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Operator: Ladies and gentlemen, thank you for joining us, and welcome to the W. R. Berkley Corporation First Quarter 2026 Earnings Call. This conference call is being recorded. [Operator Instructions] The speakers' remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words, including without limitation, beliefs, expects or estimates. We caution you that such forward-looking statements should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will, in fact, be achieved. Please refer to our annual report on Form 10-K for the year ended December 31, 2025, and our other filings made with the SEC for a description of the business environment in which we operate and the important factors that may materially affect our results. W. R. Berkley Corporation is not under any obligation and expressly disclaims any such obligation to update or alter its forward-looking statements whether as a result of new information, future events or otherwise. I would now like to turn the call over to Mr. Rob Berkley. Please go ahead, sir. W. Robert Berkley, Jr.: Alexandra thank you very much, and good afternoon to all. Thank you for finding time in your calendars to join us. My colleagues and I, we appreciate your interest in the company. So speaking of colleagues joining me on this end of the phone, we also have Executive Chairman, Bill Berkley, as well as our Group Chief Financial Officer, Rich Baio. We're going to follow a similar path to what we have used in the past. Where I'm going to offer a few more quick comments. Then Rich is going to provide us a summary on the quarter. I will follow behind with a few additional thoughts. And then we will be very pleased to take your questions and the conversation in any direction you wish to take it. Before I do hand it over to Rich, just a couple of observations for me, perhaps a bit stating the obvious. One is let there be no confusion. This continues to be very much a cyclical industry. As we've discussed in the past, the cycle is driven by two human emotions, greed and fear. And without a doubt, these days, it would seem as though the fear is fading and the greed is fully percolating in many of the corners of the marketplace today. One of the things that we've talked about in the past couple of quarters is where is some of this competition coming from or much of this competition coming from. We've talked about MGAs and MGUs delegated authority, a lot of that capacity coming from a variety of different sources, in particular, the reinsurance market as well as we talked about Lloyd's as a marketplace providing a lot of capacity to delegated authority. One of the things that we've taken note of over the past 90 days or so is a notable shift in the appetite of the standard market, in particular, national carriers who seem to be broadening their appetite and having reached a new level of, I would suggest, competitive nature that we haven't seen in some number of years, though it tends to be focused in certain pockets. A couple of other comments on the marketplace, focusing on the reinsurance market for a moment. I think no surprise, property and property cat within the reinsurance space it has been more and more competitive. We're not surprised with it directionally, but we have been taken aback a bit by the pace of change and how that level of competition has really taken hold at an accelerating pace. In addition to that, the casualty market or the liability market within the reinsurance space never seemed to have gotten much of the bounce that we saw in the property market. Nevertheless, it remains very competitive. And we remain concerned for the health and well-being of that marketplace over time, as there is more competition in the property market, that will undoubtedly, at least history would suggest, create more irrational behavior that will be plentiful in both the property cat market as well as the liability market. A couple of thoughts on the insurance marketplace, speaking of property and how it can turn into a marketplace that quickly erodes. We are definitely seeing that, particularly with cat exposed property on the insurance side. GL and umbrella, I would suggest are areas where rate is still available with good reason. Professional, as we've talked about in the past, continues to be a mixed bag. D&O remains one that we are very focused on and seems to be continuing to flirt with the bottom. On the other hand, EPLI in certain jurisdictions is an area from our perspective to be very cautious. I would call out California, particularly Southern California, as one that we are paying close attention to. Speaking of California as it relates to workers' compensation, we've talked about in the past, and we remain convinced that California this time around is out in front of much of the broader workers' comp market. And without a doubt, all eyes remain on the WCIRB, and what is to come in the not-too-distant future. And at the possibility of, I guess, finishing on a bit of a low note, I guess, auto would continue to be an area of great concern from our perspective. It's unclear to us that the marketplace has really wrapped their head around loss cost trend and what action needs to be taken. Looking at the punchline before I hand it over to Rich, is that at the intersection of a cyclical industry, a focus on risk-adjusted return, undoubtedly is a concept that we subscribe to and hopefully, others do, known as cycle management. The good news for us, as we exercise cycle management, the decoupling of product lines as to where they are in the cycle, combined with the breadth of our offering allows us to be more resilient than many of our peers that have a narrow offering. So why don't I pause there and speaking of resilient, Rich, over to you, please. Richard Baio: Great. Thanks, Rob. Good afternoon, everyone. First quarter marked an excellent start to 2026 with record net investment income and strong underwriting profits contributing to a return on beginning of year stockholders' equity of 21.2%. Net income for the quarter was $515 million or $1.31 per share, while record operating income was $514 million or $1.30 per share. Other drivers benefiting the quarter compared to the prior year included lower catastrophe losses and an improved effective tax rate. Starting with underwriting performance, current accident year combined ratio, excluding cat losses, was 88.3%, and the calendar year combined ratio was 90.7%. The difference was current accident year cat losses of 2.4 loss ratio points or $76 million compared with the prior year of $111 million or 3.7 loss ratio points. Unlike last year, which was heavily influenced by California wildfires in the first quarter, this year, the industry experienced significant winter storm activity occurring in January and February. The current accident year loss ratio ex cats for 2026 was 59.7% compared with 59.4% for the prior year which reflects a shift in business mix as we look to maximize profitability. The insurance segment's current accident year loss ratio ex cat increased 10 basis points to 60.9%, while the reinsurance and monoline access segment increased to 51.1%. The expense ratio of 28.6% is comparable to the recent sequential quarters and reflects a small impact from the decline in net premiums earned from the reinsurance and monoline access segment. We continue to believe that the 2026 expense ratio will be comfortably below 30%, barring any material changes in the marketplace. On top line production, despite heightened competition in certain pockets of the market, the insurance segment grew gross premiums written by 4.5% to $3.4 billion and net premiums written by 3.2% to $2.8 billion. As you can see from the supplemental information on Page 7 of the earnings release, net premiums written grew in all lines of business, apart from workers' compensation. The reinsurance and monoline access segment reported net premiums written of $395 million, reflecting decreases in property and casualty lines of business. Net investment income increased 12.2% to a record $404 million driven by growth in the core portfolio of 11.8% to $354 million and an increase in investment fund income of 46.3% to $40 million. As a reminder, we report the investment funds under 1 quarter lag and an average quarterly range for investment fund income is $10 million to $20 million. We expect that strong operating cash flow of $668 million in the current quarter should continue to contribute to the growth in that investment if some. The duration of our fixed maturity portfolio, including cash and cash equivalents increased during the quarter to 3.1 years, which remains below the average life of our insurance reserves. The credit quality of the investment portfolio continues to improve to a very strong AA-. The effective tax rate in the first quarter was lower than our normalized run rate of 23%, plus or minus which is usually attributable to higher taxes on foreign earnings and the ability to utilize such foreign tax credits. In the current quarter, we reflected a net nonrecurring tax benefit, reducing our effective tax rate from 22.8% to 16.3% as reported. We expect the remainder of 2026 will return to our normalized run rate. During the quarter, we repurchased approximately 4.5 million common shares amounting to $302 million and paid regular dividends of $34 million. Stockholders' equity increased to approximately $9.75 billion despite the significant capital management. In summary, another positive quarter with meaningful growth in earnings and 21% plus return on beginning equity. Rob, I'll turn it back to you. W. Robert Berkley, Jr.: Thank you, Rich. A little disappointed that this isn't our new run rate on the tax front. I guess you got a whole quarter to figure that out. Richard Baio: Yes. W. Robert Berkley, Jr.: So let me just offer a couple of more quick sound bites and then we'll move on to Q&A. First off, you would have taken a note on the rate came in reasonably healthy at the 7.2% ex comp just as another perhaps relevant data point. The renewal retention ratio continues to sit at around 80% and that thing fluctuates between 78.5% and 81.5%. It doesn't move very much. And I look at it as one barometer to really understand whether we are turning the book or not in our efforts to get rates. So that's an encouraging sign from my perspective. Just another quick sound bite on the topic of rate. And we touched on this briefly when we had our fourth quarter call, and I think you're going to see it come into more and more focus. We've taken a tremendous amount of rate over not just the past couple of quarters, the past few years. I think there are many pockets of the organization we're feeling very good with what the margin is. And the -- I guess, the need for rate is perhaps not going to be as strong going forward. So what's the punchline? We are actively rethinking what the balance is between rate versus growth. And over the coming quarters, you may see us take our foot slightly off the rate pedal and look to push harder on the growth in particular lines where we see the margin is particularly attractive and exposure growth is of more interest to us than rate. Rich talked about the top line overall growth. It was obviously some pretty separate and distinct pieces, and it does map back at least in my mind, to the topic of cycle management. You would have seen, we took a pretty firm position, which, quite frankly, given our comments in the Q4 call and earlier last year, shouldn't have surprised anyone. We all know what's been going on with the rate. We've been very transparent about our view on the casualty or liability lines. And the discipline that we'll be exercising there and kudos to our colleagues that are actually putting that discipline into practice. The other side of the coin, as Rich pointed out, we are still finding opportunities to grow within the insurance space, clearly, a bit of a mixed bag. I think the note between the gross versus net, again, highlights, hopefully, in the eyes of those that are observing that this is probably a moment, generally speaking, where it's better to be a buyer of reinsurance than a seller of reinsurance, hence the delta between the gross and the net. I do think -- just a final quick comment on the top line. In the insurance space, there is a reasonable chance that we will see a bit more growth as the year unfolds, and we are revisiting this notion of balance between growth and rate. Pivoting over quickly to the loss ratio. I think in a nutshell, it's winter storms. We had more exposure to that than some. That having been said, we think it is still a good trade. The comments on the expense ratio. I share very much Rich's view that we'll be keeping it below 30. The movement that you would have seen in the reinsurance and excess segment, was primarily a result of a reduction in premium on the reinsurance front. Switching over to the investment portfolio for a moment. And Rich flagged for you all the strength of the quality with a very strong AA- almost flirting with a AA. But a couple of other points that I would flag is that the book yield on the portfolio is about 4.7%. New money rate is 5% plus. So we still got some room there for improvement. In addition to that, the duration, as Rich pointed out, is sitting at 3.1 years. As a friendly reminder, the average life of our loss reserves, which is a big part of what we're investing is a hair inside of 4 years. So what's the punchline? The punchline is a couple of things. One, the quality is high. There's opportunity with the book yield moving up and we have flexibility around pushing that duration out which is a plus as well. So even if you discount the growth in the portfolio due to the strength of the cash flow that Rich was referencing, which is there, is real and you see it quarter after quarter. But even if you put that aside, there is meaningful upside on the -- depending on whether you look at the overall including cash, $28 billion or if you want to back out the cash $25.5 billion, there's meaningful upside from there, both because of growth of investable assets as well as the new money rate, which, again, with the duration we have, flexibility. On the topic of flexibility, and I promise last topic for me, at least for the moment, is capital. And I know it's not something that we spend a lot of time talking about on these calls, but I did want to draw folks' attention to it. And that is our financial leverage, which is sitting at about 22.6% these days, which is a -- I don't know if it's an all-time low, but it's an all-time low in my some number of decades at the organization. I think it's important to take note of that for a couple of reasons. Number one, when you look at the returns that we're generating, we're generating it with a much higher level of capital or equity for that matter, more specifically in the business. Number two, I would draw your attention to the fact that we, as an organization, do not have an expectation for 22.6% to keep going down from here. This is a very comfortable place. We think we've got lots of room if an opportunity presented itself. So what does that mean? That means if you look at this business that's earning, I don't know, between $1.750 billion and $2 billion and something a year, give or take. And you think about where our leverage ratios are, what that means is we are generating capital significantly more quickly than we can consume it and that we will have significant amounts of capital to return to shareholders for the foreseeable. And to that end, even with us doing that, we still have a tremendous amount of flexibility to take advantage of whatever unforeseen opportunities may be coming our way. So I flagged that because what you saw in the quarter with the repurchase, what you've seen us do with special dividends and recognizing the earnings power of the business and how we see the growth opportunities before us that we are going to, in all likelihood, have large amounts of capital to continue to return to shareholders and what we believe is the most effective and efficient way that is in the best interest of our shareholders. So I know we talk about repurchase every now and then. People talk about special dividends, but I just wanted to put those data points out there. And again, we can talk more about it during the Q&A if people wish to, but it seemed like that was a relevant topic of the day. So why don't we take a pause there, Alexandra, if we could please open it up for questions. Operator: [Operator Instructions] Your first question comes from the line of Elyse Greenspan with Wells Fargo. Elyse Greenspan: My first question, I guess I'm just trying to, Rob, square away your comments, right? You started off by saying just pointing to greed and fear in the market and then you were talking about standard market carriers especially national carriers, right, that brought in appetite and pointing to the market getting more competitive. But then you also right, ended your comments by saying that there's perhaps some better opportunities to push for a little less price and show better growth. So can you just help me square what felt like introductory comments that it is tough... W. Robert Berkley, Jr.: Thank you for the question, Elyse. And what I perhaps was not as clear as I should have been with my opening comments is that I think there are still pockets where there is good opportunity. I think a lot of those pockets tend to be more casualty related. We, as an organization, have a bent towards casualty as opposed to shorter tail lines, particularly property where the competition is most pronounced. So do I think overall, the market is a bit more competitive today than it was yesterday? Yes, I do. Do I think there are still pockets of the marketplace that we are a meaningful participant that offer opportunity? Yes, I do. Elyse Greenspan: Okay. And then as we triangulate that in terms of just thinking about premium growth? And I guess, my comment is more focused on the insurance segment, right? It got slightly better this quarter. But I think from your comments on last quarter's call, right, I think you had insinuated growth in January might have been within range of 7%, right? So we could see the things -- it seems like slowed in February and March. So how are you thinking about just the level of pickup of growth that we could see -- and do you expect that in the Q2... W. Robert Berkley, Jr.: I don't know -- you're right, [ Anthony ], there's a lag. Sorry to interrupt you, Elyse. I beg your pardon, there's a bit of a lag on the line. But I think to answer your question, and maybe we confused the situation, if we did, apologies. But we actually saw the top line improve as we made our way through the quarter as opposed to the other way around. So January was not our -- it did not prove to be our best month. Elyse Greenspan: Okay. But then -- so for your comments about growth getting better, I guess, my last question, is that a Q2 comment? Is that more maybe Q3, Q4, just based on how you see that today. W. Robert Berkley, Jr.: We are hopeful that we will be able to do better in Q2, but I can't promise that right now. What I can tell you is that we, as an organization, oftentimes are quoting 90 days out, sometimes 60 days out, sometimes even longer than 90 days out. So the -- as we identify pockets where we are willing to make a trade as far as maybe a bit less rate in order for a bit more growth, it takes a little bit of time for that to come into focus. How that will play out, I can't promise that. I know what I've talked to my colleagues about, and I hear from them how they're thinking about things, and that's what I'm