jones: Yes. Okay. No worries. And just a couple of modeling ones. On the Ukraine contribution, I mean, that was obviously a drag in the first quarter. Can you quantify that on EBITDA? And do you see anything changing into 2Q? Genuino Christino: Yes. Yes, it was -- Q1 was a challenging quarter for Ukraine, right? So energy prices, in particular, really very, very high. So as we discussed before, so Ukraine, they have been managing relatively well, right? So in the whole of 2025, as we discussed, at EBITDA level, they managed to be basically neutral, still free cash negative, of course, because of CapEx. Q1 EBITDA was negative as a result of the high energy costs. Energy has come down, so which is good news. So we do expect to do better in the second quarter, right? But as we know, the situation remains very challenging. But at least on that front, we expect to do better, and that has been really one of the key drivers of the result. Andrew Jones: Okay. That's clear. And just finally on Mexico, the operating issues that you had last year, there was a little bit of overspill into 1Q. Like how material was that? I think you -- I think maybe in the fourth quarter, you called out 65 million hit. I mean what was the equivalent number in 1Q? Was it material? Genuino Christino: Yes. So the evolution in Mexico is very good, right? We started the blast furnace, which is producing long products. So we were not yet at full capacity in Q1 in long. So we're going to be at full capacity in quarter 2. So I would expect our production and shipments in North America to continue to improve as we move forward, right? But it's no longer, of course, the same magnitude that we had in prior quarters. So I think it's a very good evolution. As we discussed at the time of Q4, you see profitability in North America almost doubling, and we should continue to see progress going forward in the second quarter. But production is now up and running, and it's only now the full capacity of this furnace that you should see in quarter 2. Daniel Fairclough: So we'll move now to take a question from Timna at Wells Fargo. Timna Tanners: I wanted to actually double-click as the kids say these days on North America just a bit more, if I could. I think we obviously, as you pointed out in the last response, seen a nice benefit. It was the biggest contributor to Q1 over Q4 from rising prices. You have some locked up in annual contracts. Can you talk to us about how auto annual contracts fleshed out a bit or give us high-level color on that? And then also, do you think that you could see the same order of magnitude in the U.S. into Q2 given the pace of price increases? And then also I wanted some more color on how Calvert was ramping up? Genuino Christino: Yes. So automotive, I mean, as you know, in U.S., our contracts, they are really the negotiations happen throughout the year. It's a little bit more spread out compared to Europe. In Europe, we have a concentration really at the beginning of the year. In U.S., it's more, I would say, more like 30% Q1, 30% from quarter 2 and then the rest is 25% is Q3. And so I think we are doing well. And as you know, we don't really comment so much on the outcome of these negotiations. But I have to say that they are going in line with our expectations. It's good. The ramp-up at Calvert, the EAF is progressing. So in quarter 1, we were a little bit running above already 20%, 25%, and we are progressing. We believe that by the end of quarter 2, we should be at much higher levels. And we remain optimistic that we're going to be getting close to ending this ramp-up phase by the end of this year, Timna. And then if I have... Go ahead, Timna. Timna Tanners: No, I just wanted to ask about if you would be able to quantify the extent of the price increase in Q1 over Q4, if that could be sustained given recent price strength continuing into Q2? Genuino Christino: Yes. Look, we're not going to be quantifying that, but I mean, I think you know very well how prices have moved up in the U.S. I mean they continue to rise, and you should see that reflect in our results. We talked about automotive, the annual contracts and how much is resetting, right? So yes. Timna Tanners: Okay. And one further one, if I could, please. We're hearing a bit about switching away from aluminum to steel. In the U.S., of course, it's been a more extreme change in prices between the 2. But even in Europe, to the extent that the BYDs are getting built and have more steel amount in them versus aluminum. So it would be great to get any observations that you're seeing on switching away from aluminum to steel and automotive. Genuino Christino: Yes. So when we look at -- I think you're right. I think this is -- to be honest, it has been at least now less of an issue. We continue to be very focused on that, showing the benefits of steel to our customers. I think we have been very successful there, Timna, as you know. So I think we continue to make improvements there. So it's not something that I would highlight to you as a big concern that we have at this point, right? But of course, we remain very focused on R&D, making sure that we have the right grades, we achieve what customers want. So we have successes. And so when we look at the level of intensity, steel intensity on average, we see relatively stability. Daniel Fairclough: So we'll move now to a question from Tom at Barclays. Tom Zhang: Just one quick follow-up for me, just on Ukraine, you talked about obviously high energy costs having an impact in Q1. Are you seeing anything from CBAM impacting Ukraine? I guess one of your Ukrainian peers has called out CBAM as being quite a big disruptor for Ukrainian steel going into Europe. I think it's not exempt at the moment. There's been a few articles saying maybe some order cancellations. Yes, are you seeing any kind of impact there? Genuino Christino: Yes. I think there was the expectation that Ukraine will be exempted, right? And they are not. And we believe that is right. There shouldn't be exemptions, right? At the same time, prices are increasing in Europe. So if you have the right cost base, of course, then you should be competitive. In our business, of course, we are focused in Ukraine on the domestic market, right, and also selling pig to different parts of the group. There's good demand for pig, which we continue to sell. Tom Zhang: Sorry, I didn't quite catch that. Did you say it shouldn't be or it should be exempt from CBAM? Genuino Christino: It shouldn't be an exemption. Tom Zhang: Shouldn't. Okay. So you're focusing more on the domestic market. And you would say there was some kind of earnings impact that I guess, persists into Q2 if an exemption doesn't come through. Then just second question, just on sort of buyback thoughts really. I mean I know your capital allocation policy hasn't changed. We haven't seen any buybacks for nearly a year now. If I look at your free cash over the last 12 months, it is positive. And I guess you're talking about earnings ramping up through the rest of the year. Is that sort of back on the cards potentially to restart that buyback program? Genuino Christino: Well, I think you're right. So you know our policy, right? And we had, by the way, in Q1, our first quarterly dividend which was paid. We remain very optimistic that we're going to be free cash flow positive this year. And then the policy will kick in. And based on the visibility that I have today, I see no reason why we would not go above the minimum 50% as we have been doing in the last couple of years. And if I can remind everyone, the policies has been really great. I mean we bought more than 38% of our stock. And I think we are close to restart that. Tom Zhang: Okay. Great. And sorry, you just said I'm so optimistic free cash flow positive this year, then the policy will kick in. Does that mean the policy only kicks in once you sort of see the full year numbers in? Or is it more dynamic than that if you have visibility, you could start sooner? Genuino Christino: Yes. I mean it is more dynamic. Daniel Fairclough: Great. So we have time for maybe 2, 3 more questions. So the first, we will take from Max at ODDO. Maxime Kogge: So first question is you published last week a sustainability report where you cut your carbon emissions objective to minus 10% from minus 30% previously by 2030. I think the new objective is very dependent actually on being delivered on time in 2030. So my question is what would be, in your view, a more realistic time line for the 30% reduction? Is it the mid-30s, late 30s, even beyond? And how should we think about the sequencing of the next EAF projects in Europe? Are you waiting for Gijón to be delivered and ramped up before potentially launching investments? Or will it come perhaps even later? Genuino Christino: You want to start with this one, Daniel? Daniel Fairclough: Yes. Thanks, Genuino. So I think you're right to observe the change to our 2030 target. We well flagged that, I think, in recent reports and communications. What's, I think, important to take away is that, that 2030 target is based on the announced projects. So it's a number that we are confident we can achieve and that's why we updated it. In terms of the timing of the next EAF projects, I think if you look at our communications on our messaging, we've also been quite clear that our EAF projects are going to be sequential. So we don't expect significant overlap on any of our blast furnace to EAF project. So the focus right now is completing Gijón. We've just announced Dunkirk, and that will occupy us for the medium term. And then the intention and time is to obviously communicate on what the project that will then follow will be. So let's really focus on getting a smooth start to Dunkirk at this stage, and then we will update on the next project in due course. Maxime Kogge: Okay. And just the second and last one is about the German stimulus plan. So expectations in recent weeks have come down actually amid the red tape, other priorities perhaps an infra for the new German government. So what's your latest view on the topic? You were quite vocal previously on it saying that it could increase demand in Europe by around 2% per year over the next 10 years. Is that still your scenario? And when do you expect that to really kick in already next 2 2026 or it's more of a story of 2027 or even 2028 based on your latest understanding? Genuino Christino: Well, I mean, to be honest, I mean, we don't see any significant change there. I mean when we look at the impact of the program. We start actually to see some activity, right? So I don't believe that the overall numbers that we talked about, they will change. I mean we -- at least that's not the intelligence that we have. We will, of course, have to -- we'll keep monitoring that. But I think we are progressing as the progress is happening there. Daniel Fairclough: Great. So we do have time for 2 more questions. So we'll take the first from Dominic at JPMorgan. Dominic O'Kane: Just 2 quick questions. You've spoken and given us a lot of granularity on Europe. And again, just maybe coming back to the U.S. given how tight we see that market at the moment, do you think there's any possibility that you actually run harder through Q2 than normal? So obviously, we often see a summer slowdown. Do you think there is potential that given the state of lead times that you may run harder than normal? And second question, just on -- so any kind of obvious cash flow items we need to be aware of for Q2 modeling for the net debt bridge. Genuino Christino: Dominic, so in U.S., I mean, as you know, I mean, we are running our facilities full. I mean Calvert, we have been running at high levels, and that will continue, right? So where you're going to see improvements in terms of production shipments is going to be more really in Mexico and a little bit also in Canada, right? And the focus in U.S. for us right now is to ramp up EAF as we talked about, that will bring more results, so it should contribute to results. And the second part of the question, can you repeat that for me, please? Dominic O'Kane: But just in terms of modeling for net debt in Q2, are there any... Genuino Christino: I would not -- Daniel, I would not focus so much in quarter 2, right? I mean I guess my message is more really when I think about the year as a whole, as you know, we have -- typically, we will have a larger release of working capital in the second half. That should continue to be the case despite all the improvements that we are discussing, we are seeing, right? And we explained that because we built some strategic inventories at end of last year that we're going to be releasing. So despite all the good developments that we are seeing in terms of prices, volumes in the second half, our expectation is that for full year, working capital should not really be consuming a significant amount of cash, which should then support even more the free cash flow generation. Daniel Fairclough: Is that helpful, Dominic? So I think the focus there just to reiterate is normally, the working capital movement in Q2, Q3 is not a major delta in the cash flow bridge, where it is a major delta is normally Q1 and Q4. So normally, we invest in working capital in the first quarter, and this year has been no different. And then normally, we see a nice release of working capital in Q4 and Q2, Q3 normally that's broadly a wash. Great. So I think we will now move to the last question, which we're going to take from Matt at Goldman Sachs. Matthew Greene: I have one question on your Indian operations, perhaps in 2 parts. Genuino, you mentioned costs are largely hedged, that's fine. But given India's reliance on gas imports primarily from the Middle East and some of your peers flagging shortages, could you outline where you're sourcing your gas from today and whether you've received any force majeure on future deliveries? And then just a follow-up, given your use of gas-based DRI and captive power, what measures can you realistically take to manage gas availability or reduce gas intensity across the Indian operations? Genuino Christino: So I think we are in a good place there as well. I mean we have different sources of gas. So we are not really dependent only on Middle East. So we are in a good place. So we have not had any force majeure. So we have received all our gas. We have no indication as we speak in end of April, beginning of May, no indication of force majeure. So I think we are -- as we discussed, I think we are in a good place there. So we are not expecting any disruptions because of availability for sure on the price and also on availability, it's not something that we are overly concerned at this point. Daniel Fairclough: Great. So I'll hand back to Aditya Mittal for any closing remarks. Genuino Christino: Yes. So thank you, everyone. Before we close, let me briefly reflect on the key messages from today's discussion. First, our first quarter performance again demonstrates the structural improvement in the earnings power of ArcelorMittal. Margins are well above historical levels with the further benefits of more favorable policy still to accrue. Underlying free cash is annualizing at over $2 billion. Second, we have a clear and differentiated growth pipeline. Our strategic investments are supporting our results and materially enhancing our future EBITDA potential. Finally, the positive outlook for our business is underpinned by more supportive trade policy, especially for Europe. More effective trade protections are fostering a more regionalized market structure, providing a robust platform for higher capacity utilization and profitability and higher and more consistent returns on capital employed. Alongside the impact of our growth strategy, this supports the free cash flow outlook for ArcelorMittal and the delivery of consistent capital returns to shareholders. With that, I will close today's call. And if you have any follow-up questions, please reach out to Daniel and his team. Thank you again for joining us, and I look forward to speaking with you soon. Stay safe and keep those around you safe as well. Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to the West Fraser Q1 2026 Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, April 30, 2026. During this conference call, West Fraser's representatives will be making certain statements about West Fraser's future financial and operational performance, business outlook and capital plans. These statements may constitute forward-looking information or forward-looking statements within the meaning of Canadian and United States securities laws. Such statements involve certain risks, uncertainties and assumptions, which may cause West Fraser's actual or future results and performance to be materially different from those expressed or implied in these statements. Additional information about these risk factors and assumptions is included both in accompanying webcast presentation and in our 2025 annual MD&A and annual information form as updated in our quarterly MD&A, which can be accessed on West Fraser's website or through SEDAR+ for Canadian investors and EDGAR for United States investors. I would like to turn the conference over to Sean McLaren. Please go ahead. Sean McLaren: Thank you, Ina. Good morning, everyone, and thank you for joining our first quarter 2026 earnings call. I am Sean McLaren, President and CEO of West Fraser. And joining me on the call today are Chris Virostek, Executive Vice President and Chief Financial Officer; Matt Tobin, Senior Vice President of Sales and Marketing; and other members of our leadership team. On the earnings call this morning, I will begin with a brief overview of West Fraser's first quarter and then pass the call to Chris for additional comments before I share some thoughts on our outlook and offer concluding remarks. As we entered 2026, we saw seasonal improvement in the lumber market. Southern Yellow Pine, in particular, saw a better balance between available supply and seasonal demand. While underlying demand for new residential construction and repair and remodel remains subdued, we experienced healthier market conditions compared with the second half of 2025. In OSB, Q1 market conditions remain challenging, though modest signs of improvement began to appear toward the end of the quarter as seasonal demand increased. Against this backdrop, West Fraser saw a positive sequential turnaround in first quarter results, led by stronger lumber pricing and operational progress. We generated negative $66 million of adjusted EBITDA, but this result includes $114 million of prior period duty adjustments, which Chris will get into shortly. Removing the impact of these adjustments, the underlying business generated $48 million with all 3 of our segments: lumber, North American engineered wood products and Europe contributing to the positive results. This reflects a significant improvement from the $79 million loss in the fourth quarter, representing a turnaround of over $120 million. We continue to high-grade our portfolio during the quarter. We have completed production activities at our high-level OSB mill in Alberta and are 4 months into the production ramp-up at our new Henderson lumber mill in Texas. Our U.S. lumber portfolio optimization continues to lower our cost structure with 5 mill closures and 2 brownfield modernizations over the past 5 years. Our balance sheet remains strong, providing us with the flexibility through the cycle and optionality for the future. We ended the quarter with liquidity close to $900 million. The change in Q1 reflects the normal seasonal buildup of log inventory in Western Canada, which is consistent with our typical working capital cycle. We expect this inventory investment to reduce in the second and third quarters as our mills work through their log inventories. We continue to operate with a strong balance sheet, allowing us to execute our capital allocation strategy. Our financial position also provides optionality for value-creating opportunities should they arise. As always, we will be disciplined on execution and returns. With that high-level overview, I'll now turn the call to Chris for additional detail and comments. Christopher Virostek: Thank you, Sean, and good morning, everyone. A reminder that we report in U.S. dollars and all my references are to U.S. dollar amounts, unless otherwise indicated. In Q1, we generated negative $66 million of adjusted EBITDA. As Sean discussed, we had 2 large softwood lumber duty-related adjustments in Q1, totaling $114 million. Both adjustments are noncash in nature. The first is based on preliminary rates released by the U.S. Department of Commerce for the 2024 calendar year. and the second, due to a change in our estimate of amounts recoverable and payable as a result of the liquidation process covering the last half of 2017. I would point you to our news release of April 16 and our first quarter MD&A and financials for further details. The lumber segment posted adjusted EBITDA of negative $84 million in the first quarter, but removing the duties impact results in positive $30 million compared to negative $57 million in the fourth quarter, an improvement of $87 million. This improvement is largely a result of higher SYP and SPF pricing. North America EWP segment delivered $11 million of adjusted EBITDA in the first quarter, an improvement from the prior quarter's negative $24 million. This $35 million improvement is due largely to better OSB pricing in the quarter. In Europe, we generated $10 million of adjusted EBITDA in the first quarter, more than doubling the $4 million we generated in the fourth quarter. And we've seen an improvement -- improved environment in Europe with better demand and higher prices. This marks the highest level of adjusted EBITDA in Europe since the second quarter of 2023. We have moved our previously named Pulp and Paper segment to other in the first quarter as the business has become a less significant part of our total operations, and we'll no longer be specifically addressing the results of that segment. Bridging our results from Q4 to Q1, the majority of the improvement came from higher prices in lumber and North American EWP. In addition, higher volumes in U.S. lumber in Europe and a favorable inventory adjustment represented the biggest variances. Costs were flat relative to Q4. Lower SYP costs were offset by repair costs due to the fire at Blue Ridge. And in North American OSB, we saw higher costs from resin and energy-related inputs. Resin plays a significant role in our panel cost structure and the recent rise in methanol-based resin pricing is a factor we anticipate will be more visible in our Q2 results. Our U.S. lumber business continues to show improved operating efficiency stemming from the actions we have taken. In the U.S. South, total cost per thousand board feet have reduced by approximately 6% in the last 2 years. During this period, we have closed 5 lumber mills, completed a full brownfield modernization and successfully completed a number of smaller but significant capital projects and cost reduction initiatives. This better enables us to react to changes in the external environment and improves our ability to compete more effectively and help provide low-cost supply to our customers. In Q1, our SYP shipments were 4% higher than Q4 on better operating efficiencies. Excluding the impact of the downtime at Blue Ridge in Q1, our overall shipment volumes remained consistent with expectations. We saw higher shipments in both OSB and -- in both North American OSB and European OSB. North American volumes increased due to the normal seasonal patterns. And in Europe, we increased shipments to meet higher demand. Cash flow from operations was impacted by the seasonal build in working capital, resulting in negative $170 million in the first quarter and a net debt position of $457 million. We expect this working capital position to reverse in the second and third quarters. Net debt was influenced by 2 dividend payments made during the quarter, which occurred as a result of our fiscal quarter ending on April 3 rather than March 31. Our net debt-to-capital ratio remains in single digits, and our balance sheet is robust. With respect to share repurchases, we did not repurchase shares in the first quarter as we prioritize liquidity through the cycle. Our commitment to returning capital to shareholders through a combination of both dividends and tactical share repurchases has not changed. Regarding our operational outlook for 2026, we have made no changes to our shipment guidance across our main products as well as our capital expenditure range. Transportation and resin costs have been influenced by evolving geopolitical dynamics, and we expect these factors to be more fully reflected in our second quarter results as we manage through the current environment. Due to the fluidity of the situation, it is hard to quantify what that impact may be, but we are actively managing where we can. With that overview, I'll pass the call back to Sean. Sean McLaren: Thank you, Chris. I'll now shift to our general outlook and offer some concluding remarks. Our first quarter results showed a solid improvement relative to the last half of 2025. The $120 million turnaround relative to Q4 shows what the underlying potential of our business is. Our strong balance sheet and a well-invested diversified portfolio positions us well to adapt to changing market conditions and capitalize on operating leverage while also mitigating downside risk. We manage for the long run by reinvesting in our business and are improving our operating efficiency. In the first quarter, we continued to advance our heat energy and dryer project at Bemidji, a project that, when complete, will improve safety, increase throughput, lower costs and lower energy usage and emissions. For our lumber assets in the U.S. South, as Chris discussed, we are seeing the results of the continued portfolio optimization work we are doing by removing costs, increasing margins and repositioning our production to lower cost and more efficient mills. We continue to ramp up our modernized Henderson mill, which we believe is positioned to be one of the lowest cost mills in our fleet once it achieves full operating rates. In Canada, production at Blue Ridge was temporarily paused due to a fire and the mill has since resumed full operational capacity. We have also seen preliminary duty rates poised to come down later this year by approximately 6% with the release of the proposed AR7 rates, and we continue to hold a cost advantage in SPF relative to other Canadian exporters. In our North American EWP business, the indefinite curtailment of our high-level Alberta OSB mill is complete. Our wind down of high level, a less competitive and higher cost mill, representing approximately 860 million square feet will allow us to focus our operations on our most efficient production. In Europe, we are encouraged by the progress achieved in Q1 and continue to navigate market dynamics, including managing energy and fiber costs. We are focused on operational improvements and cost reduction and expect our European operations to continue to be competitive through the cycle. Of course, this takes place in a dynamic environment influenced by developments in the Middle East. Against this backdrop, global market conditions remain fluid, and we continue to assess how broader trends may influence end market demand and energy-related cost inputs across our business. In the near term, we expect costs to be influenced by inputs linked to energy prices, and we are adapting our logistics approach to reflect the current operating environment. We continue to closely monitor these developments and remain focused on managing controllable costs, maintaining operational flexibility and supporting our customers as conditions evolve. We are realistic about the demand environment. Housing remains challenged in the near term. However, we believe the longer-term demand drivers remain favorable. Since the start of the conflict, long-term mortgage rates have moved above 6% and gas prices have risen, reflecting current economic conditions that continue to shape consumer sentiment. Despite ongoing macroeconomic and affordability pressures, lumber pricing improved modestly on a sequential basis in Q1. While uncertainties remain, the seasonally better supply-demand balance, combined with our cost reduction focus gives us cautious confidence as we navigate near-term uncertainties. To summarize, first, our Q1 results demonstrate the operating leverage in our business as markets improve. Second, our balance sheet and diversified portfolio are strengths that continue to differentiate us in this environment. And third, we are focused on lowering costs and investing in capital projects that improve the quality of our portfolio. Thank you again for your time and continued interest. We look forward to updating you next quarter. With that, we'll turn the call back to the operator for questions. Operator: [Operator Instructions] And your first question comes from the line of Sean Steuart from TD Cowen. Sean Steuart: A few questions. Sean, hoping we can pull apart the cost inflation piece a little bit. And the freight part, I think I understand, but I'm hoping you can give it a little bit more perspective around the magnitude of resin cost pressure and how that flows through and how higher diesel will feed into delivered wood costs as well? Sean McLaren: Well, I'm going to make a few comments here, then ask Chris to add anything more, fill in what I missed. So first off, on the magnitude, I would say a few comments here. First off, I would talk geographically that it's different in Europe than it is in North America. We saw the impact more quickly in Europe, but our team in Europe quickly began navigating through that. Hard to really have a lot of exact visibility on Q2 other than the pressure continues to build and our team continues to react and kind of navigate through that cost structure. And our assets in Europe are -- this affects everybody. So our assets are well positioned to compete in this environment of higher costs. In North America, I think we're still seeing that evolve. We've got obviously large relationships with our suppliers, and we're working with them to navigate the impact of that. Again, difficult to quantify for Q2. Resin is a significant component of OSB costs. But to date, we've been able to navigate it effectively and to be determined to see how significant that is in the coming months. On diesel pricing, again, in Western Canada, our wood supply is delivered. So this will be a Q3 issue as we begin to replenish log inventories. So we'll see where things are at, at that moment. And in the South, I think so far, we've been able to navigate that through and have not seen a material change in our cost structure yet, but it's something we're monitoring and watching closely. Chris, anything to add to that? Christopher Virostek: No, that's a great summary. Thank you. Sean Steuart: Okay. The second question I have is around chip offtake for your sawmills. We saw a recent announcement of a pulp mill closure in the South. And I'm not asking you to speak to that initiative specifically. But Sean, can you give us general comfort with respect to the strength of your wood chip offtake agreements across your sawmill system? Sean McLaren: Yes, you bet, Sean. And I know we've maybe spoken about this on prior calls. But clearly, over the last several years, both in the U.S. and in Canada, the restructuring of the pulp industry has implications not only on sawmills, but on landowners, but in any number of areas where they operate and those closures happen. From a West Fraser perspective, I'd maybe leave you with a few comments. One is our diverse portfolio, not only geographically between Western Canada and the U.S. South, but across both of those regions. And particularly in Western Canada as we're integrated in British Columbia with Cariboo Pulp. So we've got lots of optionality depending on where the impacts happen on how we reposition our production or our residuals and react to that. In the South, we have a number of long-term relationships as well as a number of other kind of offtake agreements that we look to, and we've been successfully able to navigate each of these changes. Does it create pressure and pinch points? Absolutely, but our team is doing a terrific job navigating that. And then finally, just as a reminder that as pulp mills restructure, our OSB business also purchases pulpwood. So we have an offset or a hedge in our system that is -- that allows us to press on costs where those opportunities present themselves. Operator: And your next question comes from the line of Ketan Mamtora from BMO Capital Markets. Ketan Mamtora: Maybe to start with and not trying to put too fine a point on the resin issue. But Sean, to the extent it's possible, can you talk about sort of how you'll are navigating this dynamic environment? Is it using different types of resins in manufacturing OSB? And if it's possible at all to maybe just give us some rough sensitivity in terms of what it means for, I don't know, like a 10% move in resin cost. Is there a way for us to think about it? Sean McLaren: Yes. And this might again be a little repetitive from the last question. So it's really hard. There's a lot of moving parts, as you can imagine, within this. So resin, I think, is roughly 25% of the cost structure in OSB mill. The -- saying that, there are different types of resins. There are different ways for the team to be able to build the board. And first and foremost is us working with our resin suppliers to navigate through this period. And this is an issue that affects sort of everybody the same, like it's not a unique West Fraser issue. So I think it all comes back to how we feel our assets are positioned on the cost curve, and we feel like they're positioned pretty well, and we're going to be able to navigate this and compete through. Ketan Mamtora: Understood. Okay. And then just maybe looking back at Q1, the price differential -- or not just the price differential, but the change in prices in Southern Yellow Pine versus SPF that we saw in Q1. Can you talk about sort of what drove that, particularly against the backdrop of what's going on with supply cuts. And I'm curious whether you are seeing any signs that Southern Yellow Pine is gaining share in the new residential market? Sean McLaren: I'm going to turn it over to Matt to make a few comments on that, Ketan. Matt Tobin: Sure. We saw Southern Yellow Pine prices rise off a low point from Q4. And this has been a pretty typical, I'd say, seasonal uplift with trigger activity picking up in the first quarter. So it's something we've seen, I'd say, the last few years is that rise in first quarter demand. And I think that watching it and talking to customers, we don't see a structural shift in demand. I'd say it's just typical seasonal activities in the first quarter around SYP. Ketan Mamtora: Understood. Okay. And then just last question for me. Chris, you talked about on the repurchase side, prioritizing liquidity. How should we think about sort of your approach over the next -- in the coming quarters against the backdrop of kind of weaker-than-expected housing demand? Should we expect that in the near term, this is on pause? Or is it sort of something that you're evaluating every quarter? Christopher Virostek: I think, Ketan, the best guide would be to look at what we've done historically, right, is we take a lot of pride in having a durable capital allocation strategy. So throughout this cycle, which we're 3 years in, in lumber now, we've been very disciplined in what we've done, right, with whether that's share repurchases or the level of the dividend or the management of the debt, the debt load and the cash balance. And so look, we came through 2 negative quarters in the back half of last year. First quarter has turned positive, the way that we look at it, excluding this $114 million on the duties. Clearly, there's a lot of uncertainty out there. But how we look at the intrinsic value of the company hasn't changed. And we're not a buyer necessarily at all times, but we're a buyer opportunistically when the flexibility is at a level on our balance sheet that we think is right and the shares are priced attractively. And I think you can count on us to continue to operate that way no differently today than over the past 2 or 3 years. Operator: And your next question comes from the line of Ben Isaacson from Scotiabank. Ben Isaacson: I just wanted to extend Ketan's question. You talked about SYP, but didn't talk about SPF. Can you talk about whether you were surprised at the relative underperformance of SPF to SYP? Or was it kind of consistent with your thinking and why? Matt Tobin: I would say in the SPF, I mean, we saw steady markets, some slight price improvement over the quarter. I would say seasonally kind of normal tightening of those spreads in the first quarter, like I said, more to do with trigger activity. I think we see those dislocations and price changes change relative to their kind of regional supply or their end user supply-demand structure. And so I would say not necessarily unexpected to see a pickup in SYP and SPF just to be -- continue to be steady. Ben Isaacson: My second question is coming back to this cost pressure. I was just hoping you could frame it or provide some goalposts. If nothing were to change from today, can you give some magnitude in terms of the goalposts for cost? I mean, should we expect a $30 to $50 per MDF change or $0 to $10? I mean how should we be thinking about it? Sean McLaren: Yes. I'll make a few more comments here, and Chris, please fill in if we can add more. Again, very -- I know the conflicts few months here. We've been able to navigate these pressures so far, but the pressure is building, and it's hard to predict where energy fuel prices might go. So I'm very reluctant to kind of speculate on magnitude because we just don't know. So we won't do that. What I would say is we've been so far able to navigate through the cost pressure. Chris, would you add anything to that? Christopher Virostek: Yes, not really. I think as Sean indicated, resin is about 25% of the input cost in OSB manufacturing. I think the other factors that he's raised that, look, this isn't something that uniquely affects West Fraser. It affects the entire industry because everybody uses resin to make OSB. So there's not, in our view, a disproportionate impact in any -- in one aspect, right? Like our fleet of assets and how they exist in different markets and make different products gives us a degree of flexibility that operators with smaller fleets may not have in order for us to mitigate more of this impact as we navigate this. I think very difficult to speculate when you see oil price moving around the way that it's moving around on a day-to-day, week-to-week basis. trying to pin a number on this and say this is discretely what it's going to be in Q2, there's as much likelihood that we're wrong as we're right in trying to give that guidance. So I think it goes back to, look, we've -- throughout this cycle, we've made investments to lower costs consistently, which gives us more headroom to deal with these shocks when they happen. And we like how we're positioned to be able to deal with this. Ben Isaacson: And my final question, Sean, can you just give a quick outlook for OSB as it relates to North America versus Europe? How are you feeling about kind of each of those regions? Sean McLaren: Yes. No. Thank you, Ben. Yes, maybe just a few comments. First off, in Europe, as Chris mentioned in his comments, our best quarter since mid-2023. So it's been 3 years. And the macro in Europe is -- continues to be difficult like North America. Saying that, our 2 OSB assets over in Europe are pretty well positioned. We have a terrific management team. We're located in good markets, good raw material areas. So our cost position, we feel quite good about. And at the same time, there is cost pressure in other regions that have resulted, we believe, in better market conditions over in Europe. So hard to -- again, the macro continues to be challenging over there. but some good sequential improvement in those markets over the last 12 to 18 months. And then in North America, again, a lot of uncertainty. And I can tell you, again, from West Fraser's perspective, we are just leaning into the things that we can control. Our asset ramp-up at Allendale, the work we've done at Chambord, the adjustments we made at high level, all those things make our platform in OSB stronger and continue to push down costs, continue to give us the ability to navigate, like Chris talked about the spike in resin costs or whatever comes our way. Hard to say on the market. All I would say is without any change, we're putting ourselves in a better position to compete. Operator: Your next question comes from the line of Nikolai Goroupitch from CIBC Capital Markets. Nikolai Goroupitch: Given the attractive margin dynamics for