trying to share with you. So I can't promise that in Q2, we will grow x amount more. We'll have to see how it unfolds. But I am trying to give you a little bit of a flavor as to what the dialogue is within our clubhouse. Operator: Your next question comes from the line of Rob Cox with Goldman Sachs. Robert Cox: Just first question on property. I hear your comments this quarter and in recent quarters that the property dynamics are repeating themselves. I'm curious where you think property is from a price adequacy perspective, whether it's ROE or whatever metric, and how you would bifurcate across insurance, reinsurance and maybe by geography? W. Robert Berkley, Jr.: So I think that's a pretty big question from my perspective. I think that there's still margin in a lot of places, but it's fallen off pretty quickly. I think it's fallen off most quickly in the reinsurance marketplace. I think then it would waterfall down into cat exposed or E&S property and probably the place where there's been the least level of sea change would be the admitted or standard risk property market overall. That having been said, that part of the market probably got the least bounce. But in my mind, the reinsurance market led the way up and the reinsurance market is leading the way down. Robert Cox: Okay. That's helpful. And then I just had a follow-up. Professional lines, you mentioned pricing trying to bottom there? Looked like your strongest growth at Berkley since the first quarter of 2022 in professional lines this quarter. I don't think a lot of that was pricing. It seems like exposure grew. Do you anticipate seeing further opportunities in professional lines? And is there any other color you could provide on the quarter? W. Robert Berkley, Jr.: Sure. So I think professional is a pretty broad category. I tried to fashion my comments around two areas that gave us reason for pause. D&O, particularly public D&O and certain components of the EPLI market. That having been said, a lot of the growth that you saw on the professional front, much of it came from outside of the United States. My earlier comments were really focused on the U.S. market. So that's really what I can offer on that. As far as the places specifically where we think it's the best opportunity, that's not something we're going to unpack publicly. Operator: Your next question comes from the line of Alex Scott with Barclays. Taylor Scott: First one is on reinsurance. I know you mentioned better to be a buyer than a seller at the moment. So I just wanted to take your temperature on what to expect there for the full year. And when we look at the growth numbers for this quarter, is there anything funky in there around like restatement premiums or anything like that, that we should consider? I just want to make sure I understand the right kind of run rate to that business. W. Robert Berkley, Jr.: Nothing funky, to use your words, in the reinsurance numbers. And I think it's just a reflection of market conditions from our perspective, and you're seeing a combination certainly of a more competitive market. And simultaneously, you're seeing a couple of signs of cedents struggling to get their top line where they want it. So they're increasing their net. And that may feel good in the short run, we'll see how it works out in the long run. Taylor Scott: Makes sense. Okay. I wanted to come back to the casualty reserves a little bit. I know this is sort of old news because you guys put out the triangles and so forth with the 4K results, sorry, the 4Q results. But would be interested if you have any comments you'd share on the other liability and just what we see in there related to some of the earlier years releasing on shorter tail casualty versus some building the reserves on longer tail. I mean what would you say to us to help us kind of wrap our arms around that and get more comfortable with the trends we see? W. Robert Berkley, Jr.: As far as that goes, I think that's probably a bigger conversation than probably makes sense to hold up everyone's time on it. We have put a fair amount of information out and supplements out. In addition to that, I think some of our folks in an effort to help piece it all together, have reached out to yourself and to others. And if you'd like to further the conversation, we're happy to help you piece together the public information. Obviously, there's a bit of a constraint as to how far we can go, but we'd be very happy to pick that up with Alex offline, but I think that's not going to be a quick answer. Operator: Your next question comes from the line of Andrew Kligerman with TD Cowen. Andrew Kligerman: The first question is around the capital management, Rob. I'm trying to frame your appetite in terms of what's bigger? Is it the buyback, the onetime big dividend, special dividend? Or is it growth in a challenged market. Because as I look at what you did in the first quarter, $302 million, that's a lot of buyback as much as you did in all of 2024 when the stock price was about 20% lower and the earnings were very similar to what we're seeing today. So yes, where do you do a big dividend like you did in '24 or '25? And then where should that leverage ratio be? You said 22.6% is too low, where would you like it to level out? So sorry for the long wind on this one, but why the big buyback in the quarter? And what's the appetite buyback versus dividend and where will the leverage be? So a lot to unpack. W. Robert Berkley, Jr.: Okay. Well, thank you for the question, Andrew. I guess a couple of things there. First off, as far as the 22.6%, I did not suggest or if I misspoke, shame on me, but I didn't suggest that we wanted to go lower or higher. I think what I tried to suggest to you is that we didn't see it going much lower than that. I'm not suggesting that we want it to go considerably higher. It really depends on the circumstances at any moment in time, and how we're positioning the business for what we see today and what we envision for tomorrow. Number two, the point that I was trying to articulate earlier is that the opportunity for growth for the organization today and what we see in all likelihood tomorrow is, we think we'll be able to grow, but it's not going to be the growth rate that we enjoyed some number of years in the past or for some number of years. So that's just a reality of market conditions. So again, will there be growth? Yes. Was there going to be the kind of growth we saw in the past? Probably not. So with that all having been said, the reality is with the company generating, call it, 20-plus percent returns or said differently, call it, flirting with $2 billion of net income that is a lot of capital that we need to figure out if we don't need it, how we're going to return it to our shareholders. And that's just the reality. As far as what levers we utilize to return capital to shareholders, that's something that we grapple with every day and we think about what is in the best interest of all shareholders as far as -- whether it's special dividend, whether it's repurchase, whatever it may be. As far as what we did in the past and when we bought back, I'm not -- we can take it offline and try and unpack what we did this quarter versus that quarter. A lot of it has to do with valuation at the moment in time. A lot of it has to do with how we see growth opportunity. So there's a lot of things that we consider. If you're looking for more guidance as to what we're specifically going to do to be returning this surplus of -- significant surplus of capital that we're generating at this today and expect to be generating tomorrow. I don't have a particular road map to share with you but it's certainly something that we will continue to be transparent about on a quarterly basis. Andrew Kligerman: Okay. And with regard to the gross versus net written premium, the net being 3.2% against the gross at 4.5%. Any read through there with the lower net? Any color that you can share on why that net was materially lower? W. Robert Berkley, Jr.: It's a combination of mix of business. And in addition to that, as we tried to flag earlier, there were opportunities to buy some reinsurance of what we believe to be attractive terms. Andrew Kligerman: Got it. And just to sneak one last one. Prior year development, anything unusual in the casualty lines, plus or minus? W. Robert Berkley, Jr.: Nothing particularly exciting. If you want to do a deeper dive at least to the extent we're able -- we'll share with you whatever we're allowed to share with you on that. And obviously, there'll be more detail available in the queue. Operator: Your next question comes from the line of Michael Zaremski with BMO Capital Markets. Michael Zaremski: First question kind of pivoting back to social inflationary lines. Rob, loud and clear, we heard your comment, I think most would agree with you that the industry is still getting their hands around loss cost trend. Industry is doing very well, though overall. Would you be willing to kind of paint a broad brush on kind of how Berkley views loss trend in GL, umbrella, commercial auto, because like back to Alex Scott's questions, we all do see Berkley like peers adding truing up your loss picks a bit higher as well. So curious if you could add any color there. W. Robert Berkley, Jr.: If you're asking me to share with you what our trend assumptions are by product line, that's not something that we put out, generally speaking, for public consumption. As it relates to our loss picks, we are constantly looking at our data. And what is it telling us? We're constantly looking at industry data, and we're looking at other data sets as well, both traditional and nontraditional and trying to respond to that. We put it all into our sausage maker and then a lot of folks sit around and try and apply our judgment to the best of our ability. So I'm not sure what more I can add, Mike, at this stage other than we are very focused on making sure that our picks are appropriate. And based on what we conclude on that front, we are looking to actively respond from a rate perspective, terms and conditions. And I think one of the points I should have made earlier that we tend to not always focus on as much as we could or should is the role that jurisdiction or territory plays as a component of selection. So anyways, I suspect there's not a satisfactory answer amongst my commentary to you. But the long and the short of it is, we just don't get into that level of detail by product line, what our view around trend is. But I can assure you, we are very focused on it, and we are responding in what we believe is a timely manner, not just for the picks, but the action that, that would suggest we should be taken from a selection and pricing perspective. Michael Zaremski: Got it. That's fair. Yes, I just thought worth asking some of your peers have reluctantly, I guess, disclosed some broad-brush trends. Just kind of pivoting back to the debt-to-cap discussion. And maybe I'll try it another way, you gave the context earlier, but we can see, as you kind of alluded to, your very long-term average, debt-to-cap escalates, low 20s, mid-30s, but it's averaged 30 plus. So can you maybe remind us, are there like circumstances when you are increasing your leverage, is it when you feel there's -- you're very bullish about the marketplace, or any additional context you think worth mentioning? W. Robert Berkley, Jr.: The answer is that when we see opportunity in the market, we are very happy to, in the short run, flex that leverage up. But quite frankly, we are very comfortable where we are today, but we certainly have the ability to flex it up if the opportunity presented itself. Operator: Your next question comes from the line of Bob Huang with Morgan Stanley. Jian Huang: So my first question is also on the capital side in a different way, right. I think you talked about willingness to grow your business, you clearly have capital. Is there some way to think about the balance between growing inorganically versus buyback and dividends? Are there lines with... W. Robert Berkley, Jr.: When you say, Bob, what -- to make sure I'm following, when you say inorganically as opposed to organically, are you talking about like M&A? Jian Huang: Yes, sir. Yes, sir. Yes. So like if we think like it does M&A make sense for you guys? Are there lines where you think M&A makes sense? W. Robert Berkley, Jr.: It's certainly some -- most things at investment bankers are out trying to sell, we get a phone call on. Most of the time when you hear about a transaction, we're already somewhat aware of it because we got the phone call. But as we've shared with some, we tend to err on the side of being cautious and cheap. And we recognize that most M&A transactions in this industry, not all but most. If folks could do it all over again, at least the buyers, they probably wouldn't. So I would never say never. We certainly look at things from time to time, but we are very comfortable with the organic growth model. We are pretty disciplined in how we operate the business, and we are willing to be patient because of this philosophy around risk and return. But again, you never know what tomorrow will bring, but there's a reason why we have not been historically active on that front. Jian Huang: Really appreciate that. My second question is on the growth side of things, right? And this is something that's been asked somewhat. And I'm just curious, in the beginning of the call, you kind of talked about the market is in a greedy environment, so to speak, right? And as you think about pivoting to growth, are there areas where you feel the market maybe is too greedy and then you just kind of have to avoid. Are there areas where you think maybe the market is too cautious, and it represents a very big opportunity for you or a semi big opportunity for you, just maybe if you can give us a little bit more of a breakdown there. W. Robert Berkley, Jr.: So the answer is -- and again, maybe I created more confusion than clarity with my opening comments and apologies for that. There is no doubt that if we want to use a broad brush, the market is overall more competitive today than it was a year ago, let alone 2 years ago or 3 years ago. That having been said, there are still pockets particularly within certain aspects of the liability space that offer some what we believe is attractive opportunities as far as available margins. It is not as broadly available as it once was, but it is still there. The shorter tail lines, not all, but much of them have become notably more competitive and certain aspects of the liability lines have become more competitive. But because of the breadth of our offering, we are still able to find opportunities where we still think that there are attractive margins that are available. And attractive enough to the point that we are willing to take our foot off of the rate pedal a little bit, which is why I'm suggesting as our colleagues are contemplating that and pivoting their behavior, there is a likelihood that you will see some level of growth that is coming from these niche opportunities. And we saw our colleagues pivoting more and more throughout the quarter, which is why I was suggesting to -- I believe it was a lease earlier that January, the growth was less relative to March, and that was primarily a result of our colleagues pivoting, reminding you and others that we are oftentimes quoting 90 days out in advance. So it takes time for that pivot to convert into binders or written premium. What does that mean for Q2? Honestly, I can't promise anything. I can only share with you what the narrative is that's going on within our organization, and how we are seeing in the marketplace, and how we are adjusting our approach. Operator: Your next question comes from the line of Tracy Benguigui with Wolfe Research. Tracy Benguigui: Since casualty reinsurance never got the same bounce as you saw on property reinsurance, I'm curious, is this business rate adequate now, or is it approaching rate inadequacy? W. Robert Berkley, Jr.: So I think you would have heard for some number of quarters or beyond us bitching and moaning about the casualty reinsurance marketplace, and how we didn't think ceding commissions made sense, and that's a pretty broad brush that I'm using there. So if we're writing the business, we believe that it's an acceptable margin. But as you would have seen, our casualty portfolio within reinsurance was down considerably in the quarter. And that is not just because -- not because we're charging less for the same exposure, it's because that book of business is shrinking. I can't speak to the broader market. I can only talk to what our colleagues are doing as I understand it. Tracy Benguigui: Understood. Also, you mentioned potential upside from net investment income, and you also noted certain insurance pockets like casualty, you might prioritize growth over rate. So are you taking more of a total return approach when setting combined targets for your underwriters, maybe putting more weight on net investment income, which will allow you to grow? W. Robert Berkley, Jr.: The answer is no. We have a view on loss ratios. And to take your comment to an extreme, we, as an organization, have never subscribed to the notion of cash flow underwriting or anything akin to that. Are we conscious of what the contribution is from the investment portfolio? Of course, we are. We are acutely aware of that, but we are not willing to throw the underwriting discipline out the window because of where interest rates are today. We look to each component of our economic model to stand on its own 2 feet and justify the capital that it utilizes. Operator: Your next question comes from the line of Mark Hughes with Truist Securities. Mark Hughes: Rob, you mentioned that -- yes, you mentioned that the large standard carriers are ramping up their appetite, you saw a step up in competition. Is that largely on the casualty side you're referring to? Is that influencing the balance in the E&S and standard markets? A little more on that would be interesting. W. Robert Berkley, Jr.: They are active on the property side and to the extent that it's on the casualty side, ironically. It's been in pockets of the casualty market that are okay, but not great. So it's really bizarre. They're not going after the good stuff. They're going after the marginal stuff. And in some cases, I mean, they're taking it for 30% off, which is bizarre because they could have had it for 10% off. So as we say around here, and certainly, my boss over here has reminded us, even long-tail business, you write it cheap enough tail business. So they'll -- they can keep going with 30% off, and we'll look forward to seeing it back in a couple of years. Mark Hughes: Yes, very good. And then to the extent that you're so successful in pivoting to growth here in the second quarter, does that have a meaning for your loss picks? Could we potentially see loss picks a little higher? W. Robert Berkley, Jr.: Sorry, Mark, you broke up a little. Could you please repeat that? Mark Hughes: Yes. The question was if you do -- Rob, can you hear me now? W. Robert Berkley, Jr.: Yes. Thank you. Mark Hughes: Okay. Well, very good. If you're successful in generating some better growth in the second quarter, does that have a meaningful loss picks, could you possibly see loss picks go a little bit higher if you're not pushing as much on rate? W. Robert Berkley, Jr.: I don't think that, that would be something that I would lead to, in my view. I think what we're really seeing is that there are pockets of the business where we've been very, very focused on rate, and we think we have room, and maybe it will prove to be that the picks were -- had more room in them than we had originally anticipated. But we'll have to see with time. Operator: Your next call comes from the line of David Motemaden with Evercore ISI. David Motemaden: Can you guys hear me? W. Robert Berkley, Jr.: Yes. Thank you. David Motemaden: Great. So just back on the topic of just maybe letting up a little bit on the rate increases in some lines. And I may have missed this, so I apologize in advance. But is there any like broad class of business that you had referred to? Is that short tail, is it casualty, is it professional lines? I'm not looking for like specific sub lines within those, but I was hoping you could elaborate on like a little bit just which broad area you think that you guys might have opportunities to let up on price and maybe we can see growth accelerate? W. Robert Berkley, Jr.: Yes. We just haven't put that detail out there. We'll think about if there's something we can tuck into the queue. That could be helpful along those lines. But at this stage, we just haven't put anything out there yet, thank you. David Motemaden: Got it. And then the growth in the insurance business in the short-tail lines continues to tick along at 5%. I was a little surprised at that, just given the pricing pressure on the commercial property side. So I was hoping maybe you could unpack that a little bit more for us and just how we should think about the durability of the growth there. W. Robert Berkley, Jr.: I think that you're focusing on it through the lens of commercial, and I would encourage you to broaden your lens to incorporate our A&H business that we've spoken of in the past as well as our private client business. David Motemaden: Got it. And then maybe just one more, maybe just a high-level question. I think you talked about the average life of your reserves at about 4 years. I was a little surprised that it hasn't really changed that much. I think it's been there around like the last few years. But I guess I was wondering, it does feel like claims durations are extending. So I was hoping maybe just philosophically, just taking a step back, what you guys are seeing. Do you think we're seeing more stability here in claims payment patterns as we think about looking through the reserves? W. Robert Berkley, Jr.: I think that at this stage, we feel pretty comfortable that -- maybe just taking half a step back, David. I think that we all know that the industry got caught a bit flat-footed with inflation, particularly social inflation, and it's been a bit of a process of catch-up. I think that picture, as we've all discussed ad nauseam was clouded by COVID for us to a great extent. And I think at this stage, the industry and ourselves included, have adopted and adapted to the new reality of the claims environment and what we see coming out of the legal environment. Operator: Your next question comes from the line of Joshua Shanker with Bank of America. Joshua Shanker: So I guess I want to talk about your go-to-market strategy or maybe the opposite go away from market strategy. As I see the decline in the reinsurance book. I'm trying to understand the complexion of your book. Sometimes people participate on syndicates. Sometimes you have some unique one-off deals. I know your program business is in the -- program management business in that reinsurance bucket, and that's probably seeing some competition from MGAs. Can you talk about as the business is leaving, are you walking away? Is it being competed away? What's the process? And what exactly are you losing? W. Robert Berkley, Jr.: A lot of -- the lion's share of what we're losing would be a treaty reinsurance business. And it's due to how we think about appropriate pricing. And it seems -- go ahead... Joshua Shanker: I mean, on that, or are those are one-off deals that you're managing? W. Robert Berkley, Jr.: No. They tend to be a subscription market, if you like, or a treaty that has multiple participants. Joshua Shanker: And so someone else is coming with the capital, you're walking away and there's plenty of... W. Robert Berkley, Jr.: Someone else either coming with the capital or the cedent is looking for better terms than we're prepared to offer and maybe they choose to keep it. Certainly, a trend that we're starting to see more of is cedents in some cases, if they can't get far better terms are looking to keep it as a way to bolster their own top line. Joshua Shanker: And then switching to the competition from MGAs right now. It's obviously something we talked about in past calls. I mean the insurance growth looks fairly healthy. Are you seeing less competition in the past, or is it as steady as ever? W. Robert Berkley, Jr.: No, we are not seeing the delegated authority model, MGA, MGU et cetera. We're not seeing that subside in any way at this time. Joshua Shanker: And then one last one. As you're thinking about deployment of capital, obviously, returning capital is a big deal, but you've liked the yields in the market. Is there anything attractive in the alternative spaces compared to past quarters where you might be deploying money into more illiquid products? W. Robert Berkley, Jr.: We certainly have a participation in the alternative space. I would add that we do not have a participation in the private credit space, just to make sure there's no question about that. But right now, given what the public fixed income market is offering as far as yield, we don't feel much need to look beyond that. Operator: Your next question comes from the line of Katie Sakys with Autonomous Research. Katie Sakys: Really quickly, how do you describe your approach to managing commercial auto exposures today versus your comments last quarter on shrinking exposures. I think with your very frank description of the auto liability market today, I'm just kind of curious as to what's giving you confidence in the growth that you're still showing in that book, but it's not resulting in adverse selection. W. Robert Berkley, Jr.: Well, just to be clear, the growth that we are experiencing is premium, not unit growth or exposure growth. So the rate that we are taking far exceeds the growth rate. So the exposure is shrinking and the rate is increasing. So the growth that you saw on page, whatever it is of the release, it's all rate and then some. Katie Sakys: Yes. Makes sense. And then any new news on Berkley Embedded. I realize it's only been a couple of months, and I might be ahead of my skis here. But are there any products that have gone live with that? And if so, how are you guys thinking about channel conflict with your traditional distribution partners there. W. Robert Berkley, Jr.: So as far as Berkley Embedded, they are off to a great start, and they do have one product offering that is chugging along in the consumer space. And as it relates to channel conflict, right now, the type of business that we are entertaining through that avenue is really not something that we would be accessing in any other way. That having been said, there is a reality, as we've talked about in the past, once upon a time, there was a defined swim lane for carriers, and there was a defined swim lane for distribution. And I think what we're seeing more and more of is those lines are getting somewhat blurred. And while we are very committed to our traditional distribution, ultimately in the end, our focus also has to be on the insured, and we need to be willing to meet insured where they wish to be met. Operator: Your next question comes from the line of Andrew Andersen with Jefferies. Andrew Andersen: Just on workers' comp, growth has been a little bit lighter there the last couple of quarters. To what extent is there an opportunity for that to pick up again, or is there may be a binding constraint here you're thinking about with regards to price or medical trend uncertainty? W. Robert Berkley, Jr.: Yes. We're just -- I can't tell you exactly what the next quarter will be, but generally speaking, directionally, we have had somewhat of a defensive posture with much -- not all, but much out of the comp market that we participate in. And we're looking forward to that market, experiencing some type of firming at some point. And when it does, I think you will see us expand. And hopefully, the opportunity will be there for us to expand dramatically. Andrew Andersen: Got it. And I know we've touched on this a bit, but just kind of high level here. When you're talking about the standard or national carriers taking back some business, would you describe this as more of normal ebb and flow, or are the standard national carriers may be going deeper into E&S and more into lines of business that have been stickier in the E&S channel historically? W. Robert Berkley, Jr.: I don't think that they are going to derail the E&S marketplace, certainly not today and likely not tomorrow. But we certainly do see them more present in the market with an appetite that is seemingly a bit broader today than it was yesterday. And at times, it would appear as though they are misclassifying risks. I don't know how else you could get to some of the rates that they are entertaining. And we'll have to see how it unfolds. I think it's, again, more pronounced in some of the shorter tail lines. It exists, but less visible in some of the liability lines. Operator: Your next question comes from the line of Meyer Shields with Keefe, Bruyette, & Woods. Meyer Shields: I appreciate you taking my call. First question, I guess, Rob, last quarter and this quarter, you talked a little bit about taking the collective foot off the gas in terms of pricing in some lines. Should we think of that as a top-down directive or is that bubbling up from the various underwriters? W. Robert Berkley, Jr.: Look, we, just to be clear, are not a top-down organization in that sense. We certainly pay attention, we ask lots of questions. We want to understand. But we are not top-down directing our colleagues throughout the operations as to what they should or shouldn't charge. We look at the data and grapple with them. But again, this is an organization where those types of decisions are driven by our colleagues that run the various businesses, and that's just part of our philosophy. That having been said, we do use group data that gets aggregated and other data sources to bring it to bear and put it in the hands of our colleagues running the businesses, so they have as good an information set as possible to make their decisions. Meyer Shields: Okay. That's very helpful. And then very briefly, whether it's Lloyd's or Reinsurance business, does Berkley have any exposure to the Middle East conflict? W. Robert Berkley, Jr.: Nothing of consequence and to our -- we're just not a big player in the war space. We're a very modest player in certain aspects of the marine market, and we are very active users of war exclusions. Alexandra, anything else? Operator: There is one final question. This comes from the line of Brian Meredith with UBS. Brian Meredith: Rob, l will keep it to just one question here. I'm just curious, in your growth thoughts for the year here. Is any of that related to perhaps your incubator type businesses transitioning in the segments. And I'm thinking something like the Berkley Edge. Maybe you can talk a little bit about Berkley Edge, and how is that doing so far? W. Robert Berkley, Jr.: So I think that some of the new ventures are off to a good start, but relative to the overall size of the group, while we look forward to their meaningful contributions, it's not likely in the short run that they are going to get enough traction to move the needle for the group on their own. I think the opportunity is certainly going to come from their contributions, but will come from many others throughout the organization. As far as Berkley Edge, they are up, they are running, and they are off to a good start. But just to level set expectations, it was a standing start that they've begun from, but we're very pleased with the progress that they're making, and we think it's an outstanding group of people that are going to bring value to distribution customers and certainly to capital. Operator: There are no further questions at this time. I will now turn the call back to Mr. Rob Berkley for closing remarks. W. Robert Berkley, Jr.: Alexandra, thank you very much for your assistance this evening. Thank you to all who tuned in for, again, your interest in the company and the questions. As I hope people would have gathered by any measure, a very solid quarter and perhaps equally, if not more exciting, how well positioned the business is to continue to grow, prosper and generate value for stakeholders. We look forward to speaking with you over the summer. Thank you very much. Have a good evening. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Northern Star March 2026 Quarterly Results. [Operator Instructions] I would now like to hand the conference over to Mr. Stuart Tonkin, Managing Director and CEO. Please go ahead. Stuart Tonkin: Good morning, and thank you for joining us today. With me on the call is Chief Financial Officer, Ryan Gurner; and Chief Operating Officer, Simon Jessop. As previously announced, in the March quarter, gold sold totaled 381,000 ounces. And today, we announced the delivery of those ounces at an all-in sustaining cost of AUD 2,709 per ounce. This improved operational performance exiting the quarter has delivered high-margin ounces to generate group underlying free cash flow of $301 million. More specifically, we are prioritizing cash flow at KCGM by accelerating volumes from the high-grade Golden Pike zone during current mill constraints. At Jundee, the operational review is underway, and across Thunderbox and Pogo, we've seen gold grades improve. With this improved performance and high-grade ROM stockpiles at KCGM, the company is forecast to deliver its revised FY '26 production guidance of above 1.5 million ounces. As previously disclosed, this outlook remains particularly dependent on mill throughput at KCGM with both downside and upside potential. Total growth capital expenditure for FY '26 remains unchanged with revisions to the KCGM mill expansion project and operational readiness CapEx. The KCGM mill expansion project remains on track for commissioning in early FY '27. And pleasingly, the project started transitioning from construction to the completions and commissioning during the March quarter, which is marking the next stage of project delivery. Due to ongoing poor productivity levels for construction activity, we prioritize the importance to keep the project on track, and therefore, forecast capital spend increased to $680 million to $700 million in FY '26 and $160 million in FY '27. The increased capital expenditure during FY '26 for the mill expansion has been offset by a reduction in the forecast spend for operational readiness related to delay in the spend of the thermal power plant and transmission infrastructure. You will see in the quarterly report, we've also introduced some extra detail regarding Stage 1 and Stage 2 for on-site construction. Stage 1 refers to the construction of the 27 million tonne per annum plant. Stage 2 refers to the consolidation of the Gidji facility, which simplifies the processing footprint to a single location in Fimiston, which supports longer-term operating efficiency and cost structure benefits. At Hemi, our team continues to optimize the engineering and design of the project while advancing approvals. So our balance sheet remains in a net cash position, and our hedge book -- as our hedge book decreases, our growing exposure to spot gold price, coupled with increasing production, positions us for a strong increase in cash flows going forward. I'd now like to hand over to Simon Jessop, our Chief Operating Officer, to discuss our operational highlights. Simon Jessop: Thank you, Stu, and good morning. This quarter, we delivered a solid operational financial performance with improving production, stronger cost control and continued investment in the long-term growth across our portfolio. At the Kalgoorlie production center, we sold 210,000 ounces of gold at an all-in sustaining cost of $2,550 an ounce, improving on the December quarter. This was driven by stronger cost efficiency at KCGM and a return to normalized performance at the Kalgoorlie operations. Mine operating cash flow was $588 million, generating a net mine cash flow of $156 million after $432 million of growth capital, reflecting both asset strength and continued investment. KCGM sold 117,000 ounces at an all-in sustaining cost of $2,485 an ounce, supported by higher grades and optimizing the available mill feed. Importantly, mining volumes continue to trend towards our annual targets. Open pit material movement is tracking towards 90 million tonnes and underground production towards 3 million tonnes per annum. Ongoing waste stripping is supporting this progress. At the same time, productivity gains are allowing us to accelerate mining in the high-grade zones, prioritizing margin and cash flow, particularly while the mill throughput remains constrained. At Carosue Dam, open pit mining is expected to conclude in the June quarter with production transitioning to underground sources and stockpiles. At the Kalgoorlie operations, performance improved with higher grades and the normalization of underground mining following the earlier H1 disruptions. Turning to our Yandal production center. Performance also strengthened. Gold sales increased to 105,000 ounces at an all-in sustaining cost of $3,347 an ounce with a mine operating cash flow of $177 million and net mine cash flow of $91 million after growth capital. At Jundee, an operational review is underway to reduce costs and improve consistency. During the quarter, we returned to conventional ore processing following the remediation works while a completed power upgrade is expected to support improved mining volumes and grades in the June quarter. At Thunderbox, production was particularly strong, with gold sales plus 26% quarter-on-quarter to 59,000 ounces driven by higher grade ore, initial open pit contributions and improved mill recovery. Turning to Pogo, we saw a step change in performance. Gold sales increased to 66,000 ounces at an all-in sustaining cost of USD 1,529 an ounce, driven by higher grades from optimized stoping in the mining areas. This translated into a mine operating cash flow of USD 136 million and a net mine cash flow of USD 124 million, highlighting the strength of this asset as a cash generator. Operations continue to perform strongly with the mine and mill running at an annualized rate of 1.4 million tonnes per annum. Development activity remains robust, establishing new mining fronts and advancing infrastructure to unlock future production, including access to the Star ore body, supporting both growth and potential mine life extension. In summary, the March quarter reflects a business delivering improved operational performance, disciplined cost management and positioning itself for stronger, more sustainable returns. I would now like to pass over to Ryan, our Chief Financial Officer, to discuss the financials. Ryan Gurner: Thanks, Simon. Good morning, everyone. Northern Star remains in a great financial position. Our balance sheet remains strong with cash and bullion of $1.2 billion at 31 March. Pleasingly, all 3 production centers generated positive free cash flow in the quarter with capital expenditure and exploration fully funded. Quarterly net mine cash flow was $426 million. Figure 8 on Page 10 sets out the company's cash and bullion movements for the quarter with key elements being the company generating just over $1 billion of post-tax operating cash flows, a 