lumber in the U.S. South, do you suspect that meaningful production has already come back online across the industry in the region? Sean McLaren: Again, hard for us to speculate on what others are doing. I'll only maybe speak to our platform. And we were navigating to the demands of our customers the last 2 quarters, the second half of last year. As Matt touched on, things improved seasonally. So we were able to respond to that, saying that our ability to add other than the ramp-ups we're in the capital execution we're in, our operating excellence focus, our ability to quickly react. I think you saw that in Q1. If you look compare it to Q3 and Q4, you see the difference there. So I -- others may be in a little different spot, hard for me to speculate on that. But I know from our perspective, we're going to continue to be cautious, and we haven't seen a fundamental change in the underlying fundamentals. So we'll continue to manage our business against that backdrop. Nikolai Goroupitch: Great. I see. And any more color you can provide what you're hearing from customers regarding the health of R&R demand? Sean McLaren: I might ask Matt to maybe comment on that. Matt Tobin: Sure. I'd say customers are mixed. I'd say you get some customers thinking it's going to be flat. Others are more positive. But I'd say across the customer base, really kind of mixed visibility there. And from what we see with our treated customers that we think are a decent lens into that market, it remains subdued. Operator: And your next question comes from the line of Matthew McKellar from RBC Capital Markets. Matthew McKellar: For all the details so far, particularly on costs. I'd like to, I guess, follow on that theme just a little bit, but from a slightly different angle and ask about capital equipment. Can you provide any perspective on if or how capital cost to build or even maintain lumber and OSB mills in the U.S. specifically may have evolved over the past few quarters, with new tariffs and tariffs that have changed in scope and magnitude? Sean McLaren: Yes. Matthew, maybe just a few comments on that. First comment I would make is we've done a lot of work, a lot of capital work the last 3, 4 years. And we're really in the mode of operationalizing that capital in start-up, getting the benefit from all the money we spent. So our exposure to some of those costs today are considerably less than they've been in the last couple of years. The one big project we have underway is Bemidji, and that equipment is largely delivered. And so we're -- again, our exposure there is -- we have very little exposure left on that project. Saying that, I don't think it's fundamentally different today if you were going to do a major project. And then you add on the potential of steel and other tariff issues for equipment that comes from outside of the U.S. So pressure is probably higher, but we're largely into the operational phase of our capital program. Matthew McKellar: Great. Just one more for me. I appreciate, I guess, that diesel is pushing transportation costs higher pretty generally and that the impact remains hard to quantify. Are you seeing any actual scarcity of capacity beyond that, that would potentially create any bottlenecks for you or your customers? Sean McLaren: Maybe I'll turn that one over to Matt. Matt Tobin: Sure. I would say it's been a challenging market in the freight market. And I think if we look back to the end of last year, there's been quite a few publications talk about the uptick in bankruptcies in trucking companies to end '25. And I'd say logistics will always kind of correct to the size of the demand. And so we've definitely seen a little bit more tightness. And when you layer on top of as well, end of Q1, early Q2 is a seasonally tight period for trucks anyway, you get uptick in produce and other things. And so you layer on a spike in fuel, and it certainly created tightness in the market. And we're working with our vendors and our customers to try to continue to provide on-time shipments of our products every day. Operator: There are no further questions at this time. I will now hand the call back to Mr. Sean McLaren for any closing remarks. Sean McLaren: Thank you, Ina. As always, Chris and I are available to respond to further questions as is Anil Aggarwala, our new Director of Treasury and Investor Relations. Thank you for your participation today. Stay well, and we look forward to reporting on our progress next quarter. Operator: This concludes today's call. Thank you for participating. You may all disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Eldorado Gold Corporation First Quarter 2026 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Lynette Gould, Vice President, Investor Relations, Communications and External Affairs. Please go ahead, Ms. Gould. Lynette Gould: Thank you, operator, and good morning, everyone. I would like to welcome you to our conference call to discuss our first quarter 2026 results. Before we begin, I would like to remind you that we will be making forward-looking statements and referring to non-IFRS measures during the call. Please refer to the cautionary statements included in the presentation and the disclosure on non-IFRS measures and risk factors in our Management’s Discussion and Analysis. Joining me on the call today, we have George Burns, Chief Executive Officer; Christian Milau, President; Paul Ferneyhough, Executive Vice President and Chief Financial Officer; and Simon Hille, Executive Vice President and Chief Operating Officer. Our release yesterday details our first quarter 2026 financial and operating results. The release should be read in conjunction with our Q1 2026 financial statements and Management’s Discussion and Analysis, both of which are available on our website. They have also both been filed on SEDAR+ and EDGAR. All dollar figures discussed today are U.S. dollars unless otherwise stated. We will be speaking to the slides that accompany this webcast, which can be downloaded from our website. After the prepared remarks, we will open the call for Q&A, at which time we will invite analysts to queue. I will now turn the call over to George. George Burns: Thank you, Lynette, and good morning, everyone. I will begin with an overview of our first quarter and provide brief updates on McIlvenna Bay and Skouries. I will then hand the call over to Paul to review the financials, and then to Simon with an update on our operations. Following that, Christian will make some concluding remarks before opening up the call for questions. We have had a very busy and solid start to 2026, with performance in the quarter tracking in line with our expectations and full-year guidance. This year, production is back-half weighted as two mines come into production and several other operations deliver stronger results later in the year. 2026 is an important year for Eldorado Gold Corporation as we continue to advance two high-quality growth projects, Skouries in Greece and McIlvenna Bay in Saskatchewan. MacBay is nearing first concentrate production, followed by first concentrate at Skouries in Q3. Once in operation, both assets will meaningfully enhance our production profile and cash flow generation. Starting in 2026, to provide greater transparency as these polymetallic assets come online, we plan to enhance our disclosure by reporting copper assets on a dollar-per-pound co-product basis for Skouries and MacBay. Before getting into the project updates, I want to note that, as previously announced, I plan to retire as CEO later this year as we ramp up Skouries towards commercial production. Christian, who joined us last September, has been deeply involved across the business and is set up to seamlessly step into the role at that time. I am pleased to remain on the Board to support continuity, and Dan Myerson has joined the Board as Deputy Chair, providing important continuity from the Foran side. I want to take a moment to recognize the achievement of our colleagues at Lamaque. In March, they received the TSM Gold Leadership Award, a special recognition for mining operations who achieved Level AAA, the highest possible rating across all applicable TSM performance indicators. This recognition reflects the dedication of our employees and our unwavering commitment to responsible mining in Quebec and across our global operations, where TSM protocols are applied as a matter of practice under Eldorado Gold Corporation’s Sustainability Integrated Management System. Well done, Lamaque team. The Foran transaction represents a significant milestone for Eldorado Gold Corporation. At MacBay, we have now begun integration activities and are working closely with the existing team as the project nears first concentrate production. Following the close, members of our management team visited Saskatchewan and the MacBay project to welcome the team to Eldorado Gold Corporation, see progress firsthand, and engage with our stakeholders in Saskatchewan. What stood out was the enthusiasm of our new team, the capability supporting the operation, and the clear focus on safety, collaboration, and responsible execution. Now that MacBay is part of our portfolio, expect us to provide the following with our second quarter results: MacBay production and cost outlook for 2026, timing for an expansion study, and progress on a study for a potential lead-silver circuit. Following the close of the transaction, we have already approved approximately $17 million to spend on exploration for the remainder of 2026, reflecting the target-rich environment and our view that continued exploration success has the potential to drive meaningful long-term value. The quality of MacBay and its exploration potential reinforce our confidence that it will become a long-term cornerstone asset within our portfolio, delivering near-term growth while adding copper exposure in a stable, top-three global mining-friendly jurisdiction. Turning to Skouries in Greece on slide six, construction activities continue to progress well across all major areas. The team remains focused on disciplined, safe execution as we move through the final construction phase. At the end of the quarter, overall project progress was approximately 94%, steadily advancing towards first concentrate production. As execution activities have progressed and the project advances towards construction completion on schedule, we have updated our forecast to complete and revised our total project capital to $1.315 billion, an increase of approximately $155 million from the prior estimate. The primary driver was the increase related to construction workforce levels to support sustained final construction momentum. Total workforce has increased from 2,350 in mid-Q1 to approximately 3,200, which includes about 490 in operations. Advancing Skouries into safe production in the current metal environment is a key driver of value creation. This incremental capital reflects our continued focus on maintaining momentum towards first concentrate production. Accelerated operational capital at Skouries is now expected to be approximately $260 million, reflecting an incremental $82 million to expand pre-commercial mining and site works. This supports open-pit mining and advancing underground development ahead of first production. We are well positioned for startup with more than 2.8 million tons of ore stockpiled, which provides the entire planned mill tonnage for 2026. Overall, this investment supports a smoother ramp-up into production. On the process plant, work remains focused on final mechanical installations, piping, cable tray, and cabling as we prepare for first ore. With respect to the damaged cyclone feed pump variable-speed drives, temporary replacement equipment is expected to be installed in Q2. High- and medium-voltage electrical distribution for multiple stations is progressing. The process control building structure is complete, and electrical rooms are being progressively handed over to commissioning. On the power line and substations, the 150 kV power line and primary substation continued to advance to startup in Q3. Ahead of grinding area ore commissioning, final electrical regulatory authority approval will require completion of inspection and energization protocols. Powerline construction is progressing with the transmission tower assembly complete and pilot wire pulling now underway along the transmission line. The primary substation is advancing through ongoing assembly of the substation structures and control building structural completion. Pre-commissioning is now underway starting with the substations that feed the process plant, filter plant, and primary crusher, while commissioning continues across fire, utility, and process water systems. In parallel, we have begun pre-commissioning in flotation focused on air and instrumentation, as well as the SAG and ball milling instrumentation, electrical and control systems, and we started wet commissioning in the process water pumps and tailings thickeners. Together, Skouries and McIlvenna Bay represent a step change for Eldorado Gold Corporation in scale and portfolio diversification across jurisdictions and metals. With that, I will turn it over to Paul to review the financial results. Paul Ferneyhough: Thank you, George, and good morning. I will start on slide seven. In Q1 2026, we produced 100,358 ounces of gold, a 13% decrease year over year, primarily reflecting lower tons at stack grades at Kisladag and lower grades at Efemcukuru, partially offset by higher grades and improved recoveries at Olympias and Lamaque. Gold sales totaled 100,119 ounces at an average realized gold price of $4,891 per ounce, generating total revenue in excess of $532 million, a 50% increase from $355 million in the comparable quarter last year, driven by significantly higher gold prices. Production costs were $188 million, up from just over $148 million, driven primarily by royalty expense in Turkey and Greece, which accounted for approximately 70% of the increase, with the balance largely attributable to labor inflation in Turkey and incremental labor and contractor costs associated with continued development of the Lamaque Complex. Royalty expense increased to $50 million from $22 million last year, reflecting higher realized gold prices and higher royalty rates, partially offset by lower sales volumes. On a unit basis, total cash costs across the portfolio averaged $14.70 per ounce sold, up from $11.53, while AISC averaged $1,942 per ounce sold compared to $15.59 in the prior-year period, mainly reflecting higher royalty expense driven by the higher gold price environment, lower production, and labor cost impacts. Below the line, net earnings attributable to shareholders from continuing operations were $136 million, or $0.69 per share, compared to $72 million, or $0.35 per share, last year, primarily due to higher realized gold prices, partially offset by lower sales volumes, higher production costs, and higher income taxes. Adjusted net earnings were $188 million, or $0.95 per share, compared to $56 million, or $0.28 per share, last year. The adjustments this quarter included an $18 million foreign exchange translation loss on deferred tax balances, a $20 million unrealized loss on derivative instruments, and $8 million of acquisition costs related to the Foran Mining transaction. Turning to slide eight, we ended the quarter with cash and cash equivalents of approximately $630 million, maintaining a strong balance sheet and significant financial flexibility to fund our growth initiatives. Cash declined in Q1 relative to Q4 2025 primarily due to capital investment, share repurchases, dividend payments, and income taxes paid, partially offset by cash generated from operating activities. As we prepare the company for the significant cash flow that will come following ramp-up of production at Skouries and McIlvenna Bay, it is worth reflecting on our developing capital allocation policy, which is based on a framework built around five key priorities. First, we continue to allocate funds towards the highest-return opportunities within our global portfolio, including potential expansion projects at Lamaque and McIlvenna Bay, advancement at Perama Hill, ongoing optimization and expansion of Olympias, and continued investment for our stable, cash-generating mines in Turkey. Second, we have meaningfully increased our exploration investment focused on mine life extensions and the discovery of new resources. Third, we remain committed to maintaining balance sheet strength with a focus on reducing leverage over time, including the prudent management of our $500 million high-yield bond maturing in 2029, while preserving the flexibility to execute our pipeline of development projects. Fourth, we have established a sustainable base dividend policy of $0.075 per share per quarter. Finally, we continued in Q1 to opportunistically repurchase shares, reflecting our conviction in the company’s intrinsic value, particularly given the potential for an estimated double-digit free cash flow yield based on our current valuation, compared to industry-leading peers who currently trade at a lower yield. Overall, we believe our capital allocation framework appropriately balances growth, financial strength, and shareholder returns. With that, I will turn it over to Simon for an operational update. Simon Hille: Thank you, Paul. Starting on slide nine, at Lamaque we produced 42,306 ounces in Q1, up 5% year over year. The outperformance was primarily grade driven, and we also saw the initial contribution from Ormaque following the receipt of our operating authorization. All-in sustaining costs were $13.70 per ounce sold, modestly lower year over year, reflecting higher production volumes and continued cost focus, partially offset by the impact of deeper mining and timing of sustaining capital spend. Total capital spend was $48 million, including $20 million of sustaining capital, primarily for underground development, drilling, and equipment. Growth capital totaled $28 million, largely related to development of Ormaque and ramp development at the Triangle Mine and supporting infrastructure. Continuing to slide 10, at Kisladag, we produced 28,339 ounces as planned. As we have previously disclosed, 2026 is a cutback year for Phase 6 of the open pit, where the average grade is lower than the life of mine. All-in sustaining cost was $2,060 per ounce sold, primarily reflecting lower volumes sold on a higher cost base. Sustaining capital spend included $4 million, while growth capital included $51 million, including a one-time $24 million purchase of strategic land to support the North Heap Leach pad and North Rock waste dump expansions. The remaining planned $27 million was largely waste stripping and continued construction of Phase 3 at the heap leach in 2026. At Efemcukuru, on slide 11, we produced 15,394 payable ounces in Q1 relative to 19,307 payable in 2025. Lower output is primarily due to lower grade, partially offset by higher throughput. All-in sustaining costs increased to $2,528 per ounce sold, primarily reflecting the lower volumes sold and the higher cost base, as expected, with the higher sustaining capital tied to increased development meters. Sustaining capital spend included $5 million, primarily for underground development, and $2 million of growth capital related to the new portal development at Kokarpinar along with the development costs for the new Bati Zone. Finally, to slide 12, at Olympias, we produced 14,319 payable ounces of gold in Q1, up 21% from 11,829 ounces in 2025. This improvement reflects a stable ore blend and flotation performance that drove higher metal recoveries. Revenue increased to $88 million from $46 million, primarily on the higher realized gold price, higher sales volumes for gold and base metals, and with the base metals also benefiting from higher grades and recoveries. All-in sustaining cost was $2,031 per ounce sold, reduced from $2,842, primarily reflecting improved metal recovery and stable mill performance that resulted in lower cash cost per ounce sold as a result of higher volumes sold. Sustaining capital was $5 million, while growth capital was $8 million, driven by the mill expansion project, with sequential area completion commencing at the end of Q3 and ramp-up through 2026. Across all sites, safety remains core to our operations, and we continue to reinforce a culture of safe, responsible production. I will now turn it over to Christian for closing remarks. Christian Milau: Thank you, Simon, and good morning, everyone. Overall, the first quarter reflects a solid start to what is a defining year for Eldorado Gold Corporation. We are delivering solid operational and financial performance while continuing to make meaningful progress on our key growth projects as they march towards the finish line. In addition, we initiated our dividend and bought back over $80 million worth of Eldorado Gold Corporation shares in Q1. Importantly, we have continued to strengthen our leadership team over recent months, including the well-deserved promotion of Simon to Chief Operating Officer and the appointment of Gordana Viseptievich, who will be joining us shortly as Senior Vice President of Projects. Gordana has significant experience leading projects of a large and small scale globally, as well as experience working with G Mining Services, which will be a key partner on a number of future projects. Additionally, we would like to recognize Sylvain Lehoux, who has been promoted to Senior Vice President, Operations for Canada, taking on responsibility for Eldorado Gold Corporation’s growing Canadian portfolio. The deliberate steps we have taken to enhance our bench strength—particularly in project execution and operational leadership—are already contributing to improved alignment and stronger integration across the business. Complementing these efforts in 2026, we entered into a project alliance with G Mining Services to support project development and execution, reinforcing our technical capacity and ability to deliver projects safely, efficiently, and on schedule. As I have spent time across our sites and corporate offices, I have seen strong alignment with our values, particularly in how our teams are approaching collaboration and execution. These behaviors will be critical as we move through the remainder of the year. With Skouries and McIlvenna Bay advancing towards key milestones and first production, and with the strength of the team we have in place, we are entering a period of meaningful transformation for the company that we believe will enhance our scale, diversify our portfolio, and strengthen our long-term value proposition. Looking ahead, while Eldorado Gold Corporation remains predominantly a gold producer, the addition of meaningful copper production from Canada and Europe represents an exciting extension of our portfolio. At McIlvenna Bay, we are building exposure to copper in a top-tier mining jurisdiction with dependable infrastructure and access to a skilled workforce, and we appreciate the Major Projects Office support of the Strategic Projects for Canada and Eldorado Gold Corporation. Further, the district-scale exploration potential and work being done by the team in Saskatchewan is extremely exciting, with excellent targets to be followed up, as evidenced by our increased investment in exploration. Expect us to aggressively explore the Deposit and wider land package starting this year. This potential and the already long mine life will enhance our peer-leading average mine life and exciting exploration portfolio across all jurisdictions. At Skouries, we expect to deliver a long-life copper-gold asset within Europe, where demand for responsibly produced metals continues to grow. Northern Greece is highly prospective and will continue to grow as a core part of our portfolio. These two near-production mines provide substantial exposure to copper and its key role in electrification and the energy transition, while also enhancing the resilience of our portfolio through greater commodity and geographic diversification, and extending our average years of mine life into the mid-teens with excellent potential to extend further. I am excited about Eldorado Gold Corporation’s future and the strong culture and teams across the company. As we reach the significant cash flow inflection point later in 2026, I have a high level of confidence in our team, our strategy, and our ability to surface significant value from execution of peer-leading near-term growth. Thank you to our employees, partners, and you, shareholders, for your continued support. I will now turn the call back to the operator for questions from our analysts. Thank you. Operator: We will now open the call for questions. The first question comes from Don DeMarco with National Bank. Please go ahead. Don DeMarco: Thank you, operator, and good afternoon, George and team. First question, looking at Skouries, given that labor cost pressures contributed to the CapEx increase, is there a read-through to potentially cost pressures on operating costs going forward? George Burns: Hi, Don, thanks for the question. No read-through there. What drove this capital increase as we get to the final stage of construction was completing electrical and instrumentation in the plant, so we brought in three EU contractors just recently to help ensure we can maintain the early Q3 startup of the plant. It is essentially some extra labor to complete that electrical and instrumentation. No read-through in terms of our operating cost. Our operating manpower levels are going to come in as expected, and we have only had normal inflationary pressure on labor costs. If you look at our cost guidance for the fourth quarter as we bring it into operation, we continue to maintain a very low cost profile once we are into production. Don DeMarco: Okay. And so then, looking at the next couple of quarters before first concentrate, are there any risks on the horizon—maybe lingering cost pressures, whether related to labor, contractors, etc.—that might require additional capital that might be unforeseen at this time? George Burns: No, Don, we do not see that at this point. Again, from a construction perspective, we should have the construction complete at the midyear point, and we have said Q3 as first concentrate. Really, the variable for us remaining is how efficiently we can get the energy connected to be able to put first ore through the grinding mills and through the plant. There we are collaborating with the Greek power authority. If we get our construction completed in July, our expectation is final checks with us and them on that main substation can happen together in parallel, and that would result in an early Q3 startup. If we cannot get that collaboration and they do their checks subsequent to ours, it could slip to mid-Q3. But really that is not a cost impact. We will be ramping down construction workforce rapidly as we get this construction completed around midyear. Don DeMarco: Okay, great. And then for a final question, just shifting over to MacBay. I see that you have approved an exploration budget. Can you share the split between infill and expansion, and some of the targets that you might be focusing on with that budget? Simon Hille: Thanks, Don. Simon here. I can give you some color on our plans around the exploration portion of the budget. The Foran team had around a $4 million exploration budget for the year, to which we are adding $17 million for the remainder of the year, and the team is quite excited to mainly focus on three key targets: the Tesla copper-rich feeder zone, Bigstone expansion, and then adding some more geoscience to the existing land package around some airborne geophysical surveys and expanded LIBS on the whole-body characterization. These things should set us up for good success moving forward. In our exploration budget, we typically do not have infill. Infills are part of an operational budget. Don DeMarco: Okay, that is very helpful. That is all for me. Good luck with the rest of the development. Paul Ferneyhough: Thanks, Don. Operator: The next question comes from Analyst with Scotiabank. Please go ahead. Analyst: Hey, good morning, everyone. Thank you for taking my questions. Just a couple more questions on Skouries. We were quite surprised by the increase in capital costs, and you mentioned it was related mainly to the workforce at the electric plant. But what else happened? What else changed since the previous increase in Q4? George Burns: Again, really, 60% of that cost increase is the additional contractor workforce completing the electrical and instrumentation, and then the balance is split between materials, FX, and owner support costs. Bottom line, it is taking us a couple of months of additional full workforce to get the final construction complete. If you go back to our last guidance on Skouries capital, at that point the view was we would be waiting to get the power connected in the power lines and doing final things in the tailings filtration plant. Bottom line, this increase is us spending some additional dollars bringing in some additional EU contractors to ensure we are ready to run once that power is connected, hopefully early Q3. Analyst: Great, thank you. And then, you said 60% was the contract work with the balance being materials, FX, etc. Could you give a little bit more of a breakdown between what the materials were and the split of that remaining 40%? George Burns: Yes. There were about $15 million in materials across four key items. In the dry stack filter plant, our insurers have requested—and we have agreed—to put in additional fire protection; that is about $5 million. We have added about $4 million in additional spares to ensure a smooth ramp-up and balance of the year. We have added about $3 million in additional gensets that are helping us with pre-commissioning as we wait for power connection. There was about $1.5 million in freight. Then there was about $15 million in foreign exchange impacts, and the balance is really the indirect costs to support that couple of months of high labor intensity to finish the construction. Analyst: Thank you. Last question for me: What are the remaining risks in your opinion—whether that be capital or operating—to startup, and what contingencies do you have in place to make sure we hit this Q3 timeframe? George Burns: The key risk for the year remaining on Skouries is to get that power connected, and the timing of that will really determine whether we are closer to the bottom end of our production guidance or the top end. If we can get that power connected in July as we expect, we would expect to be higher in production guidance. In terms of cost risk, that is not a worry for me now. We have got a couple of months of maintaining these high workforce levels to complete the construction. The only remaining risk beyond that is just the normal commissioning risk. Once power is connected, we start moving ore through the circuit, and as always in every construction you have adjustments that need to be made. At this point, I think we have a 20-year mine life plus here, fantastic infrastructure that has been constructed, and I am pretty confident about the ramp-up. Analyst: Thank you for the color and best of luck with these two projects. Lynette Gould: Thank you. Operator: The next question comes from Analyst with RBC Capital Markets. Please go ahead. Analyst: Yes, thank you very much. Just going back to this labor conversation on Skouries. I understand the need for the additional contractors to meet the timelines, but was there some difference in thinking versus the prior plan in terms of labor productivity being challenged, or what really is prompting this change? George Burns: It is really taking more hours of electrical and instrumentation to get this finished. We have not hit the numbers we expected and, again, brought in three European contractors to button this up and get it running. Analyst: Got it. Thank you. And I understand it has only been a short amount of time since the Foran acquisition closed. I noted the second quarter will have a more comprehensive update. Is there anything you could provide in terms of what is required ahead of first production, or what milestones we should be looking at there? Simon Hille: It is Simon here. We are pretty excited. We were on the ground a couple of weeks ago and are in close contact with the team. The team is right in the thrust of what we call hot commissioning right now, which is where we start to add ore into various parts of the process to test the components and simulate what we will see as we run into full production, and we link those things together on a sequential basis. We are pretty excited that things are moving to plan, and we expect to see this running this month. Analyst: Great. Thank you very much. Operator: That is all the questions we have for today. This concludes the question-and-answer session and today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Operator: Greetings, and welcome to the AMG First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the call over to your host, Patricia Figueroa, Head of Investor Relations for AMG. Thank you. You may begin. Patricia Figueroa: Good morning, and thank you for joining us today to discuss AMG's results for the first quarter of 2026. Before we begin, I'd like to remind you that during this call, we may make a number of forward-looking statements, which could differ from our actual results materially due to a number of factors, including those described in today's earnings press release and our most recent Form 10-K and subsequent filings with the SEC, and AMG assumes no obligation to update these statements. Also, please note that nothing on this call constitutes an offer of any products, investment vehicles or services of any AMG affiliates. A replay of today's call will be available on the Investor Relations section of our website, along with a copy of our earnings release and reconciliations for any non-GAAP financial measures, including any earnings guidance provided. In addition, we have posted an updated investor presentation to our website and encourage investors to consult our site regularly for updated information. With us today to discuss the company's results for the quarter are Jay Horgen, President and Chief Executive Officer; and Dava Ritchea, Chief Financial Officer. With that, I'll turn the call over to Jay. Jay Horgen: Thanks, Patricia, and good morning, everyone. AMG reported record results for the first quarter with adjusted EBITDA of approximately $317 million and economic earnings per share of $8.23, representing year-over-year growth of 39% and 58%, respectively. Rising demand for liquid alternative strategies and ongoing strength in private markets fundraising generated record quarterly net client cash flows of more than $22 billion, bringing net flows over the last 12 months to $52 billion, an organic growth rate of 7% over the period. In the quarter, given our confidence in AMG's business profile and growth prospects, we repurchased shares at an elevated pace, deploying approximately $186 million and bringing share buybacks over the past 12 months to more than $700 million, a reduction of 10% in our shares outstanding. AMG generated these excellent first quarter results against the volatile market backdrop, highlighting the value of AMG's differentiated model and the ongoing strength of our diverse business. As we have seen over AMG's history, our business is resilient and well positioned to navigate periods of uncertainty and dislocation. AMG's highly diversified profile has once again demonstrated that resilience as we ended the first quarter in a position of even greater strength relative to the beginning of the year with record assets under management and record fee-related EBITDA, and we have continued to build on this momentum in April. With 40 affiliates managing a broad range of private markets, liquid alternatives and differentiated long-only strategies, this is the type of environment where we expect AMG to not only weather a volatile environment well, but outperform. Given that we have strategically evolved towards alternative strategies over the last several years, a number of important secular trends are driving our organic growth story today. In private markets, where our affiliates manage $148 billion in assets, we see opportunities for growth across all 11 affiliates, with the strongest momentum coming in 2 areas: infrastructure and real estate, where our affiliates manage more than $60 billion and secondary solutions where our affiliates manage approximately $50 billion. We expect rising demand for infrastructure strategies as infrastructure investment has become a global imperative due to population growth, the need to modernize aging assets and an evolving economy shaped by energy security, supply chain realignment and the rapid growth of digital infrastructure, all against the backdrop of rising inflation. We also expect ongoing demand for secondary solutions across private equity, infrastructure and credit, given the role such strategies play in underlying portfolio management for both GPs and LPs to address liquidity, manage duration and adjust exposures, attributes that are even more important in the environment today given monetization headwinds in private equity. Together, infrastructure and secondary solutions have generated substantial organic growth from both institutional and individual investors over the past 12 months. In liquid alternatives, where our affiliates manage more than $261 billion in assets, we are benefiting most from growth in 2 trends: institutional demand for absolute return strategies and the growing focus on after-tax compounding in the wealth channel. Absolute return strategies, which account for approximately $180 billion in assets include multi-strategy, global macro, relative value fixed income and trend following and are designed to generate returns that have low or no correlation to broader markets. They provide AMG's business with ballast relative to pro-cyclical strategies in private markets and differentiated equities, enhancing the stability of our earnings over time. For the same reasons, clients globally are increasingly attracted to these absolute return strategies, especially as the outlook for the macro environment has become more uncertain. As a result, we had a meaningful uptick in flows in the quarter, driven by institutional demand for absolute return strategies with contributions from nearly all of our affiliates in liquid alternatives, and we expect continued organic growth momentum in these strategies. In addition, within liquid alternatives, we are benefiting from significant client demand for tax-aware long/short strategies. These strategies account for approximately $69 billion of our AUM in liquid alternatives strategies or about 8% of AMG's business. And while tax loss harvesting has been a secular trend for decades, clients and advisers are increasingly attuned to the impact of their portfolio allocation decisions on compounding returns after tax. AMG has benefited from this underlying secular trend through ongoing organic growth, which has been significant over the past year. As I mentioned, these 4 growth areas: infrastructure, secondary solutions, absolute return strategies and beta-sensitive long/short strategies have driven organic growth in the quarter and over the past 12 months. Looking ahead, given the continued tailwinds in these areas and our affiliates' excellent long-term track records, AMG is well positioned for further growth. As demonstrated over the past 5 years, our business is strong, diversified and dynamic. Through our ability to shape AMG's business profile and scale our earnings power by allocating our capital to investments in new and existing affiliates, we will further evolve our business towards areas of growth and return. Our unique approach and track record as a partner are continuing to resonate with the highest quality independent firms. We have had an active start to 2026 in this area. In January, we completed our investment in BBH Credit Partners, a leading taxable fixed income and credit franchise. In February, we announced a new partnership with Highbrook Investors, a private markets manager operating in the real estate sector. And we also announced an incremental minority investment in Garda Capital Partners, an existing highly successful affiliate operating in liquid alternatives. Stepping back from the quarter and to take a longer-term view of our business and our strategy. Over the past 5 years, we have transformed AMG and evolved our business profile in a way that we believe will benefit shareholders for years to come. During this period, our business generated more than $5 billion in capital, all of which through our disciplined capital allocation strategy we have reallocated to both high conviction growth investments and meaningful return of capital to shareholders, demonstrating our commitment to long-term value creation. Together, these strategic actions have resulted in exceptional