180% increase on the prior quarter. After deducting capital of $618 million relating to the KCGM expansion, plant and equipment and mine development, $48 million of exploration and $66 million of lease payments, quarterly free cash generation was $301 million. Also during the quarter, the company received $50 million in proceeds from the divestment of the Central Tanami Gold project and paid an interim dividend of $0.25 per share, totaling $347 million. Stuart has already discussed the revisions to FY '26 growth capital expenditure forecast, particularly KCGM. But in respect of the other investment activities, our exploration expenditure is tracking to plan, with guidance of $225 million for the full year unchanged. And at Hemi, we continue to work closely with key stakeholders and regulators to advance the project including approvals and progress on the engineering and design works and procurement of long lead items. On other financial matters, the Board has recently approved an on-market share buyback program of up to $500 million, supported by the company's strong outlook and value opportunity. The buyback will be subject to the company's security trading policy, including blackout periods, and will not affect the company's dividend policy to pay out 20% to 30% of cash earnings. From a cash tax perspective, we are guiding the second half of FY '26 range to be $240 million to $280 million, with $37 million already paid in Q3. No changes to our estimate quantum or timing for landholder duty for the De Grey and Saracen transactions, both likely to be paid during FY '27. The company is not experiencing any supply restrictions on fuel, and we continue to engage with our suppliers on this matter frequently. Q4 all-in sustaining costs are expected to be $75 to $85 per ounce higher as a result of increased oil prices. Year-to-date depreciation and amortization of $1,015 per ounce sold is just above the top end of the guided range of $875 to $975 per ounce and is expected to track modestly above the top end of the guided range for the full year. For the quarter, noncash inventory charges for the group are a credit of $46 million, primarily from increases in stockpiles at KCGM. During the quarter, the company refinanced and upsized its corporate bank facilities with maturity dates of March 2030 and March 2031 across 2 equal tranches totaling $1.75 billion. These facilities remain undrawn and available at quarter end. Also a reminder that the company will pay interest on its senior guaranteed notes in Q4, which will amount to USD 18 million. The company continues to unwind its hedging commitments with 165,000 ounces delivered during the quarter. At 31 March, commitments totaled 950,000 ounces at an average price of just over AUD 3,350 per ounce. I will now hand back to Ashley to begin the Q&A. Operator: [Operator Instructions] Your first question today comes from Hugo Nicolaci with Goldman Sachs. We will move on. Your next question comes from Levi Spry with UBS. Levi Spry: Maybe just a little bit more detail on the 2 key growth projects, KCGM and Hemi. So can you just talk us through the delay in capital into next year, how that ties in with the potential ramp up through, I guess, second half of this calendar year? Stuart Tonkin: Yes. Thanks, Levi. So there's -- on the actual expansion project, there's an increase in the overall capital and it's pretty much spread this financial year, next financial year. So you'll see those lifts in FY '26, FY '27 in regard to the expansion, about $60 million, $30 million in FY '26, FY '27, $30 million. That's due to the productivities. We're just getting poor productivities, got a lot of labor there. But it's very important to us to keep the timing of the completion in line, and that's why we've been jammed, but prepared to keep that labor there to complete that project. The delay of the spend is the thermal -- the new thermal power station infrastructure pending approvals. We're following with power because we own the Parkeston joint venture power station there, plus we are grid-connected. So they're not issues, but that's just delayed capital. And in FY '26, there's no net change, but there's certainly that uplift of the overall project due to these poor productivities. Levi Spry: Yes. Okay. I guess I'm just trying to drill down a little bit more on your retaining the 23 million tonnes as a guidance number effectively for next year given that the capital has moved a bit. So is there anything more you can add on that? Stuart Tonkin: No. So we will provide the full year guidance with the quarterly, which we typically do in July, on the June quarter. So that will give the outlook for everything for the full year for FY '27 and equally, the overall ounces throughput for KCGM sources, et cetera. So yes, quarter, we're on track for completion and commissioning of the plant in the September quarter. It obviously moves from the old plant to the new plant and then has a ramp-up, and that will relate to how we achieve the full year on that. Levi Spry: Got it. Okay. And then just is there -- can you give us a little bit more detail on the progress at Hemi as you move towards FID there sometime next financial year? Stuart Tonkin: Yes. So really, it's still depending on environmental approvals. We're working closely on the water trial progress, which would be this quarter. So working on that progress... Just need silence on the back of some of those calls, people who need to go to mute. The -- yes, sorry, on Hemi. So the approval is still pending with environmental. It's tracking okay. There's no real curveballs in it, but we're certainly -- it's been delayed from where we predicted, and that's why we pushed the timing of FID out. But yes, we -- I think the other part with FID, we're going to have to be very dependent on the refreshed pricing and with the current backdrop of cost escalations some real comfort with learnings from KCGM, et cetera, productivity levels in labor and the escalation costs around any hydrocarbon-based plastics, fuel, tires, freight. We've got to be really certain on FID there. So I think we'll be very conservative in our view on that. Operator: Your next question comes from Daniel Morgan with Barrenjoey. Daniel Morgan: Just on the super pit, I mean, you've explicitly given more detail on splitting the project ramp up in the Stage 1 and Stage 2. I'm just wondering what are you trying to -- the message you're trying to get to the market here is it the throughput will face a lot of disruptions to factor that in from tie-ins? Is it cost realized pricing from selling concentrate, not gold dore for a period of time. And I know that throughput is 23 million tonnes on Page 4. Has this been updated at all in light of latest thoughts of delivery? And does it include the disruption at Gidji that you're talking about? Stuart Tonkin: Thanks, Daniel. Look, the 23 million tonne hasn't been updated, and we'll revisit that with the full year guidance that we'll provide in July. So we need to consider everything at that point on the stage at which we've turned on the plant. What we're trying to communicate with the division of Stage 1 and Stage 2, it would not make sense or sound odd if we were continuing to spend money in FY '27 on this project yet have it running. So we're trying to be really clear that Stage 1 is the 27 million tonne per annum plant operating and that's for commissioning. That's built in that way and will be commissioned and ramped up in the September quarter. Continuing on in parallel and subsequent to that, not affecting throughput or impact is stage 2. It's effectively all of the ultrafine grinding activity occurring for 100% of that 27 million tonne per annum capacity at the Fimiston location. So people just -- I think maybe that granularity wasn't there. Right now, the concentrates go 20 kilometers north to Gidji from the current plant, get ultrafine ground and then brought back and treated and turned into gold dore at Fimiston. So all of that, the part of the efficiency is productivity to bring all that activity, which was explained in the FID and explained in the overall project approval. It's all occurring on the 1 side. The original pricing included those 2 things, but the design of the activity Stage 1, Stage 2 is there. The other highlight that we'll talk to is in half 1 of FY '27, we will be selling concentrates, continuing to sell concentrates, which is fine and the economics of it are sound. So that's not an issue, but we are just letting people know that until that second stage is complete and can take 100% of the concentrates generated, there will be some of the concentrates go to Gidji and some go in sales, which we've been doing. They go out through ports and going to smelters, and we've got good payability terms on that. Daniel Morgan: Yes. Just moving to Carosue Dam. I see that you've just called out that open pit mining is ceasing. Any plans for higher underground production? Or what are current thoughts on the longevity of underground mining? Simon Jessop: Yes. Thanks, Daniel. It's Simon. So we're still continuing with the underground mines that we've got. So Karari, Dervish is looking better at depth, and we're getting some drill hole hits at Dervish, but porphyry and million. That's the four undergrounds that we're running at the moment. Our sort of next phase is really looking at Twin Peaks and Kiena as the underground operation. So we're just moving into that phase of more underground as some of them wind off over the next couple of years. We then transition to those other underground operations coming in. There will be some open pits further into the future, but not at the moment. Daniel Morgan: And just on, I guess, a broader question of, I think you're conducting operational reviews across the business. Obviously, you've got Jundee... Simon Jessop: Sorry, Daniel, I think, you dropped out there. Daniel Morgan: Sorry, can you hear me? Stuart Tonkin: We can now. Simon Jessop: We can now, yes. Daniel Morgan: My last question is just you're doing operational reviews, I imagine across the business, including Jundee and others. What is the latest plan on providing the outcome of these? Earlier you had said by the end of the year, is there any update to that time? Stuart Tonkin: Yes. Thanks, Daniel. No, we will stick to the timing of -- we'll provide that medium-term guidance, which is a multiyear outlook, and we'll provide that this calendar year. We will provide the FY '27 guidance with the quarterly for the June quarterly, so in July. Operator: Your next question comes from Matthew Frydman with MST Financial. Matthew Frydman: Can I firstly just dig into a little bit more detail on that staging of the expansion. And I understand the detail you've given in terms of the mechanics of Stage 1 versus Stage 2 moving the ultrafine grind down to Fimiston. But I guess just wondering, is this timing or staging approach, has this always been the plan? Or has this really been an outcome or has it been driven by the productivity issues that you faced in terms of bringing 1 part of the process on a little bit later than the rest? Stuart Tonkin: Yes. Thanks, Matt. Look, the staging and the way the contracts form with the contractor has always been separable portion 1, separable portion 2, always and their contract structure is different. So they were designed, engineered, sequenced exactly like that, and that's how the FID was approved, and that's how the total number contemplated this we've contingencies on both those projects. As they've transpired separable portion 1, which is that 27 million tonne per annum plant. That's on track with the timing, but it's overspent because of the productivity is, and we're still working very hard for those final commissioning to be commenced and switched over from the old plant to that new plant in the September quarter, early in the September quarter is our current design and plant and ramping up throughout. Separable portion 2, the ultrafine grinding activity is another 4 to 6 months of activity. So the team moves from step first to the second, stay inside and get that completed. So that was always understood to be the case, and we don't get the recovery improvement of the overall project, and we had said that on the onset until all of that activity and that volume of concentrate gets done. So we're saying expect that through half 1, which will be material going to Gidji and the lower recovery in half 2 of FY '27, and we've got Stage 2 all commissioned and all the concentrates staying there, improved recovery, lower operating costs and all of the activity staying on the site. That's the final piece of the improvement for the investment project. Simon Jessop: And Matt, just to add to that. So Separable Portion 1 is over 95% complete today. And the second portion that Stu was talking about is already 48% complete. So they're happening in parallel. It's just the priority. 27 million tonne case is the focus to get first ore into the mill and start producing gold. And the second stage is just under 50% complete at the moment. So that's just trails and gets finished in H1. Matthew Frydman: Understand. And then secondly, on the power plant, you said that you're comfortable there, given that, obviously, or got your own plant and also a grid connection, but obviously, we know that the grid stability in Kalgoorlie has been an issue recently. So I guess just wondering when exactly is the new power plant needed to support the from the bigger mill. And I guess, how do you see those stability issues potentially impacting or potentially not impacting. Stuart Tonkin: Yes. So we won't -- we'll have access to the grid and the 50-odd meg of power from it. We won't be reliant on it. In the first instance, Parkeston is the foundation supply for the new plant and then the move to the newer thermal plant. It can occur within today 18 months, 2 years, and it improves the overall unit cost of the power and final piece of that is the renewables project that has been approved. So the wind and solar. So really that thermal is just the firming power for that renewables project and that's another step change in the cost structure for the site. So yes, step 1 is we're in 50% joint venture of Parkeston Power, which underpins the expanded sort of mill demand. We are building a new thermal power station subject to those approvals timing and then the renewables that sits on the back of that, which is a third-party's balance sheet. We've got some switching gear we own. Fundamentally, that comes in within a couple of years to start really driving the power costs down, and we will be in control of our own power security, not dependent on the grid. And if anything, we're out there to support the Goldfields grid in Western Power. We've got some arrangements we're progressing quite positively with the state to assist the Northern Star and assist the gold fields in underpinning that power. Matthew Frydman: Okay. I mean, maybe to put it another way, can you achieve 22 million tonnes without the support of the Kalgoorlie grid in FY '27? Stuart Tonkin: Yes. And it will be running at times, it will be running a full 27 million tonne per annum capacity. So full demand. We've got over 100 meg capacity at Parkeston. So 99 meg derated with temperature, and we got 52 meg from the grid well in surplus of the demands of the mine and the mill expanded case. Matthew Frydman: Okay. That's pretty clear. And then maybe just lastly on the Jundee technical review. You've talked about considering a range of outcomes there. And obviously, you said you're going to give more detailed guidance a little bit down the track. But maybe just conceptually, can you book in the sort of range of options that you're considering in that study? I mean if I think hypothetically may be a conservative outcome or a conservative option might be at Jundee that you just mine out the remaining reserves and then kind of ramp down the reinvestment in that asset. That might be a conservative kind of view? Or should I actually be thinking even more conservatively than that conceptually could there be a reduction in the current reserves, given the increase in the cost structure or some of those other factors? Stuart Tonkin: I think it's too early to give that granularity. But the concepts are -- the costs are high. And our aim is to cut absolute costs out of the site and then see the maximum output we can get through the current infrastructure that's there. So it means a reduction in intensity of activity to get the lower unit costs. If anything, that will extend at a lower profile can extend the reserve life that's there. And as far as that investment, again, has to be ranked and prioritized against the other opportunities we have in the business. As you appreciate now, there is a lot of intensity around a number of jumbos developing number of stopes carrying a number of diamond drill rigs doing discovery to come in depletion. So taking a bit of that pace out will actually enable a bit more time with the overall asset to focus on quality over quantity. Operator: Your next question comes from Kate McCutcheon with Bank of America. Kate McCutcheon: I got the company right this morning. I wanted to ask about the buyback. So we had that announced the $500 million circa 1% of your market cap. Just talk me through how you think about buying back your stock here versus investing that in organic growth, et cetera? Ryan Gurner: Kate, it's Ryan. Look, I think right now, it's -- yes, some of the most accretive capital allocation we can put back into this business. We see a strong outlook ahead. We're close to turning on our new mill. We're going to see cash flows live significantly there. So we see strength ahead and we see value in our underlying business. Kate McCutcheon: Okay. And while I've got you, Ryan, I think the tax cash saving numbers you gave us are new. Is it fair to think about that magnitude being less than P&L tax for '27 and '28 that you gave us on the tax shield? And secondly, did you say next quarter's asset is expected to be $75 to $85 an ounce higher as a result of oil prices? Or did I mishear what those comments were? Ryan Gurner: No. So I'll start with that for the last question first, yes. Yes. So $75 to $85 an ounce higher is our sort of estimate. Obviously, oil is volatile, but that's our best view of the impacts this quarter. And then on the tax shield, which I think you're referring to Hemi, I guess we added some more commentary at the back there on Page 10, but it's really just again reminding people of some of the timing of that. So again, the math being that we get a shield essentially of that purchase price. The total value of that from a tax effective perspective is about $1.5 billion, and we're sort of saying we'll get 50% of that back over 5 years. And it's a bit front-end weighted from a tax perspective. So we're just guiding and reminding people that, yes, we will get this benefit. We won't see it though. We're not going to see a big lump sum come back into our treasury, it's just -- it just means that FY '27 tax will just be slightly lower, that's all. Kate McCutcheon: Clear. And then if I can sneak 1 more in, updated resources reserves in May. Can you help me understand the drilling that's being done at Hemi? I assume that's mostly been infill drilling too, because I will probably get an update on CapEx, OpEx with the multiyear outlook. Is that correct before the end of the same way? And I'm just trying to understand how we think about mine life or upside at that asset versus what the focus is now. Stuart Tonkin: Yes. Thanks, Kate. Just before I close, I go to Hemi on that as with diesel and fuel, that is the expected uptick the $75 to $80 in AISC, but it's not last quarter plus that. So it's the component that is increased within. But as we grow out to ounces to the so there's other things that are moving in that side, please don't just accretively add that. Hemi, we've done the drilling, but you're right, it has been really infill and testing, and we've been more aggressive on some of the pitches and shelves on the resource. So we've been -- we've had to sort of incorporate that into how we would do things which may be a little bit stricter. But that will be reflected in how we report the resource and I think equally is being more aggressive on the reserve generally to be contingency and the like. So that will be reflected and reported, which will likely be in May. We won't be giving any other aspects of the Hemi project there, but we will be working on -- we're still working on those numbers in line with expectations around approvals. But the CapEx you're talking about perhaps is the budget of exploration in the forward years. That will be in the multiple and whether we intend to put money into Hemi, my attitude is, there's enough ounces in the ground without really heavily going into growth. We don't need it for a trigger for a FID decision. So there might be other opportunities like Pogo or Fimiston where we get much more effective investment in exploration to add ounces to make bigger longer-term decisions than Hemi needs today. So Hemi might have a lighter approach to that drilling expenditure because there's a very, very solid base for an investment case without it. Operator: Your next question comes from Hugo Nicolaci with Goldman Sachs. Hugo Nicolaci: Sorry, technical issues, and apologies if some of these have been asked. I was just revisiting firstly on Carosue Dam and Simon, your comment that the open pit mining concludes. I appreciate you've probably got new open pits that need developing. But I guess just to clarify around the timing, is that decision in the open pits this quarter and maybe demobilize that fleet largely around the strip ratio increasing and the diesel requirements that go into that. And then you're able to maybe talk through anything around the underground mining rate and grade going forward from here to potentially offset the fall in gold production by processing stockpiles? Simon Jessop: Yes. Thanks, Hugo. No, look, just to be clear, it's not around diesel and trying to conserve. I'll slow down open pit mining due to diesel. It's purely the mine sequencing. So mines coming and going at that asset is fairly normal over the journey. It's just we've reached the end of the current open pits, 11 bells Redbrook finishes this quarter, then we might have some box cuts and a few things to do early in FY '27, but there's no ounces attached to that. It's more setting up for the next leg of the underground growth. So probably the best way to think about it is when we do the Investor Day later on this calendar year. We could really show with a bit more visibility on some of the sequencing of the mines. Hugo Nicolaci: That's helpful. So if we think about it today, then realistically, the underground rates aren't picking up that materially, you're probably seeing Carosue drop below that 200,000 ounces a year for the next couple of years where you do that underground development? Stuart Tonkin: It could do. We're still working through that, but we've got some good growth at Dervish. So we'll see how that plays out when we do the resource and the reserves and then feed that current information back into the life of asset mining plan. Hugo Nicolaci: Got it. That's helpful. And then, Ryan, just sort of running back on the buyback piece, just confirming then to the timing and magnitude of the buyback as it stands purely a value decision on your stock and then maybe come August as KCGM and your capital requirements become a little bit clearer. Should we consider scope to maybe take this to a magnitude you've previously targeted as being more meaningful around the buyback? Ryan Gurner: I think everything is always on the table, Hugo. We want to allocate our capital to the best return. So buyback is something if it gets exhausted, if we're through it quickly, it's always -- we're always able to assess new opportunity there. And as I said, we're not too far away from seeing that change in free cash flow. There's challenges across the business. There's challenges in oil, all these things. So right now, we've decided on that, I guess, quantum. We're ready to act. And I guess we'll make those decisions as positive time plays out. Operator: Your next question comes from Jonathon Sharp with JPMorgan. Jonathon Sharp: Just with KCGM mill expansion, the CapEx. Can you just help us understand the split between construction productivity and cost inflation and which is proving harder to control as we move through commissioning. Stuart Tonkin: Yes. So -- thanks, Jonathon. So look, there's no lift about $60 million for that project that we've just reported, so 30 this year for next year. I'd say, and it then knocks through to the other, but probably 2/3 of that is just the lower productivity. So you've got more people doing the same work at that elevated cost. In turn, cost escalation is occurring, not just through diesel but through all other things, and labor is embedded in all of those cost escalations, which we don't see easing. So that's been a large part of -- you have extra labor, it flows through to commuting that labor, housing that labor, the consumables they use, all of those things knock through. But yes, it's a reality that underpins anyone spending money at the moment. Jonathon Sharp: Yes. Okay. That's clear. And just as you move through commissioning without getting into commercially sensitive detail, does the main contract to remain accountable through wet commissioning, performance testing and other performance incentives acceptable criteria tied to sort of final handover, just interested in knowing a little bit of detail on that? Stuart Tonkin: For sure. I mean, there's pretty traditional standard things where you do a handover and it's got to make criteria, so that's embedded. And look, we've got the commitment from the contractor that they want to see this working as well as we do and promote it for the next opportunity. So that's there. Equally, we've got the same contractor doing Stage 2. It's a different structure, again, different incentivization. So our approach to that is going well. And Simon spoke to 95% of the stage 1 is complete. Nearly 50% of Stage 2 is complete and those structures drive that behavior largely. So yes, we're okay with those things, and we'll be tracking and checking those things closely. We won't be silly on the risk balance here. If it comes down to disputes around small amounts of quality, we think running the plant and addressing some of those things as we go rather than not waiting to move in new house to your fly screens are on, we'll be sensible in the timing of that. Operator: Your next question comes from Adam Baker with Macquarie. Adam Baker: Thanks for the color on the increase in fuel prices. Assuming mostly it's related to diesel. But just looking at the midpoint of guidance, I mean, that's implying about a 3% increase in your cost base. Just wondering if you go back to the start of FY '26, prior to the diesel price escalation. Can you give us any color on what diesel prices were as a percentage of cost base for the business? Ryan Gurner: They're probably -- Adam, it's Ryan. That's basically doubled, I guess, in this quarter that we're forecasting. They're probably 4% of our business, I'd say, back then. Now they're obviously pushing 7%, 8% for the quarter. Adam Baker: That's good. And just secondly, on clearly, a lot of optionality for you guys to deploy that. Just wondering if you've considered any minimum net cash threshold before you deploy it, noting you've got $320 million at the end of the quarter, I'd say that you wouldn't draw down on the $1.75 billion corporate bank facility to prioritize the buyback, for example. Ryan Gurner: I think, Adam, what I'd say is, yes, we want to maintain good liquidity. We've got good flexibility on our balance sheet if we have to draw debt if for whatever purpose. And we see the cash flows ahead, right? So we're sitting here in late April. The mill will turn on early FY '27. We're really looking forward to that. We see what's ahead. There's challenges in the sort of more global economy with oil, but we feel is on with our balance sheet, with our cash and bullion on hand, we can manage that. Operator: There are no further questions at this time. I'll now hand back to Mr. Tonkin for closing remarks. Stuart Tonkin: Okay. Well, thanks, everyone, for joining us on the call, and I appreciate your interest in the company on what is a very busy day. Thanks very much. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Northern Star March 2026 Quarterly Results. [Operator Instructions] I would now like to hand the conference over to Mr. Stuart Tonkin, Managing Director and CEO. Please go ahead. Stuart Tonkin: Good morning, and thank you for joining us today. With me on the call is Chief Financial Officer, Ryan Gurner; and Chief Operating Officer, Simon Jessop. As previously announced, in the March quarter, gold sold totaled 381,000 ounces. And today, we announced the delivery of those ounces at an all-in sustaining cost of AUD 2,709 per ounce. This improved operational performance exiting the quarter has delivered high-margin ounces to generate group underlying free cash flow of $301 million. More specifically, we are prioritizing cash flow at KCGM by accelerating volumes from the high-grade Golden Pike zone during current mill constraints. At Jundee, the operational review is underway, and across Thunderbox and Pogo, we've seen gold grades improve. With this improved performance and high-grade ROM stockpiles at KCGM, the company is forecast to deliver its revised FY '26 production guidance of above 1.5 million ounces. As previously disclosed, this outlook remains particularly dependent on mill throughput at KCGM with both downside and upside potential. Total growth capital expenditure for FY '26 remains unchanged with revisions to the KCGM mill expansion project and operational readiness CapEx. The KCGM mill expansion project remains on track for commissioning in early FY '27. And pleasingly, the project started transitioning from construction to the completions and commissioning during the March quarter, which is marking the next stage of project delivery. Due to ongoing poor productivity levels for construction activity, we prioritize the importance to keep the project on track, and therefore, forecast capital spend increased to $680 million to $700 million in FY '26 and $160 million in FY '27. The increased capital expenditure during FY '26 for the mill expansion has been offset by a reduction in the forecast spend for operational readiness related to delay in the spend of the thermal power plant and transmission infrastructure. You will see in the quarterly report, we've also introduced some extra detail regarding Stage 1 and Stage 2 for on-site construction. Stage 1 refers to the construction of the 27 million tonne per annum plant. Stage 2 refers to the consolidation of the Gidji facility, which simplifies the processing footprint to a single location in Fimiston, which supports longer-term operating efficiency and cost structure benefits. At Hemi, our team continues to optimize the engineering and design of the project while advancing approvals. So our balance sheet remains in a net cash position, and our hedge book -- as our hedge book decreases, our growing exposure to spot gold price, coupled with increasing production, positions us for a strong increase in cash flows going forward. I'd now like to hand over to Simon Jessop, our Chief Operating Officer, to discuss our operational highlights. Simon Jessop: Thank you, Stu, and good morning. This quarter, we delivered a solid operational financial performance with improving production, stronger cost control and continued investment in the long-term growth across our portfolio. At the Kalgoorlie production center, we sold 210,000 ounces of gold at an all-in sustaining cost of $2,550 an ounce, improving on the December quarter. This was driven by stronger cost efficiency at KCGM and a return to normalized performance at the Kalgoorlie operations. Mine operating cash flow was $588 million, generating a net mine cash flow of $156 million after $432 million of growth capital, reflecting both asset strength and continued investment. KCGM sold 117,000 ounces at an all-in sustaining cost of $2,485 an ounce, supported by higher grades and optimizing the available mill feed. Importantly, mining volumes continue to trend towards our annual targets. Open pit material movement is tracking towards 90 million tonnes and underground production towards 3 million tonnes per annum. Ongoing waste stripping is supporting this progress. At the same time, productivity gains are allowing us to accelerate mining in the high-grade zones, prioritizing margin and cash flow, particularly while the mill throughput remains constrained. At Carosue Dam, open pit mining is expected to conclude in the June quarter with production transitioning to underground sources and stockpiles. At the Kalgoorlie operations, performance improved with higher grades and the normalization of underground mining following the earlier H1 disruptions. Turning to our Yandal production center. Performance also strengthened. Gold sales increased to 105,000 ounces at an all-in sustaining cost of $3,347 an ounce with a mine operating cash flow of $177 million and net mine cash flow of $91 million after growth capital. At Jundee, an operational review is underway to reduce costs and improve consistency. During the quarter, we returned to conventional ore processing following the remediation works while a completed power upgrade is expected to support improved mining volumes and grades in the June quarter. At Thunderbox, production was particularly strong, with gold sales plus 26% quarter-on-quarter to 59,000 ounces driven by higher grade ore, initial open pit contributions and improved mill recovery. Turning to Pogo, we saw a step change in performance. Gold sales increased to 66,000 ounces at an all-in sustaining cost of USD 1,529 an ounce, driven by higher grades from optimized stoping in the mining areas. This translated into a mine operating cash flow of USD 136 million and a net mine cash flow of USD 124 million, highlighting the strength of this asset as a cash generator. Operations continue to perform strongly with the mine and mill running at an annualized rate of 1.4 million tonnes per annum. Development activity remains robust, establishing new mining fronts and advancing infrastructure to unlock future production, including access to the Star ore body, supporting both growth and potential mine life extension. In summary, the March quarter reflects a business delivering improved operational performance, disciplined cost management and positioning itself for stronger, more sustainable returns. I would now like to pass over to Ryan, our Chief Financial Officer, to discuss the financials. Ryan Gurner: Thanks, Simon. Good morning, everyone. Northern Star remains in a great financial position. Our balance sheet remains strong with cash and bullion of $1.2 billion at 31 March. Pleasingly, all 3 production centers generated positive free cash flow in the quarter with capital expenditure and exploration fully funded. Quarterly net mine cash flow was $426 million. Figure 8 on Page 10 sets out the company's cash and bullion movements for the quarter with key elements being the company generating just over $1 billion of post-tax operating cash flows, a 180% increase on the prior quarter. After deducting capital of $618 million relating to the KCGM expansion, plant and equipment and mine development, $48 million of exploration and $66 million of lease payments, quarterly free cash generation was $301 million. Also during the quarter, the company received $50 million in proceeds from the divestment of the Central Tanami Gold project and paid an interim dividend of $0.25 per share, totaling $347 million. Stuart has already discussed the revisions to FY '26 growth capital expenditure forecast, particularly KCGM. But in respect of the other investment activities, our exploration expenditure is tracking to plan, with guidance of $225 million for the full year unchanged. And at Hemi, we continue to work closely with key stakeholders and regulators to advance the project including approvals and progress on the engineering and design works and procurement of long lead items. On other financial matters, the Board has recently approved an on-market share buyback program of up to $500 million, supported by the company's strong outlook and value opportunity. The buyback will be subject to the company's security trading policy, including blackout periods, and will not affect the company's dividend policy to pay out 20% to 30% of cash earnings. From a cash tax perspective, we are guiding the second half of FY '26 range to be $240 million to $280 million, with $37 million already paid in Q3. No changes to our estimate quantum or timing for landholder duty for the De Grey and Saracen transactions, both likely to be paid during FY '27. The company is not experiencing any supply restrictions on fuel, and we continue to engage with our suppliers on this matter frequently. Q4 all-in sustaining costs are expected to be $75 to $85 per ounce higher as a result of increased oil prices. Year-to-date depreciation and amortization of $1,015 per ounce sold is just above the top end of the guided range of $875 to $975 per ounce and is expected to track modestly above the top end of the guided range for the full year. For the quarter, noncash inventory charges for the group are a credit of $46 million, primarily from increases in stockpiles at KCGM. During the quarter, the company refinanced and upsized its corporate bank facilities with maturity dates of March 2030 and March 2031 across 2 equal tranches totaling $1.75 billion. These facilities remain undrawn and available at quarter end. Also a reminder that the company will pay interest on its senior guaranteed notes in Q4, which will amount to USD 18 million. The company continues to unwind its hedging commitments with 165,000 ounces delivered during the quarter. At 31 March, commitments totaled 950,000 ounces at an average price of just over AUD 3,350 per ounce. I will now hand back to Ashley to begin the Q&A. Operator: [Operator Instructions] Your first question today comes from Hugo Nicolaci with Goldman Sachs. We will move on. Your next question comes from Levi Spry with UBS. Levi Spry: Maybe just a little bit more detail on the 2 key growth projects, KCGM and Hemi. So can you just talk us through the delay in capital into next year, how that ties in with the potential ramp up through, I guess, second half of this calendar year? Stuart Tonkin: Yes. Thanks, Levi. So there's -- on the actual expansion project, there's an increase in the overall capital and it's pretty much spread this financial year, next financial year. So you'll see those lifts in FY '26, FY '27 in regard to the expansion, about $60 million, $30 million in FY '26, FY '27, $30 million. That's due to the productivities. We're just getting poor productivities, got a lot of labor there. But it's very important to us to keep the timing of the completion in line, and that's why we've been jammed, but prepared to keep that labor there to complete that project. The delay of the spend is the thermal -- the new