earnings growth, generating mid-teens compound annual growth rate in economic earnings per share over the past 5 years. And this growth is accelerating. In 2025, economic earnings per share grew by more than 20%, and we expect that growth rate to increase to more than 30% this year. As we look ahead, our capital allocation decision-making will continue to be the most impactful element of our strategy. We anticipate our business will generate significantly higher levels of capital cumulatively over the next 5 years, and we expect the impact of deploying it towards growth investments and capital return will further shape and diversify our business profile and fuel our earnings growth. With our unique partnership-centric cash-generative return-focused model, we will continue to press our advantages, executing the same proven strategy with the same level of discipline that brought us here. Today, AMG's reputation, value proposition and capital flexibility have never been stronger, a powerful combination for our firm and for our shareholders. And with that, I'll turn it over to Dava. Dava Ritchea: Thank you, Jay, and good morning, everyone. AMG entered 2026 with significant momentum, and our first quarter results reinforce that strength, highlighted by record net inflows and significant year-over-year growth in fee-related earnings, adjusted EBITDA and economic earnings per share. Our alternatives business continues to scale, underpinned by strong organic growth from existing affiliates and further enhanced by the addition of several new high-quality partnerships. These results underscore the strength and resilience of our model as a result of the ongoing execution of our strategy to evolve the business towards areas of secular growth while remaining disciplined in our capital allocation decision-making. Starting with our results for the first quarter. AMG's AUM was $882 billion, the highest level in our history, driven by record positive net inflows for our alternative affiliates and the addition of AUM from new investments. Our business reached this record AUM level despite market headwinds from broader macro events. Net client cash inflows of more than $22 billion marked our fourth consecutive quarter of positive and increasing net flows, driven by ongoing strength in alternatives. In liquid alternatives, our affiliates generated $25 billion in net inflows, marking another record quarter with most of our liquid alternative affiliates, including AQR, Capula, Garda, Systematica and Winton, contributing to this strong result. Flows were broad-based. We had net inflows from wealth clients of $15 billion into long/short tax-aware strategies, $6 billion in net inflows into absolute return strategies from institutional clients and $4 billion of inflows into retail products across both beta-sensitive and absolute return strategies. This is consistent with broader industry trends of rising allocations to these strategies as investors value the role they play in portfolios across market cycles. As momentum continues to build across channels, we believe AMG's diversified liquid alternative Affiliates are well positioned to continue to attract new flows over time. Our private market affiliates raised $4 billion in the quarter, primarily driven by Pantheon and secondary strategies, along with infrastructure fundraises at Aura, EIG and Qualitas Energy. On the heels of a record fundraising year in 2025, we continue to see consistent demand given these affiliates' specialized strategies, deep institutional relationships and strong long-term track records. Importantly, with multiple private market affiliates contributing across vintages, products and channels, AMG exhibits a more durable and consistent fundraising pattern, reflecting a structurally diversified model rather than reliance on any single fundraise, differentiating our private markets profile from that of others. To give further color on our private markets profile, we have a distinctive strategic position in the industry. Nearly 90% of AUM managed by our affiliates in private markets is institutional, largely in drawdown-style funds. These drawdown funds form the core offering of our private market affiliates. Additionally, we have experienced growing demand for these strategies from wealth clients, and we are well positioned with our differentiated product offering and capital formation solutions for affiliates to access this long-term trend. Our affiliates' private market strategies are well diversified across strategies, including secondaries, private equity, infrastructure, real estate and private credit. Our private credit exposure is low, representing approximately 3% of AMG's total assets today. Within private credit, we have limited traditional direct lending exposure given the sale of our stake in Comvest's private credit business last year. More broadly, the credit exposure we have is more opportunistic in nature, including secondaries in private credit and structured credit and relative value in liquid alternatives. We believe the current credit market environment is creating compelling long-term opportunities for these strategies. In multi-asset and fixed income, our affiliates generated net inflows of $3 billion, mainly driven by BBH Credit Partners with additional contributions from Baker Street, Artemis, Beutel Goodman and GW&K. Finally, in equities, net outflows of approximately $9 billion in the quarter reflected ongoing industry and performance headwinds. However, we continue to see pockets of strength in our differentiated long-only business, including consistent positive net flows at Artemis based on its excellent long-term track record of investment performance. In aggregate, our first quarter flows highlight the structural advantages of AMG's diversified business model. With a broad group of affiliates spanning strategies, asset classes, geographies and client channels, we were able to navigate shifting market conditions and trends while continuing to capture growth opportunities. As we further evolve our mix towards higher growth alternatives, the resulting incremental diversification enhances the resilience of our cash flows and positions AMG to deliver more consistent, sustainable organic growth across market cycles. Turning to first quarter financial results. We reported adjusted EBITDA of $317 million, which grew 39% year-over-year. Fee-related earnings, which exclude net performance fees, grew 29% year-over-year, driven by positive organic growth, the positive impact of investment performance and margin expansion at some of our largest affiliates. Net performance fee earnings of $49 million in the quarter increased $29 million from the prior year, driven by Capula, Winton, AQR and ValueAct. Economic earnings per share of $8.23 grew 58% year-over-year, driven by these factors and further benefiting from the impact of share repurchases. Now moving to second quarter guidance. We expect adjusted EBITDA to be in the range of $290 million to $305 million based on current AUM levels, reflecting our market blend, which was up 5% quarter-to-date as of April 30 and including seasonably lower net performance fees of up to $10 million. Based on this and assuming an adjusted weighted average share count of 26.7 million, we expect second quarter economic earnings per share to be between $7.60 and $8.01, the midpoint of which represents approximately 45% growth versus Q2 2025. Finally, turning to the balance sheet and capital allocation. Building on an active 2025, we continue to execute our capital allocation strategy in the first quarter of 2026, with the January close of our partnership with BBH Credit Partners and the February announcement of our new investment in Highbrook and follow-on investment in Garda. In January, conversions related to our 2037 junior convertible trust preferred securities were fully settled in cash. The $174 million in conversion premium effectively represented the repurchase of 600,000 adjusted diluted shares and the share dilution associated with these securities has now been fully removed from our capital structure. We repurchased approximately $186 million in shares in the first quarter. And for the full year, we expect to repurchase approximately $500 million, subject to market conditions and capital allocation activity. Our balance sheet remains in a strong position given our long-dated debt, low leverage level and access to our revolver. This is further supported by a healthy underlying business generating recurring annual cash flows that continue to grow. These after-tax cash flows are at record levels, delivering approximately $1 billion annually. With these factors, we are well positioned to execute our growth strategy across all stages of a market cycle. We have ample capacity to both make growth investments and simultaneously return capital to shareholders. Our strong first quarter results reflect the accelerating momentum in our business and the advantages of our highly diversified affiliate model. Looking ahead, we are excited by the breadth of opportunities in front of us as we continue to evolve our business towards higher growth alternatives. We will remain deliberate and disciplined in deploying capital, investing in growth opportunities with new and existing affiliates while also consistently returning capital to shareholders. And we are confident in our ability to generate meaningful incremental value over time. Now we are happy to take your questions. Operator: [Operator Instructions] Our first question comes from the line of Bill Katz with TD Cowen. William Katz: Appreciate the update. Jay, maybe I'll just pick up on some of your commentary. I think the investment community in the last few weeks has gotten myopically focused on AQR, just given some of the headlines coming out of Schwab, the [indiscernible], et cetera, it all seems to be noise to us. And it sounds like there's a lot of diversification from your comments today, which we appreciate the expanded discussion. Can you dig in a little bit further into maybe these 4 verticals of opportunity for growth? And then I was intrigued by your comments of April off to a good start. I was wondering if maybe expand on that as well? Jay Horgen: Yes. Great. Thanks for your question, Bill. So I'll start. Dava can help. We're going to talk about our flows and then maybe I'll circle back on AQR. So yes, the answer is our flows were broad-based, and they were along the lines of the 4 trends that I mentioned in our prepared remarks. Just to dimensionalize it, in the quarter, we had $29 billion in Alternative flows. That was a record for us. Over the past year, we generated $90 billion in flows into alternatives. And I know there's a temptation, there always has been to focus on one affiliate or one element of AMG. But AMG is truly a diverse business. These 4 growth drivers that I mentioned: infrastructure, secondary solutions, absolute return and tax-aware strategies, they're all powering the strong organic growth story and the $90 billion of flows into alternatives. Our flows were balanced across each of these 4 areas over the quarter and over the year with none accounting for a majority. So maybe I'll turn it to Dava just to drill down a little bit further contextualize some of this, and then I'll come back and address maybe some of the noise. Dava Ritchea: Thanks, Jay. So just digging in a little bit further here, our flow profile is really an output of our strategy. It aligns our business with areas of secular client demand trends and alternatives, and it continues to evolve our mix through organic growth and new investments. I'll double-click into each of private markets and then liquid alts. Starting with private markets. Our private market affiliates raise capital through multiple strategies, vehicles and channels, which help produce a more consistent fundraising profile than a single flagship-led model. That consistency is supported by durable client demand trends, most notably in infrastructure and real assets, secondaries and specialized allocations through -- such as decarbonization and health care. Our private market flows have been relatively consistent over the past 8 quarters, exhibiting about 18% annualized growth on average. As one of our largest and longest-standing affiliates, Pantheon has been a consistent driver of that fundraising, supported by a scaled multiproduct platform, particularly in secondaries. It's been recurring demand across vintages and has had meaningful contributions from institutional clients as well as within the wealth channel. Alongside of that, many of our other private market affiliates are more specialized and tend to raise capital through more targeted fundraises across their focus areas. Given we have 11 of these private market affiliates, we're less reliant on any single affiliate's capital raising calendar, and this tends to produce a more consistent, durable overall private market flow profile. And based on what we're seeing today, fundraising and client demand are expected to remain robust with multiple funds coming to market across our private market affiliate strategies, including all the affiliates we just recently partnered with over the past 15 months. Now turning over to liquid alternatives. We had $25 billion of flows this quarter, and flows this quarter were broad-based across both beta-sensitive and absolute return strategies, also broad-based across investor channels with institutional wealth and retail flows all coming through. This is consistent with broader industry trends as investors are increasing allocations to these strategies as they've demonstrated a real role that they can play across market cycles, and these allocations have been flowing to the largest managers. And here, we're well positioned with several of our affiliates like AQR, Garda, Capula and Verition. Finally, it's worth mentioning that we've been experiencing positive mix shift over the past year as well, leading to an increase in our management fee rate and margin expansion at some of our largest affiliates, which has had a direct benefit to our EBITDA. By contrast, though, we have continued to see some headwinds alongside of overall industry and equities. We reported about $9 billion in net outflows from equities this quarter, in line with average levels over the last 12 months. But when taken together, with $3 billion in net inflows in multi-asset and fixed income, we're seeing an improvement in our differentiated long-only net flows. Across these affiliates, we see pockets of strength, including at Artemis, where strong performance has led to positive net flows and at BBH Credit Partners, where we see ongoing demand for fixed income strategies. Jay Horgen: Great. Thanks, Dava. So I'm just going to comment on one thing here, which is in addition to the strong alternative flows, as we look out for the next 12 months, we actually think that our Long-Only outflows seem to be getting better. So our flow story just all around for the moment is positive relative to what it's been in the past. We had $52 billion of net flows for the last 12 months, and that trend seems to be getting better as we look forward. Now I'm going to take the second part of your question and just address AQR for a moment. And maybe I'll just start with a bit of a fun statement, which is over the past 15 years, I've answered a lot of questions on AQR, mostly on these earnings calls. Virtually, every time I answer the question, I start and I'll end as well with one observation. AQR is an incredibly innovative business. Their success is rooted in its decade-long reputation and history of this innovation. They deliver strategies and products that meet clients' objectives that can be used in portfolio construction and that can produce alpha. So AQR's reputation and its long-term investment track record across its broad range of strategies today, including absolute return, beta-sensitive, long-only. It's driving demand across all of its client types, institutional, wealth, retail. The firm's primary goal is to deliver institutional caliber pretax alpha to all investors. And for individuals, AQR has a focus on compounding after-tax returns. This is a very large addressable market. It's been around for a long time, and AQR is just one of the participants in the market. We continue to see strong demand for these strategies, including in the second quarter. And we are not aware of anything that changes our positive outlook for the firm or their strategies and underlying trends supporting its ongoing business momentum. These tax-aware strategies, however, they only speak to one aspect of AQR's broad platform and its continued innovation. The firm has generated inflows across a range of strategies, including in this quarter. And we also are very excited about their absolute return strategies and the prospect for additional flows into these strategies, which have excellent performance and are gaining interest from all types of clients, including institutions. Now I'd like to take it back to the AMG level. Long/short strategy in wealth account for just 8% of our assets under management. As I mentioned, our affiliates generated $90 billion in flows into alternatives, a minority of those flows came from tax-aware strategies. AMG is highly diverse. And this one trend is just 1 of the 4 major drivers of our growth. Again, these 4 trends being infrastructure, secondary solutions, absolute return strategies and tax aware strategies. Again, all 4 balanced across -- all 4 are driving our growth and none are accounting for a majority. So then the last question you asked me is April. Interestingly, during the first quarter, we had, as others did, we had to face reasonably significant volatility in the market and Beta was down in the quarter. Yet AMG had record AUM and record cash flow and record earnings in the quarter. In April, we've seen strong beta. And because of the balance in our business, our assets are at another all-time high. Operator: Our next question comes from the line of Alex Blostein with Goldman Sachs. Alexander Blostein: I appreciate all the detail and extra discussion on the flow backdrop. I wanted to double-click into the wealth channel. You guys had quite a lot of success with Pantheon's retail product focused on secondaries and co-invest markets. How is the appetite for these kind of products in the channel today given the turbulence we're seeing in the credit part of the business? Obviously, that's not part of your model, but just curious if you're seeing any spillover effects of that into other parts of the wealth channel? And then maybe as part of that hit on the road map of additional products you're likely to launch in the coming 12 to 18 months as we think about further diversifying your flow base? Jay Horgen: Yes. Great. Thanks, Alex. I think that's an excellent question. We'll take it in a few different pieces. We'll talk about the wealth products, and then I'll circle back. I'll let Dava do that. Then -- I'll have Dava do that, and then I'll come back and do Pantheon more broadly and then other products that we're looking at introducing. Dava Ritchea: Great. Thanks for the question, Alex. So we remain constructive on the secular trend. And while we're monitoring the broader industry dynamics, wealth investors and advisers continue to broaden portfolios beyond traditional allocations and evergreen structures are an increasingly important way to access institutional quality alternatives in a more flexible wrapper. AMG is focused on delivering the right strategies in the right structure, meeting clients where they are on liquidity preference, access and portfolio needs. We believe AMG is differentiated in this channel, providing investors access to independent affiliates and their breadth of offerings across private markets and alternative credit. We see the most compelling opportunities today in differentiated strategies, led by credit secondaries. Liquidity needs, duration management and slower exits are driving greater secondary activity, while market noise and headline risk are creating pricing dislocations that can offer seasoned assets at attractive valuations. We also see opportunity in asset-backed credit solutions, where structural protections and collateral quality support capital preservation. Ultimately, the key to long-term success is education and setting expectations while staying disciplined. Education remains a critical enabler of growth for evergreen private market solutions. While these vehicles expand access, their structural features differ meaningfully from traditional private market funds and require deeper understanding. We are committed to providing scalable education that equips advisers to understand these mechanics, assess suitability and thoughtfully integrate evergreen solutions to support clients' long-term investment objectives. We believe these products can be a compelling option for wealth clients seeking diversified access to alternatives over a long time horizon. Let me walk you through the couple -- the main products that we have here on the platform. First, P-BUILD. This is the AMG Pantheon Infrastructure Fund, which we launched last year, and it's still in its seed phase. The portfolio is ramping nicely, and we expect it will benefit from the rising demand for infrastructure strategies as infrastructure investment has become a global imperative. P-BUILD is uniquely positioned to combine the benefits of infrastructure investments, including the potential for capital appreciation, yields, lower volatility and portfolio diversification with the added advantages of secondaries, which can offer greater risk mitigation, shorter investment durations and more immediate distributions compared to traditional infrastructure investments. The next one is P-SECC, the AMG Pantheon Credit Solutions Fund, and it's still relatively new, launched within the last 2 years. The fund's investment approach is first of its kind focused on private credit secondaries. Since inception, it's been among the top performers in its peer set. And given broader market dynamics, we believe the current environment creates a compelling investment opportunity for the fund. While near-term growth may be more muted due to traditional direct lending trends, we believe this is a compelling long-term product for investors and differentiated from peer offerings. In these environments, pricing dislocations and motivated sellers can allow access to high-quality seasoned investment opportunities at potentially attractive valuations. This dynamic enables selective capital deployment with a margin of safety, positioning the fund to benefit from both income generation and potential capital appreciation as markets stabilize. For P-SECC, periods of increased volatility can create particularly attractive entry points for disciplined secondary credit investing. And this growing opportunity set underscores the increasing role credit secondaries are playing in managing liquidity and portfolio exposures in a market characterized by heightened demand for capital flexibility. And finally, P-PEXX, the AMG Pantheon Fund, which has a long operating history since its launch in 2014, with a strong long-term track record of delivering private equity exposure through cycles. Notably, it has a compelling fee structure versus market comparables with a lower management fee, and it does not charge performance fees. It provides a single allocation globally diversified portfolio across co-investments, secondaries and primaries, diversified by manager, vintage, geography and sector, which we view as more sustainable for building long-term compounding of returns. We remain constructive on its outlook, including ongoing progress in expanding its reach to new wealth platforms and intermediaries. Overall, these 3 products represent a small but growing proportion of Pantheon, and when put into context of AMG, represent less than 1% of AUM today. We are confident in the long-term secular trend and the underlying fundamentals of each of these products, but mindful of the impact of current market dynamics in the evergreen space on near-term growth expectations. We continue to focus resources on partnering with affiliates in the U.S. wealth space through robust product development and access to our broad capital formation resources with several products, including the newly registered AMG BBH Fund in development. This fund is expected to be launched into a compelling credit market environment for its opportunistic structure and alternative credit approach. Jay Horgen: Yes. So Alex, Dava covered the landscape. But I think what I would maybe contextualize, maybe even just give some perspective is, look, the market had been painting everything with a single brush. This is actually an opportunity to differentiate. I think we see opportunities here because we think our products are unique, differentiated, certainly on the semi-liquid side. Education, as Dava said, is key. People have to understand what they own. There's suitability questions. But what we like about our products is that they're opportunistic in nature. I'll take the Pantheon Credit Secondaries Fund. It actually has an opportunity to take advantage of what's happening in the market. And that's the same with the newly registered BBH Opportunity Credit Fund. So we -- it's got in its name. So I think we're having -- in some ways, we might come out better through this period as people sort through what products really are differentiated and what products people want to own. So we're long-term constructive. As Dava said, there is a bit of sorting that's going to go through -- we're going to go through here. But on the -- as we come out of it, we have an expectation that we're going to be on our front foot. Maybe just on our wealth strategy more broadly, it is clearly important to us. We collaborate with our affiliates. We offer strategic capabilities to new and existing affiliates. It's part of our brand. It's part of our reputation, the ability to engage with our affiliates and help them meet their goals, exceed their goals and get them into this channel. It's very difficult to get into this channel. It's an area where you need scale. AMG offers our affiliates that scale. We also offer them the ability to package the products and bring them to the market. So it's a growth area for us long term. I think we made it through this period reasonably well, I think partly because we were methodical and careful. But obviously, we have good fortune on our side, too. We're not -- I think we're just trying to do the very best that we can here, and we do think this is a good long-term opportunity. Operator: Our next question comes from the line of Dan Fannon with Jefferies. Daniel Fannon: So Jay, I wanted to just talk about the environment for new investment. You guys have obviously been quite active over the last 12 months. But given some of the dislocations we're seeing in certainly the private credit markets or broadly within some of the equity markets, is that creating more of an opportunity for you to deploy capital in this environment? Or any changes kind of in the backdrop as you think about the new investment pipeline? Jay Horgen: Yes. Great, Dan. Thank you. And I apologize it's so early for you on the West Coast. So yes, look, we did have a very active period. The last 18 months has been one of our more active periods of new investments. It's one of the benefits that we have. It's contributing to our earnings this year and our growth rate this year. We're very excited about the businesses that we invested in over this period, largely speaking, in alternatives with a focus on private markets, but more specialty businesses. So coming off of an active period, really even into this first quarter because we were just closing on Highbrook, the second investment in Garda and BBH. When we look at the rest of this year, one of the things that we note is that public market valuations for alternatives are way down. It takes a little while to have that trickle into the M&A market, but I think we have an expectation that it will. We're mindful that some of the key competitors in that market are the ones who have lower valuations today. So maybe they're not offering their stock. So competition just may have gotten better for AMG. As you know, we've been an active participant, maybe, I would say, the most active participant for independent firms over the past 30 years. We are open for business. We like to partner with outstanding independent firms and maybe the competitive environment and pricing has gotten better for us as we look forward. So we're excited about that. Thanks for your question. Operator: Our next question comes from the line of Brian Bedell with Deutsche Bank. Brian Bedell: Good to see the really strong flows across the franchise and diversified contribution as well. We, of course, are getting more questions on the tax aware strategy. So I just want to zone in on that a little bit. Just your view maybe of -- obviously, really strong growth in 1Q. Maybe if you could talk a little bit about the contribution in 1Q from tax aware. And I think you mentioned it's 8% of AUM, but just I was curious if there's a way to frame like what percentage of EBITDA that is or I think you -- last time you spoke about AQR as a percentage of EBITDA was about 20%. I don't know if there's updated comments on that. And then just the -- as this is getting added to more platforms, given really strong retail demand, if you can talk about the pipeline of doing that because I know, of course, Fidelity had constrained it, and I think Schwab had put some guardrails around it. Of course, they're continuing to sell it. They just had some constraints around it. So just some comments around the growth outlook for that product as it pertains to adding it to more wirehouse and brokerage and private bank platforms? Jay Horgen: Okay. Yes. Thanks, Brian. Well, I'm not going to go back through my conversation or my response on AQR specifically. But I will maybe just broaden it and talk about the environment for these products. And I'm sure I'll weave in a few of those data points that you're looking for. Tax aware businesses and tax loss harvesting, it's been around since -- as far as I can tell, since 1993. So just for everyone who may think this is a new business, it's a 3-decade old business. I think what's happened in the market is that advisers realize that investors, individual investors, they pay tax. And institutional investors, they don't pay tax. And so when you think about your portfolio, you just have to think about it in general on an after-tax basis. It might change what -- where you allocate your capital. It might change the type of asset or the type of strategy you allocate to. So I think everyone should be aware the fact that taxes interrupt compounding. So if you're aware of that fact, then you need to at least consider it when you decide that you're going to create a portfolio. These products that have been around many people, many big firms that you all cover have these products. AQR is just one participant in the market. So I just want to make sure that everyone understands that. And then the other thing I would just say is we gave you the number on an AUM basis which is less than 8%, I rounded it up. It actually has contributed to less than 8% of our EBITDA last year in the first quarter. It just isn't that big. But it has grown significantly. It's not -- it has been less than a majority of our flows. So just like I said in my prepared remarks and then in the answer to the last question, the 4 major trends that are driving our business, they're balanced over that $90 billion of inflows that we had. No one of those trends made up a majority. And even in the most recent quarter, $29 billion, the same statement holds. So very balanced. I don't want to go through that all again, but we feel pretty good about that trend as well as the other 3 trends in our business. So I think in terms of sizing, it's important, but it's not a major factor. And when you zoom way out at AMG, and I think this is probably the most important thing that I haven't said yet is we have record cash flow. Our business AUM is at an all-time high. We had record EBITDA in the quarter. As Dava said, our EBITDA guidance that we gave you at the midpoint would be up -- or at least it would be up with significant growth and cash earnings per share would be up 45% at the midpoint. With that record cash flow, if you think about that annualized out at over $1 billion a year, it is that cash flow that we have to reinvest. And so as we reinvest, we diversify the business, we add new sources of earnings. Our business grows because of it. So if you're thinking about AMG today, you need to think about what AMG is going to look like in 12 months and then 3 years and then in 5 years. Because we generated $5 billion of cash flow over the last 5 years, we're expected to generate much more than $5 billion over the next 5 years. So the biggest impact to our business is what we do with those cash flows. And I think you know this, we have a very disciplined capital allocation philosophy. And as we continue to invest in growth areas and return capital through share repurchases, this record level of free cash flow is going to shape AMG. We are looking forward to doing that. And when you think about where we are today at these record levels, we are trading -- our shares are trading at less than 10x after-tax earnings on a backward-looking basis, not a forward but a backward-looking basis and less than 8x EBITDA on a backward-looking basis. It is an excellent opportunity for us to continue to buy back at an elevated pace. So we're excited about our capital opportunity. Dava mentioned in her script that we look forward to estimated share repurchases this year of $500 million. That's not all the capital that we have. If you think about the numbers I just gave you, $1 billion of after-tax earnings, $500 million is only half of that. And with a little bit of leverage because we'd like to lever it up to 2x, and right now, we're underleveraged at that point, we can do more than $1 billion. So in the next 12 months, more than $1 billion of capital will be the single biggest impact on our business for '27 and '28 and beyond. Operator: Ladies and gentlemen, that concludes our question-and-answer session and will conclude our call today. We thank you for your interest and participation. You may now disconnect your lines.
Operator: Hello, and welcome to -- the Vita Coco Company's First Quarter 2026 Earnings Conference Call. My name is Howard, I'll be coordinating your call today. Following prepared remarks, we will open the call to your questions and time. I'd now like to turn the conference over to John Mills with ICR. John Mills: Thank you, and welcome to -- the Vita Coco Company First Quarter 2026 Earnings Results Conference Call. Today's call is being recorded. With us are Mr. Mike Kirban, Executive Chairman; Martin Roper, Chief Executive Officer; and Corey Baker, Chief Financial Officer. By now, everyone should have access to the company's first quarter earnings release issued earlier today. This information is available on the Investor Relations section of the Vita Coco Company's website at investors.thevitacococompany.com. Also on the website, there is an accompanying presentation of our commercial and financial results. Certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs Concerning future events and are subject to several risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC for a more detailed discussion of the risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Also, during the call, we will use some non-GAAP financial measures as we describe our business performance. Our SEC filings as well as the earnings press release and supplementary earnings presentation provide reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures and are available on our website as well. And with that, it is my pleasure to now turn the call over to Mike Kirban, our Co-Founder and Executive Chairman. Michael Kirban: Thanks, John, and good morning, everyone. Thank you for joining us today to discuss our first quarter financial results and our expectations for our full year 2026 performance. I want to start by thanking all of our colleagues across the globe for our strong operational and financial start to the year while also staying committed to -- the Vita Coco Company and advancing our mission of creating ethical, sustainable, better-for-you beverages that uplift our communities and do right by our planet. I'm thrilled with our momentum and by the acceleration we have seen in the quarter. Our strong inventory position and quick reaction to higher demand have enabled us to deliver very strong first quarter results in global net sales, gross profit, net income and adjusted EBITDA. Coconut Water remains one of the fastest-growing categories in the beverage aisle according to our retail data for the first quarter 2026. Growing 31% in the U.S. and 63% in our measured European markets year-over-year. For the quarter, Vita Coco Coconut Water, excluding our coconut milk-based products like treats, grew 40% in retail dollars in the U.S. I'm very excited about our international business, which continues to grow even faster than our Americas business, driven primarily by our strong performance in Europe, where our organizational and marketing investments are paying off. We saw 57% retail dollar growth this quarter in our measured European markets, gaining branded share across all our major markets. We continue to explore opportunities in international markets where we believe that we are well positioned to enter and drive profitable growth long term. Looking forward, this summer, we will continue to double down on active hydration across our markets as a driver of consumer growth, positioning Vita Coco as the natural choice for performance-minded consumers while expanding more deliberately into sport and recovery. With 3.5x the electrolytes of the leading sport drinks and clean ingredients, we believe that Vita Coco is uniquely positioned to recruit new consumers, increase usage frequency and further unlock the next phase of sustained consumer growth. We expect to maintain strong growth trends as we invest in and develop the coconut water category in our priority markets and develop and nurture new markets. Our asset-light model, leading market share and strong cash generation positions us well to take advantage of the opportunities ahead. As I've said before, I believe that the coconut water category is in the very early stages of gaining mainstream appeal on a global level. Coconut water appears to be transitioning from niche to mainstream, and we are at the forefront of that trend. If we continue the household penetration and consumption gains that we are seeing, I'm confident that coconut water will one day be as large as some of the major categories in the beverage aisle, which bodes well for our future. We are focused on building the capacity and organizational capabilities to take advantage of this opportunity. And now I'll turn the call over to our Chief Executive Officer, Martin Roper. Martin Roper: Thanks, Mike, and good morning, everyone. I'm pleased to report Vita Coco's robust first quarter performance. Our net sales were up 37%, driven by the strong growth of Vita Coco Coconut Water of 42%. Our brand trends are very healthy in all our major markets and the acceleration in retail scans that we saw this quarter contributed to our ability to deliver net sales ahead of our expectations. We believe that our U.S. Vita Coco branded business is benefiting from both increased household penetration and healthy velocity per household growth, which is combining to produce volume growth in U.S. retail scans of 36% in the 13 weeks through March 29, 2026, with the positive net impact of the 2 price increases taken in the U.S. last year, contributing an additional 3% to our retail dollar sales growth. Our year-to-date branded scan results in the United States accelerated even before accounting for the impact of the earlier major club promotion this year versus last year. We estimate based on underlying trends that through the end of April, which will account for a like-for-like view of key promotions that our Vita Coco brand will have grown 30% in U.S. retail dollars. This includes a positive impact from the Walmart reset, which we estimate to be approximately 5% to our year-to-date results. As Mike noted, the retail scan performance in all our major markets was strong and has accelerated during the quarter. I will refer you to Page 7 of our quarterly investor deck for the numbers and source of this data. Please note that we are now using Nielsen data for all European markets while continuing to use Circana for U.S. retail scan reporting. In our focus European markets, Nielsen covers a broader range of retailers, including more private label-focused channels, giving us a better view of market size, share and our potential than we previously had shared. Our total reported Americas shipments were very strong with branded shipments benefiting from a shift in timing related to a club promotion, which fell more heavily in April last year versus March this year. While the change in timing of the shipments for this promotion means this quarter's growth rate should not be used to project full year trends, the underlying acceleration in demand across our business ahead of our expectations is exciting and has caused us to raise our full year net sales outlook. We are seeing cost of goods year-to-date in 2026 benefit from the reversal of tariffs and from the Lower ocean freight costs than the full year 2025 levels, with those benefits partially offset by increased finished goods costs driven by inflationary pressure, combined with some weakness in the U.S. dollar and increased domestic logistics costs. Our observed impact to date from the recent events in the Middle East is seen mostly in inflationary factors at our manufacturing partners, particularly packaging costs and energy and in minor fuel surcharges on ocean freight with some further increased domestic transportation costs due to fuel price increases. We believe these cost increases are manageable and are incorporated into our guidance. We are in discussions to enter into fixed rate agreements with several ocean freight carriers, but have not yet increased our coverage beyond the agreements that we disclosed in February that covers approximately 25% of our expected 2026 ocean shipping requirements. As we look to the balance of 2026, we expect full year healthy brand growth in our focus markets and accelerating growth in private label, benefiting from the regained business referenced earlier and the start of shipments for the new business. We believe that we are currently well positioned with our current inventory and supply capability for the planned demand. We now expect to operate the year at between 85% and 90% of committed capacity, supporting our higher-than-planned growth through increased capacity utilization. We are working to expand capacity again for 2027 and beyond to meet our expectations for continued healthy coconut water growth in our major markets as well as the potential for growth in our smaller markets and our aspirations to enter into new markets. To summarize, our category is very healthy. Our brand and private label business are strong. Our supply chain is performing well and anticipated to support our expected growth. We are confident in our team's ability to execute and deliver on our plans for 2026 and our confidence in the category and Vita Coco brand trends remains very high. With that, I will turn the call over to Corey Baker, our Chief Financial Officer. Corey Baker: Thanks, Martin, and good morning, everyone. I will now provide you with some additional details on the first quarter 2026 financial results and our outlook for the full year. For the first quarter, net sales increased $49 million or 37% year-over-year to $180 million, driven by strong Vita Coco Coconut Water net sales growth of 42% and private label growth of 28%. Our private label shipment trends for the quarter represent very strong international private label shipments and a return to growth in the Americas. The Americas private label shipments do not yet reflect the new U.S. account announced last year where a major retailer is launching Tetra Pak private label for the first time as shipments are expected to begin in the second quarter. On a segment basis, within the Americas, net sales grew 32% to $148 million, led by Vita Coco Coconut Water that grew net sales by 37% to $118 million. This was driven by a 29% volume increase and a 6% net price/mix benefit. Private label increased net sales 15% to $24 million, driven by an 18% increase in volume and a price/mix decrease of 2%. Our International segment net sales were up 72%, where we saw continued exceptional net sales growth across branded and private label coconut water. Vita Coco Coconut Water net sales grew 71% and private label increased 86%. Consolidated gross profit was $72 million, an increase of $24 million versus the prior year. Gross margin finished at 40% for the quarter. This is up approximately 320 basis points from the 37% reported in Q1 of last year. The increase in gross margin resulted from better coconut water pricing and lower ocean freight, partially offset by increased finished goods, the impact of tariffs and slightly higher domestic logistics costs. The remaining $2 million of tariffs capitalized in inventory at the end of 2025 fully flowed through our P&L in Q1. Moving on to operating expenses. SG&A costs increased $9 million to $38 million, driven by increased investments in people resources focused on driving future growth, including increased performance-based stock comp expense, increased marketing spend and higher distributor-related expenses. Net income attributable to shareholders was $30 million or $0.50 per diluted share compared to $19 million or $0.31 per diluted share. The $12 million increase in net income was primarily driven by the increase in gross profit, partially offset by higher SG&A investments, increased income tax expenses and a foreign currency loss this year versus a gain last year. Our effective tax rate for Q1 was 18.6% versus 22.5% last year. The decrease in the effective tax rate is largely driven by more favorable discrete tax items. Adjusted EBITDA was $39 million or 22% of net sales, up from $23 million or 17% of net sales in Q1 2025. The increase was primarily due to the increased gross profit, partially offset by higher year-on-year SG&A expenses. Turning to our balance sheet and cash flow. As of March 31, 2026, our balance sheet remained very strong with total cash on hand of $202 million and no debt under our revolving credit facility. For the quarter, we generated $5 million of cash driven by strong net income, partially offset by increases in working capital, driven primarily by a $39 million increase in accounts receivable, partially offset by a $25 million reduction in inventory, both driven by very strong sales in March. The operating cash improvement was mostly offset by share repurchases of $12 million within the quarter. We have started 2026 with exceptional category trends in our major markets, healthy inventory levels and confidence in our team and our Vita Coco brand. As a result, we are raising our full year expectations for both net sales and adjusted EBITDA. We now expect net sales between $720 million and $735 million, with expected gross margins for the full year of approximately 38%, delivering adjusted EBITDA of $132 million to $138 million. Our expectation for the strong net sales growth is built on our assumptions for the U.S. category growing approximately 20% and our international business led by the U.K. and Germany, maintaining very healthy growth rates. We now expect consolidated growth of Vita Coco Coconut Water net sales mid- to high teens with our U.S. Vita Coco net sales growing low to mid-teens due to the impact from the strong year-end 2025 shipments to our DSD partners, investments in distributor incentives to deliver growth, which slightly compresses revenue per case and the anticipated impact from the launch of private label at a large U.S. retailer. Due to the stronger U.S. category growth and our regaining of some previously lost private label business, we now expect increased private label net sales growth of 35% to 40% in the U.S. We expect 2026 gross margins to improve from 2025 levels as we benefit from the branded pricing taken in 2025, the removal of tariffs and favorable ocean freight rates, partially offset by impacts from the inflation and fuel surcharges Martin referenced previously. We expect full year branded price increase of low single digits, assuming no further price actions with a higher mix of private label resulting in minimal consolidated net pricing growth. We expect Q2 2026 gross margins similar to Q1 before seeing slightly lower margins in the second half due to the current inflationary factors and planned price promotion cadence. If inflationary factors related to the current conflict in Iran appear permanent, we will explore potential price increases later this year or in 2027. We expect SG&A to increase high single digits as a percentage of net sales as we increase investment in marketing and key personnel areas to deliver the expected 2026 results and invest for long-term growth. We expect to deliver full year SG&A leverage of about 1 point over 2025 as we continue to deliver strong growth with disciplined investments. Finally, we have submitted refund claims through the CBP ACE portal for $15.6 million of IEEPA tariff paid last year. There is no guarantee that we will receive any of this refund and a successful refund is not contemplated in our current guidance. And with that, I'd like to turn the call back to Martin for his closing remarks. Martin Roper: Thank you, Corey. To close, I'd like to reiterate our confidence in the long-term potential of the Vita Coco Company, our ability to build a better beverage platform and the strength of our Vita Coco brand and the coconut water category. We have strong brands and a solid balance sheet and believe that we are well positioned to drive category and brand growth both domestically and internationally. We are confident in our ability and are excited about our key initiatives to drive long-term growth. Thank you for joining us today, and thank you for your interest in the Vita Coco Company. That concludes our first quarter 2026 prepared remarks, and we will now take your questions. Operator: [Operator Instructions] Our first question or comment comes from the line of Bonnie Herzog from Goldman Sachs. Bonnie Herzog: I have a question on your strong and impressive sales in the quarter. I guess hoping for a little bit more color on the drivers behind this. You touched on this, but could you provide a little more color on any distribution and space gains this year? I guess I'm trying to understand if there was any pull forward volume in Q1. And then your new guidance implies about 15% top line growth through year-end, which is good. But just trying to reconcile the very strong Q1 growth and I guess, some implied or expected slowdown through year-end. Martin Roper: Okay. Bonnie, I'll take the first part and then maybe Corey can take the full year guidance part. As it relates to the first quarter, we obviously benefited from a pull forward of a major club promotion into the March period from April period, which would have significantly increased shipments in the quarter. We tried to provide some sense of the scale of that by indicating that we expect U.S. retail scans through the end of April, which would basically negate the movement of that MVM in that time period because it remains in that time period to be approximately plus 30%. As we look at what is going on, first of all, our international business is very healthy and is growing ahead of our expectations. Secondly, we feel that we saw an acceleration above our expectations in Q1 in the U.S. business. And yes, the U.S. business obviously has benefited from increased distribution at Walmart through the resets that occurred in November. We've estimated that, that is potentially or possibly a 5% benefit to our U.S. scan data. But even if you strip that effect out and if you normalize for the movement of the club promotion, the business in the U.S. in the first quarter was very healthy and ahead of our expectations. When we look at what is driving it, it doesn't appear to be driven by incremental distribution. Spring resets are currently happening. So that's not driving the scan data. And our shipments are sort of pretty broadly tracking the scan data. So there's not anything weird to call out as it relates to inventory or loading. So just overall, we're very pleased. We're adjusting our guidance up to -- as the first quarter has exceeded our expectations. Obviously, we don't know whether it's a permanent or a temporary blip, but we're excited, and we're prepared to deliver on the year as we've outlined. And I'll just let Corey talk about the assumptions that went into our current guidance. Corey Baker: Bonnie, just to build on that, we saw, I think, exceptional category growth in Q1 and the brand through the end of April will be, I think, slightly above the category. We're estimating the guidance built on the U.S. category growing in the range of 20% through the first quarter, it's stronger than that. But we do see just above our expectations in the first quarter. And then as we get into the back half of the year, some of the things we talked about entering the year, the distributor inventory build, the Walmart load, we're just kind of watching those things, and they have some timing impact on shipments in Q3, Q4. That is why you see a much stronger Q1 than we'll get to through the back half of the year. And how that falls Q2, Q3 is hard to call. But we do expect that this -- the category remains quite healthy at plus 20%, but not as healthy as it is. And then just some timing on that distributor inventory and the Walmart load in through the back half. Bonnie Herzog: All right. That was helpful. And maybe just a quick follow-up. Thinking about your innovation pipeline, any color that you can provide to us on any upcoming innovation or new packaging that you plan to be rolling out either still in the first half or maybe in the second half of this year? Martin Roper: There's nothing significant. I think since we last talked, Lemonade Treats is out there, and there's another treats on an exclusive with a major retailer. But treats shows up in coconut milk as a scan data and the incremental effect of treats to our U.S. scans is 2%, 3%, I think, order of magnitude. So that's exciting, but the health of our business is being driven by coconut water. So we're executing all the major packs as hard as we can. We're still trying to add multi-packs as we've talked about, still trying to add 1 liter to convenience store, but we're basically driving the core and the growth is coming from the core. to convenience store, but we're basically driving the core and the growth is coming from the core. Operator: Our next question or comment comes from the line of Peter Galbo from Bank of America. Peter Galbo: Martin, maybe just to put a finer point on Bonnie's question around the top line and maybe a little bit more specific to 2Q. I mean, so is it fair to kind of think, again, if we average the growth rate over the first half, given the shift in the MVM that we should be kind of landing in that 30% range based on what you know today, just as a clarification point. Martin Roper: That sounds like a guidance question. So I'm going to pump that to Core, and we typically don't break guidance down by quarter, Peter, but thank you for the question anyway. Corey Baker: Peter, I maybe not follow the 30% through April on shipments. Is that? Peter Galbo: Correct. Correct. Martin Roper: Well, the 30% April number is a retail scan number. Corey Baker: Yes. And our shipments to date have been tracking close to retail. So I think that's a fair assumption on the U.S. branded shipments. But there's always timing and inventory impact, but we're not seeing anything in the beginning of the year that's driving shipments different than retail scans. And then the volume is a bit different, right? Martin Roper: And one additional point, May, June, July, August are typically peak season. The volumes are a little bigger. First quarter is predicted normally a slow quarter. So how to extrapolate these trends to the peak summer is hard. Obviously, we're planning for the optimistic scenarios from an inventory perspective and execution perspective, but it's pretty hard to project a Q1 increase for the full summer. Obviously, that would be terrific. Peter Galbo: Right. Okay. No, that's clear. And Corey, maybe just as a follow-up on the gross margins. I mean, obviously, the performance in Q1 in spite of the MVM very impressive. You're kind of calling for similar Q2 and yet you left the unchanged. I know there's some factors in the back half, but maybe you can just unpack a little bit. It would imply a pretty material sequential step down in the second half. So I just want to maybe press on that a bit more and see how much of that is what you have foresight into versus maybe conservatism on the gross margin line. Corey Baker: So I think Peter, 2 things have happened to gross margin in the last quarter. One, the branded growth is stronger than expected in guidance, and that helps push margins up. And then we are starting to see or are feeling some pressures from the conflict in Iran through domestic logistics, fuel costs, packaging materials, factory energy. So we are embedding some estimates of what that will impact through the -- it will begin later in the year. And then as we said, we'll evaluate pricing as we get closer and we see how everything unfolds. Operator: Our next question or comment comes from the line of Chris Carey from Wells Fargo Securities. Christopher Carey: Just one clarification. I believe it was Corey commenting on just considerations for revenue phasing. So are you saying that in the back half of the year, you could see revenue slowing a bit versus the front half because you're going to be comparing against some distribution expansion associated with early shipments at Walmart. Can you just expand on that comment a bit, what you meant there? And then regarding these MVMs or promotions, what are the kind of key considerations that we should be thinking about as you see them today? I know they're not all predictable, but just as you think about kind of quarterly phasing over the course of this year? Corey Baker: So, To clarify, Chris, the quarters are hard, especially Q2, Q3. But as we get into the back half, if you remember, in Q4 of last year, we saw shipments above our expectations with a chunk of that going into the distributor inventory. And then we also had the Walmart overlap that will be coming up to, and that does result in our estimates that our shipment growth will slow for sure, from Q1, how Q2, Q3 fall is a little bit harder to call. But the balance of the year will be, as you would expect, slower than plus 37%... Martin Roper: And then as it relates to -- I think you were asking about cadence of major promotions, and I assume you're referring to the major club promotion that moved from April last year into May. Last year, we ran one in July and one in October, which was similar. At this point in time, we're not aware of any sort of changes to that proposed cadence. But until the actual orders come in, we can't guarantee that business is there. Our guidance is based on what we currently know. Christopher Carey: Okay. A follow-up on international. Is there a way to frame, I guess, where you are in the international growth trajectory? I mean it appears that a lot of this is being driven by just several countries how long could these countries continue to deliver the types of growth rates that we're seeing? What's the penetration rate potential? And then just your ability or capacity or willingness to expand to other markets. Can you just maybe contextualize the international runway for us a bit more between current drivers and where you think the business is going? Martin Roper: Sure. I think we've said that our goal is for our international businesses to be as large as our Americas businesses today. In the investor deck on Slide 7, we provided a little bit of context on market size data. I would note, as we said in our remarks, that we are now using Nielsen for our European retail data and the Nielsen covers a broader range of retailers and is capturing more private label retailers. So the category to us now looks larger as we use Nielsen data, while maybe our reported share is lower, not reflecting any change in the market conditions. But in that, you'll see that the U.K. has an estimated market size of about USD 130 million. We're doing the dollar conversion. Germany is only at USD 53 million. We've previously shared that on a consumption per head basis, the U.K. is behind the U.S. and then obviously, Germany is behind the U.K. So I think there is great evidence that there's huge opportunity in Europe to bring the consumption per head up to what we are seeing in the U.S. levels and to do it across markets. And different markets are at different stages of development. If you had gone into Germany 4 years ago, for instance, you'd have seen a couple of small brands and some very dominant private label. When a market has very dominant private label, no one is investing in the market for education and growing and promotion. And so our belief is those markets are lagging the other markets where brands have been able to play. So there's a long runway here. We're very optimistic on international. We're obviously talking about it more on these calls and trying to share information. Exactly how it happens is obviously yet to be determined, but we are trying to drive it and trying to focus on large markets that are willing to adopt coconut water as their favorite beverage where we can play and be a major player. So we prioritize the markets, and we're sequencing it. We're not trying to take on too much, but we're certainly trying to take on more than we have historically. Operator: Our next question or comment comes from the line of Eric Serotta from Morgan Stanley. Eric Serotta: Last quarter, you were fairly explicit in terms of the promotional plans for the second half and essentially giving back some of last year's tariff-driven pricing. Can you give us a little bit of an update there? Are you still looking at pricing potentially being negative in the second -- in the third quarter or second half based on your current promo fund? Corey Baker: So Eric, it's amazing how different the world is from last quarter. So we are currently working through the second half retail plans. It's a different inflationary environment than it was in the second half. So the teams are now working on those plans, and we don't have any changes at this point to our kind of outlook. And our pricing guidance is the same as it was, but we'll, as we said, continue to evaluate as we move through the year. Martin Roper: And I think certainly, if the current inflation looks permanent, right, we will take -- we will have to take pricing, which is not where we were in February. Eric Serotta: Great. And then just in terms of what you're seeing in terms of inflation on your freight lanes. Obviously, you're not shipping coconut water through the street. But what have you seen in terms of rates on your key lanes from Asia to the U.S. and Brazil to U.S. and Europe? And you mentioned looking to contract more, which would imply that the rates are still pretty attractive. But any color there would be helpful. Martin Roper: Yes. So base rates sort of have held pretty firm where they were when we last spoke to you. And they are pretty attractive, obviously, relative to the last 3, 4 years, still not at long-term averages, but they're at rates that we have considered sort of locking in some percentage of our business. What we've seen since the recent Middle East escalation has largely been the carriers asking for fuel surcharges, which is on top of the base rates. We haven't seen the base rates move that much, but there have been requests for surcharges, which is pretty normal. It reflects maybe a much more normal shipping environment as existed pre-COVID that there would be fuel surcharges when fuel sort of moved around. Those surcharges are several hundred dollars depending on the lanes. It's manageable within our guidance, and it's not the material shift in ocean costs that we saw like in '22 when those changes were pretty material. So we're pretty comfortable or very comfortable with our gross margin guidance. The inflationary factors that are perhaps more significant than that are in energy costs and gasoline costs in our supplying countries, which is affecting their energy costs, their production costs, their workers' costs and et cetera. There's certainly scarcity of fuel in some of those markets. We haven't seen that affect production yet, but it's something we're monitoring. And then we're also seeing domestic transportation cost increases, right? So at this point -- and then on the packaging side, we've seen packaging inflation cost increases taken by the packaging suppliers in response to the cost inflation they're seeing. And certainly, we use TETRA a lot, and that has a relatively high shipping cost component for the inbound. So that's sort of what's going on. And that's the bigger driver of the underlying inflation we see. That tends to be a little bit more sticky than energy inflation. So that's why we're watching it closely. Operator: Our next question or comment comes from the line of Eric Des Lauriers from Craig-Hallum Capital Market Group. Eric Des Lauriers: Congrats on a very impressive quarter here. On the supply side of things, I know sourcing coconuts and coconut water has never really been a constraint for you guys. But volumes do keep surprising to the upside. There is accelerating demand sort of above your internal expectations. Could you just give us a bit more color on current outlook for matching inventory supply with the accelerating demand? Is this anything that should be on our radar at this point now? Martin Roper: So we're obviously very comfortable with our guidance from a supply perspective. We're comfortable with some potential increase on that from a supply side. I think we indicated in our prepared remarks that we're sort of operating the balance of the year closer to 85%, 90% of available capacity. We would typically try and operate 80% to 85%. So that reflects a step-up in utilization of the capacity. We've also pulled the inventory down a little bit in the first quarter, also reflecting that supported that surge, so to speak. And we think with inventory and our current committed capacity, we're in pretty good shape for what we expect to happen on the balance of the year. But if that were to accelerate significantly, then obviously, that would be challenging. As it relates to the long term, we're looking at this and going, okay, what does this mean for '27 and '28 how do we plan for it. Those discussions have been happening a long time ago, and we're tweaking up our sort of commitments and/or plans to support what we could expect if the category continues at this rate. Eric Des Lauriers: All right. That's very helpful. I appreciate that. And then on the private label side of things, so very encouraging to see this improved outlook. Could you just kind of give us an update on the landscape for private label in the U.S.? Are there other kind of large retailers still remaining that could be significant wins or I guess, significant contributors to the private label revenues? And can you just give us an update on the sort of competition or competitive environment for bidding on these private label contracts? Martin Roper: Yes, there is still some -- I would describe as major retailers, but they're not maybe in the top 4 retailers that don't have private label. So there are still some options in the U.S. and there's still opportunity for private label sort of retail space to be created. The -- internationally, most of our markets, there's already strong private label presence with a strong private label share, maybe with the exception of the U.K. major grocery where private label isn't as visible, but private label obviously exists in some of -- in the discount channels there, which have relatively significant volume. The environment on the contract side continues to be dynamic. As we said before, when there are disturbances to the cost system and the supply system and/or the demand, frankly, you tend to have retailers responding to those disturbances to see if there's a better deal to be had and a better deal might be price or service, particularly if the demand is accelerated and the service levels have been poor. So that continues to be a pretty dynamic environment. We're excited with the business that we've won to date. And I think we're more positive that there's potential to diversify our retailer group going forward so that we diminish our reliance on 1 or 2 key retailers there. But I would say the outlook looks very positive. And then on the demand side, private label is growing faster than the category in the U.S. in Europe, it's sort of growing with the category, maybe a little slower because we're gaining some share from quite a small share base, right? So -- but from a demand side, this appears at least in the U.S. to be strong interest in private label, and that is driving both our sort of share stability even with our great trends and also providing consumers, I would guess, the option for coconut water where they're choosing to shop. So I think it's more of them choosing to shop in certain channels than anything else. We're not really -- in retailers that have brand and private label sites side year round, we're not really seeing that effect. Operator: Our next question or comment comes from the line of Kaumil Gajrawala from Jefferies. Kaumil Gajrawala: I guess maybe just digging in a little bit to this acceleration in growth. It's not that small of a category, and it's putting up, in dollar terms, like very, very substantial rates of growth. Is there something that maybe more specific that's changing? Are there entirely new customers that are coming in? Is it something marketing related? Like if we could just get a few building blocks on what's sort of what was already a healthy growth rate now accelerating quite substantially. Just trying to understand it a little bit better would be, I think, helpful. Michael Kirban: I think it's clearly a hydration thing, a need for hydration, a want for hydration from consumers, everyday hydration. It's something we've been talking about. And we've talked about for a while how we pull pretty equally from -- or historically have pulled pretty equally from sport drinks, premium bottled water and conventional juices. We're seeing an acceleration specifically of how we're pulling from sport drinks. So hydration is clearly, I think, one of the drivers of the acceleration of growth that we've been seeing in the last couple of quarters, but specifically this quarter. And we seem to be aging down. Younger consumers coming into the category. Some of the marketing, I think, that we're doing and some of the things that are happening organically in social media is driving that. And it comes back to the functionality. It's potassium, it's hydration. It's 3.5x the electrolytes of leading sport drink. We think that all of these things are driving a lot of the acceleration we're seeing specifically with young consumers. Kaumil Gajrawala: Okay. Got it. And maybe just following up on that supply question prior. How are you thinking about the setup for supply for '27, '28? Have you sort of maybe fundamentally changed how you're thinking about how much you'll need? Because I guess if things continue at this rate, they're presumably growing at a faster pace than you will have expected. So is it early enough to start making those decisions? Or is it something you're just going to sort of wait out a little longer? Martin Roper: So I think we've talked about previously how it takes 12 to 18 months to put new capacity in an existing facility. A new facility might take 18 months to 2 years if they haven't done coconut water before. So that's sort of our planning horizon. We run a 3- to 5-year sort of outlook based on our assumptions on growth, and then we try and plan capacity for the next 2 years to give us a range of outcomes around that while working on the longer-range projects so that they fit in. Projects that come in at a certain capacity and can expand are ideal, so we work on those. So that's how we do the sort of capacity planning. We are also trying to plan that the available capacity is 80% to 85% of what we think the demand is. So that gives us some flexibility to deal with underestimating what demand would be. When we see a demand, let's say, surge, that immediately goes into those plans and adjust those efforts. You'll see we've talked about increased personnel costs. We've increased investments in our Singapore team to add capacity more aggressively. This started last year, if not before. And we are comfortable that we can meet the demands that we know about today for '27. Obviously, '28, we're working on. So as we said before, there are plenty of coconuts involved. And so coconut availability is not an issue. And we're investing in our supply chain to meet this exciting demand we're seeing, and we are comfortable we'll be able to do so. Operator: Our next question or comment comes from the line of Mike Lavery from Piper Sandler. Michael Lavery: Just wanted to come back. You mentioned the distributor incentives as a little bit of a headwind to price realization. And I don't feel like it comes up very often. Could you just maybe elaborate a little bit on that dynamic? And is it something new? Or what's changed there? Martin Roper: Sure. Yes, with certain distributors at appropriate times, there are good conversations about how do we move the business forward and close distribution gaps and align incentives across our organizations. And we've had some of those conversations over the last 3, 4 years. And with the acceleration of growth, those incentives are starting to sort of play out a little bit, and we're just taking that into account in our revenue planning. But we're very pleased with the distribution. That's great gains that are happening, where we fit in our distributors' sort of priorities and how they're responding to those incentives. And so it's all good, and it's basically making sure that we're aligned across all organizations. Michael Lavery: Okay. That's helpful. And just you've obviously flagged your balance sheet strength and the cash build. Just any thoughts on priorities for how to go spend the money? Martin Roper: Well, I think as we said before, our #1 priority is supporting the growth, whether that be marketing investments, creating organizational capabilities to support these new markets or investing in the long-term supply chain capability, whether that be our own capability or potentially partnering with suppliers on investments and/or underwriting them in some way, right? So that's the #1 priority. Second priority would be sort of innovation. And at this point in time, with the strength of the business, perhaps our innovation push is maybe not as strong as it was prior because of all the opportunities we have ahead of us, but we still are investing in R&D and product development work and testing on a range of things so that we can take advantage of opportunities if the occasion was right. I think we said our third priority is M&A and looking for something that would add significant value to our long-term shareholders. And we continue to do that. Obviously, it's a patient look, and we've come close a couple of times, but -- so we are serious about it, but we haven't pulled the trigger on the final structures, et cetera, for a number of reasons. So we continue to do that. And then based on all those things, and I would add sort of inventory management to that as well, given how inventory can help us deal with seasonality, both on the production side and the demand side. And then finally, we sit down and we look at all those factors based on what we think is happening, both on what we expect our cash generation to be over the coming months, and then we make decisions as to buyback jointly with the Board. You have seen, year-to-date, we purchased $20 million of shares. We still have $21 million remaining under the authorization. So that what the fourth priority is one that we're active on when the other activities are well funded. Operator: Our next question or comment comes from the line of Robert Ottenstein from Evercore. Robert Ottenstein: A couple of follow-ups, if I may. You mentioned that traditionally, you pulled equally from sports drinks and juices, and that now, kind of, the sports hydration need is becoming more prominent. So I'm just wondering, one, does that change how you and retailers are looking at shelf space and positioning? Two, does that help perhaps on convenience stores? And maybe talk a little bit about how you are doing on convenience stores? And then my second question is, I understand that there's plenty of coconuts. Your supply chain is looking good if the demand is higher than expected during the peak seasons. The other side of that is your service levels and your ability to keep the product on the shelf. So I was wondering if you can address that as well if this demand keeps surging during the high season, your ability to prevent out of stocks. Michael Kirban: I think on the first couple of questions, position in the store, regardless, I think, of whether we feel we're pulling more from juice, premium bottled water or sport drinks, we don't like moving around in the store. You've seen how that's created a problem for us. Historically, we are in different areas of the store. Some stores, we're in the sport drink set. Some stores, we're in the enhanced water set. Some stores, we're in the juice set. But moving around creates temporary issues. So we like where we're at. Relationships with retailers are very strong as we're, again, fastest-growing category in beverage aisle. And so we don't want to move. And we think we're well positioned and well placed in the store. We want to continue to gain space, expand that billboard at retail, which we've been doing and continue to do. As you think about C-store, yes, we see our C-store business growing really nicely, not only in terms of velocity, but also in terms of actual ACV. If you look at Slide 10 in the investor deck, over the past year, we've grown from 55% ACV to 59% ACV on our core item in C-store. And we want to keep that growing. We think one day, there's no reason we shouldn't be in the 80s in C-store. So continuing to grow distribution as more and more consumers are buying the product on the go at C-store for hydration specifically. And then as it relates to the supply chain piece and not running out of stock, Martin, do you want to... Martin Roper: Sure. Yes, yes. So obviously, our intention is to never run out of stock. Obviously, that intention is not always fulfilled when demand drastically increases above our expectations. By design, we entered the year with, I think, over $100 million of inventory sort of in our position on the water, which was unusually high. That allowed us to support the first 3, 4 months surge that we've seen, including the movement forward of the major club promotion. But you'll see at the end of the quarter that our inventory was down. That partially reflects the very large March that we had. It also partially reflects a little bit of delay in getting some product out of some ports, which is currently manageable. And the product is there, and the ships are coming. There was just a backlog. So as we look at the summer, obviously, I can't tell you there won't be service issues because if demand greatly accelerated, there would be, frankly, for everybody in the category. Also, with this sort of surge, I think you tend to see other suppliers and even some private label businesses running out of stock and then you get customers moving to the brands that have stock. So it can be something that you don't cause, but it happens because other people are having problems. That said, very comfortable we can support our guidance, comfortable we could support some volume above our guidance. There's obviously a limit to that. But we're in a very good shape, and we're certainly in much better shape today than we were 2 years ago when, if you remember, we entered Q4 -- 3 with a big inventory constraint and had major service issues in Q3. So I don't expect that currently based on what we see, but obviously, I can't say never. Robert Ottenstein: Congratulations. Martin Roper: Thanks. Operator: Our next question or comment comes from the line of Jim Salera from Stephens. James Salera: Martin, I actually wanted to ask a follow-up on your previous answer that you just gave. If we see the demand continue to be as robust as it's been in 1Q, is there any toggle on the promotional timing such that you might not need them and that could potentially be a net benefit to gross margin in kind of the back half of the summer, back half of the year? Martin Roper: Yes. Difficult one. Obviously, there is. But obviously, if you've made a commitment to a retailer pulling that commitment back, it is a very awkward conversation, particularly if they feel that you're not pulling back from other retailers, right? So yes, generally, you can. Yes, you can moderate entering into new agreements, but commitments that have been made, which tend to be made 3, 4 months out, right, at least, you sort of have to offer to continue to fulfill unless there's a major, major issue that everyone in the industry recognizes and a major promotion. So as an example, in our history, there was one major club promotion that we just said, look, you can run it, but it's going to be horrible. And we think we're better off not running it. And frankly, the retailer is grateful for that input. But that isn't always how the conversations go, particularly when they believe that other people might be getting price support. So difficult conversations can be had. It depends on what's going on in the industry. It's certainly a lever that we would explore to see if it made sense for us and our retail partners. James Salera: Great. I appreciate the thoughts there. And then I wanted to ask on the Treats platform. Since that's kind of a unique item that doesn't really neatly fit into a specific category or subcategory, can you just help us frame up how you think about the potential size of that as part of your portfolio? And if you could offer any thoughts on where that is right now and how you expect the incremental flavor launches to contribute to the year? Martin Roper: So it's classified as a coconut milk. It's a coconut milk ready-to-drink. There are some other beverages in that sort of space, Starbucks Pink ready-to-drink being one. It's currently contributing, I think I said 3 percentage points to our retail. That scans in the U.S., that's pretty good. I think it's fair to say, we launched it in an international market and it didn't stick. So it's not a proven success in every market. And this goes to how every market is different, and we can talk about that at great length, like what's working in Germany isn't the same as what's working in the U.K. from a flavor perspective, for instance. But I think Treats is interesting. It's currently working to where I think it has a good long-term future within our portfolio. We think we need to have flavor innovation to bring new news to it and find the right flavor additions. I'm not sure we found the right flavor portfolio yet. So that will be incremental. But I think that's pretty normal in a flavor-driven category that you work out what works and what doesn't work. So our intention is to do that, and it certainly sits nicely in our space. And I think the retailers that have added the extra SKU and supported it are happy. Operator: Our next question or comment comes from the line of Jon Andersen from William Blair. Glenn West: This is Glenn West on for Jon Andersen. We hit on a lot, so maybe a quick one. Corey, I know you mentioned the potential for like a $15 million refund from CBP. Do you have any idea on the time line of those claims or any idea when you expect kind of a decision on that? Corey Baker: We're not 100% sure, but the news would indicate 60, 90, 120 days, let's say. So we'll see how the process runs. We've submitted through to the systems and followed the rules, and we'll see how fast it gets processed and if it's accepted, all those things. Martin Roper: And if it isn't challenged, et cetera. So we're in the fight, and we'll see what happens. Operator: Our next question or comment comes from the line of Gerald Pascarelli from Needham & Company. Gerald Pascarelli: I just had a quick follow-up on capacity utilization. So like in the scenario that demand continues to surge, just thinking about this in the context of your private label business, right? Like you're regaining new business this year that you previously lost. So just again, if demand continued to surge, how would you think about balancing the split between servicing your branded products and private label this year specifically? I think any color on that would be great. Martin Roper: Yes. It's a good question, Gerry, but I think we've said this historically that our goal is to try and provide equal service to everybody, including our brand. Obviously, if we were talking about commitments and bids, let's say, '27 business or '28 business, we'd take all of these factors into account, and we try not to commit to business that we feel we're not going to be able to provide a fair level of service to. And then our -- these retail relationships and the private label, they're long-term relationships. They need to be treated as partnerships. We need to treat them fairly. We do everything we can to produce to their forecast. It's fair to say that forecasts aren't always accurate and you can then run into some difficulties. But we have -- we keep track of that stuff. And we go, this is what was committed to and this is what we committed to and all that sort of stuff. But if there's an opportunity to take care of key customers, we will. We do have a pretty long supply chain. So I would just remind everybody that what is currently on the water will get sold in July, August or what's being produced. Let's say, next month will be sold in August, September. So for most of this year, we're sort of almost locked, right? We've still got a few months we can influence. And so we will do the best we can, and we will try and service every customer in the way that we think is fair to them based on the commitments they've made to us. Operator: Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. Martin Roper for any closing remarks. Martin Roper: Thanks, Howard. No closing remarks. Thanks, everybody, for joining us for the quarter. We look forward to chatting to you at various events during this quarter and then obviously doing this again, hopefully, in 3 months' time. Everyone, have a great day. Operator: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.