thermal power station infrastructure pending approvals. We're following with power because we own the Parkeston joint venture power station there, plus we are grid-connected. So they're not issues, but that's just delayed capital. And in FY '26, there's no net change, but there's certainly that uplift of the overall project due to these poor productivities. Levi Spry: Yes. Okay. I guess I'm just trying to drill down a little bit more on your retaining the 23 million tonnes as a guidance number effectively for next year given that the capital has moved a bit. So is there anything more you can add on that? Stuart Tonkin: No. So we will provide the full year guidance with the quarterly, which we typically do in July, on the June quarter. So that will give the outlook for everything for the full year for FY '27 and equally, the overall ounces throughput for KCGM sources, et cetera. So yes, quarter, we're on track for completion and commissioning of the plant in the September quarter. It obviously moves from the old plant to the new plant and then has a ramp-up, and that will relate to how we achieve the full year on that. Levi Spry: Got it. Okay. And then just is there -- can you give us a little bit more detail on the progress at Hemi as you move towards FID there sometime next financial year? Stuart Tonkin: Yes. So really, it's still depending on environmental approvals. We're working closely on the water trial progress, which would be this quarter. So working on that progress... Just need silence on the back of some of those calls, people who need to go to mute. The -- yes, sorry, on Hemi. So the approval is still pending with environmental. It's tracking okay. There's no real curveballs in it, but we're certainly -- it's been delayed from where we predicted, and that's why we pushed the timing of FID out. But yes, we -- I think the other part with FID, we're going to have to be very dependent on the refreshed pricing and with the current backdrop of cost escalations some real comfort with learnings from KCGM, et cetera, productivity levels in labor and the escalation costs around any hydrocarbon-based plastics, fuel, tires, freight. We've got to be really certain on FID there. So I think we'll be very conservative in our view on that. Operator: Your next question comes from Daniel Morgan with Barrenjoey. Daniel Morgan: Just on the super pit, I mean, you've explicitly given more detail on splitting the project ramp up in the Stage 1 and Stage 2. I'm just wondering what are you trying to -- the message you're trying to get to the market here is it the throughput will face a lot of disruptions to factor that in from tie-ins? Is it cost realized pricing from selling concentrate, not gold dore for a period of time. And I know that throughput is 23 million tonnes on Page 4. Has this been updated at all in light of latest thoughts of delivery? And does it include the disruption at Gidji that you're talking about? Stuart Tonkin: Thanks, Daniel. Look, the 23 million tonne hasn't been updated, and we'll revisit that with the full year guidance that we'll provide in July. So we need to consider everything at that point on the stage at which we've turned on the plant. What we're trying to communicate with the division of Stage 1 and Stage 2, it would not make sense or sound odd if we were continuing to spend money in FY '27 on this project yet have it running. So we're trying to be really clear that Stage 1 is the 27 million tonne per annum plant operating and that's for commissioning. That's built in that way and will be commissioned and ramped up in the September quarter. Continuing on in parallel and subsequent to that, not affecting throughput or impact is stage 2. It's effectively all of the ultrafine grinding activity occurring for 100% of that 27 million tonne per annum capacity at the Fimiston location. So people just -- I think maybe that granularity wasn't there. Right now, the concentrates go 20 kilometers north to Gidji from the current plant, get ultrafine ground and then brought back and treated and turned into gold dore at Fimiston. So all of that, the part of the efficiency is productivity to bring all that activity, which was explained in the FID and explained in the overall project approval. It's all occurring on the 1 side. The original pricing included those 2 things, but the design of the activity Stage 1, Stage 2 is there. The other highlight that we'll talk to is in half 1 of FY '27, we will be selling concentrates, continuing to sell concentrates, which is fine and the economics of it are sound. So that's not an issue, but we are just letting people know that until that second stage is complete and can take 100% of the concentrates generated, there will be some of the concentrates go to Gidji and some go in sales, which we've been doing. They go out through ports and going to smelters, and we've got good payability terms on that. Daniel Morgan: Yes. Just moving to Carosue Dam. I see that you've just called out that open pit mining is ceasing. Any plans for higher underground production? Or what are current thoughts on the longevity of underground mining? Simon Jessop: Yes. Thanks, Daniel. It's Simon. So we're still continuing with the underground mines that we've got. So Karari, Dervish is looking better at depth, and we're getting some drill hole hits at Dervish, but porphyry and million. That's the four undergrounds that we're running at the moment. Our sort of next phase is really looking at Twin Peaks and Kiena as the underground operation. So we're just moving into that phase of more underground as some of them wind off over the next couple of years. We then transition to those other underground operations coming in. There will be some open pits further into the future, but not at the moment. Daniel Morgan: And just on, I guess, a broader question of, I think you're conducting operational reviews across the business. Obviously, you've got Jundee... Simon Jessop: Sorry, Daniel, I think, you dropped out there. Daniel Morgan: Sorry, can you hear me? Stuart Tonkin: We can now. Simon Jessop: We can now, yes. Daniel Morgan: My last question is just you're doing operational reviews, I imagine across the business, including Jundee and others. What is the latest plan on providing the outcome of these? Earlier you had said by the end of the year, is there any update to that time? Stuart Tonkin: Yes. Thanks, Daniel. No, we will stick to the timing of -- we'll provide that medium-term guidance, which is a multiyear outlook, and we'll provide that this calendar year. We will provide the FY '27 guidance with the quarterly for the June quarterly, so in July. Operator: Your next question comes from Matthew Frydman with MST Financial. Matthew Frydman: Can I firstly just dig into a little bit more detail on that staging of the expansion. And I understand the detail you've given in terms of the mechanics of Stage 1 versus Stage 2 moving the ultrafine grind down to Fimiston. But I guess just wondering, is this timing or staging approach, has this always been the plan? Or has this really been an outcome or has it been driven by the productivity issues that you faced in terms of bringing 1 part of the process on a little bit later than the rest? Stuart Tonkin: Yes. Thanks, Matt. Look, the staging and the way the contracts form with the contractor has always been separable portion 1, separable portion 2, always and their contract structure is different. So they were designed, engineered, sequenced exactly like that, and that's how the FID was approved, and that's how the total number contemplated this we've contingencies on both those projects. As they've transpired separable portion 1, which is that 27 million tonne per annum plant. That's on track with the timing, but it's overspent because of the productivity is, and we're still working very hard for those final commissioning to be commenced and switched over from the old plant to that new plant in the September quarter, early in the September quarter is our current design and plant and ramping up throughout. Separable portion 2, the ultrafine grinding activity is another 4 to 6 months of activity. So the team moves from step first to the second, stay inside and get that completed. So that was always understood to be the case, and we don't get the recovery improvement of the overall project, and we had said that on the onset until all of that activity and that volume of concentrate gets done. So we're saying expect that through half 1, which will be material going to Gidji and the lower recovery in half 2 of FY '27, and we've got Stage 2 all commissioned and all the concentrates staying there, improved recovery, lower operating costs and all of the activity staying on the site. That's the final piece of the improvement for the investment project. Simon Jessop: And Matt, just to add to that. So Separable Portion 1 is over 95% complete today. And the second portion that Stu was talking about is already 48% complete. So they're happening in parallel. It's just the priority. 27 million tonne case is the focus to get first ore into the mill and start producing gold. And the second stage is just under 50% complete at the moment. So that's just trails and gets finished in H1. Matthew Frydman: Understand. And then secondly, on the power plant, you said that you're comfortable there, given that, obviously, or got your own plant and also a grid connection, but obviously, we know that the grid stability in Kalgoorlie has been an issue recently. So I guess just wondering when exactly is the new power plant needed to support the from the bigger mill. And I guess, how do you see those stability issues potentially impacting or potentially not impacting. Stuart Tonkin: Yes. So we won't -- we'll have access to the grid and the 50-odd meg of power from it. We won't be reliant on it. In the first instance, Parkeston is the foundation supply for the new plant and then the move to the newer thermal plant. It can occur within today 18 months, 2 years, and it improves the overall unit cost of the power and final piece of that is the renewables project that has been approved. So the wind and solar. So really that thermal is just the firming power for that renewables project and that's another step change in the cost structure for the site. So yes, step 1 is we're in 50% joint venture of Parkeston Power, which underpins the expanded sort of mill demand. We are building a new thermal power station subject to those approvals timing and then the renewables that sits on the back of that, which is a third-party's balance sheet. We've got some switching gear we own. Fundamentally, that comes in within a couple of years to start really driving the power costs down, and we will be in control of our own power security, not dependent on the grid. And if anything, we're out there to support the Goldfields grid in Western Power. We've got some arrangements we're progressing quite positively with the state to assist the Northern Star and assist the gold fields in underpinning that power. Matthew Frydman: Okay. I mean, maybe to put it another way, can you achieve 22 million tonnes without the support of the Kalgoorlie grid in FY '27? Stuart Tonkin: Yes. And it will be running at times, it will be running a full 27 million tonne per annum capacity. So full demand. We've got over 100 meg capacity at Parkeston. So 99 meg derated with temperature, and we got 52 meg from the grid well in surplus of the demands of the mine and the mill expanded case. Matthew Frydman: Okay. That's pretty clear. And then maybe just lastly on the Jundee technical review. You've talked about considering a range of outcomes there. And obviously, you said you're going to give more detailed guidance a little bit down the track. But maybe just conceptually, can you book in the sort of range of options that you're considering in that study? I mean if I think hypothetically may be a conservative outcome or a conservative option might be at Jundee that you just mine out the remaining reserves and then kind of ramp down the reinvestment in that asset. That might be a conservative kind of view? Or should I actually be thinking even more conservatively than that conceptually could there be a reduction in the current reserves, given the increase in the cost structure or some of those other factors? Stuart Tonkin: I think it's too early to give that granularity. But the concepts are -- the costs are high. And our aim is to cut absolute costs out of the site and then see the maximum output we can get through the current infrastructure that's there. So it means a reduction in intensity of activity to get the lower unit costs. If anything, that will extend at a lower profile can extend the reserve life that's there. And as far as that investment, again, has to be ranked and prioritized against the other opportunities we have in the business. As you appreciate now, there is a lot of intensity around a number of jumbos developing number of stopes carrying a number of diamond drill rigs doing discovery to come in depletion. So taking a bit of that pace out will actually enable a bit more time with the overall asset to focus on quality over quantity. Operator: Your next question comes from Kate McCutcheon with Bank of America. Kate McCutcheon: I got the company right this morning. I wanted to ask about the buyback. So we had that announced the $500 million circa 1% of your market cap. Just talk me through how you think about buying back your stock here versus investing that in organic growth, et cetera? Ryan Gurner: Kate, it's Ryan. Look, I think right now, it's -- yes, some of the most accretive capital allocation we can put back into this business. We see a strong outlook ahead. We're close to turning on our new mill. We're going to see cash flows live significantly there. So we see strength ahead and we see value in our underlying business. Kate McCutcheon: Okay. And while I've got you, Ryan, I think the tax cash saving numbers you gave us are new. Is it fair to think about that magnitude being less than P&L tax for '27 and '28 that you gave us on the tax shield? And secondly, did you say next quarter's asset is expected to be $75 to $85 an ounce higher as a result of oil prices? Or did I mishear what those comments were? Ryan Gurner: No. So I'll start with that for the last question first, yes. Yes. So $75 to $85 an ounce higher is our sort of estimate. Obviously, oil is volatile, but that's our best view of the impacts this quarter. And then on the tax shield, which I think you're referring to Hemi, I guess we added some more commentary at the back there on Page 10, but it's really just again reminding people of some of the timing of that. So again, the math being that we get a shield essentially of that purchase price. The total value of that from a tax effective perspective is about $1.5 billion, and we're sort of saying we'll get 50% of that back over 5 years. And it's a bit front-end weighted from a tax perspective. So we're just guiding and reminding people that, yes, we will get this benefit. We won't see it though. We're not going to see a big lump sum come back into our treasury, it's just -- it just means that FY '27 tax will just be slightly lower, that's all. Kate McCutcheon: Clear. And then if I can sneak 1 more in, updated resources reserves in May. Can you help me understand the drilling that's being done at Hemi? I assume that's mostly been infill drilling too, because I will probably get an update on CapEx, OpEx with the multiyear outlook. Is that correct before the end of the same way? And I'm just trying to understand how we think about mine life or upside at that asset versus what the focus is now. Stuart Tonkin: Yes. Thanks, Kate. Just before I close, I go to Hemi on that as with diesel and fuel, that is the expected uptick the $75 to $80 in AISC, but it's not last quarter plus that. So it's the component that is increased within. But as we grow out to ounces to the so there's other things that are moving in that side, please don't just accretively add that. Hemi, we've done the drilling, but you're right, it has been really infill and testing, and we've been more aggressive on some of the pitches and shelves on the resource. So we've been -- we've had to sort of incorporate that into how we would do things which may be a little bit stricter. But that will be reflected in how we report the resource and I think equally is being more aggressive on the reserve generally to be contingency and the like. So that will be reflected and reported, which will likely be in May. We won't be giving any other aspects of the Hemi project there, but we will be working on -- we're still working on those numbers in line with expectations around approvals. But the CapEx you're talking about perhaps is the budget of exploration in the forward years. That will be in the multiple and whether we intend to put money into Hemi, my attitude is, there's enough ounces in the ground without really heavily going into growth. We don't need it for a trigger for a FID decision. So there might be other opportunities like Pogo or Fimiston where we get much more effective investment in exploration to add ounces to make bigger longer-term decisions than Hemi needs today. So Hemi might have a lighter approach to that drilling expenditure because there's a very, very solid base for an investment case without it. Operator: Your next question comes from Hugo Nicolaci with Goldman Sachs. Hugo Nicolaci: Sorry, technical issues, and apologies if some of these have been asked. I was just revisiting firstly on Carosue Dam and Simon, your comment that the open pit mining concludes. I appreciate you've probably got new open pits that need developing. But I guess just to clarify around the timing, is that decision in the open pits this quarter and maybe demobilize that fleet largely around the strip ratio increasing and the diesel requirements that go into that. And then you're able to maybe talk through anything around the underground mining rate and grade going forward from here to potentially offset the fall in gold production by processing stockpiles? Simon Jessop: Yes. Thanks, Hugo. No, look, just to be clear, it's not around diesel and trying to conserve. I'll slow down open pit mining due to diesel. It's purely the mine sequencing. So mines coming and going at that asset is fairly normal over the journey. It's just we've reached the end of the current open pits, 11 bells Redbrook finishes this quarter, then we might have some box cuts and a few things to do early in FY '27, but there's no ounces attached to that. It's more setting up for the next leg of the underground growth. So probably the best way to think about it is when we do the Investor Day later on this calendar year. We could really show with a bit more visibility on some of the sequencing of the mines. Hugo Nicolaci: That's helpful. So if we think about it today, then realistically, the underground rates aren't picking up that materially, you're probably seeing Carosue drop below that 200,000 ounces a year for the next couple of years where you do that underground development? Stuart Tonkin: It could do. We're still working through that, but we've got some good growth at Dervish. So we'll see how that plays out when we do the resource and the reserves and then feed that current information back into the life of asset mining plan. Hugo Nicolaci: Got it. That's helpful. And then, Ryan, just sort of running back on the buyback piece, just confirming then to the timing and magnitude of the buyback as it stands purely a value decision on your stock and then maybe come August as KCGM and your capital requirements become a little bit clearer. Should we consider