Operator: Good morning, and welcome to the NextDecade Corporation First Quarter 2026 Investor Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. And now I would like to turn the call over to Megan Light, NextDecade's Vice President of Investor Relations. Megan Light: Thank you, and good morning, everyone. Welcome to NextDecade's First Quarter 2026 Investor Update Call and Webcast. The slide presentation and access to the webcast for today's call are available on our website at www.next-decade.com. Today, I am joined by Matt Schatzman, NextDecade's Chairman and Chief Executive Officer; and Mike Mott, NextDecade's Interim Chief Financial Officer. Before we begin, I would like to remind listeners that discussion on this call, including answers to your questions, contain forward-looking statements within the meaning of U.S. federal securities laws. These statements have been based on assumptions and analysis made by NextDecade in light of current expectations, perceptions of historical trends, current conditions and projections about future events and trends. Although NextDecade believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that the expectations will prove to be correct. NextDecade's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in NextDecade's periodic reports that are filed with and available from the Securities and Exchange Commission. In addition, discussion on this call includes references to certain non-GAAP financial measures such as adjusted EBITDA and distributable cash flow. A definition of an additional information regarding these measures can be found in the appendix to our presentation. And now I will turn the call over to Matt Schatzman, NextDecade's Chairman and Chief Executive Officer. Matthew Schatzman: Thank you, Megan, and good morning, everyone. Thank you for joining us today. First quarter was productive across the NextDecade organization, and we're making solid progress on the key 2026 priorities that we introduced on our fourth quarter call. First, one of our highest priorities continues to be progressing construction at the Rio Grande LNG facility safely, on budget and ahead of schedule. Safety is ingrained in our culture and our work. And in the first quarter, we achieved a low total recordable incident rate or TRIR of less than 0.1. I'm proud of both our team and the Bechtel team for continuing to progress construction at a rapid pace while maintaining high safety standards. We also continue to be within budget across all 5 trains under construction. Train 1 early electrical commissioning is underway. Phase 1 continues to track ahead of the guaranteed substantial completion dates for the EPC contracts, and we're making excellent early progress on Trains 4 and 5 at the site. Based on our current progress, Phase 1 is tracking ahead of the schedule reflected in our early volume guidance, providing a buffer to achieve the numbers we have provided. Our second key priority for 2026 is continuing to prepare our organization for commissioning, first LNG and the transition to operations. We've been advancing hiring, system implementations and process development ahead of first LNG. We've been rapidly hiring and expanding our team, and we currently have over 400 employees with the majority based in Brownsville. As part of our enterprise readiness efforts, we've made significant progress building the digital and operational foundation required for first LNG. Core enterprise platforms are starting to go live, and we've created a robust in-house integration capability that allows systems to exchange data and supports end-to-end business processes. This work positions us to scale efficiently, reduce operational risk and enter operations with strong governance, visibility and control across the enterprise. We're laser-focused on ensuring that the organization is prepared for introducing first gas into the facility in the second half of this year and producing the first LNG from Train 1 in the first half of next year. Our third key priority is to manage near-term exposure to LNG market margins through the sale of projected early LNG cargoes. As we mentioned on the fourth quarter call, early this year, we began marketing early cargoes that we expect to produce in Phase I prior to the commencement of our long-term SPAs for Train 3. In February, we sold over 175 TBtu on a free-on-board or FOB basis with fixed liquefaction fees that are expected to achieve margins calculated as the FOB sales price less our expected cost of natural gas feedstock and fuel of over $3 per MMBtu. These sales reduced the Phase 1 early LNG production exposed to LNG market price fluctuations by 33%. Market margins have increased since the Iran conflict began. And as we increase our visibility into expected early LNG production and gain additional assurance on the timing from Bechtel later this year and early next year, we expect to sell additional early volumes to further reduce our market exposure during our ramp-up period. Our final key priority for this year is advancing the development and permitting of Trains 6 through 8. Bechtel is in the process of performing a front-end engineering and design or FEED study for the Train 6 and third berth, and we expect to file the formal FERC application for Train 6 before the end of this quarter. Additionally, we've begun early commercialization efforts for Train 6, and we're seeing strong demand from potential customers for long-term volumes. I'd like to remind everyone that additional LNG supplies were needed in the early 2030s before the Iran conflict began and demand from long-term SPAs is even stronger today. Construction at the Rio Grande LNG Facility continues to progress safely, on budget and ahead of schedule. As of March 2026, Trains 1 and 2 are 67.8% complete. Train 3 is 44.2% complete and Trains 4 and 5 are 10.6% and 6.8% complete, respectively. During the overall -- within these overall completion numbers, Trains 1 and 2 are functionally complete on the engineering and procurement front with the engineering of Trains 1 and 2, just over 98% complete and the procurement just over 94% complete. Train 3 is not far behind Trains 1 and 2 with engineering over 90% complete, and procurement over 80% complete. Since our last update, Bechtel has continued to make strong progress in construction of Phase 1 with work on Train 1 focused on piping, equipment installation, cable pulling, testing and system completions. The main cryogenic heat exchanger for Train 1 has also been successfully installed. Trains 2 and 3 made notable progress on civil works, piping, structural steel and equipment installation and placement of the Train 2 compressor packages is underway. For Tanks 1 and 2, welding of the inner tanks is progressing and concrete roof placement has been completed for both tanks. Early civil works are progressing for Train 4. Site preparation activities are underway for Train 5 and production piling has commenced for Tank 3. Across the site, construction of permanent buildings is advancing, construction activities of the gas inlet area are ongoing, dredging activities for the berths and turning basin are substantially complete, and channel deepening is nearing completion. The Bay Runner pipeline has been under construction since last fall and is expected to reach in service in the third quarter of this year. Bay Runner is being constructed by Whistler LLC, a joint venture between WhiteWater Midstream, Enbridge and MPLX and will be our primary pipeline capacity into the terminal for Trains 1 through 3. Early electrical commissioning of Train 1 continues, and we continue to expect first gas into the facility in the second half of this year and first LNG production from Train 1 in the first half of 2027. In early April, FERC approved our request to shift to a 24/7 construction schedule at the site, a transition that has been contemplated in the EPC contracts and will not increase our EPC or total project cost. 24/7 format should facilitate Bechtel making continued progress ahead of schedule. We're currently tracking ahead of the schedule reflected in our early volumes and cash flow guidance, giving us some buffer for the unexpected events during commissioning and start-up of the trains while still achieving the production guidance we have provided. We're supporting our goal of increasing our capacity at the Rio Grande LNG facility up to 60 million tonnes per annum by advancing the development and permitting of Train 6 through 8. As we mentioned on our highlight slide, the FEED study for Train 6 is underway with Bechtel. Train 6 will have the same design as Trains 1 through 5, and the FEED study will support our regulatory filings with FERC and give us a general idea of where we expect to land on cost for Train 6. We currently expect Train 6 to look a lot like Train 5 from a project cost perspective, adjusted for inflation. We are also preparing to file a formal application with FERC for Train 6 and a third berth before the end of the second quarter of this year. The current administration's emphasis on U.S. energy dominance as a national security issue, including last week's determination that expanding LNG capacity is necessary under the Defense Production Act is expected to be helpful for the development of U.S. LNG, and we expect permitting new capacity to be smoother and faster under the current administration than prior ones. Additionally, the D.C. Circuit Court's reversal in our case in March 2025 and the Supreme Court Seven County case later last year have set precedents that will go a long way in limiting the ability of certain groups tie-up permits in court over matters that have been appropriately analyzed by FERC in its environmental reviews. The permitting and regulatory framework for LNG infrastructure during the current administration appears to be taking less time, which is very encouraging. It gives us confidence that our future trains will receive approval faster than our first 5 trains. We believe it is possible that we could receive our FERC permit for Train 6 as early as mid-2027, which could set us up for an FID in the second half of 2027, if we can also sufficiently commercialize and finance Train 6 during that time frame. We expect that FID in the second half of 2027 would result in Train 6 coming online as early as 2032. As I mentioned earlier, we began commercializing efforts for Train 6 and we're seeing very strong demand from potential SPA counterparties. We believe that one of the main outcomes of the Iran conflict will be increased attractiveness of long-term U.S. LNG volumes, and we'll discuss that more in a few minutes. The potential demand we are currently seeing for Train 6 provides us with a sales pipeline that is larger than the capacity of Train 6 and places us in a strong position for the subsequent commercialization of Train 7 and 8. We're advancing development of Train 7 and 8 with a focus on determining the supporting infrastructure they will require and finalizing their location on the site. Train 7 and 8 will need a flood control mechanisms such as levee wall as they'll be outside the main levee around the site, and we're also evaluating potential tank and berth requirements. We continue to have the goals of permitting these trains during the current administration and commercializing them while they are in the permitting process. We currently have full ownership of Train 6 through 8, and we believe these trains could contribute significantly to future NextDecade distributable cash flow across a wide range of financing scenarios. This year, as we advance permitting and commercialization of Train 6, we're working on potential financing options with the goal of maximizing distributable cash flow on a per share basis. Since our last call, global LNG market dynamics have shifted significantly as a result of the Iran conflict. Closure of the Strait of Hormuz during March and April pulled approximately [ 14 million ] tons of LNG supply out of the market with capacity at Ras Laffan and Das Island shut in. Each month of continued shut-in will result in a loss of an additional approximately 7 million tons, and we expect the production ramp-up at Ras Laffan will take weeks, if not months. Based on public announcements, the 2 damaged trains at Ras Laffan totaling almost 13 million tons per annum of capacity are estimated to require between 3 and 5 years to repair. Also, it's estimated that expansion capacity in Qatar could be delayed by up to a year due to recent events. In total, a significant amount of LNG supply has been pulled out of the market between now and 2030, which we expect will tighten global balances. There's a lot we don't know today, including the full extent of the damage of Ras Laffan exact timing for production to return to the market and the ultimate impact of short-term demand destruction in price-sensitive markets, particularly in Southeast Asia. Before the conflict began, we expected the impending supply wave of LNG to spur extra normal gas demand growth and additional gas infrastructure investments in developing markets over the next few years. Clearly, with less supply in the market currently, this will slow down. Longer term, we do not see a slowdown in demand for natural gas and in particular, LNG. One very effective way for buyers around the world to acquire LNG at attractive prices is through long-term supply -- is through long-term supply and U.S. LNG SPAs indexed to Henry Hub, are particularly attractive due to the diversified prolific natural gas resource base in the U.S., which effectively shelters buyers from the spikes in the price of LNG and natural gas in other parts of the world. Henry Hub pricing has decreased since the Iran conflict began and customers with long-term contracts out of the U.S. that are indexed to Henry Hub are currently able to deliver into Europe and Asia at levels below $8 per MMBtu. Long-term LNG supplies out of the U.S. have been a buffer against market price shocks, not only during the current conflict but also during the prior market spikes associated with the Russia-Ukraine war and weather-related seasonal demand spikes. Long-term U.S. LNG supplies have also been attractively priced relative to short-term supplies in tight market conditions like -- like we have seen in the past 2 to 3 years. Since 2021, an example, U.S. long-term SPA calculated at 115% of Henry Hub plus a fixed fee of $2.50 and shipping costs of approximately $2 would have delivered into Asia at an average of $8.83 per MMBtu. The JKM spot price over the same period was over $17.50, around double the long-term price. Excluding the market spikes related to Russia-Ukraine in 2022. From 2023 to present, the example U.S. long-term SPA price averaged approximately $5 per MMBtu, lower than the short-term LNG price. Long-term Henry Hub-linked SPAs have also compared favorably to long-term LNG contracts linked to oil. Since 2021, long-term LNG contracts linked to Brent would have needed slopes below 11%, inclusive of any fixed adder to beat the pricing of the most recent wave of long-term Henry Hub-linked LNG contracts out of the U.S. Historically, these Brent-linked LNG contracts have had slopes between 11% and 15% plus a fixed adder. Before the conflict began, we received strong indications of demand for long-term supplies out of Train 6. And demand for long-term contracts is even higher today. With a prolific and diversified natural gas resource in the U.S., and the favorable geopolitical environment, buyers can have confidence in U.S. supplies from reliability, energy security and economic standpoint. We expect buyers to increasingly value long-term contracts out of the U.S., which will spur additional capacity growth in the market. And with Train 6 through 8 under development, we're in a very good position to provide a meaningful amount of additional capacity to meet that demand. Now I'd like to turn it over to Mike to talk about our financial priorities. Mike? Michael Mott: Thanks, Matt, and thanks to everyone for joining us today. Matt has just walked you through key construction, operational and strategic priorities for 2026. Now I will spend a few minutes on our financial priorities for the year. First, we are focused on actively managing debt at the project level. Specifically, we plan to continue opportunistically refinancing portions of our project level credit facilities in the debt capital markets. Today, we have over $9 billion of credit facility commitments for Phase 1, about $3.8 billion for Train 4 and roughly $3.6 billion for Train 5. Over time, we expect to refinance each of these bank facilities into a mix of bullet and amortizing debt securities. We expect to refinance the full term loan balances before the commercial operation dates for Trains 3, 4 and 5, respectively. Since Phase 1 FID, we have refinanced more than $1.85 billion of Phase 1 bank debt, and we expect to continue taking advantage of market opportunities this year. Importantly, this approach allows us to better manage project level maturities by spreading them out over time and thoughtfully balancing bullet and amortizing structures. Our second financial priority is evaluating equity financing options for Train 6. As Matt mentioned, we are targeting an FID in the second half of 2027, subject to achieving permitting, commercialization and financing prerequisites. This timing comes before we expect to be generating meaningful operating cash flows that could fund our equity requirements for Train 6, requiring us to look to other financing alternatives for this capital. We expect to contract a high percentage of Train 6 capacity, which could support project-level bank facilities covering up to approximately 75% of total project costs. Maximizing project level debt lowers the overall cost of capital and meaningfully reduces our equity requirements. Based on current SPA pricing, early estimates of Train 6 costs and the current interest rate environment, we expect the project to be highly accretive to NextDecade's distributable cash flow. As a result, all else equal, we will seek to both preserve our high economic interest in Train 6 and select the equity funding options that are most accretive to our distributable cash flow on a per share basis to maximize value for our shareholders. The FinCo bank facility that will be used to fund a portion of our equity commitments for Trains 4 and 5 remains a very attractive source of capital. It is priced at only about 150 basis points over our project level bank facilities and provides significant flexibility through delayed draws and penalty-free prepayments. We believe additional FinCo capacity will be available to help fund a portion of Train 6's equity needs. Beyond that, we are actively evaluating a range of alternatives to fund the remaining Train 6 equity requirements. We will continue working through these alternatives over the course of the year with a focus on finding the most accretive outcomes, and we expect to share more detail with you later this year as these options take shape. Today, we are reaffirming our early volume and cash flow guidance, along with our steady-state outlook. This slide provides a high-level summary highlighting the key points. You can find more detailed assumptions and supporting slides in the investor presentation we posted earlier today. Let me start with a discussion of early volumes. We continue to project total LNG production of approximately 3,800 TBtu from early cargoes beginning with start-up of Train 1 in 2027 and extending through first commercial delivery to our long-term SPA customers under Train 5. Importantly, that total includes about 1,275 TBtu of LNG production in excess of what's currently contracted under long-term SPAs. As we discussed on our fourth quarter call, earlier this year, we sold forward more than 175 TBtu of those early volumes on an FOB basis. These sales carry fixed liquefaction fees and are expected to achieve cargo margins of more than $3 per MMBtu calculated as the FOB LNG sales price less our expected feed gas and fuel costs. As a result, we have reduced our exposure to LNG market pricing on early Phase 1 volumes by roughly 1/3. As Matt mentioned earlier, we expect Bechtel to deliver our trains ahead of the guaranteed substantial completion dates. As a result, the majority of the uncontracted volumes reflected in our early production guidance are expected to be produced after substantial completion and prior to DFCD under the SPAs for each train. As construction continues to progress, our confidence in these projections remains very strong. In fact, Bechtel is currently tracking modestly ahead of the schedule assumed in our guidance, which provides additional buffer and creates potential upside for early volumes that are not currently reflected in our projections. We expect the cash flow generated from sales of these early volumes to be used primarily to pay down a portion of FinCo and SuperFinCo loans that support our equity commitments for Trains 4 and 5. Our early cash flow outlook guidance remains unchanged. Under an assumed margin of $5 per MMBtu on volumes in excess of our contracted SPAs, we project early production could generate approximately $2 billion in NextDecade share of distributable cash flow at the Rio Grande LNG project level. At a $3 per MMBtu margin, we project approximately $1.2 billion of distributable cash flow. There is potential upside to both scenarios driven by continued schedule strength, the pace of ramp-up to full production, the potential for production above nameplate capacity and possible additional market price upside. Turning to leverage and capital structure. On our last call, we introduced a steady-state leverage target of 3 to 3.5x NextDecade level debt to adjusted EBITDA. We believe this target is appropriate given the long-dated, highly visible cash flows created by our highly contracted portfolio with high-quality creditworthy customers. In the $5 per MMBtu early volume margin scenario, we expect NextDecade level debt to fall within that target range as we move into steady-state operations. In the $3 per MMBtu scenario, we would expect to pursue additional balance sheet optimization. In that case, we would consider contracting approximately an additional 2 million tons per annum under long-term SPAs across Trains 4 and 5. That would increase our 5-train portfolio to roughly 90% contracted, allow us to maximize project level debt, reduce overall equity requirements for both NextDecade and our partners and ultimately reduce the amount we expect to draw under the FinCo loan, bringing NextDecade level debt back into our target range for steady-state operations. Because we contributed the net proceeds from the SuperFinCo term loan into Trains 4 and 5 at FID, we do not expect any additional NextDecade equity funding obligations through draws on the FinCo loan for those trains for at least the next 2 to 3 years. This gives us a long runway to determine the optimal level of long-term contracting. And as Matt mentioned, we are seeing very strong demand in the long-term contracting market today. Moving our discussion to steady-state operations. We are also reaffirming our steady-state guidance today. In our base case scenario, assuming $5 per MMBtu market margins, both for early volumes and during steady state, we project annual NextDecade distributable cash flow of approximately $500 million following DFCD for the Train 5 SPAs and prior to our economic interest flip for Trains 4 and 5 in the mid-2030s. After the flip, beginning in the mid-2030s, we project annual distributable cash flow of approximately $800 million. In our additional pricing scenario, assuming $3 per MMBtu margins on early volumes, $5 per MMBtu margins on steady-state volumes and an incremental 2 MTPA of long-term SPAs across Trains 4 and 5, we project annual distributable cash flow of approximately $400 million prior to the economic interest flip for Trains 4 and 5, which we would expect to occur a couple of years later than in our base case. In this scenario, we project post-flip distributable cash flow of approximately $500 million annually. As with our early volume outlook, there are potential upsides to our steady-state guidance, including continued schedule improvement, ramp-up timing, production above nameplate capacity and ongoing operational efficiencies. Thank you again for joining us today. With that, we'll open the call up for questions. Operator: [Operator Instructions] The first question is from Sunil Sibal from Seaport Global Securities. Sunil Sibal: So I wanted to start off on your request for additional work hours at the site. I was curious, is that kind of based or baked into your base construction schedule? Or does that kind of accelerate that from the base schedule? Matthew Schatzman: Thanks for the question. The 24/7 contemplated in the original EPC. It was an option and it's something that Bechtel could call on if they wanted to use it. And I think that's what they're doing. They want to maintain the current schedule, and they want the flexibility to utilize 24/7, and that's what we requested at FERC. How they end up utilizing it and how many people they actually use is up to them. But I wanted to make sure it was clear to the market that this is not an incremental cost to us. This is something that was already baked into the EPC. And I think it's a positive sign that shows we have -- although we are already ahead of schedule, we haven't even utilized all the potential capabilities of the 24/7 schedule to further accelerate. I'm very optimistic that Bechtel is going to remain ahead of schedule at this point. And I think by adding the 24/7 optionality, that gives us even more confidence. Sunil Sibal: Okay. And I think you mentioned DPA in your prepared comments. So I was curious what seems like that's primarily related to accelerated permitting or there are other kind of potential levers that gives you or other LNG developers in your view? Matthew Schatzman: Sorry, I missed the first part of that, referencing what... Sunil Sibal: The Defense Production Act, the invocation? Matthew Schatzman: Yes. Yes. I think we'll have to see exactly how this impacts the timing. But clearly, what we've seen recently are some changes in the way FERC has handled some of the current requirements such as the prefiling waiver for VV, which I view as very positive. That may only apply in certain circumstances. It's something that we're currently in discussions with FERC on, and we're waiting to hear additional guidance. But clearly, the Trump's memorandum regarding the importance of LNG, along with other energy infrastructure in the U.S. to energy security during this period of time, especially with LNG for our allies, I think is a very positive sign and suggests that we're going to see these things move very rapidly relative to even what we've seen in the past couple of years under the first couple of years of the Trump administration. Sunil Sibal: Got it. And then just a clarification on some of your comments. So I think you mentioned that as far as Train 6 is concerned, construction cost is kind of in line with Train 5 plus inflation. And then you also commented that based on where the supply/demand for long-term contracts is that, that market has strengthened. So I'm kind of curious when you think about your project, say, Train 6, between these 2 factors kind of interplaying, do you see improving returns on investment on the project versus where things were Train 5 -- for Train 5 last year? And then how are you seeing in terms of the demand for additional cargoes, is that primarily Europe, Asia? Any color on that in terms of your discussion so far? Matthew Schatzman: Yes. On the second part, you're talking about the long-term demand? Are you talking about for the excess cargo? You said additional cargoes. You mean for long-term SPAs? Or are you talking about for the short-term cargo sales? Sunil Sibal: Actually, both. Matthew Schatzman: Okay. All right. So first off, the economics for Train 5 were extremely good, and we expect the economics for Train 6 to track closely to the economic outcome for Train 5, again, adjusted for inflation. And we still have to price up the EPC contract. And we likely won't do that until we're confident that FID is within months of that. And it's all dependent on how long we can get price validity, but it's tended to be about 90 days or so at most. But inflation, we have to monitor it. It's inflation, it's interest rates are the 2 main factors that are going to impact the project cost, inflation on the EPC, obviously, interest rates on the financing costs and interest during construction. Both of those appear to be okay right now, but we'll have to see. We've had some early discussions with equipment providers for the main equipment. I've been very pleased, very optimistic that we're not currently seeing the same sort of constraints that we saw back last year as far as timing. But we're not planning to FID until second half of next year. So a lot of things can happen between now and then. But at least in the interim, what we're seeing right now, I should say, things are tracking, I think, very positively. As far as the demand for the LNG, I think it's the same group that we saw for 4 and 5. It's Asia, Middle East, not seen as much out of Europe as far as long-term contracting, but still a lot of interest from major intermediaries that sell into Europe and have markets into Europe. But Asia and I think Middle East, especially look like they're going to be players in the next phase of RGLNG's expansion. In the shorter term, I'd say it's a combination of Europe and Asia. Operator: The next question is from Wade Suki from Capital One. Wade Suki: Just thought maybe just dovetail a little bit on Sunil's question, maybe expand a little bit on kind of cost inflation. I know we're not going to maybe get word until next year. But labor running a little hot, maybe you could speak a little bit to kind of the various equipment components, electrical, kind of just thinking about other Gulf Coast projects progressing. Now we have rebuilding, reconstruction going -- well, hopefully going abroad with all the damaged facilities. Just wondering if you can kind of speak to those items as you see them today. Matthew Schatzman: Yes. Inflation appear -- you've seen the most recent numbers that came out. Inflation appears to be heating up a little bit, but over time has been relatively modest. Again, we would expect the EPC cost to go up by at least inflation. A large part of our EPC since we're stick built in the U.S. is going to be labor. Labor does tend to be a little bit higher than inflation, although this past year, it wasn't much above inflation. We all monitor this closely, not only for the EPC, but for every year, we have to look at our own employees' costs, and we want to be fair. So I think at least right now, it's not a worry, a major worry, but we'll see how things progress over the year. As far as equipment, again, as I said, I've been pleasantly surprised at this point with the feedback we've received from our major suppliers as far as the expected availability for equipment for Train 6, 7 and 8 and the timing of when we'll be able to receive that equipment. As far as the cost, that will be determined once we price everything up for the EPC contract. I do expect electrical equipment to continue to be in high demand, not just for LNG, but obviously for data center build-out and power generation. So we'll see how that comes in. But I would expect that any sort of cost inflation that we're going to see will likely be offset by contracting -- price contracting. And again, we're not seeing any sort of -- we're not seeing the same sort of price increases that we saw after the pandemic prior to Phase which was fairly substantial. And then as you recall, between Phase 1 and Train 4 and 5, we had about a 10% increase, and there was a 2-year spread there. So it was running closer to 5% per annum as opposed to the current inflation. But that tracks pretty closely with what we were seeing in inflation. And obviously, some of the equipment stuff got really, really hot, especially around turbine orders, et cetera, that became the constraints as far as schedule and delivery of the project. Wade Suki: Great. Appreciate the color there. You kind of walked right into my next question, Matt, just to what extent these might kind of influence, if at all, long-term SPA pricing. And always appreciate your broader thoughts or insight -- whatever insight you could give us on what you're seeing out there with regard to kind of leading-edge rates. That would be great. Any color would be awesome. Matthew Schatzman: Yes. Look, I think the market for LNG is between $2.50 and $3 on a fixed fee basis, 150% Henry Hub in that range. And I think it depends on the returns you're going to receive are going to be dependent on whether or not you're running a brownfield project or a greenfield project. The greenfield projects, I think, need higher contracting prices in order to get off the ground. If they go lower than and compete with the brownfields like us, I think they're going to have to get their upside through expansion. If they don't have a lot of expansion capability, I think it's a challenging market from an equity return perspective. Clearly, as you guys have seen for our Train 4 and 5, we are -- we tend to not be on the lower end of the market. We tend to be, I think, in the mid-range of the market, kind of the true market price if you look at it from a bid offer perspective. And that's where I expect we will be or close to that for Train 6, 7 and 8. Operator: The next question is from Craig Shere from Tuohy Brothers. Craig Shere: Is your nat gas sourcing team fully in place now? And you've talked about hedging out some of the initial commissioning cargoes and that you expect $3 plus netbacks net of your feedstock costs. Could you, by the end of the year, make any more formal announcements, not just on the sales side, but on the purchase side and what you're doing there? Matthew Schatzman: Yes, that's something we'll take into consideration. We've been active on the supply side for a long term, and been working on that, and I expect that we should be able to give an update as to what we've done on a long-term basis. In addition, some of our customers have to give us notice before the end of the year as to their willingness to sell us gas under long-term contract prices. So either later this year into the year, maybe in the first quarter, Craig, we can provide some guidance as to what we -- on a basis, a year or greater. I think that will be a good update. So thanks for the steer. As far as the team, together nicely. So we already had a gas supply team in place, but we're building out the short term, what I'll call the trading and optimization team. They'll be managing our gas supply for us, and we expect to have them definitely in-house completed before we have to start introducing gas into the facility, which will be later this year. Craig Shere: Great. And you mentioned about this 24/7 construction that Bechtel officially kind of was the one who asked for it, and it's their discretion how to use it. Maybe you could just speak to their incentives by individual train or by individual FID, they may -- depending on how well things are going overall, may not necessarily make more money or incentives to accelerate further versus where they're already tracking. But when you think about a -- well, now already 5-train project moving on to 6 and more that perhaps even if they slightly increase their costs that you don't have to pay for, that their NPV building out 6 to 8 trains over time could be higher and that they're still incentivized to maximize this under most conditions. Could you opine on that? Matthew Schatzman: I think what I'd say simply, Craig, is that without getting into the details of the commercial arrangement, which I don't believe we have disclosed, what I would say is that Bechtel is highly incented to deliver substantial completion of each train prior to the guaranteed substantial completion date and that there is value there that I think can more than compensate them for an increased labor cost if they choose to use it. There's also, as you know, guarantees. I mean, we're nowhere -- at this point, we've already said and guided that we're nowhere near that guaranteed substantial completion date as far as the delivery of the trains. But they want to make sure that they achieve prior to guaranteed substantial completion because if they went past it, which, again, we're nowhere in this realm, there are key pole mechanisms and damages associated with that. So there's a bunch of different incentives for them to ensure that they deliver the trains on schedule, and there are more incentives for them to deliver them ahead of schedule. Operator: The last question is from Alexander Bidwell from Webber Research. Alexander Bidwell: Just wanted to, I guess, piggyback off some of the prior questions around Phase 1 construction. With the projects tracking ahead of schedule, could you walk us through the path to maintaining that momentum as well as any avenues that could further accelerate the project schedule? Matthew Schatzman: Yes. I think it's -- importantly, it's execution. We don't currently have any concerns about equipment and supply chain. That appears to be going very well. So we haven't seen any major impact associated with the conflict in Iran impacting that, which is good to see. I think the key here is we'll continue to provide you updates each quarter. You will see the progress from the standpoint of the construction. You note that where engineering is effectively complete. Procurement is effectively complete for Phase 1 or close to it. So it really boils down to execution at the site and building it. 4 and 5, again, further out in the future, but you should expect to start seeing steel foundations being finished up this year and hopefully steel erecting at the trains. We've already talked about the pilings for Tank 3. I hope to see that progress for Train 4 as well this year. But I think it really boils down to execution. There's really -- there's not one thing that we're specifically looking for. As far as the construction, it's just ongoing, continuing to do and execute what Bechtel has been able to do so far. The next phase, though, I think, is of equal importance, and that is the commissioning phase. You'll see gas being introduced in the facility this year. You should expect to see that. We'll be working on the warm side of the facility there. We're working on the flares, and we'll be working on the gas processing side of it. The cold side, you're going to -- you shouldn't expect to see that until next year when we start to start running compressors and start testing. And then start hopefully producing LNG, as we said, in the first half of 2027. We haven't provided any specificity on which month that's going to be. I hope to be able to provide some additional guidance on that later this year as we continue to progress with Bechtel and we get a better indication of when that's going to occur. And then, of course, once we get through the commissioning process, which I think I've told the market that we're doing with Bechtel, our operations team is seconded into Bechtel for the commissioning so that we have a seamless handover at substantial completion. Our team will have already worked on operating the facility during the commissioning with Bechtel, which we think is best practice. That should happen -- that will happen at substantial completion, which again is tracking ahead of guaranteed substantial completion which currently, I think we've guided is the fourth quarter of next year. So those are the key components. We've been very -- we believe and continue to try to be conservative in our guidance to the market because this is our first train. We are -- we've been around the block on this and other projects. We know how these things work. So far, everything has gone extremely well. We would anticipate based on how well Bechtel has done building the facility that we expect the commissioning and handover to go extremely well also. But we're not planning for the best, hoping for the best. We're going to plan for expected disruptions as you typically see when you're starting a facility, especially a new one. We will learn lessons from that. And then we would expect Trains 2 and 3 to go even smoother because we'll learn from Train 1 commissioning and startup. So I think these are the key components. And again, we will continue to update the market as we can with more details on when that facility is going to -- when Train 1 is going to start up, when we expect to produce first LNG and when we expect to load our first cargo. And then the spread of timing between Train 1 and Train 2, Train 2 and Train 3. Alexander Bidwell: All right. Appreciate the color. And then just, I guess, real quick on the shipping side. I was wondering if you could provide any additional color on your plans around shipping capacity. I understand you guys have some vessels set to be chartered in, but is there any plans to expand or add additional vessels to handle the merchant book? Matthew Schatzman: Yes. We have 5 vessels under charter, 3 long-term charters that are utilized for our Guangdong DES deal. We've chartered those from Dynagas. There are 3 new vessels. In fact, the first one just sailed yesterday from the Hyundai shipyard. I was there on Tuesday and took a tour of the vessel. It's a phenomenal piece of kit that Hyundai has built for Dynagas and Dynagas has designed. We have 2 more of those coming this year. And then we have 2 more vessels that we've subchartered. All of these will be used for our commissioning process for Train 1, and then we'll start utilizing those larger ships that we have -- that are being built for us to deliver to our long-term market in China. We will likely run a DES-type business for our excess cargoes. We believe that being able to do a delivered-ex-ship business for our excess volumes provides additional flexibility and optionality and should increase the value. So we do anticipate chartering more ships on a short-term basis for Phase 1 volumes above the firm volumes that we've already sold. And then for Train 4 and 5, we are looking at additional capacity potentially on a longer-term basis due to the fact that we currently, as you know, haven't sold all of our firm capacity out of those trains. However, as Mike mentioned in his comments, should we decide to sell more of that capacity a year or 2 from now, depending on how the short-term market goes, that may reduce how much capacity we would need under a longer-term basis. So we're going to be very mindful of that and make sure that we don't overcontract capacity before we need it. But we will be chartering more ships, simply put. Operator: That concludes our call today. Thank you for joining and for your interest in NextDecade.
Operator: Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Black Diamond Group First Quarter 2026 Results Conference Call. [Operator Instructions] I would now like to turn the call over to Emma Covenden, VP, Investor and Stakeholder Relations. Please go ahead. Emma Covenden: Thank you. Good morning, and welcome to Black Diamond Group's first quarter 2026 results conference call. With me this morning we have Chief Executive Officer, Trevor Haynes; Chief Financial Officer, Toby Labrie. Chief Operating Officer of Modular Space Solutions, Ted Redmond, Chief Operating Officer of Workforce Solutions, Mike Ridley; and President of Royal Camp Services, Jon Warren. Please be reminded that our discussion today may include forward-looking statements regarding Black Diamond's future results and that such statements are subject to a number of risks and uncertainties. Actual financial and operational results may differ materially from these forward-looking expectations. Management may also make reference to various non-GAAP financial measures in today's call such as adjusted EBITDA or net debt. For more information on these terms and others, please review the sections of Black Diamond's first quarter 2026 management discussion and analysis entitled Forward-Looking statements, Risks and Uncertainties and non-GAAP financial measures. This quarter's MD&A, financial statements and press release may be found on the company's website at www.blackdiamondgroup.com and also on the SEDAR+ website at www.sedarplus.ca. Dollar amounts discussed in today's call are expressed in Canadian dollars, unless noted otherwise and may be rounded. The format for today will be similar to prior calls. Trevor will start with a high-level overview of the company's performance and highlights from the quarter, including our view of the current and forward-looking operating environment. Trevor will then pass the call over to Toby for a more in-depth summary of the financials, including details of the quarter, and then we will open the line for question and answer. With that, I'll turn the call over to Trevor. Trevor Haynes: Thank you, Emma. And good morning, everyone. Thank you for joining our earnings conference call today. Yesterday afternoon, Black Diamond Group reported our first quarter 2026 results, showcasing continued stability across the platform. Consolidated revenue of $130 million increased by 27% with adjusted EBITDA of $32 million, up 21% in the comparative quarter. These results are inclusive of contribution from Royal Camp Services, which was acquired in November of 2025. Consolidated rental revenue increased 16% year-over-year to $43.8 million, driven by disciplined capital allocation for organic fleet growth, optimal and steady utilization and moderate rate improvement. Contracted future rental revenue totaled a robust $142.5 million at quarter end, which we continue to view as healthy and supportive of activity levels as we progress through the year and into the next. This trend of compounding performance across the business is not only a result of our well-defined growth strategies and strong leadership across the platform, but also the ability and character of our high-performance teams. Thank you all for your dedication to safety and serving our customers, disciplined focus on execution and relentless commitment in creating value for our stakeholders. Total capital expenditures were $16.8 million, consistent with the comparative quarter and capital commitments at quarter end totaled $26.5 million, largely allocated toward contract-backed asset additions. The organic reinvestment in the business underscores our commitment to putting our shareholders' capital to work prudently and in a manner that garners the highest rates of return. Given this, we will maintain our disciplined capital deployment approach and further scale our fleet in line with end market demand. Beyond organic growth of the business, the company is also well positioned to take advantage of all capital allocation mechanisms at our disposal, including accretive inorganic opportunities, debt repayment and return to shareholders through dividends or share buybacks. Our recent expansion of the asset-based lending facility to $550 million from $425 million with an uncommitted accordion of $75 million at preferred terms ensures we have the financial flexibility to continue scaling business. Looking ahead, our outlook remains constructive, with convexity of optionality across the business. We continue to see stable baseline performance across all our operating businesses underpinned by high-margin recurring rental revenue and generally healthy end market dynamics across Canada, United States and Australia. For WFS, the breadth and volume of opportunities in our pipeline suggests that nation-building thematic in Canada is indeed a substance and the pending impact of asset deployment on fleet utilization is a matter of timing. We remain bullish on our ability to unlock the significant operating leverage in this area of the business, but caution a realistic assumption on the timing of this scenario. MSS remains a resilient cash-generative business with clear runway for growth, underpinned by strong fundamentals and tailwinds in the infrastructure and construction verticals. While U.S. public sector education funding uncertainty has impacted the cadence of new sales, we expect this to stabilize moving forward. Finally, we are encouraged by the exponential growth trends we're seeing in LodgeLink. This performance reinforces its accretive potential which we expect to compound as the platform moves toward general availability of its new generation 3.0 product as we exit 2026. To summarize, we are pleased with the results of the company in the first quarter and expect similar steady near-term performance to carry through the first half of the year with the potential for a more pronounced acceleration in the back quarters with strong financial flexibility, disciplined capital allocation, best-in-class operational execution and a growing base of high-margin rental revenue, we are well positioned to continue compounding value through 2026 and beyond. With that, I'll now turn the call over to Toby. Toby Labrie: Thanks, Trevor, and good morning, everyone. I'll focus today on the results of our segments, margins and balance sheet. First, I'll address earnings per share for the quarter while EPS declined $0.06 from the comparative quarter, the decrease was due to several circumstantial factors versus any indication of eroding business performance beyond its typical episodic nature as shown through our growing consolidated revenue, EBITDA and cash flow. First, the impact of depreciation and amortization related to the acquired Royal Camp business had a $0.075 impact on EPS. EPS was also impacted by shares issued in conjunction with the bought deal and acquisition of Royal Camp services last year, higher stock-based compensation due to the increased share price and moderated activity in the company's legacy WFS operations due to the prepayments of a large U.S. contract in Q4 2025, partially offset by meaningful contributions from Royal Camp and stable performance from MSS. With respect to specific business unit performance, I'll begin with Workforce Solutions, where revenue of $81.5 million increased 54% and adjusted EBITDA of $18.9 million was up 48% from the comparative quarter, driven primarily by large services growth and contributions from Royal Camp services. Utilization for the segment was 56.5%, leaving meaningful available fleet capacity as we look to significant opportunities on the horizon. MSS generated rental revenue of $26.8 million, up 5%, with adjusted EBITDA of $19.4 million, consistent year-over-year. Utilization remained within the optimal range at 77.7% and average monthly rates increased 3% on a constant currency basis. We continue to see strength in our value-added products and services with VAPS revenue increasing 35%, driving VAPS as a percentage of rental revenue to 10.8% which continues to be an important focus and driver of margin expansion. LodgeLink delivered a strong quarter with total trade value of $32.7 million, an increase of 52% generating net revenue of $3.7 million, up 37% and total travel segments increasing 15% to 154,979 from the comparative quarter. From a balance sheet perspective, net debt at quarter end was $330.7 million, with net debt to trailing 12-month adjusted leverage EBITDA of 2.1x remaining at the low end of our target leverage range. Liquidity at quarter end was $93.3 million prior to the $125 million expansion of the ABL facility, providing flexibility to support further growth. The average interest rate paid on debt during the quarter was 4.21%, which was 62 basis points lower than the comparative quarter as benchmark interest rates are lower year-over-year. Business' ability to generate stable and growing free cash flow supported by a strong balance sheet remains a defining characteristic of Black Diamond. In the first quarter of 2026, we generated $17.8 million of free cash flow, representing a 5% increase from the comparative quarter. We also continue to make progress on the ERP implementation. Total investment to date is approximately $9.3 million with roughly $2.6 million remaining. Project is on schedule with this phase of MSS and corporate scheduled to go live in the current quarter. To reiterate Trevor's comments, we remain confident in the performance of the business. The near-term outlook is steady from these first quarter results with meaningful improvements expected in the second half of 2026 due to seasonal education and construction sector related activity. We continue to gain confidence in a further potential positive inflection point beginning as early as late 2026 aligned with progress on major nation building, infrastructure and resource projects in Canada. While the timing of large-scale construction project starts often extends beyond initial expectations, their extended duration once underway, has historically provided durable multiyear demand that we believe we are well positioned to capture over time. With that, operator, I'll ask you to open the call for questions. Operator: [Operator Instructions] Your first question comes from the line of Kyle McPhee from ATB Cormark. Kyle McPhee: I just want to start on the workforce demand wave on the way here. I'm hoping you can help us quantify some of the upside potential here. Do you expect to be able to start utilizing all of your unutilized camp fleet assets over the midterm? Is the demand coming down the pipe enough to soak up all of your excess suite notably when you layer in your odds of winning a chunk of this business on the way. Trevor Haynes: Kyle, thanks for the question. The simple answer is yes, although there's many factors involved. Certainly, what we're looking at here, from my perspective, having been involved in remote accommodation business for a better part of 40 years. I don't think I've ever seen a pipeline of active project bidding like we have today. And by that, I mean the breadth of what we're seeing certainly across pretty much every type of mining across the country as well as energy infrastructure basically coast to coast and across the north when you pull in the Canadian military initiatives. So from that perspective, we're very optimistic, and it's based on what we're seeing in our pipeline. When we add up the number of beds of demand when we think of everything that we're quoting to, it does exceed the available capacity. We've got about 6,000 beds of ready-to-deploy assets. So then we have to get into the nuance of, well, which projects go ahead in the near term and in what combination and how do we align. I would say, Mike, we're really well positioned with regard to our First Nations partners, our relationship with customers, et cetera, et cetera, our capabilities. Maybe add a little bit more granular color. Michael Ridley: Yes. I mean, if and when these go, whether FID is later this year or early next year, Trevor's point with some of our partnerships that we have in Western Canada, in particular, we're very well positioned and poised to win our fair share of work. And even beyond these nation-building projects, the sales pipeline in all of our markets right now is very, very active. When you look at mining in Eastern Canada, for example, even in the West, construction, government spend, disaster relief, homelessness, oil and gas in the Duvernay and Montney is also very active. And then moving down into the U.S., solid oil and gas sector, construction, everybody's talking about data centers these days and what they bring and benefiting potentially for Black Diamond, not only our workforce business, but we're very active with our MSS business on data centers as well. And then over in Australia, again, a really strong resource sector, construction, government, education. So yes, I would agree with Trevor's comments around -- I've been in the industry since '97. And in terms of what the sales pipeline looks like it's as strong as I've ever seen it. Trevor Haynes: As much as we talk about the timing with regard to major projects and sort of the front-end ramp-up characteristics of those projects. It's important to point out, there's many smaller projects around mining, et cetera that are mobilizing now. So there isn't this sort of gap we're looking at before the bigger projects pick up, and that's what gives us the confidence of current operating levels, Jon, anything to add from the Royal perspective. I think quick to point out to investors, we now have the full menu so to speak, of providing catering along with assets. So the opportunity is even bigger. Michael Ridley: Yes, definitely. The timing is the key thing. Even with some starting what's coming off and how do those roll into the other projects, I think that will be a big part of it. So -- and then as far as the operational side goes, ramping up for that, I think we have good opportunity to roll the operations into those different projects as they come on. Trevor Haynes: To summarize, Kyle, we really like what we're looking at in our opportunity pipeline. We're very active, and we do believe we're really well positioned with the great Royal team and platform added to the Black Diamond capabilities. So we just need the thematic to evolve over the next months, and we believe we'll see activity gradually climbing. Kyle McPhee: Okay. That's a lot of good color. Really appreciate it. Trevor, you mentioned you add up the total potential pipeline of sector-wide bed demand. Can you share what that kind of total pipeline number is, sector-wide? Trevor Haynes: Well, it's complicated because you get some elements of duplication where you have multiple subcontractors bidding on the same pipeline project, et cetera. So it's difficult for us to comment. I would say it's netting out of that, I mean, we're well in excess of $1 billion of high-quality outstanding bids, that's being somewhat conservative. I'm sure you can get read-throughs from some of our general contractor customer partners and what they're looking at and how they talk about their bid pipeline, et cetera. I think ours would chime with theirs. Kyle McPhee: Yes. And I'm not even just talking specific to Black Diamond. Just if all projects in the pipeline come to fruition sector-wide, how many more beds are needed. I think some of your peers are kind of softly indicating 10,000 to 15,000 more beds, maybe more, does that sound ballpark accurate? Trevor Haynes: Certainly. I think it's a scenario if all of these large projects go ahead, most of the existing beds, you can decide who wins prime contracts, et cetera, and how we organize amongst the industry. But pretty much everything existing will be needed to go out. And then we get into a question of been a long time since any meaningful capacity has been built for remote accommodation in Canada. So what is the capacity of the supply chain, and it's sort of an open question. But what we want to focus on currently is making sure we're positioned to service our customers on the immediate opportunity, and we've got a reasonable amount of capacity to match with that. And as we work through it, we'll start taking up -- the question of how to strategically add capacity if that's what's needed. Kyle McPhee: And do you expect this type of demand to benefit your MSS segment as well. I mean you just briefly mentioned the U.S. data centers might benefit both segments. But all these big infrastructure projects across Canada. Is that WFS beneficiary only? Or do you expect it to be meaningful for MSS? Trevor Haynes: No, it's absolutely an opportunity for the MSS platform as well. All of these remote locations also require the temporary project office, hard wall laboratories, security, training buildings, all over these project sites, and then areas of infrastructure build that aren't remote and don't require or not to the extent that the truly remote projects do require temporary accommodation for trades, they still require the site infrastructure for all the various types of temporary buildings. So we think the thematic applies to both MSS and WFS. And then, Ted, when we look at the U.S. side for MSS, the data center opportunity is much bigger for our BOXX Modular platform than for our workforce platform. And maybe bit of color on that, Ted. Edward Redmond: Yes. These data center projects are large construction projects. The data center trend has been going on for 10 years, and we've been participating in it over the last 10 years. What's changed is the dollars being put into it have increased dramatically and I think there's well over $1 trillion of data center projects in the U.S. So we're participating in this growth. We've got long-term contractor customers who were renting construction complexes too to house their construction staff. And once you get on a project to keep adding in more buildings on the sites that they have. So once you get on a site, your buildings stay on for quite a long time. So we're currently on a significant number of data centers, and we think that, that's going to continue. Trevor Haynes: If we switch back to the Canadian nation building thematic, any -- in Ontario, Darlington, et cetera, boost infrastructure and around our major cities, high-speed rail. This is all right down the fairway for MSS, Ted. Edward Redmond: There's almost $1 trillion of Canadian infrastructure projects, all the ones Trevor mentioned. And we're strong in the Ontario market. We're already working on a number of those infrastructure projects and bidding on the ones that are coming forward. Operator: Your network question comes from the line of Frederic Bastien from Raymond James. Frederic Bastien: It's been, I guess, nearly 6 months that you've had that Royal has been under your ownership. Can you just indicate how well the acquisition is going? Is it going as planned? Any anything that we -- you can point to that would help in our modeling as well. Trevor Haynes: The integration until we've done close to 35 acquisitions, many great outcomes. I would say so far with Royal, it's probably the quickest and most seamless integration from a people perspective. Really great alignment. The Royal team are really good solid group of professionals, and it's fit in well with our team. So we're already working in concert on the commercial side. And looking at all the assets as one asset pool as we match up against opportunities. So from that perspective, it's gone well. Some of the synergies, I think, Mike and Jon we've replaced external caterers with Royal to a really positive effect and picked up an element of margin in operated facilities. And it takes a bit longer on the system side for switchover of ERP, et cetera. But I would say, from integration, that's the work that's left to do, but a big risk of whether or not the businesses have good social fit, I think, is pretty low. Jon, maybe you can. Daryle Warren: Yes. I honestly couldn't see it pulling any better. The 6 months has just flown by. It seems like it was yesterday, but it seems like it was so far back. The teams just came together in every department very well. Our IT is fully integrated now. We're on the Black Diamond platform doing very well. The catering operations at Sunset Prairie. We're getting great accolades there, as you mentioned, now we're getting that margin. So we moved into a couple of drill counts as well, and we're working together on that. And then the cross-marketing the platforms, Trevor was speaking about and how we can bring MSS into workforce, and we've got several units that are in place in different locations. Very happy with that. Trevor Haynes: I think the exciting part is being able to bring the full turnkey across the Black Diamond platform and the asset platform to the Royal platform. The upside is in the new revenues we should be able to capture that would be more difficult on our own. Hopefully, that addresses your question, Frederic. Frederic Bastien: Yes, that's helpful. Could you address seasonality of the business? How do we think about historically as we go into the spring breakup, things slow down with respect to energy services company, how is Royal similar to that or not similar? Trevor Haynes: When you think about the energy sector, the way it works today is much different than the old shallow drilling days. I mean we see less and less seasonality, but I'll let Jon and Mike comment on that. Daryle Warren: At some of the open camps, we do have the drilling rigs that do quiet down for pretty much the month of April. But it's also the start of turnaround season. So -- but we lost in drilling, we gained a turnaround and right behind that international. Trevor Haynes: Turnaround at the oil sands. Daryle Warren: Yes, the oil sand side of things. So -- and we're starting to see the rig starting to come back in May. So it was a very short break up. It's not like it was 10 years ago or 15 years ago, where it would be a 3-month season, it was very quiet so. Trevor Haynes: Quick to point out a lot of the Royal revenue comes from long-term operating cams, where Royal is providing the turnkey service, a good deal of that is mining related. Daryle Warren: And mining very, yes, constant. It doesn't really have a season where it slows up. Trevor Haynes: So a little less seasonality, Frederic currently and going forward is our expectation. Michael Ridley: And just one other -- I feel like I talk about it every quarter is just, again, our core strategy in being more diversified and not necessarily focused on oil and gas, I think it really balances out the year very nicely in terms of the type of work that we're focused on in all sectors where it is much less seasonal than it was to Jon and Trevor's point years ago. Frederic Bastien: Awesome. And one more for me, please. MSS, obviously, you have grown this business through acquisition in the past. You were busy on the workforce side last year. You also did an acquisition in LodgeLink. How's the M&A landscape looking for that particular space rentals business? Trevor Haynes: Yes, we maintain healthy pipeline, as you know, ebbs and flows, the number of platforms that are looking to sell. Also, we have competition. So we start to predict when and whether we're able to complete something, but we're always working on it. And I think we've got a pretty good reputation in our industries as good buyers. I would point out on the MSS side, the industry is more and more consolidated. And so there's just fewer pieces out there. And so our first means of growth is organic and where we have strong end market demand. We're leaning in, it's a lower risk, actually higher return debt way to grow. And if we can augment that with some tuck-ins, we'd be very happy. I don't know if there's anything you would add there, Ted. Edward Redmond: Well, we're putting out a significant amount of capital over the last 5 years. And our target is to have good, strong organic growth. So we've got a whole series of growth strategies we're working on around that. And we're definitely looking for opportunities in all of our markets where we've got high utilization by customer demand, and we just -- we try to make sure that we have the fleet available to meet that customer demand. Trevor Haynes: We've got the dry powder to transact. So for all the analysts on the call, maybe not your investment bankers to bring us some fantastic ideas. Operator: Your next question comes from the line of Razi Hasan from Paradigm Capital. Razi Hasan: Maybe just one on the gross margin. Could you maybe give us some indication on how you see gross margin levels through the remainder of the year? Trevor Haynes: Thanks for the question. I think let's go straight to you, Toby. Toby Labrie: Yes. Thanks, Razi, for the question. Our margins within our existing revenue streams are -- continue to remain fairly consistent. We expect those to remain fairly consistent. So the biggest fluctuation you'll see is generally with the revenue mix itself. And so as we have higher rental revenue -- rental revenue being our highest margin business, lodging kind of following up as the second and then our nonrental being the lower margin business. So as that mix changes from quarter-to-quarter, you'll see changes in our overall margin levels. So with Q1 being relatively late on sales and nonrental seeing a bit higher gross margin levels overall. And as we see higher sales volumes and higher overall revenue typically in Q3 when we have more education, sales and nonrental-related activity, in particular, we tend to see a bit our overall margins dropping a little bit. But overall, on a full year basis, we expect things to be pretty consistent year-over-year. Razi Hasan: Okay. That's helpful. And then maybe just one more. I think you mentioned earlier, Trevor, just in regards to having a realistic time line for capital deployment on nation-building projects. Could you maybe talk about how you think utilization levels in the workforce segment carry through for the remainder of the year, you're at 56.5% or so now. How do you see that ending by the end of the year? Trevor Haynes: Yes. I mean that's something we look at and try to forecast out here. It's not an exact science because even when projects go to field level execution, and we expect a few -- that are in the headlines to move forward this year. The front-end work of preparing sites and starting to move the initial capacity for housing trades. There's a ramp-up element to it. Some of these locations are complicated, impacted by weather and various restrictions on action, et cetera. So what we expect to see is being able to give indication that we are mobilizing on larger projects, and then you would see operations type of revenue upfront as we begin to move assets in place and then a ramp-up on each project as the capacity grows to peak demand alongside of the number of trades that are going into the site. That isn't exactly a 1% increment, they do go out in blocks. And so you're going to see these sort of staircase step changes in utilization as we progress to a higher utilization run. So I'm not sure if that's a very precise answer for you, but that's the way we think about what happens over the next 3, 4, 5 quarters here. Operator: The next question comes from the line of John Gibson from BMO Capital Markets. John Gibson: When we think about unused capacity out there for workforce, you and your peers report in the mid-50s utilization, but based on increasing work in labor housing requirements is most of this equipment able to go back to work or could we reach a point where we maybe need new build workforce holding more quickly than expected? Trevor Haynes: John, thanks. To begin with characterizing the condition of our unutilized fleet, our view is that when we talked about 6,000 beds of capacity that essentially all of that is in market-ready condition. There's always a little bit of work as we assemble them, an air conditioner might not turn on or something, and so we have a little bit of maintenance capital. So we do believe that the fleet is ready for market. As we said earlier, based on what we see in the pipeline there are scenarios where demand could exceed our internal capacity. We think we've got arrangements in place that would allow us to access other equipment existing in the market, be able to meet demand prior to backing the decision of how to add new manufacturing capacity into our system or into our industry. So we kind of have a sort of a staged view of how utilization may exceed what we have available in our system. But again, our capacity is marketable with very little capital required to get it to market. If that's the primary question. John Gibson: Yes. I guess what I was -- that answered my question mostly. I just was wondering like, are we seeing a higher level of customization now that may require some new build equipment if not in your existing fleet more quicker than expected? Michael Ridley: Yes. I don't think much. I mean we are putting -- just to sort of add on the Trevor. I think the short answer is that most of our units are ready to go with minimal capital required to get into the market. Customization, project-specific with good term, good customers, good returns. We will certainly look at deploying capital in that regard -- some of our other asset types or subscribers are small format asset, we are adding capital in that area, 3-person sleepers, 4-person sleepers, self-contained units, drill camps. Not necessarily a huge piece of the pie, but we're putting capital into that to serve some of the changing dynamics in the oil and gas sector, for example, what the market is demanding. Trevor Haynes: And it's also because we're essentially fully utilized with those managers that were more streaming in the Montney. Michael Ridley: Yes. And with that, we're seeing reimprovement in that particular area as well. So yes. The base large-format fleet though is ready to go. Daryle Warren: Sorry, just going to mention the type of fleet that we have goes well with the demand, the layouts and such is exactly what is being asked for. Trevor Haynes: The private watch format. Daryle Warren: Yes. In combination of Black Diamond and Royal's fleet just mention it as well. John Gibson: No, that's great. That answers it. Second one, can you talk more specifically about military-related spending and how you're positioned, are you seeing demand on the WFS or MSS side and just, I guess, how are you positioned with government qualifications, that sort of stuff to win your share work there? Trevor Haynes: Yes. Interestingly, we've been spending time building relationships with Canadian military and government procurement staff, say, 4 years Emma and also handles our government relations. So we've positioned ourselves quite well with our security clearances and certifications, et cetera, we did create a new corporate entity called Black Diamond Defense Services based in Ottawa with the skill sets for being able to effectively interact and those customers on the specifics of what they need. And so when we think about that, it's opportunity for all 3 businesses and assess WFS as well as LodgeLink. And with various partners to take on expanded scope to provide larger turnkey contract outcomes for Canadian military. We're running in parallel or some opportunities that are moving forward quite quickly. And so I think, like Jon, we're going to see project deployment of some magnitude, likely over the next 6 months will show revenue from military. Daryle Warren: Yes. It's -- we've got a project we're working on right now that potentially is looking good for Q3 for deployment and operations to handle workforce accommodations on one of those projects. Trevor Haynes: Infrastructure build and it should be 5, 6, 7 years. So short answer, we've been working on it for a while. We're positioning as best we can, and we've got real opportunities in that vertical. John Gibson: Okay. Great. Appreciate that. Last one for me. I'm not sure if you can answer this. But what percentage of your U.S. business would be data center levered now? And where does this get to over the next few years? Trevor Haynes: I'm not sure we have that on hand, Ted, but maybe you do. Edward Redmond: Yes. I don't have an exact number for you. I think it's increasing part of our business. Our business is very diversified. We're in many of the major markets in the U.S. Southwest and the U.S. East, those cities have a lot of different projects going on them, data centers, are not uniformly distributed. There are some states where there's more data centers like Texas, and we've got significant data center activity in Texas. Other states are less data center friendly. So it is a much less than 50% of our construction activity in construction. If you look at our MD&A, you can see is only a portion of our total revenue. So it's a meaningful but and growing segment of our business. Operator: Your next question comes from the line of Vritti Munjal from Canaccord Genuity. Vritti Munjal: I'm filling in for Matt. You've indicated LodgeLink 3.0 is progressing towards general availability. Could you give us some color on the time line? And how should we expect the economics of the new platform relative to the current platform? Kind of more specifically, does it improve revenue margin structurally? Or do you see like more volume-driven benefits? Trevor Haynes: Yes. Thank you for the question. We're really excited about what's happening at LodgeLink. We've done a lot of work in positioning LodgeLink for its next phase, and we've been working at that as we've talked about 3.0 for the better part of 15, 16 months now. The new product, which is sort of a much more integrated, more dynamic type of workforce travel solution, it is really compelling. We're in -- we're just moving from pilot phase to advanced pilot. We expect to have the product in beta this summer and at a certain point this fall, I don't have an exact date yet. We'll see how beta goes. We expect to have general availability or GA. As we get there, there'll be a maturing of the revenue model that we anticipate will bring in a new type of user or revenue to add to the margins that we enjoy on the supply and through our intermediary partners. At the same time, our customer sign-ups, even prior to 3.0 availability have been really quite strong and retention of our largest long-term customers continues to be high 90s to 100%. So we've got lots of validation points that what we're doing is adding value in the ecosystem of demand and supply. And really, what we're doing here is really complicated itineraries moving large groups of people around. So we're really excited. We think we'll get to GA later this year. Quickly, the inflection point will show. Certainly, our KPIs will give a strong indication, but it is business-to-business sale and business to business sort of operational behavior will change for our customers' teams. And so there's an element of transition time line there. But we hope to have some really good data points to indicate whether the market -- product is hitting the market or the target market by late this year. Nothing has changed in our view about how large this addressable market is. We've got good traction in Australia, and we're looking more broadly at Asia Pacific and we just think this is going to be a tremendous part of our business as we continue to move through the next phase. So thank you for asking. Vritti Munjal: Yes, that's very helpful. Just one more for me. With regards to the Spencer Group integration this quarter, you -- the margin compression this quarter you attributed to Spencer Group corporate travel mix. Is 11%, 11.5% the right steady-state margin that we expect for LodgeLink? Or do you expect say, the crew accommodation business to reaccelerate and pull up the blended margin back to the 12%, 13% range we've seen before the acquisition. Trevor Haynes: The blended margin. If we look at the business without the Spencer revenues added, we actually had slight margin improvement that we would ascribe to elements of economy of scale as we're just handling more and more volume. When we blend in the more traditional travel management revenue streams, the margins are lower, but it's a profitable small business part of our LodgeLink platform. Mostly the intent was to get infrastructure, the IATA licenses, et cetera, to be able to grow our LodgeLink business in Australia. So why do I point that out? Because we anticipate seeing significant growth on the LodgeLink side, moderate growth on the traditional travel management. And so the margins even on a blended basis will increasingly be influenced by the LodgeLink side. So you should see gradual improvement as that mix changes based on the different growth levels of the 2 types of revenue stream. Hopefully, that makes sense to you. I don't know, Toby, if I explained that well enough. Toby Labrie: Yes. Yes, I think that's right. I think the -- you saw the margins blend down even though we were seeing margin expansion year-over-year. But as Trevor mentioned, as we continue to see that mix of revenue shift towards stronger growth on the accommodation side. We should see that on a sequential quarterly basis continue to improve. Operator: That concludes the question-and-answer session. I would now like to turn it over to Trevor Haynes for closing remarks. Trevor Haynes: Thank you. Thank you, everyone, for joining today. Once again, we're pretty pleased with how the business is operating. We think we've got a great deal of optionality as we look forward with a nice stable base and compounding our core business here. And thanks again to our teams across the platform for their great work. Hope everybody has a great day and a good weekend. Thank you. Operator: That concludes today's meeting. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to Magna International First Quarter 2026 Results Webcast and Conference Call. [Operator Instructions] I would now like to turn the conference over to Louis Tonelli, Vice President of Investor Relations. Louis, please go ahead. Louis Tonelli: Thanks, operator. Hello, everyone, and welcome to our conference call covering our Q1 2026 results. Joining me today are Swamy Kotagiri and Phil Fracassa. Yesterday, our Board of Directors met and approved our financial results for the first quarter of '26 and our updated outlook. We issued a press release this morning outlining both of these. You'll find today's press release, the conference call webcast, the slide presentation to go along with the call and our updated quarterly financial review all in the Investor Relations section of our website at magna.com. Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. Such statements involve certain risks, assumptions and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our safe harbor disclaimer. Please also refer to the reminder slide included in our presentation that relates to our commentary today. With that, I'll pass it over to Swamy. Seetarama Kotagiri: Thank you, Louis. Good morning, everyone, and thank you for joining us today. We appreciate your time and interest. Let's get started. Overall, I was very pleased with our strong Q1 2026 results, where we drove margin expansion with disciplined execution. In the quarter, sales were up 3% with weighted growth over market of 3%. Adjusted EBIT was up 58% with adjusted EBIT margin expanding 190 basis points to 5.4%, and adjusted EPS rose 77% to $1.38. We continue to demonstrate traction from our operational excellence initiatives across the company. Our robust cash flow reflects improved operating performance. We generated $677 million in operating cash flow and $372 million in free cash flow. In addition to strong earnings growth, our team did a great job securing additional commercial recoveries related to previous EV investments. Moody's recently reaffirmed its A3 credit rating for Magna and improved the outlook to Stable. We ended the quarter with a 1.5x rating agency leverage ratio, ahead of our expectations with $1.6 billion in cash on hand. Our 2026 outlook reinforces our confidence in our margin, EPS and cash flow trajectory. We continue to expect weighted sales growth over market of about 1.5% at the midpoint. We are reaffirming our prior outlook ranges for adjusted EBIT margin, adjusted EPS and free cash flow. While the situation in the Middle East introduces some uncertainty, we have a track record of navigating external disruptions, and we are confident in our ability to execute on what's within our control. Importantly, we expect to mitigate most cost headwinds over time. We remain focused on executing our proven capital allocation framework. We continue to invest in our business to support further profitable organic growth while returning $575 million in capital, including $440 million in stock repurchases to shareholders in the quarter. At the end of March, we had about 17 million shares remaining and available for repurchase under our NCIB. We plan to repurchase the remaining shares during 2026. We recently announced the margin accretive dispositions of our lighting and rooftop systems businesses. The transactions are consistent with our long-standing principles around portfolio management. We have highlighted in the past that we manage our portfolio using an objective set of criteria and regularly assess our product lines based on their addressable markets, market positions and returns. Specifically, we want to participate in meaningful or growing markets with stable or growing profit pools, strong or a clear path to strong market positions, profitable growth and sustainable competitive advantage. This has long been a key principle that ensures that we manage Magna for long-term success. The dispositions allow us to streamline the portfolio and focus on businesses that advance our long-term growth, margin and return objectives. The transactions are expected to close in the second half of the year. In our outlook, we have removed about $350 million of sales with minimal earnings and free cash flow impact. One example of our team's execution and innovation is the recent expansion of our hybrid driveline portfolio with the introduction of a dedicated hybrid drive for range-extended electric vehicles. The new system offers several advantages, including reduced size, weight and system cost, multiple operating modes and applicability across a broad range of vehicle segments. It underscores our commitment to providing OEMs with adaptable driveline solutions that support a wide range of vehicle performance and market expectations. Our team continues to partner closely with our OEM customers to deliver solutions that support Magna's growth. With that in mind, I would like to highlight a couple of recent complete vehicle EV program launches in Austria for China-based OEMs. This past quarter, we launched a second complete vehicle program for GAC. We also recently launched a third model, the P7+ for XPENG. Since September of 2025, we have now launched 5 vehicle models for these 2 China-based OEMs. More recently, we were awarded a fourth program with XPENG, which will launch later this year. This reinforces Magna's strong position in vehicle manufacturing and highlights the value of our flexible state-of-the-art production process, enabling fast-to-market, high-quality vehicles for any customer in the European market. Recently, Magna was once again recognized by Ethisphere as one of the world's most ethical companies marking our fifth consecutive year of recognition. This reflects our ongoing commitment to integrity, ethical decision-making and doing what's right, something we are very proud of. With that, I'll turn the call over to Phil. Philip Fracassa: Thank you, Swamy, and good morning, everyone. I will begin on Slide 19 with a summary of our strong first quarter results. Sales were $10.4 billion in the first quarter, up 3% from last year. Adjusted EBIT margin improved 190 basis points to 5.4%. Adjusted earnings were $1.38 per share, up 77%. And free cash flow was very strong at $372 million, up $685 million from last year. Each of these metrics came in ahead of our expectations. Now I'll take you through some of the details. Let's start with sales on Slide 20. First quarter sales were up 3% overall compared to last year. Excluding foreign currency translation, sales were down about 2%. Global light vehicle production declined 7% in the quarter. On a Magna-weighted basis, we estimate light vehicle production was down about 5%. This translates to 3% growth over market for Magna consolidated and 5% growth over market, excluding Complete Vehicles. Looking at the sales walk, foreign currency translation was positive $520 million or about 5%, driven by a weaker U.S. dollar compared to last year. Volumes, launches and other was relatively flat as lower light vehicle production, the end of production on certain programs, including the Ford Escape and normal course customer price concessions were largely offset by the launch of new programs, including the Ford Expedition Navigator, Mercedes-Benz CLA and Jeep Cherokee Recon and net favorable program sales mix. Sales in Complete Vehicles, excluding foreign currency, declined $172 million despite higher unit volumes. The higher unit volumes reflected new assembly programs and grants, including with XPENG and GAC, where sales are recognized on a value-added basis. Volumes with other customers where sales are generally recognized on a full cost basis, declined year-over-year collectively. This resulted in net lower assembly sales dollars. Engineering revenue was also lower, in line with our expectations. Now let's move to EBIT on Slide 21. First quarter adjusted EBIT was $558 million, an increase of $204 million or 58% from last year. Adjusted EBIT margin was 5.4%, up 190 basis points. Looking at the pluses and minuses, our largest benefit came from operational performance, volume and other items, about 80 basis points. This reflects continued momentum from operational excellence and other cost reduction initiatives. We also benefited from prior restructuring actions and favorable net foreign exchange gains. These positives more than offset the impact of lower organic sales and unfavorable mix. Equity income contributed around 70 basis points in the quarter, reflecting a favorable commercial settlement at one of our Power & Vision joint ventures that was originally planned for the second quarter. Margins were also supported by higher sales, favorable mix as well as productivity and efficiency improvements. Discrete items added around 55 basis points, driven mainly by lower warranty costs as we had a large expense accrual last year in seating. We also benefited from net favorable commercial items year-over-year in the quarter. And finally, tariff costs net of recoveries, reduced margins by about 15 basis points. While recovery mechanisms are in place with some customers, discussions with most OEMs for 2026 are ongoing, and we are following the frameworks we established last year. We remain confident that our net tariff impact for 2026 will be similar to 2025. In other words, a roughly neutral impact to EBIT margin for the full year. Looking below the EBIT line on Slide 22. Interest expense was $13 million lower than last year due mainly to our strong first quarter free cash flow. This led to lower short-term borrowings and higher cash balances, resulting in lower net interest expense for the quarter. Our first quarter adjusted tax rate was 23.8%, an improvement of 190 basis points versus last year. For the full year, we continue to forecast an adjusted tax rate of approximately 23%. Adjusted net income was $386 million, up $167 million or 76% from last year, driven mostly by the higher EBIT. And first quarter adjusted EPS was $1.38, up 77% from last year, mainly reflecting the higher net income as well as a slightly lower share count. Next, let's take a brief look at our business segment performance, which is summarized on Slide 23. Three of our four segments posted higher sales year-over-year and growth above market in the quarter with a notable 6% year-over-year increase in Power & Vision. The exception on the sales line was complete vehicles, where sales declined 4% as net lower volumes on full cost programs and lower engineering revenue were only partially offset by favorable foreign currency translation and the benefit of recent value-added program launches with China-based OEMs. Turning to EBIT. Body Exteriors & Structures, Power & Vision and Seating all posted notable year-over-year improvements in adjusted EBIT dollars and margins, reflecting strong operational execution. Power & Vision also benefited from a favorable commercial settlement in equity income, while Seating benefited from lower warranty costs. Complete Vehicles margin was lower than last year, but in line with our expectations, reflecting the impact of lower engineering revenue, offset partially by productivity and efficiency improvements. Now let's look at cash flow on Slide 24. In the first quarter, we generated $677 million in cash from operations, an increase of $600 million from last year. Operating cash flow in the current period includes over $450 million in balance sheet-related customer recoveries for certain EV programs in North America. We had originally expected to receive most of these recoveries later in 2026. Investment activities in the quarter included $219 million in CapEx, representing 2.1% of sales and $168 million for investments, other assets and intangibles, offset partially by proceeds from normal course asset dispositions. Netting everything out, we generated free cash flow of $372 million in the quarter, above our expectations and the most cash we have ever generated in the first 3 months of the year. We continue to return capital to shareholders in the first quarter with $135 million in dividends, along with $440 million in share buybacks. We repurchased 7.6 million shares during the quarter under our NCIB authorization, which left us with close to 17 million shares remaining at the end of March. We're planning to repurchase those shares before the NCIB expires in early November. Turning to Slide 25. Our balance sheet and capital structure remain strong. At the end of March, we had almost $5 billion in total liquidity including $1.6 billion of cash on hand. Our rating agency leverage ratio was 1.5x on March 31, better than we anticipated 3 months ago. This puts Magna in great position to continue our share repurchase strategy in 2026 and beyond. And we're pleased to note that Moody's recently affirmed Magna’s A3 investment-grade credit rating with an improved outlook of Stable. Next, let me cover our current outlook on Slide 26. Compared to our February outlook, we've reduced our North American production forecast by around 100,000 units to $14.9 million, and we reduced Europe by 200,000 units to $16.6 million, both reflecting current market conditions. Our China production assumptions remain unchanged. We've also updated our currency assumptions to reflect recent exchange rates. We're now expecting a slightly stronger euro, Canadian dollar and Chinese yuan in 2026 as compared to our February outlook. We continue to actively manage input costs and other volatility through commercial recoveries and cost actions. Our outlook reflects our current visibility into the balance of the year, and does not assume a prolonged geopolitical conflict in the Middle East. Moving to Slide 27. We are reaffirming our prior outlook ranges across key metrics including adjusted EBIT margin, adjusted EPS and free cash flow. We have slightly lowered our sales outlook range for the updated light vehicle production estimate provisions we covered earlier along with the expected second half closings of the lighting and rooftop systems divestitures within Power & Vision, offset partially by the benefit of foreign currency translation from a weaker U.S. dollar. We're also forecasting lower interest expense, reflecting the favorable timing of commercial recoveries, which should result in less borrowings throughout the year. All other outlook metrics from February are unchanged. Note that we continue to expect strong margin expansion with adjusted EBIT margin between 6% and 6.6%, despite slightly lower sales. Adjusted EPS between $6.25 and $7.25 per share and free cash flow between $1.6 billion and $1.8 billion. And while we don't provide a quarterly outlook, I would like to offer a framework for how we're thinking about EBIT and margin cadence for the rest of 2026. We expect 2026 adjusted EBIT to be back half weighted with first half EBIT just under 45% of full year EBIT. We're taking a measured approach to the second quarter, given the ongoing geopolitical dynamics and the potential for near-term volatility with adjusted EBIT margins expected to be relatively flat with the second quarter of last year. That's it for the financial review. Now I'll turn it back to Swamy to wrap things up. Swamy? Seetarama Kotagiri: Thank you, Phil. Before we take your questions, let me recap a couple of key points. We had a strong start to 2026 with adjusted EBIT margin expansion, cash generation and solid weighted sales growth over market. We are positioned for continued margin expansion and shareholder returns, supported by a solid 2026 outlook that is largely unchanged from February, reflecting our confidence in our operating performance. We are executing a disciplined capital allocation strategy, including significant return of capital and portfolio actions aligned with long-term value creation. Most importantly, we remain highly confident in Magna's future. We hope to see many of you in November at our investor event in New York City, where we will go into detail on our strategy, key initiatives and long-term financial outlook. Thank you for your attention. Now operator, let's open it up for questions. Operator: [Operator Instructions] And your first question comes from Alex Perry with Bank of America. Alexander Perry: Congrats on all the progress. I guess just first, I wanted to ask, can you give us an update on your raw material exposure. I guess, particularly on the resin side, what is the impact expected to have on the margins. Were there any other offsets that allowed you to keep your EBIT margin guide? And how should we think about sort of the flow-through there? Philip Fracassa: Sure, Alex. This is Phil. I'll start and then Swamy can chime in. Relative to raws, if we take a step back, if we look at exposures like steel and aluminum, as an example, we're largely protected through OEM resale programs and other pass-through mechanisms. The vast majority of our exposure there is covered. On resins, it would be a little bit less. A meaningful portion would be covered by pass-throughs as well or not resale, but more pass-throughs. But think of it as sub-50%, so a little bit exposed there. But as resins move, we would do what we normally do, which is kind of work with customers to recover the higher input costs. Looking at the first quarter, I'd say we saw minimal impact on all of that. We saw a little bit of higher freight costs in the quarter, but minimal impact across other input costs. And as we've talked about kind of many times, as we see input costs move, we typically recover on a lag basis to the extent if oil stays high, resins stay high, we would work with our customers to recover that over time and frankly, would expect to recover the bulk of any swings over the course of the rest of the year. Last comment I would make on, we get a lot of questions on energy, particularly in Europe, but we're in a much better position now than we were, say, in 2022. We're hedged about 2/3 of our both electricity and natural gas spend in Europe for this year and about 50% hedged for next year. So swings in costs, near term, we're pretty well protected there as well. Swamy, anything else? Seetarama Kotagiri: No, I think you covered it well, Phil. The one thing that you might look at is the logistics and the freight costs. But that's the reason why we talk in terms of ranges. We feel pretty confident based on everything that you said, we would be able to contain it. Alexander Perry: Really helpful. And then I guess just my follow-up question. So the production outlook came down a bit, but you kept sort of all the segments the same other than Power & Vision, which came down a bit. Maybe walk us through why that is and sort of how you're thinking about production in the various segments? Philip Fracassa: Sure, Alex. So what happened there was we had 3 things that happened in the outlook. First, we took the production estimates down, as you referenced, which was a slight downward revision in the revenue, if you will. We took foreign currency up as we're modeling a slightly weaker U.S. dollar than before. And that sort of offset one another as compared to February across most of the segments. And the one exception was P&V, where we also layered in the anticipated closing of lighting and rooftop systems and kind of in the second half, call it, near the end of the third quarter sort of what we modeled. And that kind of had the effect of bringing P&V revenue down about $400 million or so if you look at the outlook. But it was really kind of FX and vehicle production offsetting one another in the other segments. And honestly, the fact that we held the margins despite that because oftentimes when foreign currency improves, we don't get the same incremental that we do when volume goes up or down. So we were able to kind of offset that, hold the margin range where it was, hold the EPS range where it was, just given the -- given how well the business was performing, particularly in the first quarter of the year. Alexander Perry: That's incredibly helpful. Best of luck going forward. Operator: Your next question comes from the line of James Picariello with BNP Paribas. James Picariello: Can you just speak to the favorable commercial item? Can you just provide more color on what actually took place? Was it unexpected for the full year? Or was it more of a timing shift within the year in terms of the ability to get that recovery, which showed up in equity income, right? Philip Fracassa: Yes, exactly, James. So 2 things there. It was a recovery in the first quarter in equity income, it hit P&V. We had initially planned for it in the second quarter. So it wasn't a variance for the full year. It was a timing shift between Q2 and Q1, and it really related to recoveries for past investments in EV programs. And just to kind of give you an order of magnitude, it was the bulk of the equity income improvement in margins year-over-year was probably 60 basis points of that improvement was that item. And again, hitting in P&V, you'll note that P&V had really strong performance in the quarter, revenue up strong incremental margin on the revenue. But even excluding that item, the incrementals in P&V would have been quite strong on the order of 30% even without that item. So P&V performed really well, good growth across several different launches, good growth in some of our camera businesses, et cetera. But to answer the question, it was a onetime item, but it was timing between Q2 and Q1. James Picariello: Okay. That's crystal clear. Appreciate that. My apologies if I missed this in the prepared remarks. But for the lighting and rooftop divestiture, should we expect any proceeds from that? Or is it more of a partnership handoff type of arrangement because it's zero -- has neutral EBIT? Seetarama Kotagiri: James, as I said in the remarks, the transactions will be closing later this year, obviously, subject to approvals. They are margin accretive because they were below the Magna average, I would say. But it is a -- going back to the guiding principles, if you look at it from a strategic perspective in terms of market position, in terms of returns, we did not feel it was the right home and not the right path with us. That was the reason why the divestiture was done. We'll continue to look at portfolio just like we've always said with an objective lens. Philip Fracassa: Yes. And maybe just to round that out, James, I would want to point out that on our GAAP results, we did have -- we did book a loss related to those divestitures in the first quarter, just given where they were in terms of negotiations at the end of the quarter. So that was over a $400 million impairment that we took in the first quarter, which would be in the GAAP results excluded from adjusted. Seetarama Kotagiri: And there are some modest proceeds that will be used in the normal course, James, right, in terms of the cash flow looking at the balance sheet and how it will be used for share repurchases. James Picariello: Is this the beginning of a like ongoing pruning of the portfolio of smaller businesses? Or is this mainly a one-off? I'm just curious if there's anything strategic and sustained behind this type of sale for you guys? Seetarama Kotagiri: Yes. I don't think it is a onetime or it's -- if you go back into the last 10 years, you would have seen few pressure controls, you would have seen in the years. Honestly, James, this is an ongoing process. We continue to look at it every year. Can't speculate or won't comment on future actions, but I can tell you this is really a very rigorous ongoing process. Operator: Your next question comes from the line of Dan Levy with Barclays. Dan Levy: So your guide assumes 35 to 40 basis points of operational excellence. And you just did in the first quarter, I think it's 80 basis points. I know there's other stuff in that category in your earnings bridge. But maybe you can just give us a sense within the quarter, why you were out punching on that 35 to 40 basis points? And what changes in subsequent quarters? Or is there potential upside on that 35 to 40 basis points? Seetarama Kotagiri: Dan.The 35 to 40 basis points that we talked about obviously encompasses a lot of things that go on. The specific larger operational excellence initiatives that I mentioned in the past are really specific, for example, enterprise-wide digital architecture, data backbone, real-time performance management through data streaming dashboards and scalable automation of material handling and so on and so forth. But beyond that, there are thousands of initiatives that every division looks at in terms of material savings, in terms of OEE improvements. You can't really put an exact cadence. Definitely, with some of the programs in place and feel comfortable, the proliferation is a little bit accelerated. And it also depends on the cadence of how many ideas or VA/VE initiatives are in place in the fourth quarter and how they can materialize in Q1, right? But all in all, I would say we feel pretty good about the 35 basis points, 40 basis points. And if the macros hold good, yes, we feel pretty good that we'll keep that and continue the path. Philip Fracassa: Yes, Dan, just 2 things I might add there. We did accelerate really well last year with the operational excellence initiative. So probably a bit of an easier comp in the first quarter than maybe the comps we'll have as we move through the year. That would be one. But I would say, stepping back, a stronger than we expected performance on the operational excellence front in Q1. So to your point about if we can keep that going, I would agree with you that, that would present some upside for us. Seetarama Kotagiri: And that's why I keep saying, as we look at the proliferation, we are still in the early innings of the factory of the future. Dan Levy: Great. Okay. And then I just wanted to follow up on James' question on the divestitures here. So I get, there's constantly a portfolio review process to make sure that the products that you're in, that you have a strong market position, that's a relevant market and these businesses didn't clear that threshold. I guess I would just ask more broadly, the broader Magna portfolio, what percent of that would you deem to be in a market position that is not where it should be and where it's a tougher path to sort of getting to an appropriate market position? And how would you characterize Seating as it relates to your market position and path to improving the market position? Seetarama Kotagiri: Yes. It's a long question, Dan, and, you know, it's a complex one. As you look at most of the products, right, we're not really saying we have to be #1, but you need to have meaningful market position, but along with it also good returns and good profitability. And it's not at any one point in time. You have to look at it, you invest, you go through cycles. And if you see a good path and if you see good progress, we continue to stay on it. Specifically to seating position, we -- again, it's not just looking at it broadly as a global market. In North America, we have a good position. We have good position in Europe. We have really good position now in China. And more importantly, we have some really good innovation in terms of not just the product, but how we assemble the seat and how we take it forward. And as part of this operational excellence or Factory of the Future initiatives, you'll start seeing that. Hopefully, we can talk to you a little bit more when we see you in November for the Investor Day. But we feel pretty good, and you'll continue to see the traction on the profitability and the returns in that segment. Operator: Your next question comes from the line of Chris McNally with Evercore ISI. Chris McNally: Swamy, a little bit of a broader question around some of the risks in the second half of the year. And I know this is high-arching question that, you know, I think everyone is getting asked. But I'm curious your perspective, if you're more worried about sort of the known, unknowns in the second half or the unknown, unknowns. So when I think about known unknowns, raw materials transport, second half volumes sort of the typical that you're curious duration of the issue of the conflict. But the unknown unknowns is the one that we are having the hardest time grappling with as investors in the self, and things like memory availability, chip availability or just other disruptions. Just maybe you could opine on those 2 buckets for what you're seeing sitting here in April? Seetarama Kotagiri: Yes, Chris, I'm going to use your terminology, known unknowns and unknown unknowns. Honestly, I think if it's a known entity or variable, right, for example, things that you just mentioned, we at least have a scenario analysis and a playbook to say how we are going to address it. And that's the reason why we talk about outlook and ranges and not specific numbers. The bigger question is the unknown unknowns, right? Because you haven't thought about it. You might have some scenario planning, but it's not as granular. So those are the bigger questions. If you look at the DRAM, we are focused on it. We are tracking it. We are monitoring it. We're working with our customers. Continuity is the most important in terms of supply. We are doing that. We're managing costs through sourcing actions and customer alignment. That we believe, if the world doesn't flip upside down, we can manage it within our outlook ranges. That's an example of something that is a scenario planning and we can address. Things that we don't know in terms of complete volatility, big macro issues, lack of certainty and volatility are the 2 things that you have to constantly worry about. Chris McNally: That's great. And if we could just double click, Swamy, on the one on memory because we obviously get this question a lot. We see obviously everything going on with AI and the hyperscalers. But -- is it fair to summarize that the industry's view because I think that many companies have been asked this, that right now on memory, there's more of an issue around price, meaning you may have had some contracts and basically memory providers are coming back and asking for closer to spot as opposed to contract, and that's some of the risk as opposed to literally pulling the volume, which would not allow for cars to be made. Is that a fair summary of where the industry kind of view is right now that there's a little bit more of this price discussion, I want to be paid for spot as opposed to pulling volumes? Seetarama Kotagiri: The short answer, Chris, I would say your summary is correct in the short term, right? It's more a pricing and how do we manage that in terms of demand and keeping capacity and so on and so forth. In the long term, you've got to look at design options and so on. In short, your summary is correct. Operator: Your next question comes from the line of Joe Spak with UBS. Joseph Spak: Phil, just -- I'm sorry to go back to this. I just want to make sure I understand some of your comments on recoveries because it sounded like maybe it was, I don't know, $60 million, $70 million in EBIT. I'm trying to just sort of figure out how that relates to -- in the report, it said the recovery for your investments in the quarter was like $475 million in cash flow. So I just want to make sure those numbers are correct, that part of that recovery in the cash flow was not in the operating income. And then on that recovery in the cash flow, I just want to make sure that is what you sort of expected? And is that mostly done? Or do you still expect more cash recovery to come down the pike? Philip Fracassa: Yes. Thanks, Joe. Great question. So I think you've got it right. So first of all, the 60 basis points or call it, $60-ish million, the equity income item was did run through the P&L, but it's the $475 million that we called out in our MD&A was really balance sheet only. So the vast majority of that recovery was a balance sheet recovery. So getting sort of reimbursed for prior investments that we made that were sort of sitting on the balance sheet. So very little P&L impact from that. And we did largely expect that in 2026, but just later in the year, maybe a little bit overall for the full year, maybe a little bit higher than we previously anticipated. But -- so is there any more to come? There's a little bit more we would expect between now and the end of the year, not of that same order of magnitude. It's reflected in the full year outlook as we continue to work with customers on other negotiations that are ongoing. But the -- beyond that $60 million that ran through equity income, we had very little running through the P&L for the other recoveries. It was really just cash only. Joseph Spak: Okay. Really appreciate that clarification because I was having trouble connecting those 2. Second question, Swamy, and I apologize in advance because I don't want to put you in the middle of a geopolitical storm, but there have been reports of Chinese OEMs looking to maybe build vehicles in Canada. And I was wondering if you were able to comment on any conversations you might have or even more broadly, how you would view that potential opportunity? Because obviously, you mentioned some of the wins with the domestic Chinese, whether it's Complete Vehicles or others. So you have that good relationship there. And I was wondering how that could sort of spill over to this region. Seetarama Kotagiri: Yes, Joe, for the exact reason that you mentioned, I would like to remain a businessman and a capital allocator and not a policy commentator. So I won't comment on speculation. I can say that Magna's model is to be neutral global partner to all OEMs. And we are not -- as you've heard me talk about it, we continue to win business in Europe with our Complete Vehicle assembly with all OEMs. Today, it happens to be the Chinese OEMs. And we continue to win business in China with Chinese OEMs. Any OEM that continues to grow in the ecosystem, we have an opportunity to supply Magna systems and components and also do vehicle assembly where possible. Operator: Your next question comes from the line of Tom Narayan with RBC Capital Markets. Thomas Ito: This is Thomas Ito on for Tom. It looks like your guidance implies some pretty substantial margin uplift in BES and Seating for the remainder of 2026. Just wondering, is this sort of just the timing of customer recoveries or are there other factors going on in these segments? Philip Fracassa: No. I mean, I would say it's really continued progress on the operational excellence initiatives and then obviously getting really strong pull-through revenue. The P&V was a -- we're expecting strong growth in P&V for the full year. We didn't have the item in the first quarter. For the full year, the margins will be on the implied guide would be pretty close to the first quarter performance, but still really solid growth year-over-year. And the BES and Seating over the course of the rest of the year would expect the operational excellence really being the biggest item that's kind of sticking out relative to the improvement from Q1 through to Q4. I don't know, Louis, anything else you'd add. Thomas Ito: Okay. Got it. And I guess as a quick follow-up, we saw another supplier announce some revenue impacts related to the IEEPA tariff adjustments. Could you just comment on whether any such adjustments are incorporated in that '26 guidance? Philip Fracassa: Yes. I mean it's a great question and I figured we would get it. So on tariffs, let's just take a step back. We came into the year based on last year's rates, if you will. We had about $160 million gross impact last year. The run rate would have put us at around $200 million this year. Again, looking to recover that from our customers. We had a lot of development. IEEPA came out, 122 came in. We had some changes in 232. Net-net, our gross exposure has come down. So from $200 million, now we're thinking it's closer to last year's number actually, right around $160 million. Our net exposure relatively unchanged and we still expect maybe a little bit better, but relatively unchanged. We still expect a margin headwind of less than 10 basis points, but year-over-year would be neutral in that scenario. And then relative to the last element would be the refunds, I would say we are working to file those refund claims sort of as we speak. We're in the midst of filing them as we speak. And it's a good sized number. We talked about it was probably over half of our tariff exposure, roughly half of our tariff exposure was IEEPA. So as those refunds are filed, as those refunds come in, we didn't book any of those refunds in the first quarter. As those refunds come in, we'll obviously work with our customers on that given that they funded -- they covered about 80% of our tariff costs last year. So we'll work with them as those refunds come in to make sure that they're allocated appropriately. Operator: Your next question comes from the line of Emmanuel Rosner with Wolfe Research. Emmanuel Rosner: I was hoping to follow up on the comments you made in the prepared remarks about the expected cadence of earnings this year. And in particular, I think you said Q2 margins