scope to maybe take this to a magnitude you've previously targeted as being more meaningful around the buyback? Ryan Gurner: I think everything is always on the table, Hugo. We want to allocate our capital to the best return. So buyback is something if it gets exhausted, if we're through it quickly, it's always -- we're always able to assess new opportunity there. And as I said, we're not too far away from seeing that change in free cash flow. There's challenges across the business. There's challenges in oil, all these things. So right now, we've decided on that, I guess, quantum. We're ready to act. And I guess we'll make those decisions as positive time plays out. Operator: Your next question comes from Jonathon Sharp with JPMorgan. Jonathon Sharp: Just with KCGM mill expansion, the CapEx. Can you just help us understand the split between construction productivity and cost inflation and which is proving harder to control as we move through commissioning. Stuart Tonkin: Yes. So -- thanks, Jonathon. So look, there's no lift about $60 million for that project that we've just reported, so 30 this year for next year. I'd say, and it then knocks through to the other, but probably 2/3 of that is just the lower productivity. So you've got more people doing the same work at that elevated cost. In turn, cost escalation is occurring, not just through diesel but through all other things, and labor is embedded in all of those cost escalations, which we don't see easing. So that's been a large part of -- you have extra labor, it flows through to commuting that labor, housing that labor, the consumables they use, all of those things knock through. But yes, it's a reality that underpins anyone spending money at the moment. Jonathon Sharp: Yes. Okay. That's clear. And just as you move through commissioning without getting into commercially sensitive detail, does the main contract to remain accountable through wet commissioning, performance testing and other performance incentives acceptable criteria tied to sort of final handover, just interested in knowing a little bit of detail on that? Stuart Tonkin: For sure. I mean, there's pretty traditional standard things where you do a handover and it's got to make criteria, so that's embedded. And look, we've got the commitment from the contractor that they want to see this working as well as we do and promote it for the next opportunity. So that's there. Equally, we've got the same contractor doing Stage 2. It's a different structure, again, different incentivization. So our approach to that is going well. And Simon spoke to 95% of the stage 1 is complete. Nearly 50% of Stage 2 is complete and those structures drive that behavior largely. So yes, we're okay with those things, and we'll be tracking and checking those things closely. We won't be silly on the risk balance here. If it comes down to disputes around small amounts of quality, we think running the plant and addressing some of those things as we go rather than not waiting to move in new house to your fly screens are on, we'll be sensible in the timing of that. Operator: Your next question comes from Adam Baker with Macquarie. Adam Baker: Thanks for the color on the increase in fuel prices. Assuming mostly it's related to diesel. But just looking at the midpoint of guidance, I mean, that's implying about a 3% increase in your cost base. Just wondering if you go back to the start of FY '26, prior to the diesel price escalation. Can you give us any color on what diesel prices were as a percentage of cost base for the business? Ryan Gurner: They're probably -- Adam, it's Ryan. That's basically doubled, I guess, in this quarter that we're forecasting. They're probably 4% of our business, I'd say, back then. Now they're obviously pushing 7%, 8% for the quarter. Adam Baker: That's good. And just secondly, on clearly, a lot of optionality for you guys to deploy that. Just wondering if you've considered any minimum net cash threshold before you deploy it, noting you've got $320 million at the end of the quarter, I'd say that you wouldn't draw down on the $1.75 billion corporate bank facility to prioritize the buyback, for example. Ryan Gurner: I think, Adam, what I'd say is, yes, we want to maintain good liquidity. We've got good flexibility on our balance sheet if we have to draw debt if for whatever purpose. And we see the cash flows ahead, right? So we're sitting here in late April. The mill will turn on early FY '27. We're really looking forward to that. We see what's ahead. There's challenges in the sort of more global economy with oil, but we feel is on with our balance sheet, with our cash and bullion on hand, we can manage that. Operator: There are no further questions at this time. I'll now hand back to Mr. Tonkin for closing remarks. Stuart Tonkin: Okay. Well, thanks, everyone, for joining us on the call, and I appreciate your interest in the company on what is a very busy day. Thanks very much. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to the East West Bancorp's First Quarter 2026 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Adrienne Atkinson, Director of Investor Relations. Please go ahead. Adrienne Atkinson: Thank you, operator. Good afternoon, and thank you, everyone, for joining us to review East West Bancorp's First Quarter 2026 Financial Results. With me are Dominic Ng, Chairman and Chief Executive Officer; Chris Del Moral-Niles, Chief Financial Officer; and Irene Oh, our Chief Risk Officer. This call is being recorded and will be available for replay on our Investor Relations website. The slide deck referenced during this call is available on our Investor Relations site. Management may make projections or other forward-looking statements, which may differ materially from the actual results due to a number of risks and uncertainties. Management may discuss non-GAAP financial measures. For a more detailed description of the risk factors and the reconciliation of GAAP to non-GAAP financial measures, please refer to our filings with the Securities and Exchange Commission, including the Form 8-K filed today. I will now turn the call over to Dominic. Dominic Ng: Thank you, Adrienne. Good afternoon, and thank you for joining us for our first quarter earnings call. I'm pleased to report that East West had another record quarter for loans, deposits, and fee income. Our consumer and commercial depositors continue to place their trust in us, helping grow total deposits by 9% year-over-year. Growth in noninterest-bearing deposits was particularly strong this quarter, up nearly $800 million, driven by our continued focus on providing solutions to retail and small business customers. We also delivered 7% year-over-year loan growth. C&I loans increased by more than $900 million quarter-over-quarter, driven by higher line utilization, particularly amount capital call borrowers. We also achieved a record quarter of fee income growing 12% year-over-year. We saw strong momentum and wealth management this quarter as we stayed closely engaged with clients. We continue to see opportunity to grow and diversify our fee revenues over time. Credit performance remained stable. Net charge-offs and nonperforming assets were low in absolute terms consistent with our expectations and reflecting our disciplined approach to risk management. Our capital position remains a key advantage for East West with a tangible capital ratio of 10.3%. We maintained this capital level, while growing our balance sheet, increasing our dividend and opportunistically repurchasing shares. We continue to be focused on being disciplined stewards of our customers' trust and our shareholders' capital. I will now turn the call over to Chris to provide more details on our first quarter financial performance. Chris? Christopher Del Moral-Niles: Thanks, Dominic. Let's start with deposit growth on Slide 4. Our end-of-period deposits grew by $1.8 billion quarter-over-quarter. Average DDA growth was up 12% year-over-year and nearly $0.5 billion on an average basis. This checking account growth led us to price our leaner New Year CD campaign more conservatively this year, allowing us to focus on CD balance retention and drive a better mix of deposit costs for the quarter and going into the rest of 2026. Money market deposits were also up 9% year-over-year, as we continue to further diversify away from CDs and other higher-cost deposits. Turning to loans on Slide 5, as we have emphasized before, our focus has been and continues to be on growing our C&I portfolio, and C&I was the primary driver of growth in Q1. Most of the increase was driven by net line draws from existing customers. While utilization ticked up across a range of industries, as Dominic mentioned, capital call-related borrowings made up the lion's share of the first quarter's net growth. The quarter's net draws on capital call lines reflected broad-based increases in M&A and real estate property acquisitions across the quarter. While some of these lines have already been paid down here in the second quarter, private equity markets and real estate markets remain active and we expect to continue to participate in this activity during the remainder of the year. Residential mortgage experienced a seasonally slower Q1 than we expected, but our pipelines have grown and continue to grow into Q2; and we expect residential mortgage to be a consistent contributor to our overall loan growth during the year. We also grew commercial real estate balances this quarter. Our priority continues to be on supporting our long-standing real estate relationship clients. Given the level of net growth we saw in the first quarter and the pipelines we see going into Q2, we are comfortable reiterating our guidance for the full-year loan growth to be in the range of 5% to 7%. Now turning to 6, our loan portfolio remains well-diversified, with over 70% of our loans to commercial customers across a broad range of industries and commercial real estate asset types. C&I now represents 34% of our total loans, reflecting the results of our focus and emphasis on balanced growth across our balance sheet. Our CRE portfolio remains diversified by a number of product types with an emphasis on multi-family, retail, and industrial projects. As we look ahead, we remain focused on growing the portfolio in a disciplined way that enhances diversification and remains aligned with our overall risk appetite. Turning to Slide 7, we provided incremental disclosure on our NBFI portfolio. Growth in this portfolio this quarter has been driven primarily by capital call line. Our NBFI portfolio is granular, with diversification across industry and category types. 99.99% of our NBFI loans are current, and the past decades, there have been virtually no net charge-offs in this portfolio. Approximately 30% of this portfolio is made up of capital call lines. Capital call is not a regulatory classification, and our capital call loans are spread across a range of private equity, mortgage credit, and business credit borrowers. I'll now turn to net interest income and margin discussion on Slide 8. Quarterly dollar net interest income increased to $671 million, reflecting our ability to grow our balance sheet while overcoming the headwinds of rate cuts in Q4 and 2 fewer days in Q1. Our short-term liability sensitivity on deposit pricing dynamics and our positive deposit remixing during the quarter allowed us to continue to reduce our deposit costs, driving period-end costs down a further 6 basis points quarter-over-quarter. Looking back to the start of the cutting cycle, we have decreased interest-bearing deposit costs by 111 basis points, comfortably exceeding our 50% beta guidance shared in prior periods. Moving on to fees on Slide 9, fee income grew 12% year-over-year to a new record $99 million for the quarter, with significant growth in wealth management fees driven by structured note and annuity sales and deposit-related fees, driven by higher customer activity. We will remain focused on driving this growth and further diversifying our revenue overall, and are quite encouraged by the pace of growth in fee revenue so far this year. We continue to aspire to deliver double-digit year-over-year growth in fee income in 2026. Now turning to expenses on Slide 10. East West continues to deliver industry-leading efficiency while investing for future growth. The Q1 efficiency ratio was 36.2%. Total operating non-interest expense was $258 million for the first quarter and included seasonally higher payroll-related costs, some increased stock-based compensation costs, and higher incentive comp, reflecting increased commissions for our wealth management activity. Nonetheless, overall, we continue to expect expenses to come in line with our guidance for the year. Now let me hand the call over to Irene for comments on credit and capital. Irene Oh: Thank you, Chris, and good afternoon to all on the call. As you can see on Slide 11, our asset quality metrics held stable and continue to broadly outperform the industry. Quarter-over-quarter, non-performing assets remained stable at 26 basis points as of March 31, 2026. We recorded net charge-offs of just 9 basis points in the first quarter of 2026, or $12 million, compared to 8 basis points in the fourth quarter. We recorded a higher provision for credit losses of $36 million in the first quarter, compared with $30 million for the fourth quarter. We remain vigilant and proactive in managing our credit risk. Turning to Slide 12, the allowance for credit losses increased $26 million to $836 million or 1.44% of total loans, as of March 31, reflecting quarter-over-quarter loan growth and the portfolio mix shift. We believe we are adequately reserved for the content of our loan portfolio given the current economic outlook. Turning to Slide 13, all of East West's regulatory capital ratios remain well in excess of regulatory requirements for a well-capitalized institution and well above regional and national bank averages. East West Common Equity Tier 1 capital ratio stands at a robust 15.1%, while the tangible common equity ratio now sits at 10.3%. These capital levels continue to place us amongst the best-capitalized banks in the industry. In the first quarter, East West repurchased approximately 938,000 shares of common stock during the first quarter of $98 million. We currently have $117 million of repurchase authorization that remains available for future buybacks. East West also distributed approximately $111 million to shareholders via a quarterly dividend, East West's second quarter 2026 dividend will be payable on May 18, 2026, to stockholders of record on May 4, 2026. I will now turn it back to Chris to share our outlook. Christopher Del Moral-Niles: Thank you, Irene. We've assumed the forward curve as of March 31, which models no rate cuts. And therefore, we're updating our full-year 2026 net interest income guidance to grow between 6% to 8%, up from our prior expectations of growth between 5% and 7%. We're also updating our net charge-offs and now projected to fall between 15 and 25 basis points for the full year. With that, we'll be happy to open the call for questions. Operator? Operator: [Operator Instructions] And the first question will come from Ebrahim Poonawala with Bank of America. Ebrahim Poonawala: I guess, maybe the first question, just given the capital proposals that were put out by the Fed last month. I'm wondering if you can quantify what impact you expect to your capital ratios -- and yes, I guess, first, just what's the impact that you expect for what are really strong capital levels? And where is this headed if the proposal becomes a final rule? Christopher Del Moral-Niles: We are happy to cover that for you. The risk-weighted asset adjustment from what has been put out there as Basel III Endgame is roughly a $7 billion reduction in our current risk-weighted assets relative to our current balance sheet. And that would probably translate to something on the order of magnitude of 1.6% to 1.8% increase in our various respective regulatory capital ratios. Ebrahim Poonawala: Are you going to use all that excess capital to start another bank, but... Christopher Del Moral-Niles: Dominic is very opportunistic. And I think we are very comfortable maintaining very strong capital levels and having more capital has never served this bank badly. Irene Oh: We're going to use that capital to grow organically. Ebrahim Poonawala: That's the best answer. So I hope you do. So -- and maybe, I guess, moving to the P&L, strong deposit growth. I wanted to get on the private capital call-line lending. Lots of focus on just private equity in that space. One, it didn't sound like that any of that drawdown on capital call-line lending was stressed and it felt like there was more activity that drove that, if you can confirm that? And why are we not seeing more diversified C&I growth pick up, given just the broader momentum. I understand the macro volatility, but are you seeing at least green shoots of other areas where C&I is picking up? Christopher Del Moral-Niles: Well, Sure. So EB, I think on the capital call lines, it was pretty diversified. It was the lion's share of the total growth, but it was across a range of industries, and that gives us comfort that things are happening out there and there are green shoots in general. And of course, there was a component that was a capital call line, which is well over $300 million, and that was all encouraging evidence of continued activity across a range of industries. So, we saw activity in true distribution. We saw some cross-border. We talked commercial real estate. We saw a lot of areas that had positive momentum and continue to have positive momentum going into Q2. Irene Oh: And maybe I'll just add to clarify as a clarifying point, none of the drawdowns that we saw in the quarter were anything distressed. Opportunistically, it really is the time of that. And I think, as Chris alluded to, some of those, there's a timing component of this, right? Some of those did pay off in the early part of the second quarter, normal activity. Operator: The next question will come from Dave Rochester with Cantor Fitzgerald. David Rochester: I just wanted to ask about the deposit growth. Very solid this quarter. Can you just give an update on the competitive environment there? Do you find yourself having an easier time growing core deposits. I mean normally, this is a softer quarter for that for most banks. The DDA trends look really good. How do you feel about that going into 2Q and the rest of the year, especially on the DDA side. Christopher Del Moral-Niles: I think the DDA growth that you saw has been the result of a now more than a year's long campaign to really deepen our connection with retail, small business customers across our footprint. That's been successful and continue to bear fruit into Q1 '26. We're not letting up on that strategy. That campaign has been working arguably better than we expected here going after it for more than a year, but in a way that we are continuing to go more time and effort to make sure we nurture it even more. The landscape for deposits, however, is not easy. It is a very competitive landscape. And from a pricing perspective, the fact that we moved from the outlook with multiple customers to an outlook with no cuts means that deposit pricing pressure is real and coming upon us. And so the reality is, it's doubly impressive from our perspective that our teams are able to go out there and win non-interest-bearing DDA money in an environment where rates aren't expected to come down anytime soon. Kudos to our retail team, kudos to our strong business teams, kudos to all commercial RMs out there working