would be broadly stable year-over-year. Can you just give us a few of the puts and takes in there? Is there some timing of things that shifted from Q2 into Q1? Or I guess, how should we think about the stable margin year-over-year this quarter? Philip Fracassa: Yes. I think it's -- well, relative to expectations, we had that equity income item that kind of moved from Q2 to Q1. But as we sort of set up the cadence for the rest of the year, we did, I would say, deliberately take a little bit more measured view on the second quarter, a little bit more cautious view, if you will. And so as you look at year-over-year at sort of the midpoint of the guide, we'd probably see a little bit of increase in revenue year-over-year with kind of a proportionate incremental margin kind of keeping margins relatively flat. We've got foreign currency as a positive in there, which kind of come through as with a little bit lower margin and then the volumes kind of coming down a little bit with a little bit bigger impact. So really nothing more than that. The operational excellence continues, but it was really more just trying to be a little bit more measured in how we were thinking about the second quarter as kind of we're sitting here in time and space. But as we look out to the rest of the year, still very confident in the full year guide and very confident in the margins and earnings, et cetera. And if you remember in February, we talked about first half EBIT being kind of slightly above 40%. This time around, we're probably seeing a little bit more one half weighting on the EBIT, maybe sub 45%. So think 43-ish kind of percent first half, second half, and that should kind of get you in the ballpark. Emmanuel Rosner: Okay. That's helpful. And then I was hoping to ask about your growth over market, which I think you said you measured it as like 3 points for this quarter, I guess, for Q1 or 5x Complete Vehicle, still good conviction in, I think, 0% to 3% for the full year. Can you talk about some of the upcoming big launches that you have that will drive this growth of the market and potentially serve like any sort of cadence within that? Seetarama Kotagiri: Emmanuel, I think like you said, it's really a reflection of the launch activity. It's a bit of good program mix and also content growth across all our core segments. So net-net, if you look at the end of production programs and compare it to the new production launches that we have, which is many across these different geographic regions, different customers, different programs. And if you take the content, so that's positive net-net, right? So that's the reason why we are seeing that. And the Complete Vehicles, you heard me talk about the specific program launches with GAC, with XPENG and the discussions continue. Operator: Your next question comes from the line of Colin Langan with Wells Fargo. Colin Langan: I just want to follow up again on the recovery impact. You mentioned the 60 basis points from JV. If I look at the slides in discrete items, it looks like half of the discrete items are also recoveries. So is there another $25 million, $30 million outside of the JV recoveries? And then I thought last quarter, you had said that recoveries for the year were neutral, and yet we have a big help in Q1. So does that mean as we go into the second half, that there's headwinds as those recoveries are down year-over-year? Philip Fracassa: So on the first part of the question, yes, in the discrete items, we did see the favorable warranty costs, which was a big item. And we also had the net impact of -- we did have favorable commercial items as well, which sort of spans the gamut of not just EV-related recoveries, but recoveries for other commercial matters as well. And as you know, that can sort of vary quarter-to-quarter. I think we did talk about coming into the year thinking we'd be largely neutral for the full year on the P&L with respect to recoveries. But on the cash, we did get a fair amount of cash for EV-related recoveries last year. If you remember, in the fourth quarter, we had a big cash inflow in the fourth quarter. So we did expect recoveries as it related to the EVs to be a fair bit comparable. So we do expect to be that way for the full year. So we -- it was more front-loaded this year. It was a little bit more backloaded last year. But our guide of free cash flow of kind of $1.7 billion at the midpoint sort of implies about $1.3 billion for the rest of the year, and that will be, as always, is kind of back half weighted. Louis Tonelli: On the recoveries, the recovery related to equity income was kind of in the equity income in the roll between '25 and '26. So I guess it's just bucketing. We had that in equity income is part of the reason why we had higher margin this year, not in this kind of recoveries. Recoveries we're talking about here are more on a consolidated basis. Colin Langan: You still expect recoveries to be neutral for the year. The initial guide did incorporate the JV help from recoveries. Seetarama Kotagiri: It did, yes. Colin Langan: And then just broadly, if I go into the second, I mean, Q2 is supposed to be flat. Organic sales are -- I think the guide implies are fairly slightly down actually. You have $100 million sort of implied EBIT improvement. I kind of feel of like we're out of some of the puts and takes outside of warranty. JV incomes are, I think, kind of most of that good news in the initial guide is done. So is it all just operational efficiencies or other items that are kind of going to add some help to kind of offset the -- at least at the midpoint, weaker sales? Seetarama Kotagiri: Yes. I would say some of it is as you talked about operational excellence, but as new programs come in, they have different economic terms, and there is a mix of, as I said, launches, right, that are happening towards the second half of the year. So I would say it's a combination of the 2 columns. Operator: Your next question comes from the line of Andrew Percoco with Morgan Stanley. Andrew Percoco: I wanted to start out on your disposing of your lighting and rooftop systems business. But I kind of want to get a sense for is there anything -- as we think about the evolving landscape, particularly around ADAS and AVs, are there any areas where you might want to grow your portfolio or add to the offerings that you currently have around that ecosystem? Seetarama Kotagiri: Yes. Andrew, I think I've said that the last couple of quarters, and we feel pretty good where we stand with our portfolio right now. I think the focus is really on organic growth and trying to get the efficiencies up, get the traction that we have in operational excellence continue, focus on the cash flow and continue the journey right now. But if there is some really good opportunity in terms of small tuck-ins that add value here and there, obviously, we'd be open to it. But our focus really is on continuing to keep the roadmap that we have in front of us for cash flow and good value. Andrew Percoco: Okay. That makes sense. And then maybe just around these recoveries. I'm curious like if you -- if you or the industry in general, are planning to adjust how you maybe strike these contracts with your OEM partners going forward. I know there's been a big kind of rightsizing exercise in the industry around EV manufacturing capacity, but the OEMs are still very much committed to exploring new vehicle platforms. So I'm just curious, as you kind of think about that next cycle, how you might evolve that contracting structure to maybe avoid some of the overinvestment that we've seen in prior cycles? Seetarama Kotagiri: Yes. I don't know if we can change the decision of the OEMs, but we definitely can bring our opinion to the table. And there are cases where we have looked at different terms, right, there is sharing of capital deployment, let's say, looking at volumes and how we band them and how we look at the step function of cadence as you go into the program rather than putting all the capacity upfront. There are several of those discussions. We are fortunate to have those strategic discussions with the customers. And as an industry, I think the big elephant in the room is like how do you become good stewards of the capital, right? How do you extrapolate what's there, what's capacity that's existing, how do you use it more efficiently rather than just adding more. But like you said, it's a 2-way traffic, and we have many of those discussions. Operator: Your next question comes from the line of Jonathan Goldman with Scotiabank. Jonathan Goldman: Most of them have been asked already. I guess just one on the guidance. I think you talked about the rooftop and lighting business being below the Magna consolidated margin levels, but you maintained the margin guidance for the year. I would have thought the divestiture may have been margin accretive. So I just want to know what are the offsets there? Seetarama Kotagiri: So I think, Jonathan, good question. But we are looking at the broad picture of Magna, given the uncertainty in the market that we have. And what we're looking at, that's the range we are talking about. Philip Fracassa: Yes. The only -- yes, that's exactly right. The only thing I would add, Jonathan, is it was really -- we're talking about, call it, 3 to 4 months of the year, so not a big number in the current year. And the other point to keep in mind, too, is we took revenue up for currency, which comes through at an EBIT margin, if you will. We took revenue down a little bit for volume, which sort of comes out at an incremental or a decremental as the case may be. So there's a little bit of that going on there, too. But there's no question to both P&V and to Magna as a whole, that the divestitures would be modestly accretive to margins just given where they were operating. Jonathan Goldman: Okay. That's good color. And then maybe just circling back on that one, Phil, the revenue guidance, maybe switching to mix, maybe more currency in the sales this year. Is the offset the lower production volumes that you've updated the guide for? Philip Fracassa: Yes. I would say when you think about -- so we're kind of holding the EBIT -- we're holding the EPS guide, we did see a little bit of a benefit on the interest line below EBIT as, you know, the free cash flow in the first quarter was much sooner than we anticipated that cash coming in. So it will result in lower borrowings throughout the year, a little bit of interest benefit. So while revenue is down a little bit, with holding margins would bring EBIT down a little bit, a little bit of offset in interest expense, which kind of enables us to hold the range where it was before. And again, kind of holding the range despite the strong Q1 was really as much just being a little bit prudent on the rest of the year at this point. Operator: Your next question comes from the line of Mark Delaney with Goldman Sachs. Mark Delaney: One on margins. When considering the efficiency efforts that the company has underway for this year, the expectation of 35 bps to 40 bps as well as the portfolio optimization you announced relative to lighting and the rooftop part of the business. Maybe put that into the context of where Magna thinks its EBIT margins can go over the medium to longer term. And in the past, the company has spoken about the potential to get to a 7% plus type range. I'm curious where you think you are on that journey, especially in light of some of the decisions and progress you reported today. Seetarama Kotagiri: I think I can tell you we are in a good path to the roadmap that we laid out. Right now, we are focused on executing like we did in Q1 over the last 2 or 3 quarters, and we see a good path into '26. That's why we were able to reaffirm the outlook of 2026. Now regarding the midterm and long term, I would say the best time to get through that without confusing anything is the November Investor Day. We will be able to lay out the next 3 to 5 years. Mark Delaney: Looking forward to that. And my last question was around the production environment. You already described your view on overall production volumes by region, but we're hoping you can share a bit more around mix. And curious if you're seeing any changes in the kinds of vehicles your OEM customers are looking to manufacture? And perhaps is there some increase in the number of EVs and hybrids that they're planning to make in light of the recent increase in gasoline prices? Seetarama Kotagiri: Not really a significant shift in what's been talked about. Obviously, there's an increased interest in hybrids, and it's very regional. In China, we continue to see the EV proliferation. In Europe, it's a little bit more hybrids and EVs continue there at a slower pace maybe. In the North America, we see renewed interest in hybrids. But in terms of vehicle segments, no, not really, we are not seeing a material shift in anything else. Operator: Your next question comes from the line of Michael Glen with Raymond James. Michael Glen: Swamy, with the wins happening in Europe with the Chinese OEMs, are you at all supplying any parts to those vehicles yet? Or is it strictly assembly? Is there an opportunity to expand and supply parts? Seetarama Kotagiri: Yes. I think, Michael, right now, it is just assembly. Obviously, the conversations as this expands into volume, there is a localization discussion, and that's where we see the opportunity for other system and component supply. Michael Glen: Okay. And then just following on that, maybe just broadly with Europe. I know you don't break Europe out separately as a segment. But how do we sort of think about gains with new entrant OEMs into Europe and then what appears to be the lagging legacy OEMs. As a whole, is this a net negative to Magna? Or are the gains being made with the new entrants offsetting a difficult legacy business? Seetarama Kotagiri: Yes. Difficult to break down at that granularity for sure, Michael. I think I would say with the presence of Magna in China and as we continue to build that relationships, we believe that they come to different parts of the world, we will have a seat at the table. At this point of time, it's very difficult to talk at that level to say how much and how it's offsetting and so on. But overall, we still continue to grow our business in Europe. Operator: That concludes our question-and-answer session. I will now turn it back to Louis Tonelli for closing comments. Louis Tonelli: All right. Thanks, everyone, for listening in today. If you have any follow-up questions, please don't hesitate to reach out to me. Thanks, and have a great day. Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you all for joining, and you may now disconnect.
Operator: Thank you for standing by, and welcome to Corcept Therapeutics First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Atabak Mokari, CFO. Please go ahead. Atabak Mokari: Hello, everyone. Good afternoon, and thank you for joining us. Today, we issued a press release announcing our financial results for the first quarter and providing a corporate update. A copy is available at corcept.com. Our complete financial results will be available when we file our Form 10-Q with the SEC. Today's call is being recorded. A replay will be available at the Investors Past Events tab of our website. Statements during this call other than statements of historical fact are forward-looking statements based on our plans and expectations that are subject to risks and uncertainties, which might cause actual results to be materially different from those such statements expressed or implied. The risks and uncertainties that may affect our forward-looking statements are described in our annual report on Form 10-K and our quarterly reports on Form 10-Q, which are available at the SEC's website. Please refer to those documents for more information. We disclaim any intention or duty to update forward-looking statements. Our revenue in the first quarter of 2026 was $164.9 million compared to $157.2 million in the prior year period. We have increased our 2026 revenue guidance to $950 million to $1.05 billion. Net loss was $31.8 million in the first quarter of 2026 compared to net income of $20.5 million in the first quarter of last year. Our cash and investments at March 31 were $515 million. I will now turn the call over to Sean Maduck, President of our endocrinology division. Sean? Sean Maduck: Thanks, Atabak. Demand for our medications continues to increase. We ended the first quarter with a record number of new prescriptions written from a record number of prescribers, which translated to an all-time high for the number of patients receiving our medications. Importantly, we set a record for new patient starts in March and again in April. These figures are outstanding and give me great confidence in the current and future health of our hypercortisolism business. The full impact is not reflected in our revenue for 3 reasons. First, revenue often dips in the first quarter as it does for many rare disease medications because insurance companies impose onerous reauthorization procedures at the start of each year that interrupt patient coverage for a month or 2. We provide patients with free drug to bridge the gap, but our revenue suffers. Second, new patients, whom we are adding at a rapid clip, provide much less revenue when they start treatment than they will later after payer coverage has been secured and they have titrated to their optimum dose. The full revenue impact of patients added this quarter will grow substantially over the next few quarters. Finally, our specialty pharmacy vendor has done an excellent job onboarding the thousands of patients transferred from our former vendor and getting them the medicine they've been prescribed. They have also excelled at servicing new prescriptions written for our medications, the new patient starts I just described. The task that remains is grinding through the insurance prior authorization backlog that accumulated as patients transition to the new pharmacy. This is painstaking work, but it yields steady dividends that will be reflected in our revenue over the coming months. Our new pharmacy vendor's ability to handle large numbers of new patients skillfully is important because I expect demand to increase substantially as physicians adapt their practices to the landmark findings of our CATALYST and MOMENTUM trials. CATALYST showed that 24% of patients with resistant diabetes had hypercortisolism, and that treatment with Korlym led to substantial reductions in hemoglobin A1c, weight and waist circumference compared to placebo. CATALYST results were published in the field's prominent journal, Diabetes Care in December of 2025 and were referenced in the March 2026 American Association of Clinical Endocrinology or AACE, guidance document for the management of diabetes. This is an important step towards increasing the awareness of hypercortisolism by the broader physician community. The recently reported results of our MOMENTUM study showed that 27% of patients with resistant hypertension had hypercortisolism. MOMENTUM's results were featured in an oral presentation at the annual conference of the American College of Cardiology, or ACC, last month. CATALYST and MOMENTUM will transform the practice of medicine. They provide consistent complementary evidence that hypercortisolism is the underlying cause of many patients' difficult to treat diabetes and hypertension. Physicians have begun responding to these findings, but a change of this magnitude takes some time to be fully absorbed and implemented in clinical practice. As medical practices adapt, screening for and treatment of Cushing's syndrome will increase and so will the number of patients receiving our medications. We expect our current Cushing's Syndrome business to grow to at least $2 billion in annual revenue by the end of this decade. When relacorilant is available, growth will accelerate further. I will now turn the call over to Roberto Vieira, President of our Oncology Division. Roberto? Roberto Vieira: Thank you, Sean. The FDA's approval of Lifyorli for the treatment of patients with platinum-resistant ovarian cancer, 3.5 months ahead of its PDUFA date is wonderful news for patients. On behalf of Corcept, I want to thank the FDA's division of oncology for its rigorous and extremely rapid review of our new drug application, which reflected the determination to make available a safe and effective new medication to women with a very difficult-to-treat disease. Our NDA was supported by compelling clinical data. The Lifyorli's pivotal trial, ROSELLA met both of its primary endpoints, delaying disease progression and even more important, significantly extending patient survival. Patients treated with Lifyorli and nab-paclitaxel experienced a 35% reduction in risk of death, a hazard ratio of 0.65 comparing to patients treated with nab-paclitaxel monotherapy. The p-value was 0.0004. No biomarker testing was required to identify these patients. We presented ROSELLA's complete results early this month in our oral late-breaker session at the Society of Gynecologic Oncology, SGO, Annual Meeting with simultaneous publication in The Lancet. As one would expect, oncologists and patients advocacy organizations have responded to this data with great enthusiasm. Lifyorli's efficacy and safety profile make it a powerful treatment option. For those who want to learn more about Lifyorli's clinical characteristics, there is a link to The Lancet article in today's press release. Even though Lifyorli's approval came early, our commercial team was ready to translate our significant prelaunch investments in preparation into execution. Our sales and marketing, medical and market access teams were on board and trained by the time of Lifyorli's approval and its manufacturing and distribution infrastructure was in place. 36 days into our launch, things are going very well. We launched our patient support hub and ensured product availability within 5 days of approval. A wide group of physicians have requested information from our field teams, another indicator of strong interest in Lifyorli. We began seeing enrollments within hours after approval. Prescriptions have already been written by over 200 physicians from all parts of the country, indicating adoption well beyond our study investigators and academic specialists. We are also beginning to see early signs of prescribing breadth with patients coming from multiple physicians in large practices. Lifyorli's inclusion in the National Comprehensive Cancer Network, or NCCN guidelines as a preferred regimen just 15 days after approval will support strong adoption and payer access. Lifyorli's strong early results do not surprise us, given the drug's excellent efficacy and safety profile, the lack of biomarker test requirements and convenient oral administration. We expect Lifyorli only to exceed $1 billion in annual revenue in the United States by the end of the decade, but it is just the beginning of our journey in oncology. I will now turn the call over to Joe Belanoff, our Chief Executive Officer. Joe? Joseph K. Belanoff: Thank you, Roberto, and thank you, everyone, for joining us. Since Corcept's inception, we have explored the potential of cortisol modulation to treat patients with serious diseases. That potential is vast. We have made important advances. It is now established that hypercortisolism is much more prevalent than previously thought and the treatment with a cortisol modulator can benefit many patients. Lifyorli's FDA approval in platinum-resistant ovarian cancer indicates that reducing cortisol activity at the glucocorticoid receptor, GR, may be beneficial in treating a wide variety of solid tumors. And you should know our plans go well beyond hypercortisolism and oncology. In April, we met with the FDA regarding relacorilant's new drug application, its NDA in Cushing's syndrome. Our NDA was based on the positive outcome of our pivotal Phase III GRACE trial with confirmatory evidence from our double-blind, placebo-controlled Phase III GRADIENT trial, our long-term extension study and our earlier-stage development data. Collectively, these results show that patients treated with relacorilant experienced meaningful durable improvements in the signs and symptoms of Cushing's syndrome without some of the serious adverse events associated with the currently approved medications, hypokalemia, endometrial hypertrophy, vaginal bleeding, adrenal insufficiency or QT prolongation. We will provide an update on relacorilant's regulatory path in the near future. I also want to underscore Sean's remarks regarding the importance of the CATALYST and MOMENTUM studies. Their findings are changing medicine. As physicians expand screening for hypercortisolism in patients with difficult to control type 2 diabetes and in those with resistant hypertension, patients whose health has been damaged by previously undiagnosed hypercortisolism will receive more targeted and better care. Increased demand for medications that treat Cushing's syndrome will propel our endocrinology business for years to come. The approval of Lifyorli is an important first step towards realizing the full potential of glucocorticoid receptor antagonism in oncology. Lifyorli works in ovarian cancer by suppressing cortisol's anti-apoptopic effect so that nab-paclitaxel can achieve its full effect. We believe this mechanism has the potential to work with any solid tumor that expresses the glucocorticoid receptor and with any companion anticancer agent. We are currently evaluating relacorilant combined with other anticancer therapies and in a wide variety of solid tumors. The first arm of the BELLA trial is studying the effect of relacorilant plus nab-paclitaxel and bevacizumab in women with platinum-resistant ovarian cancer. Other studies are enrolling patients with endometrial, cervical, pancreatic and platinum-sensitive ovarian cancers. Data from these studies will be NCCN guideline enabling and will inform our future development decisions. The first arm of BELLA will produce results by the end of this year. Our other ongoing oncology trials will produce results by the end of next year. Successful results in these studies would immediately increase the number of patients that relacorilant might potentially help by fivefold. GR antagonism may also augment the effects of immunotherapy. Cortisol suppresses the immune system, blunting the effectiveness of therapies that stimulate an immune response. A treatment regimen combining an immunotherapy agent with a GR antagonist may stimulate a stronger, more effective immune response. We are conducting a Phase Ib study of our proprietary selective GR antagonist, nenocorilant, in combination with nivolumab, a PD-1 directed immunotherapy to treat patients with a broad range of solid tumors. Finally, cortisol activity at the GR stimulates the growth of prostate cancer tumors helping them escape the effects of androgen deprivation therapy. Our collaborators at the University of Chicago are enrolling a randomized placebo-controlled Phase II trial of relacorilant plus the androgen receptor blocker enzalutamide in patients with early-stage prostate cancer to see if adding a GR antagonist can block cortisol-mediated tumor escape routes. Cortisol activity plays a role in the initial development and progression of a serious liver disorder known as metabolic dysfunction-associated steatohepatitis or MASH, which afflicts millions of patients worldwide and is a significant and rapidly growing cause of liver and cardiometabolic morbidity and mortality. Our proprietary selective cortisol modulator, miricorilant, is very potent in the liver. In a Phase Ib study, it rapidly reduced liver fat and improved other important markers of liver health, including fibrosis. The drug was quite well tolerated without the gastrointestinal side effects commonly seen in patients being treated for MASH. Our 175-patient double-blind, placebo-controlled Phase IIb MONARCH study is fully enrolled and will produce results by year-end. Positive results would support advancement to Phase III. Patients with ALS have dysregulated cortisol levels, which is why we believe our proprietary selective cortisol modulator, dazucorilant, may provide a treatment. Results from our 249-patient double-blind, placebo-controlled DAZALS trial of dazucorilant in patients with ALS have been very encouraging. In DAZALS, patients who received 300 milligrams of dazucorilant exhibited an 84% reduction in the risk of death at the 1-year mark compared to patients who received placebo. The p-value for this finding was 0.0009. This benefit persisted into the study's second year with an 87% reduction in risk of death at the 2-year mark. The p-value for this finding less than 0.0001. I want to take a minute to be clear about the benefit dazucorilant appears to offer because it's different from the way most medications targeting ALS are intended to work. Dazucorilant does not appear to prevent functional decline. It prevents early death. There is a common misperception that death resulting from ALS is always coterminous with severe functional decline. That is not the case. Many patients die from complications such as pneumonia and cardiovascular events early in the course of the disease when they still retain significant function and good quality of life. Preventing death during this period, giving back to these patients a good time would be a great benefit. We are currently conducting a small study to see if dose titration can improve dazucorilant's gastrointestinal tolerability. Nonserious GI distress caused most of the discontinuations in DAZALS, an outcome that we think can be avoided. We will incorporate what we learned from our dose titration study into the design of the pivotal trial that we plan to start later this year. To sum up, our Cushing's syndrome business remains on a strong growth trajectory, driven by increasing understanding of hypercortisolism's true prevalence and the need for treatment. Our landmark CATALYST and MOMENTUM studies are causing expanded screening for Cushing's syndrome, more accurate diagnosis and improved care, trends that will drive substantial revenue growth for our existing medications and even faster growth for relacorilant once it is approved. We are proud to have secured our first oncology approval for Lifyorli in platinum-resistant ovarian cancer and have made great progress in a very short time, bringing it to patients. We are confident relacorilant can help patients with earlier stages of ovarian cancer and with other types of solid tumors and in combination with other anticancer therapies. We expect results from our Phase II trial of relacorilant combined with nab-paclitaxel and bevacizumab in patients with platinum-resistant ovarian cancer by the end of this year and from our recently initiated portfolio of oncology studies by the end of next year. Following up on our positive Phase II DAZALS findings, we expect to begin a Phase III trial in patients with ALS later this year. By year-end, we will know the outcome of our Phase II MONARCH trial in patients with MASH and we'll proceed to Phase III if that outcome is positive. The potential of cortisol modulation to benefit patients is immense. We remain deeply committed to converting this potential into meaningful patient outcomes. We thank the patients who participate in our trials, our employees, our clinical investigators and our academic collaborators for being part of this important work. Operator, let's proceed to questions. Operator: [Operator Instructions] Our first question comes from the line of David Amsellem of Piper Sandler. David Amsellem: So just a few. With the updated guidance, should we assume that it's mostly relacorilant contribution? Have any assumptions changed on Korlym. So can you help us just go through that. And then secondly, can you talk to positioning versus KEYTRUDA in practice and how we should think about that? And then lastly, just give us a little bit of color on how nenocorilant differs from rela. And what you see in that molecule that is driving your development decisions there. Joseph K. Belanoff: Thank you, David. Thank you. I think I got all of your questions. Atabak, why don't you take the first question about range? Atabak Mokari: Okay. Great. So David, so at this point, our endocrine business represents the bulk of our guidance range just given where we are with oncology. But in terms of where we -- the updates that we had since last quarter in oncology is obviously, now we have approval. We've published the final ROSELLA results in The Lancet and inclusion in the NCCN guidelines. And as Roberto mentioned, we're really happy with what we're seeing thus far. And to layer on top of that, where Sean talked about, we're really happy with what we're seeing on the Cushing's syndrome side of our business and the strong fundamentals that we're seeing there, we expect to translate to revenue soon. So ultimately, given the strength on both sides, we are confidently raising our guidance range. Joseph K. Belanoff: Thank you, Atabak. And I think the second question is really Roberto's. Roberto Vieira: Yes. So thank you for the question there. I think the first thing for us to think about when thinking about KEYTRUDA and Lifyorli is just to take into account that we only compete in a subset of the market. Lifyorli is approved for an all-comer and KEYTRUDA is approved for a PD-L1 population. When you factor in testing rates, we are talking about something 35% to 40% of patients there. Now when you actually look at the data from our ROSELLA trial, you see the strength of our overall survival data, you see the safety, tolerability of that regimen as well as the convenience. So what we are hearing from physicians is that there is a preference even within that population to actually look into the ROSELLA regimen as being a preferred regimen. Perhaps that is also reflected in the treatment guidelines today, as you see, we have a preferred status. So we feel very confident that our regimen brings benefits to patients. Joseph K. Belanoff: Thank you, Roberto. And let me introduce a person who hasn't spoken yet, Bill Guyer, who runs all of our -- our Chief Development Officer, who runs all of our development activities to make a comment or 2 about nenocorilant. William Guyer: Great. Thank you, David. I mean one thing we've seen related to nenocorilant is that every selective glucocorticoid receptor antagonist that we've studied has unique properties and have shown specific benefits. But we've seen those as they progress through our development program. So continuing our research in new molecules like nenocorilant is definitely worth investigating. We believe nenocorilant has unique properties that will allow us to test even more hypotheses for solid tumors that express the glucocorticoid receptor. In particular, nenocorilant has shown strong activity in animal models in combination with immunotherapy. And so based upon that, we felt that nenocorilant could be a good partner with immunotherapy like nivolumab. But we're going to learn a lot from this Phase I study that will help guide us to rapidly move forward into a Phase II study. And from that study, we'll be able to even better elucidate what those specific attributes are. Operator: Our next question comes from the line of RK with H.C. Wainwright. Swayampakula Ramakanth: Congratulations on the launch of Lifyorli. So the 3 questions that I have, 2 on pipeline -- I mean, 2 on outside of Cushing's syndrome. On the Lifyorli business, what proportion of platinum-resistant ovarian cancer prescribers do you expect to convert to Lifyorli, especially now that you have the NCCN preferred designation. And in general, what does steady-state share of script look like in that. And the second question is on DAZALS. If you think about a Phase III design, what -- should we think about like the 300-milligram dose. And in terms of endpoints and timing of the initiation of that study is question two. And the third question is on the Korlym business itself, glad to note that the pharmacy, the specialty pharma is able to handle all the increased scripts. Are you also looking to add one more specialty pharma so that we don't face the same situation which we faced last year, especially with the momentum that you're getting from MOMENTUM and on CATALYST. Joseph K. Belanoff: Okay. I think I got all of those questions, very good. I think the first one is best answered by Roberto. Roberto Vieira: Yes. So RK, let me -- your question about conversion of prescribers. Let me just go up to the top. We are targeting 5,000 physicians in the U.S. that actually respond to almost 90% of all the volume here. So our expectation is that the very large majority of those will become prescribers that's supported by our market research as we have tested, but also by the very strong uptake. We have been able to capture more than 200 of those within the first month. And we are seeing this coming from community oncology, from gynecology, from academic setting. So from a -- in a very broad and diverse group of physicians from every part of the country. So we have every expectation that these physicians will adopt the therapy. We think that the profile, as we discussed, is very favorable to that because it's very easy to adapt the clinical practice to utilize this drug given the safety profile we have. You asked about the share at steady state. I think that the most important consideration here is that we do have an expectation of becoming market leader in a relatively short time frame. We expect that the drug will be utilized by the majority of patients in different lines of therapy. But really, it's a very attractive proposition for pretty much every patient there given our indication. Joseph K. Belanoff: Thank you, Roberto. I think the second question is Bill's. William Guyer: Yes. Thank you, RK. So related to DAZALS, the 2-year overall survival benefit is highly encouraging and shows consistency of the 300 milligrams. And I think that's the focus, whether it's the 24-week blinded data showed significant benefit of survival to 300 milligrams over placebo. The 1-year data showed survival benefit of the 300 milligrams as did the 2-year data showed benefit for the 300 milligrams. So that's going to be our focus in Phase III. And we've designed a Phase III study that works off the success of the DAZALS trial to replicate those results and confirm that dazucorilant can reduce early death and improve survival. So again, the endpoint would be survival and the focus would be 300 milligrams and would likely be a placebo-controlled trial. And we're working with the top ALS researchers around the world to help guide that study, and they've already commented on our study design. And we've also collaborated with the FDA and EMA and are incorporating their comments into that study, and that will allow us to start this trial this year and enroll patients by the end of this year. Joseph K. Belanoff: Thank you, Bill. And the Korlym questions go to Sean. Sean Maduck: RK, thanks for the question. So I'll start just by saying we're very happy with what we've seen with Curant. They've done a very nice job transitioning our active patient base from our previous vendor and then handling all the new prescriptions that have come in. And again, they've been at an all-time high. So they've been working sort of in 2 places at once as they've been supporting these patients and have done a very nice job. They've scaled as our business have grown, and we know that they can continue to scale with that. That being said, we know that eventually, our business is going to get to a place from a volume standpoint that it's going to be far too much for one pharmacy to be able to handle. So our plan is down the road to expand our network. When we expand and by how many we expand will be driven by what we're seeing from a volume growth standpoint. But as it stands today, I mean, our plan is to bring in some additional support in the fourth quarter this year into the network. Joseph K. Belanoff: Okay. I'm sorry, RK, did you have something question there? Swayampakula Ramakanth: No, no. Actually, I appreciate all the color. Joseph K. Belanoff: Thank you very much. Well, this concludes our call. Thank you very much for listening for the questions. I think it's a very, very exciting time for the company. We're really pleased with what we're seeing both in the endocrinology and on the oncology side. Please look at our press release for all of the things which are going on in development. It really is wonderful to be able to see us really bring forward towards the potential of cortisol modulation as a treatment for very many serious diseases. So thank you. Good evening, and we'll talk to you next quarter. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
U.S. exports of liquefied natural gas to Asia jumped in April, with American producers helping offset reduced supplies from Middle Eastern exporters as the Iran war curtailed output in the region, preliminary ship-tracking data from financial firm LSEG showed.