with their customers to find opportunities for us to add value, really paid off here in the first quarter. But no, I don't think pricing is going to get any easier, and I don't think competition is going to get any easier. David Rochester: I appreciate that. Just a follow-up on wealth management and you talked about staying close to the customer and that helping you guys out this quarter. It's a really big number this quarter. Can you just talk about how you see that trending moving forward? If you've added new people that are helping boost that number, you've got new products. Just anything else that can help us figure this out going forward. Christopher Del Moral-Niles: There was a fair amount of volatility in Q1 and some of our clients decided that some structured notes were a good thing, and we added some notable volume in structured notes. We also added some annuities during the quarter as people moved out of equities at record highs into annuity products. But we also added people late in the quarter, so it don't have a big impact to the Q1 numbers, but we expect it will continue to support continued growth in wealth management as we roll through the rest of the year. Operator: The next question will come from Jared Shaw with Barclays. Jared David Shaw: I guess sticking on the deposit theme, with the good growth that you're seeing in the mix shift, how should we think about sort of the trend of deposit pricing costs in a flat environment? I mean, do you think you're still going to be able to continue to march that lower as we go forward? Christopher Del Moral-Niles: I think, Jared, in some prior calls or meetings, I had alluded to the fact that we have been benefited from rolling down the hill and there would come a point in time where the hill would stop to be so steep and flatten out. And I think we've hit that point now. So no, my comments earlier that I don't think deposit pricing is going to get easier allude to the fact that I think our ability to march down or roll down the next wave of CDs that sort of run its course to a large extent. That having been said, I'll just remind you all, we are asset sensitive which is why when we're changing our guidance from cuts to a flat rate environment, we're also upping our NII guidance because higher for longer is net better for East West Bank. Jared David Shaw: Okay. That's good color. And then any color, maybe, Irene, on the growth in resi nonperformers? Are you seeing any areas of stress there maybe from tech worker disruption from AI or anything that you're spending a little more time looking at? Irene Oh: Yes. That's a great question. We have seen a little bit of increases in that, ultimately, there isn't anything that we view as systemic. It really is customer by customer loan by loan. And ultimately, for us, given the low loan to values we underwrite it, we don't see a lot of loss content there. Operator: The next question will come from Casey Haire with Autonomous Research. Casey Haire: I wanted to touch on loan growth. Apologies if I missed this, but the guide of 5% to 7% off of a quarter where you're growing at 8% annualized and pipeline sound pretty constructive kind of a recurring question for you guys, but why -- is that a little conservative? Or what are we missing here? Christopher Del Moral-Niles: I would point you to Page 9 of our press release tables which says that from March 31 of last year to March 31 of this year, we grew by exactly 7.0% on total loans. So that felt like it was in the range of 5% to 7% and warranted holding the range. Casey Haire: Okay. Yes. I mean last year, it was much different. I mean, we had the tariff and obviously, the macro is -- okay. I get it. All right. Just moving back to the capital discussion. Irene, I heard you say you're going to grow organically. I've also heard you guys talk about some M&A aspirations on the East Coast where there's pockets of Chinese American populations that would fit well with the strategy here. Just some updated thoughts around that. And just given the excess capital under the Basel III proposal, what -- if you were to find an opportunity that you did like what are some parameters around earn-back and tangible book value dilution? Irene Oh: Well, I'll start and maybe Dominic and Chris can chime in afterwards. We have a kind of hierarchy organic, right? Organic growth is our priority, and we've been able to show over many, many years the ability to grow our franchise through organic growth. Although, as you know, we have a history many years ago also of being able to do successful well priced strategic acquisitions as well. So organic growth is our #1 priority. I think, certainly, when is opportunistic stock buybacks, you know what the return is and then also acquisitions, well priced, strategic, makes sense for the franchise, something that ultimately has to be a better return than our ability to grow organically. Christopher Del Moral-Niles: And we complement that, of course, with the regular dividend and we review the dividend at least annually and then the dividend is our second go-to after organic growth, and that's where we have most recently increased our dividend, you'll recall in the first quarter by 1/3, and we'll continue to look at that to make sure it remains competitive. And then as Irene mentioned, follow up the organic growth with dividends and then inorganic opportunities at the right price and then share buybacks perhaps opportunistically. Operator: The next question will come from Manan Gosalia with Morgan Stanley. Manan Gosalia: On the deposit growth side, the question is do you typically see some sort of flight to safety from clients, clients just holding more liquidity at times when there is elevated geopolitical risk. And I guess the question is, did you see any of that this quarter? I'm just trying to assess how much of the strength in DDA growth is seasonal or idiosyncratic versus how much of that -- do you see this as a new base to grow off of? Christopher Del Moral-Niles: Clearly, East West Bank over the last 15 years has been the beneficiary a very strong, well-capitalized and highly liquid bank of net deposit flows from our customers and increased balances from other banks in the region, from other banks in the country and even some pockets outside. All of that has served the East West benefit and continues to be. And it does feel like whenever there's an errant headline, we see more opportunities to engage with more customers and have been successful at gathering more deposits. So we like the positioning that we have. It apparently pays dividends to be the best capitalized bank in the industry and one of the most profitable banks in the industry and for everybody to recognize that and trust us in that way. And so I think we are well positioned, and I don't think it's temporary. But yes, we do see flows come in and out and tax flows do happen on April 15, and we saw some of those flow out, but we feel good about the base that we've built and the year-over-year growth in deposits that we've been seeing for almost 15 straight years. Manan Gosalia: Right. Perfect. And then you guys gave the C&I loan yields at the back and not a surprise to see that edge down slightly. Is that all just rate related? Or is there anything that comes there from mix shift maybe to capital call or investment-grade clients? Or is there anything you're seeing in terms of competition impacting spreads? Christopher Del Moral-Niles: I think we have seen competition broadly impact spreads over the course of the last year. We also provide the net interest margin table on Pages 10 and 11 of the press release. And what you'll see there is a broad repricing downwards because most of our portfolio is floating rate and that just come through as those naturally move forward with the rate cuts that we saw last year, including the ones that happened in December. But as we've mentioned, our reset here sometimes don't kick in for about 45 days late. So we saw still repricing impact in Q1 related to the December rate cut. Operator: The next question will come from Bernard Von Gizycki with Deutsche Bank. Bernard Von Gizycki: Chris, you mentioned the checking account growth led to pricing the Lunar New Year CD campaign more conservatively this year, allowing you to focus on CD retention. Can you just remind us how much CDs rolled off during the quarter? How much was retained? Any color on expected improvement in pricing from rolling forward CDs in 2Q? Christopher Del Moral-Niles: Yes. So we had a little over $10 billion of rollover during Q1, and we net grew CDs as presented on Slide 4 by $127 million. So we eventually priced for retention and achieve retention. And then from a pricing perspective, as I mentioned earlier, we've been benefiting from rolling downhill, but we sort of flattened out that role. And as we sit here today, I'm not sure incremental new CDs will be necessarily repricing with much of a benefit as we roll into Q2 and Q3. We're currently pricing our CD special at 3.60%, which is not going to necessarily move the needle a lot on our CD price. Bernard Von Gizycki: Okay. And just as my follow-up, I think in last quarter, you mentioned the impact from hedging impact. There was a headwind of about $2 million. What was it this quarter? Any expectations for full year you can provide? Christopher Del Moral-Niles: Yes, it's roughly flat and all those hedges today are in the money looking forward, given the backup in that but we're still in the money -- on all the mark-to-market value of all the trades is positive. So we're going to add value moving forward. Operator: The next question will come from David Chiaverini with Jefferies. David Chiaverini: On the NII outlook, so you raised it 6% to 8% from 5% to 7%. You alluded to higher for longer being good for East West. Was this the main contributor to raising the guide? Or was the loan outlook also part of it? Can you unpack that a little bit? Christopher Del Moral-Niles: Yes. We would attribute the guide increase exclusively to the change in the rate outlook. And as I noted earlier, we're not raising our loan guidance at this point in time. So that's still baked in there at 5% to 7%. David Chiaverini: Got it. And on the net interest margin, how should we think about the outlook from here based on your commentary on the deposit front, is a dip a reasonable way to think of it? Or how should we think about the NIM going forward? Christopher Del Moral-Niles: So we're thinking about the margin and dollar NII as moving higher, they'll probably both track at least flat to positive. David Chiaverini: So the NIM flat to positive from here? Christopher Del Moral-Niles: Correct. Even though -- and this sort of leads to the question I answered earlier, even though there's incremental deposit pressure, the fact that loans will be yielding higher for longer this year, we will still end up with a better net interest income and likely slightly better net interest margin than we were previously projected. David Chiaverini: Very helpful. Thank you. Christopher Del Moral-Niles: I would remind you, though, that the first quarter has fewer days, but don't index off of the Q1 number, index off of the day count adjusted number. Operator: The next question will come from Chris McGratty with KBW. Christopher McGratty: The tweak in the credit guidance is a tweak, but it's -- I think it's a fairly important vote of confidence or statement. Could you unpack what drove you to change the charge-off guide after 1 quarter? Irene Oh: Yes. That's -- it's simply put, right? When we look at the portfolio and we look at kind of what we're seeing, this is our view as far as at least today where we think the net charge-offs are going to be. Christopher McGratty: Okay. So good visibility on the outlook. Okay. And then within the 7% to 9% expense growth. I'm wondering if you could parse out, run the bank versus invest in the bank and how over time, this level of growth. I think this is a similar guide you gave last year at the beginning of the year, how AI might influence that over the medium term? Christopher Del Moral-Niles: In the short to medium term, AI is a cost because we all have to run to figure out how we're going to combat missiles and everything else that the market is doing at. And so the reality is we're spending time to make sure we're -- as we have been for the last year, investing in our cyber defense and investing in our monitoring tools, investing in our daily operating capability to make sure we're as resilient as possible. And those are investments that I'll highlight are not regulatory-driven. There are investments that are driving us to be the best bank we can be every day for our customers, and we're going to continue to make those investments every day. And that's why we will continue to believe 7% to 9% expense growth is the right level while delivering the best efficiency ratio in the industry. Operator: The next question will come from David Smith with Truist Securities. David Smith: Good afternoon. I was wondering if you could give us any updates on how you're looking at blockchain or stablecoins as you look at ways to better help your plans with international business needs, transfer money more efficiently? Christopher Del Moral-Niles: We continue to see the vast majority of our customers wanting and continuing to transact in Fiat currencies, but we do have customers that hold a variety of crypto and stablecoin, and we're monitoring those continued conversations, development, new products and new solutions. We have put some projects sort of into the hopper that we think we'll be able to deliver at the appropriate time when there's a little more market acceptance to those, and we've been working with 1 or 2 clients on select opportunities to be supporting them on a back office basis. And so we'll continue to be active around the state, but have not yet rolled anything out to customers. David Smith: Are tokenized deposits part of that potentially or anything there? Christopher Del Moral-Niles: We have explored those. We have not yet rolled out or put something like that on the shelf, but that's one of the things that we've looked at in concert with, I think, some larger industry vendors that have proposed solutions, and we're trying to figure out if we want to use those or something different. So we're just exploring that and monitoring those development cycles. Operator: The next question will come from Janet Lee with TD Cowen. Sun Young Lee: In recent years, your deposit, you generally were able to grow deposits at a pace that's modestly above loans. Is it fair to assume that your deposit growth for 2026 would be the same as in coming in, in line to above your loan growth guide for the year, given the strong results, especially given the strong results from the first quarter? Christopher Del Moral-Niles: Janet, I would note that on Page 3 of our financial highlights. We led with deposit-led growth as the story. And so we continue to see deposit-led growth as the story and continue to expect deposits to help us drive a better funding mix, a better liquidity profile and more reservoir dollars available to meet our clients' needs as borrowers over time. But yes, it's been a deposit-led story. Sun Young Lee: Okay. And maybe I'm missing something here, but if you were able to keep your net interest margin flat to modestly improving versus the first quarter, I guess, excluding the day count impact and then loans growing at 6.5% to -- sorry, what was your loan growth guide? Loan growth in the 5% to 7%. Your NII, what would be the puts and takes around you getting to that lower end versus the high end. It looks like you're tracking at least at the higher end and potentially better or... Christopher Del Moral-Niles: I think some of those things are true, but the other things that we talked about are that deposit pricing pressure continues to build, and we would expect that to eat into some of the benefit that we might see from higher for longer as we move through the course of the year. If the economy is strong enough, or inflation levels are strong enough such that rates are not nearly lower then probably there's more net funding going on in the industry and deposit pricing competition strengthens or becomes more rigid or even increases and makes that more costly, and we factor that into our models for 2026. Operator: The next question will come from Timur Braziler with UBS. Timur Braziler: Just circling back on the loan growth, maybe specifically for the coming quarter. I appreciate the comments that some of the capital call lines had already paid down. That's going to be offset with improvement in the mortgage warehouse business. I guess, net-net, in 2Q, are you still expecting those loan balances to grow? And are we still thinking that 1Q is kind of seasonally softer for some of the traditional commercial business lines? Christopher Del Moral-Niles: So unpack that question again because you said something about warehouse, and we don't do a lot of warehouse. So repeat your question, Timur, sorry. Timur Braziler: Yes. Just the puts and takes on some of the lines being paid down in 1Q versus the growth that you're expecting in the second quarter and whether or not that's going to net positive balances in 2Q? And then just the seasonality on some of the commercial pieces. Christopher Del Moral-Niles: Sure. So on the private equity capital call line activity that we saw in Q1, Irene mentioned and I mentioned, we've already seen some of that pay off here in April. And we probably expect more than 1/3 of it to pay off, frankly, in the ordinary course during the ordinary second quarter. So that uptick that we saw should be in the ordinary course paid down to some extent. However, we continue to see continued activity in private equity and in mortgage private capital. And those 2 areas may therefore offset those paydowns and allow us to deliver additional growth in Q2. As we sit here today, we would expect that. Too much seasonality per se in the other areas of our commercial business. Timur Braziler: Got it. And then one on credit ACL has been building over the last couple of quarters. I think you guys called out some mix shift here in the first quarter. Just give us a sense of where you are likely in that ACL build. And should we expect that to start settling out and being utilized here at some point? Or is that going to remain fairly conservative in holding up at these kind of levels? Christopher Del Moral-Niles: I think the bank has traditionally approach ACL as being making sure it was appropriate. And perhaps on the margin, making sure it was modestly conservative, I think we've continued to do so. From a build perspective, it was 2 basis points for the quarter. I'll defer to Irene on specific comments around the portfolio. But I think the reality is, with our visibility that we do have in the charge-offs, we feel pretty good about where we stand. Irene? Irene Oh: Yes. Maybe I'll just add a little bit on the technical side of that. You use a multi-scenario model for calculating our allowance. And as of March 31, the downsides scenario did change quite substantially from what it was at year-end. That certainly was one of the factors. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Dominic Ng for any closing remarks. Dominic Ng: Well, thank you to everyone for joining us today. I want to thank our team for their continued hard work and dedication, which continues to show in our results. We appreciate everyone your time and interest and looking forward to speaking with you again next quarter. Goodbye. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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